EVOP EVO Payments Inc

EVO Payments, Inc. (NASDAQ: EVOP) (“EVO” or “EVO Payments” or the “Company”) today announced its third quarter 2022 financial results.

For the quarter ended September 30, 2022, reported revenue was $138.7 million compared to $135.0 million in the prior year, an increase of 3%. Adjusted revenue for the quarter was $145.6 million, an increase of 16%. On a GAAP basis for the quarter, net income was $3.8 million compared to $7.1 million in the prior year, a decrease of 46%. Adjusted EBITDA increased 11% to $57.2 million for the quarter, and on a constant currency basis, adjusted EBITDA increased 21%.

For the nine months ended September 30, 2022, reported revenue was $403.3 million compared to $363.5 million in the prior year, an increase of 11%. Adjusted revenue for the nine months ended September 30, 2022 increased 19%. On a GAAP basis for the nine months ended September 30, 2022, net income was $20.2 million compared to $11.1 million in the prior year, an increase of 83%. Adjusted EBITDA increased 16% to $148.9 million for the nine months ended September 30, 2022, and on a constant currency basis, adjusted EBITDA increased 23%.

“EVO’s solid third quarter performance reflects the strong growth from our international markets coupled with the expansion of our U.S. tech-enabled businesses,” stated James G. Kelly, Chief Executive Officer of EVO. “We continued to make progress obtaining necessary regulatory approvals and satisfying customary closing conditions related to our previously announced merger with Global Payments and continue to expect to complete the transaction no later than the first quarter of 2023.”

Third Quarter Highlights

• Adjusted international revenue grew 30% and now represents 65% of total revenue.
  • Europe’s adjusted revenue increased 40% and DCC revenue increased 35% as cross border activity exceeded pre-pandemic levels.
  • Latin America’s revenue increased 11% on a constant currency basis driven by 7% growth in the merchant portfolio.
• Signed new integrated referral partners across all markets, expanding EVO’s tech-enabled referral network.
• Adjusted net income per share increased 26% compared to last year to $0.34 per share.
• Leverage as of September 30, 2022 was 1.7 times, an improvement from 2.2 times as of September 30, 2021.

Update on Pending Acquisition by Global Payments

EVO previously announced it has entered into a definitive merger agreement with Global Payments Inc. (“Global Payments”) under which Global Payments will acquire EVO for $34.00 per share in cash in a transaction that represents an enterprise value for EVO of $4.0 billion. The transaction was approved by EVO stockholders on October 26, 2022. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the transaction expired on October 17, 2022. The transaction is expected to close in the first quarter of 2023. Completion of the transaction is subject to the satisfaction of the remaining closing conditions. Due to the pending merger transaction, EVO will not provide guidance or host a conference call or webcast to review the third quarter 2022 financial results.

