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CST: 21/03/2019 09:26:09   

EVO Reports Fourth Quarter and Year-End 2018 Results

8 Days ago

ATLANTA, March 13, 2019 (GLOBE NEWSWIRE) -- EVO Payments, Inc. (NASDAQ: EVOP) (“EVO” or the “Company”) today announced its fourth quarter and year-end 2018 financial results. For the fourth quarter ended December 31, 2018, revenue increased 9% to $150.8 million, compared to $138.6 million in the prior year. On a currency-neutral basis, revenue increased 12% over the prior year. On a GAAP basis for the fourth quarter, net loss attributable to EVO Payments, Inc. was $4.0 million or $0.16 per basic and diluted share. Adjusted EBITDA increased 21% to $44.3 million for the quarter, compared to $36.6 million in the prior year. On a currency-neutral basis, adjusted EBITDA grew 25% over the prior year. 

For the twelve months ended December 31, 2018, revenue increased 12% to $564.8 million, compared to $504.8 million in the prior year period. On a currency-neutral basis, revenue increased 11% over the prior year. On a GAAP basis for the year-to-date period, net loss attributable to EVO Payments, Inc. was $14.7 million or $0.70 per basic and diluted share, representing net income from the initial public offering date forward. Adjusted EBITDA increased 16% to $148.4 million for the twelve months ended December 31, 2018, compared to $128.1 million in the prior year. On a currency-neutral basis, adjusted EBITDA grew 15% for the year-to-date period compared with the same period in the prior year. (See Schedule 1 for the Condensed Consolidated Statements of Operations and Schedule 4 for the Reconciliation of GAAP to Non-GAAP measures.)

“We are very pleased with our strong performance in the fourth quarter and 2018 overall,” said James G. Kelly, Chief Executive Officer of EVO. “In 2018, we continued to expand our distribution network through our bank partnerships and tech-enabled relationships. In addition to our revenue growth, our team delivered margin expansion as a result of our continued integration efforts. We remain focused on expanding our tech-enabled product capabilities in both North America and Europe, while continuing to look for new opportunities to expand our distribution footprint in our current and new markets.

Outlook
We expect 2019 full-year reported revenue with the adoption of the new revenue accounting standard (ASC 606) to range from $488 million to $505 million. On an adjusted basis adding back the impact of ASC 606 for comparability, we expect revenue to range from $593 million to $610 million for growth of 5% to 8% over 2018. On a constant currency basis, we expect adjusted revenue growth to be 9% to 12% over 2018 results. Net loss on a GAAP basis is expected to be in the range of $12 million to $9 million compared to a net loss of $99 million in 2018. Adjusted EBITDA is expected to be in a range of $156 million and $163 million, reflecting growth of 6% to 10% over 2018 adjusted EBITDA and 10% to 14% over currency-neutral 2018 adjusted EBITDA. Adjusted EBITDA margin is expected to range from 26.4% to 26.7%, reflecting expansion of 27 to 60 basis points over 2018 currency-neutral adjusted EBITDA margin.

Conference call
EVO’s management will host a conference call for investors at 8:00 a.m. Eastern Time on Wednesday, March 13, 2019 to discuss the results. Participants may access the conference call via the investor relations section of the company’s website at www.evopayments.com, or participants may also dial (877) 356-5729 inside the U.S. and Canada and (629) 228-0718 outside the U.S. and Canada to listen. The conference ID number is 1819469. A recording of the call will be archived on the company's investor relations website following the live call.

