EVERTEC, Inc. [EVTC] Filings

10-Q 1 evtc-20240630.htm 10-Q evtc-20240630

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 June 30, 2024 or


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

For the transition period from to

COMMISSION FILE NUMBER 001-35872

EVERTEC, Inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


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

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

(787) 759-9999

(Registrant’s telephone number, including area code)

Not applicable

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

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


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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

At July 25, 2024, there were 63,978,849 outstanding shares of common stock of EVERTEC, Inc.

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		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive (Loss) Income for the three and six months ended June 30, 2024 and 2023	3
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	40
Part II. OTHER INFORMATION		41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
SIGNATURES		43

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Report, including, without limitation, statements regarding our position as a leader within our industry; our future results of operations and financial position; our business strategies; objectives of management for future operations, including, among others, statements regarding our expected growth, international expansion and future capital expenditures; the impact of market conditions and other macroeconomic factors on our business, financial condition and results of operations; the sufficiency of our cash and cash equivalents; our future capital expenditures and debt service obligations; and the expectations, anticipated benefits of and costs associated with acquisitions, 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" or the negatives of these terms or variations of them or similar terminology are generally forward-looking in nature and not historical facts. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business and could impact our business in the future are:

•our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our second Amended and Restated Master Services Agreement (“A&R MSA”) with them, and as it may impact our ability to grow our 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/or failures in the financial services industry;

•the credit risk of our merchant clients, for which we may also be liable;

•the continuing market position of the ATH network;

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

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

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

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

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

•operating an international business in Latin America, Puerto Rico 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;

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•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 protect our IT systems and prevent a cybersecurity attack or breach to our information security;

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

•our ability to integrate Sinqia S.A. ("Sinqia") successfully into the Company or to achieve expected accretion to our earnings per common share;

•any loss of personnel or customers in connection with the acquisition of Sinqia; and

•any possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting our main markets in Latin America, Puerto Rico and the Caribbean.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under Part 1, Item 1A. "Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024 and in Part I, Item 2.“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report, as may be updated in our subsequent 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.

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.

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EVERTEC, Inc. Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share information)


	June 30, 2024		December 31, 2023
Assets
Current Assets:
Cash and cash equivalents	$	257,699	$	295,600
Restricted cash	24,434		23,073
Accounts receivable, net	122,278		126,510
Settlement assets	64,922		51,467
Prepaid expenses and other assets	61,444		64,704
Total current assets	530,777		561,354
Debt securities available-for-sale, at fair value	1,725		2,095
Equity securities, at fair value	4,960		9,413
Investment in equity investees	22,860		21,145
Property and equipment, net	65,769		62,453

Operating lease right-of-use asset	12,756		14,796
Goodwill	741,645		791,700
Other intangible assets, net	451,637		518,070
Deferred tax asset	23,851		47,847
Derivative asset	7,241		4,385

Other long-term assets	26,700		27,005
Total assets	$	1,889,921	$	2,060,263
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	114,417	$	129,160
Accounts payable	60,122		66,516
Contract liability	18,894		21,055
Income tax payable	4,222		3,402
Current portion of long-term debt	23,867		23,867


Current portion of operating lease liability	7,408		6,693
Settlement liabilities	62,041		47,620

Total current liabilities	290,971		298,313
Long-term debt	936,001		946,816
Deferred tax liability	46,148		87,916
Contract liability - long term	54,136		41,825
Operating lease liability - long-term	6,697		9,033

Other long-term liabilities	30,438		40,984
Total liabilities	1,364,391		1,424,887
Commitments and contingencies (Note 14)
Redeemable non-controlling interests	38,455		36,968
Stockholders’ equity
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued	—		—
Common stock, par value $0.01; 206,000,000 shares authorized; 64,446,211 shares issued and outstanding as of June 30, 2024 (December 31, 2023 - 65,450,799)	644		654
Additional paid-in capital	10,777		36,527
Accumulated earnings	541,248		538,903
Accumulated other comprehensive (loss) income, net of tax	(69,239)		18,209
Total stockholders’ equity	483,430		594,293
Non-redeemable non-controlling interest	3,645		4,115
Total equity	487,075		598,408
Total liabilities and equity	$	1,889,921	$	2,060,263

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

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

(In thousands, except per share information)


	Three months ended June 30,				Six months ended June 30,
	2024		2023			2024		2023

Revenues	$	211,978	$	167,076		$	417,296	$	326,890





Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	97,481		80,452			199,929		156,869
Selling, general and administrative expenses	38,187		29,522			73,813		53,397
Depreciation and amortization	32,950		22,329			67,391		41,761
Total operating costs and expenses	168,618		132,303			341,133		252,027
Income from operations	43,360		34,773			76,163		74,863
Non-operating income (expenses)
Interest income	3,218		2,103			6,578		3,236
Interest expense	(18,709)		(5,640)			(38,648)		(11,283)
Gain (loss) on foreign currency remeasurement	2,404		333			(2,052)		(4,531)

