Advances Evertec’s growth strategy,
drives geographic diversification, and offers complementary
products
Significant opportunity to provide Sinqia
customers with access to Evertec’s best-in-class payments
solutions
Increases share repurchase
authorization
Evertec to host conference call tomorrow at
8:00 AM ET
EVERTEC, Inc. (NYSE: EVTC) (“Evertec”, the “Company”, “we” or
“our”) and Sinqia (B3: SQIA3) (“Sinqia”) today jointly announced a
definitive agreement for Evertec to acquire Sinqia, a leading
player in the market of software for financial services in Brazil
for consideration with a value of R$27.19 per share, increased by a
customary daily “ticking fee” of up to R$1.00 per share depending
on the timing of the closing, subject to certain limited
exceptions.
"Sinqia is a leader in providing software to the financial
services industry in Brazil with an impressive history of
delivering organic and inorganic growth," said Mac Schuessler,
President and Chief Executive Office of Evertec. "This is a highly
complementary transaction, and together we plan to bring Evertec
payments solutions to Brazil and Sinqia’s strategies to our Latin
American markets."
“M&A has been a key strategic focus allowing Evertec to
expand into new geographies and to broaden our product offerings.
We have been executing specific strategic milestones over the past
few years that culminated with the closing of the Popular
transaction approximately one year ago, enabling us to pursue
M&A more actively to grow and diversify our business. The
Sinqia acquisition is another step in our strategic transformation.
The combination of our strong balance sheet, predictable cash flow,
and knowledge of the region allows us to significantly expand our
presence in an attractive market like Brazil. We believe that our
digital payments engine together with Sinqia’s banking and
financial software platform will position us as the leading fintech
company in Latin America,” added Mr. Schuessler.
Bernardo Gomes, Chief Executive Officer of Sinqia, stated, "We
are excited about the opportunity to join the Evertec family. Our
strategy, operating philosophy along with our results driven
culture will align well with Evertec and ensure a smooth
integration. Combining our companies will enhance services for both
of our growing customer bases as well as provide opportunities for
our team members as Evertec continues to expand in attractive
markets with strong macro tailwinds."
Frank D’Angelo, Chairman of Evertec, said "It has been my honor
to serve as Chairman of Evertec since shortly after its IPO. I am
delighted with the agreed partnership with Sinqia, which I believe
will create a powerful combination in Brazil and other countries in
the region. The future for Evertec is very bright, and I look
forward to continuing to contribute to the board."
Transaction Details
- Pursuant to the terms of the merger agreement, Evertec has
agreed to acquire Sinqia’s outstanding equity for R$27.19 per
share, plus a daily cash ticking fee of up to R$1.00 per share
based on the daily SELIC rate published by the Central Bank of
Brazil between signing and closing.
- Based on the closing price of Sinqia shares on July 19, 2023,
Sinqia has an equity valuation of R$2,326 million (USD$485 million)
and an enterprise value of R$2,835 million (USD$591 million).
- The transaction represents an approximate 24.0% premium to the
unaffected share price at July 19, 2023 and a 22.6% premium to the
prior 30-day volume weighted average price.
- Consideration will be in the form of 90% cash 10% Evertec
shares in order to benefit from an expedited process to closing
that minimizes execution risk.
- Evertec has extended and expanded its share repurchase program
with the intent of offsetting the impact of newly issued shares as
part of the transaction which amount to approximately 1.2 million
shares.
- Evertec intends to finance the acquisition with cash on hand
and committed financing of $600 million as the Company looks to
maintain a strong balance sheet that provides for added flexibility
to continue executing on our diversification and M&A
plans.
- Transaction has been unanimously approved by the boards of
directors of both Evertec and Sinqia and is expected to be
completed during the fourth quarter of 2023, subject to
satisfaction of customary closing conditions and approvals.
- The transaction is subject to Sinqia stockholder approval of a
simple majority (greater than 50%). As of the signing of the merger
agreement Evertec has entered into an agreement with shareholders
representing approximately 40% of Sinqia’s outstanding shares to
vote in favor of the transaction.
- Evertec shareholder approval is not required and is not a
condition to closing the proposed transaction.
- The proposed transaction is expected to be breakeven to
slightly accretive to 2024 Adjusted earnings per share and
accretive in 2025.
Strategic and Financial Rationale
- Enhances our existing growth strategy and diversifies the
business
Sinqia provides us with a meaningful presence in Brazil
expanding our exposure to faster growth geographies, enhances
revenue growth and boosts our ability to execute in a high-growth
region. Additionally, with Sinqia, our revenues in Latin America
will now represent 37% of our overall business, up from the 20% it
represents today.
