UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023 or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 001-35872

EVERTEC, Inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


Puerto Rico		66-0783622
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

Cupey Center Building,	Road 176, Kilometer 1.3,
San Juan,	Puerto Rico	00926
(Address of principal executive offices)		(Zip Code)

(787) 759-9999

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	EVTC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At ~~October~~July 27, ~~2022,~~2023, there were ~~65,202,196~~64,630,611 outstanding shares of common stock of EVERTEC, Inc.

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		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of ~~September~~June 30 ~~2022~~, 2023 and December 31, ~~2021~~2022	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30 , 2023 and 2022 ~~and 2021~~	23
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30 , 2023 and 2022 ~~and 2021~~	34
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30 , 2023 and 2022 ~~and 2021~~	5
	Notes to Unaudited Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2723
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4036
Item 4.	Controls and Procedures	4137
Part II. OTHER INFORMATION		4238
Item 1.	Legal Proceedings	4238
Item 1A.	Risk Factors	4238
Item 2.	Unregistered Sales of Equity in Securities, ~~and~~ Use of Proceeds and Issuer Purchases of Equity Securities	4239
Item 3.	Defaults Upon Senior Securities	4239
Item 4.	Mine Safety Disclosures	4339
Item 5.	Other Information	4340
Item 6.	Exhibits	4441
SIGNATURES		4542

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). ~~Such statements can be identified by the use of forward-looking terminology~~

Words such as “believes,” “expects,” ~~“may,”~~"anticipates," "intends," "projects," “estimates,” ~~“will,” “should,”~~and “plans” and similar expressions of future or ~~“anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy.~~conditional verbs such as "will,""should,""would," "may," and "could" are generally forward-looking in nature and not historical facts. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may ~~differ~~vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business and could impact our business in the future are:

•our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our second amended and restated Master Services Agreement (“MSA”) with them, and as it may impact our ability to grow our ~~merchant acquiring~~ business;

•our ability to renew our client contracts on terms favorable to us, including but not limited to the current term and any extension of the MSA with Popular;

•our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on our personnel and certain third parties with whom we do business, and the risks to our business if our systems are hacked or otherwise compromised;

•our ability to develop, install and adopt new software, technology and computing systems;

•a decreased client base due to consolidations ~~and~~and/or failures in the 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;

•a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending;

•our dependence on credit card associations, including any adverse changes in credit card association or network rules or fees;

•changes in the regulatory environment and changes in macroeconomic, market, international, legal, tax, political, or administrative conditions, including inflation or the risk of recession;

•the geographical concentration of our business in Puerto Rico, including our business with the government of Puerto Rico and its instrumentalities, which are facing severe political and fiscal challenges;

•additional adverse changes in the general economic conditions in Puerto Rico, whether as a result of the government’s debt crisis or otherwise, including the continued migration of Puerto Ricans to the U.S. mainland, which could negatively affect our customer base, general consumer spending, our cost of operations and our ability to hire and retain qualified employees;

•operating an international business in Latin America and the Caribbean, in jurisdictions with potential political and economic instability;

•the impact of foreign exchange rates on operations;

•our ability to protect our intellectual property rights against infringement and to defend ourselves against claims of infringement brought by third parties;

•our ability to comply with U.S. federal, state, local and foreign regulatory requirements;

•evolving industry standards and adverse changes in global economic, political and other conditions;

•our level of indebtedness and the impact of rising interest rates, restrictions contained in our debt agreements, including the secured credit facilities, as well as debt that could be incurred in the future;

•our ability to prevent a cybersecurity attack or breach to our information security;

•the possibility that we could lose our preferential tax rate in Puerto Rico;

•failure to satisfy one or more conditions to closing of the Transaction(as defined below);

•the inability to integrate Sinqia (as defined below) successfully into the Company or to achieve expected accretion to our earnings per common share;

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•the loss of personnel or customers in connection with the Transaction,;

•the cost and other terms of new debt financing incurred in connection with the Transaction; and

•the possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting our main markets in Latin America and the ~~Caribbean;~~

•~~uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate;~~

•~~the elimination of Popular's ownership of our common stock; and~~

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•the other factors set forth under "Part 1, Item 1A. Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC") on February 25, 2022, as updated by Part II, Item 1A. “Risk Factors” in this Report.Caribbean.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under “Part 1, Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2021~~2022 filed with the ~~SEC~~Securities and Exchange Commission (the “SEC”) on February ~~25, 2022,~~24, 2023, as updated by Part II, Item 1A. ~~“Risk~~“Risk Factors” in this Report, ~~and as updated in our subsequent filings with the SEC,~~” and in ~~“Item~~Part I, Item 2.“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this ~~Report. These forward-looking statements speak only~~Report as ofupdated in our subsequent filings with the ~~date of this Report, and we do not undertake any~~SEC. The Company undertakes no obligation to release publicly ~~release~~ any revisions to ~~these~~any forward-looking statements, to ~~reflect~~report events or ~~circumstances after the date of this Report or~~ to ~~reflect~~report the occurrence of unanticipated ~~events.~~events unless it is required to do so by law.

WHERE YOU CAN FIND MORE INFORMATION

All reports we file with the ~~SEC~~Securities and Exchange Commission ("SEC") are available free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also provide copies of our SEC filings at no charge upon request and make electronic copies of our reports available for download through our website at www.evertecinc.com as soon as reasonably practicable after filing such material with the SEC.

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EVERTEC, Inc. Unaudited Condensed Consolidated Balance Sheets

(In thousands, except ~~for~~ share information)


	June 30, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	191,620	$	185,274
Restricted cash	19,485		18,428
Accounts receivable, net	109,421		111,493
Settlement assets	30,014		31,542
Prepaid expenses and other assets	43,348		42,392
Total current assets	393,888		389,129
Debt securities available-for-sale, at fair value	2,175		2,203
Investment in equity investee	17,136		14,661
Property and equipment, net	57,761		56,387

Operating lease right-of-use asset	14,035		15,918
Goodwill	438,256		423,392
Other intangible assets, net	213,779		200,320
Deferred tax asset	8,264		5,701
Derivative asset	7,733		7,440
Net investment in leases	—		14
Other long-term assets	18,606		16,578
Total assets	$	1,171,633	$	1,131,743
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	79,749	$	80,666
Accounts payable	50,147		29,730
Contract liability	17,821		15,226
Income tax payable	171		9,406
Current portion of long-term debt	20,750		20,750
Short-term borrowings	—		20,000

Current portion of operating lease liability	6,189		5,936
Settlement liabilities	24,103		26,696
Total current liabilities	198,930		208,410
Long-term debt	379,602		389,498
Deferred tax liability	9,407		10,111
Contract liability - long term	33,345		34,068
Operating lease liability - long-term	8,579		10,788

Other long-term liabilities	3,628		4,120
Total liabilities	633,491		656,995
Commitments and contingencies (Note 14)
Stockholders’ equity
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued	—		—
Common stock, par value $0.01; 206,000,000 shares authorized; 64,839,109 shares issued and outstanding as of June 30, 2023 (December 31, 2022 - 64,847,233)	648		648
Additional paid-in capital	—		—
Accumulated earnings	529,364		487,349
Accumulated other comprehensive income (loss), net of tax	4,523		(16,486)
Total EVERTEC, Inc. stockholders’ equity	534,535		471,511
Non-controlling interest	3,607		3,237
Total equity	538,142		474,748
Total liabilities and equity	$	1,171,633	$	1,131,743

September 30, 2022 December 31, 2021
Assets
Current Assets:
Cash and cash equivalents $ 224,971 $ 266,351
Restricted cash 18,705 19,566
Accounts receivable, net 112,293 113,285
Prepaid expenses and other assets 40,992 37,148
Total current assets 396,961 436,350
Debt securities available-for-sale, at fair value 2,198 3,041
Investment in equity investee 14,071 12,054
Property and equipment, net 49,928 48,533
Operating lease right-of-use asset 17,799 21,229
Goodwill 417,819 393,318
Other intangible assets, net 196,316 213,288
Deferred tax asset 5,414 6,910
Net investment in leases 14 107
Derivative asset 7,070 —
Other long-term assets 13,378 9,926
Total assets $ 1,120,968 $ 1,144,756
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities $ 82,798 $ 74,540
Accounts payable 33,489 28,484
Contract liability 17,051 17,398
Income tax payable 10,757 7,132
Current portion of long-term debt 28,813 19,750
Current portion of operating lease liability 6,007 5,580
Total current liabilities 178,915 152,884
Long-term debt 426,691 444,785
Deferred tax liability 7,998 2,369
Contract liability - long term 34,726 36,258
Operating lease liability - long-term 13,320 16,456
Derivative liability — 13,392
Other long-term liabilities 4,063 8,344
Total liabilities 665,713 674,488
Commitments and contingencies (Note 14)
Stockholders’ equity
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued — —
Common stock, par value $0.01; 206,000,000 shares authorized; 65,588,270 shares issued and outstanding as of September 30, 2022 (December 31, 2021 - 71,969,856) 655 719
Additional paid-in capital — 7,565
Accumulated earnings 480,740 506,051
Accumulated other comprehensive loss, net of tax (29,586) (48,123)
Total EVERTEC, Inc. stockholders’ equity 451,809 466,212
Non-controlling interest 3,446 4,056
Total equity 455,255 470,268
Total liabilities and equity $ 1,120,968 $ 1,144,756

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share information)

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021

Revenues (affiliates Note 16) $ 145,803 $ 145,883 $ 456,622 $ 434,559
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization 76,272 62,995 215,244 182,180
Selling, general and administrative expenses 26,001 17,126 66,436 49,980
Depreciation and amortization 19,712 18,745 58,432 56,091
Total operating costs and expenses 121,985 98,866 340,112 288,251
Income from operations 23,818 47,017 116,510 146,308
Non-operating income (expenses)
Interest income 807 504 2,279 1,343
Interest expense (6,763) (5,684) (18,242) (17,248)
Earnings of equity method investment 688 411 2,120 1,307
(Loss) gain on foreign currency remeasurement (7,779) (304) (6,858) 652
Gain on sale of a business 135,642 — 135,642 —
Other income (expenses) 374 450 1,621 2,067
Total non-operating income (expenses) 122,969 (4,623) 116,562 (11,879)
Income before income taxes 146,787 42,394 233,072 134,429
Income tax expense 9,048 7,134 22,911 14,474
Net income 137,739 35,260 210,161 119,955
Less: Net loss attributable to non-controlling interest (75) (54) (140) (59)
Net income attributable to EVERTEC, Inc.’s common stockholders 137,814 35,314 210,301 120,014
Other comprehensive income (loss), net of tax of $716, $382, $1,442 and $817
Foreign currency translation adjustments 4,125 (6,942) (210) (7,823)
Gain on cash flow hedges 5,762 1,537 18,824 6,814
Unrealized (loss) gain on change in fair value of debt securities available-for-sale $ (21) $ 8 $ (77) $ 97
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders $ 147,680 $ 29,917 $ 228,838 $ 119,102
Net income per common share - basic attributable to EVERTEC, Inc.’s common stockholders $ 2.08 $ 0.49 $ 3.01 $ 1.66
Net income per common share - diluted attributable to EVERTEC, Inc.’s common stockholders $ 2.06 $ 0.48 $ 2.98 $ 1.65


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Revenues (affiliates Note 15)	$	167,076	$	160,571	$	326,890	$	310,819





Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	80,452		74,313		156,869		138,972
Selling, general and administrative expenses	29,522		20,051		53,397		40,435
Depreciation and amortization	22,329		19,560		41,761		38,720
Total operating costs and expenses	132,303		113,924		252,027		218,127
Income from operations	34,773		46,647		74,863		92,692
Non-operating income (expenses)
Interest income	2,103		805		3,236		1,472
Interest expense	(5,640)		(5,932)		(11,283)		(11,479)
Gain (loss) on foreign currency remeasurement	333		(1,747)		(4,531)		921
Earnings of equity method investment	1,476		862		2,631		1,432
Other income, net	1,591		609		2,601		1,247
Total non-operating expenses	(137)		(5,403)		(7,346)		(6,407)
Income before income taxes	34,636		41,244		67,517		86,285
Income tax expense	6,586		7,688		9,404		13,863
Net income	28,050		33,556		58,113		72,422
Less: Net loss attributable to non-controlling interest	(105)		(33)		(94)		(65)
Net income attributable to EVERTEC, Inc.’s common stockholders	28,155		33,589		58,207		72,487
Other comprehensive income (loss), net of tax of $(195), $(18), $(311) and $405
Foreign currency translation adjustments	3,153		(6,549)		20,758		(4,335)
Gain on cash flow hedges	1,816		3,337		271		13,062
Unrealized loss on change in fair value of debt securities available-for-sale	—		$	(29)	(20)		$	(56)
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders	$	33,124	$	30,348	$	79,216	$	81,158
Net income per common share - basic attributable to EVERTEC, Inc.’s common stockholders	$	0.43	$	0.47	$	0.90	$	1.01
Net income per common share - diluted attributable to EVERTEC, Inc.’s common stockholders	$	0.43	$	0.47	$	0.89	$	1.00

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share information)


	Number of Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income		Non-Controlling Interest		Total Stockholders’ Equity
Balance at December 31, 2022	64,847,233	$	648	$	—	$	487,349	$	(16,486)	$	3,237	$	474,748
Share-based compensation recognized	—	—		5,557		—		—		—		5,557
Repurchase of common stock	(187,976)	(1)		—		(6,268)		—		—		(6,269)
Restricted stock units delivered	419,205	4		(5,557)		(321)		—		—		(5,874)
Net income	—	—		—		30,052		—		11		30,063
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,249)		—		—		(3,249)
Other comprehensive income	—	—		—		—		16,040		125		16,165

Balance at March 31, 2023	65,078,462	$	651	$	—	$	507,563	$	(446)	$	3,373	$	511,141
Share-based compensation recognized	—	—		6,499		—		—		—		$	6,499
Repurchase of common stock	(268,398)	(3)		(6,418)		(3,100)		—		—		(9,521)
Restricted stock units delivered	29,045	—		(81)		—		—		—		(81)
Net income	—	—		—		28,155		—		(105)		28,050
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,254)		—		—		(3,254)
Other comprehensive income	—	—		—		—		4,969		339		5,308

Balance at June 30, 2023	64,839,109	$	648	$	—	$	529,364	$	4,523	$	3,607	$	538,142


	Number of Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total Stockholders’ Equity
Balance at December 31, 2021	71,969,856	$	719	$	7,565	$	506,051	$	(48,123)	$	4,056	$	470,268
Share-based compensation recognized	—	—		4,279		—		—		—		4,279
Repurchase of common stock	(521,643)	(5)		(6,193)		(14,981)		—		—		(21,179)
Restricted stock units delivered	251,085	3		(5,651)		—		—		—		(5,648)
Net income (loss)	—	—		—		38,898		—		(32)		38,866
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,598)		—		—		(3,598)
Other comprehensive income	—	—		—		—		11,912		248		12,160

Balance at March 31, 2022	71,699,298	$	717	$	—	$	526,370	$	(36,211)	$	4,272	$	495,148
Share-based compensation recognized	—	—		5,165		—		—		—		5,165
Repurchase of common stock	(357,114)	(4)		(3,466)		(10,566)		—		—		(14,036)
Restricted stock units delivered	25,149	—		(28)		—		—		—		(28)
Net income	—	—		—		33,589		—		(33)		33,556
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,579)		—		—		(3,579)
Other comprehensive loss	—	—		—		—		(3,241)		(384)		(3,625)

Balance at June 30, 2022	71,367,333	713		1,671		545,814		(39,452)		3,855		512,601

Number of
Shares of
Common
Stock Common
Stock Additional
Paid-in
Capital Accumulated
Earnings Accumulated
Other
Comprehensive
Loss Non-Controlling
Interest Total
Stockholders’
Equity
Balance at December 31, 2021 71,969,856 $ 719 $ 7,565 $ 506,051 $ (48,123) $ 4,056 $ 470,268
Share-based compensation recognized — — 4,279 — — — 4,279
Repurchase of common stock (521,643) (5) (6,193) (14,981) — — (21,179)
Restricted stock units delivered 251,085 3 (5,651) — — — (5,648)
Net income (loss) — — — 38,898 — (32) 38,866
Cash dividends declared on common stock, $0.05 per share — — — (3,598) — — (3,598)
Other comprehensive income — — — — 11,912 248 12,160
Balance at March 31, 2022 71,699,298 $ 717 $ — $ 526,370 $ (36,211) $ 4,272 $ 495,148
Share-based compensation recognized — — 5,165 — — — 5,165
Repurchase of common stock
(357,114) (4) (3,466) (10,566) — — (14,036)
Restricted stock units delivered 25,149 — (28) — — — (28)
Net income (loss) — — — 33,589 — (33) 33,556
Cash dividends declared on common stock, $0.05 per share — — — (3,579) — — (3,579)
Other comprehensive income (loss) — — — — (3,241) (384) (3,625)
Balance at June 30, 2022 71,367,333 $ 713 $ 1,671 $ 545,814 $ (39,452) $ 3,855 $ 512,601
Share-based compensation recognized — — 5,296 — — — 5,296
Repurchase of common stock
(1,190,388) (12) (6,958) (30,347) — — (37,317)
Restricted stock units delivered 485 — (9) — — — (9)
Net income (loss) — — — 137,814 — (75) 137,739
Cash dividends declared on common stock, $0.05 per share — — — (3,338) — — (3,338)
Other comprehensive income (loss) — — — — 9,866 (334) 9,532
Common stock received in exchange of the sale of a Business (4,589,160) (46) — (169,203) — — (169,249)
Balance at September 30, 2022 65,588,270 $ 655 $ — $ 480,740 $ (29,586) $ 3,446 $ 455,255

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Number of
Shares of
Common
Stock Common
Stock Additional
Paid-in
Capital Accumulated
Earnings Accumulated
Other
Comprehensive
Loss Non-Controlling
Interest Total
Stockholders’
Equity
Balance at December 31, 2020 72,137,678 $ 721 $ 5,340 $ 379,934 $ (48,254) $ 4,688 $ 342,429
Share-based compensation recognized — — 3,380 — — — 3,380
Repurchase of common stock (382,974) (4) (1,290) (12,974) — — (14,268)
Restricted stock units delivered 411,739 4 (7,430) (1,302) — — (8,728)
Net income — — — 35,503 — 101 35,604
Cash dividends declared on common stock, $0.05 per share — — — (3,605) — — (3,605)
Other comprehensive income (loss) — — — — 1,576 (381) 1,195
Balance at March 31, 2021 72,166,443 $ 721 $ — $ 397,556 $ (46,678) $ 4,408 $ 356,007
Share-based compensation recognized — — 3,855 — — — 3,855
Repurchase of common stock (231,314) (2) (3,790) (6,328) — — (10,120)
Restricted stock units delivered 34,727 — (65) — — — (65)
Net income (loss) — — — 49,197 — (106) 49,091
Cash dividends declared on common stock, $0.05 per share — — — (3,608) — — (3,608)
Other comprehensive income (loss) — — — — 2,909 (25) 2,884
Balance at June 30, 2021 71,969,856 $ 719 $ — $ 436,817 $ (43,769) $ 4,277 $ 398,044
Share-based compensation recognized — — 3,708 — — — 3,708
Net income (loss) — — — 35,314 — (54) 35,260
Cash dividends declared on common stock, $0.05 per share — — — (3,598) — — (3,598)
Other comprehensive loss — — — — (5,397) (87) (5,484)
Balance at September 30, 2021 71,969,856 719 3,708 468,533 (49,166) 4,136 427,930

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


	Six months ended June 30,
	2023		2022
Cash flows from operating activities
Net income	$	58,113	$	72,422
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,761		38,720
Amortization of debt issue costs and accretion of discount	791		805
Operating lease amortization	3,103		3,056
Provision for expected credit losses and sundry losses	3,752		1,795
Deferred tax benefit	(3,467)		(1,210)
Share-based compensation	12,056		9,444

Loss on disposition of property and equipment	372		4,370
Earnings of equity method investment	(2,631)		(1,432)

Loss (gain) on foreign currency remeasurement	4,531		(921)
Decrease (increase) in assets:
Accounts receivable, net	1,261		2,759
Prepaid expenses and other assets	(628)		(1,972)
Other long-term assets	(2,282)		(3,965)
(Decrease) increase in liabilities:
Accrued liabilities and accounts payable	21,979		9,364
Income tax payable	(10,027)		(3,862)
Contract liability	1,181		1,025
Operating lease liabilities	(3,035)		(1,605)
Other long-term liabilities	(592)		1,109
Total adjustments	68,125		57,480
Net cash provided by operating activities	126,238		129,902
Cash flows from investing activities

Additions to software	(24,151)		(18,918)
Acquisition of customer relationship	—		(10,607)
Property and equipment acquired	(11,327)		(10,051)
Proceeds from sales of property and equipment	22		76

