EVERTEC, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") covers: (i) the results of operations for the
three and six months ended months ended June 30, 2022 and 2021 and (ii) the
financial condition as of June 30, 2022. You should read the following
discussion and analysis in conjunction with the audited consolidated financial
statements (the "Audited Consolidated Financial Statements") and related notes
for the fiscal year ended December 31, 2021, included in the Company's Annual
Report on Form 10-K as filed with the SEC on February 25, 2022 and with the
unaudited condensed consolidated financial statements (the "Unaudited Condensed
Consolidated 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.

Except as otherwise indicated or unless the context otherwise requires, (a) the
terms "EVERTEC," "we," "us," "our," "our Company" and "the Company" refer to
EVERTEC, Inc. and its subsidiaries on a consolidated basis, (b) the term
"Holdings" refers to EVERTEC Intermediate Holdings, LLC, but not any of its
subsidiaries and (c) the term "EVERTEC Group" refers to EVERTEC Group, LLC and
its predecessor entities and their subsidiaries on a consolidated basis. EVERTEC
Inc.'s subsidiaries include Holdings, EVERTEC Group, EVERTEC Dominicana, SAS,
Evertec Chile Holdings SpA (formerly known as Tecnopago SpA), Evertec Chile SpA
(formerly known as EFT Group SpA), Evertec Chile Global SpA (formerly known as
EFT Global Services SpA), Evertec Chile Servicios Profesionales SpA (formerly
known as EFT Servicios Profesionales SpA), EFT Group S.A., Tecnopago España SL,
Paytrue S.A., Caleidon, S.A., Evertec Brasil Informática Ltda. (formerly known
as Paytrue Solutions Informática Ltda.), EVERTEC Panamá, S.A., EVERTEC Costa
Rica, S.A. ("EVERTEC CR"), EVERTEC Guatemala, S.A., Evertec Colombia, SAS
(formerly known as Processa, SAS), EVERTEC USA, LLC, Evertec Placetopay, SAS
(formerly known as EGM Ingeniería sin Fronteras, S.A.S. ("PlacetoPay")) and
EVERTEC México Servicios de Procesamiento, S.A. de C.V. Neither EVERTEC nor
Holdings conducts any operations other than with respect to its indirect or
direct ownership of EVERTEC Group.

Executive Summary

EVERTEC is a leading full-service transaction-processing business in Puerto
Rico, the Caribbean and Latin America, providing a broad range of merchant
acquiring, payment services and business process management services. We believe
that we are one of the largest merchant acquirers in Latin America based on
total number of transactions and the largest merchant acquirer in the Caribbean.
We serve 26 countries out of 11 offices, including our headquarters in Puerto
Rico. We own and operate the ATH network, one of the leading personal
identification number ("PIN") debit and automated teller machine ("ATM")
networks in the Caribbean and Latin America. We manage a system of electronic
payment networks and offer a comprehensive suite of services for core banking,
cash processing, and fulfillment in Puerto Rico, that process over three billion
transactions annually. Additionally, we offer technology outsourcing in 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. 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 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 these competitive advantages
include:

•Our ability to provide competitive products;
•Our ability to provide in one package a range of services that traditionally
had to be sourced from different vendors;
•Our ability to leverage proprietary IP that enables us to be nimble and
flexible when it comes to client requirements;
•Our ability to put forth Spanish speaking developers in front of our Spanish
speaking customers making communication much more effective and integrations
more efficient;
•Our ability to serve customers with disparate operations across several
geographies with technology solutions that enable them to manage their business
as one enterprise; and
•Our ability to capture and analyze data across the transaction-processing value
chain and use that data to provide value-added services that are differentiated
from those offered by pure-play vendors that serve only one portion of the
transaction-processing value chain (such as only merchant acquiring or payment
services).

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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, as
well as back-end support services such as the clearing and settlement of
transactions and account reconciliation for card issuers. 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. We
provide these services through scalable, end-to-end technology platforms that we
manage and operate in-house and that generate significant operating efficiencies
that enable us to maximize profitability.

We sell and distribute our services primarily through a proprietary direct sales
force with established customer relationships. We continue to pursue joint
ventures and merchant acquiring alliances. 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
negotiate multi-year contracts with our customers. We believe our business model
should enable us to continue to grow our business organically in the primary
markets we serve without significant incremental capital expenditures.

