Evertec(EVTC) - 2020 Q1 - Quarterly Report

FORM 10-Q General Information Registrant Information and Filing Status EVERTEC, Inc. filed its Q1 2020 Form 10-Q, confirming large accelerated filer status and SEC compliance - EVERTEC, Inc. is a large accelerated filer, meeting specific market capitalization and public float criteria[5] - As of May 7, 2020, 71,865,305 common shares were outstanding[6] - The company has complied with all required reports under the Securities Exchange Act of 1934 for the preceding 12 months[2] Forward-Looking Statements Risks and Uncertainties This section highlights various factors that could cause actual results to differ materially from forward-looking statements, including operational, regulatory, and macroeconomic risks, particularly from COVID-19 - Key risks include reliance on Popular, Inc. for a significant portion of revenues and potential concessions in contract renewals[10] - Operational risks involve dependence on processing systems, technology infrastructure, security systems, and personnel, with potential business impacts if systems are compromised[10] - External factors such as the uncertainty of Puerto Rico's debt restructuring (PROMESA), the aftermath and possibility of future hurricanes, and the potential impact of COVID-19 on operations, revenues, net income, and liquidity are significant concerns[11] Financial Statements This section presents EVERTEC's unaudited condensed consolidated financial statements, including balance sheets, income statements, equity changes, and cash flows Unaudited Condensed Consolidated Balance Sheets Total assets and liabilities decreased, driven by reductions in current assets, intangible assets, and long-term debt Condensed Consolidated Balance Sheet Highlights (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | Change (Absolute) | Change (%) | | :-------------------- | :------------- | :---------------- | :---------------- | :--------- | | Total Assets | $979,218 | $1,011,676 | $(32,458) | -3.21% | | Total Liabilities | $716,534 | $740,053 | $(23,519) | -3.18% | | Total Equity | $262,684 | $271,623 | $(8,939) | -3.29% | | Cash and cash equivalents | $103,521 | $111,030 | $(7,509) | -6.76% | | Accounts receivable, net | $95,305 | $106,812 | $(11,507) | -10.77% | | Goodwill | $394,498 | $399,487 | $(4,989) | -1.25% | | Other intangible assets, net | $229,787 | $241,937 | $(12,150) | -5.02% | | Long-term debt | $490,844 | $510,947 | $(20,103) | -3.93% | Unaudited Condensed Consolidated Statements of Income and Comprehensive Income Net income decreased to $22.28 million in Q1 2020, despite slightly higher revenues, due to increased operating costs and income tax expense Condensed Consolidated Statements of Income and Comprehensive Income (Three Months Ended March 31) | Metric (in thousands, except per share) | 2020 | 2019 | Change (Absolute) | Change (%) | | :-------------------------------------- | :-------- | :-------- | :---------------- | :--------- | | Revenues | $121,942 | $118,836 | $3,106 | 2.61% | | Total operating costs and expenses | $89,179 | $81,431 | $7,748 | 9.51% | | Income from operations | $32,763 | $37,405 | $(4,642) | -12.41% | | Income before income taxes | $26,793 | $30,543 | $(3,750) | -12.28% | | Income tax expense | $4,518 | $3,809 | $709 | 18.61% | | Net income | $22,275 | $26,734 | $(4,459) | -16.68% | | Net income per common share - basic | $0.31 | $0.37 | $(0.06) | -16.22% | | Net income per common share - diluted | $0.30 | $0.36 | $(0.06) | -16.67% | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Total equity decreased from $271.62 million to $262.68 million in Q1 2020, primarily due to share repurchases, cash dividends, and other comprehensive loss Changes in Stockholders' Equity (Three Months Ended March 31, 2020) | Item (in thousands) | Amount | | :------------------------------------------------ | :--------- | | Balance at December 31, 2019 | $271,623 | | Share-based compensation recognized | $3,483 | | Repurchase of common stock | $(7,300) | | Restricted stock units delivered | $(2,706) | | Net income | $22,275 | | Cash dividends declared on common stock, $0.05 per share | $(3,600) | | Other comprehensive loss | $(21,017) | | Balance at March 31, 2020 | $262,684 | - The number of common shares outstanding decreased from 72,000,261 at December 31, 2019, to 71,865,305 at March 31, 2020, due to share repurchases[15][23] Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $33.93 million in Q1 2020, while net cash used in financing activities significantly increased to $31.36 million, leading to an overall net decrease in cash Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31) | Cash Flow Activity (in thousands) | 2020 | 2019 | Change (Absolute) | Change (%) | | :-------------------------------- | :-------- | :-------- | :---------------- | :--------- | | Net cash provided by operating activities | $33,925 | $29,339 | $4,586 | 15.63% | | Net cash used in investing activities | $(9,412) | $(13,956) | $4,544 | -32.56% | | Net cash used in financing activities | $(31,358) | $(15,628) | $(15,730) | 100.66% | | Net decrease in cash, cash equivalents and restricted cash | $(6,017) | $(245) | $(5,772) | 2355.92% | | Cash, cash equivalents and restricted cash at end of period | $125,104 | $86,501 | $38,603 | 44.63% | - Cash paid for interest decreased from $7.39 million in 2019 to $6.37 million in 2020[26] - Cash paid for income taxes decreased from $3.50 million in 2019 to $2.08 million in 2020[26] Notes to Unaudited Condensed Consolidated Financial Statements Note 1 - The Company and Basis of Presentation EVERTEC, Inc. is a leading full-service transaction processing business in Latin America and the Caribbean, operating across 26 countries, with Q1 2020 statements prepared under GAAP and COVID-19 precautionary measures implemented The Company Basis of Presentation Risks and Uncertainties due to COVID-19 Pandemic - EVERTEC, Inc. is a leading full-service transaction processing business in Latin America and the Caribbean, operating the ATH network and providing merchant acquiring, payment processing, and business process management services across 26 countries[29] - In response to COVID-19, EVERTEC deployed its business continuity plan, transitioned most employees to remote work, implemented safety measures for critical on-site staff, drew down $30 million on its Senior Secured Revolving Facility, and commenced deferral of payroll taxes under the CARES Act[33][