Evertec(US:EVTC)2021-04-30 20:03Part I. FINANCIAL INFORMATION Financial Statements This section presents EVERTEC's unaudited condensed consolidated financial statements for Q1 2021, showing a 14% revenue increase to $139.5 million and a 60% net income increase to $35.6 million Unaudited Condensed Consolidated Balance Sheets As of March 31, 2021, total assets were $1.04 billion, liabilities decreased to $684.6 million, and equity increased to $356.0 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $156,363 | $202,649 | | Goodwill | $396,298 | $397,670 | | Other intangible assets, net | $229,972 | $219,909 | | Total Assets | $1,040,649 | $1,072,579 | | Liabilities & Equity | | | | Total current liabilities | $136,580 | $152,992 | | Long-term debt | $458,738 | $481,041 | | Total Liabilities | $684,642 | $730,150 | | Total Equity | $356,007 | $342,429 | Unaudited Condensed Consolidated Statements of Income and Comprehensive Income Q1 2021 revenues increased 14% to $139.5 million, income from operations grew 37% to $45.0 million, and diluted EPS rose to $0.49 Statement of Income Highlights (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $139,528 | $121,942 | 14.4% | | Income from operations | $44,999 | $32,763 | 37.3% | | Net income attributable to common stockholders | $35,503 | $22,211 | 59.8% | | Diluted EPS | $0.49 | $0.30 | 63.3% | Unaudited Condensed Consolidated Statements of Cash Flows Q1 2021 saw $34.7 million in operating cash, $34.4 million used in investing (including a $14.8 million acquisition), and $48.7 million used in financing activities Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,746 | $33,925 | | Net cash used in investing activities | ($34,413) | ($9,412) | | Net cash used in financing activities | ($48,716) | ($31,358) | | Net decrease in cash | ($45,683) | ($6,017) | - Investing activities in Q1 2021 included a $14.8 million acquisition of a customer relationship and $12.0 million in additions to software2242 Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, segment revenue, debt, intangibles, and related-party transactions, including a $14.8 million customer relationship acquisition and 44% revenue from Popular, Inc - In Q1 2021, the Company acquired a customer relationship in Puerto Rico for $14.8 million, which will be amortized over ten years and is part of the Merchant Acquiring segment42 - The Company has an interest rate swap agreement with a notional amount of $250 million to convert a portion of its variable-rate 2024 Term B Loan to a fixed rate of 2.89%51 - Revenues from related party Popular, Inc. represented 44% of total revenues for the three months ended March 31, 202193 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2021 financial results, including a 14% revenue increase to $139.5 million, growth across all segments, and adjusted EBITDA rising to $68.9 million - The company is a leading transaction-processing business in Puerto Rico, the Caribbean, and Latin America, operating in 26 countries and owning the ATH debit network113 - The company benefits from the ongoing migration from cash to electronic payments and the trend of financial institutions outsourcing technology systems in Latin America121 Non-GAAP Reconciliation Highlights (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $35,604 | $22,275 | | EBITDA | $64,452 | $51,004 | | Adjusted EBITDA | $68,889 | $56,290 | | Adjusted Net Income | $45,032 | $33,533 | | Adjusted Diluted EPS | $0.62 | $0.46 | Results of Operations Q1 2021 revenues increased 14% to $139.5 million, driven by recovery and digital solutions, while income from operations grew 37% to $45.0 million Q1 2021 vs Q1 2020 Results of Operations (in thousands) | Line Item | Q1 2021 | Q1 2020 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $139,528 | $121,942 | $17,586 | 14% | | Cost of revenues | $59,804 | $54,067 | $5,737 | 11% | | SG&A expenses | $16,102 | $17,317 | ($1,215) | (7)% | | Income from operations | $44,999 | $32,763 | $12,236 | 37% | Segment Results of Operations All four business segments reported year-over-year revenue growth in Q1 2021, driven by digital payments, new contracts, and increased sales volume Segment Revenue and Adjusted EBITDA (in thousands) | Segment | Q1 2021 Revenue | Q1 2020 Revenue | Q1 2021 Adj. EBITDA | Q1 2020 Adj. EBITDA | | :--- | :--- | :--- | :--- | :--- | | Payment Services - PR & Caribbean | $36,264 | $29,887 | $20,803 | $16,074 | | Payment Services - Latin America | $25,014 | $21,640 | $10,019 | $8,242 | | Merchant Acquiring | $30,867 | $25,121 | $15,517 | $11,284 | | Business Solutions | $60,611 | $55,943 | $29,632 | $27,445 | Liquidity and Capital Resources The company maintains strong liquidity with $156.4 million in cash and $117.0 million available on its revolving facility, making a $17.8 million debt repayment in Q1 2021 - As of March 31, 2021, the company had $156.4 million in cash and cash equivalents and $117.0 million available under its Revolving Facility147149 - Primary uses of cash include operating expenses, capital expenditures ($16.7 million in Q1 2021), dividend payments ($3.6 million in Q1 2021), share repurchases, and debt service150154155 - On March 8, 2021, the company made a mandatory debt repayment of $17.8 million based on its 2020 excess cash flow calculation48160 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on variable debt and foreign exchange risk, mitigating the former with swaps; a 100 basis point rate increase would raise annual interest expense by $2.8 million - The company's primary market risks are interest rate risk on its floating-rate debt and foreign exchange risk from Latin American operations178 - A 100 basis point increase in interest rates on outstanding debt would increase annual interest expense by about $2.8 million179 - The company utilizes an interest rate swap to hedge against interest rate volatility on its 2024 Term B Loan180181 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2021, the Company's disclosure controls and procedures are effective183 - No material changes to internal control over financial reporting occurred during the fiscal quarter ended March 31, 2021184 Part II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially affect financial condition or results - The company is a defendant in various lawsuits arising in the ordinary course of business, which are not expected to have a material adverse effect187 Risk Factors This section refers to risk factors from the 2020 Annual Report on Form 10-K, with no new material changes reported - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, with no material updates188 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 382,974 shares at an average price of $37.255 in Q1 2021, part of a $100 million program extended to 2023 Share Repurchases for Q1 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 8,700 | $35.777 | | Feb 2021 | 26,820 | $36.519 | | Mar 2021 | 347,454 | $37.349 | | Total | 382,974 | $37.255 | - As of March 31, 2021, approximately $85.7 million remained available for future repurchases under the authorized program189 Exhibits This section lists exhibits filed with the Form 10-Q, including RSU agreements, CEO/CFO certifications, and XBRL data files