EVERTEC Inc

Previous wording

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 months ended March 31, 2024 and 2023 and (ii) the financial condition as of March 31, 2024. 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 year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 29, 2024 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.

Current wording

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 June 30, 2024 and 2023 and (ii) the financial condition as of June 30, 2024. 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 year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 29, 2024 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.

Previous wording

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 and, (b) 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; Evertec Chile SpA; Evertec Chile Global SpA; Evertec Chile Servicios Profesionales SpA; Tecnopago España SL; Paytrue S.A.; Caleidon; S.A.; Evertec Brasil Solutions Informática S.A.; EVERTEC Panamá, S.A.; EVERTEC Costa Rica, S.A. (“EVERTEC CR”); EVERTEC Guatemala, S.A.; Evertec Colombia, SA;, EVERTEC USA, LLC; OPG Technology Corp.; Evertec Placetopay, SAS ("PlacetoPay"); BBR Chile, SpA and BBR Perú, S.A.C.,(collectively "BBR"); Paysmart Pagamentos Eletronicos Ltda, Issuer Holding Ltda. and Issuer Instituição de Pagamentos Ltda( collectively "paySmart"); EVERTEC México Servicios de Procesamiento, S.A. de C.V.; Sinqia S.A.,Torq. Inovação Digital Ltda, Sinqia Tecnologia Ltda., Homie do Brasil Informática S.A., Rosk Software S.A., Lote 45 Participações S.A., and Compliasset S.A. (collectively "Sinqia"). Neither EVERTEC nor EVERTEC Intermediate Holdings, LLC conducts any operations other than with respect to its indirect or direct ownership of EVERTEC Group.

Current wording

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 and, (b) 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; Evertec Chile SpA; Evertec Chile Global SpA; Evertec Chile Servicios Profesionales SpA; Tecnopago España SL; Paytrue S.A.; Caleidon; S.A.; Evertec Brasil Solutions Informática S.A.; EVERTEC Panamá, S.A.; EVERTEC Costa Rica, S.A. (“EVERTEC CR”); Zunify Payments Ltda; EVERTEC Guatemala, S.A.; Evertec Colombia, SA;, EVERTEC USA, LLC; OPG Technology Corp.; Evertec Placetopay, SAS ("PlacetoPay"); BBR Chile, SpA and BBR Perú, S.A.C.,(collectively "BBR"); Paysmart Pagamentos Eletronicos Ltda, Issuer Holding Ltda. and Issuer Instituição de Pagamentos Ltda( collectively "paySmart"); EVERTEC México Servicios de Procesamiento, S.A. de C.V.; Sinqia S.A.,Torq. Inovação Digital Ltda, Sinqia Tecnologia Ltda., Homie do Brasil Informática S.A., Rosk Software S.A., Lote 45 Participações S.A., and Compliasset S.A. (collectively "Sinqia"). Neither EVERTEC nor EVERTEC Intermediate Holdings, LLC conducts any operations other than with respect to its indirect or direct ownership of EVERTEC Group.

Previous wording

On March 6, 2024, the Company entered into an accelerated share repurchase agreement (the “ASR”) with Bank of America, N.A. to repurchase an aggregate of $70 million of the Company’s common stock, par value $0.01 per share. In connection with the launch of the ASR, on March 8, 2024, the Company paid Bank of America, N.A., an aggregate of $70 million and received approximately 1.5 million shares of the Company’s common stock. The final number of shares to be received under the ASR agreement will be determined upon completion of the transaction and will be based on the total transaction value and the average of the daily volume-weighted average share price of the Company’s common stock during the term of the transaction. Final settlement of the transaction is expected to be completed in the third quarter of 2024.

Current wording

On March 6, 2024, the Company entered into an accelerated share repurchase agreement (the “ASR”) with Bank of America, N.A. to repurchase an aggregate of $70 million of the Company’s common stock, par value $0.01 per share. In connection with the launch of the ASR, on March 8, 2024, the Company paid Bank of America, N.A. an aggregate of $70 million and received approximately 1,516,793 shares of the Company’s common stock.