Relationship with Popular

On September 30, 2010, EVERTEC Group entered into a 15-year MSA, and several
related agreements with Popular. Under the terms of the MSA, Popular agreed to
use EVERTEC services on an ongoing exclusive basis for the duration of the
agreement. Additionally, Popular granted us a right of first refusal on the
development of certain new financial technology products and services for the
duration of the MSA. On February 24, 2022, we entered into an agreement to
modify and extend the main commercial agreements with Popular, including a
10-year extension of the Merchant Acquiring Independent Sales Organization
Agreement (the "ISO Agreement"), a 5-year extension of the ATH Network
Participation Agreement and a 3-year extension of the MSA. The ISO Agreement,
which sets our merchant acquiring relationship with Popular, will now include
revenue sharing provisions with Popular. The MSA modifications include the
elimination of the exclusivity requirement, the inclusion of annual MSA minimums
through 2028, a 10% discount on certain MSA services in October 2025 and
adjustments to the existing CPI pricing escalator clause. We also entered into
an agreement to sell Popular certain assets in exchange for Popular owned
Evertec stock ("Popular Transaction"). As part of this transaction, Popular has
agreed to take certain actions after closing to ensure that Evertec is no longer
deemed a "subsidiary" of Popular for purposes of the Bank Holding Company Act,
including reducing Popular's voting interest in Evertec to 4.5% over a period of
three months after the close of the transaction through either the sale of
shares or conversion to non-voting preferred shares. The Popular Transaction
closed on July 1, 2022, on which date the Company received approximately 4.6
million shares of its own common stock as consideration and the contract
extensions and modifications became effective.

Results of Operations

Comparison of the three months ended June 30, 2022 and 2021

                                                Three months ended June 30,
In thousands                                      2022                  2021                             Variance

Revenues                                    $      160,571          $ 149,148                $  11,423                    8  %
Operating costs and expenses
Cost of revenues, exclusive of depreciation
and amortization                                    74,313             59,381                   14,932                   25  %
Selling, general and administrative
expenses                                            20,051             16,752                    3,299                   20  %
Depreciation and amortization                       19,560             18,723                      837                    4  %
Total operating costs and expenses                 113,924             94,856                   19,068                   20  %
Income from operations                      $       46,647          $  54,292                $  (7,645)                 (14) %






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Revenues

Total revenues for the quarter ended June 30, 2022 were $160.6 million, an
increase of 8% compared with $149.1 million in the prior year. Revenue in Puerto
Rico benefited from increased payment transaction volumes in addition to
continued growth in the Company's digital solutions, ATH Movil and ATH Business,
as well as revenue generated from an acquisition completed at the beginning of
the quarter. Revenue in the quarter also benefited from the printing contract
entered into in June 2021, one-time software sales and the year over year CPI
escalator on the MSA with Popular. Latin America revenue reflected organic
growth.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2022 amounted to $74.3
million, an increase of $14.9 million or 25% when compared to the same period in
the prior year. The increase in cost of revenues includes a $4.1 million
impairment loss related to a multi-year software development recorded during the
quarter, as well as an increase in personnel costs, mainly due to increased
headcount in Latin America, an increase in professional fees, higher equipment
expenses for cloud services as utilization continues to grow and an increase in
provisions for expected losses.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended June 30,
2022 amounted to $20.1 million, an increase of $3.3 million or 20% when compared
to the same period in the prior year driven by an increase in professional fees
related to corporate transactions and increased personnel costs.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2022
amounted to $19.6 million, an increase of $0.8 million or 4% when compared to
the same period in the prior year. Increased expense during the three months is
driven by the amortization of customer relationships mainly resulting from the
acquisition completed in the quarter.

Non-Operating Expenses

                                                 Three months ended June 30,
In thousands                                   2022                  2021                               Variance

Interest income                          $          805          $      450                $      355                    79  %
Interest expense                                 (5,932)             (5,658)                     (274)                   (5) %
Earnings of equity method investment                862                 394                       468                   119  %
Other (expenses) income                          (1,138)              2,245                    (3,383)                 (151) %
Total non-operating expenses             $       (5,403)         $   (2,569)               $   (2,834)                 (110) %



Non-operating expenses for the three months ended June 30, 2022 amounted to
$5.4 million, an increase of $2.8 million when compared to the same period in
the prior year. Other (expenses) income amounted to an expense of $1.1 million
compared with income of $2.2 million in the prior year comparable quarter as the
current year includes a loss from the remeasurement of assets and liabilities
denominated in US dollars while the prior year includes a gain. This negative
impact was partially offset by a $0.5 million increase in earnings from equity
method investments.

Income Tax Expense

                                    Three months ended June 30,
        In thousands                     2022                   2021                   Variance
        Income tax expense   $        7,688                   $ 2,632            $ 5,056       192  %



Income tax expense for the three months ended June 30, 2022 amounted to $7.7
million, an increase of $5.1 million when compared to the same period in the
prior year. The effective tax rate for the period was 18.6%, compared with 5.1%
in the 2021 period. The increase in the effective tax rate primarily reflects
the impact of higher revenues in higher taxed jurisdictions, shift in the mix of
business in Puerto Rico and higher withholding taxes, while the prior year
reflected the impact from the reversal of a potential liability for uncertain
tax positions as a result of the expiration of the statute of limitation.
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Comparison of the six months ended June 30, 2022 and 2021

                                                 Six months ended June 30,
In thousands                                      2022                  2021                             Variance

Revenues                                    $      310,819          $ 288,676                $  22,143                   8  %
Operating costs and expenses
Cost of revenues, exclusive of depreciation
and amortization                                   138,972            119,185                   19,787                  17  %
Selling, general and administrative
expenses                                            40,435             32,854                    7,581                  23  %
Depreciation and amortization                       38,720             37,346                    1,374                   4  %
Total operating costs and expenses                 218,127            189,385                   28,742                  15  %
Income from operations                      $       92,692          $  99,291                $  (6,599)                 (7) %



Revenues

Total revenues for the six months ended June 30, 2022 were $310.8 million, an
increase of 8% compared with $288.7 million in the prior year reflecting
increases across all of the Company's segments. The increase is primarily driven
by the same factors explained above for the quarter.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2022 amounted to $139.0
million, an increase of $19.8 million or 17% when compared to the same period in
the prior year. The increase is primarily driven by the same factors explained
above for the quarter.

