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•	our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our master services agreement with them, and to grow our merchant acquiring business;

•	as a regulated institution, the likelihood we will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition, and our potential inability to obtain such approval on a timely basis or at all, which may make transactions more expensive or impossible to complete, or make us less attractive to potential sellers;

•	our ability to renew our client contracts on terms favorable to us, including our contract with Popular, and any significant concessions we may have to grant to Popular with respect to pricing or other key terms in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA;

•	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 international, legal, tax, political, administrative or economic conditions;

•	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;

•	a protracted federal government shutdown may affect our financial performance;

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

•	our ability to execute our geographic expansion and acquisition strategies, including challenges in successfully acquiring new businesses and integrating and growing acquired businesses;

•	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 recruit and retain the qualified personnel necessary to operate our business;

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

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

•	our ability to generate sufficient cash to service our indebtedness and to generate future profits;

•	our ability to refinance our debt;

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

•	the risk that the counterparty to our interest rate swap agreements fail to satisfy its obligations under the agreement;

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•	uncertainty of the pending debt restructuring process under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”), as well as actions taken by the government of Puerto Rico or by the PROMESA Board to address the fiscal crisis in Puerto Rico;

•	the aftermath of Hurricanes Irma and Maria and their continued impact on the economies of Puerto Rico and the Caribbean;

•	the possibility of future catastrophic hurricanes affecting Puerto Rico and/or the Caribbean, as well as other potential natural disasters;

•	the nature, timing and amount of any restatement; and

•	the potential impact of COVID-19 on our revenues, net income and liquidity due to future disruptions in operations as well as the macroeconomic instability caused by the pandemic.

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Note 1 – The Company and Basis of Presentation

The Company

EVERTEC, Inc. (formerly known as Carib Latam Holdings, 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. The Company provides services across 26 countries in the region. EVERTEC owns and operates the ATH network, one of the leading automated teller machine ("ATM") and personal identification number ("PIN") debit networks in 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 all the regions the Company serves. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations and government agencies with solutions that are essential to their operations, enabling them to issue, process and accept transactions securely. EVERTEC's common stock is listed under the ticker symbol "EVTC" on the New York Stock Exchange.

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, 2019, included in the Company’s 2019 Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements, prepared in accordance with GAAP, contain all adjustments necessary for a fair presentation. Intercompany accounts and transactions are eliminated in consolidation.

Risks and Uncertainties due to COVID-19 Pandemic

In December 2019, the outbreak of a novel strain of coronavirus ("COVID-19") was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 100 countries, including every state and territory of the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and shortly thereafter, governmental authorities in Puerto Rico and the other countries in which EVERTEC operates declared states of emergency and implemented numerous public health measures to try to contain the virus, including lockdowns and curfews, school and business closures and restrictions on travel. COVID-19 presents material uncertainty and risk with respect to EVERTEC’s business, results of operations and cash flows, as well as with respect to changes in laws and regulations and government and regulatory policy. As the spread of the pandemic persists, entities are experiencing conditions often associated with a general economic downturn. The outbreak has disrupted global financial markets and negatively affected supply and demand across a broad range of industries. COVID-19’s impact on global economies could have a material adverse effect on (among other things) the profitability, capital and liquidity of the Company, particularly if consumer spending levels are depressed for a prolonged period of time. While the rapid development and fluidity of the situation prevents management from having clear visibility into the medium and long-term impacts, management believes possible effects may include, but are not limited to, disruption to the Company’s customers and revenue, absenteeism in the Company’s workforce, unavailability of products and supplies used in operations, and a decline in the value of assets held by the Company, including, among other things, tangible and intangible long-lived assets, and increased levels in the Company's current expected credit loss reserve.

Given the uncertain and rapidly evolving situation, management has taken certain precautionary measures intended to help minimize the risk of COVID-19 to the Company, its employees, and customers, including the following:

•

The Company deployed its business continuity plan for the entire organization a few days before the government of Puerto Rico enacted a shelter in place directive on March 16, 2020. Since then, every country in which the Company operates has implemented some type of social distancing measures. Management expects that the offices will remain closed for an undetermined period, until it is deemed safe by management to return and as permitted or advised by local authorities in each country where the Company operates;

