EVO PAYMENTS, INC. Introduction
This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" ("MD&A") is intended to provide an understanding of our financial
condition, cash flow, liquidity and results of operations. This MD&A should be
read in conjunction with our Annual Report on Form 10-K for the year ended
December 31, 2021 and our unaudited condensed consolidated financial statements
and the notes to the accompanying unaudited condensed consolidated financial
statements appearing elsewhere in this Form 10-Q and the Risk Factors included
in Part II, Item 1A of this Form 10-Q, as well as other cautionary statements
and risks described elsewhere in this Form 10-Q.
Company background
We are a leading payments technology and services provider offering an array of payment solutions to merchants ranging from small and mid-size enterprises to multinational companies and organizations across theAmericas andEurope . As a fully integrated merchant acquirer and payment processor across more than 50 markets and 150 currencies worldwide, we provide competitive solutions that promote business growth, increase customer loyalty, and enhance data security in the markets we serve. Founded in 1989 as an individually owned, independent sales organization inthe United States , we have transformed into a publicly traded company that today derives approximately 65% of its revenues from markets outside ofthe United States . Our revenue consists primarily of transaction and volume based fees, as well as fixed fees for certain services we perform. We are a global merchant acquirer and payment processor, with approximately 2,300 employees on four continents, servicing over 550,000 merchants in theAmericas andEurope . We differentiate ourselves from our competitors through (1) a highly productive and scaled sales distribution network, including exclusive global financial institution and tech-enabled referral partnerships, (2) our three proprietary, in-house processing platforms that are connected by a single point of integration, and (3) a comprehensive suite of payment and commerce solutions, including integrated software, at the POS, eCommerce, and B2B solutions. We believe these points of differentiation allow us to deliver strong organic growth, increase market share, and attract additional relationships with financial institutions, technology companies, and other strategic partners. We classify our business into two segments: theAmericas andEurope . The alignment of our segments is designed to establish lines of business that support the various geographical markets we operate in and allow us to further globalize our solutions while working seamlessly with our teams across these markets. In both of our segments, we provide our customers with merchant acquiring solutions, including integrated solutions for retail transactions at the physical and virtual POS, as well as B2B transactions. We plan to continue to grow our business and improve our operations by expanding market share in our existing markets and entering new markets. In our current markets, we seek to grow our business through broadening our distribution network, leveraging our innovative payment technology solutions and direct sales force, and acquiring additional merchant portfolios and tech-enabled businesses. We seek to enter new markets through acquisitions and partnerships inLatin America ,Europe , and certain other markets.
Executive overview
We delivered solid financial performance in the three and six months ended
Revenue for the three months ended
increase of 12.6% compared to the three months ended
? the six months ended
compared to the six months endedJune 30, 2021 . The increase was due to the growth in our 44 Table of Contents merchant portfolio, processing volumes and transactions, increased card
adoption, sales-related activity, including the expansion of our tech-enabled
partners, and the increase in economic activity from the abatement of COVID-19
related restrictions, especially in
the impact of the strong
million, 4.0% lower than the three months ended
was primarily due to an increase in employee compensation as a result of
headcount growth.
?
growth in our merchant portfolio, processing volumes and transactions, and
sales-related activity, including the expansion of tech-enabled partners,
partially offset by an increase in employee compensation as a result of headcount growth.Europe segment profit for the three months endedJune 30, 2022 was$16.3
million, 4.5% lower than the three months ended
primarily due to a loss on the change in fair value of our investment in
Series A preferred stock, partially offset by an increase in revenue.
segment profit for the six months ended
? higher than the six months ended
to the increase in revenue, growth in our merchant portfolio, processing
volumes and transactions, and sales-related activity, including the expansion
of tech-enabled partners, and the increase in economic activity from the
abatement of COVID-19 related restrictions. This growth was partially offset by
the impact of the strong
We processed approximately 1.2 billion transactions in the three months ended
?
We processed approximately 2.3 billion transactions in the six months ended
Merger with Global Payments Inc.
