EVERTEC, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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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 months ended March 31, 2022 and 2021 and (ii) the financial condition as
of March 31, 2022. 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, included in the Company's Annual Report on Form 10-K as filed
with the SEC on February 25, 2022 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 that involve risks and uncertainties. Our actual
results may differ from those indicated in the forward-looking 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")) 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.

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 we are one of the largest merchant acquirers in Latin America based on
total number of transactions and the largest merchant acquirer in the Caribbean.
We serve 26 countries out of 11 offices, including our headquarters in Puerto
Rico. We own and operate the ATH network, one of the leading personal
identification number ("PIN") debit and automated teller machine ("ATM")
networks in the Caribbean and Latin America. We manage a system of electronic
payment networks and offer a comprehensive suite of services for core banking,
cash processing, and fulfillment in Puerto Rico, that process over three billion
transactions annually. Additionally, we offer technology outsourcing in 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 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 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 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, as
well as back-end support services such as the clearing and settlement of
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 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 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. Additionally, Popular granted us a right of first refusal on the
development of certain new financial technology products and services for the
duration of the MSA. On February 24, 2022, we entered into an agreement to
modify and extend the main commercial agreements with Popular, including a
10-year extension of the Merchant Acquiring Independent Sales Organization
Agreement (the "ISO Agreement"), a 5-year extension of the ATH Network
Participation Agreement and a 3-year extension of the MSA. The ISO Agreement,
which sets our merchant acquiring relationship with Popular, will now include
revenue sharing provisions with Popular. The MSA modifications include the
elimination of the exclusivity requirement, the inclusion of annual MSA minimums
through 2028, a 10% discount on certain MSA services in October 2025 and
adjustments to the existing CPI pricing escalator clause. We also entered into
an agreement to sell Popular certain assets in exchange for Popular owned
Evertec stock ("Popular Transaction"). As part of this transaction, Popular has
agreed to take certain actions after closing to ensure that Evertec is no longer
deemed a "subsidiary" of Popular for purposes of the Bank Holding Company Act,
including reducing Popular's voting interest in Evertec to 4.5% over a period of
three months after the close of the transaction through either the sale of
shares or conversion to non-voting preferred shares. The Popular Transaction is
expected to close mid-year 2022, at which point the contract extensions will
become effective.

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, coupled 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 American 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 American 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.

As a result of the COVID-19 pandemic, 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 ongoing migration from cash and paper methods of payment to
electronic payments continues to benefit the transaction-processing industry
globally. The markets in which we operate, particularly in the Latin American
and Caribbean region 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
becoming popular alternatives to cash payments. We continue to believe that the
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Table of Contents The attractive characteristics of our markets and our position in multiple services and sectors will continue to drive the growth and profitability of our business.

Finally, our financial condition and results of operations depend in part on economic and general conditions in the regions in which we operate.


Results of Operations

Comparison of the three months ended March 31, 2022 and 2021

                                                Three months ended March 31,
In thousands                                       2022                  2021                             Variance

Revenues                                    $       150,248          $ 139,528                $  10,720                   8  %
Operating costs and expenses
Cost of revenues, exclusive of depreciation
and amortization                                     64,659             59,804                    4,855                   8  %
Selling, general and administrative
expenses                                             20,384             16,102                    4,282                  27  %
Depreciation and amortization                        19,160             18,623                      537                   3  %
Total operating costs and expenses                  104,203             94,529                    9,674                  10  %
Income from operations                      $        46,045          $  44,999                $   1,046                   2  %



Revenues

Total revenues for the quarter ended March 31, 2022 was $150.2 million, an
increase of 8% compared with $139.5 million in the prior year reflecting
increases across all of the Company's segments. Revenue in Puerto Rico benefited
from sales volume growth, driven by a full quarter of revenue contribution from
the FirstBank expanded relationship, with a higher average ticket and slightly
higher spread, as well as, growth in POS transactions processed and the
continued growth of our digital solutions, ATH Movil and ATH Business. Revenue
also benefited from the year over year CPI impact on the current Popular MSA and
revenue generated from the printing contract entered into in the prior year.
Latin America revenue reflected organic growth that includes revenue generated
from new client contracts.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2022 amounted to $64.7
million, an increase of $4.9 million or 8% when compared to the same period in
the prior year. The increase during the three months is primarily driven by an
increase in personnel costs, mainly due to increased headcount, and equipment
expenses, mainly as a result of increases in repairs and maintenance of software
and hardware, and an increase in cloud services as utilization continues to
grow.