Selling, General and Administrative

Selling, general and administrative expenses for the six months ended June 30,
2022 amounted to $40.4 million, an increase by $7.6 million or 23% when compared
to the same period in the prior year. The increase is driven by the same factors
explained above for the quarter.

Depreciation and Amortization

Depreciation and amortization expense for the six months ended June 30, 2022
amounted to $38.7 million, an increase of $1.4 million or 4% when compared to
the same period in the prior year. Increased expense during the period is driven
by an increase in the amortization of customer relationships, primarily due to
the aforementioned acquisition in the second quarter of 2022 and the expansion
of the FirstBank relationship in the prior year, as well as increased software
amortization as a result of key projects that went into production in the prior
years.


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Non-Operating Expenses

                                                 Six months ended June 30,
In thousands                                   2022                 2021                               Variance

Interest income                          $       1,472          $      839                $       633                   75  %
Interest expense                               (11,479)            (11,564)                        85                    1  %
Earnings of equity method investment             1,432                 896                        536                   60  %
Other income (expenses)                          2,168               2,573                       (405)                 (16) %
Total non-operating expenses             $      (6,407)         $   (7,256)               $       849                   12  %



Non-operating expenses for the six months ended June 30, 2022 decreased by $0.8
million to $6.4 million when compared to the same period in the prior year. The
decrease is mainly related to a $0.6 million increase in interest income coupled
with a $0.5 million increase in earnings from the Company's equity method
investment.

Income Tax Expense

                                     Six months ended June 30,
         In thousands                    2022                 2021                   Variance
         Income tax expense   $       13,863                $ 7,340            $ 6,523        89  %



Income tax expense for the six months ended June 30, 2022 amounted to $13.9
million, an increase of $6.5 million when compared to the same period in the
prior year. The effective tax rate for the period was 16.1%, compared with 8.0%
in the 2021 period. The increase in the effective tax rate is driven by the same
factors explained above for the quarter.


Factors and Trends Affecting the Results of Our Operations

The ongoing migration from cash and paper methods of payment to electronic
payments continues to benefit the transaction- processing industry globally. 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. For example,
currently the adoption of banking products, including electronic payments, in
the Latin America and Caribbean region is lower relative to the mature U.S. and
European markets. We believe that the unbanked and underbanked population in our
markets will continue to shrink, and therefore drive incremental penetration and
growth of electronic payments in Puerto Rico and other Latin America regions. We
also benefit from the outsourcing of technology systems and processes trend for
financial institutions and government. Many medium- and small-size institutions
in the Latin American markets in which we operate have outdated computer systems
and updating these IT legacy systems is financially and logistically
challenging, which presents a business opportunity for us.

As a result of the COVID-19 pandemic, consumer preference has accelerated its
shift away from cash and paper payment methods, noting increased demand for
omni-channel payment services that facilitate cashless and contactless
transactions. The markets in which we operate, particularly Latin America and
the Caribbean continue to grow and consumer preference is driving an increase
for electronic payments usage. Latin America is one of the fastest-growing
mobile markets globally, with a growing base of tech-savvy customers that
demonstrate a preference for credit cards, digital wallets, contactless
payments, and other value-added offerings. The region's FinTech sector is
driving change via new contactless payment technology that are becoming popular
alternatives to cash payments. We continue to believe that the attractive
characteristics of our markets and our position across multiple services and
sectors will continue to drive growth and profitability in our businesses.

On July 1, 2022, we closed the previously announced Popular Transaction, which
includes extensions and amendments to the main commercial agreements with Banco
Popular. The extension of the ISO Agreement includes a revenue sharing provision
which will be treated as an expense and will result in a decline to the Merchant
Acquiring Segment results. The extension of the MSA includes a reduction in the
CPI cap from 5% to 1.5%, as well as a retroactive credit for the 5% CPI price
increase applied to certain services since October 1, 2021 through closing, both
of which will negatively impact the revenue and consequently margin of our
Business Solutions Segment and, to a lesser extent, the Payment Services -
Puerto Rico Segment. Additionally, as part of the amendments to the MSA, there
will be contractual revenue minimums through 2028. As part of the Popular
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Transaction, we also sold certain assets from our Business Solutions Segment to
Banco Popular, which will result in a reduction in revenue and margin for this
segment.

