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What changed in EVERTEC, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of EVERTEC, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+292 added−273 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in EVERTEC, Inc.'s 2024 10-K

292 paragraphs added · 273 removed · 212 edited across 7 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

102 edited+50 added−20 removed171 unchanged
Biggest changeThese laws generally require companies to implement specific privacy and information security controls and legal protections to protect certain types of personal information and to collect or use it subject to disclosures. Additional compliance investment and potential business process changes may continue to be required as these laws and others go into effect.
Biggest changeCertain states in the United States and most countries where we conduct our business have adopted privacy and security laws that may apply to our business. These laws generally require companies to implement specific privacy and information security controls and legal protections to protect certain types of personal information and to collect or use it subject to disclosures.
If we are unable to renew or negotiate extensions for our A&R MSA with Popular, our A&R ISO Agreement with Banco Popular and our A&R ATH Network Participation Agreement with Banco Popular (together with its ATH Support Schedule, the “A&R BPPR ATH Agreement ” ), or if we are required to provide significant concessions to Popular or Banco Popular to secure extensions or otherwise, our ability to renegotiate our debt, secure additional debt, results of operations, financial condition and trading price of our common stock may be materially adversely affected.
If we are unable to renew or negotiate extensions for our A&R MSA with Popular, A&R ISO Agreement with Banco Popular and A&R ATH Network Participation Agreement with Banco Popular (together with its ATH Support Schedule, the “A&R BPPR ATH Agreement ” ), or if we are required to provide significant concessions to Popular or Banco Popular to secure extensions or otherwise, our ability to renegotiate our debt, secure additional debt, results of operations, financial condition and trading price of our common stock may be materially adversely affected.
If the A&R ISO Agreement is not renewed, we will have to seek other card association sponsors, we will not benefit from Banco Popular referral of merchants and we may experience the loss 15 Table of Contents of some merchants if Banco Popular itself enters the merchant acquiring business or agrees to sponsor another independent sales organization.
If the A&R ISO Agreement is not renewed, we will have to seek other card association sponsors, we will not benefit from Banco Popular referral of merchants and we may experience the loss of 15 Table of Contents some merchants if Banco Popular itself enters the merchant acquiring business or agrees to sponsor another independent sales organization.
Security breaches, improper use of our systems, and unauthorized access to our data and information by employees and others may pose a risk that data may be exposed to unauthorized persons or to the public.
Security breaches, improper use of our systems, and unauthorized access to our data and information by employees and others pose a risk that data may be exposed to unauthorized persons or to the public.
Puerto Rico’s economy, including the ongoing financial crisis and the effects of potential natural disasters, including weather events connected to climate change, or future disease pandemics or other public health crisis, could have a prolonged negative impact on the countries and markets in which we operate and, as a result, could have a material adverse effect on our business and results of operations.
Puerto Rico’s economy, including the ongoing financial crisis and the effects of potential natural disasters, including weather events connected to climate change, or future disease pandemics or other public health crises, could have a prolonged negative impact on the countries and markets in which we operate and, as a result, could have a material adverse effect on our business and results of operations.
Additionally, any such failure by clients to comply could also result in fines, penalties or obligations imputed to EVERTEC, which could also have a material adverse effect on our business. We rely on our information technology systems, employees and certain suppliers and counterparties, and certain failures or disruptions in those systems or chains could materially adversely affect our operations.
Additionally, any such failure by clients to comply could also result in fines, penalties or obligations imputed to EVERTEC, which could also have a material adverse effect on our business. We rely on our information technology systems, employees and certain suppliers and counterparties, and certain failures or disruptions in those systems or chains that could materially adversely affect our operations.
This and other stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, many of our customers, business partners, and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
This and other stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, many of our customers, business partners, suppliers, and other stakeholders may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
The A&R MSA, A&R ISO Agreement, and A&R BPPR ATH Agreement, amended and restated on July 1, 2022, have terms ending in 2028, 2035, and 2030, respectively. Our inability to renew or continue to maintain client contracts on favorable terms or at all may materially adversely affect our results of operations and financial condition.
The A&R MSA, A&R ISO Agreement, and A&R BPPR ATH Agreement, amended and restated in July 2022, have terms ending in 2028, 2035, and 2030, respectively. Our inability to renew or continue to maintain client contracts on favorable terms or at all may materially adversely affect our results of operations and financial condition.
Any such events may materially and negatively impact our financial condition, results of operations and trading price of our common stock, as well as potentially limit our ability to renegotiate our debt. Our A&R ISO Agreement with Banco Popular, which sets our merchant acquiring relationship with Popular, now includes revenue sharing provisions with Popular.
Any such events may materially and negatively impact our financial condition, results of operations and trading price of our common stock, as well as potentially limit our ability to renegotiate our debt. Our A&R ISO Agreement with Banco Popular, which sets our merchant acquiring relationship with Popular, includes revenue sharing provisions with Popular.
Further, despite these efforts, these arrangements may not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our technologies that we consider proprietary.
Despite these efforts, these arrangements may not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our technologies that we consider proprietary.
Our degree of leverage could have a significant impact on us, including (i) increasing our vulnerability to adverse economic, industry or competitive developments; (ii) requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, reducing our ability to use our cash flow for other purposes, including for our operations, capital expenditures and future business opportunities; (iii) exposing us to the risk of increased interest rates because our borrowings are predominantly at variable rates of interest; (iv) making it difficult for us to satisfy our indebtedness obligations generally, including complying with restrictive covenants and borrowing conditions, our noncompliance with which could result in an event of default under the agreements setting forth the terms of such indebtedness; (v) restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; (vi) limiting our ability to obtain additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions and general corporate or other purposes; and (vii) limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage to competitors who may be less highly leveraged.
Our degree of leverage could have a significant impact on us, including (i) increasing our vulnerability to adverse economic, industry or 31 Table of Contents competitive developments; (ii) requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, reducing our ability to use our cash flow for other purposes, including for our operations, capital expenditures and future business opportunities; (iii) exposing us to the risk of increased interest rates because our borrowings are predominantly at variable rates of interest; (iv) making it difficult for us to satisfy our indebtedness obligations generally, including complying with restrictive covenants and borrowing conditions, our noncompliance with which could result in an event of default under the agreements setting forth the terms of such indebtedness; (v) restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; (vi) limiting our ability to obtain additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions and general corporate or other purposes; and (vii) limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage to competitors who may be less highly leveraged.
Moreover, if we fail to comply with new laws, regulations, expectations or reporting requirements, or if we are perceived as failing, our reputation and business could be adversely impacted. Any reputational damage associated with ESG factors may also adversely impact our ability to recruit and retain employees and customers.
If we fail to comply with new laws, regulations, expectations or reporting requirements, or if we are perceived as failing, our reputation and business could be adversely impacted. Any reputational damage associated with ESG factors may also adversely impact our ability to recruit and retain employees and customers.
Such occurrences could adversely affect our business, results of operations, financial position, and reputation, and could result in litigation (including class actions) or regulatory investigations or enforcement actions. In addition, we make extensive use of third-party service providers, including providers that store, transmit and process data.
Such occurrences could adversely affect our business, results of operations, financial position, and reputation, and could result in litigation (including class actions) or regulatory investigations or enforcement actions. We make extensive use of third-party service providers, including providers that store, transmit and process data.
Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm our business and operating results. Third parties may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us.
Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm our business and operating results. Third parties have and may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us.
We rely on computer systems, hardware, software, technology infrastructure, and online sites for both internal and external operations that are critical to our business (collectively, "IT Systems"). For example, we use our IT Systems to connect with our clients, people, and others.
We rely on computer systems, hardware, software, technology infrastructure, and online sites for both internal and external operations that are critical to our business (collectively, "IT Systems"). For example, we use our IT Systems to connect with our clients, business partners, people, and others.
Any failure, or perceived failure, by us to comply with our posted privacy and security-related policies or with any current or future federal or state data privacy or security-related laws, regulations, regulatory guidance, orders, or other legal obligations relating to privacy or security could adversely affect our reputation, brand and business, and may result in claims, proceedings, or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease using certain data sets, and may otherwise adversely affect our financial condition and operating results.
Any failure, or perceived failure, by us to comply with our posted privacy and security-related policies or with any current or future federal or state data privacy or security-related laws, regulations, regulatory guidance, orders, or other legal obligations relating to privacy or security could adversely affect our reputation, brand and business, and may result in claims, proceedings, or actions against us by governmental entities, expose us to liabilities, or require us to change our operations and/or cease using certain data sets, and may otherwise adversely affect our financial condition and operating results.
Instability in Latin America has been caused by many different factors, including (i) exposure to foreign exchange 24 Table of Contents variation, (ii) significant governmental influence over local economies; (iii) substantial fluctuations in economic growth; (iv) instability in the banking sector and high inflation levels or domestic interest rates; (v) wage, price or exchange controls, or restrictions on expatriation of earnings; (vi) changes in governmental economic or tax policies or unexpected changes in regulation which may restrict the movement of funds or results in the deprivation of contract or property rights; (vii) imposition of trade barriers; (viii) terrorist attacks and other acts of violence or war; (ix) high unemployment; and (x) overall political, social, and economic disruptions.
Instability in Latin America has been caused by many different factors, including (i) exposure to foreign exchange variation, (ii) significant governmental influence over local economies; (iii) substantial fluctuations in economic growth; (iv) instability in the banking sector and high inflation levels or domestic interest rates; (v) wage, price or exchange controls, or restrictions on expatriation of earnings; (vi) changes in governmental economic or tax policies or unexpected changes in regulation which may restrict the movement of funds or results in the deprivation of contract or property rights; (vii) imposition of trade barriers; (viii) terrorist attacks and other acts of violence or war; (ix) high unemployment; and (x) overall political, social, and economic disruptions.
We believe future growth in the use of credit, debit and other electronic and digital payments will be driven by the cost, ease-to-use, and quality of products and services offered to customers and businesses.
We believe future growth in the use of credit, debit and other electronic and digital payments will be driven by the cost, ease-to-use, availability, and quality of products and services offered to customers and businesses.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, we cannot guarantee that we will be successful, that all open source software is reviewed prior to use in our products, that our developers have not incorporated open source software into our products that we are unaware of or that they will not do so in the future.
While we monitor our use of OSS and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, we cannot guarantee that we will be successful, that all OSS is reviewed prior to use in our products, that our developers have not incorporated OSS into our products that we are unaware of or that they will not do so in the future.
A substantial portion of our business is generated from our Amended and Restated Independent Sales Organization Sponsorship and Services Agreement (the “A&R ISO Agreement”) with Banco Popular, which was amended and restated on July 1, 2022, among other things, to extend its term to end in 2035.
A substantial portion of our business is generated from our Amended and Restated Independent Sales Organization Sponsorship and Services Agreement (the “A&R ISO Agreement”) with Banco Popular, which was amended and restated in July 2022, among other things, to extend its term to end in 2035.
If we are not able to successfully complete these integrations in an efficient and cost-effective manner, the anticipated benefits of this merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common stock may be affected adversely.