Forward-Looking Statements

This release contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are often identified by words such as “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives,” “intends,” “may,” “opportunity,” “plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,” “could,” “would,” “will” and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current beliefs, assumptions, estimates, and expectations, taking into account the information currently available to us, and are not guarantees of future results or performance. Forward-looking statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that could contribute to these differences include the following: (1) disruption to our business caused by the proposed acquisition of us by Global Payments Inc. (“Global Payments”); (2) our ability to consummate the proposed transaction with Global Payments within the contemplated timeframe, or at all, including risks and uncertainties related to securing the necessary regulatory approvals and the satisfaction of other closing conditions; (3) the impact on our stock price, business, financial condition and results of operations if the proposed transaction with Global Payments is not consummated; (4) costs, charges and expenses relating to the proposed transaction with Global Payments; (5) the continuing uncertainties regarding the ultimate scope and trajectory of the COVID-19 pandemic (including its variant strains) on our business and our merchants, including the impact of social distancing, shelter-in-place, shutdowns of non-essential businesses and similar measures imposed or undertaken by governments; (6) our ability to anticipate and respond to changing industry trends and the needs and preferences of our customers and consumers; (7) the impact of substantial and increasingly intense competition; (8) the impact of changes in the competitive landscape, including disintermediation from other participants in the payments chain; (9) the effects of global economic, political, market, health and other conditions, including the continuing impact of the COVID-19 pandemic and the evolving situation with Ukraine and Russia; (10) our compliance with governmental regulations and other legal obligations, particularly related to privacy, data protection, information security, and consumer protection laws; (11) our ability to protect our systems and data from continually evolving cybersecurity risks or other technological risks; (12) failures in our processing systems, software defects, computer viruses, and development delays; (13) degradation of the quality of the products and services we offer, including support services; (14) our ability to recruit, retain and develop qualified personnel; (15) risks associated with our ability to successfully complete, integrate and realize the expected benefits of acquisitions; (16) continued consolidation in the banking and payment services industries, including the impact of the combination of Banco Popular and Grupo Santander and the related bank branch consolidation; (17) increased customer, referral partner, or sales partner attrition; (18) the incurrence of chargebacks; (19) failure to maintain or collect reimbursements; (20) fraud by merchants or others; (21) the failure of our third-party vendors to fulfill their obligations; (22) failure to maintain merchant and sales relationships or financial institution alliances; (23) ineffective risk management policies and procedures; (24) our inability to retain smaller-sized merchants and the impact of economic fluctuations on such merchants, (25) damage to our reputation, or the reputation of our partners; (26) seasonality and volatility; (27) geopolitical and other risks associated with our operations outside of the United States, such as the conflict between Russia and Ukraine; (28) any decline in the use of cards as a payment mechanism or other adverse developments with respect to the card industry in general; (29) increases in card network fees; (30) failure to comply with card networks requirements; (31) a requirement to purchase the equity interests of our eService subsidiary in Poland held by our JV partner; (32) changes in foreign currency exchange rates; (33) future impairment charges; (34) risks relating to our indebtedness, including our ability to raise additional capital to fund our operations on economized terms or at all and exposure to interest rate risks; (35) the phase out of LIBOR and the transition to other benchmarks; (36) restrictions imposed by our credit facilities and outstanding indebtedness; (37) participation in accelerated funding programs; (38) failure to enforce and protect our intellectual property rights; (39) failure to comply with, or changes in, laws, regulations and enforcement activities, including those relating to corruption, anti-money laundering, data privacy, and financial institutions; (40) impact of new or revised tax regulations; (41) legal proceedings, including the impact of potential litigation relating to the proposed transaction with Global Payments, including litigation that seeks to prevent the merger from being consummated within the contemplated timeframe, or at all; (42) our dependence on distributions from EVO Investco, LLC to pay our taxes and expenses, including certain payments to the Continuing LLC Owners (as defined our public filings) and, in the event that any tax benefits are disallowed, our inability to be reimbursed for payments made to the Continuing LLC Owners; (43) our organizational structure, including benefits available to the Continuing LLC Owners that are not available to holders of our Class A common stock to the same extent; (44) the risk that we could be deemed an investment company under the Investment Company Act of 1940, as amended; (45) the significant influence the Continuing LLC Owners continue to have over us, including control over decisions that require the approval of stockholders; (46) certain provisions of Delaware law and antitakeover provisions in our organizational documents could delay or prevent a change of control; (47) certain provisions in our organizational documents, including those that provide Delaware as the exclusive forum for litigation matters and that renounce the doctrine of corporate opportunity; (48) our ability to maintain effective internal control over financial reporting and disclosure (48) changes in our stock price, including relating to downgrades, analyst reports, and future sales by us or by existing stockholders; and (49) the other risks and uncertainties included from time to time in our filings with the SEC, including those listed under Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

We qualify any forward-looking statements entirely by the cautionary factors listed above, among others. Other risks, uncertainties and factors, not listed above, could also cause our actual results to differ materially from those projected in any forward-looking statements we make. Except as may be required by any applicable securities laws, we assume no obligation to update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Non-GAAP financial measures

