EVO Reports First Quarter 2021 Results

Rhea-AI Summary

EVO Payments reported a 4% decline in revenue for Q1 2021, totaling $106.2 million, while a net loss improved to $2.8 million from $13.6 million. Adjusted EBITDA rose 7% to $33.7 million. Despite pandemic impacts, CEO James G. Kelly noted recovery in economic activity and card usage, positioning the Company for growth through M&A and organic strategies. For the full year, GAAP revenue is projected between $483 million and $491 million, with expected net income of $16 million to $24 million and adjusted EBITDA growth of 16% to 20%.

Positive

• Net loss improved to $2.8 million from $13.6 million year-over-year.
• Adjusted EBITDA increased 7% to $33.7 million.
• Full-year GAAP revenue projected to grow 10% to 12% over 2020.

Negative

• Revenue decreased by 4% year-over-year.
• Currency neutral basis revenue decreased by 6%.

EVO Payments, Inc. (NASDAQ: EVOP) (“EVO” or the “Company”) today announced its first quarter 2021 financial results. For the first quarter ended March 31, 2021, reported revenue was $106.2 million compared to $111.2 million in the prior year, a decrease of 4%. On a currency neutral basis, revenue for the first quarter decreased 6%. On a GAAP basis for the quarter ended March 31, 2021, net loss was $2.8 million compared to a net loss of $13.6 million in the prior year. Adjusted EBITDA increased 7% to $33.7 million for the quarter, and on a currency neutral basis, adjusted EBITDA increased 6%.

“I’m pleased with the financial performance we demonstrated in the first quarter,” said James G. Kelly, Chief Executive Officer of EVO. “While our results still reflect the impact of the COVID-19 pandemic, in recent months, we have seen significant improvements in economic activity and card utilization, which has had a positive impact on our payment volumes. As our markets continue to recover and global travel resumes, we are well-positioned to grow our business, both organically and through M&A.”

Outlook

We continue to expect 2021 full-year GAAP revenue to range from $483 million to $491 million, representing growth of 10% to 12% over 2020 results. On a GAAP basis, net income is expected to range from $16 million to $24 million compared to a net loss of $4 million in 2020. Adjusted EBITDA is expected to range from $170 million to $176 million, reflecting growth of 16% to 20% over 2020 adjusted EBITDA. The adjusted EBITDA margin is expected to range from 35.4% to 35.9%, reflecting expansion of 200 to 250 basis points over the 2020 EBITDA margin.

Conference Call

EVO’s management will host a conference call for investors at 8:00 a.m. Eastern Time on Thursday, May 6, 2021 to discuss the results. Participants may register for the conference call via the investor relations section of the Company’s website at investor.evopayments.com or at http://www.directeventreg.com/registration/event/8281959. A recording of the call will be archived on the Company's investor relations website following the live call.

Additional Resources

To assist in understanding the impact COVID-19 is having on our business, the Company has posted a summary of its recent payment volume trends on its investor relations website at https://investor.evopayments.com/1Q21paymentvolume.