Finally, our financial condition and results of operations are, in part,
dependent on the economic and general conditions of the geographies in which we
operate. Rising interest rates, inflationary pressure and economic uncertainty
in the markets in which we operate may affect consumer confidence which could
result in a decrease in consumer spending and impact our financial results.

Segment Results of Operations

The Company operates in four business segments: Payment Services - Puerto Rico &
Caribbean, Payment Services - Latin America, Merchant Acquiring, and Business
Solutions.

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 point of sale
("POS") transactions, and ATM management and monitoring. The segment revenues
also include revenues from card processing services (such as credit and debit
card processing, authorization and settlement and fraud monitoring and control
to debit or credit issuers), payment processing services (such as payment and
billing products for merchants, businesses and financial institutions and
digital payment services to the government of Puerto Rico), ATH Movil
(person-to-person) and ATH Business (person-to-merchant) digital transactions
and EBT (which principally consist of services to the government of Puerto Rico
for the delivery of benefits to participants). For ATH debit network and
processing services, revenues are primarily driven by the number of transactions
processed. Revenues are derived primarily from network fees, transaction
switching and processing fees, and the leasing of POS devices. 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.

The Payment Services - Latin America segment 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. The segment revenues also include revenues from card
processing services (such as credit and debit card processing, authorization and
settlement and fraud monitoring and control to debit or credit issuers), payment
processing services (such as payment and billing products for merchants,
businesses and financial institutions), as well as licensed software solutions
for risk and fraud management and card payment processing. For network and
processing services, revenues are primarily driven by the number of transactions
processed. Revenues are derived primarily from network fees, transaction
switching and processing fees, and the leasing of POS devices. 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.

The Merchant Acquiring segment consists of revenues from services that allow
merchants to accept electronic methods of payment. In the Merchant Acquiring
segment, revenues include a discount fee and membership fees charged to
merchants, debit network fees and rental fees from POS devices and other
equipment, net of credit card interchange and assessment fees charged by credit
cards associations (such as VISA or MasterCard) or payment networks. The
discount fee is generally a percentage of the transaction value. 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. Core
bank processing and network services revenues are derived in part from a
recurrent fixed fee and from fees based on the number of accounts on file (i.e.
savings or checking accounts, loans, etc.), server capacity usage or computer
resources utilized. 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.

In addition to the four operating segments described above, management
identified certain functional cost areas that operate independently and do not
constitute businesses in themselves. These areas could neither be concluded as
operating segments nor could they be combined with any other operating segments.
Therefore, these areas are aggregated and presented within the "Corporate and
Other" category in the financial statements alongside the operating segments.
The Corporate and Other category consists of corporate overhead expenses,
intersegment eliminations, certain leveraged activities and other non-operating
and
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Table of Contents miscellaneous expenses that are not included in the operating segments. The overhead and leveraged costs relate to activities such as:

marketing,

•corporate finance and accounting,
•human resources,
•legal,
•risk management functions,
•internal audit,
•corporate debt related costs,
•non-operating depreciation and amortization expenses generated as a result of
merger and acquisition activity,
•intersegment revenues and expenses, and
•other non-recurring fees and expenses that are not considered when management
evaluates financial performance at a segment level.

The Chief Operating Decision Maker ("CODM") reviews the operating segments
separate financial information to assess performance and to allocate resources.
Management evaluates the operating results of each of its operating segments
based upon revenues and Adjusted EBITDA. Adjusted EBITDA is defined as EBITDA
further adjusted to exclude unusual items and other adjustments. 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. Segment asset disclosure is not used by the CODM as a
measure of segment performance since the segment evaluation is driven by
revenues and adjusted EBITDA. As such, segment assets are not disclosed in the
notes to the accompanying unaudited condensed consolidated financial statements.

The following tables set forth information about the Company’s operations by its four business segments for the periods indicated below.

Comparison of the three months ended June 30, 2022 and 2021

Payment Services – Puerto Rico & Caribbean

                                  Three months ended June 30,
In thousands                     2022                       2021
Revenues                   $      46,078                 $ 38,589
Adjusted EBITDA            $      23,848                 $ 23,620
Adjusted EBITDA Margin              51.8   %                 61.2  %



Payment Services - Puerto Rico & Caribbean segment revenues for the three months
ended June 30, 2022 increased by $7.5 million to $46.1 million when compared to
the same period in the prior year. The increase in revenues was primarily driven
by an increase in transaction volumes for POS processing, the ongoing growth
from ATH Movil and ATH Business and an increase in issuing services. The revenue
increase also includes the impact of the acquisition completed in the quarter.
The segment also continues to benefit from increases in transaction processing
and monitoring revenue recognized for services provided to the Payment Services
- Latin America Segment. Adjusted EBITDA increased by $0.2 million to $23.8
million driven by the increase in revenues partially offset by the impairment
charge recognized in the quarter and higher operating expenses, including higher
equipment expenses and personnel costs.