Earnings from equity method investments	1,096		1,476			2,167		2,631

Other income, net	2,255		1,591			6,095		2,601
Total non-operating expenses	(9,736)		(137)			(25,860)		(7,346)
Income before income taxes	33,624		34,636			50,303		67,517
Income tax expense	1,101		6,586			1,393		9,404
Net income	32,523		28,050			48,910		58,113
Less: Net income (loss) attributable to non-controlling interest	622		(105)			1,030		(94)
Net income attributable to EVERTEC, Inc.’s common stockholders	31,901		28,155			47,880		58,207
Other comprehensive (loss) income, net of tax of $474, $(195), $631 and $(311)
Foreign currency translation adjustments	(64,351)		3,153			(90,827)		20,758
Gain on cash flow hedges	1,034		1,816			3,382		271
Unrealized loss on change in fair value of debt securities available-for-sale	—		—			(3)		(20)
Other comprehensive (loss) income, net of tax	$	(63,317)	$	4,969		$	(87,448)	$	21,009
Total comprehensive (loss) income attributable to EVERTEC, Inc.’s common stockholders	$	(31,416)	$	33,124		$	(39,568)	$	79,216
Net income per common share - basic attributable to EVERTEC, Inc.’s common stockholders	$	0.50	$	0.43		$	0.74	$	0.90
Net income per common share - diluted attributable to EVERTEC, Inc.’s common stockholders	$	0.49	$	0.43		$	0.73	$	0.89

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

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

(In thousands, except share information)


	Number of Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest (excluding Redeemable Non-Controlling Interest)		Total Stockholders’ Equity
Balance at December 31, 2023	65,450,799	$	654	$	36,527	$	538,903	$	18,209	$	4,115	$	598,408
Share-based compensation recognized	—	—		7,349		—		—		—		7,349
Repurchase of common stock	(1,516,793)	(15)		(30,943)		(39,042)		—		—		(70,000)
Restricted stock units delivered	474,953	5		(9,761)		—		—		—		(9,756)
Net income	—	—		—		16,497		—		(110)		16,387
Cash dividends on common stock, $0.05 per share	—	—		—		(3,273)		—		—		(3,273)
Adjustment of redeemable noncontrolling interest to redemption value	—	—		(3,172)		—		—		—		(3,172)
Excise tax on repurchase of common stock	—	—		—		(550)		—		—		(550)
Other comprehensive loss	—	—		—		—		(24,131)		(23)		(24,154)

Balance at March 31, 2024	64,408,959	$	644	$	—	$	512,535	$	(5,922)	$	3,982	$	511,239
Share-based compensation recognized	—	—		7,660		—		—		—		7,660

Restricted stock units delivered	37,252	—		(69)		—		—		—		(69)
Net income	—	—		—		31,383		—		(73)		31,310
Cash dividends on common stock, $0.05 per share	—	—		—		(3,220)		—		—		(3,220)
Adjustment of redeemable noncontrolling interest to redemption value	—	—		3,186		—		—		—		3,186
Reversal of excise tax on repurchase of common stock	—	—		—		550		—		—		550
Other comprehensive loss	—	—		—		—		(63,317)		(264)		(63,581)

Balance at June 30, 2024	64,446,211	$	644	$	10,777	$	541,248	$	(69,239)	$	3,645	$	487,075

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

Balance at March 31, 2023	65,078,462	$	651	$	—	$	507,563	$	(446)	$	3,373	$	511,141
Share-based compensation recognized	—	—		6,499		—		—		—		6,499
Repurchase of common stock	(268,398)	(3)		(6,418)		(3,100)		—		—		(9,521)
Restricted stock units delivered	29,045	—		(81)		—		—		—		(81)
Net income (loss)	—	—		—		28,155		—		(105)		28,050
Cash dividends on common stock, $0.05 per share	—	—		—		(3,254)		—		—		(3,254)
Other comprehensive income	—	—		—		—		4,969		339		5,308
Balance at June 30, 2023	64,839,109	$	648	$	—	$	529,364	$	4,523	$	3,607	$	538,142

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

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EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


	Six months ended June 30,
	2024		2023
Cash flows from operating activities
Net income	48,910		$	58,113
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,391		41,761
Amortization of debt issue costs and accretion of discount	2,361		791
Operating lease amortization	3,565		3,103



Deferred tax benefit	(13,324)		(3,467)
Share-based compensation	15,009		12,056

Gain on sale of equity securities	(2,599)		—

Earnings of equity method investment	(2,167)		(2,631)



Loss on foreign currency remeasurement	2,052		4,531
Other, net	(1,666)		4,124
(Increase) decrease in assets:
Accounts receivable, net	1,329		1,261

Prepaid expenses and other assets	(431)		(628)
Other long-term assets	(734)		(2,282)
Increase (decrease) in liabilities:
Accrued liabilities and accounts payable	3,101		16,392

Income tax payable	1,103		(10,027)
Contract liability	11,561		1,181
Operating lease liabilities	(1,672)		(3,035)
Other long-term liabilities	(2,449)		(592)
Total adjustments	82,430		62,538
Net cash provided by operating activities	131,340		120,651
Cash flows from investing activities