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 and Section 21E of the Securities Exchange Act of 1934. 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) our ability to anticipate and respond to changing industry trends and the needs and preferences of our customers and consumers; (2) the impact of substantial and increasingly intense competition; (3) the impact of changes in the competitive landscape, including disintermediation from other participants in the payments chain; (4) the effects of global economic, political and other conditions; (5) our compliance with governmental regulations and other legal obligations, particularly related to privacy, data protection and information security, and consumer protection laws; (6) our ability to protect our systems and data from continually evolving cybersecurity risks or other technological risks; (7) failures in our processing systems, software defects, computer viruses and development delays; (8) degradation of the quality of the products and services we offer, including support services; (9) risks associated with our ability to successfully complete, integrate and realize the expected benefits of acquisitions; (10) continued consolidation in the banking and payment services industries; (11) increased customer, referral partner, or sales partner attrition; (12) the incurrence of chargebacks; (13) failure to maintain or collect reimbursements; (14) fraud by merchants or others; (15) the failure of our third-party vendors to fulfill their obligations; (16) failure to maintain merchant and sales relationships and financial institution alliances; (17) ineffective risk management policies and procedures; (18) our inability to retain smaller-sized merchants and the impact of economic fluctuations on such merchants, (19) damage to our reputation, or the reputation of our partners; (20) seasonality and volatility; (21) our inability to recruit, retain and develop qualified personnel; (22) geopolitical and other risks associated with our operations outside of the United States; (23) any decline in the use of cards as a payment mechanism or other adverse developments with respect to the card industry in general; (24) increases in card network fees; (25) failure to comply with card networks requirements; (26) a requirement to purchase our eService subsidiary in Poland; (27) changes in foreign currency exchange rates; (28) future impairment charges; (29) 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; (30)  changes to, or the potential phasing out of, LIBOR; (31) restrictions imposed by our credit facilities and outstanding indebtedness; (32) participation in accelerated funding programs; (33) failure to enforce and protect our intellectual property rights; (34) 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; (35) impact of new or revised tax regulations; (36) legal proceedings; (37) our dependence on distributions from EVO, LLC to pay our taxes and expenses, including certain payments to the Continuing LLC Owners and, in the event that any tax benefits are disallowed, our inability to be reimbursed for payments made to the Continuing LLC Owners; (38) 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; (39) the risk that we could be deemed an investment company under the 1940 Act; (40) the significant influence the Continuing LLC Owners continue to have over us, including control over decisions that require the approval of stockholders; (41) certain provisions of Delaware law and anti-takeover provisions in our organizational documents could delay or prevent a change of control; (42) the effect of the Jumpstart our Business Startups Act of 2012 which allows us to reduce our SEC disclosure and postpone compliance with certain laws and regulations intended to protect investors; (43) certain provision 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 establish and 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 contained from time to time in our filings with the SEC, including our quarterly reports on Form 10-Q and our annual report on From 10-K. 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) and earnings per share information determined in accordance with GAAP by providing these and other measures on an adjusted basis in this release to assist with evaluating performance.  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 evaluate period-to-period comparisons.  Management also uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation.  The Company believes that these adjusted measures provide useful information to investors about 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, giving pro forma effect to the Company’s going forward effective tax rate following its Up-C reorganization, costs related to restructuring transactions, acquisition costs and other transitionary costs.  This release also contains information on various financial measures presented on a currency-neutral basis.  The Company believes these currency-neutral measures provide useful information to investors about the Company’s performance without taking into account fluctuations caused by currency exchange rates in the non-U.S. jurisdictions where the Company operates. Reconciliations of each non-GAAP measure to the most directly comparable GAAP measure are included in the schedules to this release. The Company also presents adjustments to its reported segment profit in this release. Segment profit is adjusted to exclude the impact of share-based compensation, transition, acquisition-related and integration costs.

Adjusted EBITDA is a non-GAAP measure presented in this release. Adjusted EBITDA does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, adjusted EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements.

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

Adjusted EBITDA is defined as income before provision for income taxes, net interest expense, and depreciation and amortization, excluding the impact of share-based compensation, transition, acquisition-related and integration costs. The calculation of adjusted EBITDA has limitations as an analytical tool, including: (a) it does not reflect the Company’s cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) it does not reflect changes in, or cash requirements for, the Company’s working capital needs; (c) it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on the Company’s indebtedness; (d) it does not reflect the Company’s tax expense or the cash requirements to pay the Company’s taxes; and (e) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements.

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 North America and Europe. 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.
Contact:
Sarah Jane Perry
Investor Relations & Corporate Communications Manager
770-709-7365
investor.relations@evopayments.com

  

EVO PAYMENTS, INC. AND SUBSIDIARIES                        
Schedule 1 - Consolidated Statements of Operations (unaudited)                        
                         
(in thousands, except share and per share data)                        
                         
    Three Months Ended December 31,   Year Ended December 31,
      2018       2017     % change     2018       2017     % change
                         