Payment Services – Latin America

                                  Three months ended June 30,
In thousands                     2022                       2021
Revenues                   $      30,784                 $ 25,835
Adjusted EBITDA            $       9,560                 $ 10,975
Adjusted EBITDA Margin              31.1   %                 42.5  %



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Payment Services - Latin America segment revenues for the three months ended
June 30, 2022 increased by $4.9 million to $30.8 million driven mainly by
organic growth including revenue generated by new client contracts signed in
prior years as well as an increase in intercompany software developments and
transaction processing revenue recognized for services provided to the Payment
Services - Puerto Rico & Caribbean segment. Adjusted EBITDA decreased by $1.4
million as prior year comparable quarter included a $1.4 million favorable
impact from the remeasurement of assets and liabilities denominated in US
dollars, while the current year quarter is reflecting a $0.1 million unfavorable
impact. Additionally, operating expenses in the segment increased primarily due
to an increase in personnel costs driven by merit increases and increased
headcount, an increase in provisions for expected losses as well as increases in
fees for transaction processing and monitoring services from the Payment
Services - Puerto Rico & Caribbean segment.


Merchant Acquiring

                                  Three months ended June 30,
In thousands                     2022                       2021
Revenues                   $      38,539                 $ 38,335
Adjusted EBITDA            $      17,534                 $ 20,546
Adjusted EBITDA Margin              45.5   %                 53.6  %



Merchant Acquiring segment revenues for the three months ended June 30, 2022
increased slightly by $0.2 million mainly as a result of lower sales volumes and
a lower transaction spread offset by pricing initiatives implemented during the
quarter. Volumes were impacted on a year over year basis as prior year period
was positively impacted by incremental COVID related federal stimulus. Adjusted
EBITDA decreased by $3.0 million driven by higher operating expenses, mainly
transaction processing costs and supplies.

Business Solutions
                                  Three months ended June 30
In thousands                     2022                      2021
Revenues                   $      64,690                $ 60,693
Adjusted EBITDA            $      29,835                $ 30,621
Adjusted EBITDA Margin              46.1   %                50.5  %



Business Solutions segment revenues for the three months ended June 30, 2022
increased by $4.0 million to $64.7 million as a result of higher transactions
and account volumes, the benefit from the CPI escalator on the MSA with Popular,
another strong quarter of contribution from the printing contract that began
generating revenue in June of the prior year, and one-time software sales in the
Dominican Republic. Adjusted EBITDA decreased by $0.8 million to $29.8 million
as the increase in revenue was offset by an increase in provisions for expected
losses, increased printing related expenses and an increase in cost of sales
directly related to the software sale.

Comparison of the six months ended June 30, 2022 and 2021

Payment Services – Puerto Rico & Caribbean

                                 Six months ended June 30,
In thousands                     2022                    2021
Revenues                   $     86,086               $ 74,853
Adjusted EBITDA            $     47,628               $ 44,423
Adjusted EBITDA Margin             55.3   %               59.3  %



Payment Services - Puerto Rico & Caribbean segment revenues for the six months
ended June 30, 2022 increased by $11.2 million to $86.1 million when compared to
the same period in the prior year. The increase in revenues was primarily driven
by an increase in transaction volumes, mainly POS processing, the continued
strong digital payments growth from ATH Movil and ATH Business, higher issuing
services, and revenue contribution from the acquisition completed in the current
year quarter, as
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well as an increase in transaction processing and monitoring revenue recognized
for services provided to the Payment Services - Latin America Segment. Adjusted
EBITDA increased by $3.2 million to $47.6 million driven by the increase in
revenues partially offset by the impairment loss discussed above, higher
personnel costs and an increase in equipment expenses, including POS equipment
maintenance costs.


Payment Services – Latin America

                                 Six months ended June 30,
In thousands                     2022                    2021
Revenues                   $     59,567               $ 50,849
Adjusted EBITDA            $     21,987               $ 20,994
Adjusted EBITDA Margin             36.9   %               41.3  %



Payment Services - Latin America segment revenues for the six months ended June
30, 2022 increased by $8.7 million to $59.6 million driven mainly by organic
growth including revenue generated by new client contracts signed in prior
years, and higher revenues recognized for services provided to the Payment
Services - Puerto Rico & Caribbean and Business Solutions segments. Adjusted
EBITDA increased by $1.0 million when compared to the same period in the prior
year reflecting the increase in revenues as well as the year over year favorable
impact from the remeasurement of assets and liabilities denominated in US
dollars, partially offset by higher operating expenses, including an increase in
personnel costs, and in provisions for expected losses as well as increases in
fees for transaction processing and monitoring services from the Payment
Services - Puerto Rico & Caribbean segment.

Merchant Acquiring

                                 Six months ended June 30,
In thousands                     2022                    2021
Revenues                   $     74,168               $ 69,202
Adjusted EBITDA            $     34,618               $ 36,063
Adjusted EBITDA Margin             46.7   %               52.1  %



Merchant Acquiring segment revenues for the six months ended June 30, 2022
increased by $5.0 million to $74.2 million mainly as a result of an increase in
sales volume with a higher average ticket and a slightly higher spread per
transaction as well as the benefit of pricing initiatives implemented. The
higher volume was driven mainly by six months of contribution from the FirstBank
expanded relationship, compared with four months in the prior year. Adjusted
EBITDA decreased by $1.4 million as the increase in revenues was entirely offset
by higher transaction processing costs.