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•

In connection with the Company's business continuity plan, we transitioned most of the Company’s employees to a work from home environment. For certain critical employees who are required to remain working on-site in order to, among other things, maintain network operations oversight functions, cash handling and other critical operations for our customers, we have implemented safety measures including administering daily temperature checks upon entry into the work site, providing protective gear, developing safe social distancing workspaces and increasing overall sanitation at our offices;

•	As a precautionary measure, to increase the Company's cash position and preserve its financial flexibility in light of the current uncertainty resulting from the COVID-19 outbreak, the Company drew down $30 million on its Senior Secured Revolving Facility on April 8, 2020;

•	On May 1, 2020, the Company commenced deferral of payroll taxes as permitted under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act"); management anticipates a $2.7 million deferral of payroll taxes during the allowed time;

•	Management identified additional expense reductions that are intended to be implemented as necessary; and

•	Management has suspended all non-essential travel for employees.

While the Company anticipates that the foregoing measures are temporary, management cannot predict their duration, and management may elect or need to take additional precautions as more information related to COVID-19 becomes available, including with respect to employees, customers, and relationships with the Company's business partners. The extent to which the COVID-19 pandemic and EVERTEC’s precautionary measures in response to it, may impact the Company’s business, financial condition or results of operations will depend on the ongoing developments related to the pandemic and its direct and indirect consequences, all of which are highly uncertain and cannot be predicted at this time.

Note 2 – Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued updated guidance for the measurement of credit losses on financial instruments, which replaces the incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The main objective of this update and subsequent clarifications and corrections, including ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2020-03, is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments affect the Company's trade receivables. Additional disclosures about significant estimates and credit quality are also required. The Company adopted this new guidance effective January 1, 2020, using a modified retrospective approach through a cumulative-effect adjustment to retained earnings, considered immaterial to the consolidated financial statements. Results for reporting periods beginning after January 1, 2020 are presented under the new guidance provided by Accounting Standards Codification ("ASC") Topic 326, while prior period amounts are not adjusted and continue to be reported under legacy GAAP.

Refer to Note 3, Current Expected Credit Losses, for discussions of the implementation of ASC Topic 326 with respect to the Company’s consolidated financial statements.

In August 2018, the FASB issued updated guidance for customer’s accounting for implementation, set-up and other upfront costs (collectively referred to as implementation costs) incurred in a cloud computing arrangement constituting a service contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The updated guidance does not impact the accounting for the service element of a hosting arrangement that is a service contract. The Company adopted this guidance prospectively effective January 1, 2020 with respect to all implementation costs incurred in a cloud computing arrangement constituting a service contract.

In November 2018, the FASB issued updated guidance to clarify the interaction between the guidance for collaborative arrangements and the updated revenue recognition guidance. The amendments in this update, among other things, provide guidance on how to assess whether certain collaborative arrangement transactions should be accounted for under ASC Topic 606, Revenue from Contracts with Customers. The Company adopted the amendments in this update effective January 1, 2020. All contracts after this date will be evaluated under the updated guidance.

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Recently Issued Accounting Pronouncements

In March 2020, the FASB issued updated guidance for ASC Topic 848, Reference Rate Reform, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met for a limited period of time in order to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are elective and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments to this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating whether to elect the adoption of this guidance with respect to the consolidated financial statements.

Accounting Pronouncements Issued Prior to 2020 and Not Yet Adopted

In December 2019, the FASB issued updated guidance for ASC Topic 740, Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles set out in ASC Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. The amendments to this update are effective for fiscal years, and interim periods within such fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating the impact, if any, of the adoption of this guidance on the consolidated financial statements.

Note 3 - Current Expected Credit Losses

Allowance for Current Expected Credit Losses

The Company has only one type of financial asset that is subject to the expected credit loss model, which is trade receivables for contracts with customers. While contract assets and net investments in leases are also subject to the impairment requirements of ASC Topic 326, the impairment loss identified for these financial assets is immaterial to the consolidated financial statements.

To measure expected credit losses, trade receivables are grouped based on shared risk characteristics (i.e., the relevant industry sector and customer's geographical location) and days past due (i.e., delinquency status), while considering the following:

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

•

The Company has two main industry sectors: private and governmental. The private pool is comprised mainly of leading financial institutions, merchants and corporations, while the governmental pool by government agencies. The governmental customers possess different risk characteristics than private customers because although all invoices are due every 30 days, governmental customers usually pay within 60 to 90 days after issuance (i.e., between 30 to 60 more days than private customers). The Company provides to its customers a broad range of merchant acquiring, payment services and business process management services, which constitute mission-critical technology solutions enabling customers to issue, process and accept transactions securely.