Revenue   $ 150,823     $ 138,585     9 %   $ 564,754     $ 504,750     12 %
Operating expenses:                        
Cost of services and products, exclusive of depreciation
and amortization shown separately below
    47,549       45,170     5 %     189,375       164,480     15 %
Selling, general and administrative     68,371       58,101     18 %     311,353       220,971     41 %
Depreciation and amortization     25,876       18,657     39 %     87,184       74,136     18 %
Impairment of intangible assets     14,627       -     n/a     14,627       -     n/a
Total operating expenses     156,423       121,928     28 %     602,539       459,587     31 %
Income (loss) from operations     (5,600 )     16,657     (134 %)     (37,785 )     45,163     (184 %)
Other (expense) income:                        
Interest income     597       538     11 %     2,219       1,489     49 %
Interest expense     (12,306 )     (16,360 )   (25 %)     (59,759 )     (62,876 )   (5 %)
Income from investment in unconsolidated investees     788       205     284 %     1,513       941     61 %
(Loss) gain on acquisition of unconsolidated investee     (255 )     -     n/a     8,404       -     n/a
Other expense, net     (35 )     (214 )   (84 %)     (2,998 )     (477 )   529 %
Total other expense     (11,211 )     (15,831 )   (29 %)     (50,621 )     (60,923 )   (17 %)
(Loss) income before income taxes     (16,811 )     826     (2135 %)     (88,406 )     (15,760 )   461 %
Income tax expense     (2,470 )     (1,854 )   33 %     (10,444 )     (16,588 )   (37 %)
Net loss     (19,281 )     (1,028 )   1776 %     (98,850 )     (32,348 )   206 %
Less: Net income attributable to non-controlling interests in consolidated entities     (2,262 )     (2,875 )   (21 %)     (6,696 )     (7,894 )   (15 %)
Net loss attributable to EVO Investco, LLC       $ (3,903 )           $ (40,242 )    
Less: Net loss attributable to non-controlling interests in EVO Investco, LLC     17,506               90,834          
Net loss attributable to EVO Payments, Inc.   $ (4,037 )           $ (14,712 )        
                         
Earnings per share                        
Basic   $ (0.16 )           $ (0.70 )        
Diluted   $ (0.16 )           $ (0.70 )        
Weighted average Class A common stock outstanding                        
Basic     25,595,780               21,081,447          
Diluted     25,595,780               21,081,447          
                         

 

EVO PAYMENTS, INC. AND SUBSIDIARIES        
Schedule 2 - Consolidated Balance Sheets (unaudited)        
         
(in thousands, except share and interest data)        
         
    December 31,   December 31,
      2018       2017  
Assets        
Current assets:        
Cash and cash equivalents   $ 350,697     $ 205,142  
Accounts receivable, net     13,248       15,881  
Other receivables     56,518       55,345  
Due from related parties     1,871       2,625  
Inventory     8,867       11,210  
Settlement processing assets     248,330       439,269  
Other current assets     11,817       20,941  
Total current assets     691,348       750,413  
Equipment and improvements, net     103,046       96,587  
Goodwill     353,011       311,678  
Intangible assets, net     290,139       313,483  
Investment in unconsolidated investees     1,753       1,379  
Due from related parties     915       109  
Deferred tax asset     72,296       9,057  
Other assets     21,879       25,592  
Total assets   $ 1,534,387     $ 1,508,298  
         