Purchase of certificates of deposit	—		(7,264)
Proceeds from maturities of available-for-sale debt securities	—		572
Acquisitions, net of cash acquired	(22,915)		—
Net cash used in investing activities	(58,371)		(46,192)
Cash flows from financing activities
Withholding taxes paid on share-based compensation	(5,955)		(5,676)


Net decrease in short-term borrowings	(20,000)		—
Repayment of short-term borrowings for purchase of equipment and software	—		(853)
Dividends paid	(6,503)		(7,177)

Repurchase of common stock	(15,790)		(35,215)
Repayment of long-term debt	(10,375)		(9,875)
Net cash used in financing activities	(58,623)		(58,796)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	(1,841)		(191)
Net increase in cash, cash equivalents and restricted cash	7,403		24,723
Cash, cash equivalents and restricted cash at beginning of the period	203,702		277,707
Cash, cash equivalents, restricted cash, and cash and cash equivalents including settlement assets at beginning of the period	$	215,657	$	285,917
Cash, cash equivalents and restricted cash at end of the period	$	211,105	$	302,430
Cash and cash equivalents included in settlement assets	17,542		8,210
Total cash and cash equivalents on the consolidated statement of cash flows	$	228,647	$	310,640
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	191,620	$	279,854
Restricted cash	19,485		22,576
Cash and cash equivalents included in settlement assets	17,542		8,210

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Nine months ended September 30,
2022 2021
Cash flows from operating activities
Net income $ 210,161 $ 119,955
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 58,432 56,091
Amortization of debt issue costs and accretion of discount 1,187 1,423
Operating lease amortization 4,576 4,443
Provision for expected credit losses and sundry losses 3,363 1,428
Deferred tax benefit (1,699) (1,119)
Share-based compensation 14,740 10,943
Gain on sale of a business (135,642) —
Gain from sale of assets — (778)
Loss on disposition of property and equipment and impairment of software 4,691 1,168
Earnings of equity method investment (2,120) (1,307)
Dividend received from equity method investment 2,053 1,183
Loss (gain) on valuation of foreign currency 6,858 (652)
(Increase) decrease in assets:
Accounts receivable, net 3,503 (593)
Prepaid expenses and other assets (3,417) (3,070)
Other long-term assets (4,389) (339)
Increase (decrease) in liabilities:
Accrued liabilities and accounts payable 468 (773)
Income tax payable 2,921 (2,685)
Contract liability 1,344 (2,654)
Operating lease liabilities (4,450) (4,107)
Other long-term liabilities (3,571) (2,702)
Total adjustments (51,152) 55,900
Net cash provided by operating activities 159,009 175,855
Cash flows from investing activities
Additions to software (28,287) (31,004)
Acquisition of customer relationships (10,607) (14,750)
Acquisitions, net of cash acquired (44,369) —
Property and equipment acquired (16,313) (12,388)
Proceeds from sales of property and equipment 77 805
Purchase of certificates of deposit (7,264) —
Proceeds from maturities of available-for-sale debt securities 1,015 —
Acquisition of available-for-sale debt securities (254) (2,968)
Net cash used in investing activities (106,002) (60,305)
Cash flows from financing activities
Statutory withholding taxes paid on share-based compensation (5,685) (8,793)
Repayment of short-term borrowings for purchase of equipment and software (901) (1,603)
Dividends paid (10,515) (10,811)
Repurchase of common stock (72,532) (24,388)
Repayment of long-term debt (9,875) (28,482)
Net cash used in financing activities (99,508) (74,077)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash 4,260 215
Net (decrease) increase in cash, cash equivalents and restricted cash (42,241) 41,688
Cash, cash equivalents and restricted cash at beginning of the period 285,917 221,105
Cash, cash equivalents and restricted cash at end of the period $ 243,676 $ 262,793
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents $ 224,971 $ 244,129
Restricted cash 18,705 18,664
Cash, cash equivalents and restricted cash $ 243,676 $ 262,793
Supplemental disclosure of cash flow information:
Cash paid for interest $ 18,523 $ 16,289
Cash paid for income taxes 24,386 19,468

~~Table of Contents~~

~~Supplemental disclosure of non-cash activities:~~

~~Payable due to vendor related to equipment and software acquired~~

—

~~739~~

~~Non-cash investing activities~~

~~Software exchanged for common stock~~

~~18,761~~

—

~~Goodwill exchanged for common stock~~

~~5,813~~

—

~~CDs transferred in the acquisition of a business~~

~~7,169~~

—

~~Non-cash financing and investing activities~~

~~Common stock received and retired for sale of a business~~

~~169,249~~

—


Cash, cash equivalents and restricted cash	$	228,647	$	310,640
Supplemental disclosure of cash flow information:
Cash paid for interest	$	11,056	$	6,034
Cash paid for income taxes	21,226		12,868




Supplemental disclosure of non-cash activities:

Payable due to vendor related to equipment and software acquired	2,930		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Notes to Unaudited Condensed Consolidated Financial Statements


Note 1 - The Company and Basis of Presentation			8
Note 2 - ~~Recent~~ A ~~ccounting~~ P ~~ronouncements~~Business Acquisition			98
Note 3 - ~~Business Acquisitions and Dispositions~~Debt Securities			9
Note 4 ~~- Debt Securities~~			12
~~Note 5~~ - Property and Equipment, net			1210
Note 5 - Goodwill and Other Intangible Assets			10
Note 6 - ~~Goodwill~~Debt and ~~Other Intangible Assets~~Short-Term Borrowings			11
Note 7 - Financial Instruments and Fair Value Measurements			12
Note 78 - ~~Debt and Short-Term Borrowings~~Equity			12
Note 9 - Share-based Compensation			13
Note 10 - Revenues			14
Note 811 - ~~Financial Instruments and Fair Value Measurements~~Current Expected Credit Losses			15
Note 912 - ~~Equity~~Income Tax			16
Note 1013 - ~~Share-based Compensation~~			16
~~Note 11 - Revenues~~Net Income per Common Share			17
Note 1214 - ~~Current Expected Credit Losses~~Commitments and Contingencies			19
~~Note 13 - Income Tax~~			20
~~Note 14 - Net Income per Common Share~~			2118
Note 15 - ~~Commitments and Contingencies~~Related Party Transactions			2118
Note 16 - ~~Related Party Transactions~~Segment Information			2118
Note 17 - ~~Segment Information~~Subsequent Events			22
~~Note 18 - Subsequent Events~~			26

Table of Contents

Note 1 – The Company and Basis of Presentation

The Company

EVERTEC, Inc. and its subsidiaries (collectively the “Company” or “EVERTEC”) is a leading full-service transaction processing business in Latin America and the Caribbean. The Company is based in Puerto Rico and provides a broad range of merchant acquiring, payment processing and business process management services. The Company provides services across 26 countries in the region. EVERTEC owns and operates the ATH network, which we believe is one of the leading personal identification number ~~("PIN"~~(“PIN”) debit ~~and automated teller machine ("ATM")~~ networks in ~~the Caribbean and~~ Latin America. In addition, EVERTEC provides a comprehensive suite of services for core ~~bank~~banking, cash processing and ~~cash processing~~fulfillment in Puerto Rico and technology outsourcing and payment transactions fraud monitoring in all the regions the Company serves. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations, and government agencies with solutions that are essential to their ~~operations.~~operations, enabling them to issue, process and accept transactions securely.

Basis of Presentation

The unaudited condensed consolidated financial statements of EVERTEC have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the accompanying unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.

Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to the rules and regulations of the Securities and Exchange Commission and, accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements of the Company for the year ended December 31, ~~2021,~~2022, included in the Company’s 2022 Annual Report on Form ~~10-K for the year ended December 31, 2021.~~10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements, prepared in accordance with GAAP, contain all adjustments necessary for a fair presentation. Intercompany accounts and transactions are eliminated in consolidation. Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Settlement Assets and Liabilities

Settlement assets and liabilities result from timing differences in the Company’s settlement processes with merchants, financial institutions, and credit card associations related to merchant and card transaction processing. The amounts are generally collected or paid the following business day. Settlement assets represent cash received or amounts receivable from agents, payment networks, bank partners, merchants or direct consumers. Settlement liabilities represent amounts payable to merchants and payees. Settlement assets were historically presented within cash and accounts receivable, while Settlement liabilities were presented within accrued liabilities and accounts payable.

Note 2 – ~~Recent Accounting Pronouncements~~

~~Recently adopted accounting pronouncements~~

~~In October 2021, the FASB issued ASU 2021-08 to update ASC 805,~~Business ~~Combinations,~~ to require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company selected to early adopt this guidance for its most recent business combination.

~~Note 3 – Business Acquisitions and Dispositions~~Acquisition

Acquisition of a Business

On ~~July 1, 2022, EVERTEC's main operating subsidiary, EVERTEC Group~~February 16, 2023, the Company closed on the acquisition of 100% of ~~the share capital of BBR SpA ("BBR"~~Paysmart Pagamentos Eletronicos Ltda (“paySmart”)~~, a payment solutions~~. Headquartered in Porto Alegre, Brazil, paySmart provides issuer processing services and ~~business technology company with operations~~BIN Sponsorship services for prepaid programs under domestic and international schemes in ~~Chile and Peru, by entering into a share~~Brazil. The aggregate purchase agreement (Contrato de Compraventa de Acciones), between EVERTEC Group and IG Capital, Cuatro R, Rivers and Brela ( collectively, the "Sellers"). As consideration for the purchase, the Company transferred to the sellers upon closing cash that amounted to $45.9price was $130 million ~~and certificates of deposits that amounted to $7.3~~Brazilian reais, approximately USD$25 million. The ~~BBR~~ acquisition ~~increases the Company's payment solution offerings, provides access to larger merchants in Chile and~~ expands the Company's ~~physical presence into Peru.~~footprint in Brazil and compliments the current product offering in the country.

The Company accounted for this transaction as a business combination. The following table details the preliminary fair value of assets acquired and liabilities assumed from the ~~BBR~~paySmart acquisition:

Table of Contents


	Preliminary Assets/Liabilities (at fair value)
( In thousands)
Cash and cash equivalents	$	~~1,551~~2,037
Accounts receivable, net	~~2,969~~451
Prepaid expenses and other assets			58
Property and equipment, net	3107
Operating lease right-of-use asset	76182
~~Goodwill~~Preliminary goodwill	~~33,247~~8,292
Settlement assets	52,593
Other intangible assets, net	~~24,850~~15,935
~~Deferred tax asset~~	~~267~~
Total assets acquired	~~62,963~~79,655
Accounts payable	~~1,039~~269
~~Contract liability~~Settlement liabilities	~~1,136~~50,368
Operating lease liability	85185
Income tax payable	298
Deferred tax liability	~~7,614~~4,262
Total liabilities assumed	$	~~9,874~~55,382

~~Table of Contents~~

The following table details the major groups of intangible assets acquired and the weighted average amortization period for these assets:


		Amount		Weighted-average life		Amount		Weighted-average life
(Dollar amounts in thousands)	(Dollar amounts in thousands)				(Dollar amounts in thousands)

Customer relationships	Customer relationships	$	22,500	15	Customer relationships	$	11,057	20
Trademark	Trademark	1,250		5	Trademark	1,261		5
Software packages	Software packages	1,100		5	Software packages	3,617		5
Total	Total	$	24,850	14	Total	$	15,935	15

Refer to Note 65- Goodwill and Other Intangible Assets for detail of goodwill allocated by reportable segments. The goodwill is primarily attributed to anticipated synergies. ~~None~~Currently, none of the goodwill is deductible for income tax purposes.

Revenues and earnings from the BBR acquisition were not material for either the three or nine months ended September 30, 2022. Pro forma results of operations have not been presented because the effect of this business combination is not material to the consolidated financial condition and results of operations.

~~Sale of a Business~~

On July 1, 2022, the Company closed on a definitive agreement with Banco Popular de Puerto Rico and its parent, Popular, to sell software and prepaid assets and transfer certain employees in connection with those assets (the "Business"). As consideration for the sale of the Business, Popular delivered 4.6 million shares of Evertec common stock held by Popular with a value of $169.2 million at close (the "Popular Transaction"). Additionally, management concluded that $15.4 million included in the Company's contract liability should be treated as consideration for the sale therefore, total consideration for the sale of the Business amounted to $184.7 million. The Company also modified and extended the main commercial agreements with Popular, including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement, a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA. The MSA modifications, among other things, includes the elimination of the exclusivity requirement which was the basis for a non-compete intangible asset recorded in 2010 as part of the original MSA that was amortized over a 15 year period. The Company also entered into new contracts and transition services agreements concurrently with the close of the Popular Transaction with terms between 3 months and 36 months.

Given the elimination of the exclusivity clause discussed above, the Company determined that the balance of the non-compete intangible asset on July 1, 2022 of $12.3 million, should be written off as a component of the gain on sale of a business. The Company also concluded that certain provisions in the new contracts and transition services agreements with Popular were not at fair value, therefore requiring that a portion of the gain be allocated to these contracts. The Company recorded a contract liability based on relative fair value of $11.7 million in connection with this conclusion.

~~The following table details the consideration for the sale of the business, major classes of assets and liabilities included in the business sale and the gain on sale of a business:~~

~~July 1, 2022~~

~~(In thousands)~~

~~Common stock received in exchange for the sale of a business~~

~~169,249~~

~~Contract liability representing consideration for the sale of a business~~

~~15,426~~

~~Total consideration for the sale of a business~~

~~184,675~~

~~Goodwill~~

~~(5,813)~~

~~Other intangible assets, net~~

~~(31,011)~~

~~Prepaid expenses and other assets~~

~~(497)~~

~~Contract liability~~

~~(11,712)~~

~~Gain on sale of a business~~

~~135,642~~

~~Table of Contents~~

Note 43 – Debt Securities

The amortized cost, gross unrealized gains and losses recorded in OCI and estimated fair value of debt securities available-for-sale by contractual maturity as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:


		September 30, 2022						June 30, 2023
(In thousands)	(In thousands)			Gross unrealized					(In thousands)			Gross unrealized
		Amortized cost		Gains	Losses	Fair Value				Amortized cost		Gains		Losses		Fair Value
Costa Rica Government Obligations	Costa Rica Government Obligations								Costa Rica Government Obligations
After 1 to 5 years	After 1 to 5 years	$	2,219	—	(21)	$	2,198		After 1 to 5 years	$	2,195	$	—	$	(20)	$	2,175


		December 31, 2021								December 31, 2022
(In thousands)	(In thousands)			Gross unrealized							(In thousands)			Gross unrealized
		Amortized cost		Gains		Losses		Fair Value				Amortized cost		Gains		Losses		Fair Value
Costa Rica Government Obligations	Costa Rica Government Obligations										Costa Rica Government Obligations
After 1 to 5 years	After 1 to 5 years	$	2,963	$	78	$	—	$	3,041		After 1 to 5 years	$	2,194	$	9	$	—	$	2,203

~~Debt securities~~

Table of Contents

Costa Rica Government Obligations are held by a trust in the Costa Rica National Bank as a collateral requirement for settlement activities. The Company may substitute securities as needed but must maintain certain levels of collateral based on transaction volumes.

~~For both the three and nine months period ended September 30, 2022, the Company purchased $0.3 million in debt securities that were classified as available-for-sale.~~ No debt securities were purchased or sold during the ~~nine months~~six-month period ended ~~September~~June 30, ~~2022, while $1.0~~2023 or June 30, 2022. Debt securities amounting to $0.6 million matured during the ~~same period.~~ six-month period ended June 30, 2022, none in 2023.

A provision for credit losses was not required for the periods presented above. Refer to Note 87 for disclosure requirements related to the fair value hierarchy.

Note 54 – Property and Equipment, net

Property and equipment, net consists of the following:


(In thousands)		Useful life in years	September 30, 2022		December 31, 2021
(Dollar amounts in thousands)							(Dollar amounts in thousands)	Useful life in years	June 30, 2023		December 31, 2022
Buildings	Buildings	30	$	1,387	$	1,359	Buildings	30	$	1,594	$	1,456
Data processing equipment	Data processing equipment	3 - 5	151,545		141,359		Data processing equipment	3 - 5	174,894		162,761
Furniture and equipment	Furniture and equipment	3 - 20	8,742		7,718		Furniture and equipment	3 - 20	9,773		9,154
Leasehold improvements	Leasehold improvements	5 -10	3,572		3,277		Leasehold improvements	5 -10	4,213		3,660
			165,246		153,713				190,474		177,031
Less - accumulated depreciation and amortization	Less - accumulated depreciation and amortization		(116,531)		(106,365)		Less - accumulated depreciation and amortization		(134,108)		(121,919)
Depreciable assets, net	Depreciable assets, net		48,715		47,348		Depreciable assets, net		56,366		55,112
Land	Land		1,213		1,185		Land		1,395		1,275
Property and equipment, net	Property and equipment, net		$	49,928	$	48,533	Property and equipment, net		$	57,761	$	56,387

Depreciation and amortization expense related to property and equipment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 amounted to $5.5 million and $10.5 million, respectively, compared to $4.6 million and ~~$13.9 million, respectively, compared to $4.2 million and $13.0~~$9.3 million for the corresponding periods in ~~2021.~~2022.

~~During the nine months ended September 30, 2021, the Company recorded a loss on the disposition of damaged POS devices amounting to $0.5 million through cost of revenues.~~

~~Table of Contents~~

Note 65 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill, allocated by operating segments, were as follows (see Note ~~17)~~16):

(In thousands) Payment
Services -
Puerto Rico & Caribbean Payment
Services -
Latin America Merchant
Acquiring, net Business
Solutions Total
Balance at December 31, 2021 $ 160,972 $ 48,402 $ 138,121 $ 45,823 $ 393,318
Goodwill attributable to acquisition — 33,247 — — 33,247
Goodwill attributable to the sale of a business — — — (5,813) (5,813)
Foreign currency translation adjustments — (2,933) — — (2,933)
Balance at September 30, 2022 $ 160,972 $ 78,716 $ 138,121 $ 40,010 $ 417,819


(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Balance at December 31, 2022	$	160,972	$	84,289	$	138,121	$	40,010	$	423,392


Foreign currency translation adjustments	—		6,572		—		—		6,572
Preliminary goodwill attributable to acquisition	—		8,292		—		—		8,292
Balance at June 30, 2023	$	160,972	$	99,153	$	138,121	$	40,010	$	438,256

Goodwill is tested for impairment on an annual basis as of August 31, or more often if events or changes in circumstances indicate there may be impairment. The Company may test for goodwill impairment using a qualitative or a quantitative analysis. In a qualitative analysis, the Company assesses whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount. In the quantitative analysis, the Company compares the estimated fair value of the reporting units to their carrying values, including goodwill. No impairment losses were recognized for the periods ended ~~September~~June 30, ~~2022~~2023 or ~~2021.~~2022. Refer to Note 2 - Business Acquisition, for further details of goodwill acquired in the first quarter of 2023.

The carrying amount of other intangible assets at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was as follows:

September 30, 2022
(In thousands) Useful life in years Gross
amount Accumulated
amortization Net carrying
amount
Customer relationships 8 - 15 $ 390,221 $ (295,170) $ 95,051
Trademarks 1 - 15 43,025 (37,638) $ 5,387
Software packages 3 - 10 332,767 (236,889) $ 95,878
Other intangible assets, net $ 766,013 $ (569,697) $ 196,316

Table of Contents


			December 31, 2021								June 30, 2023
(Dollar amounts in thousands)	(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount		(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	Customer relationships	8 - 14	$	357,991	$	(272,732)	$	85,259	Customer relationships	8 - 20	$	406,713	$	(319,410)	$	87,303
Trademarks	Trademarks	2 - 15	41,901		(36,684)		5,217		Trademarks	1 - 15	44,661		(38,880)		$	5,781
Software packages	Software packages	3 - 10	326,320		(217,643)		108,677		Software packages	3 - 10	378,680		(257,985)		$	120,695
Non-compete agreement		15	56,539		(42,404)		14,135

Other intangible assets, net	Other intangible assets, net		$	782,751	$	(569,463)	$	213,288	Other intangible assets, net		$	830,054	$	(616,275)	$	213,779

In the second quarter of 2022, the Company acquired a customer relationship in Puerto Rico for $10.6 million that is being amortized over five years. Revenues and expenses in connection with this customer relationship are included as part of the Payment Services - Puerto Rico & Caribbean segment. As part of the BBR acquisition, the Company added a customer relationship amounting to $22.5 million, a trademark of $1.3 million, and software of $1.1 million, refer to Note 3- Business Acquisitions and Dispositions for further details. On July 1, 2022, in connection with the closing of the Popular Transaction, the remaining balance of the Non-compete agreement of $12.3 million was written off against the transaction gain. The Company no longer has non-compete intangibles on its Balance Sheets as of September 30, 2022. Refer to Note 3- Business Acquisitions and Dispositions for further details.