Previous wording

On September 30, 2010, EVERTEC Group entered into a 15-year MSA, and several related agreements with Popular. On July 1, 2022, we modified and extended the main commercial agreements with Popular, including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement (as amended, the "A&R ISO Agreement"), a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA (the "A&R ISO Agreement"). The A&R ISO Agreement, which defines our merchant acquiring relationship with Popular, now includes revenue sharing provisions with Popular. The MSA modifications also include the elimination of the exclusivity requirement, the inclusion of annual MSA minimums through September 30, 2028, a 10% discount on certain MSA services beginning in October of 2025 and adjustments to the CPI pricing escalator clause. On the same date, we also sold to Popular certain assets in exchange for 4.6 million shares of EVERTEC common stock owned by Popular (collectively with the contract amendments, the "Popular Transaction"). On August 15, 2022, through a secondary offering, Popular sold its remaining shares of EVERTEC common stock. EVERTEC is no longer deemed a subsidiary of Popular under the Bank Holding Company Act. Popular continues to be the Company's largest customer and for the three months ended March 31, 2024 approximately 31% of our revenues were generated from this relationship.

Current wording

On September 30, 2010, EVERTEC Group entered into a 15-year MSA, and several related agreements with Popular. On July 1, 2022, we modified and extended the main commercial agreements with Popular, including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement (as amended, the "A&R ISO Agreement"), a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA (the "A&R ISO Agreement"). The A&R ISO Agreement, which defines our merchant acquiring relationship with Popular, now includes revenue sharing provisions with Popular. The MSA modifications also include the elimination of the exclusivity requirement, the inclusion of annual MSA minimums through September 30, 2028, a 10% discount on certain MSA services beginning in October of 2025 and adjustments to the CPI pricing escalator clause. On the same date, we also sold to Popular certain assets in exchange for 4.6 million shares of EVERTEC common stock owned by Popular (collectively with the contract amendments, the "Popular Transaction"). On August 15, 2022, through a secondary offering, Popular sold its remaining shares of EVERTEC common stock. EVERTEC is no longer deemed a subsidiary of Popular under the Bank Holding Company Act. Popular continues to be the Company's largest customer and for the six months ended June 30, 2024 approximately 31% of our revenues were generated from this relationship.

Previous wording

Total revenue for the quarter ended March 31, 2024 was $205.3 million, an increase of 28% as compared with $159.8 million in the prior year period, reflecting the contribution from the Sinqia acquisition and organic growth across all of the Company's segments. Merchant acquiring revenue growth was a result of an increase in sales volume along with an improvement in overall spread. Payment processing revenues in Puerto Rico continue to reflect an increase in POS transaction volumes as well as continued growth in ATH Movil revenues, primarily ATH Business. Latin America revenues benefited from a full quarter contribution from the Sinqia acquisition as well as continued organic growth across the region. Business solutions revenue in Puerto Rico increased mainly due to growth across several lines of business.

Current wording

Total revenue for the quarter ended June 30, 2024 was $212.0 million, an increase of 27% compared with $167.1 million in the prior year quarter, reflecting the contribution from the Sinqia acquisition and organic growth across all of the Company's segments. Merchant acquiring revenue growth was a result of an improvement in the overall spread and strong sales volume growth. Continued growth in ATH Movil Business and increased transaction volumes drove the revenue increase in Payments Puerto Rico. Latin America revenue benefited from the contribution from the Sinqia acquisition as well as continued organic growth across the region. Business Solutions revenue reflected an increase mainly driven by a project related one-time revenue impact.

Previous wording

Cost of revenues, exclusive of depreciation and amortization, for the three months ended March 31, 2024 amounted to $102.4 million, an increase of $26.0 million or 34% when compared to the same period in the prior year. The increase during the three month period was primarily related to the addition of Sinqia, as well as an increase in cloud services, professional fees, personnel costs and an increase in costs of sales in connection with the increase in revenues from Business Solutions.

Current wording

Cost of revenues, exclusive of depreciation and amortization, for the three months ended June 30, 2024 amounted to $97.5 million, an increase of $17.0 million or 21% when compared to the same period in the prior year. The increase during the three month period was primarily related to the increase in personnel costs, mostly due to Sinqia, as well as an increase in cloud services and professional fees.