Additions to software	(39,106)		(24,151)

Property and equipment acquired	(17,226)		(11,305)




Proceeds from maturities of available-for-sale debt securities	370		—
Purchase of equity securities	(111)		—
Proceeds from sale of equity securities	5,906		—
Acquisitions, net of cash acquired	—		(22,915)
Net cash used in investing activities	(50,167)		(58,371)
Cash flows from financing activities


Withholding taxes paid on share-based compensation	(9,825)		(5,955)


Net decrease in short-term borrowings	—		(20,000)

Dividends paid	(6,493)		(6,503)

Repurchase of common stock	(70,000)		(15,790)
Repayment of long-term debt	(11,933)		(10,375)
Repayment of other financing agreements	(7,046)		—
Settlement activity, net	21,703		5,587
Other financing activities, net	(2,182)		—
Net cash used in financing activities	(85,776)		(53,036)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	(10,234)		(1,841)
Net (decrease) increase in cash, cash equivalents and restricted cash	(14,837)		7,403

Cash, cash equivalents, restricted cash and cash included in settlement assets at beginning of the period	343,724		221,244



Cash, cash equivalents, restricted cash, and cash included in settlement assets at end of the period	$	328,887	$	228,647

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

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Notes to Unaudited Condensed Consolidated Financial Statements


Note 1 - The Company and Basis of Presentation			8
Note 2 - Business Acquisition			8
Note 3 – Property and Equipment, net			10
Note 4 - Goodwill and Other Intangible Assets			10
Note 5 - Debt and Short-Term Borrowings			11
Note 6 - Financial Instruments and Fair Value Measurements			13
Note 7 - Redeemable Non-Controlling Interests			15
Note 8 - Equity			15
Note 9 - Share-based Compensation			16
Note 10 - Revenues			18
Note 11 - Current Expected Credit Losses			18
Note 12 - Income Tax			19
Note 13 - Net Income per Common Share			20
Note 14 - Commitments and Contingencies			21
Note 15 - Segment Information			21
Note 16 - Supplemental Statement of Cash Flows Information			25
Note 17 - Subsequent Events			25

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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 and financial technology provider in Latin America, Puerto Rico and the Caribbean. The Company is based in Puerto Rico and provides a broad range of merchant acquiring, payment services and business process management services. The Company operates across 26 countries in the region. EVERTEC owns and operates the ATH network, which we believe is one of the leading personal identification number debit networks in the Caribbean and Latin America. In addition, EVERTEC provides a comprehensive suite of services for core banking, cash processing and fulfillment 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.

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”) and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. 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, 2023, included in the Company’s 2023 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. Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Change in presentation

During the second quarter of 2024, the Company elected to change the manner in which it presents cash flows associated with settlement activities from operating activities to financing activities within the condensed consolidated statements of cash flows. In connection with this change, the Company reclassified comparative amounts for the six-month period ended June 30, 2023. Settlement cash and cash equivalents represents cash received from agents, payment networks, bank partners, merchants or direct consumers. In certain cases, the amounts may be invested into short-term, highly liquid investments from the time the funds are collected until payments are made to the applicable recipients. This change does not have an impact on the condensed consolidated balance sheet, the condensed consolidated statement of income and comprehensive (loss) income or on the condensed consolidated statement of changes in stockholders’ equity.

The following table presents the effects of the change in presentation within the condensed consolidated statements of cash flows:


	For the six months ended June 30, 2023
(In Thousands)	As Previously Reported	Adjustment	As Adjusted
Cash flows from operating activities:
Accrued liabilities and accounts payable	21,979	(5,587)	16,392
Net cash provided by operating activities	126,238	(5,587)	120,651
Cash flows from financing activities:
Settlement activities, net	—	5,587	5,587
Net cash used in financing activities	(58,623)	5,587	(53,036)

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Note 2 – Business Acquisition

Acquisition of a Business

On November 1, 2023, the Company completed the acquisition of 100% of the outstanding shares of Sinqia S.A. (“Sinqia”), a publicly held company incorporated and existing in accordance with the laws of the Federative Republic of Brazil. The Company completed the acquisition through its wholly-owned subsidiary, Evertec Brasil Informática S.A (“Evertec BR”). In accordance with ASC 805-10-25-15, Evertec is allowed a period, not to exceed 12 months from the acquisition date, to adjust the provisional amounts recognized for a business combination. During 2024, the Company adjusted the operating lease right-of-use asset, goodwill, long-term deferred tax asset, operating lease liability, deferred tax liability and other intangible assets as a result of additional information that became available during the period. The preliminary purchase price allocation based on the applicable exchange rate at the date of acquisition is as follows:


	Assets/Liabilities (at fair value)
( In thousands)
Cash and cash equivalents	$	37,147
Restricted cash	2,166
Accounts receivable, net	9,989
Prepaid expenses and other assets	5,975
Property and equipment, net	3,618
Operating lease right-of-use asset	3,191
Goodwill	341,801
Equity securities, at fair value	9,035
Long-term deferred tax asset	28,758
Other intangible assets, net	289,540
Other long-term assets	5,455
Total assets acquired	$	736,675
Accounts payable	13,241
Accrued liabilities	40,775
Operating lease liability	4,114
Current portion of long-term debt	11,400
Long-term debt	57,492
Contract liability	7,356
Deferred tax liability	76,150
Other long-term liabilities	15,134
Total liabilities assumed	$	225,662
Redeemable noncontrolling interests	39,340
Additional paid-in capital	471,673
Total liabilities and equity	$	736,675

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


	Amount		Weighted-average life
(Dollar amounts in thousands)
Customer relationships	$	155,876	18
Trademark	47,688		10
Software packages	85,976		10
Total	$	289,540	14

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Refer to Note 4- Goodwill and Other Intangible Assets for detail of goodwill allocated by reportable segments. The goodwill is primarily attributed to selling the Company's products and services to Sinqia's client base, exporting Sinqia's products to other markets where the Company has presence and the assembled workforce. Currently, a portion of goodwill related to previous Sinqia acquisitions is deductible for income tax purposes on a statutory basis. The Company continues to finalize the purchase price allocation and further changes to the preliminary allocation may be required.

Note 3 – Property and Equipment, net

Property and equipment, net consisted of the following:


(Dollar amounts in thousands)	Useful life in years	June 30, 2024		December 31, 2023
Buildings	30	$	2,104	$	2,193
Data processing equipment	3 - 5	198,263		187,761
Furniture and equipment	3 - 20	10,335		10,281
Leasehold improvements	5 -10	5,145		4,876
		215,847		205,111
Less - accumulated depreciation and amortization		(151,526)		(144,117)
Depreciable assets, net		64,321		60,994
Land		1,448		1,459
Property and equipment, net		$	65,769	$	62,453

Depreciation and amortization expense related to property and equipment for the three and six months ended June 30, 2024 amounted to $5.4 million and $11.1 million, respectively, compared to $5.5 million and $10.5 million for the corresponding periods in 2023.

Note 4– Goodwill and Other Intangible Assets

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


(In thousands)	Payment Services - Puerto Rico & Caribbean		Latin America Payments and Solutions		Merchant Acquiring, net		Business Solutions		Total
Balance at December 31, 2023	$	160,972	$	452,597	$	138,121	$	40,010	$	791,700


Adjustment to goodwill from prior year acquisition	—		(1,352)		—		—		(1,352)
Foreign currency translation adjustments	—		(48,703)		—		—		(48,703)
Balance at June 30, 2024	$	160,972	$	402,542	$	138,121	$	40,010	$	741,645

Goodwill is tested for impairment on an annual basis as of August 31, or more often if events or changes in circumstances indicate there may be impairment. The Company may test for goodwill impairment using a qualitative or a quantitative analysis. In a qualitative analysis, the Company assesses whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount. In the quantitative analysis, the Company compares the estimated fair value of the reporting units to their carrying values, including goodwill. No impairment losses were recognized for the periods ended June 30, 2024 or 2023.

The carrying amount of other intangible assets at June 30, 2024 and December 31, 2023 was as follows:

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		June 30, 2024
(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	8 - 20	$	550,381	$	(373,726)	$	176,655
Trademarks	10 - 15	88,097		(46,238)		$	41,859
Software packages	3 - 10	522,934		(292,938)		$	229,996
Non-compete agreement	5	3,555		(428)		$	3,127
Other intangible assets, net		$	1,164,967	$	(713,330)	$	451,637


		December 31, 2023
(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	8 - 20	$	568,284	$	(340,952)	$	227,332
Trademarks	1 - 15	94,203		(41,319)		52,884
Software packages	3 - 10	510,898		(274,610)		236,288
Non-compete agreement	5	1,735		(169)		1,566
Other intangible assets, net		$	1,175,120	$	(657,050)	$	518,070

Amortization expense related to other intangibles for the three and six months ended June 30, 2024 amounted to $27.6 million and $56.3 million, respectively, compared to $14.9 million and $31.2 million for the corresponding periods in 2023.

The estimated amortization expense of the other intangible balances outstanding at June 30, 2024, for the remainder of 2024 and the years thereafter is as follows:


(In thousands)
Remaining 2024	$	54,782
2025	87,631
2026	74,283
2027	61,724
2028	49,983
Thereafter	123,234

Note 5 – Debt and Short-Term Borrowings

Debt at June 30, 2024 and December 31, 2023 was as follows:


(In thousands)	June 30, 2024		December 31, 2023
2027 Term A Loan bearing interest at a variable interest rate (SOFR plus applicable margin(1)(2))	$	438,021	$	449,450


2030 Term B Loan bearing interest at a variable interest rate (SOFR plus applicable margin(1)(3))	521,847		521,233

Deferred consideration from Business Combinations	11,505		19,467

Note payable due September 1, 2030(1)	7,325		7,403
Total debt	$	978,698	$	997,553

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

(2)Subject to a minimum rate ("SOFR floor") of 0.00% plus applicable margin of 2.00% at June 30, 2024 and 1.50% at December 31, 2023.