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

The credit losses of the Company’s trade receivables have been historically low and most balances are collected within one year. Therefore, the Company determined that the expected loss rates should be calculated using the historical loss rates adjusted by macroeconomic factors. The historical rates are calculated for each of the aging categories used for pooling trade receivables. To determine the collected portion of each bucket, the collection time of each trade receivable is identified, as well as, the proportion of outstanding balances per aging bucket that ultimately was never collected. This is used to determine the expectation of losses based on the history of uncollected trade receivables once the specific past due period is surpassed. The historical rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability

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of customers to settle the receivables by applying a country risk premium as the forward-looking macroeconomic factor. Specific reserves are established for certain customers for which collection is doubtful.

Rollforward of the Allowance for Expected Current Credit Losses

The activity in the allowance for expected current credit losses on trade receivables during the period from January 1, 2020 to March 31, 2020, was as follows:

Copy History

(In thousands)		March 31, 2020
Balance at beginning of period		$	3,460
Current period provision for expected credit losses		(19		)
Write-offs		(1,386		)
Recoveries of amounts previously written-off		3
Balance at end of period		$	2,058

The Company does not have a delinquency threshold for writing-off trade receivables. Potential write-offs of trade receivables are discussed in the Reserve Committee, which is responsible for the review and approval of write-offs.

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

Note 4 – Property and Equipment, net

Property and equipment, net consists of the following:

Copy History

(Dollar amounts in thousands)		Useful life in years		March 31, 2020				December 31, 2019
Buildings		30		$	1,497			$	1,542
Data processing equipment		3 - 5		119,428				116,950
Furniture and equipment		3 - 20		6,660				6,936
Leasehold improvements		5 -10		3,007				2,814
				130,592				128,242
Less - accumulated depreciation and amortization				(89,916		)		(85,780		)
Depreciable assets, net				40,676				42,462
Land				1,308				1,329
Property and equipment, net				$	41,984			$	43,791

Depreciation and amortization expense related to property and equipment for the three months ended March 31, 2020 amounted to $4.2 million compared to $4.0 million for the corresponding period in 2019.

Note 5 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill, allocated by operating segments, were as follows (see Note 15):

Copy History

(In thousands)		Payment Services - Puerto Rico & Caribbean				Payment Services - Latin America				Merchant Acquiring, net				Business Solutions				Total
Balance at December 31, 2019		$	160,972			$	54,571			$	138,121			$	45,823			$	399,487
Foreign currency translation adjustments		—				(4,989		)		—				—				(4,989		)
Balance at March 31, 2020		$	160,972			$	49,582			$	138,121			$	45,823			$	394,498

Goodwill is tested for impairment on an annual basis as of August 31, or more often if events or changes in circumstances indicate there may be impairment. The Company may test for goodwill impairment using a qualitative or a quantitative

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analysis. In the quantitative analysis, the Company compares the estimated fair value of the reporting units to their carrying values, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the fair value does not exceed the carrying value, an impairment loss is recorded for the excess of the carrying value over the fair value, limited to the recorded balance of goodwill. In the first quarter of 2020, global equity markets conditions deteriorated in reaction to the COVID-19 pandemic resulting in a corresponding decrease in the Company's stock price and market capitalization. As a result, management performed assessments as to whether the fair value of reporting units was less than carrying value as of March 31, 2020 and concluded that it was more likely than not that the fair value continued to be in excess of the carrying value for all reporting units. No impairment losses were recognized as of March 31, 2020.

The carrying amount of other intangible assets at March 31, 2020 and December 31, 2019 was as follows:

Copy History

				March 31, 2020
(Dollar amounts in thousands)		Useful life in years		Gross amount				Accumulated amortization				Net carrying amount
Customer relationships		8 - 14		$	343,557			$	(226,905	)		$	116,652
Trademarks		10 - 15		41,874				(33,360		)		8,514
Software packages		3 - 10		259,121				(175,230		)		83,891
Non-compete agreement		15		56,539				(35,809		)		20,730
Other intangible assets, net				$	701,091			$	(471,304	)		$	229,787

Copy History

				December 31, 2019
(Dollar amounts in thousands)		Useful life in years		Gross amount				Accumulated amortization				Net carrying amount
Customer relationships		8 - 14		$	344,883			$	(220,434	)		$	124,449
Trademarks		2 - 15		42,025				(32,456		)		9,569
Software packages		3 - 10		256,220				(169,974		)		86,246
Non-compete agreement		15		56,539				(34,866		)		21,673
Other intangible assets, net				$	699,667			$	(457,730	)		$	241,937

Amortization expense related to other intangibles for the three months ended March 31, 2020 amounted to $13.6 million compared to $12.2 million for the corresponding period in 2019.