		December 31, 2022
(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	8 - 15	$	392,737	$	(303,733)	$	89,004
Trademarks	1 - 15	43,195		(37,998)		5,197
Software packages	3 - 10	349,474		(243,355)		106,119

Other intangible assets, net		$	785,406	$	(585,086)	$	200,320

Amortization expense related to other intangibles for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 amounted to ~~$15.2~~$14.9 million and ~~$44.5~~$31.2 million, respectively, compared to ~~$14.5~~$14.8 million and ~~$43.0~~$29.3 million for the corresponding periods in ~~2021, respectively.~~2022. During the ~~nine~~six months ended ~~September~~June 30, 2022, the Company recorded an impairment loss through cost of revenues of $4.1 million for a multi-year software development for which ~~a reduction in future~~ cash flows ~~was projected. During~~used in the ~~nine months ended September 30, 2021,~~internal model were impacted due to a decrease in the ~~Company recorded an impairment charge through cost of~~forecasted revenues

~~Table of Contents~~

~~amounting~~ to ~~$0.6 million for a software solution that will no longer~~ be ~~used. Both impairment charges affected~~generated by the ~~Company’s Payment Services – Puerto Rico & Caribbean segment.~~software.

The estimated amortization expense of the other intangible balances outstanding at ~~September~~June 30, ~~2022~~2023, for the next five years is as follows:


(Dollar amounts in thousands)
Remaining 2022		$	14,156
2023		53,108
(In thousands)				(In thousands)
Remaining 2023				Remaining 2023	$	32,186
2024	2024	41,611		2024	52,923
2025	2025	16,218		2025	26,410
2026	2026	11,300		2026	17,198
2027				2027	12,573

Note 76 – Debt and Short-Term Borrowings

Total debt at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was as follows:

(In thousands) September 30, 2022 December 31, 2021
2023 Term A Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(2))
$ 162,930 $ 170,875
2024 Term B Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(3))
292,574 293,660
Note payable due January 1, 2022(1)
— 758
Total debt $ 455,504 $ 465,293


(In thousands)	June 30, 2023		December 31, 2022
2027 Term A Loan bearing interest at a variable interest rate (SOFR plus applicable margin(1)(2))	$	400,352	$	410,248

(1)Net of unaccreted discount and unamortized debt issue costs, as applicable.

(2)~~Applicable margin of 1.75% at September 30, 2022 and December 31, 2021.~~

~~(3)~~Subject to a minimum rate ("~~LIBOR~~SOFR floor") of 0% plus applicable margin of ~~3.50%~~1.50% at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Secured Credit Facilities

On ~~November 27, 2018,~~December 1, 2022, EVERTEC and EVERTEC Group, ~~LLC ("EVERTEC Group") (collectively, the “Borrower”)~~ entered into a credit agreement with a syndicate of lenders and Truist Bank, as administrative agent and collateral agent, providing for ~~the secured credit facilities, consisting of~~(i) a ~~$220.0~~$415.0 million term loan A facility ~~that matures on November 27, 2023~~ (the ~~“2023 Term A Loan"~~“Term Loan Facility”), and (ii) a ~~$325.0 million term loan B facility that matures on November 27, 2024 (the “2024 Term B Loan”), and a $125.0~~$200.0 million revolving credit facility (the “Revolving Facility”, and together with the Term Loan Facility, the “2022 Credit Facilities”) ~~that matures~~. The 2022 Credit Facilities mature on November 27, 2023, with a syndicate of lenders and Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent, swingline lender and line of credit issuer (collectively the “2018 Credit Agreement”).December 1, 2027.

~~The 2018 Credit Agreement requires mandatory repayment of outstanding principal balances based on a percentage of excess cash flow, provided that no such payment shall be due if~~At June 30, 2023, the leverage ratio is below 1.75x or the resulting amount of the excess cash flow multiplied by the applicable percentage is less than $10 million. On March 8, 2021, in connection with this mandatory repayment clause, the Company repaid $17.8 million, as a result of excess cash flow calculation performed for the year ended December 31, 2020. No mandatory repayment was required in 2022 in connection with the excess cash flow calculation performed for the year ended December 31, 2021 as the leverage ratio was below 1.75x.

~~The~~ unpaid principal balance ~~at September 30, 2022~~ of the ~~2023~~ Term A Loan ~~and the 2024 Term B Loan~~Facility was ~~$163.4 million and $294.2 million, respectively.~~$404.6 million. The additional borrowing capacity ~~under our~~for the Revolving Facility at ~~September~~June 30, ~~2022~~2023 was ~~$119.1~~$194.0 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

~~Notes Payable~~

In December 2019, EVERTEC Group entered into two non-interest bearing financing agreements amounting to $2.4 million to purchase software and maintenance, which were fully repaid in January 2022. As of December 31, 2021, the outstanding principal balance of the notes payable was $0.8 million. These notes were included in accounts payable in the Company's unaudited condensed consolidated balance sheets.

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Interest Rate ~~Swap~~Swaps

As of ~~September~~June 30, ~~2022,~~2023, the Company has antwo interest rate swap ~~agreement,~~agreements, entered into in December 2018 and May 2023, which converts a portion of the interest rate payments on the Company's ~~2024~~ Term B Loan Facility from variable to fixed:

Swap Agreement

Effective date

Maturity Date

Notional Amount

Variable Rate

Fixed Rate

2018 Swap

April 2020

November 2024

$250 million

1-month ~~LIBOR~~SOFR

~~2.89%~~2.929%

2023 Swap

November 2024

December 2027

$250 million

1-month SOFR

3.375%

~~The Company has accounted for this agreement as a cash flow hedge.~~

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the carrying amount of the ~~derivative~~derivatives included on the Company's unaudited condensed consolidated balance sheets was ~~an asset of $7.1~~$7.7 million and ~~a liability $13.4~~$7.4 million, respectively. The fair value of this derivative is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 for disclosure of ~~losses~~gains recorded on cash flow hedging activities.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company reclassified ~~losses~~gains of ~~$0.4~~$1.4 million and ~~$3.5~~$2.4 million, respectively, from accumulated other comprehensive ~~loss~~income into interest expense compared to ~~$1.8~~losses of $1.4 million and ~~$5.3~~$3.1 million, respectively, for the corresponding periods in ~~2021.~~2022. Based on current ~~LIBOR~~SOFR rates, the Company expects to reclassify gains of ~~$3.4~~$5.8 million from accumulated other comprehensive ~~loss~~income into interest expense over the next 12 months.

The cash flow hedge is considered highly effective.

Note 87 – Financial Instruments and Fair Value Measurements

Recurring Fair Value Measurements

Debt Securities Available for Sale

The fair value of debt securities is estimated based on observable inputs, therefore classified as a Level 2 asset within the fair value hierarchy. The fair value of ~~debt securities~~the Costa Rica Government Obligations was $2.2 million ~~and $3.0 million~~ as of ~~September~~each June 30, ~~2022~~2023 and December 31, ~~2021 respectively.~~2022.

Derivative Instruments

The fair value of the Company's interest rate swap is estimated using Level 2 inputs under the fair value hierarchy. ~~This derivative was~~These derivatives were in an asset position with a balance of ~~$7.1~~$7.7 million and $7.4 million as of ~~September~~June 30, ~~2022~~2023 and ~~in a liability position with a balance of $13.4 million as of~~ December 31, ~~2021.~~2022, respectively.

~~Debt~~The following table presents the carrying value, as applicable, and ~~Short-Term Borrowings~~estimated fair value for financial instruments at June 30, 2023 and December 31, 2022:


	June 30, 2023				December 31, 2022
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Costa Rica government obligations	$	2,175	$	2,175	$	2,203	$	2,203
Interest rate swaps	7,733		7,733		7,440		7,440
Financial liabilities:


Term Loan Facility	400,352		403,209		410,248		413,494

The fair ~~values~~value of the term ~~loans~~loan at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021 were~~2022 was obtained using prices provided by third party service providers. Their pricing is based on various inputs such as market quotes, recent trading activity in a non-active market or imputed prices. These inputs are considered Level 3 inputs under the fair value hierarchy. Also, the pricing may include the use of an algorithm that could take into account movements in the general high yield market, among other variants. The secured term ~~loans are~~loan is not accounted for at fair value in the balance ~~sheets.~~sheet.

Note 8 – Equity

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~~The following table presents the carrying value, as applicable, and estimated fair value for financial instruments at September 30, 2022 and December 31, 2021:~~

September 30, 2022 December 31, 2021
(In thousands) Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Financial assets:
Costa Rica government obligations 2,198 2,198 3,041 3,041
Interest rate swap 7,070 7,070 — —
Financial liabilities:
2023 Term A Loan 162,930 161,730 170,875 168,610
2024 Term B Loan 292,574 291,400 293,660 294,735
Interest rate swap — — 13,392 13,392

~~Note 9 – Equity~~

Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The following table provides a summary of the changes in the balances of accumulated other comprehensive ~~loss~~income (loss) for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

(In thousands) Foreign Currency
Translation
Adjustments Cash Flow Hedges Unrealized Gains (losses) on Debt Securities AFS Total
Balance - December 31, 2021, net of tax $ (35,971) $ (12,261) 109 (48,123)
Other comprehensive (loss) income before reclassifications (210) 15,320 (77) 15,033
Effective portion reclassified to net income — 3,504 — 3,504
Balance - September 30, 2022, net of tax $ (36,181) $ 6,563 $ 32 $ (29,586)


(In thousands)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Unrealized Gains (losses) on Debt Securities AFS		Total
Balance - December 31, 2022, net of tax	$	(23,481)	$	6,954	$	41	(16,486)
Other comprehensive income (loss) before reclassifications	20,758		2,676		(20)		23,414
Effective portion reclassified to net income	—		(2,405)		—		(2,405)
Balance - June 30, 2023, net of tax	$	(2,723)	$	7,225	$	21	$	4,523

Note 109 – Share-based Compensation

Long-term Incentive Plan ("LTIP")

During the three months ended March 31, ~~2020,~~ 2021, 2022 and ~~2022,~~2023, the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors ("Board") approved grants of restricted stock units (“RSUs”) to executives and certain employees pursuant to the ~~2020 LTIP,~~ 2021 LTIP, 2022 LTIP and ~~2022~~2023 LTIP, respectively, all under the terms of the Company's ~~2013~~2022 Equity Incentive Plan.

~~On May 20, 2022 (the “Effective Date”),~~ Under the Company's shareholders approved the Company's 2022 Equity Incentive Plan (the "2022 Plan") which replaced the Company's 2013 Equity Incentive Plan. All shares remaining available for grant under the 2013 Plan as of the Effective Date plus any shares of common stock ofLTIPs, the Company ~~covered by outstanding~~granted RSUs to eligible participants as time-based awards under the 2013 Plan as of the Effective Date that again become available for grant pursuant to the terms of the 2022 Plan as of the Effective Date, to the extent the shares underlying such awards are not issued because they are forfeited and/or ~~settled or terminate without distribution of shares of common stock of the Company became available for issuance under the 2022 Plan on the Effective Date pursuant to the terms of the 2022 Plan.~~performance-based awards.

The vesting of the RSUs is dependent upon service and/or performance conditions as defined in the award agreements. Employees that received time-based awards with service conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the employee provides services to the Company through the vesting date. Time-based awards vest over a period of three years in substantially equal installments commencing on the grant date and ending on ~~February 27 of each year for the 2020 LTIP,~~ March 2 of each year for the 2021 LTIP, ~~and~~ February 25 of each year for the 2022 LTIP and February 24 of each year for the 2023 LTIP. In 2022 and 2023, the Company also granted time-based awards with a three year service vesting period which will cliff vest on February 25, ~~2025.~~2025 and February 24, 2026, respectively.

For the performance-based awards under the ~~2020 LTIP,~~ 2021 LTIP, 2022 LTIP, and ~~2022~~2023 LTIP, the Compensation Committee established adjusted earnings before income taxes, depreciation and amortization ("Adjusted EBITDA") as the primary performance

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measure while maintaining focus on total shareholder return through the use of a market-based total shareholder return ("TSR") performance modifier. The Adjusted EBITDA measure is based on annual targets and can ~~produce~~result in a payout between 0% and 200%., depending on the performance level. The TSR modifier adjusts the shares earned based on the ~~core~~ Adjusted EBITDA performance upwards or downwards (+/- 25%) based on the Company’s relative TSR at the end of the three-year performance period as compared to the companies in the Russell 2000 Index. The Adjusted EBITDA performance measure will be calculated for the one-year period commencing on January 1 of the year of the grant and ending on December 31 of the same year, relative to the goals set by the Compensation Committee for this same period. The shares earned will be subject to an additional two-year service vesting period and will vest on ~~February 27, 2023 for the 2020 LTIP,~~ March 2, 2024 for the 2021 LTIP, ~~and~~ February 25, 2025 for the 2022 LTIP, and February 24, 2026 for the 2023 LTIP. Unless otherwise specified in the award agreement, or in an employment agreement, awards are forfeited if the employee voluntarily ceases to be employed by the Company prior to vesting.

The following table summarizes nonvested RSUs activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


Nonvested RSUs	Nonvested RSUs	Shares	Weighted-average grant date fair value		Nonvested RSUs	Shares	Weighted-average grant date fair value
Nonvested at December 31, 2021		1,086,329	$	34.73
Nonvested at December 31, 2022					Nonvested at December 31, 2022	1,363,780	$	38.96
Granted	Granted	709,302	41.90		Granted	778,656	38.22
Vested	Vested	(421,764)	33.02		Vested	(608,392)	34.05
Forfeited	Forfeited	(8,546)	37.10		Forfeited	(17,307)	40.62
Nonvested at September 30, 2022		1,365,321	$	38.97
Nonvested at June 30, 2023					Nonvested at June 30, 2023	1,516,737	$	40.13

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized ~~$5.3~~$6.5 million and ~~$14.7~~$12.1 million of share-based compensation expense, ~~respectively,~~ compared with ~~$3.7~~$5.1 million and ~~$10.9~~$9.4 million for the corresponding ~~periods~~period in ~~2021.~~2022.

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As of ~~September~~June 30, ~~2022,~~2023, the maximum unrecognized ~~expense~~cost for RSUs was ~~$32.0~~$43.3 million. The cost is expected to be recognized over a weighted average period of 2.0 years.

Note 1110 – Revenues

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into primary geographical markets, nature of the products and services, and timing of transfer of goods and services. The Company's operating segments are determined by the nature of the products and services the Company provides and the primary geographical markets in which the Company operates. Revenue disaggregated by segment is discussed in Note ~~17,~~16, Segment Information.

In the following tables, revenue for each segment, excluding intersegment revenues, is disaggregated by timing of revenue

recognition for the periods indicated.

Three months ended September 30, 2022
(In thousands) Payment Services - Puerto Rico & Caribbean Payment Services - Latin America Merchant Acquiring, net Business Solutions Total
Timing of revenue recognition
Products and services transferred at a point in time $ 89 $ 973 $ — $ 3,790 $ 4,852
Products and services transferred over time 29,456 29,068 36,911 45,516 140,951
$ 29,545 $ 30,041 $ 36,911 $ 49,306 $ 145,803



	Three Months Ended June 30, 2023
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	125	$	639	$	—	$	1,930	$	2,694
Products and services transferred over time	33,983		34,110		41,248		55,041		164,382
	$	34,108	$	34,749	$	41,248	$	56,971	$	167,076



	Three Months Ended June 30, 2022
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	101	$	418	$	—	$	2,281	$	2,800
Products and services transferred over time	30,159		26,664		38,540		62,408		157,771
	$	30,260	$	27,082	$	38,540	$	64,689	$	160,571



	Six months ended June 30, 2023
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	238	$	1,253	$	—	$	3,657	$	5,148
Products and services transferred over time	66,349		64,789		81,595		109,009		321,742
	$	66,587	$	66,042	$	81,595	$	112,666	$	326,890

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		Three months ended September 30, 2021											Six months ended June 30, 2022
(In thousands)	(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total		(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition	Timing of revenue recognition											Timing of revenue recognition
Products and services transferred at a point in time	Products and services transferred at a point in time	$	30	$	449	$	—	$	446	$	925	Products and services transferred at a point in time	$	155	$	432	$	—	$	4,166	$	4,753
Products and services transferred over time	Products and services transferred over time	25,712		23,807		37,606		57,833		144,958		Products and services transferred over time	56,589		52,161		74,168		123,148		306,066
		$	25,742	$	24,256	$	37,606	$	58,279	$	145,883		$	56,744	$	52,593	$	74,168	$	127,314	$	310,819

Nine months ended September 30, 2022
(In thousands) Payment Services - Puerto Rico & Caribbean Payment Services - Latin America Merchant Acquiring, net Business Solutions Total
Timing of revenue recognition
Products and services transferred at a point in time $ 244 $ 1,405 $ — $ 7,956 $ 9,605
Products and services transferred over time 86,045 81,229 111,079 168,664 447,017
$ 86,289 $ 82,634 $ 111,079 $ 176,620 $ 456,622

Nine months ended September 30, 2021
(In thousands) Payment Services - Puerto Rico & Caribbean Payment Services - Latin America Merchant Acquiring, net Business Solutions Total
Timing of revenue recognition
Products and services transferred at a point in time $ 119 $ 1,633 $ — $ 4,048 $ 5,800
Products and services transferred over time 76,642 69,919 106,808 175,390 428,759
$ 76,761 $ 71,552 $ 106,808 $ 179,438 $ 434,559
Revenue concentration with a single customer, Popular, as a percentage of total revenues for the quarters ended June 30, 2023 and 2022 was approximately 37% and 41%, respectively. For the six months ended June 30, 2023 and June 30, 2022 this percentage was approximately 37% and 42%, respectively.

Contract Balances

The following table provides information about contract assets from contracts with customers.


(In thousands)	(In thousands)	September 30, 2022		December 31, 2021		(In thousands)	June 30, 2023		December 31, 2022
Balance at beginning of period	Balance at beginning of period	$	1,715	$	2,796	Balance at beginning of period	$	4,749	$	1,715
Services transferred to customers	Services transferred to customers	7,246		5,374		Services transferred to customers	8,900		9,313
Transfers to accounts receivable	Transfers to accounts receivable	(3,861)		(6,455)		Transfers to accounts receivable	(7,501)		(6,279)
Balance at end of period	Balance at end of period	$	5,100	$	1,715	Balance at end of period	$	6,148	$	4,749

The current portion of contract assets is recorded as part of prepaid expenses and other assets, and the long-term portion is included in other long-term assets in the unaudited condensed consolidated balance sheets.

Accounts receivable, net ~~as of September~~at June 30, ~~2022~~2023 amounted to ~~$112.3~~$109.4 million. Contract liability and contract liability - long term at ~~September~~June 30, ~~2022~~2023 amounted to ~~$17.1~~$17.8 million and ~~$34.7~~$33.3 million, respectively, and may arise when consideration is received or due in advance from customers prior to performance. The contract liability is mainly comprised of upfront fees for implementation or set up activities, including fees charged in pre-production periods in connection with hosting ~~services, as~~

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~~well as amounts related to contracts entered into concurrently with the close of the Popular Transaction as described in Note 3- Business Acquisitions and Dispositions.~~services. Contract liabilities may also arise when consideration is received or due in advance from customers prior to performance. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized revenue of ~~$17.0~~$4.3 million and ~~$29.0~~$8.7 million, respectively, that was included in the contract liability at December 31, ~~2021.~~2022. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recognized revenue of ~~$5.3~~$5.0 million and ~~$20.7~~$12.1 million, respectively, that was included in the contract liability at December 31, ~~2020.~~2021.

Transaction price allocated to the remaining performance obligations

The estimated aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially satisfied at ~~September~~June 30, ~~2022~~2023 is ~~$1,061.8~~$944.5 million, which is expected to be recognized over the next 1 to 6 years. This amount consists of minimums on certain master services agreements, professional service fees for implementation or set up activities related to managed services and maintenance services typically recognized over the life of the contract, and professional service fees for customizations or development of on-premise licensing agreements, which are recognized over time based on inputs relative to the total expected inputs to satisfy a performance obligation.

Note 1211 – Current Expected Credit Losses

Allowance for Current Expected Credit Losses

Trade receivables from contracts with customers are financial assets analyzed by the Company under the expected credit loss model. To measure expected credit losses, trade receivables are grouped based on shared risk characteristics (i.e., the relevant industry sector and customer's geographical location) and days past due (i.e., delinquency status), while considering the following:

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•Customers in the same geographical location share similar risk characteristics associated with the macroeconomic environment of their country.

