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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 30, 2022 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)
(787759-9999
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareEVTCNew 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  


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 27, 2022, there were 65,202,196 outstanding shares of common stock of EVERTEC, Inc.



TABLE OF CONTENTS
 


  Page
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




















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 such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. 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 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 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;
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


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.

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 filed with the SEC on February 25, 2022, as updated by Part II, Item 1A. “Risk Factors” in this Report, and as updated in our subsequent filings with the SEC, and in “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 as of the date of this Report, and we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

WHERE YOU CAN FIND MORE INFORMATION

All reports we file with the 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.








EVERTEC, Inc. Unaudited Condensed Consolidated Balance Sheets
(In thousands, except for share information)

September 30, 2022December 31, 2021
Assets
Current Assets:
Cash and cash equivalents$224,971 $266,351 
Restricted cash18,705 19,566 
Accounts receivable, net112,293 113,285 
Prepaid expenses and other assets40,992 37,148 
Total current assets396,961 436,350 
Debt securities available-for-sale, at fair value 2,198 3,041 
Investment in equity investee14,071 12,054 
Property and equipment, net49,928 48,533 
Operating lease right-of-use asset17,799 21,229 
Goodwill417,819 393,318 
Other intangible assets, net196,316 213,288 
Deferred tax asset5,414 6,910 
Net investment in leases14 107 
Derivative asset7,070  
Other long-term assets13,378 9,926 
Total assets$1,120,968 $1,144,756 
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities$82,798 $74,540 
Accounts payable33,489 28,484 
Contract liability17,051 17,398 
Income tax payable10,757 7,132 
Current portion of long-term debt28,813 19,750 
Current portion of operating lease liability6,007 5,580 
Total current liabilities178,915 152,884 
Long-term debt426,691 444,785 
Deferred tax liability7,998 2,369 
Contract liability - long term34,726 36,258 
Operating lease liability - long-term13,320 16,456 
Derivative liability 13,392 
Other long-term liabilities4,063 8,344 
Total liabilities665,713 674,488 
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 earnings480,740 506,051 
Accumulated other comprehensive loss, net of tax(29,586)(48,123)
Total EVERTEC, Inc. stockholders’ equity451,809 466,212 
Non-controlling interest3,446 4,056 
Total equity455,255 470,268 
Total liabilities and equity$1,120,968 $1,144,756 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1

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,
 2022202120222021
   
Revenues (affiliates Note 16)$145,803 $145,883 $456,622 $434,559 
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization76,272 62,995 215,244 182,180 
Selling, general and administrative expenses26,001 17,126 66,436 49,980 
Depreciation and amortization19,712 18,745 58,432 56,091 
Total operating costs and expenses121,985 98,866 340,112 288,251 
Income from operations23,818 47,017 116,510 146,308 
Non-operating income (expenses)
Interest income807 504 2,279 1,343 
Interest expense(6,763)(5,684)(18,242)(17,248)
Earnings of equity method investment688 411 2,120 1,307 
(Loss) gain on foreign currency remeasurement (7,779)(304)(6,858)652 
Gain on sale of a business135,642  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 taxes146,787 42,394 233,072 134,429 
Income tax expense 9,048 7,134 22,911 14,474 
Net income137,739 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 stockholders137,814 35,314 210,301 120,014 
Other comprehensive income (loss), net of tax of $716, $382, $1,442 and $817
Foreign currency translation adjustments4,125 (6,942)(210)(7,823)
Gain on cash flow hedges5,762 1,537 18,824 6,814 
Unrealized (loss) gain on change in fair value of debt securities available-for-sale$(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 

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

2

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
Non-Controlling
Interest
Total
Stockholders’
Equity
Balance at December 31, 202171,969,856 $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 delivered251,085 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, 202271,699,298 $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 delivered25,149 — (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, 202271,367,333 $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 delivered485 — (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, 202265,588,270 $655 $ $480,740 $(29,586)$3,446 $455,255 


3

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, 202072,137,678 $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 delivered411,739 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, 202172,166,443 $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 delivered34,727 — (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, 202171,969,856 $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, 202171,969,856 719 3,708 468,533 (49,166)4,136 427,930 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands) 
5