- Expands our addressable markets
Sinqia opens the door for Evertec to bring our expertise in
payment solutions to their over 900 customers in Brazil and
complement their software solutions that today don’t have a payment
offering. Additionally, we see an opportunity to potentially export
some of Sinqia’s products to our existing customer base of
financial institutions across other parts of Latin America
benefiting from the shift towards financial inclusion in the
region.
- Increases our product offering
Sinqia is a leader in its industry providing software solutions
to financial institutions in Brazil across four key verticals of
banks, funds, pensions and consortiums. These are very
complementary set of assets to Evertec’s product offering around
payments with very little direct overlap that combined represent a
comprehensive and complete value proposition for clients.
- Attractive Financial Profile
Sinqia has an attractive financial model, with approximately 85%
recurring revenue, over 900 customers with no customer
concentration, strong position across their verticals that allows
for upsell and cross sell opportunities in a market and in an
industry that is expected to continue growing. Additionally, Sinqia
has a clear track record of consistent growth both organically and
through a successful M&A strategy. We see potential for
important revenue synergies when combined with Evertec.
Share Repurchase
The Company's Board of Directors approved an increase to the
share repurchase authorization to an aggregate $150 million and an
extension of the expiration date to December 31, 2024. Prior to
this amendment, the share repurchase program had approximately $63
million remaining. The Company may repurchase shares in the open
market, through accelerated share repurchase programs, 10b5-1
plans, or in privately negotiated transactions, subject to business
opportunities and other factors.
Preliminary earnings
The Company is also announcing preliminary financial results for
the quarter ended June 30, 2023:
- The Company estimates that total revenue will range between
$166 million and $167 million, as compared to 160.6 million in the
prior year quarter, reflecting growth across all the Company’s
payment segments.
- We estimate that Adjusted EBITDA will range between $73 million
and $74 million compared with $74.1 million in the prior year
quarter.
- Adjusted EBITDA margin is expected in a range of 44% to 45%,
compared with 46.1% in the prior year quarter.
- Diluted earnings per share are expected to range between $0.42
and $0.45, compared with $0.47 in the prior year quarter.
- Adjusted earnings per common share is expected in a range of
$0.70 and $0.72 compared with $0.67 in the prior year quarter.
2023 Outlook
The Company is revising its financial outlook for 2023 as
follows:
- Total consolidated revenue is now anticipated to be between
$652 million and $658 million representing growth of approximately
5% to 6% growth, compared with $644 to $652 million previously
estimated.
- Earnings per common share between $1.82 to $1.91 as compared to
$3.45 in 2022, as recast, compared with $1.80 to $1.90 previously
estimated.
- Adjusted earnings per common share between $2.75 to $2.83
representing approximately 9% to 12% growth as compared to $2.53 in
2022, as recast, compared with $2.59 to $2.68 previously
estimated.
- We continue to expect capital expenditures to be approximately
$70 million.
- We continue to expect an effective tax rate of approximately
16% to 17%.
Advisors
Evercore, Seneca Evercore and Goldman Sachs are acting as lead
financial advisors to Evertec. Truist Securities is also serving as
a financial advisor to Evertec and Truist bank is providing
committed financing to support the acquisition. Latham &
Watkins and Mattos Filho are serving as legal advisors to Evertec.
BTG Pactual is acting as financial advisor to Sinqia. Trindade
Sociedade de Advogados and Simpson Thacher & Bartlett LLP are
acting as legal advisor to Sinqia.
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss the
transaction tomorrow at 8:00 a.m. ET. The conference call can be
accessed live over the phone by dialing (888) 338-7153 or for
international callers by dialing (412) 317-5117. A replay will be
available one hour after the end of the conference call and can be
accessed by dialing (877) 344-7529 or (412) 317-0088 for
international callers; the pin number is 3473106. The replay will
be available through Friday, July 28, 2023. The call will be
webcast live from the Company’s website at www.evertecinc.com under
the Investor Relations section or directly at
http://ir.evertecinc.com. A supplemental slide presentation that
accompanies this call and webcast will be available prior to the
call on the investor relations website at ir.evertecinc.com and
will remain available after the call.