Liabilities and Shareholders'/Members' Equity (Deficit):          
Current liabilities:        
Settlement lines of credit   $ 41,819     $ 28,563  
Current portion of long-term debt     7,191       75,008  
Accounts payable     48,935       61,149  
Accrued expenses     112,281       89,601  
Settlement processing obligations     428,328       484,518  
Due to related parties     4,824       7,847  
Total current liabilities     643,378       746,686  
Long-term debt, net of current portion     676,865       760,946  
Due to related parties     385       675  
Deferred tax liability     13,519       11,011  
Tax receivable agreement obligations     47,221       -  
ISO reserves     2,684       2,611  
Other long-term liabilities     2,924       4,634  
Total liabilities     1,386,976       1,526,563  
Commitments and contingencies        
Redeemable non-controlling interests     1,010,093       148,266  
Shareholders'/members' equity (deficit):        
Investco, LLC Units, Outstanding - 0 and 12,371 units at December 31, 2018 and December 31, 2017 respectively.     -       135,166  
Class A common stock (par value $0.0001), Authorized - 200,000,000 and 0 shares, Issued and Outstanding - 26,025,189 and 0 shares at December 31, 2018 and December 31, 2017 respectively.     3       -  
Class B common stock (par value $0.0001), Authorized - 40,000,000 and 0 shares, Issued and Outstanding - 35,913,538 and 0 shares at December 31, 2018 and December 31, 2017 respectively.     4       -  
Class C common stock (par value $0.0001), Authorized - 4,000,000 and 0 shares, Issued and Outstanding - 2,461,055 and 0 shares at December 31, 2018 and December 31, 2017 respectively.     -       -  
Class D common stock (par value $0.0001), Authorized - 32,000,000 and 0 shares, Issued and Outstanding - 16,785,552 and 0 shares at December 31, 2018 and December 31, 2017 respectively.     1       -  
Additional paid-in capital     178,176       -  
Accumulated deficit attributable to Class A common stock     (223,799 )     -  
Accumulated deficit attributable to members of EVO Investco, LLC     -       (237,330 )
Accumulated other comprehensive loss     (2,993 )     (67,679 )
Total shareholders'/members' equity (deficit)     (48,608 )     (169,843 )
Nonredeemable non-controlling interests     (814,074 )     3,312  
Total deficit     (862,682 )     (166,531 )
Total liabilities and deficit   $ 1,534,387     $ 1,508,298  
         

 

EVO PAYMENTS, INC. AND SUBSIDIARIES        
Schedule 3 - Consolidated Statement of Cash Flows (unaudited)        
         
(in thousands)        
         
    Year Ended December 31,
      2018       2017  
Cash flows from operating activities:        
Net loss   $ (98,850 )   $ (32,348 )
Adjustments to reconcile net loss to net cash provided by        
operating activities:        
Depreciation and amortization     87,184       74,136  
Loss on sale of investments     -       1,308  
Amortization of deferred financing costs     8,528       3,197  
Loss on extinguishment of debt     2,055       -  
Share-based compensation expense     55,519       -  
Impairment of intangible assets     14,627       -  
Gain on acquisition of unconsolidated investee     (8,404 )     -  
Deferred taxes     (1,778 )     11,514  
Other     1       2,260  
Changes in operating assets and liabilities, net of effect of acquisitions:        
Accounts receivable, net     3,141       (10,243 )
Other receivables     (1,563 )     5,898  
Inventory     2,049       (1,378 )
Other current assets     (4,018 )     (9,407 )
Other assets     2,948       7,093  
Related parties     (498 )     (5,155 )
Accounts payable     (12,426 )     2,330  
Accrued expenses     15,509       6,907  
Settlement processing funds, net     137,898       (48,080 )
Other     76       178  
Net cash provided by operating activities     201,998       8,210  
Cash flows from investing activities:        
Restricted cash     -       125,000  
Acquisition of businesses, net of cash acquired     (56,193 )     (124,964 )
Purchase of equipment and improvements     (48,751 )     (42,021 )
Acquisition of intangible assets     (20,704 )     (17,310 )
Net proceeds from sale of investments     -       205  
Issuance of notes receivable     (37 )     -  
Collections of notes receivable     120       974  
Net cash used in investing activities     (125,565 )     (58,116 )
Cash flows from financing activities:        
Proceeds from long-term debt     774,359       854,135  
Repayments of long-term debt     (853,487 )     (868,990 )
Deferred financing costs paid     (3,903 )     (1,232 )
Contingent consideration paid     (2,505 )     (282 )
Consideration paid for additional shares in a consolidated subsidiary     -       (3,962 )
Deferred cash consideration paid     (65,000 )     (5,000 )
Acquisition of additional non-controlling interest     (16,916 )     -  
Distribution to non-controlling interests holders     (7,577 )     (5,722 )
IPO proceeds, net of underwriter fees     231,500       -  
Tax withholdings related to net share settlement of share-based payments     (795 )     -  
Secondary offering proceeds, net of underwriter fees     24,967       -  
Contributions by members     -       71,250  
Distribution to members     -       (1,726 )
Net cash provided by financing activities     80,643       38,471  
Effect of exchange rate changes on cash and cash equivalents     (11,521 )     13,253  
Net increase in cash and cash equivalents     145,555       1,818  
Cash and cash equivalents, beginning of year     205,142       203,324  
Cash and cash equivalents, end of year   $ 350,697     $ 205,142  
         