EVO Payments, Inc. has supplemented revenue, segment profit, net income (loss), earnings per share information and weighted average common shares determined in accordance with GAAP by providing these and other measures on an adjusted basis in this release. The non-GAAP financial measures presented herein should not be considered in isolation of, as a substitute for, or superior to, financial information prepared in accordance with GAAP, and such measures may not be comparable to those reported by other companies. Management uses these adjusted financial performance measures for financial and operational decision making and as a means to facilitate period-to-period comparisons. Management also uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation. The Company believes that these adjusted measures provide useful information to investors about the Company’s ongoing underlying operating performance and enhance the overall understanding of the financial performance of the Company’s core business by presenting the Company’s results without giving effect to non-operational items such as equity-based compensation and costs related to transition, acquisition and integration matters, and giving effect to a normalized effective tax rate for the Company. This release also contains information on various financial measures presented on a currency-neutral basis. The Company believes these currency-neutral measures provide useful information to investors about the Company’s performance by excluding fluctuations caused solely by movements in currency exchange rates in the non-U.S. jurisdictions where the Company operates. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure are included in the schedules to this release.

Among other non-GAAP financial measures presented, this release contains a presentation of our adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per share information. These measures do not purport to be an alternative to cash flows from operating activities as a measure of liquidity, and are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as tax payments and, in the case of adjusted EBITDA, interest payments and debt service requirements. Further, adjusted EBITDA does not purport to be an alternative to net income as a measure of operating performance. These measures, or measures similar to them, are frequently used by analysts, investors, and other interested parties to evaluate companies in our industry.

Adjusted revenue is defined as revenue adjusted for constant currency and includes operating income in the form of liquidated damages resulting from the termination of the bank partner marketing alliance agreement during the fiscal quarter. Such liquidated damages are in lieu of future merchant referrals and revenue that the Company would have otherwise earned.

Adjusted EBITDA is defined as net income (loss) before provision for income taxes, net interest expense, and depreciation and amortization, excluding the impact of net income attributable to non-controlling interests in consolidated entities (including related depreciation and amortization and income taxes), share-based compensation, gain (loss) on investment in equity securities, financing costs, currency exchange impacts, and transition, acquisition and integration costs.

Adjusted net income is defined as net income (loss) adjusted to exclude income taxes, the impact of net income attributable to non-controlling interests in consolidated entities (including related depreciation and amortization and income taxes), share-based compensation, gain (loss) on investment in equity securities, financing costs, currency exchange impacts, transition, acquisition and integration costs, and amortization of acquisition intangibles and subsequently adjusted to give effect to a normalized tax rate for the Company.

The calculation of adjusted EBITDA and adjusted net income have limitations as analytical tools, including: (a) they do not reflect the Company’s cash expenditures, or future requirements for capital expenditures, or contractual commitments; (b) they do not reflect changes in, or cash requirements for, the Company’s working capital needs; (c) in the case of adjusted EBITDA, it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on the Company’s indebtedness; (d) they do not reflect the Company’s tax expense or the cash requirements to pay the Company’s taxes; and (e) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements.

Adjusted net income per share is defined as adjusted net income divided by pro forma weighted average shares. On May 25, 2021, all 32,163,538 outstanding shares of the Company’s Class B common stock were automatically cancelled for no consideration and each outstanding share of the Company’s Class C common stock was automatically converted into one share of Class D common stock. Prior to May 25, 2021, pro forma weighted average shares is defined as GAAP common weighted average shares (equal to our weighted average Class A common shares) plus our weighted average Class B common shares, weighted average Class C common shares, weighted average Class D common shares, dilutive equity awards measured under the treasury stock method, and weighted average preferred shares (including paid-in-kind dividends). Following May 25, 2021, pro forma weighted average shares is defined as GAAP common weighted average shares (equal to our weighted average Class A common shares), plus weighted average Blueapple common shares (formerly Class B common shares), weighted average Class D common shares (which include converted weighted average Class C common shares), dilutive equity awards measured under the treasury stock method, and weighted average preferred shares (including paid-in-kind dividends). Weighted average preferred shares is defined as the weighted average shares of Class A common stock issuable upon a voluntary conversion of the Company’s Series A convertible preferred stock by its holder. Blueapple common shares (formerly Class B common shares) is defined as the weighted average Class A common shares issuable upon the exercise by Blueapple, Inc., a Delaware corporation which is controlled by entities affiliated with the Company’s founder and Chairman of the board of directors (“Blueapple”), of its right to cause the Company to use its commercially reasonable best efforts to pursue a public offering of up to 32,163,538 Class A common shares and use the net proceeds therefrom to purchase an equivalent number of the units of EVO Investco, LLC held by Blueapple.

