EVERTEC, Inc. Reports Fourth Quarter and Full Year 2010 Results

SAN JUAN, Puerto Rico--(BUSINESS WIRE)-- EVERTEC, Inc. (“EVERTEC” or the “Company”) today reported its consolidated and combined results for the fourth quarter and full year ended December 31, 2010.

As previously reported on September 30, 2010, an affiliate of Apollo Management VII, L.P. (“Apollo”) acquired a 51% indirect interest in EVERTEC, with Popular, Inc. retaining a 49% indirect interest (the “Merger”). The accompanying consolidated and combined financial information and discussion below compares (a) the results of operations of the Successor for the three months ended December 31, 2010 to the results of the Predecessor for the three months ended December 31, 2009, and (b) the aggregate results of operations of the Predecessor for the nine months ended September 30, 2010 and of the Successor for the three months ended December 31, 2010 (which we refer to as the year ended December 31, 2010 results) to the results of operations of the Predecessor for the year ended December 31, 2009.

Highlights for the three months ended December 31, 2010 include:

• Total revenues increased by $8.1 million, or 12%, to $77.1 million, when compared to $69.0 million for the same period in 2009
• Operating costs and expenses, excluding depreciation and amortization and non-recurring expenses, increased by $2.1 million, or 5%, when compared to the same period in 2009
• Adjusted EBITDA for the three month period was $34.9 million, an increase of 8% over the $32.2 million achieved in the same period in 2009

Highlights for the year ended December 31, 2010 include:

• Total revenues increased by $18.0 million, or 7%, to $285.4 million, when compared to $267.4 million for the same period in 2009
• Operating costs and expenses, excluding depreciation and amortization and non-recurring expenses, increased by approximately $2.0 million, or 1%, when compared to the same period in 2009
• Adjusted EBITDA for the year ended December 31, 2010 was $127.2 million, an increase of 8% over the $117.6 million achieved in the same period in 2009

Fourth Quarter 2010 Results

EVERTEC total revenues increased $8.1 million, or 12%, to $77.1 million for three months ended December 31, 2010, when compared to $69.0 million for the same period in 2009. The increase was attributable to each of our three reportable segments: Transaction Processing increased $2.3 million, or 12%; Merchant Acquiring increased $1.4 million, or 11%; and Business Solutions increased $4.4 million, or 12%. These increases are mostly related to higher transaction volumes, new service offerings and new customer additions, including new customers added as a result of the consolidation of financial institutions in Puerto Rico.

Félix M. Villamil, President and Chief Executive Officer, stated, “We are very pleased with the solid revenue growth of our three segments, for both the last quarter and the year in 2010, which demonstrates the effectiveness of our business plans.”

For the three months ended December 31, 2010, total operating costs and expenses increased $15.9 million when compared to the same period last year. The increase is primarily the result of incremental depreciation and amortization expense of $10.0 million related to the purchase price adjustments to reflect the fair market value assigned to property and equipment and intangible assets in connection with the Merger. In addition, professional fees included increased transaction and transition advisory costs in the amount of $1.8 million incurred since the closing of the Merger. Total operating costs and expenses, excluding depreciation and amortization and non-recurring professional fees, would have increased by $2.1 million, or 5%, when compared to the same period last year.

Non-operating income (expenses) for the three months ended December 31, 2010 totaled $(14.6) million in net non-operating expenses, compared to a net non-operating income of $1.4 million for the same period in 2009. The negative variance of $16.0 million was mostly due to interest expense of $13.4 million related to the senior secured credit facilities and the notes incurred in connection with the Merger.

Adjusted EBITDA for the three months ended December 31, 2010 increased by $2.7 million, or 8%, to $34.9 million when compared to the same period last year, primarily as a result of the increase in revenues in the three business segments.

Year ended December 31, 2010 Results

EVERTEC total revenues for the year ended <chron>December 31, 2010 increased by $18.0 million, or 7%, to $285.4 million, when compared to $267.4 million for the same period in 2009.