Previous wording

Selling, general and administrative expenses for the three months ended March 31, 2024 amounted to $35.6 million, an increase of $11.8 million or 49% when compared to the same period in the prior year. This increase was mainly driven by the addition of Sinqia along with an increase in personnel costs.

Current wording

Selling, general and administrative expenses for the three months ended June 30, 2024 amounted to $38.2 million, an increase of $8.7 million or 29% when compared to the same period in the prior year. This increase was mainly driven by an increase in personnel costs, primarily related to the addition of Sinqia headcount.

Previous wording

Depreciation and amortization expense for the three months ended March 31, 2024 amounted to $34.4 million, an increase of $15.0 million or 77% when compared to the same period in the prior year. This increase was primarily driven by an increase in amortization of intangible assets created in connection with the Sinqia and paySmart acquisitions, as well as an increase in software amortization for internally developed software.

Current wording

Depreciation and amortization expense for the three months ended June 30, 2024 amounted to $33.0 million, an increase of $10.6 million or 48% when compared to the same period in the prior year. This increase was primarily driven by an increase in amortization of intangible assets created in connection with the Sinqia acquisition, as well as an increase in software amortization for internally developed software.

Previous wording

Income tax expense for the three months ended March 31, 2024 amounted to $0.3 million, a decrease of $2.5 million when compared to the income tax expense in the same period in the prior year. The effective tax rate for the period was 1.8%, compared with 8.6% in the comparable 2023 period. The decrease in the effective tax rate was primarily driven by the higher interest expense resulting from the incremental debt raised as part of the Sinqia acquisition.

Current wording

Income tax expense for the three months ended June 30, 2024 amounted to $1.1 million, a decrease of $5.5 million when compared to the income tax expense in the same period in the prior year. The effective tax rate for the period was 3.3%, compared with 19.0% in the comparable 2023 period. The decrease in the effective tax rate was primarily driven by the higher interest expense resulting from the incremental debt raised as part of the Sinqia acquisition, coupled with the reversal of a potential liability for uncertain tax positions as a result of the expiration of the statute of limitation and a shift of the mix of the business to lower taxed jurisdictions.

Previous wording

Non-operating expenses for the three months ended March 31, 2024 increased by $8.9 million to $16.1 million when compared to the same period in the prior year. The increase was mainly related to an increase of $14.3 million in interest expense resulting from the incremental debt raised to finance the Sinqia acquisition, partially offset by an increase in other income of $2.8 million mainly related to unrealized gains on change in fair value of equity securities and an increase in interest income of $2.2 million.

Current wording

Non-operating expenses for the six months ended June 30, 2023 increased by $18.5 million to $25.9 million when compared to the same period in the prior year. The increase was mainly related to an increase of $27.4 million in interest expense resulting from the incremental debt raised to finance the Sinqia acquisition, partially offset by an increase in other income of $3.5 million mainly related to gain on the sale of equity securities, an increase of $3.3 million in interest income and a decrease in foreign currency losses from remeasurement of $2.5 million.

Previous wording

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 certain non-cash unrealized items and unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from non-cash unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency. Adjusted EBITDA, as it relates to operating segments, is presented in conformity with ASC Topic 280, Segment Reporting, given that it is reported to the CODM for purposes of allocating resources. The Company has recast prior periods to conform with the modified definition of Adjusted EBITDA. 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 unaudited condensed consolidated financial statements.

Current wording

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 certain non-cash unrealized items and unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from non-cash unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency. Adjusted EBITDA, 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 unaudited condensed consolidated financial statements.

Previous wording

Payment Services - Puerto Rico & Caribbean segment revenues for the three months ended March 31, 2024 increased by $4.6 million to $53.0 million when compared to the same period in the prior year. The increase in revenues was primarily driven by an increase in POS transactions and continued strong digital payments growth from ATH Movil, primarily ATH Business, as well as increases in transaction-processing and monitoring services provided to the Latin America Payments and Solutions segment. Adjusted EBITDA increased by $2.5 million to $30.4 million. This increase was primarily driven by an increase in revenue, which was partially offset by higher professional services and personnel costs.