OnAugust 1, 2022 , we entered into the Merger Agreement with Global Payments and Merger Sub. Subject to the terms and conditions of the Merger Agreement, Global Payments has agreed to acquireEVO, Inc. in an all-cash transaction for$34.00 per share of Class A common stock. Pursuant to the Merger Agreement, following consummation of the Merger,EVO, Inc. will be a wholly-owned subsidiary of Global Payments. Upon the consummation of the Merger, we will cease to be a publicly traded company. We have agreed to various customary covenants and agreements, including, among others, agreements to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. We do not believe these restrictions will prevent us from meeting our debt service obligations, ongoing costs of operations, working capital needs, or capital expenditure requirements. If the Merger Agreement is terminated under certain specified circumstances, we will be required to pay Global Payments a termination fee of$100 million . The transaction is currently expected to close no later than the first quarter of 2023. The obligations ofEVO, Inc. and Global Payments to consummate the Merger are subject to the satisfaction or waiver of certain customary conditions, including, (i) the adoption of the Merger Agreement byEVO, Inc.'s stockholders, (ii) the expiration or termination of any waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as the receipt of certain additional competition and other regulatory approvals outside ofthe United States , (iii) the lack of any governmental authority restraining, enjoining or otherwise prohibiting the Merger, and (iv) the absence of a "Material Adverse Effect" (as defined in the Merger Agreement) with respect toEVO, Inc. The Merger is not conditioned on Global Payments or any other party obtaining financing. In connection with the execution and delivery of the Merger Agreement,EVO, Inc. ,EVO, LLC and certain other parties to the TRA entered into the TRA Amendment, pursuant to which such parties agreed to certain terms with respect to the treatment of the TRA upon the consummation of the Merger. In the event the Merger Agreement is terminated, the TRA Amendment will no longer be of any force and effect. The foregoing description of the Merger Agreement and TRA Amendment is only a summary, does not purport to be complete and is qualified by reference to the full text of the Merger Agreement and TRA Amendment, copies of which 45
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are attached as Exhibit 2.1 and Exhibit 10.4, respectively, to the Current
Report on Form 8-K filed by
For additional information related to the Merger Agreement and TRA Amendment, please refer to the definitive proxy statement and other relevant materials in connection with the proposed transaction with Global Payments that we have filed or will file with theSEC and which will contain important information aboutEVO, Inc. and the Merger.
Business trends and challenges
Inflation
We have seen a rise in inflation across many of our markets and anticipate this trend will continue throughout 2022. The effects of inflation on our results of operations and financial condition have not been significant. However, future inflationary pressures may adversely impact spending by cardholders, which could negatively impact our transaction volumes and business.
COVID-19
Global economic conditions may continue to be volatile as long as COVID-19 (and its variants) remains a public health threat, which volatility could negatively impact our business. Due to the continuing impact of the COVID-19 pandemic on the global economy, certain of our vendors have indicated that they are exposed to incidents of supply chain disruption, constraint, or other difficulties, including as it relates to their ability to meet the POS terminal delivery needs for our merchants. We are mitigating the impact of such incidents, in some cases, by entering into terminal purchase agreements with vendors which provides us with prioritized allocation of their available supply. Further disruption in the delivery of POS terminals in the future could impact our ability to service our merchants or add new merchants.
Longer term, we believe the pandemic will serve as a catalyst for greater utilization of digital payments, a trend we are continuing to see in our markets.
The crisis inRussia andUkraine that began inFebruary 2022 continues as of the date of this quarterly report. The current conflict betweenRussia andUkraine and the related sanctions and other penalties imposed by countries across the globe againstRussia are creating substantial uncertainty in the global economy. While we do not have operations or merchants inRussia orUkraine , we are unable to predict the future impact of this evolving situation, including on the political and economic environment inEurope . We will continue to monitor the conflict and assess any potential impact to our operations.
Other factors impacting our business and results of operations
In general, our revenue is impacted by factors such as global consumer spending trends, foreign exchange rates, the pace of adoption of commerce-enablement and payment solutions, acquisitions and dispositions, types and quantities of products and services provided to merchants, timing and length of contract renewals, new merchant wins, retention rates, mix of payment solution types employed by consumers, and changes in card network fees, including interchange rates and size of merchants served. In addition, we may pursue acquisitions from time to time. These acquisitions could result in redundant costs, such as increased interest expense resulting from indebtedness incurred to finance such acquisitions, or could require us to incur additional costs as we restructure or reorganize our operations following these acquisitions.
Seasonality
We have experienced in the past, and expect to continue to experience, seasonality in our revenues as a result of consumer spending patterns. Historically, in both theAmericas andEurope , our revenue has been strongest in the fourth quarter and weakest in the first quarter as many of our merchants experience a seasonal lift during the traditional vacation and holiday months. Operating expenses do not typically fluctuate seasonally. 46
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Foreign currency translation impact on our operations
We present our financial statements inU.S. dollars and have approximately 65% of our revenues in non-U.S. dollar currencies. The primary non-U.S. dollar currencies are the Euro, Polish Zloty, and Mexican Peso. Accordingly, we are exposed to foreign currency exchange rate risk arising from transactions in the normal course of business. It is difficult to predict the future fluctuations of foreign currency exchange rates and how those fluctuations will impact our unaudited condensed consolidated statements of operations and comprehensive (loss) income in the future. As a result of the relative size of our international operations, these fluctuations may be material on individual balances. Our revenues and expenses from our international operations are generally denominated in the local currency of the country in which they are derived or incurred. Therefore, the impact of currency fluctuations on our operating results and margins is partially mitigated.