Business Solutions
                                 Six months ended June 30,
In thousands                     2022                   2021
Revenues                   $    127,314             $ 121,304
Adjusted EBITDA            $     59,439             $  60,253
Adjusted EBITDA Margin             46.7   %              49.7  %



Business Solutions segment revenues for the six months ended June 30, 2022
increased by $6.0 million to $127.3 million as a result of higher transactions
and account volumes and the benefit of the CPI escalator on the Popular MSA. In
addition, the segment benefited from incremental printing volume resulting from
the contract entered into in June of the prior year. These increases were
partially offset by services provided to the Puerto Rico Department of Education
in the prior year quarter that did not recur. Adjusted EBITDA decreased by $0.8
million to $59.4 million as the increase in revenue was offset by increased
expenses, mainly software and hardware maintenance costs and printing related
expenses.

Liquidity and Capital Resources

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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, debt service, dividend payments and share
repurchases. We also have a $125.0 million Revolving Facility, of which $119.1
million was available for borrowing as of June 30, 2022. The Company issues
letters of credit against our Revolving Facility which reduce our availability
of funds to be drawn.

As of June 30, 2022, we had cash and cash equivalents of $288.1 million, of
which $103.3 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.
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. However, if in the
future we determine that we no longer need to maintain cash balances within our
foreign subsidiaries, we may elect to distribute such cash to the Company in
Puerto Rico. Distributions from the foreign subsidiaries to Puerto Rico may be
subject to tax withholding and other tax consequences. Additionally, our credit
agreement imposes certain restrictions on the distribution of dividends from
subsidiaries.

Based on our current level of operations, we believe our cash flows from
operations and the available secured Revolving Facility will be adequate to meet
our liquidity needs for the next twelve months. However, our ability to fund
future operating expenses, dividend payments, capital expenditures, mergers and
acquisitions, and our ability to make scheduled payments of interest, to pay
principal on or refinance our indebtedness and to satisfy any other of our
present or future debt obligations will depend on our future operating
performance, which may be affected by general economic, financial and other
factors beyond our control.

                                                                           Six months ended June 30,
(In thousands)                                                            2022                   2021

Cash provided by operating activities                               $      129,902          $    112,029
Cash used in investing activities                                          (46,192)              (47,036)
Cash used in financing activities                                          (58,796)              (66,869)

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

                                                               (191)                   73
Increase (decrease) in cash, cash equivalents and restricted
cash                                                                $       24,723          $     (1,803)



Net cash provided by operating activities for the six months ended June 30, 2022
was $129.9 million compared to $112.0 million for the same period in the prior
year. The $17.9 million increase in cash provided by operating activities is
primarily driven by less cash used to pay down accounts payable and accrued
liabilities as the Company continues to effectively manage working capital.

Net cash used in investing activities for the six months ended June 30, 2022 was
$46.2 million compared to $47.0 million for the same period in the prior year.
The $0.8 million decrease is driven by lower capital expenditures of $1.2
million as well as a decrease in acquisitions of customer relationships given
that the prior year acquisition amounted to $14.8 million while the acquisition
in the current year amounted to $10.6 million. Partially offsetting these
decreases was a $7.3 million purchase of certificates of deposit while the prior
year included a $3.0 million purchase of available-for-sale debt securities.

Net cash used in financing activities for the six months ended June 30, 2022 was
$58.8 million compared to $66.9 million for the same period in the prior year.
The $8.1 million decrease was mainly attributed to a decrease of $15.0 million
in cash used to pay down long-term debt as in the prior year, in connection with
the mandatory repayment clause, the Company repaid $17.8 million, as a result of
excess cash flow calculation performed, while no mandatory repayment was
required in the current year, and a $3.1 million decrease in withholding taxes
paid on share-based compensation partially offset by an increase in cash used to
repurchase common stock of $10.8 million.

Capital Resources

Our principal capital expenditures are for hardware and computer software
(purchased and internally developed) and additions to property and equipment.
During the six months ended June 30, 2022 and 2021, the Company invested
approximately $29.0 million and $30.1 million, respectively, the Company
acquired customer relationships amounting to $10.6 million and $14.8 million
during the six months ended June 30, 2022 and 2021, respectively, as well as
$7.3 million in certificates of deposit in 2022 and $3.0 million in
available-for-sale debt securities in 2021. Generally, we fund capital
expenditures with cash flow generated from operations and, if necessary,
borrowings under our Revolving Facility.

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Dividend Payments

On February 15, 2022 and April 21, 2022, the Board declared quarterly cash
dividends of $0.05 per share of common stock, which were paid on March 25, 2022
and June 3, 2022, respectively, to stockholders of record as of the close of
business on February 25, 2022 and May 2, 2022, respectively.