The estimated amortization expense of the balances outstanding at March 31, 2020 for the next five years is as follows:

Copy History

(Dollar amounts in thousands)
Remaining 2020		$	37,989
2021		46,130
2022		40,887
2023		36,191
2024		28,071

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Note 6 – Debt and Short-Term Borrowings

Total debt at March 31, 2020 and December 31, 2019 follows:

Copy History

(In thousands)		March 31, 2020				December 31, 2019
2023 Term A Loan paying interest at a variable interest rate (LIBOR plus applicable margin(1)(2))		$	196,693			$	207,261
2024 Term B Loan paying interest at a variable interest rate (LIBOR plus applicable margin(1)(3))		308,401				317,936
Note payable due April 30, 2021(1)		143				175
Note payable due January 1, 2022(1)		1,339				2,231
Total debt		$	506,576			$	527,603

 

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

(2)	Applicable margin of 2.00% at March 31, 2020 and December 31, 2019.

(3)	Subject to a minimum rate ("LIBOR floor") of 0% plus applicable margin of 3.50% at March 31, 2020 and December 31, 2019.

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. On March 5, 2020, the Company repaid $17.0 million as a result of excess cash flows for the year ended December 31, 2019.

The unpaid principal balance at March 31, 2020 of the 2023 Term A Loan and the 2024 Term B Loan was $198.3 million and $311.9 million, respectively. The additional borrowing capacity under our Revolving Facility at March 31, 2020 was $116.9 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. As of March 31, 2020 and December 31, 2019, the outstanding principal balance of the notes payable was $1.5 million and $2.4 million, respectively. The current portion of these notes, which totaled $0.8 million at March 31, 2020, is included in accounts payable and the long-term portion is included in other long-term liabilities in the Company's unaudited condensed consolidated balance sheet.

Interest Rate Swaps

As of March 31, 2020, the Company has two interest rate swap agreements, entered into in December 2015 and December 2018, which convert a portion of the interest rate payments on the Company's 2024 Term B Loan from variable to fixed: 

Copy History

Swap Agreement		Effective date		Maturity Date		Notional Amount		Variable Rate		Fixed Rate
2015 Swap		January 2017		April 2020		$200 million		1-month LIBOR		1.9225%
2018 Swap		April 2020		November 2024		$250 million		1-month LIBOR		2.89%

The Company has accounted for these agreements as cash flow hedges.

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As of March 31, 2020 and December 31, 2019, the carrying amount of derivatives included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheets was $27.4 million and $14.5 million, respectively. The fair value of these derivatives is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 for disclosure of losses recorded on cash flow hedging activities.

During the three months ended March 31, 2020, the Company reclassified gains of $0.2 million from accumulated other comprehensive loss into interest expense. Based on current LIBOR rates, the Company expects to reclassify losses of $4.7 million from accumulated other comprehensive loss into interest expense over the next 12 months.

The cash flow hedges are considered highly effective.

Note 7 – Financial Instruments and Fair Value Measurements

Recurring Fair Value Measurements

The Company's interest rate swaps are the only financial instruments measured at fair value on a recurring basis. The fair value is estimated using Level 2 inputs under the fair value hierarchy. These derivatives were on a liability position with balances of $27.4 million and $14.5 million as of March 31, 2020 and December 31, 2019, respectively.