Financial institution partners
We maintain referral partnerships with a number of leading financial institutions, includingDeutsche Bank USA ,Deutsche Bank Group , Grupo Santander, PKO Bank Polski, Bank of Ireland, Raiffeisen Bank, Moneta, Citibanamex, Sabadell,Liberbank , and BCI, among others. We commenced operations inChile through our joint venture with BCI at the end of the second quarter in 2021. Our pending joint venture and exclusive referral relationship with the National Bank of Greece is expected to be completed in the second half of 2022, subject to regulatory approvals and other customary conditions. We rely on our various financial institution relationships to grow and maintain our business. These relationships are structured in various ways, such as commercial alliance relationships and joint ventures. We enter into long-term relationships with our bank partners where these partners typically provide exclusive merchant referrals and credit facilities to support the settlement process. Our relationships with our financial institution partners may be impacted by, among other things, consolidations and other transactions in the banking and payments industries. InJanuary 2022 , Citigroup Inc. announced its decision to exit the consumer, small-business and middle-market banking operations of Citibanamex, our financial institution partner inMexico . The details of the proposed transaction are unknown, including structural complexity and anticipated timing of the consummation of their transaction. While our long term, exclusive commercial agreement with Citibanamex remains in place, at this time, we cannot estimate the potential impact of this development to our referral relationship with Citibanamex or our Mexican business. One of our Spanish financial institution referral partners, Banco Popular, was acquired by Santander inJune 2017 . As reported previously and reflected in our previous years' financial statements, Santander's acquisition of Banco Popular has adversely impacted our business inSpain . Revenues from this channel have declined significantly due primarily to reduced merchant referrals following the acquisition and the bank's failure to perform certain of its other obligations under our agreements. See Note 19, "Commitments and Contingencies," in the notes to the accompanying unaudited condensed consolidated financial statements for additional information.
Increased regulations and compliance
We, our partners and our merchants are subject to various laws and regulations that affect the electronic payments industry in the many countries in which our services are used, including numerous laws and regulations applicable to banks, financial institutions, and card issuers. A number of our subsidiaries in ourEurope segment hold aPayments Institution ("PI") license, allowing them to operate in theEuropean Union (the "EU") member states in which such subsidiaries do business. As a PI, we are subject to regulation and oversight, which include, among other obligations, a requirement to maintain specific regulatory capital and adhere to certain rules regarding the conduct of our business, including the European Payment Services Directive of 2015 ("PSD2"). PSD2 contains a number of additional regulatory mandates, such as provisions relating to Strong Customer Authentication ("SCA"), which aim to increase the security of electronic payments by requiring multi-factor user authentication. Failure to comply with SCA requirements may result in fines from card networks as well as declined payments from card issuers.The EU has also enacted legislation relating to the offering of DCC services, which went into effect inApril 2020 . These new rules require additional disclosures of foreign exchange margins in connection with our DCC product offerings. 47
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We are currently operating in theUnited Kingdom within the scope of its temporary permissions regime pending approval of our application for a stand alone PI license. In addition, we continue to closely monitor the impact of Brexit on our operations as further details emerge regarding the post-Brexit regulatory landscape.
Key performance indicators
Transactions Processed
Transactions processed refers to the number of transactions we processed during any given period of time and is a meaningful indicator of our business and financial performance, as a significant portion of our revenue is driven by the number and/or value of transactions we process. In addition, transactions processed provides a valuable measure of the level of economic activity across our merchant base. In ourAmericas segment, transactions include acquiredVisa and Mastercard credit and signature debit, American Express, Discover,UnionPay , JCB, PIN-debit, electronic benefit transactions and gift card transactions. In ourEurope segment, transactions include acquiredVisa and Mastercard credit and signature debit, other card network merchant acquiring transactions, and ATM transactions. For the three months endedJune 30, 2022 , we processed approximately 1.2 billion transactions, which included approximately 0.2 billion transactions in theAmericas and approximately 1.0 billion transactions inEurope . This represents a decrease of 0.5% in theAmericas and an increase of 28.3% inEurope for an aggregate increase of 20.8% compared to the three months endedJune 30, 2021 . Transactions processed in theAmericas andEurope accounted for 21.4% and 78.6%, respectively, of the total transactions we processed for the three months endedJune 30, 2022 . For the six months endedJune 30, 2022 , we processed approximately 2.3 billion transactions, which included approximately 0.5 billion transactions in theAmericas and approximately 1.8 billion transactions inEurope . This represents an increase of 5.5% in theAmericas and an increase of 31.4% inEurope for an aggregate increase of 24.4% compared to the six months endedJune 30, 2021 . Transactions processed in theAmericas andEurope accounted for 22.9% and 77.1%, respectively, of the total transactions we processed for the six months endedJune 30, 2022 . The changes in the transactions processed in the three and six months endedJune 30, 2022 were primarily driven by the growth in our merchant portfolio, increased card adoption, sales-related activity, including the expansion of our tech-enabled partners, and the increase in economic activity from the abatement of COVID-19 related restrictions especially inEurope . 48
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Comparison of results for the three months ended
The following table sets forth the unaudited condensed consolidated statements
of operations in dollars and as a percentage of revenue for the period
presented.