(3)Subject to a SOFR floor of 0.50% plus applicable margin of 3.25% at June 30, 2024 and an applicable margin of 3.50% at December 31, 2023.

Secured Credit Facilities

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On December 1, 2022, EVERTEC and EVERTEC Group, entered into a credit agreement with a syndicate of lenders and Truist Bank, as administrative agent and collateral agent, providing for (i) a $415.0 million term loan A facility that matures on December 1, 2027, and a $200.0 million revolving credit facility (the “Revolving Facility”) that matures on December 1, 2027. On October 30, 2023, Evertec, EVERTEC Group and other Loan Parties (as defined in the Existing Credit Agreement) party thereto, entered into a first amendment (the “Amendment”) to the credit agreement, dated as of December 1, 2022 (the “Existing Credit Agreement,” and as amended by the Amendment, the “Amended Credit Agreement”), with a syndicate of lenders and Truist, as administrative agent and collateral agent. Under the Amended Credit Agreement, a syndicate of financial institutions and other lenders provided (i) additional term loan A commitments in the amount of $60.0 million and (ii) a new tranche of term loan B commitments in the amount of $600.0 million (the “TLB Facility,” and together with the Incremental TLA Facility, the “Facilities”). The $600.0 million term loan B facility matures on October 30, 2030. Unless otherwise indicated, the terms and conditions detailed below apply to both the TLA facility and TLB facility. In the fourth quarter of 2023, the Company prepaid $60 million of the outstanding balance on TLB facility.

At June 30, 2024, the unpaid principal balance of the TLA Facility and TLB Facility were $441.5 million and $540.0 million, respectively. The additional borrowing capacity for the Revolving Facility at June 30, 2024 was $194.0 million, considering letters of credit issued. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Deferred Consideration from Business Combinations

As part of the Company’s merger and acquisition activities, the Company may enter into agreements by which a portion of the purchase price is financed directly by the seller. At June 30, 2024 and December 31, 2023, the unpaid principal balance of these agreements amounted to $11.5 million and $19.5 million, respectively. Obligations bear interest at rates ranging from 2% to 12% with maturities ranging from October 2024 through March 2027. The current portion of the deferred consideration is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Note Payable

In September 2023, EVERTEC Group entered into a non-interest bearing financing agreement amounting to $10.1 million to purchase software and maintenance which the Company recorded on a discounted basis using an implied interest of 6.9%. As of June 30, 2024, the outstanding principal balance of the note payable on a discounted basis was $7.3 million. The current portion of the note is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Interest Rate Swaps

As of June 30, 2024, the Company has four interest rate swap agreements which convert a portion of the interest rate payments on the Company's Term Loan Facilities from variable to fixed. The interest rate swaps are used to hedge the market risk from changes in interest rates corresponding with the Company's variable rate debt. The interest rate swaps are designated as cash flow hedges and are considered highly effective. Cash flows from the interest rate swaps are included in the accrued liabilities and accounts payable line item in the Company's unaudited condensed consolidated statements of cash flows. Changes in the fair value of the interest rate swaps are recognized in other comprehensive (loss) income until the gains or losses are reclassified to earnings. Gains or losses reclassified to earnings are presented within interest expense in the accompanying condensed consolidated statements of income and comprehensive (loss) income.

Swap Agreement

Effective date

Maturity Date

Notional Amount

Variable Rate

Fixed Rate

2018 Swap

April 2020

November 2024

$250 million

1-month SOFR

2.929%

2023 Swap

November 2024

December 2027

$250 million

1-month SOFR

3.375%

2024 Swap

March 2024

October 2027

$150 million

1-month SOFR

4.182%

2024 Swap

March 2024

October 2027

$150 million

1-month SOFR

4.172%

At June 30, 2024, the carrying amount of the derivatives included on the Company's unaudited condensed consolidated balance sheet was an asset of $7.2 million. At December 31, 2023, the carrying amount of the derivatives included on the Company's unaudited condensed consolidated balance sheet was an asset of $4.4 million and a liability of $0.9 million, included in other long-term liabilities. The fair value of these derivatives are estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 for disclosure of gains (losses) recorded on cash flow hedging activities.

During the three and six months ended June 30, 2024, the Company reclassified gains of $2.4 million and $4.1 million, respectively, from accumulated other comprehensive (loss) income into interest expense compared to gains of $1.4 million and

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$2.4 million, respectively, for the corresponding periods in 2023. Based on current SOFR rates, the Company expects to reclassify gains of $5.7 million from accumulated other comprehensive (loss) income into interest expense over the next 12 months.