About Evertec
EVERTEC, Inc. (NYSE: EVTC) 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. Evertec owns and
operates the ATH® network, one of the leading personal
identification number (“PIN”) debit networks in Latin America. In
addition, the Company processes over six billion transactions
annually and manages a system of electronic payment networks in
Puerto Rico and Latin America and offers a comprehensive suite of
services for core banking, cash processing, and fulfillment in
Puerto Rico. Additionally, the Company offers technology
outsourcing and payment transactions fraud monitoring to all the
regions it serves. Based in Puerto Rico, the Company operates in 26
Latin American countries and serves a diversified customer base of
leading financial institutions, merchants, corporations and
government agencies with “mission-critical” technology solutions.
For more information, visit www.evertecinc.com.
About Sinqia
Sinqia (B3:SQIA3) is a leading provider of technology for
financial institutions operating in Brazil. The company offers a
comprehensive portfolio of software and serves more than 900
clients through four business verticals. The company has been
executing a consolidation strategy that resulted in a leadership
position within the country following 24 acquisitions.
Consequently, Sinqia has been mentioned in the global IDC FinTech
Top 100 rankings for five consecutive years. Based in Sao Paulo,
the company serves major financial institutions in Brazil such as
banks, non-banking financial institutions, fund managers, pension
entities and consortium administrators. For more information, visit
www.sinqia.com.br.
Use of Non-GAAP Financial Information
The non-GAAP measures referenced in this press release are
supplemental measures of the Company’s performance and are not
required by, or presented in accordance with, accounting principles
generally accepted in the United States of America (“GAAP”). They
are not measurements of the Company’s financial performance under
GAAP and should not be considered as alternatives to total revenue,
net income or any other performance measures derived in accordance
with GAAP or as alternatives to cash flows from operating
activities, as indicators of operating performance or as measures
of the Company’s liquidity. In addition to GAAP measures,
management uses these non-GAAP measures to focus on the factors the
Company believes are pertinent to the daily management of the
Company’s operations and believes that they are also frequently
used by analysts, investors and other stakeholders to evaluate
companies in our industry. These measures have certain limitations
in that they do not include the impact of 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.
Reconciliations of the non-GAAP measures to the most directly
comparable GAAP measure are included at the end of this press
release. These non-GAAP measures include EBITDA, Adjusted EBITDA,
Adjusted Net Income and Adjusted Earnings per common share, each as
defined below.
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization.
Adjusted EBITDA is defined as EBITDA further adjusted to
exclude certain non-cash items and 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. This measure 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 the Company's segments, is
presented in conformity with Accounting Standards Codification 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. The Company's
presentation of Adjusted EBITDA is substantially consistent with
the equivalent measurements that are contained in the secured
credit facilities in testing EVERTEC Group’s compliance with
covenants therein such as the secured leverage ratio.
Adjusted EBITDA margin is defined as Adjusted EBITDA
divided by revenues.
Adjusted Net Income is defined as 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 non-cash amortization of debt
issue costs, premium and 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, unrealized gains
and losses from foreign currency remeasurement; 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 among others.
Adjusted Earnings per common share is defined as Adjusted
Net Income divided by diluted shares outstanding.
The Company uses Adjusted Net Income to measure the Company's
overall profitability because the Company believes it better
reflects the 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 the Company may incur expenses such as those
excluded in calculating them.
Forward-Looking Statements
Certain statements in this press release constitute
“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, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements contained in this press release other than statements of
historical facts, including, without limitation, statements
regarding our ability to meet our guidance expectations for
revenue, earnings per share, Adjusted earnings per common share,
capital expenditures and effective tax rate, including for fiscal
year 2023, are forward looking statements. Words such as
“believes,” “expects,” “anticipates,” “intends,” “projects,”
“estimates,” and “plans” and similar expressions of future or
conditional verbs such as “will,” “should,” “would,” “may,” and
“could” are generally forward-looking in nature and not historical
facts.