On July 28, 2022, our Board declared a regular quarterly cash dividend of $0.05
per share on the Company's outstanding shares of common stock. The dividend will
be paid on September 2, 2022 to stockholders of record as of the close of
business on August 8, 2022. The Board anticipates declaring this dividend in
future quarters on a regular basis; however, future declarations of dividends
are subject to the Board's approval and may be adjusted as business needs or
market conditions change.

Financial Obligations

Secured Credit Facilities

On November 27, 2018, EVERTEC and EVERTEC Group ("Borrower") entered into a
credit agreement providing for the secured credit facilities, consisting of a
$220.0 million term loan A facility that matures on November 27, 2023 (the "2023
Term A Loan"), a $325.0 million term loan B facility that matures on November
27, 2024 (the "2024 Term B Loan"), and a $125.0 million revolving credit
facility (the "Revolving Facility") that matures on November 27, 2023, with a
syndicate of lenders and Bank of America, N.A. ("Bank of America"), as
administrative agent, collateral agent, swingline lender and line of credit
issuer (collectively the "2018 Credit Agreement").

The 2018 Credit Agreement requires mandatory repayment of outstanding principal
balances based on a percentage of excess cash flow, provided that no such
payment shall be due if the resulting amount of the excess cash flow multiplied
by the applicable percentage is less than $10 million or if the leverage ratio
is below 1.75x. On March 8, 2021, in connection with this mandatory repayment
clause, the Company repaid $17.8 million, as a result of excess cash flow
calculation performed for the year ended December 31, 2020. No mandatory
repayment was required in the first quarter of 2022 in connection with the
excess cash flow calculation performed for the year ended December 31, 2021 as
the leverage ratio was below 1.75x.

The unpaid principal balance at June 30, 2022 of the 2023 Term A Loan and the
2024 Term B Loan was $163.4 million and $294.2 million, respectively. The
additional borrowing capacity under our Revolving Facility at June 30, 2022 was
$119.1 million. The Company issues letters of credit against the Revolving
Facility which reduce the additional borrowing capacity of the Revolving
Facility.

Notes Payable

In December 2019, EVERTEC Group entered into two non-interest bearing financing
agreements amounting to $2.4 million to purchase software and maintenance, which
were fully repaid in January 2022. As of December 31, 2021, the outstanding
principal balance of the notes payable was $0.8 million. These notes were
included in accounts payable in the Company's unaudited condensed consolidated
balance sheets.

Interest Rate Swaps

As of June 30, 2022, the Company has an interest rate swap agreement, entered
into in December 2018, which converts 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 LIBOR                  2.89%


The Company has accounted for this agreement as a cash flow hedge.

As of June 30, 2022 and December 31, 2021, the carrying amount of the derivative
included on the Company's unaudited condensed consolidated balance sheets was an
asset of $0.8 million, recorded in other long term assets and $13.4 million
liabilities, respectively. The fair value of this derivative is estimated using
Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 7
of the unaudited condensed consolidated financial statements for disclosure of
losses recorded on cash flow hedging activities.

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During the three and six months ended months ended June 30, 2022 and 2021, the
Company reclassified losses of $1.4 million and $3.1 million respectively, from
accumulated other comprehensive loss into interest expense compared to $3.5
million and $5.3 million for the corresponding periods in 2021. Based on current
LIBOR rates, the Company expects to reclassify gains of $0.8 million from
accumulated other comprehensive loss into interest expense over the next 12
months.

The cash flow hedge is considered highly effective.

Covenant Compliance

As of June 30, 2022, our secured leverage ratio was 1.37 to 1.00, as determined
in accordance with the 2018 Credit Agreement. As of the date of filing of this
Report, no event has occurred that constitutes an Event of Default or Default
under our 2018 Credit Agreement.

Net Income Reconciliation to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share (Non-GAAP Measures)

We define "EBITDA" as earnings before interest, taxes, depreciation and
amortization. We define "Adjusted EBITDA" as EBITDA further adjusted to exclude
unusual items and other adjustments described below. Adjusted EBITDA by segment
is reported to the chief operating decision maker for purposes of making
decisions about allocating resources to the segments and assessing their
performance. For this reason, Adjusted EBITDA, as it relates to our segments, is
presented in conformity with ASC Topic 280, Segment Reporting, and is excluded
from the definition of non-GAAP financial measures under the Securities and
Exchange Commission's Regulation G and Item 10(e) of Regulation S-K. We define
"Adjusted Net Income" as net income adjusted to exclude unusual items and other
adjustments described below. We define "Adjusted Earnings per common share" as
Adjusted Net Income divided by diluted shares outstanding.

We present EBITDA and Adjusted EBITDA because we consider them important
supplemental measures of our performance and believe they are frequently used by
securities analysts, investors and other interested parties in the evaluation of
ourselves and other companies in our industry. In addition, our presentation of
Adjusted EBITDA is substantially consistent with the equivalent measurements
that are contained in the senior secured credit facilities in testing EVERTEC
Group's compliance with covenants therein such as the secured leverage ratio. We
use Adjusted Net Income to measure our overall profitability because we believe
better reflects our comparable operating performance by excluding the impact of
the non-cash amortization and depreciation that was created as a result of
merger and acquisition activity. In addition, in evaluating EBITDA, Adjusted
EBITDA, Adjusted Net Income and Adjusted Earnings per common share, you should
be aware that in the future we may incur expenses such as those excluded in
calculating them. Further, our presentation of these measures should not be
construed as an inference that our future operating results will not be affected
by unusual or nonrecurring items.