Current wording

Payment Services - Puerto Rico & Caribbean segment revenues for the three months ended June 30, 2024 increased by $3.4 million to $54.2 million when compared to the same period in the prior year. The increase in revenues was primarily driven by an increase in POS transactions and continued strong digital payments growth from ATH Movil, primarily ATH Business, as well as increases in transaction-processing and monitoring services provided to the Latin America Payments and Solutions segment partially offset by lower issuing services revenue, mainly driven by lower active accounts. Adjusted EBITDA increased by $2.2 million to $31.4 million. This increase was primarily driven by an increase in revenue, partially offset by higher infrastructure and programming expenses and higher personnel costs.

Previous wording

Latin America Payments and Solutions segment revenues for the three months ended March 31, 2024 increased by $38.9 million to $74.2 million when compared to the same period in the prior year. Revenues benefited from a full quarter contribution from the Sinqia acquisition as well as continued organic growth across the region, contribution generated from the paySmart acquisition completed in March of 2023 and higher minimums from the processing contract with GetNet Chile. Adjusted EBITDA increased by $5.9 million when compared to the same period in the prior year driven by the impact from the Sinqia acquisition, which contributes at a lower margin.

Current wording

Latin America Payments and Solutions segment revenues for the three months ended June 30, 2024 increased by $35.6 million to $74.7 million when compared to the same period in the prior year. Revenues benefited from a full quarter contribution from the Sinqia acquisition as well as continued organic growth across the region and higher minimums from the processing contract with GetNet Chile. Revenues were also positively impacted by higher intercompany development services provided to the Puerto Rico segments. Adjusted EBITDA increased by $3.4 million when compared to the same period in the prior year driven by the impact from the Sinqia acquisition, which contributes at a lower margin. The prior year margin was positively impacted the reversal of one-time provisions for operational losses.

Previous wording

Merchant Acquiring segment revenues for the three months ended March 31, 2024 increased by $2.8 million to $43.1 million when compared to the same period in the prior year. The revenue increase was primarily driven by an increase in sales volume and an increase in the overall spread. Adjusted EBITDA increased by $0.6 million to $16.2 million driven by the increase in revenues partially offset by higher processing costs driven by the effect of a declining average ticket and an increase in the revenue sharing agreements.

Current wording

Merchant Acquiring segment revenues for the three months ended June 30, 2024 increased by $4.1 million to $45.3 million when compared to the same period in the prior year. The revenue increase was primarily driven by an increase in sales volume and an improvement in the overall spread. Adjusted EBITDA increased by $2.6 million to $18.2 million driven by the increase in revenues partially offset by higher processing costs from the Payment Services - Puerto Rico & Caribbean segment, higher processing costs driven by the effect of a declining average ticket and an increase in the costs associated with the revenue sharing agreements.

Previous wording

Business Solutions segment revenues for the three months ended March 31, 2024 increased by $2.4 million to $58.1 million as compared to the prior year period. This increase was primarily driven by an increase in several lines of business. Adjusted EBITDA increased by $0.7 million to $23.0 million as compared to the prior year period. This increase was primarily driven by the higher revenues partially offset by higher cost of sale and equipment expenses.

Current wording

Business Solutions segment revenues for the six months ended June 30, 2024 increased by $7.8 million to $120.5 million as compared to the prior year period. This increase was primarily driven by the same factors described for the quarter in addition to an increase in several lines of business. Adjusted EBITDA increased by $7.1 million to $52.8 million as compared to the prior year period. This increase was primarily driven by the higher revenues partially offset by higher cost of sale and equipment expenses.

Previous wording

As of March 31, 2024, there were no material changes to our primary short-term and long-term requirements for liquidity and capital resources as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, acquisitions, dividend payments, share repurchases and debt service. We also have a $200.0 million Revolving Facility, of which $114.0 million was available for borrowing as of March 31, 2024. The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn.