•The Company has two main industry sectors: private and governmental. The private pool is comprised mainly of leading financial institutions, merchants and corporations, while the governmental pool is comprised of government agencies. The governmental customers possess different risk characteristics than private customers because although all invoices are due 30 days after issuance, governmental customers usually pay within 60 to 90 days after issuance (i.e., approximately 30 to 60 more days than private customers).

•The expected credit loss rate is likely to increase as receivables move to older aging buckets. The Company used the following aging categories to estimate the risk of delinquency status: (i) 0 days past due; (ii) 1-30 days past due; (iii) 31-60 days past due; (iv) 61-90 days past due; and (v) over 90 days past due.

The credit losses of the Company’s trade receivables have been low historically and most balances are collected within one year. Therefore, the Company determined that the expected loss rates should be calculated using the historical loss rates adjusted by macroeconomic factors. The historical rates are calculated for each of the aging categories used for pooling trade receivables. To determine the collected portion of each bucket, the collection time of each trade receivable is identified, to estimate the proportion of outstanding balances per aging bucket that ultimately will not be collected. This is used to determine the expectation of losses based on the history of uncollected trade receivables once the specific past due period is surpassed. The historical rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of customers to settle the receivables by applying a country risk premium as the forward-looking macroeconomic factor. Specific reserves are established for certain customers for which collection is doubtful.

Rollforward of the Allowance for Expected Current Credit Losses

The following table provides information about the allowance for expected current credit losses on trade receivables.


(In thousands)	(In thousands)	September 30, 2022		December 31, 2021		(In thousands)	June 30, 2023		December 31, 2022
Balance at beginning of period	Balance at beginning of period	$	2,523	$	2,401	Balance at beginning of period	$	2,159	$	2,523
Current period provision for expected credit losses	Current period provision for expected credit losses	649		819		Current period provision for expected credit losses	731		754
Write-offs	Write-offs	(135)		(698)		Write-offs	(40)		(1,268)
Recoveries of amounts previously written-off	Recoveries of amounts previously written-off	150		1		Recoveries of amounts previously written-off	17		150
Balance at end of period	Balance at end of period	$	3,187	$	2,523	Balance at end of period	$	2,867	$	2,159

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The Company does not have a delinquency threshold for writing-off trade receivables. The Company has a formal process for the review and approval of write-offs.

Impairment losses on trade receivables are presented as net impairment losses within cost of revenue, exclusive of depreciation and amortization in the unaudited condensed consolidated statements of income and comprehensive income. Subsequent recoveries of amounts previously written-off, when applicable, are credited against the allowance for expected current credit losses within accounts receivable, net on the unaudited condensed consolidated balance sheets.

Note 1312 – Income Tax

The components of income tax expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, consisted of the following:


		Three months ended September,				Nine months ended September 30,					Three Months Ended June 30,				Six months ended June 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022		2023		2022

Current tax provision	Current tax provision	$	9,537	$	7,306	$	24,610	$	15,593	Current tax provision	$	7,845	$	8,196	$	12,871	$	15,073
Deferred tax benefit	Deferred tax benefit	(489)		(172)		(1,699)		(1,119)		Deferred tax benefit	(1,259)		(508)		(3,467)		(1,210)
Income tax expense	Income tax expense	$	9,048	$	7,134	$	22,911	$	14,474	Income tax expense	$	6,586	$	7,688	$	9,404	$	13,863

The Company conducts operations in Puerto Rico, the United States, and certain countries in Latin America. As a result, the income tax expense includes the effect of taxes paid to the government of Puerto Rico as well as foreign jurisdictions. The following table presents the components of income tax expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, and its segregation based on location of operations:

Three months ended September 30, Nine months ended September 30,
(In thousands) 2022 2021 2022 2021
Current tax provision (benefit)
Puerto Rico $ 6,318 $ 2,328 $ 11,809 $ 3,363
United States 44 57 107 132
Foreign countries 3,175 4,921 12,694 12,098
Total current tax provision $ 9,537 $ 7,306 $ 24,610 $ 15,593
Deferred tax (benefit) provision
Puerto Rico $ 719 $ (258) $ (321) $ (778)
United States 54 116 9 (71)
Foreign countries (1,262) (30) (1,387) (270)
Total deferred tax benefit $ (489) $ (172) $ (1,699) $ (1,119)

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	Three Months Ended June 30,				Six months ended June 30,
(In thousands)	2023		2022		2023		2022

Current tax provision
Puerto Rico	$	2,595	$	3,176	$	3,775	$	5,491
United States	47		33		58		63
Foreign countries	5,203		4,987		9,038		9,519
Total current tax provision	$	7,845	$	8,196	$	12,871	$	15,073
Deferred tax benefit
Puerto Rico	$	(189)	$	(647)	$	(424)	$	(1,040)
United States	29		26		3		(45)
Foreign countries	(1,099)		113		(3,046)		(125)
Total deferred tax benefit	$	(1,259)	$	(508)	$	(3,467)	$	(1,210)

Taxes payable to foreign countries by EVERTEC’s subsidiaries will be paid by such subsidiary and the corresponding liability and expense will be presented in EVERTEC’s consolidated financial statements.

As of ~~September~~June 30, ~~2022,~~2023, the Company ~~has $113.3~~had $124.0 million of unremitted earnings from foreign subsidiaries, compared to ~~$99.1~~$115.5 million as of December 31, ~~2021.~~2022. The Company has not recognized a deferred tax liability on undistributed earnings for the Company’s foreign subsidiaries because these earnings are intended to be indefinitely reinvested.

As of ~~September~~June 30, ~~2022,~~2023, the gross deferred tax asset amounted to ~~$18.6~~$17.1 million and the gross deferred tax liability amounted to ~~$19.4~~$21.4 million, compared to ~~$22.3~~$17.9 million and ~~$16.3~~$20.7 million, respectively, as of December 31, ~~2021.~~2022. As of ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, there is a valuation allowance against the gross deferred tax asset of approximately ~~$1.8~~$1.1 million and ~~$1.4~~$1.6 million, respectively.

During the quarter ended September 30, 2022, the Company released $3.6 million of the previously recorded Puerto Rico liability for uncertain tax positions related to the net operating loss created by transaction costs from mergers and acquisitions as a result of the expiration of the statute of limitations.

Income tax expense differs from the amount computed by applying the Puerto Rico statutory income tax rate to the income before income taxes as a result of the following:

~~Table of Contents~~


		Nine months ended September 30,					Six months ended June 30,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Computed income tax at statutory rates	Computed income tax at statutory rates	$	87,402	$	50,411	Computed income tax at statutory rates	$	25,319	$	32,357
Differences in tax rates due to multiple jurisdictions	Differences in tax rates due to multiple jurisdictions	2,612		1,789		Differences in tax rates due to multiple jurisdictions	2,350		1,155
Effect of income subject to tax-exemption grant	Effect of income subject to tax-exemption grant	(26,262)		(35,121)		Effect of income subject to tax-exemption grant	(16,219)		(20,440)
Effect of the gain on sale of a business		(39,645)		—
Unrecognized tax (benefit) expense		(3,472)		(3,475)
Unrecognized tax expense						Unrecognized tax expense	69		122
Excess tax benefits on share-based compensation	Excess tax benefits on share-based compensation	169		(1,027)		Excess tax benefits on share-based compensation	(23)		(21)
Tax credits for research and development activities						Tax credits for research and development activities	(884)		—
Other, net	Other, net	2,107		1,897		Other, net	(1,208)		690
Income tax expense	Income tax expense	$	22,911	$	14,474	Income tax expense	$	9,404	$	13,863

Note 1413 – Net Income Per Common Share

The reconciliation of the numerator and denominator of the income per common share is as follows:


		Three months ended September 30,				Nine months ended September 30,					Three Months Ended June 30,				Six months ended June 30,
(In thousands, except per share information)	(In thousands, except per share information)	2022		2021		2022		2021		(In thousands, except per share information)	2023		2022		2023		2022
Net income available to EVERTEC, Inc.’s common shareholders	Net income available to EVERTEC, Inc.’s common shareholders	$	137,814	$	35,314	$	210,301	$	120,014	Net income available to EVERTEC, Inc.’s common shareholders	$	28,155	$	33,589	$	58,207	$	72,487
Weighted average common shares outstanding	Weighted average common shares outstanding	66,398,547		71,969,856		69,906,483		72,082,082		Weighted average common shares outstanding	65,046,328		71,476,850		65,007,528		71,714,876
Weighted average potential dilutive common shares (1)	Weighted average potential dilutive common shares (1)	647,262		906,397		682,432		735,625		Weighted average potential dilutive common shares (1)	463,763		673,099		563,925		843,689
Weighted average common shares outstanding - assuming dilution	Weighted average common shares outstanding - assuming dilution	67,045,809		72,876,253		70,588,915		72,817,707		Weighted average common shares outstanding - assuming dilution	65,510,091		72,149,949		65,571,453		72,558,565
Net income per common share - basic	Net income per common share - basic	$	2.08	$	0.49	$	3.01	$	1.66	Net income per common share - basic	$	0.43	$	0.47	$	0.90	$	1.01
Net income per common share - diluted	Net income per common share - diluted	$	2.06	$	0.48	$	2.98	$	1.65	Net income per common share - diluted	$	0.43	$	0.47	$	0.89	$	1.00

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(1)Potential common shares consist of common stock issuable under RSUs awards using the treasury stock method.

On February ~~15, 2022,~~16, 2023 and April ~~21, 2022 and July 28, 2022, respectively~~20, 2023, the Company's Board declared quarterly cash dividends of $0.05 per share of common stock, which was paid on March ~~25, 2022,~~17, 2023 and June ~~3, 2022 and September~~ 2, ~~2022, respectively~~2023, to stockholders' of record on February ~~25, 2022,~~28, 2023 and May ~~2, 2022 and August 8, 2022, respectively.~~1, 2023.

Note 1514 – Commitments and Contingencies

EVERTEC is a defendant in a number of legal proceedings arising in the ordinary course of business. Based on the opinion of legal counsel and other factors, management believes that the final disposition of these matters will not have a material adverse effect on the business, results of operations, financial condition, or cash flows of the Company. The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate the loss would be insignificant. For other claims regarding proceedings that are in an initial phase, the Company is unable to estimate the range of possible loss, if any, but at this time believes that any loss related to such claims will not be material.

Note 1615 – Related Party Transactions

In connection with closing of the Popular Transaction on July 1, 2022, the Company terminated the existing stockholder agreement with Popular, which granted Popular certain benefits as a shareholder of the Company. In addition, on August 15, 2022, through a secondary offering, Popular sold its remaining shares of common stock of Evertec and as of that date no longer holds any shares of ~~Evertec~~EVERTEC common stock. ~~Evertec~~EVERTEC is no longer considered a subsidiary of Popular under the Bank Holding Company Act of 1956, as amended (the ~~"Bank~~“Bank Holding Company ~~Act"~~Act”). Given both the termination of the stockholder agreement and that Popular is no longer a shareholder of EVERTEC, management concluded that Popular is no longer a related party as of August 15, 2022.

The following table presents the Company’s transactions with Popular for the three and six months ended June 30, 2022 while they were deemed a related ~~party during 2022 and for the three and nine months ended September 30, 2021:~~

~~Table of Contents~~

Three months ended September 30, Nine months ended September 30,
(In thousands)
2022 (1)
2021
2022 (1)
2021
Total revenues $ 22,782 $ 60,091 $ 153,335 $ 182,344
Cost of revenues $ 653 $ 624 $ 2,386 $ 2,242
Operating lease cost and other fees $ 807 $ 1,958 $ 4,433 $ 5,482
Interest earned from affiliate
Interest income $ 231 $ 184 $ 1,011 $ 422

~~(1)Amounts presented through August 15, 2022.~~party:

The Company continues to have revenue concentration with Popular, revenues as a percentage of total revenues were 35% and 40% for the three and nine months ended September 30, 2022, respectively and 41% and 42%, for the comparable periods in 2021, respectively. Accounts receivable from Popular as of September 30, 2022 amounted to $36.4 million.


	Three Months Ended June 30,		Six months ended June 30,
(In thousands)	2022		2022
Total revenues	$	65,825	$	130,553
Cost of revenues	$	418	$	1,733
Operating lease cost and other fees	$	1,765	$	3,626
Interest earned from affiliate
Interest income	$	440	$	780

~~As of the December 31, 2021, EVERTEC had the following balances arising from transactions with related parties:~~


~~(In thousands)~~	~~December 31, 2021~~
~~Cash and restricted cash deposits in affiliated bank~~	$	~~187,602~~
~~Other due to/from affiliate~~
~~Accounts receivable~~	$	~~38,120~~
~~Prepaid expenses and other assets~~	$	~~1,763~~
~~Operating lease right-of-use assets~~	$	~~13,533~~
~~Other long-term assets~~	$	~~2,853~~
~~Accounts payable~~	$	~~5,601~~
~~Contract liabilities~~	$	~~40,982~~
~~Operating lease liabilities~~	$	~~14,019~~

Note 1716 – Segment Information

The Company operates in four business segments: Payment Services - Puerto Rico & Caribbean, Payment Services - Latin America (collectively "Payment Services segments"), Merchant Acquiring, and Business Solutions.

The Payment Services - Puerto Rico & Caribbean segment revenues are comprised of revenues related to providing access to the ATH debit network and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and point of sale ("POS") transactions, and ATM management and monitoring. The segment revenues also include revenues from card processing services (such as credit and debit card processing, authorization and settlement and fraud monitoring and control to debit or credit issuers), payment processing services (such as payment and billing products for merchants, businesses and financial ~~institutions and digital payment services to the government of Puerto Rico)~~institutions), ATH Movil (person-to-person) and ATH Business (person-to-merchant) digital transactions and EBT (which principally consist of services to the government of Puerto Rico for the delivery of benefits to participants). For ATH debit network and processing services, revenues are primarily driven by the number of transactions processed. Revenues are derived primarily from network fees, transaction switching and processing fees, and the leasing of POS devices. For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenues are primarily derived from the number of beneficiaries on file.

2218

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The Payment Services - Latin America segment revenues consist of revenues related to providing access to the ATH network of ATMs and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring. The segment revenues also include revenues from card processing services (such as credit and debit card processing, authorization and settlement and fraud monitoring and control to debit or credit issuers), payment processing services (such as payment and billing products for merchants, businesses and financial institutions), as well as licensed software solutions for risk and fraud management and card payment processing. For network and processing services, revenues are primarily driven by the number of transactions processed. Revenues are derived primarily from network fees, transaction switching and processing fees, and the leasing of POS ~~devices and network fees.~~devices. For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed, and other processing services.

The Merchant Acquiring segment consists of revenues from services that allow merchants to accept electronic methods of payment. In the Merchant Acquiring segment, revenues include a discount fee and membership fees charged to merchants, debit network fees and rental fees from POS devices and other equipment, net of credit card interchange and assessment fees charged by credit cards associations (such as VISA or MasterCard) or payment networks. The discount fee is generally a percentage of the transaction value. EVERTEC also charges merchants for other services that are unrelated to the number of transactions or the transaction value.

The Business Solutions segment consists of revenues from a full suite of business process management solutions in various product areas such as core bank processing, network hosting and management, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment. Core bank processing and network services revenues are derived in part from a recurrent fixed fee and from fees based on the number of accounts on file (i.e., savings or checking accounts, loans, etc.), server capacity usage or computer resources utilized. Revenues from other processing services within the Business Solutions segment are generally volume-based and depend on factors such as the number of accounts processed. In addition, EVERTEC is a reseller of hardware and software products and these resale transactions are generally non-recurring.

In addition to the four operating segments described above, management identified certain functional cost areas that operate independently and do not constitute businesses in themselves. These areas could neither be concluded as operating segments nor could they be combined with any other operating segments. Therefore, these areas are aggregated and presented within the “Corporate and Other” category in the financial statements alongside the operating segments. The Corporate and Other category consists of corporate overhead expenses, intersegment eliminations, certain leveraged activities and other non-operating and miscellaneous expenses that are not included in the operating segments. The overhead and leveraged costs relate to activities such as:

•marketing,

•corporate finance and accounting,

•human resources,

•legal,

•risk management functions,

•internal audit,

•corporate debt related costs,

•non-operating depreciation and amortization expenses generated as a result of merger and acquisition activity,

•intersegment revenues and expenses, and

•other non-recurring fees and expenses that are not considered when management evaluates financial performance at a segment level

The Chief Operating Decision Maker ("CODM") reviews the operating segments separate financial information to assess performance and to allocate resources. Management evaluates the operating results of each of its operating segments based upon revenues and Adjusted EBITDA. Effective for the quarter ended March 31, 2023, the Company modified the manner in which it calculates and reports Adjusted EBITDA presented to the CODM for assessing segment performance to exclude the impact of non-cash unrealized gains and losses from foreign currency remeasurement. Adjusted EBITDA is defined as EBITDA further adjusted to exclude ~~unusual~~certain non-cash unrealized items and ~~other adjustments.~~unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency. Adjusted EBITDA, as it relates to operating segments, is presented in conformity with ASC Topic 280, Segment Reporting,, given that it is reported to the CODM for purposes of allocating resources. The Company has recast prior periods to conform with the modified definition of Adjusted EBITDA. Segment asset disclosure is not used by the CODM as a measure of segment performance since the segment

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evaluation is driven by revenues and Adjusted EBITDA. As such, segment assets are not disclosed in the notes to the ~~accompanying~~ unaudited condensed consolidated financial statements.

~~Table of Contents~~

The following tables set forth information about the Company’s operations by its four business segments for the periods indicated:


		Three months ended September 30, 2022													Three Months Ended June 30, 2023
(In thousands)	(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total		(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	Revenues	$	44,592	$	33,741	$	36,911	$	49,306	$	(18,747)	$	145,803	Revenues	$	50,795	$	39,076	$	41,248	$	56,971	$	(21,014)	$	167,076
Operating costs and expenses	Operating costs and expenses	$	26,960	$	28,513	$	25,261	$	38,522	$	2,729	$	121,985	Operating costs and expenses	28,895		33,666		27,616		39,097		3,029		132,303
Depreciation and amortization	Depreciation and amortization	$	5,116	$	4,104	$	1,045	$	3,745	$	5,702	$	19,712	Depreciation and amortization	6,087		5,393		1,150		4,469		5,230		22,329
Non-operating income (expenses)	Non-operating income (expenses)	$	385	$	(7,094)	$	348	$	136,218	$	(932)	$	128,925	Non-operating income (expenses)	115		2,290		1		66		928		3,400
EBITDA	EBITDA	23,133		2,238		13,043		150,747		(16,706)		172,455		EBITDA	28,102		13,093		14,783		22,409		(17,885)		60,502
Compensation and benefits (2)	Compensation and benefits (2)	1,557		972		498		503		2,141		$	5,671	Compensation and benefits (2)	842		999		860		965		5,035		8,701
Transaction, refinancing and other fees (3)	Transaction, refinancing and other fees (3)	330		—		325		(134,974)		8,567		$	(125,752)	Transaction, refinancing and other fees (3)	288		253		—		—		5,068		5,609
(Gain) loss on foreign currency remeasurement (4)														(Gain) loss on foreign currency remeasurement (4)	(49)		(285)		—		—		1		(333)
Adjusted EBITDA	Adjusted EBITDA	$	25,020	$	3,210	$	13,866	$	16,276	$	(5,998)	$	52,374	Adjusted EBITDA	$	29,183	$	14,060	$	15,643	$	23,374	$	(7,781)	$	74,479

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the ~~$12.3~~$13.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of ~~$3.7~~$4.4 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of ~~$2.8~~$3.3 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)Primarily represents share-based compensation and severance payments.

(3)Primarily represents fees and expenses associated with corporate transactions as defined in the ~~2018~~ Credit Agreement, ~~the gain from the Popular transaction~~ and the elimination of ~~non-cash~~unrealized equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.~~, net of dividends received.~~

(4)Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.