Net Debt to LTM Adjusted EBITDA ratio, which we refer to as our Leverage Ratio, is a non-GAAP measure defined as total long-term debt less available cash (cash on the balance sheet and cash in transit less certain merchant settlement account balances and merchant reserves) divided by the trailing twelve month Adjusted EBITDA. This ratio is frequently used by investors, and management believes this measure provides relevant and useful information.

About EVO Payments, Inc.

EVO Payments, Inc. (NASDAQ: EVOP) is a leading payment technology and services provider. EVO offers an array of innovative, reliable, and secure payment solutions to merchants ranging from small and mid-size enterprises to multinational companies and organizations across the globe. As a fully integrated merchant acquirer and payment processor in over 50 markets and 150 currencies worldwide, EVO provides competitive solutions that promote business growth, increase customer loyalty, and enhance data security in the international markets it serves.

EVO PAYMENTS, INC. AND SUBSIDIARIES Schedule 1 - Condensed Consolidated Statements of Operations (unaudited)   (in thousands, except share and per share data)  

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

% change

2022

2021

% change

  Revenue

$

138,663

 

$

135,041

 

3

%

$

403,260

 

$

363,456

 

11

%

Operating expenses: Cost of services and products

 

21,831

 

 

19,121

 

14

%

 

66,278

 

 

54,276

 

22

%

Selling, general and administrative

 

81,453

 

 

71,982

 

13

%

 

224,668

 

 

198,050

 

13

%

Depreciation and amortization

 

21,136

 

 

21,941

 

(4

%)

 

60,453

 

 

63,562

 

(5

%)

Total operating expenses

 

124,420

 

 

113,044

 

10

%

 

351,399

 

 

315,888

 

11

%

Other operating income

 

6,939

 

 

-

 

NM

 

 

6,939

 

 

-

 

NM

 

Income from operations

 

21,182

 

 

21,997

 

(4

%)

 

58,800

 

 

47,568

 

24

%

Other income (expense): Interest income

 

769

 

 

454

 

69

%

 

2,229

 

 

1,024

 

118

%

Interest expense

 

(4,260

)

 

(6,123

)

30

%

 

(12,634

)

 

(18,282

)

31

%

Gain (loss) on investment in equity securities

 

4,425

 

 

(1,298

)

NM

 

 

2,122

 

 

968

 

119

%

Other income (expense), net

 

228

 

 

379

 

(40

%)

 

(658

)

 

(340

)

(94

%)

Total other income (expense)

 

1,162

 

 

(6,588

)

118

%

 

(8,941

)

 

(16,630

)

46

%

Income before income taxes

 

22,344

 

 

15,409

 

45

%

 

49,859

 

 

30,938

 

61

%

Income tax expense

 

(18,513

)

 

(8,284

)

(123

%)

 

(29,614

)

 

(19,859

)

(49

%)

Net income

 

3,831

 

 

7,125

 

(46

%)

 

20,245

 

 

11,079

 

83

%

Less: Net income attributable to non-controlling interests in consolidated entities

 

3,845

 

 

3,259

 

18

%

 

9,545

 

 

6,484

 

47

%

Less: Net (loss) income attributable to non-controlling interests of EVO Investco, LLC

 

(220

)

 

1,396

 

NM

 

 

3,558

 

 

(196

)

NM

 

Net income attributable to EVO Payments, Inc.