The increase was attributable to each of our reportable segments. The Transaction Processing segment revenues increased by $3.1 million, or 4%, primarily due to higher volumes and revenue generated from new service offerings. The Merchant Acquiring segment net revenues increased by $5.8 million, or 12%, mainly due to higher transaction volumes, new customer additions, and selected price increases. The Business Solutions segment revenues increased by $9.1 million, or 6%, mostly due to higher volumes and new services provided to certain clients. Also, all three segments benefited from additional volume generated as a result of the consolidation of financial institutions in Puerto Rico.

For the year ended December 31, 2010, total operating costs and expenses increased $24.3 million, or 13%, when compared to the same period last year. Total operating costs and expenses, excluding depreciation and amortization, increased $11.6 million, or 7%, for the year ended December 31, 2010, when compared to the same period last year. The increase was primarily associated with Merger related non-recurring compensation bonuses (including payroll taxes) of $7.8 million, and audit and consulting fees of $1.8 million to support additional requirements related to the transition to a stand-alone entity. Excluding non-recurring expenses and depreciation and amortization, operating costs and expenses would have increased by approximately $2.0 million, or 1%, when compared to the year ended December 31, 2009.

Non-operating income (expenses) for the year ended December 31, 2010 totaled $(9.8) million in net non-operating expenses, compared to net non-operating income of $12.4 million for the same period in 2009. The negative variance of $22.2 million was mostly due to interest expense of $13.4 million related to the senior secured credit facilities and the notes incurred in connection with the Merger. Additionally, there was a decrease in other income resulting from a non-recurring pre-tax gain of approximately $7.9 million in 2009 from the sale of investments.

Adjusted EBITDA for the year ended December 31, 2010 increased by $9.6 million, or 8%, to $127.2 million from $117.6 million for the same period last year. For 2010, Adjusted EBITDA margin improved to 45%, compared to 44% for the same period last year. The improvement in margin was mostly driven by our ability to support incremental business volume with low incremental costs due to our highly scalable technology platform.

Cash and Liquidity

As of December 31, 2010, the Company’s liquidity stood at $105.7 million, with $55.7 million of unrestricted cash and $50.0 million of borrowing availability under our revolving credit facility (before giving effect to letters of credit), which remained undrawn.

Recent Developments

Refinancing of Senior Secured Credit Facilities

On March 3, 2011, the Company amended its senior secured credit facilities to, among other things, reduce the interest rate margins payable on the term loan and revolving loan borrowings, decrease the applicable LIBOR and ABR floors, and increase the amount available for future borrowing under the uncommitted incremental facility. We also modified certain restrictive covenants to provide us generally with additional flexibility. For additional details, see our report to investors dated March 9, 2011 posted on the Investor Relations section of our website.

Acquisition of CONTADO Minority Interests

On March 31, 2011, EVERTEC acquired a 19.99% equity interest in CONTADO from Popular. Pursuant to the merger agreement and related documents, we transferred to Popular the $20.0 million that was held back at the time of the Merger and we received cash proceeds of $10.8 million representing 50% of the after tax sales proceeds of the 33.98% equity interest in CONTADO not transferred to us from Popular. On April 7, 2011, we made a repayment of our senior secured term loans of $1.7 million, which repayment was required under the terms of our senior secured credit facilities.

Conference Call Information

The Company will host its first investor conference call on Thursday, April 14, 2011 at 4:30 p.m. (Eastern Time) to review the operating results for the fourth quarter 2010 and for the year ended December 31, 2010.

To listen to the call, dial (866) 804-6929 (U.S.) or (857) 350-1675 (outside the U.S.), passcode #67469075. This call will also be available through April 28 by dialing (888) 286-8010 (U.S.) or (617) 801-6888 (outside the U.S.), reference pin # 84097682.

About EVERTEC, Inc.