Note 6 – Financial Instruments and Fair Value Measurements

Recurring Fair Value Measurements

The following table presents assets and liabilities measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023:


	June 30, 2024								December 31, 2023
(In thousands)	Level 2		Level 3		Measured at NAV		Total		Level 2		Level 3		Total
Financial assets:
Debt securities AFS	$	1,725	$	—	$	—	$	1,725	$	2,095	$	—	$	2,095
Equity securities	—		—		4,960		4,960		6,447		2,966		9,413
Interest rate swaps	7,241		—		—		7,241		4,385		—		4,385
Financial liabilities:
Interest rate swaps	—		—		—		—		900		—		900

Debt Securities Available for Sale ("AFS")

Costa Rica Government Obligations are held by a trust in the Costa Rica National Bank as a collateral requirement for settlement activities. The Company may substitute securities as needed but must maintain certain levels of collateral based on transaction volumes. No debt securities were purchased or sold during the six-month periods ended June 30, 2024 or June 30, 2023. Debt securities amounting to $0.4 million matured during the six-month period ended June 30, 2024, none in 2023. A provision for credit losses was not required for either June 30, 2024 or 2023.

The fair value of debt securities is estimated based on observable inputs through corroboration with market data at the measurement date, therefore classified as a Level 2 asset within the fair value hierarchy.

Interest rate swaps

The fair value of the Company's interest rate swaps are estimated using Level 2 inputs under the fair value hierarchy. Refer to Note 5 for additional information related to the derivative instruments.

Equity Securities

The fair value of the equity securities was calculated based on enterprise value to revenue multiples ranging from 0.4x to 8.3x, therefore classified as a Level 3 asset within the fair value hierarchy. During the six-month period ended June 30, 2024, the Company sold equity securities with a carrying value of $5.5 million classified as Level 3 assets within the fair value hierarchy. In connection with this sale, the Company realized a gain of $2.5 million, recognized through other income, net. At June 30, 2024, the Company no longer holds equity securities classified as Level 3. The fair value of the equity securities was $3.0 million at December 31, 2023. At December 31, 2023, mutual funds classified as equity securities, were registered with the securities and exchange commission in Brazil and were broker traded and therefore classified as Level 2.

The following table presents the changes in equity securities classified as Level 3 assets:


(In thousands)	Equity Securities
Balance at December 31, 2023	$	2,966
Disposition of equity securities	(5,487)
Change in fair value of equity securities, recognized through Other income, net	2,521

Balance at June 30, 2024	$	—

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There were no transfers in or out of Level 3 during the six-month periods ended June 30, 2024 or June 30, 2023.

Equity Securities Measured at Net Asset Value (NAV)

At June 30, 2024, the Company holds mutual funds classified as equity securities on the Company's unaudited condensed consolidated balance sheet that are measured at fair value using the NAV per share, or its equivalent, as a practical expedient. Mutual funds consist of investments in venture capital strategies and start-ups with a focus on privately held technology companies. The NAV is based on the fair value of the underlying net assets owned by the mutual funds and the relative interest of each participating investor in the fair value of the underlying assets.

Financial assets and liabilities not measured at fair value

The following table presents the carrying value and estimated fair value for financial instruments at June 30, 2024 and December 31, 2023:


	June 30, 2024		December 31, 2023
(In thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial liabilities:
2027 Term A Loan Facility	438,021	443,745	449,450	452,337
2030 Term B Loan Facility	521,847	542,700	521,240	539,325

The fair value of the term loans at June 30, 2024 and December 31, 2023 was obtained using prices provided by third party service providers. Their pricing is based on various inputs such as market quotes, recent trading activity in a non-active market or imputed prices. These inputs are considered Level 3 inputs under the fair value hierarchy. Also, the pricing may include the use of an algorithm that could take into account movements in the general high yield market, among other variants. The secured term loans are not accounted for at fair value in the balance sheet.

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Note 7 – Redeemable Noncontrolling Interests

At June 30, 2024, redeemable noncontrolling interests ("RNCI") consist of interests in consolidated subsidiaries for which the Company has entered into separate option contracts by which the Company has the right to purchase the remaining non-controlling interests through a call option and the non-controlling interest holder has the right to sell the non-controlling interest to the Company through a put option. The following table summarizes the terms of the issued options:

Percentage of redeemable noncontrolling interest

Earliest exercise date

Formula of redemption value

Homie Do Brasil Informatica

40%

April 1, 2025

Variable multiple of gross sales dependent upon EBITDA margin and gross sales attained times percentage of ownership

Rosk Software S.A.

49%

March 15, 2025

Variable multiple of gross sales dependent upon EBITDA margin attained times percentage of ownership

Compliasset Software e Solucoes Digitais LTDA.

40%

March 15, 2026

Variable multiple of net sales dependent upon EBITDA margin attained plus net debt times percentage of ownership

Lote45 Participacoes S.A.