 

206

 

 

2,470

 

(92

%)

 

7,142

 

 

4,791

 

49

%

Less: Accrual of redeemable preferred stock paid-in-kind dividends

 

2,672

 

 

2,511

 

6

%

 

7,809

 

 

7,338

 

6

%

Net loss attributable to Class A common stock

$

(2,466

)

$

(41

)

NM

 

$

(667

)

$

(2,547

)

74

%

  Earnings per share Basic

($0.05

)

($0.00

)

($0.01

)

($0.05

)

Diluted

($0.05

)

($0.00

)

($0.01

)

($0.05

)

Weighted average Class A common stock outstanding Basic

 

48,151,438

 

 

47,380,034

 

 

47,853,503

 

 

46,979,057

 

Diluted

 

48,151,438

 

 

47,380,034

 

 

47,853,503

 

 

46,979,057

 

EVO PAYMENTS, INC. AND SUBSIDIARIES Schedule 2 - Condensed Consolidated Balance Sheets (unaudited)   (in thousands, except share data)  

September 30,

December 31,

2022

2021

Assets Current assets: Cash and cash equivalents

$

429,760

 

$

410,368

 

Accounts receivable, net

 

16,533

 

 

16,065

 

Other receivables

 

28,830

 

 

18,087

 

Inventory

 

7,296

 

 

4,210

 

Settlement processing assets

 

341,952

 

 

311,681

 

Other current assets

 

29,134

 

 

20,514

 

Total current assets

 

853,505

 

 

780,925

 

Equipment and improvements, net

 

62,410

 

 

68,506

 

Goodwill, net

 

370,571

 

 

385,651

 

Intangible assets, net

 

178,506

 

 

200,726

 

Deferred tax assets

 

245,943

 

 

238,261

 

Operating lease right-of-use assets

 

36,238

 

 

34,704

 

Investment in equity securities, at fair value

 

30,627

 

 

25,398

 

Other assets

 

18,282

 

 

19,214

 

Total assets

$

1,796,082

 

$

1,753,385

 

  Liabilities and Shareholders' Equity (Deficit) Current liabilities: Settlement lines of credit

$

3,622

 

$

7,887

 

Current portion of long-term debt

 

14,092

 

 

14,058

 

Accounts payable

 

7,719

 

 

6,889

 

Accrued expenses and other current liabilities

 

135,006

 

 

127,060

 

Settlement processing obligations

 

468,732

 

 

422,109

 

Current portion of operating lease liabilities, inclusive of related party liability of $1.0 million and $1.3 million at September 30, 2022 and December 31, 2021, respectively

 

6,779

 

 

7,122

 

Total current liabilities

 

635,950

 

 

585,125

 

Long-term debt, net of current portion

 

558,396

 

 

568,632

 

Deferred tax liabilities

 

24,105

 

 

22,207

 

Tax receivable agreement obligations, inclusive of related party liability of $169.7 million and $169.4 million at September 30, 2022 and December 31, 2021, respectively

 

180,406

 

 

180,143

 

Operating lease liabilities, net of current portion, inclusive of related party liability of $0.1 million and $1.0 million at September 30, 2022 and December 31, 2021, respectively

 

31,363

 

 

28,948

 

Other long-term liabilities

 

11,169

 

 

7,891

 

Total liabilities

 

1,441,389

 

 

1,392,946

 

Commitments and contingencies Redeemable non-controlling interests

 

1,288,210

 

 

1,029,090

 

Redeemable preferred stock (par value, $0.0001 per share), Authorized, Issued and Outstanding – 152,250 shares at September 30, 2022 and December 31, 2021. Liquidation preference: $175,900 and $168,309 at September 30, 2022 and December 31, 2021, respectively

 

171,816

 

 

164,007

 

Shareholders' equity (deficit): Class A common stock (par value $0.0001), Authorized - 200,000,000 shares, Issued and Outstanding - 48,293,979 and 47,446,061 shares at September 30, 2022 and December 31, 2021, respectively

 

5

 

 

5

 

Class D common stock (par value $0.0001), Authorized - 32,000,000 shares, Issued and Outstanding - 3,741,074 and 3,783,074 shares at September 30, 2022 and December 31, 2021.