If we are not able to successfully complete these integrations in an efficient and cost-effective manner, the anticipated benefits of the Sinqia merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common stock may be affected adversely.
These provisions include: • prohibiting cumulative voting in the election of directors; • authorizing the issuance of “blank check” preferred stock without any need for action by stockholders (as further described below); • prohibiting stockholders from acting by written consent unless the action is taken by unanimous written consent; and • establishing advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by stockholders at stockholder meetings.
These provisions include: • prohibiting cumulative voting in the election of directors; • authorizing the issuance of “blank check” preferred stock without any need for action by stockholders (as further described below); • prohibiting stockholders from acting by written consent unless the action is taken by unanimous written consent; and 30 Table of Contents • establishing advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by stockholders at stockholder meetings.
Any concerns about our data privacy and security practices (even if unfounded), or any failure, real or perceived, by us to comply 21 Table of Contents with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us, could cause our customers, riders and users to reduce their use of our products and services.
Any concerns about our data privacy and security practices (even if unfounded), or any failure, real or perceived, by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us, could cause our customers, riders and users to reduce their use of our products and services.
If we are not successful in achieving high renewal rates and/or contract terms that are favorable to us, our results of operations and financial condition may be adversely affected. We also depend on our payment processing clients to comply with their contractual obligations, applicable laws, regulatory requirements and credit card associations rules or standards.
If we are not successful in achieving high renewal rates and/or contract terms that are favorable to us, our results of operations and financial condition may be adversely affected. We also depend on our payment processing clients to comply with their contractual obligations, applicable laws, regulatory requirements and payment card networks rules or standards.
We could experience increased expenses resulting from strategic planning, litigation and changes to our technology, operations, products and services, access to energy and water, as well as reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced stakeholder confidence, due to our response to climate change or real or perceived vulnerability to climate change-related risks.
We have historically and could continue to experience increased expenses resulting from strategic planning, litigation and changes to our technology, operations, products and services, access to energy and water, as well as reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced stakeholder confidence, due to our response to climate change or real or perceived vulnerability to climate change-related risks.
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business, then we may not achieve the anticipated benefits, of the merger within our anticipated timeframe or at all and our revenue, expenses, operating results, financial condition and stock price could be materially adversely affected.
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business, then we may not achieve the anticipated benefits, of the merger within 29 Table of Contents our anticipated timeframe or at all and our revenue, expenses, operating results, financial condition and stock price could be materially adversely affected.
Moreover, to the extent inflation has other adverse effects on the market, it may adversely affect our business, financial condition and results of operations. 27 Table of Contents Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute shareholder value, and adversely affect our business, financial condition and results of operations.
Moreover, to the extent inflation has other adverse effects on the market, it may adversely affect our business, financial condition and results of operations. Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute shareholder value, and adversely affect our business, financial condition and results of operations.
If one or both of the BPPR ATH Agreements are not extended, our ATH brand and network could be negatively impacted, and our financial condition and results of operations also be materially adversely affected.
If one or both of the A&R BPPR ATH Agreements are not extended, our ATH brand and network could be negatively impacted, and our financial condition and results of operations also be materially adversely affected.
To the extent that our products depend upon the successful operation of open-source software, any undetected errors or defects in open source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation. In addition, the public availability of such software may make it easier for others to compromise our products.
To the extent that our products depend upon the successful operation of OSS, any undetected errors or defects in OSS that we use could prevent the deployment or impair the functionality of our systems and injure our reputation. In addition, the public availability of such software may make it easier for others to compromise our products.
Our business is subject to the laws, rules, regulations, and policies in the countries in which we operate, as well as the legal interpretation of such regulations by administrative bodies and the judiciary of those countries.
Our business is subject to the laws, rules, regulations, and policies in the jurisdictions in which we operate, as well as the legal interpretation of such regulations by administrative bodies and the judiciary of those jurisdictions.
Under this grant, EVERTEC Group will benefit from a preferential income tax rate of 4% on industrial development income, as well as from tax exemptions with respect to its municipal and property tax obligations for certain activities derived from its data processing operations in Puerto Rico.
Under this grant, EVERTEC Group will benefit from a preferential income tax rate of 4% on industrial development income, as 27 Table of Contents well as from tax exemptions with respect to its municipal and property tax obligations for certain activities derived from its data processing operations in Puerto Rico.
Any material interruptions or failures in our payment related systems could have a material adverse effect on our business, financial condition and results of operations. Changes in interchange fees charged by credit card associations and debit networks could increase our costs or otherwise materially adversely affect our business.
Any material interruptions or failures in our payment related systems could have a material adverse effect on our business, financial condition and results of operations. Changes in interchange fees charged by payment card networks could increase our costs or otherwise materially adversely affect our business.
As such, we and many of our customers are subject to card association and network rules that could subject us or our customers to a variety of fines or penalties that may be levied by the card associations or networks for certain acts or omissions by us, acquirer customers, processing customers and merchants.
As such, we and many of our customers are subject to payment card network rules that could subject us or our customers to a variety of fines or penalties that may be levied by the networks for certain acts or omissions by us, acquirer customers, processing customers and merchants.
Any of these occurrences could diminish our ability to operate one or more of our businesses, or result in potential liability to clients, reputational damage and regulatory intervention or fines, any of which could materially adversely affect our financial condition or results of operations.
Any of these occurrences could diminish our 17 Table of Contents ability to operate one or more of our businesses, or result in potential liability to clients, reputational damage and regulatory intervention or fines, any of which could materially adversely affect our financial condition or results of operations.
We expect that the occurrence of infringement claims is likely to grow as the market for our products and 25 Table of Contents solutions grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.
We expect that the occurrence of infringement claims is likely to grow as the market for our products and solutions grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.
Consolidations in the banking and financial services industry could adversely affect our revenues by eliminating existing or potential clients and making us more dependent on a more limited number of clients. There have been a number of mergers and consolidations in the banking and financial services industry.
Consolidations in the banking and financial services industry could adversely affect our revenues by eliminating existing or potential clients and making us more dependent on a more limited number of clients. 20 Table of Contents There have been a number of mergers and consolidations in the banking and financial services industry.
We incorporate technology and components from third parties into our products, and our inability to obtain or maintain rights to the technology could harm our business. We incorporate technology and software from third parties into our products.
We incorporate technology and components from third parties into our products, and our inability to obtain or maintain rights to such technology could harm our business. We incorporate technology and software from third parties into our products.
Antitrust 22 Table of Contents Due to our ownership of the ATH network and our merchant acquiring and payment services business in Puerto Rico, we are involved in a significant percentage of the debit and credit card transactions conducted in Puerto Rico each day.
Antitrust Due to our ownership of the ATH network and our merchant acquiring and payment services business in Puerto Rico, we are involved in a significant percentage of the debit and credit card transactions conducted in Puerto Rico each day.
From time to time, card associations and debit networks change interchange, processing, and other fees, which could impact our merchant acquiring and payment services businesses.
From time to time, payment card networks change interchange, processing, and other fees, which could impact our merchant acquiring and payment services businesses.
It is possible that other types of environmental and social regulations, for example regulations regarding the use of energy or water or regulations regarding human capital management matters, may also result in increased costs.
It is possible that other types of environmental and social regulations, for example regulations regarding the use of energy or water or 23 Table of Contents regulations regarding human capital management matters, may also result in increased costs.
Puerto Rico ’ s fiscal crisis could have a material adverse effect on our business and the trading price of our common stock. For the years ended December 31, 2023 and 2022, approximately 73% and 78%, respectively, of our total revenues were generated from our operations in Puerto Rico.
Puerto Rico ’ s fiscal crisis could have a material adverse effect on our business and the trading price of our common stock. For the years ended December 31, 2024 and 2023, approximately 64% and 73%, respectively, of our total revenues were generated from our operations in Puerto Rico.
If companies in the financial services and related industries decide not to commence new operations or not to expand their existing operations in Puerto Rico, or consider closing operations in Puerto Rico, the demand for our services could be negatively affected. Our operations, business, customers and partners could be adversely affected by climate change.
If companies in the financial services and related industries decide not to commence new operations or not to expand their existing operations in Puerto Rico, or consider closing operations in Puerto Rico, the demand for our services could be negatively affected. Our operations, business, customers and partners could be adversely affected by climate change or other environmental or social pressures.
Risks Related to Our Business 14 Table of Contents Our services to Banco Popular, our largest customer, account for a significant portion of our revenues, and we expect that our services to Popular will continue to represent a significant portion of our revenues for the foreseeable future.
Risks Related to Our Business Our services to Banco Popular, our largest customer, account for a significant portion of our revenues, and we expect that our services to Popular will continue to represent a significant portion of our revenues for the foreseeable future.
If we do infringe a third party’s rights and are unable to provide a sufficient workaround, we may need to negotiate with holders of those rights to obtain a license to those rights or otherwise settle any infringement claim as a party that makes a claim of infringement against us may obtain an injunction preventing us from shipping products containing the allegedly infringing technology.
If we were found to be infringing a third party’s rights and are unable to provide a sufficient workaround, we may need to negotiate with holders of those rights to obtain a license to those rights or otherwise settle any infringement claim as a party that makes a claim of infringement against us may obtain an injunction preventing us from shipping products containing the allegedly infringing technology.
We are exposed to fluctuations in inflation, which could negatively affect our business, financial condition and results of operations. The markets in which we operate have experienced historically high levels of inflation.
We are exposed to fluctuations in inflation, which could negatively affect our business, financial condition and results of operations. 28 Table of Contents The markets in which we operate have experienced historically high levels of inflation.
In the event inflation remains elevated or continues to increase, we may seek to increase the sales prices of our products and services in order to maintain satisfactory margins. Any attempts to offset cost increases with price increases may result in reduced sales, increase customer dissatisfaction or otherwise harm our reputation.
In the event inflation increases again, we may seek to increase the sales prices of our products and services in order to maintain satisfactory margins. Any attempts to offset cost increases with price increases may result in reduced sales, increase customer dissatisfaction or otherwise harm our reputation.
Certain of these events may become more frequent or intense as a result of climate change. For more information, see our risk factor titled "Our operations, business, customers and partners could be adversely affected by climate change".
Certain of these events may become more frequent or intense as a result of climate change or other environmental or social pressures. For more information, see our risk factor titled "Our operations, business, customers and partners could be adversely affected by climate change or other environmental or social pressures".
We cannot predict the size of future issuances of our common stock or the effect, if any that future issuances and sales of our 28 Table of Contents common stock will have on the market price of our common stock.
We cannot predict the size of future issuances of our common stock or the effect, if any that future issuances and sales of our common stock will have on the market price of our common stock.
In addition to risks related to license requirements, use of certain open-source software carries greater technical and legal risks than does the use of third-party commercial software.
In addition to risks related to license requirements, use of certain OSS carries greater technical and legal risks than does the use of third-party commercial software.
The termination of Banco Popular’s or our subsidiaries’ member registration or our subsidiaries’ status as a certified service provider, or any changes in card association or other network rules or standards, including interpretation and implementation of the rules or standards, that increase the cost of doing business or limit our ability to provide transaction-processing services to or through our customers, could have an adverse effect on our business, results of operations and financial condition.