Selling, general and administrative expenses


Selling, general and administrative expenses for the three months ended
March 31, 2022 increased by $4.3 million or 27% when compared to the same period
in the prior year. The increase is driven by an increase in professional fees
for corporate transactions and increased personnel costs.

Depreciation and amortization


Depreciation and amortization expense for the three months ended March 31, 2022
amounted to $19.2 million, an increase of $0.5 million or 3% when compared to
the same period in the prior year. Increased expense during the three months is
driven by an increase in software amortization as a result of key projects that
went into production in the prior years and an increase in the amortization of
customer relationships.


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Non-Operating Expenses

                                                 Three months ended March 31,
In thousands                                    2022                  2021                               Variance

Interest income                          $           667          $      389                $      278                   71  %
Interest expense                                  (5,547)             (5,906)                      359                    6  %
Earnings of equity method investment                 570                 502                        68                   14  %
Other income                                       3,306                 328                     2,978                  908  %
Total non-operating expenses             $        (1,004)         $   (4,687)               $    3,683                   79  %



Non-operating expenses for the three months ended March 31, 2022 decreased by
$3.7 million to $1.0 million when compared to the same period in the prior year.
The decrease is mainly related to a $3.0 million increase in other income driven
by the favorable impact of the remeasurement of assets and liabilities
denominated in US dollars and a $0.4 million decrease in interest expense,
resulting from a reduction in interest rates and a lower outstanding balance.

Income Tax Expense

                                   Three months ended March 31,
       In thousands                      2022                   2021                   Variance
       Income tax expense   $        6,175                    $ 4,708            $ 1,467        31  %



Income tax expense for the three months ended March 31, 2022 amounted to $6.2
million, an increase of $1.5 million when compared to the same period in the
prior year. The effective tax rate for the period was 13.7%, compared with 11.7%
in the 2021 period. The increase in the effective tax rate primarily reflects an
increase in revenues in higher taxed jurisdictions, in addition to higher
withholding taxes and the impact of higher net discrete tax items recorded in
the prior year quarter.


Segment Results of Operations

The Company operates through four business segments: Payment Services – Porto Rico &
CaribbeanPayment services – Latin America (collectively “Payment Services Segments”), Merchant Acquiring and Enterprise 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), 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.

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
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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.

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. Adjusted EBITDA is defined as EBITDA
further adjusted to exclude unusual items and other adjustments. 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. 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 EBITDA. As such, segment assets are not disclosed in the
notes to the accompanying unaudited condensed consolidated financial statements.

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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 March 31, 2022 and 2021

Payment services – Porto Rico & Caribbean

                                  Three months ended March 31,
In thousands                           2022                   2021
Revenues                                         $40,008      $36,264
Adjusted EBITDA                                   23,781       20,803
Adjusted EBITDA Margin                           59.4  %      57.4  %



Payment Services - Puerto Rico & Caribbean segment revenues for the three months
ended March 31, 2022 increased by $3.7 million to $40.0 million when compared to
the same period in the prior year. The increase in revenues was primarily driven
by an increase in POS processing and continued strong digital payments growth
from ATH Movil and ATH Business, as well as an increase in transaction
processing and monitoring revenue recognized for services provided to the
Payment Services - Latin America Segment. Adjusted EBITDA increased by $3.0
million to $23.8 million driven by the increase in revenues partially offset by
higher operating expenses, including costs related to POS equipment maintenance.

Payment services – Latin America

                                  Three months ended March 31,
In thousands                           2022                   2021
Revenues                                         $28,783      $25,014
Adjusted EBITDA                                   12,427       10,019
Adjusted EBITDA Margin                           43.2  %      40.1  %



Payment Services - Latin America segment revenues for the three months ended
March 31, 2022 increased by $3.8 million to $28.8 million driven mainly by
organic growth including revenue generated by new client contracts signed in
prior years. Adjusted EBITDA increased by $2.4 million when compared to the same
period in the prior year primarily due to the increase in revenues and the $3.1
million favorable impact of the remeasurement of assets and liabilities
denominated in US dollars, partially offset by an increase in fees for
transaction processing and monitoring services from the Payment Services -
Puerto Rico & Caribbean segment.