 

-

 

 

-

 

Additional paid-in capital

 

-

 

 

-

 

Accumulated deficit attributable to Class A common stock

 

(890,378

)

 

(652,871

)

Accumulated other comprehensive loss

 

(22,196

)

 

(9,154

)

Total EVO Payments, Inc. shareholders' deficit

 

(912,569

)

 

(662,020

)

Nonredeemable non-controlling interests

 

(192,764

)

 

(170,638

)

Total deficit

 

(1,105,333

)

 

(832,658

)

  Total liabilities, redeemable non-controlling interests, redeemable preferred stock, and shareholders' deficit

$

1,796,082

 

$

1,753,385

 

EVO PAYMENTS, INC. AND SUBSIDIARIES Schedule 3 - Condensed Consolidated Statements of Cash Flows (unaudited)   (in thousands)  

Nine Months Ended September 30,

2022

2021

Cash flows from operating activities: Net income

$

20,245

 

$

11,079

 

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization

 

60,453

 

 

63,562

 

Gain on investment in equity securities

 

(2,122

)

 

(968

)

Amortization of deferred financing costs

 

890

 

 

2,006

 

Loss on disposal of equipment and improvements

 

-

 

 

872

 

Share-based compensation expense

 

21,947

 

 

21,459

 

Deferred taxes, net

 

8,090

 

 

14,118

 

Other

 

(2,541

)

 

365

 

Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, net

 

(2,908

)

 

3,048

 

Other receivables

 

(12,667

)

 

3,091

 

Inventory

 

(3,966

)

 

631

 

Other current assets

 

971

 

 

(1,439

)

Operating lease right-of-use assets

 

5,878

 

 

4,912

 

Other assets

 

(3,789

)

 

(2,777

)

Accounts payable

 

1,969

 

 

3,631

 

Accrued expenses and other current liabilities

 

17,814

 

 

683

 

Settlement processing funds, net

 

22,208

 

 

(44,270

)

Operating lease liabilities

 

(5,676

)

 

(5,637

)

Other

 

(1,358

)

 

(2,310

)

Net cash provided by operating activities

 

125,438

 

 

72,056

 

Cash flows from investing activities: Acquisition of businesses, net of cash acquired

 

(5,254

)

 

(18,809

)

Purchase of equipment and improvements

 

(26,774

)

 

(25,929

)

Acquisition of intangible assets

 

(18,256

)

 

(6,871

)

Collections of notes receivable

 

-

 

 

48

 

Net cash used in investing activities

 

(50,284

)

 

(51,561

)

Cash flows from financing activities: Net repayments of settlement lines of credit

 

(3,680

)

 

(1,433

)

Proceeds from long-term debt

 

11,200

 

 

-

 

Repayments of long-term debt

 

(22,225

)

 

(4,945

)

Deferred and contingent consideration paid

 

(1,593

)

 

(484

)

Repurchases of shares to satisfy minimum tax withholding

 

(3,156

)

 

(4,463

)

Proceeds from exercise of common stock options

 

7,301

 

 

7,668

 

Distributions to non-controlling interest holders

 

(9,398

)

 

(10,914

)

Contribution from non-controlling interest holders

 

2,133

 

 

1,487

 

Net cash used in financing activities

 

(19,418

)

 

(13,084

)

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

 

(36,088

)

 

(9,708

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

19,648

 

 

(2,297

)

Cash, cash equivalents, and restricted cash, beginning of period

 

410,615

 

 

418,539

 

Cash, cash equivalents, and restricted cash, end of period

$

430,263

 

$

416,242

 

EVO PAYMENTS, INC. AND SUBSIDIARIES Schedule 4 - Reconciliation of GAAP to Non-GAAP Measures   (in thousands)  

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

% change

2022

2021

% change

  Revenue

$

138,663

 

$

135,041

 

3

%

$

403,260

 

$

363,456

 

11

%

Liquidated damages payment1

 

6,939

 

 

-

 

NM

 

 

6,939

 

 

-

 

NM

 

Currency impact2

 

-

 

 

(9,266

)

NM

 

 

-

 