EVERTEC, Inc. is a diversified processing business, offering transaction processing, payment processing, merchant acquiring and other related services in Puerto Rico and certain countries within the , Central and Latin America. EVERTEC operates in three reportable business segments organized based on the nature of products and services: transaction processing, merchant acquiring and business solutions. EVERTEC owns and operates the ATH network, the leading debit payment and ATM network in Puerto Rico. EVERTEC’s products and services include point-of-sale processing, network and switch services, automated teller machine driving services, core bank processing, business process outsourcing solutions, technology infrastructure management, financial services applications and merchant acquiring services.Headquartered in San Juan, Puerto Rico, EVERTEC has approximately 1,800 employees in 8 countries throughout the Caribbean, Central and Latin America.EVERTEC is 51% owned by an affiliate of Apollo Management VII, L.P., a leading private equity and capital markets investor, and 49% owned by Popular, Inc., the largest financial institution in Puerto Rico and the Caribbean.For more information about EVERTEC, please visit www.evertecinc.com.

Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements" within themeaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates" and "plans" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: our high level of indebtedness and restrictions contained in our debt agreements; our ability to generate sufficient cash to service our indebtedness and to generate future profits; our reliance on our relationship with Popular, Inc. for a significant portion of our revenues; our ability to renew our client contracts on terms favorable to us; our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems; our ability to develop, install and adopt new technology; a decreased client base due to consolidations in the banking and financial services industry; the credit risk of our merchant clients, for which we may also be liable; the continuing market position of the ATH network; our dependence on credit card associations; changes in the regulatory environment and changes in international, legal, political, administrative or economic conditions; the geographical concentration of our business in Puerto Rico; operating an international business in multiple regions with potential political and economic instability; our ability to execute our expansion and acquisition strategies; our ability to protect our intellectual property rights; our ability to recruit and retain qualified personnel; our ability to comply with federal, state and local regulatory requirements; evolving industry standards; and our ability to operate as a stand-alone entity.

Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings “Forward-Looking Statements” and "Risk Factors" in the reports to our investors that are posted from time to time on our website, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

Net income reconciliation to EBITDA and Adjusted EBITDA

We define “EBITDA” as earnings before interest, taxes, depreciation and amortization. We define “Adjusted EBITDA” as EBITDA as further adjusted to exclude unusual items and other adjustments described below. We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition, our presentation of Adjusted EBITDA is consistent with the equivalent measurements that are contained in the documents governing our indebtedness. In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses such as those excluded in calculating them. Further, our presentation of these measures should not be construed as an inference that our future operating results will not be affected by unusual or nonrecurring items.

Some of the limitations of EBITDA and Adjusted EBITDA are as follows:

• they do not reflect cash outlays for capital expenditures or future contractual commitments;
• they do not reflect changes in, or cash requirements for, working capital;
• they do not reflect interest expense, or the cash requirements necessary to service interest or principal payments on indebtedness;
• they do not reflect income tax expense or the cash necessary to pay income taxes;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and
• other companies, including other companies in our industry, may not use EBITDA and Adjusted EBITDA or may calculate EBITDA and Adjusted EBITDA differently than as presented in this press release, limiting their usefulness as a comparative measure.

Adjusted EBITDA is not a measurement of liquidity or financial performance under GAAP. You should not consider Adjusted EBITDA as an alternative to cash flows from operating activities determined in accordance with GAAP, as an indicator of cash flows, as a measure of liquidity or as an alternative to operating or net income determined in accordance with GAAP.

While management believes that these measures provide useful information to investors, the Securities and Exchange Commission (“SEC”) may require that EBITDA or Adjusted EBITDA be presented differently, or not at all, in any future filings the Company makes with the SEC.

A reconciliation of net income to EBITDA and Adjusted EBITDA is provided below.

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EVERTEC, Inc.
Investor Contacts:Luis O. Abreu, 787-759-9999, ext 4895
Chief Financial Officer
[email protected]
orLuis M. Cabrera, 787-759-9999, ext 3897
Treasurer – Investor Relations
[email protected]
or
Media Contact:Wanda Betancourt, APR, 787-759-9999, ext 4805
Senior Vice President
HR, Communications and Marketing
[email protected]

Source: EVERTEC, Inc.