 Nine months ended September 30,
 20222021
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 amortization58,432 56,091 
Amortization of debt issue costs and accretion of discount1,187 1,423 
Operating lease amortization4,576 4,443 
Provision for expected credit losses and sundry losses3,363 1,428 
Deferred tax benefit(1,699)(1,119)
Share-based compensation14,740 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 software4,691 1,168 
Earnings of equity method investment(2,120)(1,307)
Dividend received from equity method investment2,053 1,183 
Loss (gain) on valuation of foreign currency6,858 (652)
(Increase) decrease in assets:
Accounts receivable, net3,503 (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 payable468 (773)
Income tax payable2,921 (2,685)
Contract liability1,344 (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 activities159,009 175,855 
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 equipment77 805 
Purchase of certificates of deposit(7,264) 
Proceeds from maturities of available-for-sale debt securities1,015  
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 cash4,260 215 
Net (decrease) increase in cash, cash equivalents and restricted cash(42,241)41,688 
Cash, cash equivalents and restricted cash at beginning of the period285,917 221,105 
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 cash18,705 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 taxes24,386 19,468 
6


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 stock18,761  
Goodwill exchanged for common stock5,813  
CDs transferred in the acquisition of a business7,169  
Non-cash financing and investing activities
Common stock received and retired for sale of a business169,249  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

Notes to Unaudited Condensed Consolidated Financial Statements


 

8

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, one of the leading personal identification number ("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 processing and cash processing in Puerto Rico and technology outsourcing in 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.

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, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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.

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 of a Business

On July 1, 2022, EVERTEC's main operating subsidiary, EVERTEC Group closed on the acquisition of 100% of the share capital of BBR SpA ("BBR"), a payment solutions and business technology company with operations in Chile and Peru, by entering into a share 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 $45.9 million and certificates of deposits that amounted to $7.3 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.

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 acquisition:
9

Assets/Liabilities (at fair value)
( In thousands)
Cash and cash equivalents$1,551 
Accounts receivable, net2,969 
Property and equipment, net3 
Operating lease right-of-use asset76 
Goodwill33,247 
Other intangible assets, net24,850 
Deferred tax asset267 
Total assets acquired62,963 
Accounts payable1,039 
Contract liability1,136 
Operating lease liability85 
Deferred tax liability7,614 
Total liabilities assumed$9,874 


10

The following table details the major groups of intangible assets acquired and the weighted average amortization period for these assets:
AmountWeighted-average life
(Dollar amounts in thousands)
Customer relationships$22,500 15
Trademark1,250 5
Software packages1,100 5
Total$24,850 14

Refer to Note 6 Goodwill and Other Intangible Assets for detail of goodwill allocated by reportable segments. The goodwill is primarily attributed to synergies. 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 business15,426 
Total consideration for the sale of a business184,675 
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 


11

Note 4 – 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 30, 2022 and December 31, 2021 were as follows:

 September 30, 2022
(In thousands)Gross unrealized
Amortized costGainsLossesFair Value
Costa Rica Government Obligations
After 1 to 5 years$2,219  (21)$2,198 

 December 31, 2021
(In thousands)Gross unrealized
Amortized costGainsLossesFair Value
Costa Rica Government Obligations
After 1 to 5 years$2,963 $78 $ $3,041 

Debt securities 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 sold during the nine months ended September 30, 2022, while $1.0 million matured during the same period. A provision for credit losses was not required for the periods presented above. Refer to Note 8 for disclosure requirements related to the fair value hierarchy.

Note 5 – Property and Equipment, net

Property and equipment, net consists of the following:
(In thousands)Useful life
in years
September 30, 2022December 31, 2021
Buildings30$1,387 $1,359 
Data processing equipment
3 - 5
151,545 141,359 
Furniture and equipment
3 - 20
8,742 7,718 
Leasehold improvements
5 -10
3,572 3,277 
165,246 153,713 
Less - accumulated depreciation and amortization(116,531)(106,365)
Depreciable assets, net48,715 47,348 
Land1,213 1,185 
Property and equipment, net$49,928 $48,533 

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

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.


12

Note 6 – Goodwill and Other Intangible Assets

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