EVO Reports Second Quarter 2018 Results

ATLANTA, Aug. 08, 2018 (GLOBE NEWSWIRE) -- EVO Payments, Inc. EVOP ("EVO" or the "Company") today announced its second quarter financial results and its first earnings announcement as a public company. For the second quarter ended June 30, 2018, revenue increased 14% to $140.9 million, compared to $123.9 million in the prior year. On a currency-neutral basis, revenue increased 11% over the prior year. On a GAAP basis for the second quarter, net income attributable to EVO Payments, Inc. was $16.7 million or $0.96 per diluted share, representing net income from the initial public offering date forward.  Adjusted EBITDA defined as earnings before interest, taxes, depreciation, amortization, and the impact of share-based compensation, transition, acquisition-related, and integration costs, increased 12% to $37.0 million for the quarter, compared to $33.0 million in the prior year. On a currency-neutral basis, adjusted EBITDA grew 10% over the prior year. 

For the six months ended June 30, 2018, revenue increased 15% to $269.2 million, compared to $233.5 million in the prior year period. On a currency-neutral basis, revenue increased 10% over the prior year. On a GAAP basis for the year-to-date period, net income attributable to EVO Payments, Inc. was $16.7 million or $0.96 per diluted share, representing net income from the initial public offering date forward.  Adjusted EBITDA increased 16% to $65.6 million for the six months ended June 30, 2018, compared to $56.4 million in the prior year. On a currency-neutral basis, adjusted EBITDA grew 10% for the year-to-date period compared with the same period in the prior year.  (See Schedule 1 for the Condensed Consolidated Statements of Operations and Schedule 4 for the Reconciliation of GAAP to Non-GAAP measures.)

"We are committed to delivering solid results for our shareholders through organic growth, long-term margin expansion and acquisition opportunities. Our second quarter results demonstrate our ability to deliver on our commitments by providing high quality products and services to our growing customer base across North America and Europe," said James Kelly, Chief Executive Officer of EVO, "In addition, we expanded our Spanish customer base by approximately 20,000 new merchants and completed a ten-year alliance with Liberbank, a leading regional Spanish bank focused on the small and medium-sized enterprise market. We also strengthened our Eastern Europe presence through a ten-year alliance agreement with Moneta Money Bank, a leading Czech financial institution."

Outlook

For the full year 2018, the Company expects revenue to range from $556 million to $564 million, reflecting growth of 10% to 12% over 2017 reported results and 9% to 10% over currency-neutral 2017 results. Adjusted EBITDA is expected to be in a range of $142 million and $146 million, reflecting growth of 11% to 14% over 2017 adjusted EBITDA and 10% to 13% over currency-neutral 2017 adjusted EBITDA.  Pro forma adjusted net income per diluted share is expected to be in a range of $0.44 to $0.52.

Conference call

EVO's management will host a conference call for investors at 8:00 a.m. Eastern Time on Wednesday, August 8, 2018 to discuss the results. Participants may access the conference call via the investor relations section of the company's website at www.evopayments.com, or participants may also dial (877) 356-5729 inside North America and (629) 228-0718 outside North America to listen.  The conference ID number is 6550489. A recording of the call will be archived on the company's investor relations website following the live call.

Forward-looking statements

This announcement and the Company's discussion today both include forward-looking statements. Forward-looking statements are subject to risks and uncertainty.  They are not guarantees of future performance, and the Company's actual results could differ materially from the expectations expressed or implied in any forward-looking statements. You should not put undue reliance upon them.  Words such as "anticipates," "believes," "continues," "estimates," "expects," "goal," "objectives," "intends," "may," "opportunity," "plans," "potential," "near-term," "long-term," "projections," "assumptions," "projects," "guidance," "forecast," "outlook," "target," "should," "could," "would," "will" and comparable words are a common way to identify forward-looking statements. Examples of forward-looking statements contained in this release include statements about the Company's full year 2018 outlook.

