Evertec(US:EVTC)2025-07-31 11:37Forward-Looking Statements This section outlines forward-looking statements concerning future performance and strategies, which are inherently subject to significant risks and uncertainties - This report contains forward-looking statements regarding future performance, business strategies, growth, and other operational objectives, which are subject to significant risks and uncertainties12 - Key risk factors that could cause actual results to differ materially include reliance on Popular, Inc., IT system and data security risks, regulatory compliance challenges, geographical concentration in Puerto Rico, potential inability to realize merger benefits, and risks associated with substantial indebtedness and interest rate fluctuations1314 Part I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025, including balance sheets, income statements, and cash flows, with detailed explanatory notes Unaudited Condensed Consolidated Financial Statements The company's total assets increased to $1.96 billion as of June 30, 2025, from $1.86 billion at year-end 2024, primarily due to an increase in goodwill; for the six months ended June 30, 2025, net income attributable to common stockholders rose to $73.2 million from $47.9 million in the prior-year period, while net cash provided by operating activities decreased significantly to $86.1 million from $131.3 million year-over-year Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $290,578 | $273,645 | | Goodwill | $771,403 | $726,901 | | Total Assets | $1,961,345 | $1,857,611 | | Total Long-term debt | $914,865 | $925,062 | | Total Liabilities | $1,304,641 | $1,338,350 | | Total Stockholders' Equity | $612,330 | $472,524 | Condensed Consolidated Income Statement Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $229,607 | $211,978 | $458,399 | $417,296 | | Income from Operations | $56,134 | $43,360 | $105,634 | $76,163 | | Net Income | $40,973 | $32,523 | $74,064 | $48,910 | | Diluted EPS | $0.62 | $0.49 | $1.13 | $0.73 | Condensed Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,128 | $131,340 | | Net cash used in investing activities | ($42,680) | ($50,167) | | Net cash used in financing activities | ($40,325) | ($85,776) | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies, recent acquisitions, segment performance, and debt structure, including a significant revenue concentration with Popular, Inc - In late 2024, the company acquired Grandata, Inc., a data analytics company, for $33.3 million and Nubity, Inc., a cloud services provider, for $11.0 million to enhance its product offerings3334 - Goodwill increased to $771.4 million as of June 30, 2025, from $726.9 million at year-end 2024, primarily due to foreign currency translation adjustments of $44.0 million and a measurement period adjustment of $0.5 million for prior year acquisitions39 - Total debt stood at $951.3 million as of June 30, 2025, primarily consisting of a $415.2 million Term A Loan and a $523.6 million Term B Loan43 - Popular, Inc. remains a key customer, accounting for approximately 31% of total revenues for the six months ended June 30, 202574 - Subsequent to the quarter end, on July 24, 2025, the Board declared a quarterly cash dividend of $0.05 per share; on July 30, 2025, the Board increased the share repurchase authorization to $150 million114115 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth for Q2 and H1 2025, driven by organic expansion and acquisitions, alongside segment performance, liquidity, and non-GAAP financial measures, noting a decrease in operating cash flow Results of Operations For Q2 2025, revenues increased 8% to $229.6 million, and income from operations grew 29% to $56.1 million compared to Q2 2024; for the first six months of 2025, revenues increased 10% to $458.4 million, and income from operations grew 39% to $105.6 million, attributed to organic expansion, pricing initiatives, and recent acquisitions, while depreciation and amortization expense decreased due to fully amortized intangible assets Q2 2025 vs. Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $229,607 | $211,978 | 8% | | Cost of Revenues | $110,060 | $97,481 | 13% | | SG&A Expenses | $35,104 | $38,187 | (8)% | | Income from Operations | $56,134 | $43,360 | 29% | H1 2025 vs. H1 2024 Performance (in thousands) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $458,399 | $417,296 | 10% | | Cost of Revenues | $224,669 | $199,929 | 12% | | SG&A Expenses | $71,314 | $73,813 | (3)% | | Income from Operations | $105,634 | $76,163 | 39% | - Revenue growth was driven by organic expansion in all segments, pricing initiatives in Merchant Acquiring, increased ATH Movil revenue, and contributions from acquisitions completed in Q4 2024129136 - Depreciation and amortization expense decreased by 14% in Q2 and 16% in H1 2025, primarily due to intangible assets that became fully amortized during the prior year132139 Segment Results of Operations All four segments reported revenue growth in Q2 and H1 2025; Latin America Payments and Solutions saw the largest revenue increase, driven by organic growth and acquisitions, leading to a significant margin expansion; Merchant Acquiring benefited from improved spread and sales volume; Business Solutions revenue grew from new projects, though its