		Three months ended September 30, 2021													Three Months Ended June 30, 2022
(In thousands)	(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total		(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	Revenues	$	38,773	$	26,792	$	37,606	$	58,134	$	(15,422)	$	145,883	Revenues	$	46,078	$	30,784	$	38,539	$	64,690	$	(19,520)	$	160,571
Operating costs and expenses	Operating costs and expenses	21,420		22,209		19,922		37,412		(2,097)		98,866		Operating costs and expenses	28,680		25,032		22,823		40,297		(2,908)		113,924
Depreciation and amortization	Depreciation and amortization	3,989		2,809		1,010		4,691		6,246		18,745		Depreciation and amortization	5,466		2,712		1,040		4,279		6,063		19,560
Non-operating income (expenses)	Non-operating income (expenses)	203		1,844		281		551		(2,322)		557		Non-operating income (expenses)	309		123		332		624		(1,664)		(276)
EBITDA	EBITDA	21,545		9,236		18,975		25,964		(9,401)		66,319		EBITDA	23,173		8,587		17,088		29,296		(12,213)		65,931
Compensation and benefits (2)	Compensation and benefits (2)	260		755		255		70		2,153		3,493		Compensation and benefits (2)	675		973		446		555		2,756		5,405
Transaction, refinancing and other fees (3)	Transaction, refinancing and other fees (3)	—		—		—		—		(42)		(42)		Transaction, refinancing and other fees (3)	—		—		—		(16)		1,009		993
Loss (gain) on foreign currency remeasurement (4)														Loss (gain) on foreign currency remeasurement (4)	27		674		—		—		1,046		1,747
Adjusted EBITDA	Adjusted EBITDA	$	21,805	$	9,991	$	19,230	$	26,034	$	(7,290)	$	69,770	Adjusted EBITDA	$	23,875	$	10,234	$	17,534	$	29,835	$	(7,402)	$	74,076

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the ~~$10.8~~$13.3 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, ~~and~~ intercompany software developments and transaction processing of ~~$2.4~~$3.7 million from Payment ~~Services-~~Services - Latin America to both Payment ~~Services-~~Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of ~~$2.2~~$2.5 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

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(2)Primarily represents share-based ~~compensation.~~compensation and severance payments.

(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, and the elimination of ~~non-cash~~unrealized equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas ~~S.A, net dividends received.~~S.A.

(4)Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

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		Nine months ended September 30, 2022													Six months ended June 30, 2023
(In thousands)	(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total		(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	Revenues	$	130,678	$	93,308	$	111,079	$	176,620	$	(55,063)	$	456,622	Revenues	$	99,224	$	74,393	$	81,595	$	112,666	$	(40,988)	$	326,890
Operating costs and expenses	Operating costs and expenses	76,920		77,132		68,288		117,747		25		340,112		Operating costs and expenses	56,617		62,978		54,305		78,010		117		252,027
Depreciation and amortization	Depreciation and amortization	15,062		9,628		3,104		12,787		17,851		58,432		Depreciation and amortization	11,975		8,104		2,279		8,957		10,446		41,761
Non-operating income (expenses)	Non-operating income (expenses)	928		(3,365)		980		137,542		(3,560)		132,525		Non-operating income (expenses)	480		(1,495)		308		598		810		701
EBITDA	EBITDA	69,748		22,439		46,875		209,202		(40,797)		307,467		EBITDA	55,062		18,024		29,877		44,211		(29,849)		117,325
Compensation and benefits (2)	Compensation and benefits (2)	2,569		2,758		1,284		1,503		7,241		15,355		Compensation and benefits (2)	1,370		1,651		1,392		1,530		8,603		14,546
Transaction, refinancing and other fees (3)	Transaction, refinancing and other fees (3)	330		—		325		(134,990)		12,647		(121,688)		Transaction, refinancing and other fees (3)	580		253		—		—		4,379		5,212
Loss (gain) on foreign currency remeasurement (4)														Loss (gain) on foreign currency remeasurement (4)	46		4,487		—		—		(2)		4,531
Adjusted EBITDA	Adjusted EBITDA	$	72,647	$	25,197	$	48,484	$	75,715	$	(20,909)	$	201,134	Adjusted EBITDA	$	57,058	$	24,415	$	31,269	$	45,741	$	(16,869)	$	141,614

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the ~~$36.5~~$26.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, ~~and~~ intercompany software developments and transaction processing of ~~$10.7~~$8.4 million from Payment ~~Services -~~Services- Latin America to both Payment ~~Services -~~Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of ~~$7.9~~$6.2 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)Primarily represents share-based compensation and severance payments.

(4)Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.


		Nine months ended September 30, 2021													Six months ended June 30, 2022
(In thousands)	(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total		(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	Revenues	$	113,626	$	77,641	$	106,808	$	179,438	$	(42,954)	$	434,559	Revenues	$	86,086	$	59,567	$	74,168	$	127,314	$	(36,316)	$	310,819
Operating costs and expenses	Operating costs and expenses	61,270		63,020		55,762		110,276		(2,077)		$	288,251	Operating costs and expenses	49,960		48,619		43,027		79,225		(2,704)		218,127
Depreciation and amortization	Depreciation and amortization	11,813		8,695		2,631		14,085		18,867		$	56,091	Depreciation and amortization	9,946		5,524		2,059		9,042		12,149		38,720
Non-operating income (expenses)	Non-operating income (expenses)	618		5,348		835		2,494		(5,269)		$	4,026	Non-operating income (expenses)	544		3,729		632		1,324		(2,629)		3,600
EBITDA	EBITDA	64,787		28,664		54,512		85,741		(27,279)		206,425		EBITDA	46,616		20,201		33,832		58,455		(24,092)		135,012
Compensation and benefits (2)	Compensation and benefits (2)	781		2,321		781		1,193		6,204		$	11,280	Compensation and benefits (2)	1,012		1,786		786		1,000		5,100		9,684
Transaction, refinancing and other fees (3)	Transaction, refinancing and other fees (3)	660		—		—		(647)		1,202		$	1,215	Transaction, refinancing and other fees (3)	—		—		—		(16)		3,034		3,018
Loss (gain) on foreign currency remeasurement (4)														Loss (gain) on foreign currency remeasurement (4)	162		(2,129)		—		—		1,046		(921)
Adjusted EBITDA	Adjusted EBITDA	$	66,228	$	30,985	$	55,293	$	86,287	$	(19,873)	$	218,920	Adjusted EBITDA	$	47,790	$	19,858	$	34,618	$	59,439	$	(14,912)	$	146,793

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the ~~$31.2~~$24.2 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, ~~and~~ intercompany software developments and transaction processing of ~~$6.6~~$7.0 million from Payment ~~Services -~~Services- Latin America to both Payment ~~Services -~~Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $5.1 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)Primarily represents share-based compensation and severance payments.

2521

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(4)Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

The reconciliation of ~~EBITDA to~~ consolidated net income to EBITDA is as follows:


		Three months ended September 30,				Nine months ended September 30,					Three Months Ended June 30,				Six months ended June 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022		2023		2022
Total EBITDA		$	172,455	$	66,319	$	307,467	$	206,425
Less:
Net Income										Net Income	$	28,050	$	33,556	$	58,113	$	72,422
Add:										Add:
Income tax expense	Income tax expense	9,048		7,134		22,911		14,474		Income tax expense	6,586		7,688		9,404		13,863
Interest expense, net	Interest expense, net	5,956		5,180		15,963		15,905		Interest expense, net	3,537		5,127		8,047		10,007
Depreciation and amortization	Depreciation and amortization	19,712		18,745		58,432		56,091		Depreciation and amortization	22,329		19,560		41,761		38,720
Net income		$	137,739	$	35,260	$	210,161	$	119,955
Total EBITDA										Total EBITDA	$	60,502	$	65,931	$	117,325	$	135,012

Note 1817 – Subsequent Events

On ~~October~~July 20, ~~2022,~~2023, the Board declared a regular quarterly cash dividend of $0.05 per share on the Company’s outstanding shares of common stock. The dividend will be paid on ~~December 2, 2022~~September 1, 2023 to stockholders of record as of the close of business on ~~November 1, 2022.~~July 31, 2023. The Board anticipates declaring this dividend in future quarters on a regular basis; however future declarations of dividends are subject to the Board’s approval and may be adjusted as business needs or market conditions change.

On July 20, 2023, the Company entered into a Merger Agreement and Other Covenants (the “Merger Agreement”), by and among Evertec Brasil Informática S.A, a wholly-owned subsidiary of Evertec (“Evertec BR”), Sinqia S.A., a publicly held company incorporated and existing in accordance with the laws of the Federative Republic of Brazil (“Sinqia”), and certain other Key Shareholders (as defined therein), as shareholders of Sinqia. The Board and the board of directors of Sinqia (the “Sinqia Board”) have unanimously approved the Merger Agreement. Pursuant to and on the terms and subject to the conditions set forth in the Merger Agreement,a business combination of Evertec BR and Sinqia (the "Merger Transaction") will be carried out through a merger of all shares issued by Sinqia into Evertec BR pursuant to provisions of the Brazilian Corporations Law (the “Merger of Shares”), and as a result of such Merger of Shares, Sinqia will become a wholly-owned subsidiary of Evertec BR. The Merger Transaction is expected to close in the fourth quarter of 2023 and is subject to the satisfaction or waiver of customary closing conditions. Evertec intends to finance the Merger Transaction with cash on hand and committed financing of $600 million. In connection with this potential acquisition, on July 24, 2023, the Company entered into a foreign currency swap to fix the purchase price on the Merger Transaction.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) covers: (i) the results of operations for the three and ~~nine~~six months ended ~~months ended September~~June 30, ~~2022~~2023 and ~~2021~~2022 and (ii) the financial condition as of ~~September~~June 30, ~~2022.~~2023. You should read the following discussion and analysis in conjunction with the audited consolidated financial statements (the “Audited Consolidated Financial Statements”) and related notes for the ~~fiscal~~ year ended December 31, ~~2021,~~2022, included in the Company’s Annual Report on Form 10-K ~~("2021 Form 10-K")~~ as filed with the SEC on February ~~25, 2022~~24, 2023 and with the unaudited condensed consolidated financial statements (the “Unaudited Condensed Consolidated Financial Statements”) and related notes appearing elsewhere herein. This MD&A contains forward-looking statements ~~based upon current expectations~~ that involve risks and uncertainties. Our actual results may differ from those indicated in the forward-looking ~~statements as a result of various factors, including those set forth in the section titled "Risk Factors" in our 2021 Form 10-K, as may be updated from time to time in our other filings with the SEC.~~statements. See “Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with these statements.

Except as otherwise indicated or unless the context otherwise requires, (a) the terms “EVERTEC,” “we,” “us,” “our,” “our Company” and “the Company” refer to EVERTEC, Inc. and its subsidiaries on a consolidated basis, (b) the term “Holdings” refers to EVERTEC Intermediate Holdings, LLC, but not any of its subsidiaries and (c) the term “EVERTEC Group” refers to EVERTEC Group, LLC and its predecessor entities and their subsidiaries on a consolidated basis. EVERTEC Inc.’s subsidiaries include Holdings, EVERTEC Group, EVERTEC Dominicana, SAS, Evertec Chile Holdings SpA (formerly known as Tecnopago SpA), Evertec Chile SpA (formerly known as EFT Group SpA), Evertec Chile Global SpA (formerly known as EFT Global Services SpA), Evertec Chile Servicios Profesionales SpA (formerly known as EFT Servicios Profesionales SpA), EFT Group S.A., Tecnopago España SL, Paytrue S.A., Caleidon, S.A., Evertec Brasil Informática Ltda. (formerly known as Paytrue Solutions Informática Ltda.), EVERTEC Panamá, S.A., EVERTEC Costa Rica, S.A. (“EVERTEC CR”), EVERTEC Guatemala, S.A., Evertec Colombia, SAS (formerly known as Processa, SAS), EVERTEC USA, LLC, Evertec Placetopay, SAS (formerly known as EGM Ingeniería sin Fronteras, S.A.S. ("PlacetoPay")), BBR, SpA, BBR Perú, S.A.C., Paysmart Pagamentos Eletronicos Ltda and EVERTEC México Servicios de Procesamiento, S.A. de C.V. Neither EVERTEC nor Holdings conducts any operations other than with respect to its indirect or direct ownership of EVERTEC Group.

Executive Summary

EVERTEC is a leading full-service transaction-processing business in Puerto Rico, the Caribbean and Latin America, providing a broad range of merchant acquiring, payment services and business process management services. ~~We believe that~~According to the September 2022 Nilson Report, we are one of the largest merchant acquirers in Latin America based on total number of transactions and we believe we are the largest merchant acquirer in the Caribbean. We serve 26 countries out of 12 offices, including our headquarters in Puerto Rico. We own and operate the ATH network, which we believe is one of the leading personal identification number ~~("PIN"~~(“PIN”) debit ~~and automated teller machine ("ATM")~~ networks in ~~the Caribbean and~~ Latin America. We ~~manage~~process over six billion transactions annually through a system of electronic payment networks in Puerto Rico and ~~offer~~Latin America and a comprehensive suite of services for core banking, cash processing, and fulfillment in Puerto ~~Rico, that process over three billion transactions annually.~~Rico. Additionally, we offer technology outsourcing inand payment transactions fraud monitoring to all the regions we serve. We serve a diversified customer base of leading financial institutions, merchants, corporations, and government agencies with “mission-critical” technology solutions that enable them to issue, process and accept transactions securely. We believe our business is well-positioned to continue to expand across the fast-growing Latin American region.

We are differentiated, in part, by our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets. We believe this capability provides several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, win new customers, develop new sales channels, and enter new markets. We believe these competitive advantages include:

•Our ability to provide competitive products;

•Our ability to provide in one package a range of services that traditionally had to be sourced from different vendors;

•Our ability to ~~leverage proprietary IP that enables us to be nimble and flexible when it comes to client and country requirements;~~

•~~Our ability to put forth Spanish speaking developers in front of our Spanish speaking customers making communication much more effective and integrations more efficient;~~

•~~Our ability to~~ serve customers with disparate operations ~~across~~in several geographies with technology solutions that enable them to manage their business as one enterprise; and

•Our ability to capture and analyze data across the transaction-processing value chain and use that data to provide value-added services that are differentiated from those offered by pure-play vendors that serve only one portion of the transaction-processing value chain (such as only merchant acquiring or payment services).

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Our broad suite of services spans the entire ~~transaction-processing~~transaction processing value chain and includes a range of front-end customer-facing solutions such as the electronic capture and authorization of transactions at the point-of-sale for both card present transactions and card not present transactions, as well as back-end support services such as the clearing and settlement of

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transactions and account reconciliation for card issuers. These include: (i) merchant acquiring services, which enable point of sales (“POS”) and e-commerce merchants to accept and process electronic methods of payment such as debit, credit, prepaid and electronic benefit transfer (“EBT”) cards; (ii) payment processing services, which enable financial institutions and other issuers to manage, support and facilitate the processing for credit, debit, prepaid, automated teller machines (“ATM”) and EBT card programs; and (iii) business process management solutions, which provide “mission-critical” technology solutions such as core bank processing, as well as IT outsourcing and cash management services to financial institutions, corporations and governments. We provide these services through scalable, end-to-end technology platforms that we manage and operate in-house and that generate significant operating efficiencies that enable us to maximize profitability.

We sell and distribute our services primarily through a proprietary direct sales force with established customer relationships. We continue to pursue ~~both organic and inorganic opportunities such as acquisitions,~~ joint ventures and merchant acquiring alliances. We benefit from an attractive business model, the hallmarks of which are recurring revenue, scalability, significant operating margins and moderate capital expenditure requirements. Our revenue is predominantly recurring in nature because of the mission-critical and embedded nature of the services we provide. In addition, we generally ~~negotiate~~enter into multi-year contracts with our customers. We believe our business model should enable us to continue to grow our business organically in the primary markets we serve without significant incremental capital expenditures.

Relationship with Popular

On September 30, 2010, EVERTEC Group entered into a 15-year MSA, and several related agreements with Popular. ~~Under the terms of the MSA, Popular agreed to use Evertec services on an ongoing exclusive basis for the duration of the agreement.~~ On July 1, 2022, we modified and extended the main commercial agreements with Popular, ~~which had initial terms ending in 2025,~~ including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement (as amended, the “A"A&R ISO ~~Agreement”~~Agreement"), a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA (the "A&R ~~MSA~~ISO Agreement"). The A&R ISO Agreement, which ~~sets~~defines our merchant acquiring relationship with Popular, now includes revenue sharing provisions with Popular. The MSA modifications also include the elimination of the exclusivity requirement, the inclusion of annual MSA minimums through September 30, 2028, a 10% ~~fee~~ discount on certain MSA services beginning in October of 2025 and adjustments to the ~~existing~~ CPI pricing escalator clause. On the same date, we also sold to Popular certain assets in exchange for 4.6 million shares of ~~Evertec~~EVERTEC common stock owned by ~~Popular. As part of this transaction,~~ Popular ~~agreed to take certain actions after closing to ensure that Evertec was no longer deemed a “subsidiary” of Popular for purposes of~~(collectively with the ~~Bank Holding Company Act by 90 days following~~contract amendments, the ~~closing, including selling its shares of Evertec common stock in the open market and, if necessary, converting certain Evertec common stock into non-voting stock to reduce its voting interest to 4.5%~~"Popular Transaction"). On August 15, 2022, through a secondary offering, Popular sold its remaining shares of ~~Evertec common stock and as of this date no longer holds any shares of Evertec~~EVERTEC common stock. ~~Evertec~~EVERTEC is no longer ~~considered~~deemed a subsidiary of Popular under the Bank Holding Company Act.

Popular continues to be the Company's largest customer and for the six months ended June 30, 2023 approximately 37% of our revenues were generated from this relationship.

~~Results of Operations~~2023 Developments

~~Comparison~~On July 20, 2023, the Company entered into a Merger Agreement and Other Covenants (the “Merger Agreement”), by and among Evertec Brasil Informática S.A, a wholly-owned subsidiary of Evertec (“Evertec BR”), Sinqia S.A., a publicly held company incorporated and existing in accordance with the laws of the ~~three months ended September 30, 2022~~Federative Republic of Brazil (“Sinqia”), and ~~2021~~

Three months ended September 30,
In thousands 2022 2021 Variance
Revenues $ 145,803 $ 145,883 $ (80) — %
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization 76,272 62,995 13,277 21 %
Selling, general and administrative expenses 26,001 17,126 8,875 52 %
Depreciation and amortization 19,712 18,745 967 5 %
Total operating costs and expenses 121,985 98,866 23,119 23 %
Income from operations $ 23,818 $ 47,017 $ (23,199) (49) %
certain other Key Shareholders (as defined therein), as shareholders of Sinqia. The Board and the board of directors of Sinqia (the “Sinqia Board”) have unanimously approved the Merger Agreement.

Pursuant to and on the terms and subject to the conditions set forth in the Merger Agreement,a business combination of Evertec BR and Sinqia will be carried out through a merger of all shares issued by Sinqia into Evertec BR pursuant to provisions of the Brazilian Corporations Law (the “Merger of Shares”), and as a result of such Merger of Shares, Sinqia will become a wholly-owned subsidiary of Evertec BR.

At the effective time of the Merger of Shares, each common share of Sinqia (the “Sinqia Common Shares”), issued and outstanding immediately prior to the Merger of Shares will be exchanged by (a) one class A mandatorily redeemable preferred share issued by Evertec BR (“Evertec BR New Class A Shares”), and (b) one class B mandatorily redeemable preferred share issued by Evertec BR (“Evertec BR New Class B Shares” and, jointly with Evertec BR New Class A Shares, the “Evertec BR New Shares”). Immediately upon implementation of the Merger of Shares, all Evertec BR New Shares delivered to the then shareholders of Sinqia will be automatically redeemed and canceled (the “Redemption”, and together with the Merger of Shares, the “Transaction”), and each then shareholder of Sinqia will be entitled to receive, for each Evertec BR New Class A Share held, (i) twenty-four Reais and forty-seven cents (R$ 24.47), increased by a customary daily “ticking fee” of up to one Reais (R$1.00) per share depending on the timing of the closing and subject to other customary adjustments as set forth in the Merger Agreement, and (ii) Brazilian Depositary Receipts representing 0.014354 underlying share of common stock, par value $0.01 per share, of Evertec. The Transaction is expected to close in the fourth quarter of 2023and is subject to the satisfaction or waiver of customary closing conditions

On the same date, Evertec also obtained financing commitments for the purpose of financing the Transaction and paying related fees and expenses with debt financing in an aggregate principal amount of $600 million (as such amount may be increased).

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~~Revenues~~The obligations of the lenders to provide debt financing under the related debt commitment letter are subject to customary terms and conditions.

~~Total revenues for~~This complementary acquisition is expected to help the ~~quarter ended September 30, 2022 were $145.8 million, relatively flat when compared with~~Company enhance existing growth strategy and diversify the ~~prior year quarter. Revenue in Puerto Rico was negatively impacted by~~Company’s business, expand the ~~close of~~Company’s addressable markets, increase the Popular Transaction, including the $6.9 million one-time credit granted upon closing. Revenues in the quarter were also negatively impacted by Hurricane Fiona, primarily the Company's Merchant Acquiring segment. These negative impacts were partially offset by the continued growth of the Company's digital solutions, specifically, ATH Movil Business, increased transaction volumesCompany’s product offering, and ~~one-time hardware and software sales. Additionally, the quarter benefited from~~attract revenue generated from the small acquisition completed in the second quarter. Latin America revenue reflected organic growth and revenue contribution from the BBR acquisition completed at the beginning of the quarter.