The termination of Banco Popular’s or our subsidiaries’ member registration or our subsidiaries’ status as a registered and certified third party service provider, or any changes in payment network rules or standards, including interpretation and implementation of the rules or standards, that increase the cost of doing business or limit our ability to provide transaction-processing services to or through our customers, could have an adverse effect on our business, results of operations and financial condition.
Item 1A. Risk Factors Readers should carefully consider, in connection with other information disclosed in this Annual Report on Form 10-K, the risks and uncertainties described below. The following discussion sets forth risks that we believe are material to our stockholders and prospective stockholders.
Item 1A. Risk Factors Readers should carefully consider, in connection with other information disclosed in this Report, the risks and uncertainties described below. The following discussion sets forth risks that we believe are material to our stockholders and prospective stockholders.
Changes in credit card association or other network rules or standards could adversely affect our business. In order to provide our transaction-processing services, several of our subsidiaries are registered with or certified by Visa, Discover and MasterCard and other networks as members or as service providers for member institutions.
Changes in payment card network or other network rules or standards could adversely affect our business. In order to provide our transaction-processing services, several of our subsidiaries are registered with or certified by Visa, Discover and MasterCard and other networks as members or as third-party providers for member institutions.
Even though some of these attacks have been successful; none of these actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition, and we cannot guarantee that any such incidents will not have such an impact in the future.
Even though some of these attacks have been successful, none of these actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition but we cannot guarantee that material incidents will not occur in the future.
Banco Popular sponsors us as an independent sales organization with respect to certain credit card associations and is required to exclusively refer to us any merchant that inquires about the service, requests or otherwise evidences interest in merchant and other services.
Banco Popular sponsors us as an independent sales organization with respect to certain payment card network and is required to exclusively refer to us any merchant that inquires about the service, requests or otherwise shows interest in merchant and other services.
Regulation of the electronic payment card industry has increased significantly in recent years. There is also continued scrutiny by the U.S. Congress of the manner in which payment card networks and card issuers set various fees. Banking regulators have been strengthening their examination guidelines with respect to relationships between banks and their third-party service providers, such as us.
There is also continued scrutiny by the U.S. Congress of the manner in which payment card networks and card issuers set various fees. Banking regulators have been strengthening their examination guidelines with respect to relationships between banks and their third-party service providers, such as us.
In addition to the $194.0 million which was available for borrowing under our revolving credit facility as of December 31, 30 Table of Contents 2023, the terms of the secured credit facilities enable us to increase the amount available under the term loan and/or revolving credit facilities if we are able to obtain loan commitments from banks and satisfy certain other conditions.
In addition to the $193.9 million which was available for borrowing under our revolving credit facility as of December 31, 2024, the terms of the secured credit facilities enable us to increase the amount available under the term loan and/or revolving credit facilities if we are able to obtain loan commitments from banks and satisfy certain other conditions.
For example, our actions or statements that we may make based on expectations, assumptions, or third-party information that we currently believe to be reasonable may subsequently be determined to be erroneous or not in keeping with best practice.
For example, our actions or statements that we may make based on expectations, assumptions, or third-party information that we currently believe to be reasonable may subsequently be determined to be erroneous or not in keeping with best practice. There are also increasing regulatory expectations for ESG matters.
Competitive pressures could result in our merchant acquiring and payment services businesses absorbing a portion of such increases in the future, which would increase our operating costs, reduce our profit margin, and adversely affect our business, results of operations and financial condition. We are subject to extensive government regulation and oversight.
Competitive pressures could result in our merchant acquiring and payment services businesses absorbing a portion of such increases in the future, which would increase our operating costs, reduce our profit margin, and adversely affect our business, results of operations and financial condition.
Examples of merchant fraud include merchants or other parties knowingly using a stolen or counterfeit credit, debit or prepaid card, card number, or other credentials to record a false sales or credit transaction, processing an invalid card or intentionally failing to deliver the merchandise or services sold in an otherwise valid transaction.
Examples of merchant fraud include merchants or other parties knowingly using a stolen or counterfeit credit, debit or prepaid card, card number, or other credentials to record a false sales or credit transaction, processing an invalid card, selling goods or services that are considered forbidden by the payment card networks, or intentionally failing to deliver the merchandise or services sold in an otherwise valid transaction.
Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud.
Criminals and other misfeasors are using increasingly sophisticated methods to engage in forbidden and/or illegal activities such as counterfeiting and fraud.
We are subject to a series of risks associated with scrutiny of environmental, social, and sustainability matters. Companies across industries are facing increasing scrutiny from a variety of stakeholders related to their ESG practices.
We are subject to a series of risks associated with scrutiny of environmental, social, and sustainability matters. Companies across industries are facing increasing scrutiny from a variety of stakeholders and policymakers related to their ESG practices, such as climate change and human capital matters.
Adverse economic conditions, such as those caused by the COVID-19 pandemic, could result in a decrease in consumers' use of banking services and financial service providers resulting in significant decreases in the demand for our products and services which could adversely affect our business and operating results.
Adverse economic conditions could result in a decrease in consumers' use of banking services and financial service providers resulting in significant decreases in the demand for our products and services which could adversely affect our business and operating results.
Additionally, we are subject to the PCI DSS, issued by the Payment Card Industry Security Standards Council. The PCI DSS contains compliance requirements regarding our security surrounding the physical and electronic storage, processing and 20 Table of Contents transmission of cardholder data.
Additionally, we are subject to the Payment Card Industry’s Data Security Standards (“PCI DSS”), promulgated by the Payment Card Industry Security Standards Council. The PCI DSS contains compliance requirements regarding our security surrounding the physical and electronic storage, processing, and transmission of cardholder data.
In addition, inflation has driven a rising interest rate environment, which has had an adverse effect on our cost of funding, as well as led to enhanced volatility on foreign currency exchange rates.
In addition, inflation has driven in the past and may in the future drive a rising interest rate environment, which has had and may in the future have an adverse effect on our cost of funding, as well as led and may in the future lead to enhanced volatility on foreign currency exchange rates.
Our amended and restated certificate of incorporation authorizes us to issue 206,000,000 shares of common stock, of which 65,450,799 are outstanding as of December 31, 2023. All of these shares, other than the 866,616 shares held by our officers and directors as of December 31, 2023 are freely transferable without restriction or further registration under the Securities Act.
Our amended and restated certificate of incorporation authorizes us to issue 206,000,000 shares of common stock, of which 63,614,077 are outstanding as of December 31, 2024. All of these shares, other than certain outstanding shares held by our officers and directors as of December 31, 2024, are freely transferable without restriction or further registration under the Securities Act.
We and our customers are also generally subject to U.S. federal, Puerto Rico and other countries’ laws, rules and regulations that affect the electronic payments industry, including with respect to activities in the countries where we operate and due to our relationship with customers that are subject to banking and financial regulation, including Popular.
We and our customers are also generally subject to U.S. federal, Puerto Rico and other countries’ laws, rules and regulations that affect the electronic payments industry, including with respect to activities in the countries where we operate and due to our relationship with customers that are subject to banking and financial regulation, including Popular. 22 Table of Contents Regulation of the electronic payment card industry has increased significantly in recent years.
While we are not a direct-to-consumer business, we do collect, process, store, use and share personal data of our employees and business partners, which is governed by a variety of U.S. federal and state and foreign laws and regulations. Laws and regulations relating to data privacy and security are complex and rapidly evolving and subject to potentially differing interpretations.
While we are not a direct-to-consumer business, we do collect, process, store, use and share personal data of our employees and business partners, which is governed by a variety of U.S. federal and state and foreign laws and regulations.
For example, the inability to adopt technological advancements surrounding POS technology available to merchants could have a material and adverse impact on our merchant acquiring business.
Our inability to respond to new competitors and technological advancements could impact all of our businesses. For example, the inability to adopt technological advancements surrounding POS technology otherwise generally available to merchants could have a material and adverse impact on our merchant acquiring business.
The occurrence of any of the following risks might cause our stockholders to lose all or a part of their investment in our Company. Some statements contained in this Report, including statements in the following risk factors section, constitute forward-looking statements. Please also refer to the section titled “Forward- Looking Statements” at the beginning of this Report.
The occurrence of any of the following risks might cause our stockholders to lose all or a part of their investment in our Company. Some statements contained in this Report, including statements in the following risk factors section, constitute 14 Table of Contents forward-looking statements.
We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations, or other legal obligations relating to privacy or security or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.
We have historically been and may continue in the future to be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations, or other legal obligations relating to privacy or security or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business, which could result in a material adverse effect on our business.
We are subject to security breaches or other confidential data theft from our systems, which can adversely affect our reputation and business. 17 Table of Contents As part of our business, we electronically receive, process, store and transmit a wide range of confidential information, including sensitive customer information and personal consumer data, such as names and addresses, social security numbers, driver’s license numbers, cardholder data and payment history records, as well as proprietary information belonging to our business or to our business partners (collectively, "Confidential Information").
As part of our business, we electronically receive, process, store and transmit a wide range of confidential information, including sensitive customer information and personal consumer data, such as names and addresses, social security numbers, driver’s license numbers, cardholder data and payment history records, as well as proprietary information belonging to our business or to our business partners (collectively, "Confidential Information").
Our businesses are dependent on our ability to reliably process, record and monitor a large number of transactions. We settle funds on behalf of financial institutions, other businesses and consumers and process funds transactions from clients, card issuers, payment networks and consumers on a daily basis for a variety of transaction types.
We settle funds on behalf of financial institutions, other businesses and consumers and process funds transactions from clients, card issuers, payment networks and consumers on a daily basis for a variety of transaction types.
If alternative software or technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our products, subscriptions and services. As a result, our margins, market share and results of operations could be significantly harmed.
If alternative software or technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our products, subscriptions and services.
Additionally, future disease pandemics or any other public health crisis may materially adversely affect our business, results of operations and financial condition, similar to or beyond those disruptions and operational consequences that we experienced in connection with the COVID-19 pandemic.
Additionally, future pandemics or any other public health crises may materially adversely 24 Table of Contents affect our business, results of operations and financial condition, similar to or beyond those disruptions and operational consequences that we experienced in connection with the COVID-19 pandemic. Prolonged economic uncertainties could limit our ability to grow our business and negatively affect our operating results.
Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary information will be effective. 26 Table of Contents If EVERTEC Group does not comply with the terms of its preferential tax exemption grant, it may be subject to reduction of the benefits of the grant, tax penalties, other payment obligations or full revocation of the grant, which could have a material adverse effect on our financial condition, results of operations and our stock price.
If EVERTEC Group does not comply with the terms of its preferential tax exemption grant, it may be subject to reduction of the benefits of the grant, tax penalties, other payment obligations or full revocation of the grant, which could have a material adverse effect on our financial condition, results of operations and our stock price.
The A&R MSA by and among Popular, Banco Popular de Puerto Rico and EVERTEC Group, is our most significant client contract, and was amended and restated to include a term ending in 2028.