Factors that could contribute to differences between the Company's actual results and the expectations expressed or implied in any forward-looking statements include the following: changing industry trends and changing needs and preferences of our customers and consumers; the impact of substantial and increasingly intense competition; changes in the competitive landscape, including disintermediation from other participants in the payments chain; the impact of global economic, political and other conditions on trends in consumer, business and government spending; compliance with governmental regulations and other legal obligations, particularly related to privacy, data protection and information security, and consumer protection laws; the ability to protect the Company's systems and data from continually evolving cybersecurity risks or other technological risks; failures in the Company's processing systems, software defects, computer viruses and development delays; degradation of the quality of the products and services the Company offers; the Company's ability to successfully complete, integrate and realize the expected benefits of any acquisitions it pursues or has completed; continued consolidation in the banking and payment services industries; increased customer, referral partner or sales partner attrition; the incurrence of chargeback liability; fraud by merchants or others; service failures by third-party vendors providing products and services to the Company; failure to maintain merchant relationships and alliances; ineffective risk management policies and procedures; reputational harm to the Company or its partners; the Company's ability to recruit, retain and develop qualified personnel; geopolitical and other risks associated with operations outside of the United States; decline in the use of cards as a payment mechanism for consumers or adverse developments with respect to the card industry in general; increases in card network fees; failure to comply with the applicable requirements of card networks; changes in foreign currency exchange rates; inability to raise additional capital to fund the Company's operations on acceptable terms or at all; failure to protect the Company's intellectual property rights and defend against potential patent claims; failure to comply with, or changes in, laws, regulations and enforcement activities; future impairment charges; the impact of the Company's organizational structure; the significant influence of certain of the Company's stockholders over Company decisions; and the other risks and factors, including the risks listed under "Item 1A. Risk factors," contained in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2018.

Non-GAAP financial measures

EVO Payments, Inc. has supplemented revenue, net income/(loss) and earnings per share information determined in accordance with GAAP by providing these and other measures on an adjusted basis in this release to assist with evaluating performance.   Such financial measures should not be considered as an alternative to GAAP revenue or net income/(loss), 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 evaluate 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 operating results and enhance the overall understanding of financial performance of the Company's core business by presenting the Company's results without giving effect to equity-based compensation, giving pro forma effect to the Company's going forward effective tax rate following its Up-C reorganization, costs related to restructuring transactions, acquisition costs and other transitionary costs.  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 without taking into account fluctuations caused by 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.

About EVO Payments, Inc.

EVO Payments, Inc. EVOP is a leading payment technology and services provider.  EVO offers an array of innovative, reliable, and secure payment solutions to merchants ranging from micro-enterprises to multinational companies and organizations across North America and Europe.  EVO supports all major card types in the markets it serves.  For more information, please visit www.evopayments.com.

EVO Payments, Inc.
Investor contact
Ed O'Hare, 770-709-7353
investor.relations@evopayments.com

or

EVO Payments, Inc.
Media contact
Mark Nawrocki, 720-745-7711
Mark.nawrocki@evopayments.com

EVO Payments, Inc.

Schedule 1 – Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except share and per share data)

EVO Payments, Inc.

Schedule 2 – Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except share and interest data)

EVO Payments, Inc.

Schedule 3 – Condensed Consolidated Statement of Cash Flows (unaudited)

(in thousands)

EVO Payments, Inc.

Schedule 4 – Reconciliation of GAAP to Non-GAAP measures (unaudited)

(in thousands)

¹ Represents the impact of currency shifts by adjusting prior year results to current period average fx rates for the currencies in which EVO conducts operations. 
² Represents $52.1 million of share-based compensation costs incurred with the completion of the initial public offering, less a $0.9 million non-controlling interest component.
³ For the three months ended June 30, 2018, earnings adjustments include $2.4 million of employee termination benefits, $2.0 million of debt extinguishment costs, and $10.0 million of transaction and acquisition related costs. Includes the net loss carryforward adjustment from EVO Investco, LLC of $15.8 million.
  For the three months ended June 30, 2017, earnings adjustments include $1.4 million of employee termination benefits and $1.6 million of transaction and acquisition related costs.
  For the six months ended June 30, 2018, earnings adjustments include $2.4 million of employee termination benefits, $4.0 million of a strategic advisory fee, and $13.3 million of transaction and acquisition related costs.
  For the six months ended June 30, 2017, earnings adjustments include $3.0 million of employee termination benefits and $2.5 million of transaction and acquisition related costs.