~~Cost of Revenues~~

Cost of revenues for the three months ended September 30, 2022 amounted to $76.3 million, an increase of $13.3 million or 21% when compared to the same period in the prior year. The increase in cost of revenues was primarily driven by an increase in cost of sales mainly due to the new revenue sharing agreement with Popular resulting from the Popular Transaction and costs incurred for hardware sales, an increase in personnel costs, mainly due to increased headcount in Latin America including the added headcount from the BBR acquisition, and an increase in printing supplies which have been impacted by the inflationary environment.

~~Selling, General and Administrative~~

Selling, general and administrative expenses for the three months ended September 30, 2022 amounted to $26.0 million, an increase of $8.9 million or 52% when compared to the same period in the prior year driven by an increase in professional fees related to corporate transactions, including the Popular Transaction related costs.

~~Depreciation and Amortization~~

Depreciation and amortization expense for the three months ended September 30, 2022 amounted to $19.7 million, an increase of $1.0 million or 5% when compared to the same period in the prior year. Increased expense during the three months is driven by the amortization of intangible assets created in connection with acquisitions completed in 2022.

~~Non-Operating Expenses~~

Three months ended September 30,
In thousands 2022 2021 Variance
Interest income $ 807 $ 504 $ 303 60 %
Interest expense (6,763) (5,684) (1,079) (19) %
Earnings of equity method investment 688 411 277 67 %
Loss on foreign currency remeasurement (7,779) (304) (7,475) 2,459 %
Gain on sale of a business 135,642 — 135,642 — %
Other income (expenses) 374 450 (76) (17) %
Total non-operating income (expenses) $ 122,969 $ (4,623) $ 127,592 2,760 %

Non-operating income for the three months ended September 30, 2022 amounted to $123.0 million, an increase of $127.6 million when compared to the same period in the prior year, as it includes the gain from the Popular Transaction of $135.6 million. Non-operating expenses in the quarter also reflect a $7.8 million loss from the remeasurement of assets and liabilities denominated in US dollars, as well as a $1.1 million increase in interest expense due to rising interest rates.

~~Income Tax Expense~~

Three months ended September 30,
In thousands 2022 2021 Variance
Income tax expense $ 9,048 $ 7,134 $ 1,914 27 %

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Income tax expense for the three months ended September 30, 2022 amounted to $9.0 million, an increase of $1.9 million when compared to the same period in the prior year. The effective tax rate for the period was 6.2%, compared with 16.8% in the 2021 period. The decrease in the effective tax rate was primarily driven by the impact of the Popular Transaction which was taxed at a preferential tax rate and the impact from the reversal of a potential liability for uncertain tax positions as a result of the expiration of the statute of limitation, partially offset by the impact of higher revenues in higher taxed jurisdictions, a shift in the mix of business in Puerto Rico and higher withholding taxes.

~~Comparison of the nine months ended September 30, 2022 and 2021~~

Nine months ended September 30,
In thousands 2022 2021 Variance
Revenues $ 456,622 $ 434,559 $ 22,063 5 %
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization 215,244 182,180 33,064 18 %
Selling, general and administrative expenses 66,436 49,980 16,456 33 %
Depreciation and amortization 58,432 56,091 2,341 4 %
Total operating costs and expenses 340,112 288,251 51,861 18 %
Income from operations $ 116,510 $ 146,308 $ (29,798) (20) %

~~Revenues~~

Total revenues for the nine months ended September 30, 2022 were $456.6 million, an increase of $22.1 million compared to $434.6 million in the prior year. Revenue in Puerto Rico benefited from increased payment transaction volumes in addition to continued growth in the Company's digital solutions, ATH Movil Business, as well as revenue generated from an acquisition completed in the second quarter. Revenue also benefited from the printing contract entered into in June 2021, one-time software sales, partially offset by the impacts from the Popular Transaction, including the $6.9 million one-time credit granted upon closing of the Popular Transaction. Latin America revenue reflected organic growth and the revenue contribution from the BBR acquisition.

~~Cost of Revenues~~

Cost of revenues for the nine months ended September 30, 2022 amounted to $215.2 million, an increase of $33.1 million or 18% when compared to the same period in the prior year. The increase in cost of revenues includes a $4.1 million impairment loss related to a multi-year software development recorded during the second quarter, as well as an increase in personnel costs, mainly due to increased headcount in Latin America including the added headcount from the BBR acquisition, higher equipment expenses for cloud services as utilization continues to grow, an increase in printing supply expense and an increase in cost of sales due to the same factors explained above for the quarter.

~~Selling, General and Administrative~~

Selling, general and administrative expenses for the nine months ended September 30, 2022 amounted to $66.4 million, an increase by $16.5 million or 33% when compared to the same period in the prior year. The increase is driven by the same factors explained above for the quarter.

~~Depreciation and Amortization~~

Depreciation and amortization expense for the nine months ended September 30, 2022 amounted to $58.4 million, an increase of $2.3 million or 5% when compared to the same period in the prior year, mainly due to the same factors explained above for the quarter.

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~~Non-Operating Expenses~~

Nine months ended September 30,
In thousands 2022 2021 Variance
Interest income $ 2,279 $ 1,343 $ 936 70 %
Interest expense (18,242) (17,248) (994) (6) %
Earnings of equity method investment 2,120 1,307 813 62 %
(Loss) gain on foreign currency remeasurement (6,858) 652 (7,510) (1,152) %
Gain on sale of a business 135,642 — 135,642 — %
Other income (expenses) 1,621 2,067 (446) (22) %
Total non-operating income (expenses) $ 116,562 $ (11,879) $ 128,441 1,081 %

Non-operating income for the nine months ended September 30, 2022 increased by $128.4 million to $116.6 million when compared to the same period in the prior year, primarily driven by the same factors explained above for the quarter, partially offset by a $0.9 million increase in interest income coupled with a $0.8 million increase in earnings from the Company's equity method investment.

~~Income Tax Expense~~

Nine months ended September 30,
In thousands 2022 2021 Variance
Income tax expense $ 22,911 $ 14,474 $ 8,437 58 %

Income tax expense for the nine months ended September 30, 2022 amounted to $22.9 million, an increase of $8.4 million when compared to the same period in the prior year. The effective tax rate for the period was 9.8%, compared with 10.8% in the 2021 period. The decrease in the effective tax rate was driven by the same factors explained above for the quarter.

synergies.

Factors and Trends Affecting the Results of Our Operations

The ongoing migration from cash and paper methods of payment to electronic payments continues to benefit the transaction- processing industry globally. We believe that the penetration of electronic payments in the markets in which we operate is significantly lower relative to the U.S. market, which, together with the ongoing shift from cash and paper methods of payment to electronic payments will continue to generate growth opportunities for our business. For example, currently the adoption of banking products, including electronic payments, in the Latin America and Caribbean region is lower relative to the mature U.S. and European markets. We believe that the unbanked and underbanked population in our markets will continue to shrink, and therefore drive incremental penetration and growth of electronic payments in Puerto Rico and other Latin America regions. We also benefit from the outsourcing of technology systems and processes trend for financial institutions and government. Many medium- and small-size institutions in the Latin American markets in which we operate have outdated computer systems and updating these IT legacy systems is financially and logistically challenging, which presents a business opportunity for us.

In recent years, consumer preference has accelerated its shift away from cash and paper payment methods, noting increased demand for omni-channel payment services that facilitate cashless and contactless transactions. The markets in which we operate, particularly Latin America and the Caribbean, continue to grow and consumer preference is driving an increase for electronic payments usage. Latin America is one of the fastest-growing mobile markets globally, with a growing base of tech-savvy customers that demonstrate a preference for credit cards, digital wallets, contactless payments, and other value-added offerings. The region's FinTech sector is driving change via new contactless payment technology, ~~that are~~which is becoming a popular ~~alternatives~~alternative to cash payments. We continue to believe that the attractive characteristics of our markets and our position across multiple services and sectors will continue to drive growth and profitability in our businesses.

~~On July 1, 2022, we closed~~Our payment businesses also generally experience moderate increased activity during the ~~previously announced Popular Transaction,~~traditional holiday shopping periods and around other nationally recognized holidays, which includes extensions and amendments to the main commercial agreements with Banco Popular. The extension of the A&R ISO Agreement includes a revenue sharing provision which will be treated as an expense and has resulted, and we expect will continue to result in a decline to the Merchant Acquiring Segment Adjusted EBITDA and margin. The extension of the MSA includes a reduction in the CPI cap from 5% to 1.5%, as well as a retroactive one-time credit for the 5% CPI price increase applied to certain services since October

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1, 2021 through closing, both of which negatively impacted our results of operations, and we expect will continue to negatively impact revenue and consequently, margin of our Business Solutions Segment and, to a lesser extent, the Payment Services – Puerto Rico Segment. Additionally, as part of the amendments to the MSA, there will be contractual revenue minimums through 2028. As part of the Popular Transaction, we also sold certain assets from our Business Solutions Segment to Banco Popular, which has resulted, and we expect will continue to result in a reduction in revenue and margin for this segment.follow consumer spending patterns.

Finally, our financial condition and results of operations are, in part, dependent on the economic and general conditions of the geographies in which we operate. Rising interest rates, inflationary ~~pressure~~pressures and economic uncertainty in the markets in which we operate may affect consumer confidence, which could result in a decrease in consumer spending and an impact to our financial results.

Results of Operations

Comparison of the three months ended June 30, 2023 and 2022


	Three months ended June 30,
In thousands	2023		2022		Variance

Revenues	$	167,076	$	160,571	$	6,505	4	%
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	80,452		74,313		6,139		8	%
Selling, general and administrative expenses	29,522		20,051		9,471		47	%
Depreciation and amortization	22,329		19,560		2,769		14	%
Total operating costs and expenses	132,303		113,924		18,379		16	%
Income from operations	$	34,773	$	46,647	$	(11,874)	(25)	%

Revenues

Total revenues for the quarter ended June 30, 2023 was $167.1 million, an increase of 4% compared with $160.6 million in the same period in the prior year. The revenue increase was primarily driven by growth in the Company's payment segments, both Puerto Rico and Latin America. Merchant acquiring revenue reflected a higher spread which is mainly due to the continued benefit from pricing initiatives, shift in the card mix, and an increase in sales volumes. Payment processing growth in Puerto

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Rico was driven by increased transaction volumes as well as continued growth in ATH Movil revenues, primarily from the ATH Business. Revenues also reflect the contribution from organic growth in Payment Services Latin America, and the positive impact from revenue contribution from the BBR and paySmart acquisitions, completed in the third quarter of 2022 and first quarter of 2023, respectively. These increases were partially offset by the impact to business solutions from the assets sold as part of the Popular Transaction in the third quarter of 2022.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2023 amounted to $80.5 million, an increase of $6.1 million or 8% when compared to the same period in the prior year. The increase during the three month period was primarily driven by the revenue sharing agreement with Banco Popular as well as an increase in personnel costs, mainly due to increased headcount in Latin America, including the additional headcount from the BBR and paySmart acquisitions and an increase in cloud services as utilization continues to grow. These increases were partially offset by the impact in the prior year of a $4.1 million impairment loss on a multi-year software development.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2023 amounted to $29.5 million, an increase of $9.5 million or 47% when compared to the same period in the prior year. This increase was primarily driven by an increase in professional fees related to corporate transactions and increased personnel costs.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2023 amounted to $22.3 million, an increase of $2.8 million or 14% when compared to the same period in the prior year. This increase was primarily driven by an increase in amortization of intangible assets created in connection with the aforementioned acquisitions, as well as an increase in software amortization for internally developed software.

Non-Operating Expenses


	Three months ended June 30,
In thousands	2023		2022		Variance

Interest income	$	2,103	$	805	$	1,298	161	%
Interest expense	(5,640)		(5,932)		292		5	%
Gain (loss) on foreign currency remeasurement	333		(1,747)		2,080		119	%
Earnings of equity method investment	1,476		862		614		71	%
Other income	1,591		609		982		161	%
Total non-operating expenses	$	(137)	$	(5,403)	$	5,266	97	%

Non-operating expenses for the three months ended June 30, 2023 decreased by $5.3 million to $0.1 million when compared to the same period in the prior year. The decrease was mainly related to a gain on foreign currency remeasurement of $0.3 million in the current quarter compared to a loss of $1.7 million in the prior period and an increase of $1.3 million in interest income.

Income Tax Expense


	Three months ended June 30,
In thousands	2023		2022		Variance
Income tax expense	$	6,586	$	7,688	$	(1,102)	(14)	%

Income tax expense for the three months ended June 30, 2023 amounted to $6.6 million, a decrease of $1.1 million when compared to the same period in the prior year. The effective tax rate for the period was 19.0%, compared with 18.6% in the comparable 2022 period. The slight increase in the effective tax rate primarily reflects the shift in mix of business in Puerto Rico and higher withholding taxes.

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Comparison of the six months ended June 30, 2023 and 2022


	Six months ended June 30,
In thousands	2023		2022		Variance

Revenues	$	326,890	$	310,819	$	16,071	5	%
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	156,869		138,972		17,897		13	%
Selling, general and administrative expenses	53,397		40,435		12,962		32	%
Depreciation and amortization	41,761		38,720		3,041		8	%
Total operating costs and expenses	252,027		218,127		33,900		16	%
Income from operations	$	74,863	$	92,692	$	(17,829)	(19)	%

Revenues

Total revenues for the six months ended June 30, 2023 was $326.9 million, an increase of 5% compared with $310.8 million in the same period in the prior year. The revenue increase was primarily driven by the same factors explained above for the quarter as well as revenue contribution from the small acquisition completed in the second quarter of 2022.

Cost of Revenues

Cost of revenues for six months ended June 30, 2023 amounted to $156.9 million, an increase of $17.9 million or 13% when compared to the same period in the prior year. The increase during the six month period was primarily driven by the same factors explained above for the quarter as well as an increase in printing supplies expense, higher professional fees and an increase in operational losses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for six months ended June 30, 2023 amounted to $53.4 million, an increase of $13.0 million or 32% when compared to the same period in the prior year due to the same reasons explained for the quarter.

Depreciation and Amortization

Depreciation and amortization expense for the six months ended June 30, 2023 amounted to $41.8 million, an increase of $3.0 million or 8% when compared to the same period in the prior year. This increase was primarily driven by an increase in depreciation expense for hardware upgrades completed in the current and prior year and an increase in software amortization for internally developed software.

Non-Operating Expenses


	Six months ended June 30,
In thousands	2023		2022		Variance

Interest income	$	3,236	$	1,472	$	1,764	120	%
Interest expense	(11,283)		(11,479)		196		2	%
Gain (loss) on foreign currency remeasurement	(4,531)		921		(5,452)		(592)	%
Earnings of equity method investment	2,631		1,432		1,199		84	%
Other income	2,601		1,247		1,354		109	%
Total non-operating expenses	$	(7,346)	$	(6,407)	$	(939)	(15)	%

Non-operating expenses for the six months ended June 30, 2023 increased by $0.9 million to $7.3 million when compared to the same period in the prior year. The increase was mainly related to a loss on foreign currency remeasurement of $4.5 million in the current period compared to a gain of $0.9 million in the prior period, partially offset by an increase of $1.8 million in

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interest income, $1.2 million in earnings from the Company's equity method investment in Contado and $1.4 million in other income primarily related to realized gains from foreign currency transactions.

Income Tax Expense


	Six months ended June 30,
In thousands	2023		2022		Variance
Income tax expense	$	9,404	$	13,863	$	(4,459)	(32)	%

Income tax expense for the six months ended June 30, 2023 amounted to $9.4 million, a decrease of $4.5 million when compared to the same period in the prior year. The effective tax rate for the period was 13.9%, compared with 16.1% in the comparable 2022 period. The decrease in the effective tax rate is driven by the benefit of a discrete item in Puerto Rico recorded during the quarter ended March 31, 2023, partially offset by the same factors explained above for the quarter.

Segment Results of Operations

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~~“Corporate~~ “Corporate and Other” category in the financial statements alongside the operating segments. The Corporate and Other category consists of corporate overhead expenses, intersegment eliminations, certain leveraged activities and other non-operating and miscellaneous expenses that are not included in the operating segments. The overhead and leveraged costs relate to activities such as:

•marketing,

•corporate finance and accounting,

•human resources,

•legal,

•risk management functions,

•internal audit,

•corporate debt related costs,

•non-operating depreciation and amortization expenses generated as a result of merger and acquisition activity,

•intersegment revenues and expenses, and

•other non-recurring fees and expenses that are not considered when management evaluates financial performance at a segment ~~level.~~level

The Chief Operating Decision Maker ("CODM") reviews the operating segments separate financial information to assess performance and to allocate resources. Management evaluates the operating results of each of its operating segments based upon revenues and Adjusted EBITDA. Effective for the quarter ended March 31, 2023, the Company modified the manner in which it calculates and reports Adjusted EBITDA presented to the CODM for assessing segment performance to exclude the impact of non-cash unrealized gains and losses from foreign currency remeasurement. Adjusted EBITDA is defined as EBITDA further adjusted to exclude ~~unusual~~certain non-cash unrealized items and ~~other adjustments.~~unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from non-cash unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency. Adjusted EBITDA, as it relates to operating segments, is presented in conformity with ASC Topic 280, Segment Reporting, given that it is reported to the CODM for purposes of allocating resources. The Company has recast prior periods to conform with the modified definition of Adjusted EBITDA. Segment asset disclosure is not used by the CODM as a measure of segment performance since the segment evaluation is driven by revenues and ~~adjusted~~Adjusted EBITDA. As such, segment assets are not disclosed in the notes to the ~~accompanying~~ unaudited condensed consolidated financial statements.

The following tables set forth information about the Company’s operations by its four business segments for the periods indicated below.

Comparison of the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

Payment Services - Puerto Rico & Caribbean


		Three months ended September 30,						Three months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	44,592		$	38,773			Revenues	$50,795		$46,078
Adjusted EBITDA	Adjusted EBITDA	$	25,020		$	21,805			Adjusted EBITDA	29,183		23,875
Adjusted EBITDA Margin	Adjusted EBITDA Margin	56.1		%	56.2		%		Adjusted EBITDA Margin	57.5	%	51.8	%

Payment Services - Puerto Rico & Caribbean segment revenues for the three months ended ~~September~~June 30, ~~2022~~2023 increased by ~~$5.8~~$4.7 million to ~~$44.6~~$50.8 million when compared to the same period in the prior year. The increase in revenues was primarily driven by an increase in ~~transaction volumes for~~ POS processing ~~the ongoing~~and continued strong digital payments growth from ATH Movil, ~~and~~primarily the ATH Business, ~~and an increase in~~as well as revenue contribution from issuing ~~services. The revenue increase also includes the impact of the small acquisition completed in the second quarter. The segment continues~~services provided to ~~benefit from~~health care companies along with increases in transaction processing and monitoring ~~revenue recognized for~~ services provided to the ~~Payment Services -~~ Latin America ~~Segment. These positive impacts were partially offset by the one-time credit granted to Popular.~~segment. Adjusted EBITDA increased by ~~$3.2~~$5.3 million to ~~$25.0 million~~$29.2 million. The increase was primarily driven by the increase in revenues ~~partially offset by higher~~in addition to lower operating ~~expenses.~~expenses, primarily due to the impact in the prior year of a $4.1 million impairment loss on a multi-year software development.

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Payment Services - Latin America

Three months ended September 30,
In thousands 2022 2021
Revenues $ 33,741 $ 26,792
Adjusted EBITDA $ 3,210 $ 9,991
Adjusted EBITDA Margin 9.5 % 37.3 %


	Three months ended June 30,
In thousands	2023		2022
Revenues	$39,076		$30,784
Adjusted EBITDA	14,060		10,234
Adjusted EBITDA Margin	36.0	%	33.2	%

Payment Services - Latin America segment revenues for the three months ended ~~September~~June 30, ~~2022~~2023 increased by ~~$6.9~~$8.3 million to ~~$33.7~~$39.1 million when compared to the same period in the prior year. This increase was driven mainly by organic growth ~~in all regions~~ as well as revenue generated from the BBR acquisition completed atin the ~~beginning~~third quarter of 2022 and the ~~quarter. Furthermore,~~paySmart acquisition completed in the first quarter of 2023. Adjusted EBITDA increased by $3.8 million when compared to the same period in the prior year driven by the increase in revenues ~~benefited~~and the reversal of one-time provisions for operational losses, partially offset by higher personnel costs, driven by the added employees from the acquisitions and the impact from foreign currency appreciation, as well as an increase in ~~intercompany software developments and transaction processing revenue recognized for~~professional services provided to the Payment Services - Puerto Rico & Caribbean segment. Adjusted EBITDA decreased by $6.8 million primarily due to a $7.8 million loss from foreign currency remeasurement of assets and liabilities denominated in US dollars and an increase in personnel costs, mainly due to higher headcount, as well as increases in fees for transaction processing and monitoring services from the Payment Services - Puerto Rico & Caribbean segment as more transactions are processed in our centralized platforms.fees.