For the year ended December 31, 2024, approximately 31% of our revenue was attributable to Banco Popular, a wholly-owned subsidiary of Popular. The A&R MSA by and among Popular, Banco Popular de Puerto Rico and EVERTEC Group, is our most significant client contract, and was amended and restated to include a term ending in 2028.
As of December 31, 2023, the total principal amount of our indebtedness was approximately $993.5 million.
As of December 31, 2024, the total principal amount of our indebtedness was approximately $969.6 million.
As we seek to expand our business, we are, and may increasingly become, subject to various laws, regulations, standards, and contractual obligations relating to data privacy and security in the jurisdictions in which we operate. 18 Table of Contents Certain states in the United States and most countries have adopted privacy and security laws that may apply to our business.
As we seek to expand our business, we are, and may increasingly become, subject to various laws, regulations, standards, and contractual obligations relating to data privacy and security in the jurisdictions in which we operate.
We and our third-party providers regularly experience cyberattacks and other incidents, and we expect such attacks and incidents to continue in varying degrees. In particular, we have experienced actual and attempted cyber-attacks of our IT Systems, such as through phishing scams, ransomware, exploitation of vulnerabilities in our IT Systems, and other methods of attack.
In particular, we have experienced actual and attempted cyber-attacks of our IT Systems, such as through phishing scams, ransomware, exploitation of vulnerabilities in our IT Systems, and other methods of attack.
As a result, we may be unable to detect, investigate, remediate, or recover from future attacks or incidents, or to avoid a material adverse impact to our IT Systems, data, or business. 16 Table of Contents There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures, will be fully implemented, complied with, or effective in protecting our IT Systems and data, and our systems and processes may be unable to prevent material security breaches.
There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures, will be fully implemented, complied with, or effective in protecting our IT Systems and data, and our systems and processes may be unable to prevent material security breaches.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. 31 Table of Contents Key elements of our cybersecurity risk management program include but are not limited to: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and digital assets; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, incident response personnel, senior management and our Board of Directors; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers, suppliers, and vendors, based on their critically and risk profile.
Biggest changeKey elements of our cybersecurity risk management program include but are not limited to: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and digital assets; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, incident response personnel, senior management and our Board of Directors; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers, suppliers, and vendors, based on their critically and risk profile.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
Item 1C. Cybersecurity 32 Table of Contents Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
Our Chief Information Security Officer experience includes approximately 17 years in different information security roles, including recent roles as Chief Information Security Officer of Unum and Deputy Chief Information Security Officer of MasterCard.
Our Chief 33 Table of Contents Information Security Officer experience includes approximately 18 years in different information security roles, including recent roles as Chief Information Security Officer of Unum and Deputy Chief Information Security Officer of MasterCard.
See "Risk factors - We rely on our information technology systems, employees and certain suppliers and counterparties, and certain failures or disruptions in those systems or chains could materially adversely affect our operations." Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Information Technology Committee (the "IT Committee") oversight of cybersecurity and other information technology risks, which includes, among others things: • oversight of IT and cybersecurity related risks with regard to the Company’s IT platforms and investments; • advising and making recommendations to the Board regarding the state of the Company’s cybersecurity preparedness, including review of the threat landscape facing the Company; and • monitoring and evaluating the effectiveness of IT security and cybersecurity protocols within the Company, including disaster recover capabilities.
" Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Information Technology Committee (the "IT Committee") oversight of cybersecurity and other information technology risks, which includes, among others things: • oversight of IT and cybersecurity related risks with regard to the Company’s IT platforms and investments; • advising and making recommendations to the Board regarding the state of the Company’s cybersecurity preparedness, including review of the threat landscape facing the Company; and • monitoring and evaluating the effectiveness of IT security and cybersecurity protocols within the Company, including disaster recover capabilities.
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Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
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See "Risk Factors— We rely on our information technology systems, employees and certain suppliers and counterparties, and certain failures or disruptions in those systems or chains could materially adversely affect our operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease space 32 Table of Contents in 20 other locations across Latin America and the Caribbean, including various data centers and office facilities to meet our sales and operating needs. We believe that our properties are in good operating condition and adequately serve our current business operations.
Biggest changeWe also lease space in 24 other locations across Latin America and the Caribbean, including various data centers and office facilities to meet our sales and operating needs. We believe that our properties are in good operating condition and adequately serve our current business operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement believes, based on the opinion of legal counsel and other factors, that the aggregated liabilities, if any, arising from such actions will not have a material adverse effect on the financial condition, results of operations and the cash flows of the Company. See Note 25 to the Audited Consolidated Financial Statements appearing elsewhere in this Report for additional information.
Biggest changeGiven that such proceedings are subject to uncertainty, there can be no assurance that such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, results of operations, financial condition or cash flows. See Note 25 to the Audited Consolidated Financial Statements appearing elsewhere in this Report for additional information.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes equity compensation plans approved by security holders and equity compensation plans that were not approved by security holders as of December 31, 2023: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (A) Weighted average exercise price of outstanding options, warrants and rights (B) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C) Equity compensation plans approved by security holders 1,799,012 $0.00 3,117,365 Equity compensation plans not approved by security holders N/A N/A N/A Stock Performance Graph The following Performance Graph shall not be deemed incorporated by reference and shall not constitute soliciting material or otherwise considered filed under the Securities Act or the Exchange Act.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans Item 12 of Part III contains information concerning securities authorized for issuance under our equity compensation plans. Stock Performance Graph The following Performance Graph shall not be deemed incorporated by reference and shall not constitute soliciting material or otherwise considered filed under the Securities Act or the Exchange Act.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on the NYSE under the symbol “EVTC”. Holders of Record As of February 22, 2024, there were 328 registered holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on the NYSE under the symbol “EVTC”. Holders of Record As of February 11, 2025, there were 349 registered holders of our common stock.
The following graph shows a comparison of the cumulative total return for our common stock, the Russell 2000 Index and the S&P Composite 1500 / Information Technology Index for the five years ended December 31, 2023. The graph assumes that $100 was invested on December 31, 2017 in our common stock and each index and that all dividends were reinvested.
The following graph shows a comparison of the cumulative total return for our common stock, the Russell 2000 Index and the S&P Composite 1500 / Information Technology Index for the five years ended December 31, 2024.
In addition, the secured credit facilities limit EVERTEC Inc.’s ability to pay distributions on its equity interests.
In addition, the secured credit facilities limit EVERTEC Inc.’s ability to pay distributions on its equity interests. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Obligations.” Issuer Purchases of Equity Securities None.
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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Obligations.” Issuer Purchases of Equity Securities The following table summarizes repurchases of shares of the Company's common stock in the three-month period ended December 31, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of a publicly announced program (1) Approximate dollar value of shares that may yet be purchased under the program 11/1/2023-11/30/2023 209,560 35.26 209,560 12/1/2023-12/31/2023 135,155 37.79 135,155 344,715 36.82 344,715 137,493,259 (1) On July 20, 2023, the Company announced that its Board approved an increase to the current stock repurchase program, authorizing the purchase of up to an aggregate of $150 million shares of the Company’s common stock under the program which expires on December 31, 2024.
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The graph assumes that $100 was invested on December 31, 2019 in our common stock and each index and that all dividends were reinvested. 35 Table of Contents Note that historical stock price performance is not necessarily indicative of future stock price performance.
Removed
Under the repurchase program, the Company may repurchase shares in the open market, through accelerated share repurchase programs, Rule 10b5-1 plans, or in privately negotiated transactions, subject to business opportunities and other factors.
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Securities Authorized for Issuance under Equity Compensation Plans On May 20, 2022 (the “Effective Date”), the Company’s stockholders approved the Company’s 2022 Equity Incentive Plan (the “2022 Plan”) which replaced the Company’s 2013 Equity Incentive Plan. The 2022 Plan allows the Company to grant 5,250,000 shares of common stock.
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In addition, 757,357 shares remaining available for grant under the 2013 Plan as of the Effective Date were rolled over to the 2022 Plan and are available to be granted as of the Effective Date.
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Under the terms of the 2022 Plan, any shares of common stock of the Company covered by outstanding awards under the 2013 Plan as of the Effective 34 Table of Contents Date will again become available for grant, to the extent the shares underlying such awards are not issued because they are forfeited or settled or terminated without distribution of shares of common stock of the Company.
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Note that historical stock price performance is not necessarily indicative of future stock price performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(“CONTADO”), net of cash dividends received. 2) Primarily represents share-based compensation and severance payments. 3) Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and the foreign currency swap loss. 4) Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies. 5) Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity. 6) Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount. 7) Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discrete items. 8) Represents the non-controlling equity interests, net of amortization for intangibles created as part of the purchase.
Biggest changeIn addition, in evaluating EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, you should be aware that in the future the Company may incur expenses such as those excluded in calculating them. 49 Table of Contents A reconciliation of net income to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share is provided below: Year Ended December 31, 2024 (Dollar amounts in thousands) Net income $ 114,779 Income tax expense 4,847 Interest expense, net 61,401 Depreciation and amortization 127,846 EBITDA 308,873 Equity income (1) (1,270) Compensation and benefits (2) 31,644 Transaction, refinancing and other fees (3) (4,215) Loss on foreign currency remeasurement (4) 5,198 Adjusted EBITDA 340,230 Operating depreciation and amortization (5) (61,467) Cash interest expense, net (6) (56,931) Income tax expense (7) (6,371) Non-controlling interest (8) (2,217) Adjusted net income $ 213,244 Net income per common share (GAAP): Diluted $ 1.73 Adjusted Earnings per common share (Non-GAAP): Diluted $ 3.28 Shares used in computing adjusted earnings per common share: Diluted 65,077,535 1) Represents the elimination of non-cash equity earnings from our equity investments, net of dividends received. 2) Primarily represents share-based compensation and severance payments. 3) Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, recorded as part of selling, general and administrative expenses, the elimination of multi-year non recurring gains recognized in connection with the sale of tax credits and realized gains from the change in fair market value of equity securities. 4) Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies. 5) Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity. 6) Represents interest expense, less interest income, as they appear on the consolidated statements of income and comprehensive (loss) income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount. 7) Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discrete items. 8) Represents the non-controlling equity interests, net of amortization for intangibles created as part of the purchase.
We believe that the penetration of electronic payments in the markets in which we operate is significantly lower relative to the U.S. market, which, together with the ongoing shift from cash and paper methods of payment to electronic payments will continue to generate growth opportunities for our business.
We continue to believe that the penetration of electronic payments in the markets in which we operate is significantly lower relative to the U.S. market, which, together with the ongoing shift from cash and paper methods of payment to electronic payments will continue to generate growth opportunities for our business.
Accordingly, the amount of benefit recognized in the consolidated financial statements may differ from the amount taken or expected to be taken in the tax return resulting in unrecognized tax benefits (“UTBs”). The Company recognizes the interest and penalties associated with UTBs as part of the provision for income taxes on its consolidated statements of income and comprehensive income.
Accordingly, the amount of benefit recognized in the consolidated financial statements may differ from the amount taken or expected to be taken in the tax return resulting in unrecognized tax benefits (“UTBs”). The Company recognizes the interest and penalties associated with UTBs as part of the provision for income taxes on its consolidated statements of income and comprehensive (loss) income.