 

(17,694

)

NM

 

Adjusted revenue

$

145,601

 

$

125,775

 

16

%

$

410,198

 

$

345,762

 

19

%

    Net income

$

3,831

 

$

7,125

 

(46

%)

$

20,245

 

$

11,079

 

83

%

Net income attributable to non-controlling interests in consolidated entities

 

(3,845

)

 

(3,259

)

(18

%)

 

(9,545

)

 

(6,484

)

(47

%)

Income tax expense

 

18,513

 

 

8,284

 

123

%

 

29,614

 

 

19,859

 

49

%

Interest expense, net

 

3,491

 

 

5,669

 

(38

%)

 

10,405

 

 

17,258

 

(40

%)

Depreciation and amortization

 

21,136

 

 

21,941

 

(4

%)

 

60,453

 

 

63,562

 

(5

%)

(Gain) loss on investment in equity securities

 

(4,425

)

 

1,298

 

NM

 

 

(2,122

)

 

(968

)

(119

%)

Share-based compensation expense

 

7,237

 

 

9,172

 

(21

%)

 

21,947

 

 

21,459

 

2

%

Transition, acquisition and integration costs3

 

11,280

 

 

1,132

 

896

%

 

17,916

 

 

2,113

 

748

%

Adjusted EBITDA

 

57,218

 

 

51,363

 

11

%

 

148,912

 

 

127,880

 

16

%

Currency impact2

 

-

 

 

(3,971

)

NM

 

 

-

 

 

(6,679

)

NM

 

Currency-neutral adjusted EBITDA

$

57,218

 

$

47,392

 

21

%

$

148,912

 

$

121,200

 

23

%

1

Represents the Liberbank liquidated payment. Recorded as other operating income, but shown here as the fee reflects a payment for forgone processing revenues.

2

Represents the impact of currency shifts by adjusting prior year results to current period average foreign exchange rates for the currencies in which EVO conducts operations.

3

For the three months ended September 30, 2022, earnings adjustments include $11.3 million of transition, acquisition and integration related costs, inclusive of $8.7 million of costs associated with the announced merger with Global Payments Inc.

For the three months ended September 30, 2021, earnings adjustments include $1.1 million of transition, acquisition and integration related costs.

For the nine months ended September 30, 2022, earnings adjustments include $17.9 million of transition, acquisition and integration related costs, inclusive of $9.3 million of costs associated with the announced merger with Global Payments Inc.

For the nine months ended September 30, 2021, earnings adjustments include $2.1 million of transition, acquisition and integration related costs.

EVO PAYMENTS, INC. AND SUBSIDIARIES Schedule 5 - Adjusted Net Income (unaudited) Reconciliation of GAAP to Non-GAAP Measures (in thousands, except share and per share data)  

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

% change

2022

2021

% change

  Net income

$

3,831

 

$

7,125

 

(46

%)

$

20,245

 

$

11,079

 

83

%

Net income attributable to non-controlling interests in consolidated entities

 

(3,845

)

 

(3,259

)

(18

%)

 

(9,545

)

 

(6,484

)

(47

%)

Share-based compensation expense

 

7,237

 

 

9,172

 

(21

%)

 

21,947

 

 

21,459

 

2

%

(Gain) loss on investment in equity securities

 

(4,425

)

 

1,298

 

NM

 

 

(2,122

)

 

(968

)

(119

%)

Income tax expense

 

18,513

 

 

8,284

 

123

%

 

29,614

 

 

19,859

 

49

%

Transition, acquisition and integration costs1

 

11,280

 

 

1,132

 

896

%

 

17,916

 

 

2,113

 

748

%

Acquisition intangible amortization2

 

10,359

 

 

9,558

 

8

%

 

25,873

 

 

28,164

 

(8

%)

Non-GAAP adjusted income before taxes

 

42,950

 

 

33,311

 

29

%

 

103,927

 

 

75,222

 

38

%

Income taxes at normalized tax rate3

 

(9,707

)

 

(7,528

)

(29

%)

 

(23,487

)

 

(17,000

)