Merchant Acquiring

                                  Three months ended March 31,
In thousands                           2022                   2021
Revenues                                         $35,629      $30,867
Adjusted EBITDA                                   17,084       15,517
Adjusted EBITDA Margin                           47.9  %      50.3  %



Merchant Acquiring segment revenues for the three months ended March 31, 2022
increased by $4.8 million to $35.6 million mainly as a result of an increase in
sales volume with a higher average ticket and a slightly higher spread per
transaction. The higher volume was driven mainly by a full quarter contribution
from the FirstBank expanded relationship, compared with one month in the prior
year quarter. Adjusted EBITDA increased by $1.6 million driven by the increase
in revenues, partially offset by higher operating costs from a full quarter of
FirstBank and higher operating expenses.

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Business Solutions
                                  Three months ended March 31,
In thousands                           2022                   2021
Revenues                                         $62,624      $60,611
Adjusted EBITDA                                   29,604       29,632
Adjusted EBITDA Margin                           47.3  %      48.9  %



Business Solutions segment revenues for the three months ended March 31, 2022
increased by $2.0 million to $62.6 million as a result of higher transactions
and account volumes, and the benefit of the CPI impact on the current MSA. In
addition, the quarter benefited from incremental printing volume resulting from
the printing contract entered into in the prior year and that began to have an
impact in the second half of 2021. These increases were partially offset by
hardware and software sales as well as services provided to the Puerto Rico
Department of Educations in the prior year quarter that did not recur. Adjusted
EBITDA remained relatively flat at $29.6 million as the increase in revenue was
offset by increased expenses, mainly software and hardware maintenance costs.


Cash and capital resources


Our principal source of liquidity is cash generated from operations, and our
primary liquidity requirements are the funding of working capital needs, capital
expenditures, dividend payments, share repurchases, debt service, and
acquisitions. We also have a $125.0 million Revolving Facility, of which $119.1
million was available for borrowing as of March 31, 2022. The Company issues
letters of credit against our Revolving Facility which reduce our availability
of funds to be drawn.

As of March 31, 2022, we had cash and cash equivalents of $283.6 million, of
which $103.7 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.

                                                                         Three months ended March 31,
(In thousands)                                                            2022                   2021

Cash provided by operating activities                               $       70,350          $     34,746
Cash used in investing activities                                          (14,290)              (34,413)
Cash used in financing activities                                          (36,169)              (48,716)

Effect of exchange rate on cash, cash equivalents and restricted cash

                                                             (1,903)                2,700
Increase (decrease) in cash, cash equivalents and restricted
cash                                                                $       17,988          $    (45,683)



Net cash provided by operating activities for the three months ended March 31,
2022 was $70.4 million compared to $34.7 million for the same period in the
prior year. The $35.6 million increase in cash provided by operating activities
is primarily driven by an increase in collections for accounts receivable as
well as less cash used to pay down accounts payable and accrued liabilities as
the Company continues to effectively manage working capital.

Net cash used in investing activities for the three months ended March 31, 2022
was $14.3 million compared to $34.4 million for the same period in the prior
year. The $20.1 million decrease is primarily attributable to the acquisition in
the prior year of a
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$14.8 million customer relationship and $3.0 million in available-for-sale debt
securities in addition to a decrease in additions to software of $3.3 million.

Net cash used in financing activities for the three months ended March 31, 2022
was $36.2 million compared to $48.7 million for the same period in the prior
year. The $12.5 million decrease was mainly attributed to a decrease of $16.4
million in cash used to pay down long-term debt and a $3.1 million decrease in
withholding taxes paid on share-based compensation partially offset by an
increase in cash used to repurchase common stock of $6.9 million.

Capital resources


Our principal capital expenditures are for hardware and computer software
(purchased and internally developed) and additions to property and equipment.
During the three months ended March 31, 2022 and 2021, we invested approximately
$14.3 million and $16.7 million, respectively. In addition, during the three
month period ended March 31, 2021, the Company acquired a $14.8 million customer
relationship as well as $3.0 million in available-for-sale debt securities.
Generally, we fund capital expenditures with cash flow generated from operations
and, if necessary, borrowings under our Revolving Facility.

Dividend payments


On February 15, 2022, the Board declared quarterly cash dividends of $0.05 per
share of common stock, which were paid on March 25, 2022, to stockholders of
record as of the close of business on February 25, 2022.