We intend to indefinitely reinvest these funds outside of Puerto Rico, and based on our liquidity forecast, we will not need to repatriate this cash to fund the Puerto Rico operations or to meet debt-service obligations.
We intend to reinvest these funds outside of Puerto Rico, and based on our liquidity forecast, we will not need to repatriate this cash to fund the Puerto Rico operations or to meet debt-service obligations.
The Company’s lease contracts have remaining terms ranging from 1 year to 6 years, some of which may include options to extend the leases for up to 5 years, and some which may include the option to terminate the lease within 1 year.
The Company’s lease contracts have remaining terms ranging from 1 year to 5 years, some of which may include options to extend the leases for up to 5 years, and some which may include the option to terminate the lease within 1 year.
These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations that are necessary to run our business.
These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of income and comprehensive income in the period that includes the enactment date.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of income and comprehensive (loss) income in the period that includes the enactment date.
We believe our business is well-positioned to continue to expand across the fast-growing Latin American region. We are differentiated, in part, by our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets.
We believe our business is well-positioned to continue to expand across the fast-growing Latin America region. We are differentiated, in part, by our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets.
Solution revenues consist of (a) licensing, support and maintenance (“subscription”), implementation and customization of software used to provide financial products in areas such as core banking, credit, investments, payments, foreign exchange, mutual funds, pension funds and consortium, in addition to software used to execute processes such as digital onboarding, digital signature and digital collection; and (b) outsourcing of mission critical IT services.
Solutions revenues consist of (a) licensing, support and maintenance (“subscription”), implementation and customization of software used to provide financial products in areas such as core banking, credit, investments, payments, foreign exchange, mutual funds, pension funds and consortium, in addition to software used to execute processes such as digital onboarding, digital signature and digital collection; and (b) outsourcing of mission critical IT services.
Adjusted Net Income is defined as Adjusted EBITDA less: operating depreciation and amortization expense, defined as GAAP Depreciation and amortization less amortization of intangibles related to acquisitions such as customer relationships, trademarks; cash interest expense defined as GAAP interest expense, less GAAP interest income adjusted to exclude non-cash amortization of debt issue costs, premium and accretion of discount; income tax expense which is calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for uncertain tax position releases, tax true-ups, windfall from share-based compensation, unrealized gains and losses from foreign currency remeasurement, among others; and non-controlling interests, net of amortization for intangibles created as part of the purchase.
Adjusted Net Income is defined as Adjusted EBITDA less: operating depreciation and amortization expense, defined as GAAP Depreciation and amortization less amortization of intangibles related to acquisitions such as customer relationships, trademarks; cash interest expense defined as GAAP interest expense, less GAAP interest income adjusted to exclude non-cash amortization of debt issue costs, premium and accretion of discount; income tax expense which is calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for uncertain tax positions, tax true-ups, windfall from share-based compensation, unrealized gains and losses from foreign currency remeasurement, among others; and non-controlling interests, net of amortization for intangibles created as part of the purchase.
Our broad suite of services spans the entire transaction processing value chain and includes a range of front-end customer-facing solutions such as the electronic capture and authorization of transactions at the point-of-sale for both card present transactions and card not present transactions, as well as back-end support services such as the clearing and settlement of transactions and account reconciliation for card issuers.
Our broad suite of services spans the entire payment processing value chain and includes a range of front-end customer-facing solutions such as the electronic capture and authorization of transactions at the point-of-sale for both card present transactions and card-not-present transactions, as well as back-end support services such as the clearing and settlement of transactions and account reconciliation for card issuers.
We believe this capability provides several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, win new customers, develop new sales channels, and enter new markets.
We believe this capability provides several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, gain new customers, develop new sales channels, and enter new markets.
We benefit from an attractive business model, the hallmarks of which are recurring revenue, scalability, significant operating margins and moderate capital expenditure requirements. Our revenue is predominantly recurring in nature because of the mission-critical and embedded nature of the services we provide. In addition, we generally enter into multi-year contracts with our customers.
We benefit from an attractive business model, the hallmarks of which are recurring revenue, scalability, significant operating margins and moderate capital expenditure requirements. Our revenue is predominantly recurring in nature because of the mission-critical and embedded nature of the 37 Table of Contents services we provide. In addition, we generally enter into multi-year contracts with our customers.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) focuses on discussion of our 2023 results as compared to our 2022 results. For discussion of our 2022 results as compared to our 2021 results, see “Part II, Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) focuses on discussion of our 2024 results as compared to our 2023 results. For discussion of our 2023 results as compared to our 2022 results, see “Part II, Item 7.
Additionally, our credit agreement imposes certain restrictions on the distribution of dividends from subsidiaries. 44 Table of Contents Our primary use of cash is for operating expenses, working capital requirements, capital expenditures, acquisitions, dividend payments, share repurchases, debt service, and other transactions as opportunities present themselves.
Additionally, our credit agreement imposes certain restrictions on the distribution of dividends from subsidiaries. Our primary use of cash is for operating expenses, working capital requirements, capital expenditures, acquisitions, dividend payments, share repurchases, debt service, and other transactions as opportunities present themselves.
Notes 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 December 31, 2023, the outstanding principal balance of the note payable on a discounted basis was $7.4 million.
Notes 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 December 31, 2024, the outstanding principal balance of the note payable on a discounted basis was $6.5 million.
Management's Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023. See Note 1 to the Audited Consolidated Financial Statements for additional information about the Company and the basis of presentation of our financial statements.
Management's Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. See Note 1 to the Audited Consolidated Financial Statements for additional information about the Company and the basis of presentation of our financial statements.
The negative covenants in the Credit Facilities include, among other things, limitations (subject to exceptions) on the ability of EVERTEC and its restricted subsidiaries to: • declare dividends and make other distributions; 47 Table of Contents • redeem or repurchase capital stock; • grant liens; • make loans or investments (including acquisitions); • merge or enter into acquisitions • sell assets; • enter into any sale or lease-back transactions; • incur additional indebtedness; • prepay, redeem or repurchase certain indebtedness; • modify the terms of certain debt; • restrict dividends from subsidiaries; • change the business of EVERTEC or its subsidiaries; and • enter into transactions with their affiliates.
The negative covenants include, among other things, limitations (subject to exceptions) on the ability of EVERTEC and its restricted subsidiaries to: • declare dividends and make other distributions; • redeem or repurchase capital stock; • grant liens; • make loans or investments (including acquisitions); • merge or enter into acquisitions • sell assets; • enter into any sale or lease-back transactions; • incur additional indebtedness; • prepay, redeem or repurchase certain indebtedness; • modify the terms of certain debt; • restrict dividends from subsidiaries; • change the business of EVERTEC or its subsidiaries; and • enter into transactions with their affiliates.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash unrealized items and unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from non-cash unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency.
Adjusted EBITDA reviewed by the CODM is calculated as EBITDA further adjusted to exclude certain non-cash unrealized items and unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from non-cash unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency.
The Company funded such repurchases with cash on hand. At December 31, 2023, the Company's share repurchase program has approximately $137.5 million remaining and approved for future use. The Company may repurchase shares in the open market, through accelerated share repurchase programs, 10b5-1 plans, or in privately negotiated transactions, subject to business opportunities and other factors.
The Company funded such repurchases with cash on hand. At December 31, 2024, the Company's share repurchase program has approximately $138 million remaining and approved for future use. The Company may repurchase shares in the open market, through accelerated share repurchase programs, 10b5-1 plans, or in privately negotiated transactions, subject to business opportunities and other factors.
On July 1, 2022, we modified and extended the main commercial agreements with Popular, including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement (as amended, the "A&R ISO Agreement"), a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA (the "A&R ISO Agreement").
On July 1, 2022, we modified and extended the main commercial agreements with Popular, including obtaining a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement, a 5-year extension of the 38 Table of Contents ATH Network Participation Agreement and a 3-year extension of the MSA (as amended, the "A&R ISO Agreement").
These include: (i) merchant acquiring services, which enable POS and e-commerce merchants to accept and process electronic methods of payment such as debit, credit, prepaid and EBT cards; (ii) payment processing services, which enable financial institutions and other issuers to manage, support and facilitate the processing for credit, debit, prepaid, automated teller machines (“ATM”) and EBT card programs; and (iii) business process management solutions, which provide “mission-critical” technology solutions such as core bank processing, as well as IT outsourcing and cash management services to financial institutions, corporations and governments.
These include: (i) merchant acquiring services, which enable point of sales (“POS”) and e-commerce merchants to accept and process electronic methods of payment such as debit, credit, prepaid and electronic benefit transfer (“EBT”) cards; (ii) payment processing services, which enable financial institutions and other issuers to manage, support and facilitate the processing for credit, debit, prepaid, automated teller machines (“ATM”) and EBT card programs; and (iii) business process management solutions, which provide “mission-critical” technology solutions such as core bank processing, as well as IT outsourcing and cash management services to financial institutions, corporations and governments.
During the years ended December 31, 2023, 2022 and 2021, the Company reclassified gains of $5.6 million, losses of $3.0 million and losses of $7.1 million, respectively, from accumulated other comprehensive income (loss) into interest expense.
During the years ended December 31, 2024, 2023 and 2022, the Company reclassified gains of $8.1 million, gains of $5.6 million and losses of $3.0 million, respectively, from accumulated other comprehensive (loss) income into interest expense.
If and when applicable, these adjustments are recorded in equity and are not reflected in the accompanying consolidated statements of income and comprehensive income. 38 Table of Contents Income Tax Income taxes are accounted for under the asset and liability method.
If and when applicable, these adjustments are recorded in equity and are not reflected in the accompanying consolidated statements of income and comprehensive (loss) income. Income Tax Income taxes are accounted for under the asset and liability method.
Redeemable Non-controlling Interests The Company records redeemable non-controlling interests ("RNCI") in consolidated subsidiaries that result from business acquisition transactions where the Company is granted the right to purchase ("Call Option") and the sellers are granted the right to sell to the Company ("Put Option") the remaining interest at the calculated redemption value and classifies them as mezzanine equity in the consolidated balance sheets as potential redemption is not solely within the Company's control.
Redeemable Non-controlling Interests The Company records redeemable non-controlling interests ("RNCI") in consolidated subsidiaries that result from business acquisition transactions where the Company is granted the right to purchase and the sellers are granted the right to sell to the 39 Table of Contents Company the remaining interest at the calculated redemption value and classifies them as mezzanine equity in the consolidated balance sheets as potential redemption is not solely within the Company's control.
For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenues are primarily derived from the number of beneficiaries on file.
For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services.
As of December 31, 2023, we had cash and cash equivalents of $295.6 million, of which $206.5 million resides in our subsidiaries located outside of Puerto Rico for purposes of (i) funding the respective subsidiary’s current business operations and (ii) funding potential future investment outside of Puerto Rico.
As of December 31, 2024, we had cash and cash equivalents of $273.6 million, of which $224.5 million resides in our subsidiaries located outside of Puerto Rico for purposes of (i) funding the respective subsidiary’s current business operations and (ii) funding potential future investment outside of Puerto Rico.
Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented herein, limiting their usefulness as comparative measures. Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included at the end of this earnings release.
Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented herein, limiting their usefulness as comparative measures. Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included below.
Additionally, we offer technology outsourcing and payment transactions fraud monitoring to all the regions we serve. We serve a diversified customer base of leading financial institutions, merchants, corporations, and government agencies with “mission-critical” technology solutions that enable them to issue, process and accept transactions securely.
Additionally, we offer managed services, managed security services and payment transactions fraud monitoring to all the regions where we do business. We serve a diversified customer base of leading financial institutions, merchants, corporations, and government agencies with “mission-critical” technology solutions that enable them to issue, process and accept transactions securely.
See Note 26 to the Audited Consolidated Financial Statements appearing elsewhere in this Report for the reconciliation of EBITDA to consolidated net income. The following tables set forth information about the Company’s operations by its four business segments for the periods indicated below.
See Note 26 to the Audited Consolidated Financial Statements appearing elsewhere in this Report for the reconciliation of segment adjusted EBITDA to consolidated income before taxes. The following tables set forth information about the Company’s operations by its four reportable segments for the periods indicated below.
The Company’s presentation of Adjusted EBITDA is substantially consistent with the equivalent measurements that are contained in the secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the secured leverage ratio.
The Company’s presentation of Adjusted EBITDA is substantially consistent with the equivalent measurements that are contained in the secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the secured leverage ratio. Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of total revenues.
You should read the following discussion and analysis in conjunction with the financial statements and related notes appearing elsewhere herein. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those indicated in the forward-looking statements. See “Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with these statements.
You should read the following discussion and analysis in conjunction with the financial statements and related notes appearing elsewhere herein. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those indicated in the forward-looking statements.
Based on current SOFR rates, the Company expects to reclassify gains of $6.3 million from accumulated other comprehensive income (loss) into interest expense over the next 12 months.
Based on expected SOFR rates, the Company expects to reclassify gains of $1.7 million from accumulated other comprehensive (loss) income into interest expense over the next 12 months.
Revenues from other processing services within the Business Solutions segment are generally volume-based and depend on factors such as the number of accounts processed. In addition, EVERTEC is a reseller of hardware and software products and these resale transactions are generally non-recurring.
Revenues from other processing services within the Business Solutions segment are generally volume-based and depend on factors such as the number of accounts processed. In addition, EVERTEC is a reseller of hardware and software products and these resale transactions are generally non-recurring. The Company’s Chief Operating Decision Maker ("CODM") is the President and Chief Executive Officer (“CEO”).
As of December 31, 2022, the carrying amount of the derivative asset included on the Company's consolidated balance sheets was $7.4 million. The fair value of this derivative is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis.
As of December 31, 2023, the carrying amount of the derivatives included on the Company's consolidated balance sheets was an asset $4.4 million and a liability of $0.9 million. The fair value of this derivative is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis.
According to the September 2022 Nilson Report, we are one of the largest merchant acquirers in Latin America based on total number of transactions and we believe we are the largest merchant acquirer in the Caribbean. We serve 26 countries out of 20 offices, including our headquarters in Puerto Rico.
We believe we are one of the largest merchant acquirers in Latin America based on total number of transactions and we also believe we are the largest merchant acquirer in the Caribbean. We serve 26 countries out of 24 offices, including our headquarters in Puerto Rico.
Capital Resources Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to property and equipment. During the years ended December 31, 2023 and 2022, the Company invested approximately $85.0 million and $71.9 million, respectively in our capital resources.
Capital Resources Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to property and equipment. During the years ended December 31, 2024 and 2023, the Company invested approximately $88.4 45 Table of Contents million and $85.0 million, respectively in our capital resources.
EVERTEC is no longer deemed a subsidiary of Popular under the Bank Holding Company Act. Popular continues to be the Company’s largest customer and during the year ended December 31, 2023 approximately 35% of our revenues were generated from this relationship. 2023 Developments On February 16, 2023, the Company closed on the acquisition of 100% of paySmart.
EVERTEC is no longer deemed a subsidiary of Popular under the Bank Holding Company Act. Popular continues to be the Company’s largest customer and during the year ended December 31, 2024 approximately 31% of our revenues were generated from this relationship.
As of the date of filing of this Report, no event has occurred that constitutes an Event of Default or Default. 48 Table of Contents In this Report, we refer to the term “Adjusted EBITDA” to mean EBITDA as so defined and calculated in a substantially consistent manner for purposes of determining compliance with the total secured net leverage ratio based on the financial information for the last twelve months at the end of each quarter.
In this Report, we refer to the term “Adjusted EBITDA” to mean EBITDA as so defined and calculated in a substantially consistent manner for purposes of determining compliance with the total secured net leverage ratio based on the financial information for the last twelve months at the end of each quarter.
These non-GAAP measures include EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, each as defined below.
These non-GAAP measures include EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, each as defined below. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.
Voluntary Prepayments and Reduction and Termination of Commitments Other than as set forth below with respect to the New TLB Facility, EVERTEC Group may prepay loans under the Term Loan Facilities and permanently reduce the loan commitments under the Revolving Facility at any time without premium or penalty, subject to compensation for any break funding costs incurred by a lender and timely submission of a notice of prepayment or commitment reduction, as applicable.
Voluntary Prepayments and Reduction and Termination of Commitments EVERTEC Group may prepay loans under the Term Loan Facilities and permanently reduce the loan commitments under the Revolving Facility at any time without premium or penalty, subject to compensation for any break funding costs incurred by a lender and timely submission of a notice of prepayment or commitment reduction, as applicable; provided that any prepayment of the TLB Facility made prior to May 26, 2025 is subject to a 1% prepayment premium.
Refer to the table below for details regarding our dividends in 2023 and 2022: 45 Table of Contents Declaration Date Record Date Payment Date Dividend per share February 15, 2022 February 25, 2022 March 25, 2022 $0.05 April 21, 2022 May 2, 2022 June 3, 2022 0.05 July 28, 2022 August 8, 2022 September 2, 2022 0.05 October 21, 2022 November 1, 2022 December 2, 2022 0.05 February 16, 2023 February 28, 2023 March 17, 2023 0.05 April 20, 2023 May 1, 2023 June 2, 2023 0.05 July 20, 2023 July 31, 2023 September 1, 2023 0.05 October 19, 2023 October 30, 2023 December 1, 2023 0.05 Stock Repurchase During 2023, the Company repurchased 1,009,653 shares of the Company’s common stock at a cost of $36.1 million.
Refer to the table below for details regarding our dividends in 2024 and 2023: Declaration Date Record Date Payment Date Dividend per share February 15, 2024 February 27, 2024 March 15, 2024 0.05 April 18, 2024 April 29, 2024 June 7, 2024 0.05 July 18, 2024 July 29, 2024 September 6, 2024 0.05 October 17, 2024 October 28, 2024 December 6, 2024 0.05 February 16, 2023 February 28, 2023 March 17, 2023 0.05 April 20, 2023 May 1, 2023 June 2, 2023 0.05 July 20, 2023 July 31, 2023 September 1, 2023 0.05 October 19, 2023 October 30, 2023 December 1, 2023 0.05 Stock Repurchase During 2024, the Company repurchased 2,358,246 shares of the Company’s common stock at a cost of $82.3 million.
The Latin America Payments and Solutions segment payment revenues consist of revenues related to providing access to the ATH network of ATMs and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring.
For EBT services, revenues are primarily derived from the number of beneficiaries on file. 42 Table of Contents The Latin America Payments and Solutions segment payment revenues consist of revenues related to providing access to the ATH network of ATMs and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring.
Scheduled Amortization Payments The Term Loan A Facility and Incremental TLA Facility amortizes in equal quarterly installments at an amount equal to (a) 46 Table of Contents initially, $5,966,720.78 per quarter and (b) for any installment payments to be made in the calendar year ending 2027, $8,950,081.17 per quarter, with the balance payable on the 2022 Credit Facilities Maturity Date.
Scheduled Amortization Payments The TLA Facility amortizes in equal quarterly installments at an amount equal to $5,966,720.78 per quarter (increasing to $8,950,081.17 per quarter for any installment payments to be made in the calendar year ending 2027), with the balance payable on the TLA Facility maturity date.
Guarantees and Collateral The Credit Facilities are secured by substantially all assets of EVERTEC and its existing and future material subsidiaries (including EVERTEC Group), subject to customary exceptions.
Guarantees and Collateral The Term Loan Facilities and the Revolving Facility are guaranteed by, and secured by substantially all assets of, EVERTEC and its existing and future material subsidiaries (including EVERTEC Group), subject to customary exceptions. Covenants The Term Loan Facilities and the Revolving Facility are subject to customary affirmative and negative covenants.
In the fourth quarter of 2023, the Company prepaid $60 million of the outstanding balance on Term Loan B.
In the fourth quarter of 2023, the Company prepaid $60 million of the outstanding balance on TLB Facility.
Payment Services - Puerto Rico & Caribbean Years ended December 31, (In thousands) 2023 2022 Revenues $203,232 $178,481 Adjusted EBITDA 118,266 100,860 Adjusted EBITDA margin 58.2 % 56.5 % Payment Services - Puerto Rico & Caribbean segment revenues for the year ended December 31, 2023 increased by $24.8 million to $203.2 million when compared to the same period in the prior year.
Payment Services - Puerto Rico & Caribbean Years ended December 31, (In thousands) 2024 2023 Total Revenues $214,749 $203,232 Segment Adjusted EBITDA 121,390 118,266 Adjusted EBITDA margin 56.5 % 58.2 % Payment Services - Puerto Rico & Caribbean segment revenues for the year ended December 31, 2024 increased by $11.5 million to $214.7 million when compared to the same period in the prior year.
The effective tax rate for the period was 6.4%, compared with 10.8% in the 2022 period.
The effective tax rate for the period was 4.1%, compared with 6.4% in the 2023 period.
Rising interest rates, inflationary pressures, foreign currency fluctuations and economic uncertainty in the markets in which we operate may affect consumer confidence, which could result in a decrease in consumer spending and an impact to our financial results. 37 Table of Contents Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Rising interest rates, inflationary pressures, foreign currency fluctuations and economic uncertainty in the markets in which we operate may affect consumer confidence, which could result in a decrease in consumer spending and an impact to our financial results.
Segment Results of Operations The Company operates in four business segments: Payment Services - Puerto Rico & Caribbean, Latin America Payments and Solutions, Merchant Acquiring, and Business Solutions. 41 Table of Contents The Payment Services - Puerto Rico & Caribbean segment revenues are comprised of revenues related to providing access to the ATH debit network and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring.
The Payment Services - Puerto Rico & Caribbean segment revenues are comprised of revenues related to providing access to the ATH debit network and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring.
Recent Accounting Pronouncements For a description of recent accounting standards, see Note 2 to the Audited Consolidated Financial Statements included in this Report. Non-GAAP Financial Measures EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, as presented in this Report, are supplemental measures of our performance that are not required by or presented in accordance with GAAP.