Adjusted EBITDA is a supplemental measure of the Company's performance that is not required by, or presented in accordance with, GAAP.  Adjusted EBITDA is not a term defined under U.S. GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, adjusted EBITDA is not intended to be a measure of free cash flow available for management's discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements.

Adjusted EBITDA is included in this release because it is a key metric used by the Company's management and board of directors to assess the Company's financial performance. The presentation of adjusted EBITDA is intended to provide additional information to investors about the Company's results of operations that management utilizes on an ongoing basis to assess the Company's core operating performance.  Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in the industry.

Adjusted EBITDA is defined as income before provision for income taxes, net interest expense, and depreciation and amortization, excluding the additional items described in the reconciliation above. Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. The calculation of adjusted EBITDA has limitations as an analytical tool, including: (a) it does not reflect the Company's cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) it does not reflect changes in, or cash requirements for, the Company's working capital needs; (c) it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on the Company's indebtedness; (d) it does 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 Adjusted EBITDA does not reflect any cash requirements for such replacements.

EVO Payments, Inc.

Schedule 5 – Segment information (unaudited)

(in thousands, except transactions in millions)

¹ For the three months ended June 30, 2018, North America segment earnings adjustments include $2.4 million of employee termination benefits and $3.2 million of transaction and acquisition related costs.
  Europe segment earnings adjustment includes $0.2 million of an acquisition related charge.
  Corporate and other adjustments include $2.0 million of debt extinguishment costs, $6.5 million of transaction and acquisition charges, and the net loss carryforward adjustment from EVO Investco, LLC of $15.8 million.
² For the three months ended June 30, 2017, North America segment earnings adjustment includes $1.3 million of employee termination benefits.
  Europe segment earnings adjustment includes $0.2 million of employee termination benefits.
  Corporate adjustment includes $1.6 million of transaction and acquisition charges.

¹ For the six months ended June 30, 2018, North America segment earnings adjustments include $2.5 million of employee termination benefits and $3.2 million of transaction and acquisition related costs.
  Europe segment earnings adjustment includes $0.2 million of an acquisition related charge.
  Corporate and other adjustments include $2.0 million of debt extinguishment costs and $11.7 million of transaction and acquisition charges.
² For the six months ended June 30, 2017, North America segment earnings adjustment includes $2.8 million of employee termination benefits.
  Europe segment earnings adjustment includes $0.2 million of employee termination benefits.
  Corporate adjustment includes $2.5 million of transaction and acquisition charges.

EVO Payments, Inc.

Schedule 6 – Pro forma adjusted net income (unaudited)

(in thousands, except share and per share data)

¹ Represents $52.1 million of share-based compensation costs incurred with the completion of the initial public offering, less a $0.8 million non-controlling interest component.
² Represents acquisition and integration costs incurred in connection with our acquisitions, charges related to employee termination benefits, other transition activities, $7.2 million of charges related to extinguishment of debt, and the net loss carryforward from EVO Investco, LLC of $15.8 million.
See Schedule 4 for a more detailed description of these charges.
³ Represents amortization of intangible assets acquired through business combinations and other customer portfolio and related asset acquisitions.
⁴ Pro forma corporate income tax expense calculated using 23.3% and 35.7% for 2018 and 2017, respectively, based on blended federal and state tax rates and utilizing the Tax Reform Act for 2018 federal rates.
⁵ Uses adjusted shares outstanding including an additional 63.5 million Class B, C, D shares, unvested restricted units, and unvested options that are excluded from the GAAP diluted share count.

EVO Payments, Inc.

Schedule 7 – Financial outlook (unaudited)

(in millions, except per share)

¹ Represents estimated ranges for (a) acquisition and integration costs in connection with our acquisitions, charges related to employee termination benefits and other transition activities; (b) share-based compensation costs; (c) amortization of intangible assets acquired in business combinations and other customer portfolio and related asset acquisitions; and (d) adjustments to income tax expense/ (benefit) to reflect an effective corporate tax rate based on tax reform legislation. GAAP net income per share uses basic share counts and pro forma adjusted net income per share uses adjusted share counts as the denominator including an additional 63.5 million shares inclusive of Class B, C, D, unvested restricted units, and unvested options that are excluded from the GAAP diluted share count. Currency assumptions based on June 30, 2018 year-to-date actual rates and current spot rates forward from July through December.