Some of the limitations of EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted earnings per common share are as follows:

•they do not reflect cash outlays for capital expenditures or future contractual
commitments;
•they do not reflect changes in, or cash requirements for, working capital;
•although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and
EBITDA and Adjusted EBITDA do not reflect cash requirements for such
replacements;
•in the case of EBITDA and Adjusted EBITDA, they do not reflect interest
expense, or the cash requirements necessary to service interest, or principal
payments, on indebtedness;
•in the case of EBITDA and Adjusted EBITDA, they do not reflect income tax
expense or the cash necessary to pay income taxes; and
•other companies, including other companies in our industry, may not use EBITDA,
Adjusted EBITDA, Adjusted Net Income, and Adjusted Earnings per common share or
may calculate EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings
per common share differently than as presented in this Report, limiting their
usefulness as a comparative measure.

EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common
share are not measurements of liquidity or financial performance under GAAP. You
should not consider EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted
Earnings per common share as alternatives to cash flows from operating
activities or any other performance measures determined in accordance with GAAP,
as an indicator of cash flows, as a measure of liquidity or as an alternative to
operating or net income determined in accordance with GAAP.

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A reconciliation of net income to EBITDA, Adjusted EBITDA, Adjusted Net Income
and Adjusted Earnings per common share is provided below:

                                                                                             Six months ended June        Twelve months
                                               Three months ended June 30,                            30,                     ended
(In thousands, except per share
information)                                   2022                   2021                              2022                   2021               June 30, 2022
Net income                               $       33,556          $     49,091                      $     72,422          $      84,695          $      148,870
Income tax expense                                7,688                 2,632                            13,863                  7,340                  27,085
Interest expense, net                             5,127                 5,208                            10,007                 10,725                  20,203
Depreciation and amortization                    19,560                18,723                            38,720                 37,346                  76,444
EBITDA                                           65,931                75,654     -                     135,012                140,106                 272,602

Equity income (1)                                  (862)                  923                            (1,432)                   421                  (2,248)
Compensation and benefits (2)                     5,405                 4,283                             9,684                  7,787                  17,041
Transaction, refinancing and other
fees (3)                                          2,901                  (599)                            5,496                    836                   7,033

Adjusted EBITDA                                  73,375                80,261     -                     148,760                149,150                 294,428
Operating depreciation and
amortization (4)                                (11,156)              (10,724)                          (22,408)               (21,606)           

(44,240)

Cash interest expense, net (5)                   (4,858)               (4,944)                           (9,487)               (10,020)            

(19,271)

Income tax expense (6)                          (10,325)               (7,535)                          (19,002)               (15,291)            

(35,395)

Non-controlling interest (7)                          1                    71                                11                    (72)                    (78)
Adjusted net income                      $       47,037          $     57,129                      $     97,874          $     102,161          $      195,444
Net income per common share
(GAAP):
Diluted                                  $         0.47          $       0.68                      $       1.00          $        1.16
Adjusted Earnings per common share
(Non-GAAP):
Diluted                                  $         0.65          $       0.78                      $       1.35          $        1.40
Shares used in computing adjusted
earnings per common share:
Diluted                                      72,149,949            72,831,366                        72,558,565             72,716,950




1)Represents the elimination of non-cash equity earnings from our 19.99% equity
investment in Dominican Republic, Consorcio de Tarjetas Dominicanas S.A.
("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 2018 Credit Agreement, a software impairment charge and a gain from sale
of assets.
4)Represents operating depreciation and amortization expense, which excludes
amounts generated as a result of merger and acquisition activity.
5)Represents interest expense, less interest income, as they appear on the
condensed consolidated statements of income and comprehensive income, adjusted
to exclude non-cash amortization of the debt issue costs, premium and accretion
of discount.
6)Represents income tax expense calculated on adjusted pre-tax income using the
applicable GAAP tax rate, adjusted for certain discrete items.
7)Represents the 35% non-controlling equity interest in Evertec Colombia, net of
amortization for intangibles created as part of the purchase.

Seasonality

Our payment businesses generally experience moderate increased activity during
the traditional holiday shopping periods and around other nationally recognized
holidays, which follow consumer spending patterns.

Effect of Inflation

While inflation has had minimal net effect on our operating results during the
last three years given that overall inflation has been offset by sales and cost
reduction actions, the rate of inflation can impact certain input costs, such as
occupancy, labor and benefits, and general administrative costs, which may not
be readily recoverable from our customers and could affect our results
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of operations and financial condition. In addition, if inflation were to result
in rising interest rates, it could result in an adverse effect on our cost of
funding due to increased interest expense on our outstanding debt.


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