Evertec(EVTC) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Performance EVERTEC reported strong Q1 2024 revenue growth of 28% to $205.3 million, with Adjusted EBITDA and EPS increasing despite a GAAP Net Income decline Financial Highlights EVERTEC reported strong Q1 2024 results with revenue up 28% to $205.3 million, Adjusted EBITDA and EPS growth, and a $70 million share repurchase program initiated Q1 2024 Key Financial Metrics vs. Q1 2023 (in millions) | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $205.3 | +28% | | GAAP Net Income | $16.0 | -47% | | GAAP Diluted EPS | $0.24 | -48% | | Adjusted EBITDA | $78.2 | +16% | | Adjusted EPS | $0.72 | +4% | - The company entered into an accelerated share repurchase (ASR) agreement for $70 million, which is anticipated to be completed in the third quarter of 2024[7] - The CEO stated the results reflect the strength of the business in Puerto Rico and successful expansion in Latin America[4] Detailed Financial Results Q1 2024 revenue grew 28% to $205.3 million, driven by the Sinqia acquisition and organic growth, while GAAP Net Income declined due to higher expenses, and Adjusted EBITDA increased 16% despite margin contraction - Total revenue increased by 28% to $205.3 million, reflecting the contribution from the Sinqia acquisition and organic growth, with strong sales volume driving Merchant acquiring revenue and Payments Puerto Rico benefiting from transaction growth and ATH Movil Business[4] - GAAP Net Income attributable to common shareholders decreased by $14.1 million to $16.0 million, primarily due to increased interest expense from debt for the Sinqia acquisition and higher depreciation and amortization expense[5] - Adjusted EBITDA increased by $11.0 million to $78.2 million, though the Adjusted EBITDA margin decreased by approximately 390 basis points to 38.1%, reflecting the impact of the lower-margin Sinqia acquisition[6] - Adjusted Net Income rose to $48.0 million from $45.6 million in the prior year, and Adjusted EPS increased to $0.72 from $0.69, driven by higher adjusted net income but partially offset by a higher share count from the Sinqia acquisition[7][8] Share Repurchase Program In Q1 2024, EVERTEC repurchased 1.5 million shares of common stock at an average price of $37.92 per share as part of its ASR program - In Q1 2024, the Company repurchased 1.5 million shares of its common stock[9] - The average repurchase price was $37.92 per share, as part of the Company's ASR[9] 2024 Full-Year Outlook EVERTEC projects 2024 full-year consolidated revenue between $846 million and $854 million, with Adjusted EPS expected to range from $2.85 to $2.94 2024 Financial Outlook For 2024, EVERTEC projects consolidated revenue of $846 million to $854 million and Adjusted EPS of $2.85 to $2.94, alongside $80 million in capital expenditures and a 6% to 7% effective tax rate Full-Year 2024 Guidance (in millions, except EPS) | Metric | 2024 Outlook | YoY Growth vs. 2023 | | :--- | :--- | :--- | | Total Consolidated Revenue | $846M - $854M | 22% to 23% | | Adjusted EPS | $2.85 - $2.94 | 1% to 4% | | Capital Expenditures | ~$80M | N/A | | Effective Tax Rate | ~6% to 7% | N/A | Financial Statements The financial statements detail Q1 2024 performance, showing revenue growth but a decline in net income, alongside changes in balance sheet composition and cash flow activities Consolidated Statements of Income Q1 2024 revenues increased to $205.3 million, but higher operating costs, especially tripled interest expense, led to a decline in income from operations and net income attributable to common stockholders Q1 2024 Statement of Income (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $205,318 | $159,814 | | Income from operations | $32,803 | $40,090 | | Interest expense | $(19,939) | $(5,643) | | Net income attributable to common stockholders | $15,979 | $30,052 | | Diluted EPS | $0.24 | $0.46 | Consolidated Balance Sheets As of March 31, 2024, total assets decreased slightly to $1.996 billion, while total liabilities increased to $1.445 billion, resulting in a decrease in total equity to $511 million Balance Sheet Summary (in thousands) | Metric | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $562,999 | $561,354 | | Goodwill | $777,932 | $791,700 | | Total assets | $1,996,486 | $2,060,263 | | Total current liabilities | $354,432 | $298,313 | | Long-term debt | $941,717 | $946,816 | | Total liabilities | $1,444,589 | $1,424,887 | | Total equity | $511,239 | $598,408 | Consolidated Statements of Cash Flows Q1 2024 net cash from operations decreased to $36.0 million, while investing activities used $22.0 million, and financing activities used $16.4 million due to share repurchases and debt movements Cash Flow Summary for Three Months Ended March 31 (in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,975 | $54,511 | | Net cash used in investing activities | $(21,994) | $(36,637) | | Net cash used in financing activities | $(16,350) | $(40,579) | | Net increase in cash, cash equivalents, and restricted cash | $(6,137) | $(22,980) | Segment Information In Q1 2024, the Latin America Payments and Solutions segment led revenue growth, more than doubling to $74.2 million due to the Sinqia acquisition, with all segments showing revenue increases and varied Adjusted EBITDA performance Segment Revenue and Adjusted EBITDA (in thousands) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | Q1 2024 Adj. EBITDA | Q1 2023 Adj. EBITDA | | :--- | :--- | :--- | :--- | :--- | | Payment Services - Puerto Rico & Caribbean | $53,031 | $48,429 | $30,352 | $27,875 | | Latin America Payments and Solutions | $74,216 | $35,317 | $16,297 | $10,355 | | Merchant Acquiring, net | $43,099 | $40,347 | $16,220 | $15,626 | | Business Solutions | $58,128 | $55,695 | $23,039 | $22,367 | Non-GAAP Financial Measures and Reconciliations This section explains the company's use of non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents for both historical results and future outlook Explanation of Non-GAAP Measures The company utilizes non-GAAP measures like EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to supplement GAAP results, providing a clearer view of operational performance by excluding non-cash and unusual items - Management uses non-GAAP measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Earnings per common share, as they are believed to be pertinent to daily operations and are frequently used by industry stakeholders for evaluation[12] - Adjusted EBITDA excludes items like share-based compensation, M&A-related fees, and unrealized foreign currency gains/losses[15] - Adjusted Net Income is used to measure overall profitability by excluding non-cash amortization and depreciation from M&A activity, among other adjustments[16][18] Reconciliation of GAAP to Non-GAAP Results Q1 2024 GAAP Net Income of $16.4 million was reconciled to an Adjusted Net Income of $48.0 million, with key adjustments leading to a Non-GAAP Diluted EPS of $0.72 compared to GAAP EPS of $0.24 Reconciliation of Net Income to Adjusted Net Income (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $16,387 | $30,063 | | EBITDA | $67,699 | $56,823 | | Adjusted EBITDA | $78,177 | $67,135 | | Adjusted net income (Non-GAAP) | $48,004 | $45,587 | Reconciliation of Diluted EPS (GAAP to Non-GAAP) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.24 | $0.46 | | Adjusted Diluted EPS (Non-GAAP) | $0.72 | $0.69 | Reconciliation of GAAP to Non-GAAP Outlook EVERTEC's 2024 full-year outlook projects GAAP EPS between $1.46 and $1.60, with adjustments leading to a Non-GAAP Adjusted EPS range of $2.85 to $2.94 2024 EPS Outlook Reconciliation (GAAP to Non-GAAP) | Metric | Low End | High End | | :--- | :--- | :--- | | EPS (GAAP) | $1.46 | $1.60 | | Share-based comp, non-cash equity earnings & other | $0.77 | $0.77 | | M&A related depreciation and amortization | $0.71 | $0.69 | | Non-cash interest expense | $0.05 | $0.04 | | Tax effect of non-gaap adjustments | $(0.09) | $(0.10) | | Non-controlling interest | $(0.05) | $(0.06) | | Total adjustments | $1.39 | $1.34 | | Adjusted EPS (Non-GAAP) | $2.85 | $2.94 | Other Information This section provides an overview of the company's business and highlights key forward-looking statements and associated risk factors About the Company EVERTEC, Inc. is a leading full-service transaction processor and financial technology provider operating the ATH® network across Latin America, Puerto Rico, and the Caribbean - EVERTEC is a leading full-service transaction processor and financial technology provider in Latin America, Puerto Rico, and the Caribbean[11] - The company owns and operates the ATH® network, one of the leading PIN debit networks in Latin America, and processes approximately six billion transactions annually[11] Forward-Looking Statements & Risk Factors This report contains forward-looking statements subject to risks including reliance on Popular, Inc., technology infrastructure, cybersecurity threats, regulatory changes, economic instability, and Sinqia acquisition integration - The earnings release contains forward-looking statements regarding financial guidance and future events, which are not historical facts and are subject to risks[19] - Significant risks include reliance on Popular, Inc., security of processing systems, client consolidation, the market position of the ATH network, and regulatory changes[20] - Other material risks involve the geographical concentration in Puerto Rico, political and economic instability in Latin America, cybersecurity threats, and the inability to successfully integrate the Sinqia acquisition[21]