Forward-Looking Statements

This release and the accompanying earnings conference call contain statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are often identified by words such as “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives,” “intends,” “may,” “opportunity,” “plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,” “could,” “would,” “will” and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current beliefs, assumptions, estimates, and expectations, taking into account the information currently available to us, and are not guarantees of future results or performance. Forward-looking statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that could contribute to these differences include the following: (1) the continuing impact of the COVID-19 pandemic on our business and our merchants, including the impact of social distancing, shelter-in-place, shutdowns of non-essential businesses and similar measures imposed or undertaken by governments; (2) our ability to anticipate and respond to changing industry trends and the needs and preferences of our customers and consumers; (3) the impact of substantial and increasingly intense competition; (4) the impact of changes in the competitive landscape, including disintermediation from other participants in the payments chain; (5) the effects of global economic, political, market, health and other conditions, including the impact of the COVID-19 pandemic; (6) our compliance with governmental regulations and other legal obligations, particularly related to privacy, data protection, information security, and consumer protection laws; (7) our ability to protect our systems and data from continually evolving cybersecurity risks or other technological risks; (8) failures in our processing systems, software defects, computer viruses, and development delays; (9) degradation of the quality of the products and services we offer, including support services; (10) risks associated with our ability to successfully complete, integrate and realize the expected benefits of acquisitions; (11) continued consolidation in the banking and payment services industries, including the impact of the combination of Banco Popular and Grupo Santander and the related bank branch consolidation; (12) increased customer, referral partner, or sales partner attrition; (13) the incurrence of chargebacks; (14) failure to maintain or collect reimbursements; (15) fraud by merchants or others; (16) the failure of our third-party vendors to fulfill their obligations; (17) failure to maintain merchant and sales relationships or financial institution alliances; (18) ineffective risk management policies and procedures; (19) our inability to retain smaller-sized merchants and the impact of economic fluctuations on such merchants, (20) damage to our reputation, or the reputation of our partners; (21) seasonality and volatility; (22) our inability to recruit, retain and develop qualified personnel; (23) geopolitical and other risks associated with our operations outside of the United States; (24) any decline in the use of cards as a payment mechanism or other adverse developments with respect to the card industry in general; (25) increases in card network fees; (26) failure to comply with card networks requirements; (27) a requirement to purchase the equity interests of our eService subsidiary in Poland held by our JV partner; (28) changes in foreign currency exchange rates; (29) future impairment charges; (30) risks relating to our indebtedness, including our ability to raise additional capital to fund our operations on economized terms or at all and exposure to interest rate risks; (31) the planned phase out of LIBOR and the transition to other benchmarks; (32) restrictions imposed by our credit facilities and outstanding indebtedness; (33) participation in accelerated funding programs; (34) failure to enforce and protect our intellectual property rights; (35) failure to comply with, or changes in, laws, regulations and enforcement activities, including those relating to corruption, anti-money laundering, data privacy, and financial institutions; (36) impact of new or revised tax regulations; (37) legal proceedings; (38) our dependence on distributions from EVO Investco LLC to pay our taxes and expenses, including certain payments to the Continuing LLC Owners (as defined in our public filings) and, in the event that any tax benefits are disallowed, our inability to be reimbursed for payments made to the Continuing LLC Owners; (39) our organizational structure, including benefits available to the Continuing LLC Owners that are not available to holders of our Class A common stock to the same extent; (40) the risk that we could be deemed an investment company under the Investment Company Act of 1940, as amended; (41) the significant influence the Continuing LLC Owners continue to have over us, including control over decisions that require the approval of stockholders; (42) certain provisions of Delaware law and antitakeover provisions in our organizational documents could delay or prevent a change of control; (43) certain provisions in our organizational documents, including those that provide Delaware as the exclusive forum for litigation matters and that renounce the doctrine of corporate opportunity; (44) our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; (45) changes in our stock price, including relating to downgrades, analyst reports, and future sales by us or by existing stockholders; and (46) the other risks and uncertainties included from time to time in our filings with the SEC, including those listed under “Risk Factors” contained in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.

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

Non-GAAP financial measures

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

Among other non-GAAP financial measures presented, this release contains a presentation of our adjusted EBITDA and adjusted net income, and adjusted net income per share information. These measures do not purport to be an alternative to cash flows from operating activities as a measure of liquidity, and are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as tax payments and, in the case of adjusted EBITDA, interest payments and debt service requirements. Further, adjusted EBITDA does not purport to be an alternative to net income as a measure of operating performance. These measures, or measures similar to them, are frequently used by analysts, investors and other interested parties to evaluate companies in the industry. Adjusted EBITDA is defined as net income (loss) before provision for income taxes, net interest expense, and depreciation and amortization, excluding the impact of net income attributable to non-controlling interests in consolidated entities (including related depreciation and amortization), share-based compensation, gain (loss) on investment in equity securities, and transition, acquisition and integration costs. Adjusted net income is defined as net income (loss) adjusted to exclude income taxes, the impact of net income attributable to non-controlling interests in consolidated entities (including related depreciation and amortization), share-based compensation, gain (loss) on investment in equity securities, transition, acquisition and integration costs, and amortization of acquisition intangibles and subsequently adjusted to give effect to a normalized tax rate for the Company. The calculation of adjusted EBITDA and adjusted net income have limitations as analytical tools, including: (a) they do not reflect the Company’s cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) they do not reflect changes in, or cash requirements for, the Company’s working capital needs; (c) in the case of adjusted EBITDA, it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on the Company’s indebtedness; (d) they do not reflect the Company’s tax expense or the cash requirements to pay the Company’s taxes; and (e) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements. Adjusted net income per share is defined as adjusted net income divided by pro forma weighted average shares. Pro forma weighted average shares is defined as GAAP common weighted average shares (equal to our weighted average Class A common shares) plus, our weighted average Class B common shares, weighted average Class C common shares, weighted average Class D common shares, dilutive equity awards measured under the treasury stock method, and weighted average preferred shares. Weighted average preferred shares is defined as the weighted average shares of Class A common stock issuable upon conversion of the Company’s Series A convertible preferred stock.

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

About EVO Payments, Inc.