 

EVO PAYMENTS, INC. AND SUBSIDIARIES                          
Schedule 4 - Reconciliation of GAAP to Non-GAAP measures  
     
(in thousands)    
     
    Three Months Ended December 31,   Year Ended December 31,
      2018       2017     % change     2018       2017     % change
                         
Revenue   $ 150,823     $ 138,585     9 %   $ 564,754     $ 504,750     12 %
Currency impact1     -       (3,478 )   n/a     -       6,090     n/a
Currency-neutral revenue     150,823       135,107     12 %     564,754       510,840     11 %
                         
                         
Net loss     (19,281 )     (1,028 )   1776 %     (98,850 )     (32,348 )   206 %
Net loss attributable to non-controlling interests in consolidated entities     (2,262 )     (2,875 )   (21 %)     (6,696 )     (7,894 )   (15 %)
Income tax expense     2,470       1,854     33 %     10,444       16,588     (37 %)
Interest expense, net     11,709       15,822     (26 %)     57,540       61,387     (6 %)
Depreciation and amortization     25,876       18,657     39 %     87,184       74,136     18 %
Share-based compensation2     1,595       -     n/a     54,880       -     n/a
Transition, acquisition and integration costs3     24,237       4,190     478 %     43,899       16,200     171 %
Adjusted EBITDA     44,344       36,620     21 %     148,401       128,069     16 %
Currency impact1     -       (1,272 )   n/a     -       1,116     n/a
Currency-neutral adjusted EBITDA   $ 44,344     $ 35,348     25 %   $ 148,401     $ 129,185     15 %
                         
                         
1 Represents the impact of currency shifts by adjusting prior year results to current period average fx rates for the currencies in which EVO conducts operations. 
2 Represents $1.6 million of share-based compensation costs related to vesting of share-based awards for the three months ended December 31, 2018, and $55.5 million in share-based compensation costs for the twelve months ended December 31, 2018, largely related to vesting upon completion of the IPO, plus a $0.3 million payroll tax expense, less a $0.9 million non-controlling interest component.
3 For the three months ended December 31, 2018, earnings adjustments include $0.9 million of employee termination benefits, and $8.7 million of acquisition related and integration costs, and a $14.6 million impairment of intangible assets. For the three months ended December 31, 2017, earnings adjustments include $2.7 million of employee termination benefits and $1.5 million of transaction and acquisition related costs. For the year ended December 31, 2018, earnings adjustments include $7.3 million of employee termination benefits, $4.0 million of a strategic advisory fee, $26.4 million of acquisition related and integration costs, the adjustment of the $8.4 million gain related to the fair value mark-up on the acquisition of a previously minority owned subsidiary, and a $14.6 impairment of intangible assets. For the year ended December 31, 2017, earnings adjustments include $6.7 million of employee termination benefits, and $9.5 million of transaction and acquisition related costs.


EVO PAYMENTS, INC. AND SUBSIDIARIES                                  
Schedule 5 - Segment Information (unaudited)  
     
(dollar amount in thousands, transactions in millions)  
     
    Three Months Ended December 31,
      2018     Adjustment 1   2018 Adjusted     2017     Adjustment 2   Fx impact 3   2017 Adjusted   % change
Transactions:                                
North America     246.5               235.5                 5 %
Europe     575.1               470.0                 22 %
Total     821.6               705.5                 16 %
                                 
Segment revenue:                                
North America   $ 87,794                   $ 82,078     $ -   $ (1,270 )   $ 80,808     9 %
Europe     63,029                     56,507       -     (2,207 )     54,300     16 %
Total     150,823                     138,585       -     (3,477 )     135,108     12 %
                                 
Segment profit:                                
North America     11,762       19,701     31,463       25,749       2,184     (730 )     27,203     16 %
Europe     18,538       1,610     20,148       13,348       -     (542 )     12,806     57 %
Corporate     (9,552 )     2,285     (7,267 )     (6,667 )     2,006     -       (4,661 )   56 %
Total   $ 20,748     $ 23,596   $ 44,344     $ 32,430     $ 4,190   $ (1,272 )   $ 35,348     25 %
                                 
                                 
                                 