Merchant Acquiring


		Three months ended September 30,						Three months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	36,911		$	37,606			Revenues	$41,248		$38,539
Adjusted EBITDA	Adjusted EBITDA	$	13,866		$	19,230			Adjusted EBITDA	15,643		17,534
Adjusted EBITDA Margin	Adjusted EBITDA Margin	37.6		%	51.1		%		Adjusted EBITDA Margin	37.9	%	45.5	%

Merchant Acquiring segment revenues for the three months ended ~~September~~June 30, ~~2022 decreased~~2023 increased by ~~$0.7~~$2.7 million asto $41.2 million when compared to the same period in the prior ~~year quarter benefited~~year. The revenue increase was primarily driven by an increase in spread resulting from ~~COVID related federal stimulus and~~ the ~~current year quarter reflects~~continued benefit from pricing initiatives as well as a shift in the mix of credit cards spend towards premium cards, and an increase in sales volume impacting our spread per transaction as well as the negative impact from Hurricane Fiona estimated to be approximately $1.0 million, partially offset by certain pricing initiatives implemented in the second quarter.volume. Adjusted EBITDA decreased by ~~$5.4~~$1.9 million as compared to the prior year period. This decrease was mainly driven by ~~lower revenues, in addition to~~ higher operating expenses, ~~driven by~~including the revenue sharing agreement with Popular as well as ~~increased transaction~~the effect of a declining average ticket, higher processing costs ~~resulting~~ from ~~lower~~the Payment Services Puerto Rico segment and the effect of a declining average ~~ticket per transaction.~~ticket.

Business Solutions


		Three months ended September 30,						Three months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	49,306		$	58,134			Revenues	$56,971		$64,690
Adjusted EBITDA	Adjusted EBITDA	$	16,276		$	26,034			Adjusted EBITDA	23,374		29,835
Adjusted EBITDA Margin	Adjusted EBITDA Margin	33.0		%	44.8		%		Adjusted EBITDA Margin	41.0	%	46.1	%

Business Solutions segment revenues for the three months ended ~~September~~June 30, ~~2022~~2023 decreased by ~~$8.8~~$7.7 million to ~~$49.3~~$57.0 million as compared to the prior year period. This decrease was primarily driven by the impact from the ~~Popular Transaction, specifically, the one-time credit granted to Popular upon closing amounting to $6.3 million and the impact from the sale of~~ assets ~~to Popular which the Company estimates at $30 million annually. These negative impacts were partially offset by revenue generated from projects completed in connection with closing~~sold as part of the Popular ~~Transaction.~~Transaction completed in the third quarter of 2022, which were of higher margins. Adjusted EBITDA decreased by ~~$9.8~~$6.5 million to ~~$16.3~~$23.4 million as compared to the prior year period. This decrease was primarily driven by the ~~decrease in revenues as well as an increase in cost of sales and operating expenses, mainly cloud services and printing supplies,~~impacts from the ~~latter of which has been impacted by the inflationary environment.~~Popular Transaction.

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Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

Payment Services - Puerto Rico & Caribbean


		Nine months ended September 30,						Six months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	130,678		$	113,626			Revenues	$99,224		$86,086
Adjusted EBITDA	Adjusted EBITDA	$	72,647		$	66,228			Adjusted EBITDA	57,058		47,790
Adjusted EBITDA Margin	Adjusted EBITDA Margin	55.6		%	58.3		%		Adjusted EBITDA Margin	57.5	%	55.5	%

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Payment Services - Puerto Rico & Caribbean segment revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 increased by ~~$17.1~~$13.1 million to ~~$130.7~~$99.2 million when compared to the same period in the prior year. The increase in revenues was primarily driven by ~~an increase~~the same drivers as in ~~transaction volumes, mainly POS processing,~~ the ~~continued strong digital payments growth from ATH Movil Business, higher issuing services and~~quarter, as well as revenue contribution from the small acquisition completed in the ~~current year. Segment revenue also benefited from an increase in transaction processing and monitoring revenue recognized for services provided to the Payment Services - Latin America Segment.~~second quarter of 2022. Adjusted EBITDA increased by ~~$6.4~~$9.3 million to ~~$72.6 million~~$57.1 million. The increase was primarily driven by the increase in revenues, the impact of the impairment charge recognized in 2022 and reduced printing and personnel costs partially offset by higher operating expenses, including ~~the $4.1 million impairment charge discussed in Cost of Revenues above,~~ an increase in ~~cloud services,~~operational losses and higher ~~personnel costs and the impact from the one-time credit granted upon closing of the Popular Transaction.~~professional fees.

Payment Services - Latin America


		Nine months ended September 30,						Six months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	93,308		$	77,641			Revenues	$74,393		$59,567
Adjusted EBITDA	Adjusted EBITDA	$	25,197		$	30,985			Adjusted EBITDA	24,415		19,858
Adjusted EBITDA Margin	Adjusted EBITDA Margin	27.0		%	39.9		%		Adjusted EBITDA Margin	32.8	%	33.3	%

Payment Services - Latin America segment revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 increased by ~~$15.7~~$14.8 million to ~~$93.3~~$74.4 million driven mainly by organic growth including revenue generated by new client contracts signed in prior years, the contribution from the BBR acquisition and higher revenues recognized for services providedwhen compared to the ~~Payment Services - Puerto Rico & Caribbean and Business Solutions segments.~~same period in the prior year. This increase was primarily due to the same factors explained above for the quarter. Adjusted EBITDA ~~decreased~~increased by ~~$5.8~~$4.6 million when compared to the same period in the prior year ~~primarily due to~~driven by the ~~same factors explained above for~~increase in revenues, partially offset by higher personnel costs, the ~~quarter.~~negative impact from foreign currency remeasurement, as well as an increase in professional fees.

Merchant Acquiring


		Nine months ended September 30,						Six months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	111,079		$	106,808			Revenues	$81,595		$74,168
Adjusted EBITDA	Adjusted EBITDA	$	48,484		$	55,293			Adjusted EBITDA	31,269		34,618
Adjusted EBITDA Margin	Adjusted EBITDA Margin	43.6		%	51.8		%		Adjusted EBITDA Margin	38.3	%	46.7	%

Merchant Acquiring segment revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 increased by ~~$4.3~~$7.4 million to ~~$111.1~~$81.6 million ~~mainly as a result of~~when compared to the same period in the prior year. The revenue increase was primarily driven by an increase in sales volume ~~driven by nine months of contribution~~mainly due to new higher volume merchants and incremental sales volume in existing merchants, higher spread due to the continued benefit from ~~the FirstBank expanded relationship compared to 7 months in the prior year,~~pricing initiatives as well as the benefit of pricing initiatives implemented throughout the year partially offset by the benefits to prior year from COVID related federal stimulus, the impact from Hurricane Fiona as well as changesa shift in the mix of ~~volume~~credit cards spend towards ~~lower margin merchants.~~premium cards. Adjusted EBITDA decreased by ~~$6.8~~$3.3 million as compared to the ~~increase in revenues~~prior year period. This decrease was ~~entirely offset~~mainly driven by ~~an increase in~~higher operating expenses, ~~driven by the impact of~~including the revenue sharing agreement with Popular, ~~that began on July 1, 2022 and~~ higher ~~transaction~~ processing costs ~~as a result~~from the Payment Services Puerto Rico segment and the effect of a ~~lower~~declining average ticket.

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Business Solutions


		Nine months ended September 30,						Six months ended June 30,
In thousands	In thousands	2022			2021				In thousands	2023		2022
Revenues	Revenues	$	176,620		$	179,438			Revenues	$112,666		$127,314
Adjusted EBITDA	Adjusted EBITDA	$	75,715		$	86,287			Adjusted EBITDA	45,741		59,439
Adjusted EBITDA Margin	Adjusted EBITDA Margin	42.9		%	48.1		%		Adjusted EBITDA Margin	40.6	%	46.7	%

Business Solutions segment revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 decreased by ~~$2.8~~$14.6 million to ~~$176.6~~$112.7 million as compared to the prior year period. This decrease was primarily due to the same factors explained above for the quarter. Partially offsetting these negative impacts was the benefit from higher transactions and account volumes, contribution from the printing contract that began generating revenue in June of 2021, and one-time software and hardware sales. Adjusted EBITDA decreased by ~~$10.6~~$13.7 million to ~~$75.7~~$45.7 million as ~~a result of~~compared to the prior year period. This decrease was driven by the decrease in ~~revenue, the impact from the sale of higher margin assets included in the Popular Transaction and an increase in cost of sales in connection~~revenues partially offset by reduced expenses along with ~~hardware sales completed during the year and operating expenses, mainly printing supplies expense that has been impacted by the inflationary environment.~~

lower infrastructure spending.

Liquidity and Capital Resources

As of June 30, 2023, there are no material changes to our primary short-term and long-term requirements for liquidity and capital as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023. Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, ~~acquisitions,~~dividend payments, share repurchases, debt service, ~~dividend payments~~ and ~~share repurchases.~~ acquisitions.

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We also have a ~~$125.0~~$200.0 million Revolving Facility, of which ~~$119.1~~$194.0 million was available for borrowing as of ~~September~~June 30, ~~2022.~~2023. The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn. The Company has also obtained financing commitments for the purpose of financing the Sinqia acquisition and paying related fees and expenses with debt financing in an aggregate principal amount of $600 million (as such amount may be increased). The obligations of the lenders to provide debt financing under the related debt commitment letter are subject to customary terms and conditions.

As of ~~September~~June 30, ~~2022,~~2023, we had cash and cash equivalents of ~~$225.0~~$191.6 million, of which ~~$111.5~~$133.6 million resides in our subsidiaries located outside of Puerto Rico for purposes of (i) funding the respective subsidiary’s current business operations and (ii) funding potential future investment outside of Puerto Rico. We intend to indefinitely reinvest these funds outside of Puerto Rico, and based on our liquidity forecast, we will not need to repatriate this cash to fund the Puerto Rico operations or to meet debt-service obligations. However, if in the future we determine that we no longer need to maintain cash balances within our foreign subsidiaries, we may elect to distribute such cash to the Company in Puerto Rico. Distributions from the foreign subsidiaries to Puerto Rico may be subject to tax withholding and other tax consequences. Additionally, our credit agreement imposes certain restrictions on the distribution of dividends from subsidiaries.

Based on our current level of operations, we believe our cash flows from operations and the available secured Revolving Facility will be adequate to meet our liquidity needs for the next twelve months. However, our ability to fund future operating expenses, dividend payments, capital expenditures, mergers and acquisitions, and our ability to make scheduled payments of interest, to pay principal on or refinance our indebtedness and to satisfy any other of our present or future debt obligations will depend on our future operating performance, which may be affected by general economic, financial and other factors beyond our control.


		Nine months ended September 30,					Six months ended June 30,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022

Cash provided by operating activities	Cash provided by operating activities	$	159,009	$	175,855	Cash provided by operating activities	$	126,238	$	129,902
Cash used in investing activities	Cash used in investing activities	(106,002)		(60,305)		Cash used in investing activities	(58,371)		(46,192)
Cash used in financing activities	Cash used in financing activities	(99,508)		(74,077)		Cash used in financing activities	(58,623)		(58,796)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	Effect of foreign exchange rate on cash, cash equivalents and restricted cash	4,260		215		Effect of foreign exchange rate on cash, cash equivalents and restricted cash	(1,841)		(191)
(Decrease) increase in cash, cash equivalents and restricted cash		$	(42,241)	$	41,688
Increase in cash, cash equivalents and restricted cash						Increase in cash, cash equivalents and restricted cash	$	7,403	$	24,723

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$159.0~~$126.2 million compared to ~~$175.9~~$129.9 million for the same period in the prior year. The ~~$16.8~~$3.7 million decrease in cash provided by operating activities iswas primarily driven by the ~~effects from the sale of a business to Popular and the one-time credit granted to them upon closing,~~decrease in net income partially offset by ~~an increase in collections from accounts receivable and~~ less cash used to pay down accounts payable and accrued liabilities as the Company continues to effectively manage working ~~capital .~~capital.

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$106.0~~$58.4 million compared to ~~$60.3~~$46.2 million for the same period in the prior year. The ~~$45.7~~$12.2 million increase ~~is driven~~was primarily attributable to the paySmart acquisition, which closed in the first quarter of 2023 for $22.9 million and an increase in software additions of $5.2 million, along with an increase of $1.3 million in property and equipment acquired partially offset by the ~~BBR~~ acquisition ~~closed on July 1, 2022 for $44.4 million~~of customer relationships and ~~a $7.3 million purchase of~~ certificates of deposit ~~which were transferred upon closing of the BBR~~

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~~acquisition, partially offset by lower capital expenditures of $1.2~~amounting to $10.6 million ~~proceeds from the maturity of available-for-sale debt securities of $1.0~~and $7.3 million, ~~as well as a decrease~~respectively, in ~~acquisitions of customer relationships given that~~ the prior ~~year acquisition amounted to $14.8 million while the acquisition in the current year amounted to $10.6 million.~~period.

Net cash used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$99.5~~$58.6 million compared to ~~$74.1~~$58.8 million for the same period in the prior year. The ~~$25.4~~$0.2 million ~~increase~~decrease was mainly attributed to ~~an increase in~~ cash used to ~~repurchase shares of our common stock of $48.1~~pay down the Revolving Facility for $20.0 million, partially offset by a decrease ~~of $18.6 million~~ in cash used ~~to pay down long-term debt as in the prior year, in connection with the mandatory repayment clause, the Company repaid $17.8 million, as a result~~for repurchases of ~~excess cash flow calculation performed, while no mandatory repayment was required in the current year, and a $3.1 million decrease in withholding taxes paid on share-based compensation.~~common stock of $19.4 million.

Capital Resources

Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to our property and equipment. During the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, the Company~~we invested approximately ~~$44.6~~$35.5 million and ~~$43.4~~$29.0 million in our capital resources, respectively. ~~Additionally~~In addition, during the six month period ended June 30, 2023, the Company acquired a business for ~~$44.4~~$22.9 million, net of cash acquired. During the six month period ended June 30, 2022, the Company acquired customer relationships amounting to $10.6 million as well as $7.3 million in certificates of deposit in connection with this business acquisition in 2022. The Company acquired customer relationships amounting to $10.6 million and $14.8 million during the nine months ended September 30, 2022 and 2021, respectively. In 2021 acquired $3.0 million in available-for-sale debt securities.deposit. Generally, we fund capital expenditures with cash flow generated from operations and, if necessary, borrowings under our Revolving ~~Facility.~~Facility and a committed financing of $600 million.

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Dividend Payments

On ~~February 15, 2022,~~ April ~~21, 2022 and July 28, 2022, respectively~~20, 2023, the Board declared quarterly cash dividends of $0.05 per share of common stock, which were paid on ~~March 25, 2022,~~ June ~~3, 2022 and September~~ 2, ~~2022, respectively,~~2023, to stockholders of record as of the close of business on ~~February 25, 2022,~~ May ~~2, 2022 and August 8, 2022, respectively.~~

1, 2023. On ~~October~~July 20, ~~2022,~~2023, our Board declared a regular quarterly cash dividend of $0.05 per share on the Company’s outstanding shares of common stock. The dividend will be paid on ~~December 2, 2022~~September 1, 2023 to stockholders of record as of the close of business on ~~November 1, 2022.~~July 31, 2023. The Board anticipates declaring this dividend in future quarters on a regular basis; however future declarations of dividends are subject to the Board’s approval and may be adjusted as business needs or market conditions change.

Financial Obligations

Secured Credit Facilities

On ~~November 27, 2018,~~December 1, 2022, EVERTEC and EVERTEC Group, ~~(“Borrower”)~~ entered into a credit agreement with a syndicate of lenders and Truist Bank, as administrative agent and collateral agent, providing for ~~the secured credit facilities, consisting of~~(i) a ~~$220.0~~$415.0 million term loan A facility ~~that matures on November 27, 2023~~ (the ~~“2023 Term A Loan”~~“Term Loan Facility”), and (ii) a ~~$325.0 million term loan B facility that matures on November 27, 2024 (the “2024 Term B Loan”), and a $125.0~~$200.0 million revolving credit facility (the “Revolving Facility”, and together with the Term Loan Facility, the “2022 Credit Facilities”) ~~that matures~~. The 2022 Credit Facilities mature on November 27, 2023, with a syndicate of lenders and Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent, swingline lender and line of credit issuer (collectively the “2018 Credit Agreement”).December 1, 2027.

~~The 2018 Credit Agreement requires mandatory repayment of outstanding principal balances based on a percentage of excess cash flow, provided that no such payment shall be due if~~At June 30, 2023, the resulting amount of the excess cash flow multiplied by the applicable percentage is less than $10 million or if the leverage ratio is below 1.75x. On March 8, 2021, in connection with this mandatory repayment clause, the Company repaid $17.8 million, as a result of excess cash flow calculation performed for the year ended December 31, 2020. No mandatory repayment was required in the first quarter of 2022 in connection with the excess cash flow calculation performed for the year ended December 31, 2021 as the leverage ratio was below 1.75x.

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~~Notes Payable~~

Interest Rate Swaps

Swap Agreement

Effective date

Maturity Date

Notional Amount

Variable Rate

Fixed Rate

2018 Swap

April 2020

November 2024

$250 million

1-month ~~LIBOR~~SOFR

~~2.89%~~2.929%

2023 Swap

November 2024

December 2027

$250 million

1-month SOFR

3.375%

~~The Company has accounted for this agreement as a cash flow hedge.~~

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the carrying amount of the ~~derivative~~derivatives included on the Company's unaudited condensed consolidated balance sheets was ~~an asset of $7.1~~$7.7 million and ~~a liability of $13.4~~$7.4 million, respectively. The fair value of this derivative is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 78 of the unaudited condensed consolidated financial statements for disclosure of ~~losses~~gains recorded on cash flow hedging activities.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company reclassified ~~losses~~gains of ~~$0.4~~$1.4 million and ~~$3.5~~$2.4 million, respectively, from accumulated other comprehensive loss into interest expense compared to ~~$1.8~~losses of $1.7 million and ~~$5.3~~$3.1 million, respectively, for the corresponding periods in ~~2021.~~2022. Based on current ~~LIBOR~~SOFR rates, the Company expects to reclassify gains of ~~$3.4~~$5.8 million from accumulated other comprehensive loss into interest expense over the next 12 months.

The cash flow ~~hedge is~~hedges are considered highly effective.

Covenant Compliance

As of ~~September~~June 30, ~~2022,~~2023, our secured leverage ratio was ~~1.41~~0.86 to 1.00, as determined in accordance with the ~~2018~~ Credit Agreement. As of the date of filing of this ~~Report,~~Form 10-Q, no event has occurred that constitutes an Event of Default or Default under our ~~2018~~ Credit Agreement.

Net Income Reconciliation to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share (Non-GAAP Measures)

We define “EBITDA” as earnings before interest, taxes, depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted to exclude ~~unusual~~certain non-cash unrealized items and ~~other adjustments described below.~~unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from non-cash unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency. Adjusted EBITDA by segment is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, Adjusted EBITDA, as it relates to our segments, is presented in conformity with ASC Topic

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280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K. We define “Adjusted Net Income” as ~~net~~Adjusted EBITDA less: operating depreciation and amortization expense, defined as GAAP Depreciation and amortization less amortization of intangibles related to acquisitions such as customer relationships, trademarks; cash interest expense defined as GAAP interest expense, less GAAP interest income adjusted to exclude ~~unusual items~~non-cash amortization of debt issue costs, premium and ~~other adjustments described below.~~accretion of discount; income tax expense which is calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for uncertain tax position releases, tax true-ups, windfall from share-based compensation, non-cash unrealized gains and losses from foreign currency remeasurement, among others; and non-controlling interest which is the 35% non-controlling equity interest in Evertec Colombia, net of amortization for intangibles created as part of the purchase. We define “Adjusted Earnings per common share” as Adjusted Net Income divided by diluted shares outstanding.

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 ourselves and other companies in our industry. In addition, our presentation of Adjusted EBITDA is substantially consistent with the equivalent measurements that are contained in the senior secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the secured leverage ratio. We use Adjusted Net Income to measure our overall profitability because we believe better reflects our comparable operating performance by excluding the impact of the non-cash amortization and depreciation that was created as a result of merger and acquisition activity. In addition, in evaluating EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, 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.

~~Table~~ These measures have certain limitations in that they do not include the impact of ~~Contents~~

certain expenses that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented herein, limiting their usefulness as comparative measures.

Some of the limitations of EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted earnings per common share 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;

•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;

•in the case of EBITDA and Adjusted EBITDA, they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness;

•in the case of EBITDA and Adjusted EBITDA, they do not reflect income tax expense or the cash necessary to pay income taxes; and

•other companies, including other companies in our industry, may not use EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Earnings per common share or may calculate EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share differently than as presented in this Report, limiting their usefulness as a comparative measure.

EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share are not measurements of liquidity or financial performance under GAAP. You should not consider EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share as alternatives to cash flows from operating activities or any other performance measures 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.

A reconciliation of net income to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share is provided below:

Three months ended September 30, Nine months ended September 30, Twelve months ended
(In thousands, except per share information) 2022 2021 2022 2021 September 30, 2022
Net income $ 137,739 $ 35,260 $ 210,161 $ 119,955 $ 251,349
Income tax expense 9,048 7,134 22,911 14,474 28,999
Interest expense, net 5,956 5,180 15,963 15,905 20,979
Depreciation and amortization 19,712 18,745 58,432 56,091 77,411
EBITDA 172,455 66,319 307,467 206,425 378,738
Equity income (loss) (1)
1,159 (411) (273) 10 (678)
Compensation and benefits (2)
5,671 3,493 15,355 11,280 19,219
Transaction, refinancing and other fees (3)
(126,911) 369 (121,415) 1,205 (120,247)
Adjusted EBITDA 52,374 69,770 201,134 218,920 277,032
Operating depreciation and amortization (4)
(10,748) (10,779) (33,156) (32,385) (44,209)
Cash interest expense, net (5)
(5,645) (4,926) (15,132) (14,946) (19,990)
Income tax expense (6)
(8,908) (9,125) (27,910) (24,416) (35,178)
Non-controlling interest (7)
47 17 58 (55) (48)
Adjusted net income $ 27,120 $ 44,957 $ 124,994 $ 147,118 $ 177,607
Net income per common share (GAAP):
Diluted $ 2.06 $ 0.48 $ 2.98 $ 1.65
Adjusted Earnings per common share (Non-GAAP):
Diluted $ 0.40 $ 0.62 $ 1.77 $ 2.02
Shares used in computing adjusted earnings per common share:
Diluted 67,045,809 72,876,253 70,588,915 72,817,707

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	Three months ended June 30,				Six months ended June 30,				Twelve months ended
(In thousands, except per share information)	2023		2022		2023		2022		June 30, 2023
Net income	$	28,050	$	33,556	$	58,113	$	72,422	$	224,560
Income tax expense	6,586		7,688		9,404		13,863		24,524
Interest expense, net	3,537		5,127		8,047		10,007		19,691
Depreciation and amortization	22,329		19,560		41,761		38,720		81,659
EBITDA	60,502		65,931		117,325		135,012		350,434

Equity income (1)	(1,476)		(862)		(2,631)		(1,432)		(2,320)
Compensation and benefits (2)	8,701		5,405		14,546		9,684		25,197
Transaction, refinancing and other fees (3)	7,085		1,855		7,843		4,450		(115,481)


(Gain) loss on foreign currency remeasurement (4)	(333)		1,747		4,531		(921)		13,097
Adjusted EBITDA	74,479		74,076		141,614		146,793		270,927
Operating depreciation and amortization (5)	(12,835)		(11,156)		(25,204)		(22,408)		(47,214)
Cash interest expense, net (6)	(3,457)		(4,858)		(7,820)		(9,487)		(19,341)
Income tax expense (7)	(11,626)		(10,075)		(16,408)		(18,884)		(33,152)
Non-controlling interest (8)	80		1		46		11		69
Adjusted net income	$	46,641	$	47,988	$	92,228	$	96,025	$	171,289
Net income per common share (GAAP):
Diluted	$	0.43	$	0.47	$	0.89	$	1.00
Adjusted Earnings per common share (Non-GAAP):
Diluted	$	0.71	$	0.67	$	1.41	$	1.32
Shares used in computing adjusted earnings per common share:
Diluted	65,510,091		72,149,949		65,571,453		72,558,565

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1)Represents the elimination of non-cash equity earnings from our 19.99% equity investment in Dominican Republic, Consorcio de Tarjetas Dominicanas S.A. ("CONTADO"), net of cash dividends received.

2)Primarily represents share-based compensation and severance payments.

3)Represents fees and expenses associated with corporate transactions as defined in the ~~2018~~ Credit Agreement, ~~the gain from the Popular transaction,~~recorded as part of selling, general and administrative expenses, a software impairment charge and a gain from sale of assets.

4)Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

5)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity.

5)6)Represents interest expense, less interest income, as they appear on the condensed consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.

6)7)Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discrete items.

7)8)Represents the 35% non-controlling equity interest in Evertec Colombia, net of amortization for intangibles created as part of the purchase.

~~Seasonality~~

Our payment businesses generally experience moderate increased activity during the traditional holiday shopping periods and around other nationally recognized holidays, which follow consumer spending patterns.

Effect of Inflation

While it is difficult to accurately measure the impact of inflation on our results of operations and financial condition, we believe the effects of inflation, on our historical results of operations and financial condition have been immaterial. General inflation in the geographies in which we operate has risen to levels that have not been experienced in recent years, however, inflation has historically had a minimal net effect on our operating results given that overall inflation has been offset by sales and cost reduction actions.

Rising prices for input costs, including wages and benefits, occupancy and general administrative costs, could potentially have a negative impact on our results of operations and financial condition which may not be readily recoverable from our customers.

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In addition, inflation has driven a rising interest rate environment, which has had an adverse effect on our cost of funding, as well as led to enhanced volatility on foreign currency exchange rates. While we proactively try to mitigate these rising costs, we may not be able to fully offset these impacts and these could result in negative effect on our results of ~~operations.~~

operation. Thus, we cannot assure you that our results of operations and financial condition will not be materially impacted by inflation in the future.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of certain assets and liabilities, and in some instances, the reported amounts of revenues and expenses during the period. We base our assumptions, estimates, and judgments on historical experience, current events, and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. However, because future events are inherently uncertain and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of the Company’s critical accounting estimates, refer to “Part II-Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 24, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks arising from our normal business activities. These market risks principally involve the possibility of changes in interest rates that will adversely affect the value of our financial assets and liabilities or future cash flows and ~~earnings.~~earnings, foreign exchange risk that may result in unfavorable foreign currency translation adjustments and inflation. Market risk is the potential loss arising from adverse changes in market rates and prices. The following analysis provides quantitative information regarding these risks.

Interest Rate Risks

Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.

We issued floating-rate debt which is subject to fluctuations in interest rates. Our secured credit facilities accrue interest at variable rates and ~~only the 2024 Term B Loan is~~are subject to a floor or a minimum rate. A hypothetical 100 basis point increase in interest rates over our ~~floor(s)~~floor on our debt balances outstanding as of ~~September~~June 30, ~~2022,~~2023, under the secured credit facilities, would increase our annual interest expense by approximately ~~$2.1~~$2.6 million. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings at that time.

As of ~~September~~June 30, ~~2022,~~2023, the Company has an interest rate swap agreement, entered into in December 2018, which converts a portion of our outstanding variable rate debt to fixed.

The interest rate swap exposes us to credit risk in the event that the counterparty to the swap agreement does not or cannot meet its obligations. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap. The counterparty to the swap is a major US based financial institution and we expect the counterparty to be able to perform its obligations under the swap. We use derivative financial instruments for hedging purposes only and not for trading or speculative ~~purposes~~purposes.

See Note 76 of the Unaudited Condensed Consolidated Financial Statements for additional information related to the secured credit facilities.

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Foreign Exchange Risk

We conduct business in certain countries in Latin America for which we have determined that the functional currency is other than the US dollar. Given this, our operating results are exposed to volatility due to fluctuations in exchange rates for the countries' functional currencies. Non-functional currency transactions are remeasured into the functional currency which results in a foreign exchange gain or loss recorded through Other income (expenses). For the ~~nine month periods~~three and six months ended ~~September~~June 30, ~~2022 and 202,~~2023, the Company recognized non-cash unrealized foreign currency remeasurement gains of $0.3 million and losses $4.5 million, respectively, compared to losses of ~~$6.9~~$1.7 million and gains of ~~$0.7~~$0.9 million, ~~respectively.~~ respectively for the same periods in 2022 .

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For subsidiaries whose ~~local~~functional currency is ~~their functional currency,~~other than the U.S. dollar, their assets and liabilities are translated into U.S. dollars at exchange rates at the balance sheet date, and revenues and expenses are translated using average exchange rates in effect during the period. The resulting foreign currency translation adjustments are reported in accumulated other comprehensive ~~loss~~income (loss) in the ~~unaudited~~ condensed consolidated balance sheets. As of ~~September~~June 30, ~~2022,~~2023, the Company had ~~$36.2~~$2.7 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive ~~loss~~income (loss) compared with an unfavorable foreign currency translation adjustment of ~~$36.0~~$23.5 million as of December 31, ~~2021.~~2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, ~~under~~with the ~~direction~~participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated, as of the end of the period covered by this Report on Form 10-Q, disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of ~~September~~June 30, ~~2022,~~2023, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a -15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are defendants in various lawsuits or arbitration proceedings arising in the ordinary course of business. Management believes, based on the opinion of legal counsel and other factors, that the aggregated liabilities, if any, arising from such actions will not have a material adverse effect on the financial condition, results of operations and the cash flows of the Company.

Item 1A. Risk Factors

Other than the risk ~~factor~~factors set forth below, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on February ~~25, 2022.~~24, 2023. For a discussion of the potential risks and uncertainties related to us, see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The risks described below and those described in our Annual Report on Form 10-K for the year ended December 31, ~~2021 filed with the SEC on February 25,~~ 2022 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

~~Banco Popular,~~Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our ~~largest customer, is controlled by Popular,~~business, dilute shareholder value, and ~~the elimination of Popular's ownership of our common stock could~~ adversely affect ~~us.~~our business, financial condition and results of operations.

We may in the future seek to acquire or invest in businesses, joint ventures, products and platform capabilities, or technologies that we believe could complement or expand our products and platform capabilities, enhance our technical capabilities, or otherwise offer growth opportunities. For example,in July 2023, we entered into the ~~year ended December 31, 2021, approximately 42%~~Merger Agreement,pursuant to which, among other things,upon closing Sinqia will become a wholly-owned subsidiary of Evertec BR.Any such acquisition or investment may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products and platform capabilities, personnel, or operations of the acquired companies, particularly if we are unable to retain the key personnel of the acquired company, their software is not easily adapted to work with our existing platforms, or we have difficulty retaining customer, vendors and other relationships of any acquired business due to changes in ownership, management, or otherwise. These transactions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our ~~revenue was attributable~~existing businesses. Any such transactions that we are able to ~~Banco Popular, a wholly owned subsidiary of Popular. Prior~~complete may not result in any synergies or other benefits we had expected to ~~closing the Popular Transaction on July 1, 2022, Popular owned approximately 17.5%~~achieve, which could result in substantial impairment charges.

In addition, we may not be able to find and identify desirable acquisition targets or business opportunities or be successful in entering into agreements with any particular strategic partner. We expect that certain of our ~~common stock~~competitors, many of which have greater resources than we do, will compete with us in acquiring complementary businesses or products. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are often subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we may not be able to consummate an acquisition that we believe is in our best interests and historically had substantial influence over our policies and management. In connection with the closing of the Popular Transaction, Popular delivered 4.6 million shares of Evertec common stock that were owned by Popularmay incur significant costs. These transactions could also result in exchange for certain assets of EVERTEC Group, and the Company also modified and extended its main commercial agreements with Banco Popular. Furthermore, effective as of July 1, 2022, the stockholders agreement dated April 17, 2012 with Popular, which had granted them certain benefits as a shareholder of the Company, was terminated. On August 15, 2022, through a secondary offering, Popular sold its remaining shares of Evertec common stock and as of this date no longer holds any sharestransaction fees, dilutive issuances of our ~~common stock. Evertec is no longer deemed~~equity securities, incurrence of debt or contingent liabilities, and fluctuations in quarterly results and expenses. Further, if the resulting business from such a ~~subsidiary~~transaction fails to meet our expectations, our business, financial condition and results of ~~Popular under~~operations may be adversely affected, or we may be exposed to unknown risks or liabilities.

We may acquire businesses located primarily or entirely outside the ~~Bank Holding Company Act.~~United States which could increase our current exposure to international operations located in the Caribbean and Latin America including currency exchange fluctuations, regulatory and organizational complexity, and varying economic, climatic and geopolitical circumstances.

The ~~elimination~~failure to complete the Transaction or ultimately realize the benefits may adversely affect our business and our stock price.

Consummation of ~~Popular's holdings~~the Transaction is subject to the satisfaction or waiver of ~~our common stock~~customary closing conditions, including, (i) the absence of any court order or regulatory injunction with the effect of preventing or otherwise preventing the consummation of the Transaction, (ii) the accuracy of the representations and warranties of each party, (iii) compliance by each party in all material respects with its obligations and commitments under the Merger Agreement and the ~~modification~~Voting Agreement (as defined in the Merger Agreement), (iv) obtaining the registration of the BDR Level I program sponsored by Evertec with the Comissão de Valores Mobiliários - CVM, the Brazilian Securities Commission and the admission of the BDRs for trade on B3

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S.A. - Brasil, Bolsa, Balcão (“B3”), (v) Evertec notifying Sinqia that it has completed its funding efforts for the closing, (vi) Sinqia obtaining the consent or waiver for the non-acceleration of the maturity date or prepayment of the two certain issuances of debentures of Sinqia as a result of the Transaction, (vii) the acceleration and cancellation of Sinqia’s stock option plans, (viii) the approval of the Protocolo e Justificação de Incorporação de Ações de Emissão da Sinqia S.A. pela Evertec Brasil Informática S.A., as required pursuant to ~~commercial arrangements with Banco Popular~~Articles 224 and 225 of the Brazilian Corporation Law (the “Protocol”) by the Sinqia Board and the execution of the Protocol by Evertec BR’s management and Sinqia’s management, and subsequent calling of the Sinqia general shareholder’s meeting (“Sinqia’s GSM”), (ix) the necessary corporate approvals by Evertec and Evertec BR, including Evertec approving the Transaction and Evertec BR’s general shareholders’ meeting approving the Protocol, the ratification of the engagement of the appraisal company that shall prepare the appraisal report of Sinqia at economic value, to be prepared for purposes of the Merger of Shares (as defined in the Merger Agreement) (the “Appraisal Report”), the Appraisal Report, the Merger of Shares, the capital increase of Evertec BR due to the Merger of Shares and consequent issuance of the Evertec BR New Shares and amendment to the bylaws of Evertec BR, the Redemption (as defined in the Merger Agreement), and authorization for the management of Evertec BR to adopt all measures necessary to perform the resolutions taken, (x) the necessary corporate approvals by Sinqia, including Sinqia’s GSM approving the Protocol, the Merger of Shares, the authorization for Sinqia’s management to subscribe to Evertec BR New Shares on the Closing Date, the waiver of Evertec BR’s obligation to be listed in the Novo Mercado special segment of B3 due to the Transaction, as required by Article 46, Sole Paragraph, of the Novo Mercado Ruling, and the authorization for Sinqia’s management to adopt all measures necessary to perform the resolutions taken and (xi) the absence of any Material Adverse Change (as defined in the Merger Agreement). There can be no assurance that these or other closing conditions will be satisfied in a timely manner or at all. Any delay in completing the Transaction could cause us not to realize some or all of the anticipated benefits when expected, if at all. If the Transaction is not completed, our stock price could decline to the extent it reflects an assumption that we will complete the acquisition. Furthermore, if the Transaction is not completed, we may ~~negatively impact~~suffer other consequences that could adversely affect our business, ~~relationship with Banco Popular and could have a material adverse effect on our business, financial condition,~~ results of operations and ~~cash flows,~~stock price, including incurring significant acquisition costs that we would be unable to recover, negative publicity and a negative impression of us in the investment community.

Although we expect benefits to result from the Transaction, including future accretive impact to our earnings per common share and potential for revenue synergies, there can be no assurance that we will actually realize any of them, or realize them within the anticipated timeframe. Achieving these benefits will depend, in part, on our ability to integrate Sinqia’s business successfully and efficiently. The challenges involved in this integration will likely be complex and time consuming. If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business, then we may not achieve the anticipated benefits, of the Transaction within our anticipated timeframe or at all and our revenue, expenses, operating results, financial condition and stock price could be materially adversely ~~affect~~affected. The successful integration of the ~~trading price~~Sinqia business will require significant management attention both before and after the completion of the Transaction, and may divert the attention of management from our ~~common stock.~~

business and operational issues.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds and Issuer Purchases of Equity Securities

The following table summarizes repurchases ~~of shares~~ of the Company’s common stock in the three month period ended ~~September~~June 30, ~~2022:~~2023:

Period Total number of shares purchased Average price paid per share
Total number of shares purchased as part of a publicly announced program (1)
Approximate dollar value of shares that may yet be purchased under the program
8/1/2022-8/31/2022 803,341 31.12
9/1/2022-9/30/2022 387,038 31.83 387,038
1,190,379 31.35 387,038 102,467,677


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of a publicly announced program (1)	Approximate dollar value of shares that may yet be purchased under the program


6/1/2023-6/30/2023	268,398	35.64	268,398
	268,398	35.64	268,398	62,565,507

(1) On ~~February 24, 2022,~~July 20, 2023, the Company announced that its Board approved an increase to the current stock

repurchase program, authorizing the purchase of up to an aggregate of $150 million ~~shares~~ of the Company’s common stock ~~under~~and an extension to the expiration of the program ~~which expires on~~to December 31, ~~2023.~~2024. Under the repurchase program, the Company may repurchase shares in the open market, through accelerated share repurchase programs, Rule 10b5-1 plans, or in privately negotiated transactions, subject to business opportunities and other factors.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Table of Contents

Not applicable.

Item 5. Other Information

a.None.

b.None.

c.During the three months ended June 30, 2023, no director or “officer” (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits















10.1*2.1#			~~Amendment No.1~~Merger Agreement and Other Covenants, dated July 20, 2023 (incorporated by reference to ~~Asset Purchase Agreement by~~Exhibit 2.1 of EVERTEC, Inc.’s Current Report on Form 8-K filed on July 21, 2023, File No. 001-35872).
3.1			Third Amended and ~~among~~Restated Certificate of Incorporation of EVERTEC, Inc., ~~Evertec Group, LLC, Popular, Inc. and Banco Popular de Puerto Rico,~~ dated as of ~~July~~May 25, 2023 (incorporated by reference to Exhibit 3.1 of EVERTEC, Inc.’s Current Report on Form 8-K filed on June 1, ~~2022.~~2023, File No. 001-35872).
3.2			Amended and Restated Bylaws of EVERTEC, Inc., dated as of May 25, 2023 (incorporated by reference to Exhibit 3.2 of EVERTEC, Inc.’s Current Report on Form 8-K filed on June 1, 2023, File No. 001-35872).
10.1*+			Form of Restricted Stock Unit Award Agreement for grant of restricted stock units to directors under the EVERTEC, Inc. 2022 Incentive Award Plan, dated June 1, 2023, by and between EVERTEC, Inc. and the director (applicable Frank G. D’Angelo, Kelly Barrett, Olga Botero, Virginia Gambale, Jorge A. Junquera, Iván Pagán, Aldo J. Polak, Alan H. Schumacher, and Brian J. Smith).
10.2			~~Second Amended~~Voting Agreement and ~~Restated Master Service Agreement,~~Other Covenants, dated ~~as of~~ July ~~1, 2022, among Popular, Inc., Banco Popular de Puerto Rico and Evertec Group, LLC and its subsidiaries~~20, 2023 (incorporated by reference to Exhibit 10.1 of EVERTEC, Inc.’s Current Report on Form 8-K filed on July ~~1, 2022, File No. 001-35872).~~
~~10.3~~			Second Amended and Restated Independent Sales Organization Sponsorship and Services Agreement, dated as of July 1, 2022, between Evertec Group, LLC and Banco Popular de Puerto Rico (incorporated by reference to Exhibit 10.2 of EVERTEC, Inc.’s Current Report on Form 8-K filed on July 1, 2022,21, 2023, File No. 001-35872).
31.1*			CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL**			Inline Instance document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL**			Inline Taxonomy Extension Schema
101.CAL XBRL**			Inline Taxonomy Extension Calculation Linkbase
101.DEF XBRL**			Inline Taxonomy Extension Definition Linkbase
101.LAB XBRL**			Inline Taxonomy Extension Label Linkbase
101.PRE XBRL**			Inline Taxonomy Extension Presentation Linkbase
104**			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

~~+ This~~# Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit ~~is a management contract or a compensatory plan or arrangement.~~will be furnished to the Securities and Exchange Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	EVERTEC, Inc. (Registrant)

Date: ~~November 4, 2022~~August 1, 2023	By:	/s/ Morgan Schuessler
		Morgan Schuessler Chief Executive Officer (Principal Executive Officer)

Date: ~~November 4, 2022~~August 1, 2023	By:	/s/ Joaquin A. Castrillo-Salgado
		Joaquin A. Castrillo-Salgado Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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