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

EVO PAYMENTS, INC. AND SUBSIDIARIES
Schedule 1 - Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except share and per share data)
		Three Months Ended March 31,
			2021				2020			% change
Revenue		$	106,180			$	111,169			(4	%)
Operating expenses:
Cost of services and products			17,127				23,129			(26	%)
Selling, general and administrative			60,398				72,303			(16	%)
Depreciation and amortization			20,926				21,424			(2	%)
Total operating expenses			98,451				116,856			(16	%)
Income (loss) from operations			7,729				(5,687	)		NM
Other income (expense):
Interest income			241				413			(42	%)
Interest expense			(6,098	)			(9,867	)		38	%
(Expense) income from investment in unconsolidated investees			(163	)			40			NM
Loss on investment in equity securities			(240	)			-			NM
Other income (expense), net			238				(49	)		NM
Total other expense			(6,022	)			(9,463	)		36	%
Income (loss) before income taxes			1,707				(15,150	)		NM
Income tax (expense) benefit			(4,530	)			1,580			NM
Net loss			(2,823	)			(13,570	)		79	%
Less: Net income attributable to non-controlling interests in consolidated entities			1,068				1,039			3	%
Less: Net loss attributable to non-controlling interests of EVO Investco, LLC			(3,049	)			(9,801	)		69	%
Net loss attributable to EVO Payments, Inc.			(842	)			(4,808	)		82	%
Less: Accrual of redeemable preferred stock paid-in-kind dividends			2,382				-			NM
Net loss attributable to Class A common stock		$	(3,224	)		$	(4,808	)		33	%
Earnings per share
Basic		($	0.07	)		($	0.12	)
Diluted		($	0.07	)		($	0.12	)
Weighted average Class A common stock outstanding
Basic			46,509,375				41,259,398
Diluted			46,509,375				41,259,398

EVO PAYMENTS, INC. AND SUBSIDIARIES
Schedule 2 - Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except share data)
		March 31,				December 31,
			2021				2020
Assets
Current assets:
Cash and cash equivalents		$	401,046			$	418,439
Accounts receivable, net			12,243				17,052
Other receivables			17,101				20,128
Due from related parties			540				625
Inventory			6,464				5,221
Settlement processing assets			303,836				285,705
Other current assets			12,334				14,659
Total current assets			753,564				761,829
Equipment and improvements, net			77,135				83,606
Goodwill, net			375,976				383,108
Intangible assets, net			202,763				217,077
Investment in unconsolidated investees			477				839
Deferred tax assets			231,334				234,749
Operating lease right-of-use assets			34,892				35,124
Investment in equity securities, at fair value			24,921				25,526
Other assets			15,724				15,863
Total assets		$	1,716,786			$	1,757,721
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Settlement lines of credit		$	10,266			$	13,718
Current portion of long-term debt			4,628				4,628
Accounts payable			5,655				9,482
Accrued expenses			97,958				113,127
Settlement processing obligations			455,722				446,344
Current portion of operating lease liabilities, inclusive of related party liability of $1.2 million and $1.1 million at March 31, 2021 and December 31, 2020, respectively			6,822				6,614
Due to related parties			3,391				5,124
Total current liabilities			584,442				599,037
Long-term debt, net of current portion			578,161				579,162
Due to related parties			185				185
Deferred tax liabilities			14,799				13,957
Tax receivable agreement obligations, inclusive of related party liability of $165.2 million and $164.3 million at March 31, 2021 and December 31, 2020, respectively			174,871				173,890
ISO reserves			2,854				2,942
Operating lease liabilities, net of current portion, inclusive of related party liability of $2.0 million and $2.2 million at March 31, 2021 and December 31, 2020, respectively			30,326				30,968
Other long-term liabilities			6,479				7,047
Total liabilities			1,392,117				1,407,188
Commitments and contingencies
Redeemable non-controlling interests			1,044,814				1,055,633
Redeemable preferred stock (par value, $0.0001 per share), Authorized, Issued and Outstanding – 152,250 shares at March 31, 2021 and December 31, 2020. Liquidation preference: $160,999 and $158,647 at March 31, 2021 and December 31, 2020, respectively			156,500				154,118
Shareholders' equity (deficit):
Class A common stock (par value $0.0001), Authorized - 200,000,000 shares, Issued and Outstanding - 46,844,184 and 46,401,607 shares at March 31, 2021 and December 31, 2020, respectively			5				5
Class B common stock (par value $0.0001), Authorized - 40,000,000 shares, Issued and Outstanding - 32,163,538 and 32,163,538 shares at March 31, 2021 and December 31, 2020			3				3
Class C common stock (par value $0.0001), Authorized - 4,000,000 shares, Issued and Outstanding - 1,638,425 and 1,720,425 shares at March 31, 2021 and December 31, 2020, respectively			-				-
Class D common stock (par value $0.0001), Authorized - 32,000,000 shares, Issued and Outstanding - 2,315,870 and 2,390,870 shares at March 31, 2021 and December 31, 2020, respectively			-

FAQ

What were EVO Payments' Q1 2021 financial results?

EVO Payments reported revenue of $106.2 million, a 4% decrease year-over-year, and a net loss of $2.8 million.

What is EVO Payments' adjusted EBITDA for Q1 2021?

The adjusted EBITDA for Q1 2021 was $33.7 million, reflecting a 7% increase.

What is EVO Payments' revenue outlook for 2021?

EVO expects full-year GAAP revenue to be between $483 million and $491 million, with a growth of 10% to 12% over 2020.

How did the COVID-19 pandemic affect EVO Payments' financial results?

The effects of COVID-19 were evident, with a decline in revenue, although improvements in economic activity and card usage were noted.

When will EVO Payments discuss its Q1 2021 results in a conference call?

EVO Payments will host a conference call on May 6, 2021, at 8:00 a.m. Eastern Time to discuss its Q1 results.