1 For the three months ended December 31, 2018, North America segment profit adjustment includes $0.2 million of employee termination benefits, $4.9 million of acquisition and integration related costs and a $14.6 million impairment of intangible assets. Europe segment profit adjustment includes $0.7 million of employee termination benefits, and $0.9 million of acquisition and integration costs. Corporate adjustments include $2.3 million of acquisition and integration charges.
2 For the three months ended December 31, 2017, North America segment profit adjustment includes $2.2 million of employee termination benefits. Corporate and other adjustments include $0.5 million of employee termination benefits and $1.5 million of transaction and acquisition related costs. Segment profit excludes share-based compensation and therefore is not included in the adjustment totals.
3 Fx impact adjusts prior year results using current year average period fx rates.                
                                 
    Year Ended December 31,
      2018     Adjustment 1   2018 Adjusted     2017     Adjustment 2   Fx impact 3   2017 Adjusted   % change
Transactions:                                
North America     955.1               913.1                 5 %
Europe     2,140.9               1,732.4                 24 %
Total     3,096.0               2,645.5                 17 %
                                 
Segment revenue:                                
North America   $ 320,481     $ -   $ 320,481     $ 299,034     $ -   $ (2,144 )   $ 296,890     8 %
Europe     244,273       -     244,273       205,716       -     8,234       213,950     14 %
Total     564,754       -     564,754       504,750       -     6,090       510,840     11 %
                                 
Segment profit:                                
North America     85,377       19,626     105,003       82,758       7,109     (1,230 )     88,637     18 %
Europe     61,195       4,710     65,905       54,843       876     2,346       58,065     14 %
Corporate     (41,431 )     18,924     (22,507 )     (25,732 )     8,215     -       (17,517 )   28 %
Total   $ 105,141     $ 43,260   $ 148,401     $ 111,869     $ 16,200   $ 1,116     $ 129,185     15 %
                                 
                                 
1 For the year ended December 31, 2018, North America segment profit adjustments include $4.0 million of employee termination benefits, and $9.4 million of acquisition and integration related costs, a reduction of a $8.4 million gain from the fair value markup on the acquisition of a previously minority owned subsidiary, and a $14.6 million impairment of intangible assets. Europe segment profit adjustment includes $3.1 million of employee termination benefits and $1.6 million of acquisition and integration costs. Corporate adjustments include $18.9 million of acquisition and integration charges.
2 For the year ended December 31, 2017, North America segment profit adjustment includes $5.5 million of employee termination benefits, and $1.6 million of transaction and acquisition related costs. Europe segment earnings adjustment includes $0.9 million of transaction and acquisition related costs. Corporate and other adjustments include $1.0 million of employee termination benefits and $7.2 million of transaction and acquisition related costs. Segment profit excludes share-based compensation and therefore is not included in the adjustment totals. 
3 Fx impact adjusts prior year results using current year average period fx rates.                
                                 

 

EVO PAYMENTS, INC. AND SUBSIDIARIES                          
Schedule 6 - Pro Forma Adjusted Net Income (unaudited)                      
                           
(in thousands, except share and per share data)                        
                           
      Three Months Ended December 31,   Year Ended December 31,
        2018       2017     % change     2018       2017     % change
                           
Net loss   $ (19,281 )   $ (1,028 )   1776 %   $ (98,850 )   $ (32,348 )   206 %
Net loss attributable to non-controlling interests in consolidated entities     (2,262 )     (2,875 )   (21 %)     (6,696 )     (7,894 )   (15 %)
Non-GAAP adjustments:           n/a            
Income tax expense     2,470       1,854     33 %     10,444       16,588     (37 %)
Share-based compensation1     1,595       -     n/a     54,880       -     n/a
Transition, acquisition and integration costs2     24,237       4,190     478 %     51,147       16,200     216 %
Acquisition intangible amortization3     12,361       11,294     9 %     44,574       43,580     2 %
Non-GAAP adjusted income before taxes     19,120       13,435     42 %     55,499       36,126     54 %
Income taxes at pro forma tax rate4     (4,461 )     (4,796 )   (7 %)     (12,948 )     (12,897 )   0 %
Pro forma adjusted net income   $ 14,659     $ 8,639     70 %   $ 42,551     $ 23,229     83 %
                           