Current wording

As of June 30, 2024, there were no material changes to our primary short-term and long-term requirements for liquidity and capital resources as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, acquisitions, dividend payments, share repurchases and debt service. We also have a $200.0 million Revolving Facility, of which $194.0 million was available for borrowing as of June 30, 2024. The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $293.7 million, of which $201.2 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 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.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $257.7 million, of which $201.3 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 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.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 was $36.0 million compared to $54.5 million for the same period in the prior year, a decrease of $18.5 million, which was primarily driven by a decrease in net income as well as a decrease in collections for accounts receivable.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was $131.3 million compared to $120.7 million for the same period in the prior year, an increase of $10.7 million was primarily driven by cash received for services billed but not yet recognized through revenue.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was $22.0 million compared to $36.6 million for the same period in the prior year, the decrease is primarily related to the Acquisition of Paysmart completed in the first quarter of the prior year for $23.3 million. Partially offsetting this decrease was an increase in additions to software and purchases of property, plant and equipment of $8.6 million.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was $50.2 million compared to $58.4 million for the same period in the prior year, this decrease was primarily related to the acquisition of Paysmart completed in the first quarter of the prior year for $22.9 million partially offset by an increase in additions to software and purchases of property, plant and equipment of $20.9 million and the proceeds from the sale of equity securities of $5.9 million.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $16.4 million compared to $40.6 million for the same period in the prior year. The decrease in cash used in financing activities was primarily driven by a $80.0 million draw on the Revolving Facility compared with a repayment of $20.0 million in the prior year period. Partially offsetting this decrease was an increase in share repurchases of $63.7 million, cash used to paydown other financing arrangements of $6.2 million and dividends paid to non-controlling interest shareholders of $1.1 million.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $85.8 million compared to $53.0 million for the same period in the prior year. The increase in cash used in financing activities was primarily driven by an increase in share repurchases of $54.2 million and cash used to pay down other financing agreements of $7.0 million partially offset by settlement activity, net of $21.7 million.

Previous wording

Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to our property and equipment. During the three months ended March 31, 2024 and 2023, we invested approximately $21.9 million and $13.3 million in our capital resources, respectively. Generally, we fund capital expenditures with cash generated from operations and, if necessary, borrowings under our Revolving Facility.

Current wording

Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to our property and equipment. During the six months ended June 30, 2024 and 2023, we invested approximately $56.3 million and $35.5 million in our capital resources, respectively. Generally, we fund capital expenditures with cash generated from operations and, if necessary, borrowings under our Revolving Facility.

Previous wording

At March 31, 2024, the unpaid principal balance of the Term A Loan Facility and Term B Loan Facility were $447.5 million and $540.0 million, respectively. At March 31, 2024, the outstanding balance of the Revolving Facility is $80 million and the additional borrowing capacity was $114.0 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Current wording

At June 30, 2024, the unpaid principal balance of the Term A Loan Facility and Term B Loan Facility were $441.5 million and $540.0 million, respectively. The additional borrowing capacity for the Revolving Facility at June 30, 2024 was $194.0 million, considering letters of credit issued. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Previous wording

As part of the Company’s merger and acquisition activities, the Company may enter into agreements by which a portion of the purchase price is financed directly by the seller. At March 31, 2024 and December 31, 2023, the unpaid principal balance of these agreements amounted to $18.9 million and $19.5 million, respectively. The current portion of the deferred consideration is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Current wording

As part of the Company’s merger and acquisition activities, the Company may enter into agreements by which a portion of the purchase price is financed directly by the seller. At June 30, 2024 and December 31, 2023, the unpaid principal balance of these agreements amounted to $11.5 million and $19.5 million, respectively. Obligations bear interest at rates ranging from 2% to 12% with maturities ranging from October 2024 through March 2027. The current portion of the deferred consideration is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Previous wording

In September 2023, EVERTEC Group entered into a non-interest bearing financing agreement amounting to $10.1 million to purchase software and maintenance which the Company recorded on a discounted basis using an implied interest of 6.9%. As of March 31, 2024, the outstanding principal balance of the note payable on a discounted basis was $7.2 million. The current portion of the note is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Current wording

In September 2023, EVERTEC Group entered into a non-interest bearing financing agreement amounting to $10.1 million to purchase software and maintenance which the Company recorded on a discounted basis using an implied interest of 6.9%. As of June 30, 2024, the outstanding principal balance of the note payable on a discounted basis was $7.3 million. The current portion of the note is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Previous wording