48%

January 1, 2027

Variable multiple of net sales dependent upon EBITDA margin attained plus net debt minus BRL$10.0 million times percentage of ownership

Given certain provisions within the option contracts, the Company has classified the RNCI as mezzanine equity on the Company's unaudited condensed consolidated balance sheets. RNCI are adjusted quarterly, if necessary, to their estimated redemption value. Adjustments to the redemption value impact stockholders' equity. The following table presents changes in RNCI:


(In thousands)	Redeemable noncontrolling interests
Balance at December 31, 2023	$	36,968
Net income attributable non-controlling interests	1,213
Adjustment of redeemable non-controlling interests to redemption value	(14)

Distributions from redeemable non-controlling interests	(294)
Foreign currency translation adjustments	582
Balance at June 30, 2024	$	38,455

Note 8 – Equity

Accumulated Other Comprehensive (Loss) Income

The following table provides a summary of the changes in the balances of accumulated other comprehensive (loss) income for the six months ended June 30, 2024:


(In thousands)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Unrealized Gains (Losses) on Debt Securities AFS		Total
Balance - December 31, 2023, net of tax	$	14,847	$	3,336	$	26	$	18,209
Other comprehensive (loss) income before reclassifications	(90,827)		7,522		(3)		(83,308)
Effective portion reclassified to net income	—		(4,140)		—		(4,140)
Balance - June 30, 2024, net of tax	$	(75,980)	$	6,718	$	23	$	(69,239)

Share Repurchase

On March 6, 2024, the Company entered into an accelerated share repurchase agreement (the “ASR”) with Bank of America, N.A. to repurchase an aggregate of $70 million of the Company’s common stock, par value $0.01 per share. In connection with

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the launch of the ASR, on March 8, 2024, the Company paid Bank of America, N.A., an aggregate of $70 million and received approximately 1.5 million shares of the Company’s common stock. The final number of shares to be received under the ASR agreement will be determined upon completion of the transaction and will be based on the total transaction value and the average of the daily volume-weighted average share price of the Company’s common stock during the term of the transaction. Final settlement of the transaction occurred on July 9, 2024, for further details refer to Note 17 - Subsequent Events. The Company accounted for this contract as an equity contract.

Note 9 – Share-based Compensation

Long-term Incentive Plan ("LTIP")

During the three months ended March 31, 2022, 2023 and 2024, the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors ("Board") approved grants of restricted stock units (“RSUs”) to executives and certain employees pursuant to the 2022 LTIP, 2023 LTIP and 2024 LTIP, respectively, all under the terms of the Company's 2022 Equity Incentive Plan. Under the LTIPs, the Company granted RSUs to eligible participants as time-based awards and/or performance-based awards.

The vesting of the RSUs is dependent upon service and/or performance conditions as defined in the award agreements. Employees that received time-based awards with service conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the employee provides services to the Company through the vesting date. Time-based awards generally vest over a period of three years in substantially equal installments commencing on the grant date and ending on February 25 of each year for the 2022 LTIP, February 24 of each year for the 2023 LTIP and February 28 of each year for the 2024 LTIP. In 2022 and 2023, the Company also granted time-based awards with a three year service vesting period which will cliff vest on February 25, 2025 and February 24, 2026, respectively.

For the performance-based awards under the 2022 LTIP, 2023 LTIP, and 2024 LTIP, the Compensation Committee established adjusted earnings before interest, 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 Adjusted EBITDA measure is based on annual Adjusted EBITDA targets and can result in a payout between 0% and 200%, depending on the performance level. The TSR modifier adjusts the shares earned based on the Adjusted EBITDA performance upwards or downwards (+/- 25%) based on the Company’s relative TSR at the end of the three-year performance period as compared to the companies in the Russell 2000 Index. The Adjusted EBITDA performance measure will be calculated for the one-year period commencing on January 1 of the year of the grant and ending on December 31 of the same year, relative to the goals set by the Compensation Committee for this same period. The shares earned will be subject to an additional two-year service vesting period and will vest on February 25, 2025 for the 2022 LTIP, February 24, 2026 for the 2023 LTIP and February 28, 2027 for the 2024 LTIP. Unless otherwise specified in the award agreement, or in an employment agreement, awards are forfeited if the employee voluntarily ceases to be employed by the Company prior to vesting.

The following table summarizes nonvested RSUs activity for the six months ended June 30, 2024:


Nonvested RSUs	Shares	Weighted-average grant date fair value
Nonvested at December 31, 2023	1,799,012	$	39.42
Granted	1,146,952	36.81
Vested	(778,201)	36.83
Forfeited	(63,493)	38.16
Nonvested at June 30, 2024	2,104,270	$	38.56

For the three and six months ended June 30, 2024, the Company recognized $7.7 million and $15.0 million of share-based compensation expense, compared with $6.5 million and $12.1 million for the corresponding periods in 2023.

As of June 30, 2024, the maximum unrecognized cost for RSUs was $54.9 million. The cost is expected to be recognized over a weighted average period of 2.3 years.

Note 10 – Revenues

Disaggregation of Revenue

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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, excluding intersegment revenues, is disaggregated by timing of revenue

recognition for the periods indicated.