Non-GAAP Financial Measures and Segment Reporting EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, as presented in this Report for the Company on a consolidated basis, are supplemental measures of our performance that are not required by or presented in accordance with GAAP.
Latin America Payments and Solutions Years ended December 31, (In thousands) 2023 2022 Revenues $186,503 $128,221 Adjusted EBITDA 60,158 42,607 Adjusted EBITDA margin 32.3 % 33.2 % Latin America Payments and Solutions segment revenues for the year ended December 31, 2023 increased by $58.3 million to $186.5 million when compared to the same period in the prior year.
Latin America Payments and Solutions Years ended December 31, (In thousands) 2024 2023 Total Revenues $302,784 $186,503 Segment Adjusted EBITDA 79,681 60,158 Adjusted EBITDA margin 26.3 % 32.3 % Latin America Payments and Solutions segment revenues for the year ended December 31, 2024 increased by $116.3 million to $302.8 million when compared to the same period in the prior year.
Adjusted EBITDA, as it relates to operating segments, is presented in conformity with ASC Topic 280, Segment Reporting , given that it is reported to the CODM for purposes of allocating resources. The Company has recast prior periods to conform with the modified definition of Adjusted EBITDA.
Adjusted EBITDA, as it relates to operating segments, is presented in conformity with ASC Topic 280, Segment Reporting , given that it is used by the CODM for purposes of evaluating performance and allocating resources.
Depreciation and amortization Depreciation and amortization expense for the year ended December 31, 2023 amounted to $93.6 million, an increase of $15.0 million or 19% when compared to the same period in the prior year.
Depreciation and amortization Depreciation and amortization expense for the year ended December 31, 2024 amounted to $127.8 million, an increase of $34.2 million or 37% when compared to the same period in the prior year.
EVERTEC also charges merchants for other services that are unrelated to the number of transactions or the transaction value. The Business Solutions segment consists of revenues from a full suite of business process management solutions in various product areas such as core bank processing, network hosting and management, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment.
The Business Solutions segment consists of revenues from a full suite of business process management solutions in various product areas such as core bank processing, network hosting, managed services and managed security services, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment.
Cost of revenues Cost of revenues for the year ended December 31, 2023 amounted to $336.8 million, an increase of $44.1 million or 15% when compared to the same period in the prior year.
Cost of revenues Cost of revenues for the year ended December 31, 2024 amounted to $406.4 million, an increase of $69.7 million or 21% when compared to the same period in the prior year.
Merchant Acquiring Years ended December 31, (In thousands) 2023 2022 Revenues $162,366 $151,085 Adjusted EBITDA 60,992 63,607 Adjusted EBITDA margin 37.6 % 42.1 % Merchant Acquiring segment revenues for the year ended December 31, 2023 increased by $11.3 million to $162.4 million when compared to the same period in the prior year.
Merchant Acquiring Years ended December 31, (In thousands) 2024 2023 Total Revenues $180,500 $162,366 Segment Adjusted EBITDA 72,632 60,992 Adjusted EBITDA margin 40.2 % 37.6 % Merchant Acquiring segment revenues for the year ended December 31, 2024 increased by $18.1 million to $180.5 million when compared to the same period in the prior year.
The increase in revenues was primarily driven by an increase in POS transaction volumes, continued strong digital payments growth from ATH Movil, primarily ATH Business, increases in transaction processing and monitoring services provided to the Latin America Payments and Solutions segment, as well as revenue contribution from issuing services provided to health care companies and revenue from the small acquisition completed in the second quarter of 2022.
The increase in revenues was primarily driven by 43 Table of Contents continued strong digital payments growth from ATH Movil, primarily ATH Business, as well as increased POS transactions and increases in transaction-processing and monitoring services provided to the Latin America Payments and Solutions segment partially offset by lower issuing services revenue, mainly driven by lower active accounts.
Overview EVERTEC is a leading full-service transaction-processing business in Latin America, Puerto Rico and the Caribbean, providing a broad range of merchant acquiring, payment services and business solutions.
See “Forward-Looking Statements and Risk Factor Summary” for a discussion of the risks, uncertainties and assumptions associated with these statements. Overview EVERTEC is a leading full-service transaction-processing business and financial technology provider in Latin America, Puerto Rico and the Caribbean, providing a broad range of merchant acquiring, payment services and business solutions.
Income tax expense Years ended December 31, (In thousands) 2023 2022 Variance Income tax expense $ 5,477 $ 28,983 $ (23,506) (81) % Income tax expense for the year ended December 31, 2023 amounted to $5.5 million, a decrease of $23.5 million when compared to the same period in the prior year.
Income tax expense Years ended December 31, (In thousands) 2024 2023 Variance Income tax expense $ 4,847 $ 5,477 $ (630) (12) % Income tax expense for the year ended December 31, 2024 amounted to $4.8 million, relatively flat when compared to the same period in the prior year.
The additional borrowing capacity for the Revolving Facility at December 31, 2023 was $194.0 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.
The unpaid principal balance at December 31, 2024 of the TLA Facility and TLB Facility were $429.6 million and $540.0 million. The additional borrowing capacity for the Revolving Facility at December 31, 2024 was $193.9 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.
Refer to Note 16 to the Consolidated Financial Statements in this Report for tabular disclosure of the fair value of derivatives and to Note 19 to the Consolidated Financial Statements in this Report for tabular disclosure of gains (losses) recorded on cash flow hedging activities. At December 31, 2023, the cash flow hedge is considered highly effective.
Refer to Note 16 - Financial Instruments and Fair Value Measurements for tabular disclosure of the fair value of derivatives and to Note 19 - Equity for tabular disclosure of gains (losses) recorded on cash flow hedging activities.
Comparison of the years ended December 31, 2023 and 2022 The following table presents our cash flows from operations for the years ended December 31, 2023 and 2022: Years ended December 31, (In thousands) 2023 2022 Cash provided by operating activities $ 224,290 $ 223,361 Cash used in investing activities (507,932) (133,324) Cash provided by (used in) financing activities 403,270 (156,768) Effect of foreign exchange rate on cash, cash equivalents and restricted cash 8,439 (3,529) Net increase (decrease) in cash, cash equivalents and restricted cash $ 128,067 $ (70,260) Net cash provided by operating activities for the year ended December 31, 2023 was $224.3 million, an increase of $0.9 million compared to 2022.
Comparison of the years ended December 31, 2024 and 2023 The following table presents our cash flows from operations for the years ended December 31, 2024 and 2023: Years ended December 31, (In thousands) 2024 2023 Cash provided by operating activities $ 260,059 $ 211,194 Cash used in investing activities (118,282) (507,932) Cash (used in) provided by financing activities (152,560) 416,366 Effect of foreign exchange rate on cash, cash equivalents and restricted cash (18,292) 8,439 Net (decrease) increase in cash, cash equivalents and restricted cash $ (29,075) $ 128,067 Net cash provided by operating activities for the year ended December 31, 2024 was $260.1 million, an increase of $48.9 million compared to 2023 as the Company continues to effectively manage working capital.
Interest Rate Swaps As of December 31, 2023, the Company has two interest rate swap agreements, entered into in December 2018 and May 2023, which convert a portion of the interest rate payments on the Company’s 2024 Term B Loan from variable to fixed: 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% As of December 31, 2023, the carrying amount of the derivatives included on the Company’s consolidated balance sheets was an asset of $4.4 million and a liability of $0.9 million.
Swap Amendment Effective date Maturity Date Notional Amount Variable Rate Fixed Rate 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% As of December 31, 2024, the carrying amount of the derivatives included on the Company’s consolidated balance sheets was an asset of $4.3 million and a liability of $1.4 million.
With respect to the New TLB Facility, the interest rates are based on, at EVERTEC Group’s option (a) the Adjusted Term SOFR, which means SOFR plus 10 basis points, for the Interest Period in effect for such borrowing plus an applicable margin of 3.50% per annum or (b) the ABR plus an applicable margin of 2.50% per annum.
Interest The Term Loan Facilities and borrowings under the Revolving Facility accrue interest, at EVERTEC Group’s option at (a) the Adjusted Term SOFR, which means SOFR plus 10 basis points (for the TLA Facility and the Revolving Facility) and plus 0 basis points (for the TLB Facility), for the Interest Period in effect for such borrowing or (b) the ABR, in each case plus an applicable margin.
Covenant Compliance As of December 31, 2023, the total secured net leverage ratio was 2.24 to 1.00.
At December 31, 2024, the cash flow hedges are considered highly effective. 48 Table of Contents Covenant Compliance As of December 31, 2024, the total secured net leverage ratio was 2.06 to 1.00.
Net cash provided by financing activities for the year ended December 31, 2023 was $403.3 million, compared with cash used of $156.8 million in prior year.
Net cash used in financing activities for the year ended December 31, 2024 was $152.6 million, compared with cash provided of $416.4 million in prior year related to the debt issued for the Sinqia acquisition.
Adjusted EBITDA increased by $17.6 million when compared to the same period in the prior year, primarily related to the increase in revenues partially offset by higher personnel costs driven by 43 Table of Contents higher headcount from acquisitions, an increase in professional services fees and an increase in transaction processing and monitoring expenses charged from Payments Puerto Rico segment.
Adjusted EBITDA increased by $11.6 million when compared to the same period in the prior year, driven by the increase in revenues partially offset by higher processing costs from the Payment Services - Puerto Rico & Caribbean segment, an increase in costs associated with the revenue sharing agreements and an increase in operational losses.
For more information regarding EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, including a quantitative reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share to the most directly comparable GAAP financial performance measure, which is net income, see “—Net Income Reconciliation to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share” and “—Covenant Compliance” below. 39 Table of Contents Results of Operations Years ended December 31, (In thousands) 2023 2022 Variance Revenues $ 694,709 $ 618,409 $ 76,300 12 % Operating costs and expenses Cost of revenues, exclusive of depreciation and amortization shown below 336,756 292,621 44,135 15 % Selling, general and administrative expenses 128,172 89,770 38,402 43 % Depreciation and amortization 93,621 78,618 15,003 19 % Total operating costs and expenses 558,549 461,009 97,540 21 % Income from operations $ 136,160 $ 157,400 $ (21,240) (13) % Revenues Total revenues for the year ended December 31, 2023 were $694.7 million, an increase of $76.3 million compared to $618.4 million in the prior year.
For more information regarding EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, including a quantitative reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share to the most directly comparable GAAP financial performance measure, which is net income, see “—Net Income Reconciliation to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share” and “—Covenant Compliance” below. 40 Table of Contents Results of Operations Years ended December 31, (In thousands) 2024 2023 Variance Revenues $ 845,486 $ 694,709 $ 150,777 22 % Operating costs and expenses Cost of revenues, exclusive of depreciation and amortization shown below 406,416 336,756 69,660 21 % Selling, general and administrative expenses 145,558 128,172 17,386 14 % Depreciation and amortization 127,846 93,621 34,225 37 % Total operating costs and expenses 679,820 558,549 121,271 22 % Income from operations $ 165,666 $ 136,160 $ 29,506 22 % Revenues Total revenues for the year ended December 31, 2024 was $845.5 million, an increase of $150.8 million or 22% compared with $694.7 million in the prior year, reflecting the contribution from a full year from Sinqia and organic growth across all of the company's segments.