As of March 31, 2024, the Company has four interest rate swap agreements, which convert a portion of the interest rate payments on the Company's Term Loan Facilities from variable to fixed. The interest rate swaps are used to hedge the market risk from changes in interest rates corresponding with the Company's variable rate debt. The interest rate swaps are designated as cash flow hedges and are considered highly effective. Changes in the fair value of the interest rate swaps are recognized in other comprehensive income (loss) until the gains or losses are reclassified to earnings. Gains or losses reclassified to earnings are presented within interest expense in the accompanying condensed consolidated statements of income and comprehensive income.

Current wording

As of June 30, 2024, the Company has four interest rate swap agreements, which convert a portion of the interest rate payments on the Company's Term Loan Facilities from variable to fixed. The interest rate swaps are used to hedge the market risk from changes in interest rates corresponding with the Company's variable rate debt. The interest rate swaps are designated as cash flow hedges and are considered highly effective. Cash flows from the interest rate swaps are included in the accrued liabilities and accounts payable line item in the Company's unaudited condensed consolidated statements of cash flows. Changes in the fair value of the interest rate swaps are recognized in other comprehensive (loss) income until the gains or losses are reclassified to earnings. Gains or losses reclassified to earnings are presented within interest expense in the accompanying condensed consolidated statements of income and comprehensive (loss) income.

Previous wording

As of March 31, 2024, the carrying amount of the derivatives included on the Company's unaudited condensed consolidated balance sheets was an asset of $7.0 million and a liability of $0.9 million, included in other long-term liabilities. As of December 31, 2023, the carrying amount of the derivatives included on the Company's consolidated balance sheet was an asset of $4.4 million and a liability of $0.9 million, included in other long-term liabilities. The fair value of these derivatives are estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 to the Unaudited Condensed Consolidated Financial Statements for disclosure of gains (losses) recorded on cash flow hedging activities.

Current wording

As of June 30, 2024, the carrying amount of the derivatives included on the Company's unaudited condensed consolidated balance sheet was an asset of $7.2 million. As of December 31, 2023, the carrying amount of the derivatives included on the Company's consolidated balance sheet was an asset of $4.4 million and a liability of $0.9 million, included in other long-term liabilities. The fair value of these derivatives is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 to the Unaudited Condensed Consolidated Financial Statements for disclosure of gains (losses) recorded on cash flow hedging activities.

Previous wording

During the three months ended March 31, 2024 and 2023, the Company reclassified gains of $1.7 million and $1.0 million, respectively, from accumulated other comprehensive loss into interest expense. Based on current SOFR rates, the Company expects to reclassify gains of $10.0 million from accumulated other comprehensive loss into interest expense over the next 12 months.

Current wording

During the three and six months ended June 30, 2024 the Company reclassified gains of $2.4 million and $4.1 million, respectively, from accumulated other comprehensive (loss) income into interest expense compared to gains of $1.4 million and $2.4 million, respectively, for the corresponding periods in 2023. Based on current SOFR rates, the Company expects to reclassify gains of$5.7 million from accumulated other comprehensive (loss) income into interest expense over the next 12 months.

Previous wording

As of March 31, 2024, the total secured net leverage ratio was 2.50 to 1.00. As of the date of filing of this Report, no event has occurred that constitutes an Event of Default or Default.

Current wording

As of June 30, 2024, the total secured net leverage ratio was 2.21 to 1.00. As of the date of filing of this Report, no event has occurred that constitutes an Event of Default or Default.

Previous wording

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of certain assets and liabilities, and in some instances, the reported amounts of revenues and expenses during the period. We base our assumptions, estimates, and judgments on historical experience, current events, and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. However, because future events are inherently uncertain and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 29, 2024.

Current wording

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of certain assets and liabilities, and in some instances, the reported amounts of revenues and expenses during the period. We base our assumptions, estimates, and judgments on historical experience, current events, and other factors that management believes to be relevant at the time our condensed consolidated financial statements are prepared. However, because future events are inherently uncertain and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7-Management’s Discussion and Analysis of Financial Condition and Results of