Various factors that could cause actual future results and other
future events to differ materially from those estimated by
management include, but are not limited to: failure to satisfy one
or more conditions to closing of the transaction with Sinqia, the
inability to integrate Sinqia successfully into the Company or to
achieve expected revenue and cost synergies, the loss of personnel
or customers in connection with the transaction, any delays in
obtaining regulatory approvals, the cost and other terms of new
debt financing incurred in connection with the Sinqia transaction,
the ability to execute planned share repurchases in a timely manner
or at anticipated prices, the Company’s reliance on its
relationship with Popular, Inc. (“Popular”) for a significant
portion of its revenues pursuant to the Company’s second amended
and restated Master Services Agreement ("MSA") with them, and to
grow the Company’s merchant acquiring business; the Company’s
ability to renew its client contracts on terms favorable to the
Company, including but not limited to the current term and any
extension of the MSA with Popular; the Company’s dependence on its
processing systems, technology infrastructure, security systems and
fraudulent payment detection systems, as well as on the Company’s
personnel and certain third parties with whom it does business, and
the risks to the Company’s business if its systems are hacked or
otherwise compromised; the Company’s ability to develop, install
and adopt new software, technology and computing systems; a
decreased client base due to consolidations and failures in the
financial services industry; the credit risk of the Company’s
merchant clients, for which it 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; the
Company’s 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
international, legal, tax, political, administrative or economic
conditions; the geographical concentration of the Company’s
business in Puerto Rico, including its 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 the Company’s customer base, general consumer
spending, the Company’s cost of operations and the Company’s
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; the Company’s
ability to protect its intellectual property rights against
infringement and to defend itself against claims of infringement
brought by third parties; the Company’s 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; the Company’s level of indebtedness
and restrictions contained in the Company’s debt agreements,
including the secured credit facilities, as well as debt that could
be incurred in the future; the Company’s ability to prevent a
cybersecurity attack or breach to its information security; the
possibility that the Company could lose its preferential tax rate
in Puerto Rico; the possibility of future catastrophic hurricanes,
earthquakes and other potential natural disasters affecting the
Company’s main markets in Latin America and the Caribbean; and
uncertainty related to the effect of the discontinuation of the
London Interbank Offered Rate; the elimination of Popular's
ownership of the Company's common stock; and the other factors set
forth under "Part 1, Item 1A. Risk Factors," in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2022 filed with the Securities and Exchange Commission (the "SEC")
on February 24, 2023, as any such factors may be updated from time
to time in the Company’s filings with the SEC. The Company
undertakes no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the
occurrence of unanticipated events unless it is required to do so
by law.
Information for U.S. Persons Holding Sinqia Shares
The proposed transaction described above involves the securities
of a non-U.S. company that is subject to disclosure and procedural
requirements in Brazil that are different from those applicable to
issuers in the United States. The offer by Evertec of Brazilian
Depositary Receipts representing interests in shares of Company
common stock is expected to be exempt from registration with the
SEC pursuant to Rule 802 under the Securities Act of 1933. When
available, the Company will file with the SEC under cover of Form
CB an English language copy of the documents provided to Sinqia
shareholders in accordance with applicable requirements in Brazil.
Sinqia shareholders are encouraged to review those materials
carefully before making any voting or investment decision with
respect to the proposed transaction. This communication does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval.
EVERTEC, Inc.
Outlook Summary and
Reconciliation to Non-GAAP Adjusted Earnings per Common Share
2022
Outlook 2023
(As recast)
(Dollar amounts in millions, except per
share data)
Low
High
Revenues
$ 652
to
$ 658
$ 618
Earnings per Share (EPS) (GAAP)
$ 1.82
to
$ 1.91
$ 3.45
Per share adjustment
to reconcile GAAP EPS to Non-GAAP Adjusted EPS:
Share-based comp, non-cash equity earnings
and other (1)
0.56
0.56
(1.42)
Merger and acquisition related
depreciation and amortization (2)
0.47
0.47
0.49
Non-cash interest expense (3)
0.01
0.01
0.01
Tax effect of Non-GAAP adjustments (4)
(0.18)
(0.19)
(0.10)
Loss (gain) on foreign currency
remeasurement (5)
0.07
0.07
0.10
Total adjustments
0.93
0.92
(0.92)
Adjusted EPS (Non-GAAP)
$ 2.75
to
$ 2.83
$ 2.53
Shares used in computing adjusted earnings
per common share
65.5
69.3
____________________________
(1) Represents share-based compensation,
the elimination of non-cash equity earnings from the Company's
19.99% equity investment in CONTADO, severance and other
adjustments to reconcile GAAP EPS to Non-GAAP EPS.
(2) Represents depreciation and
amortization expenses amounts generated as a result of M&A
activity.
(3) Represents non-cash amortization of
the debt issue costs, premium and accretion of discount.
(4) Represents income tax expense on
non-GAAP adjustments using the applicable GAAP tax rate
(anticipated at approximately 16% to 17%).
(5) Represents non-cash unrealized gains
(losses) on foreign currency remeasurement for assets and
liabilities denominated in non-functional currencies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230720027708/en/
Investor Contact - Evertec Beatriz Brown-Sáenz (787)
773-5442 IR@evertecinc.com
Investor Contact - Sinqia Emerson Faria (11) 97515-9162
ri@sinqia.com.br
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