The following table presents the carrying value, as applicable, and estimated fair values for financial instruments at March 31, 2020 and December 31, 2019:

Copy History

		March 31, 2020								December 31, 2019
(In thousands)		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Financial liabilities:
Interest rate swap		$	27,401			$	27,401			$	14,452			$	14,452
2023 Term A Loan		196,693				185,366				207,261				206,388
2024 Term B Loan		308,401				264,108				317,936				324,163

Note 8 – Equity

Accumulated Other Comprehensive Loss

The following table provides a summary of the changes in the balances of accumulated other comprehensive loss for the three months period ended March 31, 2020: 

Copy History

(In thousands)		Foreign Currency Translation Adjustments				Cash Flow Hedges				Total
Balance - December 31, 2019, net of tax		$	(16,872	)		$	(13,137	)		$	(30,009	)
Other comprehensive loss before reclassifications		(8,305		)		(12,050		)		(20,355		)
Effective portion reclassified to net income		—				191				191
Balance - March 31, 2020, net of tax		$	(25,177	)		$	(24,996	)		$	(50,173	)

Note 9 – Share-based Compensation

Long-term Incentive Plan ("LTIP")

In the first quarter of 2018, 2019 and 2020, the Compensation Committee of the Company's Board of Directors ("Board") approved grants of restricted stock units (“RSUs”) to executives and certain employees pursuant to the 2018 LTIP, 2019 LTIP

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and 2020 LTIP, respectively, all under the terms of the Company's 2013 Equity Incentive Plan. Under the LTIPs, the Company granted restricted stock units to eligible participants as time-based awards and/or performance-based awards.

The vesting of the RSUs is dependent upon service, market, and/or performance conditions as defined in the grants. Employees that received time-based awards with service conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the employee is providing services to the Company on the vesting date. Time-based awards vest over a period of three years in substantially equal installments commencing on the grant date and ending on February 28 of each year for the 2018 LTIP, February 22 of each year for the 2019 LTIP, and February 27 of each year for the 2020 LTIP.

For the performance-based awards under the 2018 LTIP, 2019 LTIP, and 2020 LTIP, the Compensation Committee established adjusted earnings before income taxes, depreciation and amortization ("Adjusted EBITDA") as the primary performance measure while maintaining focus on total shareholder return through the use of a market-based total shareholder return ("TSR") performance modifier. The TSR modifier adjusts the shares earned based on the core Adjusted EBITDA performance upwards or downwards (+/- 25%) based on the Company’s relative TSR at the end of the three-year performance period as compared to the companies in the Russell 2000 Index. The Adjusted EBITDA performance measure will be calculated for the one-year period commencing on January 1 of the year of the grant and ending on December 31 of the same year, relative to the goals set by the Compensation Committee for this same period. The shares earned will be subject to an additional two-year service vesting period.

Performance and market-based awards vest at the end of the performance period that commenced on February 28, 2018 for the 2018 LTIP, February 22, 2019 for the 2019 LTIP, and February 27, 2020 for the 2020 LTIP. The periods end on February 28, 2021 for the 2018 LTIP, February 22, 2022 for the 2019 LTIP and February 27, 2023 for the 2020 LTIP. Unless otherwise specified in the award agreement, or in an employment agreement, awards are forfeited if the employee voluntarily ceases to be employed by the Company prior to vesting.

The following table summarizes nonvested restricted shares and RSUs activity for the three months ended March 31, 2020:

Copy History

Nonvested restricted shares and RSUs		Shares			Weighted-average grant date fair value
Nonvested at December 31, 2019		1,592,755			$	20.71
Forfeited		(139,854	)		19.26
Vested		(305,531	)		19.84
Granted		378,135			31.84
Nonvested at March 31, 2020		1,525,505			$	23.77

For the three months ended March 31, 2020, the Company recognized $3.5 million of share-based compensation expense, compared with $3.3 million for the corresponding period in 2019.

Note 10 - Revenues

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into primary geographical markets, nature of the products and services, and timing of transfer of goods and services. The Company's operating segments are determined by the nature of the products and services the Company provides and the primary geographical markets in which the Company operates. Revenue disaggregated by segment is discussed in Note 15, Segment Information.

In the following tables, revenue for each segment is disaggregated by timing of revenue recognition for the periods indicated.

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Copy History

	Three months ended March 31, 2020
(In thousands)	Payment Services - Puerto Rico & Caribbean				Payment Services - Latin America				Merchant Acquiring, net				Business Solutions				Total
Timing of revenue recognition
Products and services transferred at a point in time	$	5			$	431			$	—			$	297			$	733
Products and services transferred over time	20,633				19,809				25,121				55,646				121,209
	$	20,638			$	20,240			$	25,121			$	55,943			$	121,942

Copy History

Three months ended March 31, 2019

(In thousands)

Payment Services - Puerto Rico & Caribbean

Payment Services - Latin America

Merchant Acquiring, net

Business Solutions

Total

Timing of revenue recognition

Products and services transferred at a point in time

$

2,677