On April 21, 2022, 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 June 3, 2022 to stockholders of record as of the close of business on
May 2, 2022. 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, EVERTEC and EVERTEC Group ("Borrower") entered into a
credit agreement providing for the secured credit facilities, consisting of a
$220.0 million term loan A facility that matures on November 27, 2023 (the "2023
Term A Loan"), a $325.0 million term loan B facility that matures on November
27, 2024 (the "2024 Term B Loan"), and a $125.0 million revolving credit
facility (the "Revolving Facility") that matures 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").

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 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.

The unpaid principal balance at March 31, 2022 of the 2023 Term A Loan and the
2024 Term B Loan was $167.5 million and $295.0 million, respectively. The
additional borrowing capacity under our Revolving Facility at March 31, 2022 was
$119.1 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 Swaps

As of March 31, 2022, the Company has an interest rate swap agreement, entered
into in December 2018, which converts a portion of the interest rate payments on
the Company's 2024 Term B Loan 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                  2.89%


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


As of March 31, 2022 and December 31, 2021, the carrying amount of the
derivative included on the Company's unaudited condensed consolidated balance
sheets was $2.8 million and $13.4 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 7 of the unaudited condensed consolidated
financial statements for disclosure of losses recorded on cash flow hedging
activities.

During the three months ended March 31, 2022 and 2021, the Company reclassified
losses of $1.7 million and losses of $1.7 million, respectively, from
accumulated other comprehensive loss into interest expense. Based on current
LIBOR rates, the Company expects to reclassify losses of $2.8 million from
accumulated other comprehensive loss into interest expense over the next 12
months.

Cash flow hedging is considered highly effective.

Compliance with commitments


As of March 31, 2022, our secured leverage ratio was 1.36 to 1.00, as determined
in accordance with the 2018 Credit Agreement. As of the date of filing of this
Form 10-Q, no event has occurred that constitutes an Event of Default or Default
under our 2018 Credit Agreement.

Reconciliation of Net Earnings to EBITDA, Adjusted EBITDA, Adjusted Net Earnings 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 items and other adjustments described below. 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 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 income adjusted to exclude unusual items and other
adjustments described below. 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.

Some of the limits for 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;
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•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 earnings to EBITDA, adjusted EBITDA, adjusted net earnings and adjusted earnings per common share is shown below:


                                                         Three months ended March 31,                     Twelve months ended
(In thousands, except per share information)              2022                   2021                                                March 31, 2022
Net income                                         $        38,866          $     35,604                                           $       164,405
Income tax expense                                           6,175                 4,708                                                    22,029
Interest expense, net                                        4,880                 5,517                                                    20,284
Depreciation and amortization                               19,160                18,623                                                    75,607
EBITDA                                                      69,081                64,452                                                   282,325

Equity income (1)                                             (570)                 (502)                                                     (463)
Compensation and benefits (2)                                4,279                 3,504                                                    15,919
Transaction, refinancing and other fees (3)                  2,595                 1,435                                                     3,533

Adjusted EBITDA                                             75,385                68,889                                                   301,314
Operating depreciation and amortization (4)                (11,252)              (10,882)                                                  (43,808)
Cash interest expense, net (5)                              (4,629)               (5,076)                                                  (19,357)
Income tax expense (6)                                      (8,677)               (7,756)                                                  (32,605)
Non-controlling interest (7)                                    10                  (143)                                                       (8)
Adjusted net income                                $        50,837          $     45,032                                           $       205,536
Net income per common share (GAAP):
Diluted                                            $          0.53          $       0.49
Adjusted Earnings per common share
(Non-GAAP):
Diluted                                            $          0.70          $       0.62
Shares used in computing adjusted earnings
per common share:
Diluted                                                 72,853,216            72,949,401




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, recorded as part of selling, general and
administrative expenses, a software impairment charge and a gain from sale of
assets.
4)Represents operating depreciation and amortization expense, which excludes
amounts generated as a result of merger and acquisition activity.
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5)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)Represents income tax expense calculated on adjusted pre-tax income using the
applicable GAAP tax rate, adjusted for certain discrete items.
7)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 inflation has had minimal net effect on our operating results during the
last three years given that overall inflation has been offset by sales and cost
reduction actions, the rate of inflation can impact certain input costs, such as
occupancy, labor and benefits, and general administrative costs, which may not
be readily recoverable from our customers and could affect our results of
operations and financial condition. In addition, if inflation were to result in
rising interest rates, it could result in an adverse effect on our cost of
funding due to increased interest expense on our outstanding debt.

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