(38

%)

Adjusted net income

$

33,243

 

$

25,783

 

29

%

$

80,439

 

$

58,222

 

38

%

Adjusted net income per share4

$

0.34

 

$

0.27

 

26

%

$

0.84

 

$

0.62

 

35

%

1 For the three months ended September 30, 2022, earnings adjustments include $11.3 million of transition, acquisition and integration related costs, inclusive of $8.7 million of costs associated with the announced merger with Global Payments Inc. For the three months ended September 30, 2021, earnings adjustments includes $1.1 million of transition, acquisition and integration related costs. For the nine months ended September 30, 2022, earnings adjustments include $17.9 million of transition, acquisition and integration related costs, inclusive of $9.3 million of costs associated with the announced merger with Global Payments Inc. For the nine months ended September 30, 2021, earnings adjustments includes $2.1 million of transition, acquisition and integration related costs. 2 Represents amortization of intangible assets acquired through business combinations and other merchant portfolio and related asset acquisitions. 3 Normalized corporate income tax expense calculated using 22.6% for all periods.

4

Reflects pro forma weighted average shares for the period using GAAP weighted average common shares (equal to weighted average Class A common shares), weighted average Blueapple common shares (formerly Class B common shares), weighted average Class D common shares which include converted weighted average Class C common shares, weighted average preferred shares including paid-in-kind dividends, and dilutive equity awards measured under the treasury stock method.

Three Months Ended Sept. 30,

Nine Months Ended Sept. 30,

(share count in millions)

2022

2021

2022

2021

Class A (GAAP weighted average common stock)

48.2

47.4

47.9

47.0

Blueapple common shares (formerly Class B)

32.2

32.2

32.2

32.2

Class D

3.8

3.8

3.8

3.9

Stock options, RSUs, RSAs

1.9

1.1

1.0

1.2

Series A convertible preferred (if converted)

11.1

10.4

10.9

10.3

Pro forma weighted average shares

97.0

94.9

95.7

94.5

EVO PAYMENTS, INC. AND SUBSIDIARIES Schedule 6 - Net Debt to Adjusted EBITDA Ratio Reconciliation of GAAP to Non-GAAP Measures (in thousands)   Year Ended 9 Months 9 Months LTM1 12/31/2021 9/30/2021 9/30/2022 9/30/2022 Net income

$

17,689

 

$

11,079

 

$

20,245

 

$

26,855

 

Net income attributable to non-controlling interests in consolidated entities

 

(9,003

)

 

(6,484

)

 

(9,545

)

 

(12,064

)

Income tax expense

 

26,376

 

 

19,859

 

 

29,614

 

 

36,131

 

Interest expense, net

 

21,510

 

 

17,258

 

 

10,405

 

 

14,657

 

Depreciation and amortization

 

83,389

 

 

63,562

 

 

60,453

 

 

80,280

 

Gain on investment in equity securities

 

(237

)

 

(968

)

 

(2,122

)

 

(1,391

)

Share-based compensation expense

 

27,419

 

 

21,459

 

 

21,947

 

 

27,907

 

Transition, acquisition and integration costs

 

4,296

 

 

2,113

 

 

17,916

 

 

20,099

 

Other adjustments

 

6,587

 

 

-

 

 

-

 

 

6,587

 

Adjusted EBITDA

$

178,027

 

$

127,880

 

$

148,912

 

$

199,060

 

    Ratio of Net Debt to LTM Adjusted EBITDA 9/30/2022 Gross debt

$

576,975

 

Less: available cash2

 

(230,726

)

Net debt

$

346,249

 

Leverage Ratio 1.7x

1

Reflects last twelve months Adjusted EBITDA by taking full year 2021, less the nine months ended September 30, 2021, plus the nine months ended September 30, 2022 period. Amounts may differ due to rounding.

2

 

Available cash includes cash in transit from September 30, 2022 transaction date.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221102005052/en/

EVO Payments, Inc. Sarah Jane Schneider Investor Relations & Corporate Communications Manager 770-709-7365 investor.relations@evopayments.com