Segment Adjusted EBITDA margin decreased due to higher costs Q2 2025 Segment Performance (in thousands) | Segment | Revenue | % Change (YoY) | Segment Adj. EBITDA | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Payment Services - PR & Caribbean | $56,421 | 4.1% | $33,028 | 5.3% | | Latin America Payments & Solutions | $86,055 | 15.2% | $23,350 | 33.4% | | Merchant Acquiring | $47,292 | 4.4% | $20,002 | 9.6% | | Business Solutions | $64,519 | 3.5% | $26,032 | (12.5)% | H1 2025 Segment Performance (in thousands) | Segment | Revenue | % Change (YoY) | Segment Adj. EBITDA | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Payment Services - PR & Caribbean | $111,578 | 4.1% | $64,466 | 4.5% | | Latin America Payments & Solutions | $169,830 | 14.1% | $48,245 | 42.7% | | Merchant Acquiring | $94,941 | 7.4% | $40,361 | 17.1% | | Business Solutions | $130,083 | 8.0% | $48,243 | (8.6)% | Liquidity and Capital Resources The company's primary liquidity source is cash from operations, which was $86.1 million for H1 2025, a decrease from $131.3 million in H1 2024 due to working capital requirements; as of June 30, 2025, cash and cash equivalents were $290.6 million, with an additional $193.9 million available under the revolving credit facility, and management believes existing cash flows are adequate to meet liquidity needs for at least the next twelve months - As of June 30, 2025, the company had $290.6 million in cash and cash equivalents and $193.9 million available for borrowing under its Revolving Facility160161 Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Cash from Operations | $86,128 | $131,340 | | Cash used in Investing | ($42,680) | ($50,167) | | Cash used in Financing | ($40,325) | ($85,776) | - Capital expenditures for H1 2025 were $42.3 million, a decrease from $56.3 million in the same period of 2024168 Non-GAAP Measures The company uses non-GAAP measures like EBITDA, Adjusted EBITDA, and Adjusted Net Income to evaluate performance; for Q2 2025, Adjusted EBITDA was $92.6 million, up from $86.1 million in Q2 2024, and Adjusted Net Income was $57.7 million ($0.89 per diluted share) compared to $53.8 million ($0.83 per diluted share) in the prior year quarter, reflecting improved underlying profitability Non-GAAP Performance Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $92,565 | $86,052 | $182,004 | $164,229 | | Adjusted Net Income | $57,665 | $53,815 | $113,925 | $101,819 | | Adjusted Diluted EPS | $0.89 | $0.83 | $1.76 | $1.55 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations, foreign currency exchange, and inflation; a hypothetical 100 basis point increase in interest rates would raise annual interest expense by approximately $4.1 million, which the company mitigates using three interest rate swap agreements, while foreign exchange risk stems from Latin American operations, and rising inflation could negatively impact input costs - A hypothetical 100 basis point increase in interest rates on the company's variable-rate debt would increase annual interest expense by approximately $4.1 million194 - The company uses three interest rate swap agreements to convert a portion of its variable-rate debt to fixed rates, hedging against interest rate risk195 - Foreign exchange risk from operations in Latin America resulted in an unfavorable foreign currency translation adjustment of $58.8 million recorded in accumulated other comprehensive income as of June 30, 2025198 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation by the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of June 30, 2025201 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting202 Part II. OTHER INFORMATION Legal Proceedings & Risk Factors The company is involved in ordinary course legal proceedings that are not expected to have a material adverse effect, and there have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - The company is party to various legal proceedings arising in the ordinary course of business, which management believes will not have a material adverse effect on the company204 - There have been no material changes to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2024205 Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, the company repurchased 101,890 shares of its common stock at an average price of $36.22 per share; subsequently, on July 30, 2025, the Board of Directors increased the share repurchase authorization to an aggregate of $150 million, effective through December 31, 2026 Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 6/1/2025-6/30/2025 | 101,890 | $36.22 | - On July 30, 2025, the Board approved an increase to the share repurchase authorization, permitting future repurchases of up to an aggregate of $150 million worth of common stock by December 31, 2026206 Other Information and Exhibits This section confirms there were no defaults upon senior securities or mine safety disclosures, states that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter, and provides a list of exhibits filed with the report - No defaults upon senior securities were reported for the period207 - During the quarter, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement212 - The report includes a list of filed exhibits, such as the CEO and CFO certifications pursuant to the Sarbanes-Oxley Act213