	Three months ended June 30, 2024
(In thousands)	Payment Services - Puerto Rico & Caribbean		Latin America Payments and Solutions		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	78	$	996	$	—	$	1,653	$	2,727
Products and services transferred over time	34,735		68,514		45,319		60,683		$	209,251
	$	34,813	$	69,510	$	45,319	$	62,336	$	211,978



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


	Six months ended June 30, 2024
(In thousands)	Payment Services - Puerto Rico & Caribbean		Latin America Payments and Solutions		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	110	$	1,553	$	—	$	4,128	$	5,791
Products and services transferred over time	68,647		138,104		88,418		116,336		$	411,505
	$	68,757	$	139,657	$	88,418	$	120,464	$	417,296

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

Revenue concentration with a single customer, Popular, as a percentage of total revenues for the quarters ended June 30, 2024 and 2023 was approximately 32% and 37%, respectively. For the six months ended June 30, 2024 and 2023 this percentage was approximately 31% and 37%, respectively. Accounts receivable from Popular at June 30, 2024 and 2023 amounted to $37.0 million and $34.7 million, respectively.

Contract Balances

The following table provides information about contract assets from contracts with customers for the six months ended June 30, 2024 and the year ended December 31, 2023.


(In thousands)	June 30, 2024		December 31, 2023
Balance at beginning of period	$	13,917	$	4,749
Services transferred to customers	15,000		28,165
Transfers to accounts receivable	(16,510)		(18,997)
Balance at end of period	$	12,407	$	13,917

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

Accounts receivable, net at June 30, 2024 amounted to $122.3 million. Contract liability and contract liability - long term at June 30, 2024 amounted to $18.9 million and $54.1 million, respectively, and may arise when consideration is received or due in advance from customers prior to performance. The contract liability is mainly comprised of upfront fees for implementation or set up activities, including fees charged in pre-production periods in connection with hosting services. During the three and six months ended June 30, 2024, the Company recognized revenue of $7.2 million and $15.0 million, respectively, that was included in the contract liability at December 31, 2023. During the three and six months ended June 30, 2023, the Company recognized revenue of $4.3 million and $8.7 million, respectively, that was included in the contract liability at December 31, 2022.

Transaction price allocated to the remaining performance obligations

The estimated aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially satisfied at June 30, 2024 was $860.7 million, which is expected to be recognized over the next 1 to 6 years. This amount consists of minimums on certain master services agreements, professional service fees for implementation or set up activities related to managed services and maintenance services typically recognized over the life of the contract, and professional service fees for customizations or development of on-premise licensing agreements, which are recognized over time based on inputs relative to the total expected inputs to satisfy a performance obligation.

Note 11 – Current Expected Credit Losses

Allowance for Current Expected Credit Losses

Trade receivables from contracts with customers are financial assets analyzed by the Company under the expected credit loss model. To measure expected credit losses, trade receivables are grouped based on shared risk characteristics (i.e., the relevant

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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 is comprised of government agencies. The governmental customers possess different risk characteristics than private customers because although all invoices are due 30 days after issuance, governmental customers usually pay within 60 to 90 days after issuance (i.e., approximately 30 to 60 more days than private customers).

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

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

Rollforward of the Allowance for Expected Current Credit Losses

The following table provides information about the allowance for expected current credit losses on trade receivables for the six months ended June 30, 2024 and the year ended December 31, 2023



(In thousands)	June 30, 2024		December 31, 2023
Balance at beginning of period	$	4,010	$	2,159
Current period provision for expected credit losses	851		2,218
Write-offs	(1,412)		(384)
Recoveries of amounts previously written-off	1		17
Balance at end of period	$	3,450	$	4,010

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

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

Note 12 – Income Tax

The components of income tax expense for the three and six months ended June 30, 2024 and 2023, respectively, consisted of the following:


	Three months ended June 30,		Six months ended June 30,
(In thousands)	2024	2023

EVERTEC, Inc. [EVTC] Filings
10-Q	[2024-08-01]
10-Q	[2024-05-02]
10-K	[2024-02-29]
10-Q	[2023-10-27]
10-Q	[2023-08-01]
10-Q	[2023-04-28]
10-K	[2023-02-24]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-04-29]
10-K	[2022-02-25]
10-Q	[2021-10-28]
10-Q	[2021-08-04]
10-Q	[2021-04-30]
10-K	[2021-03-01]
10-Q	[2020-10-30]
10-Q	[2020-08-05]
10-Q	[2020-05-11]
10-K	[2020-02-27]
10-Q	[2019-10-31]
10-Q	[2019-08-02]
10-Q	[2019-05-03]
10-K	[2019-02-26]
10-Q	[2018-10-31]
10-Q	[2018-08-02]
10-Q	[2018-05-03]
10-K	[2018-02-28]
10-Q	[2017-11-09]
10-Q	[2017-08-03]
10-Q	[2017-05-05]
10-K	[2017-02-24]
10-Q	[2016-11-03]
10-Q	[2016-08-02]
10-K	[2016-05-26]
10-Q	[2016-05-26]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-11]
10-K	[2015-03-02]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-03-17]
S-1	[2013-12-03]
10-Q	[2013-11-07]
S-1	[2013-08-29]
10-Q	[2013-08-14]
10-Q	[2013-05-15]
S-1	[2013-02-06]