EVERTEC Group is required to make certain mandatory prepayments of the 2022 Credit Facilities in certain circumstances. Interest With respect to the 2022 Facilities and the Incremental TLA Facility, the interest rates under the Credit Facilities denominated in U.S.
EVERTEC Group is required to make certain mandatory prepayments of the Term Loan Facilities and the Revolving Facility in certain circumstances.
Adjusted EBITDA increased by $17.4 million to $118.3 million driven by the increase in revenues and the positive net effect of previously recorded operational losses, partially offset by higher operating expenses, including higher professional fees.
Adjusted EBITDA increased by $3.1 million to $121.4 million driven by the increase in revenues partially offset by higher operating expenses, including higher professional services, higher losses on disposition related to POS retirements along with increased infrastructure and programming expenses.
The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn.
We also have a $200.0 million Revolving Facility, of which $193.9 million was available for borrowing as of December 31, 2024. The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn.
The negative variance was mainly related to the gain on sale of a business of $135.6 million recorded in the prior year period upon closing of the Popular Transaction as well as the impact in 2023 from the loss on foreign currency swap of $24.1 million and an increase in interest expense of $7.5 million resulting from the increased debt raised to finance the Sinqia acquisition.
The decrease was mainly related to the loss on foreign currency swap in the prior year of $24.1 million, an increase in other income of $15.9 million mainly related to the impact from the $8.9 million gain on the sale of tax credits along with a $3.1 million gain on sale of investments, an increase in interest income of $4.8 million, and a decrease in foreign currency losses from remeasurement of $3.1 million, partially offset by an increase in interest expense of $42.4 million resulting from the increased debt raised to finance the Sinqia acquisition.
We own and operate the ATH network, which we believe is one of the leading personal identification number (“PIN”) debit networks in Latin America. We process over six billion transactions annually through a system of electronic payment networks in Puerto Rico and Latin America and a comprehensive suite of services for core banking, cash processing, and fulfillment in Puerto Rico.
We process over ten billion transactions annually through a system of electronic payment networks in Puerto Rico and Latin America and provide a comprehensive suite of services for core banking, cash processing, fulfillment in Puerto Rico and a "one stop shop" set of access to products for the financial sector in Brazil, which includes solutions such as core banking, investments, asset management, pension funds and consortium.
The decrease in the effective tax rate was primarily driven by the loss on foreign currency swap, as well as the higher interest expense resulting from the incremental debt raised as part of the Sinqia acquisition, partially offset by the impact of higher revenues in higher taxed jurisdictions, a shift in the mix of business in Puerto Rico and higher withholding taxes.
The decrease in the effective tax rate was primarily driven by the higher interest expense resulting from the incremental debt raised as part of the Sinqia acquisition, coupled with the reversal of a potential liability for uncertain tax positions as a result of the expiration of the statute of limitations, partially offset by the foreign currency hedge loss of $24.1 million in the prior year.
The following table presents the balance of operating lease obligations: December 31, (In thousands) 2023 2022 Operating lease liability - current 6,693 5,936 Operating lease liability - long-term 9,033 10,788 Total operating lease liabilities $ 15,726 $ 16,724 See Note 25 to the Audited Consolidated Financial Statements for additional information regarding operating lease obligations. 2023 Secured Credit Facilities On December 1, 2022, EVERTEC and EVERTEC Group, entered into a credit agreement with a syndicate of lenders and Truist Bank (“Truist”), 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”, and together with the Term A Loan Facility, the “2022 Credit Facilities”) that matures on December 1, 2027 (the “2022 Credit Facilities Maturity Date”).
Secured Credit Facilities 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 a $415.0 million term loan A facility (the “TLA Facility”) that matures on December 1, 2027, and a $200.0 million revolving credit facility (the “Revolving Facility”) that matures on December 1, 2027 (the “Credit Agreement”).
The New TLB Facility amortizes in equal quarterly at a rate equal to 1% per calendar year, with the balance payable on the Term Loan B Maturity Date. The Revolving Credit Facility terminates on the 2022 Credit Facilities Maturity Date, and loans thereunder may be borrowed, repaid and reborrowed prior thereto.
The TLB Facility amortizes in equal quarterly installments at a per annum rate equal to 1% of the original aggregate principal amount of the TLB Facility, with the balance payable on the TLB Facility maturity date. Any optional prepayments of the Term Loan Facilities can be applied to the remaining installments.
Borrowings under the Revolving Facility that are denominated in a currency other than Dollars will bear interest at the Alternative Currency Rate for the Interest Period in effect for such borrowing plus an applicable margin of 1.50% per annum, which applicable margin is subject to four 25 bps step-ups (i.e. 1.75%, 2.00%, 2.25% or 2.50% per annum) based upon the Company’s total net leverage ratio.
The applicable margin for (i) the TLA Facility and the Revolving Facility is 2.00% per annum for SOFR loans and 1.50% per annum for ABR loans (each subject to four 25 bps step-downs based upon the Company’s total net leverage ratio), and (ii) the TLB Facility, is 2.75% per annum for SOFR loans and 1.75% per annum for ABR loans.
Liquidity and Capital Resources Liquidity Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, acquisitions, dividend payments, share repurchases and debt service. We also have a $200.0 million Revolving Facility, of which $194.0 million was available for borrowing as of December 31, 2023.
This increase was primarily driven by the higher revenues partially offset by higher costs of sale, primarily related to the completed projects, and an increase in professional services. 44 Table of Contents Liquidity and Capital Resources Liquidity Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, acquisitions, dividend payments, share repurchases and debt service.
Business Solutions Years ended December 31, (In thousands) 2023 2022 Revenues $226,960 $235,299 Adjusted EBITDA 86,880 100,568 Adjusted EBITDA margin 38.3 % 42.7 % Business Solutions segment revenues for the year ended December 31, 2023 decreased by $8.3 million to $227.0 million when compared to the same period in the prior year, primarily driven by the impact from the assets sold as part of the Popular Transaction completed in the third quarter of 2022, which were of higher margins, partially offset by the one-time credit granted to Popular upon closing of the Popular Transaction.
Business Solutions Years ended December 31, (In thousands) 2024 2023 Total Revenues $243,975 $226,960 Segment Adjusted EBITDA 102,669 86,880 Adjusted EBITDA margin 42.1 % 38.3 % Business Solutions segment revenues for the year ended December 31, 2024 grew by $17.0 million to $244.0 million when compared to the same period in the prior year, primarily driven by completed projects, mainly for Popular and to a lesser extent the impact of the CPI escalator that started on October 1 of 1.5% for services provided to Popular.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign currency exchange risk We conduct business in certain countries in Latin America and the Caribbean for which we have determined that the functional currency is other than the U.S. dollar. Given this, our operating results are exposed to volatility due to fluctuations in exchange rates for the countries’ functional currencies.
Biggest changeSee Note 15 to the Audited Consolidated Financial Statements appearing elsewhere in this Report for additional information related to the secured credit facilities. Foreign currency exchange risk We conduct business in certain countries in Latin America for which we have determined that the functional currency is other than the U.S. dollar.
These market risks principally involve the possibility of change in interest rates that will adversely affect the value of our financial assets and liabilities or future cash flows and earnings, foreign currency exchange risk that may result in unfavorable foreign currency translation adjustments and inflation. Market risk is the potential loss arising from adverse changes in market rates and prices.
These market risks principally involve the possibility of changes in interest rates that will adversely affect the value of our financial assets and liabilities or future cash flows and earnings, foreign currency exchange risk that may result in unfavorable foreign currency translation adjustments and inflation. Market risk is the potential loss arising from adverse changes in market rates and prices.
Based upon a sensitivity analysis of our outstanding debt on December 31, 2023, a hypothetical 100 basis point increase in interest rates over our floor on our debt balances outstanding as of December 31, 2023, under the secured credit facilities would increase our annual interest expense by approximately $7.4 million.
Based upon a sensitivity analysis of our outstanding debt on December 31, 2024, a hypothetical 100 basis point increase in interest rates over our floor on our debt balances outstanding as of December 31, 2024, under the secured credit facilities would increase our annual interest expense by approximately $4.2 million.
For subsidiaries whose local currency is their functional currency, their assets and liabilities are translated into U.S. dollars at exchange rates at the balance sheet date, and revenues and expenses are translated using average exchange rates in effect during the period.
For subsidiaries whose functional currency is other than the U.S. dollar, their assets and liabilities are translated into U.S. dollars at exchange rates at the balance sheet date, and revenues and expenses are translated using average exchange rates in effect during the period.
The resulting foreign currency translation adjustments are reported in accumulated other comprehensive income (loss) in the audited consolidated balance sheets. As of December 31, 2023, the Company had $14.8 million in a favorable foreign currency translation adjustment as part of accumulated other comprehensive income compared with an unfavorable foreign currency translation adjustment of $23.5 million as of December 31, 2022.
The resulting foreign currency translation adjustments are reported in accumulated other comprehensive (loss) income in the consolidated balance sheets. As of December 31, 2024, the Company had $138.0 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive (loss) income compared with a favorable foreign currency translation adjustment of $14.8 million as of December 31, 2023.
The interest rate swap exposes us to credit risk in the event that the counterparty to the swap agreement does not or cannot meet its obligations. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss.
The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap.
As of December 31, 2023, the Company has two interest rate swap agreements, entered into in December 2018 and May 2023, which convert a portion of the interest rate payments on the Company's Term Loan Facility from variable rate debt to fixed.
As of December 31, 2024, the Company has three interest rate swap agreements which convert a portion of the interest rate payments on the Company's Term Loan Facilities from variable rate debt to fixed. The interest rate swap exposes us to credit risk in the event that the counterparty to the swap agreement does not or cannot meet its obligations.
Non-functional currency transactions are remeasured into the functional currency which results in a foreign exchange gain or loss recorded through Other income (expenses). For the years ended December 31, 2023, 2022 and 2021, we recognized foreign currency remeasurement losses of $8.3 million, losses of $7.6 million and gains of $1.9 million, respectively.
For the years ended December 31, 2024, 2023 and 2022, we recognized foreign currency remeasurement losses of $5.2 million, $8.3 million and $7.6 million, respectively.
The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap. The counterparties to the swaps are major U.S. based financial institution and we expect both counterparties to be able to perform its obligations under the swaps.
The counterparties to the swaps are major U.S. based financial institutions and we expect all counterparties to be able to perform its obligations under the swaps. We use derivative financial instruments for hedging purposes only and not for trading or speculative purposes.
Removed
We use derivative financial instruments for hedging purposes only and not for trading or speculative purposes. See Note 15 to the Audited Consolidated Financial Statements appearing elsewhere in this Report for additional information related to the secured credit facilities.
Added
Given this, our operating results are exposed to volatility due to fluctuations in exchange rates for the countries' functional currencies. Non-functional currency transactions are remeasured into the functional currency which results in a foreign exchange gain or loss recorded through Other income (expenses).

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