Pro forma adjusted net income per share5   $ 0.18             $ 0.52          
                           
                           
1 Represents $1.6 million of share-based compensation costs incurred with the completion of the initial public offering, for the three months ended December 31, 2018, and $55.5 million of share-based compensation for the year ended December 31, 2018, plus a $0.3 million payroll tax expense less a $0.9 million non-controlling interest component. 
2 For the three months ended December 31, 2018, earnings adjustments include $0.9 million of employee termination benefits, and $8.7 million of acquisition and integration related costs, and a $14.6 million impairment of intangible assets. For the three months ended December 31, 2017, earnings adjustments include $2.7 million of employee termination benefits and $1.5 million of transaction and acquisition related costs. For the year ended December 31, 2018, earnings adjustments include $7.3 million of employee termination benefits, $4.0 million of a strategic advisory fee, $9.2 million of debt extinguishment and modification costs, $24.4 million of acquisition and integration costs, reduction of a $8.4 million gain related to the fair value mark-up on the acquisition of a previously minority owned subsidiary, and a $14.6 impairment of intangible assets. For the year ended December 31, 2017, earnings adjustments include $6.7 million of employee termination benefits, and $9.5 million of transaction and acquisition related costs. 
3 Represents amortization of intangible assets acquired through business combinations and other merchant portfolio and related asset acquisitions.            
4 Pro forma corporate income tax expense calculated using 23.3% and 35.7% for 2018 and 2017, respectively, based on blended federal and state tax rates and utilizing the Tax Reform Act for 2018 federal rates. 
5 Uses adjusted shares outstanding including an additional 55.2 million Class B, C, D shares, unvested restricted units, and unvested options that are excluded from the GAAP diluted share count. 
                           

 

EVO PAYMENTS, INC. AND SUBSIDIARIES                  
Schedule 7 - Outlook summary (unaudited)  
     
(in millions, except per share data)    
     
        Reported   Constant fx
    2019 Outlook   2018 Actual   % Change   % Change  
                 
Revenue   $488 to $505     $ 565     NM   NM
Network fees1   105       -          
Adjusted revenue   $593 to $610     $ 565     5% - 8%   9% - 12%
                 
GAAP net loss   ($12) to ($9)     $ (99 )        
Adjustments2   168 to 172       247          
Adjusted EBITDA   $156 to $163     $ 148     6% - 10%   10% - 14%
         
GAAP net loss per share attributable to EVO ($0.26) to ($0.21)     $ (0.70 )        
Adjustments3   $0.79 to $0.77     $ 1.21          
Pro forma adjusted net income per share4   $0.53 to $0.56     $ 0.52     2% - 8%   11% - 17%
         
             
1 Effective January 1, 2019, EVO adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.  The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks.  This change in presentation affected our reported GAAP revenues and operating expenses by the same amount.  For 2018, payment network fees were presented within operating expenses and in 2019 payment network fees are presentation as a reduction of revenue.  As a result, adjusted revenue for 2019 is presented on a basis that is comparable to the prior year.   
     
2 2019 represents an estimated range of adjustments to reconcile net loss to adjusted EBITDA. These adjustments include a) net loss attributable to non-controlling interests in consolidating entities, b) income tax expense, c) net interest expense, d) depreciation and amortization, e) share-based compensation, and f) costs related to transition, acquisition or integration activities.
     
3 2019 represents an estimated range of adjustments to reconcile net loss to pro forma adjusted net income per share. These adjustments include a) income tax expense, b) share-based compensation costs, c) costs related to transition, acquisition or integration activities, d) the inclusion of amortization of intangible assets acquired in business combinations and other customer portfolio and related asset acquisitions and e) adjustments to income to reflect an effective pro forma corporate tax rate of 23.1%. 2018 includes adjustments as described in Schedule 6 which reconcile net loss to pro forma adjusted net income per share. GAAP net loss per share uses Class A share counts and pro forma adjusted net income per share uses adjusted share counts as the denominator including an additional 55.8 million shares inclusive of Class B, C, D, unvested restricted units, and unvested options that are excluded from the GAAP basic share count.
     
4 2019 pro forma adjusted net income per share is impacted by $0.18 of additional depreciation expense associated with acquisitions, strong international growth including the Poland cashless initiative, and periodic terminal compliance upgrade requirements, offset by a net $0.04 related to lower interest expense associated with the partial year impact of the IPO-related debt payoff, and higher interest expense associated with the partial year impact of 2018 interest rate increases.
   

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