Three Months Ended Three Months Ended
(dollar amounts in
thousands) June 30, 2022 % of revenue June 30, 2021 % of revenue $ change % change
Segment revenue:
Americas $ 81,692 59.3% $ 76,979 63.0% $ 4,713 6.1%
Europe 55,979 40.7% 45,256 37.0% 10,723 23.7%
Revenue $ 137,671 100.0% $ 122,235 100.0% $ 15,436 12.6%
Operating expenses:
Cost of services and
products $ 22,431 16.3% $ 18,028 14.7% $ 4,403 24.4%
Selling, general, and
administrative 70,502 51.2% 65,670 53.7% 4,832 7.4%
Depreciation and
amortization 18,806 13.7% 20,695 16.9% (1,889) (9.1%)Total operating expenses 111,739 81.2% 104,393 85.4% 7,346 7.0% Income from operations $ 25,932 18.8% $
17,842 14.6% $ 8,090 45.3%
Segment profit:
Americas $ 36,285 26.4% $ 37,781 30.9% $ (1,496) (4.0%)
Europe $ 16,290 11.8% $ 17,055 14.0% $ (765) (4.5%)
Revenue
Revenue was
Europe segment revenue was$56.0 million for the three months endedJune 30, 2022 , an increase of$10.7 million , or 23.7%, compared to the three months endedJune 30, 2021 . This growth was partially offset by the impact of the strongU.S. dollar on foreign exchange rates. The increase in bothAmericas andEurope segment revenue for the three months endedJune 30, 2022 was due to the growth in our merchant portfolio, processing volumes and transactions, increased card adoption, sales-related activity, including the expansion of our tech-enabled partners, and the increase in economic activity from the abatement of COVID-19 related restrictions, especially inEurope .
Operating expenses
Cost of services and products
Cost of services and products was
Selling, general, and administrative expenses
Selling, general, and administrative expenses were$70.5 million for the three months endedJune 30, 2022 , an increase of$4.8 million , or 7.4%, compared to the three months endedJune 30, 2021 . The increase was primarily due to share-based compensation and higher personnel costs. 49
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Depreciation and amortization
Depreciation and amortization was$18.8 million for the three months endedJune 30, 2022 , a decrease of$1.9 million , or 9.1%, compared to the three months endedJune 30, 2021 . The decrease was primarily driven by lower amortization due to the accelerated amortization method of merchant contract portfolios and the impact of foreign exchange rates.
Interest expense
Interest expense was$4.1 million for the three months endedJune 30, 2022 , a decrease of$1.9 million , or 32.0%, compared to the three months endedJune 30, 2021 . The decrease was primarily due to lower interest rates on the term loan. Income tax expense Income tax expense represents federal, state, local, and foreign taxes based on income in multiple domestic and foreign jurisdictions. Historically, as a limited liability company treated as a partnership forU.S. federal income tax purposes,EVO, LLC's income was not subject to corporate tax inthe United States , but only on income earned in foreign jurisdictions. Inthe United States , our members were taxed on their proportionate share of income ofEVO, LLC . However, following the Reorganization Transactions, we incur corporate tax on our share of taxable income ofEVO, LLC . Our income tax expense reflects suchU.S. federal, state, and local income tax as well as taxes payable in foreign jurisdictions by certain of our subsidiaries. For the three months endedJune 30, 2022 , we recorded a tax expense of$7.7 million and for the three months endedJune 30, 2021 , we recorded an income tax expense of$7.0 million , which included a net discrete tax benefit of$0.3 million .
Segment performance
Americas segment profit for the three months endedJune 30, 2022 was$36.3 million , compared to$37.8 million for the three months endedJune 30, 2021 , a decrease of 4.0%. This decrease was primarily due to an increase in employee compensation as a result of headcount growth.Americas segment profit margin was 44.4% for the three months endedJune 30, 2022 , compared to 49.1% for the three months endedJune 30, 2021 .Europe segment profit was$16.3 million for the three months endedJune 30, 2022 , compared to$17.1 million for the three months endedJune 30, 2021 , a decrease of 4.5%. The decrease was primarily due to a loss on the change in fair value of our investment in Visa Series A preferred stock and the impact of the strongU.S. dollar on foreign exchange rates, partially offset by an increase in revenue.Europe segment profit margin was 29.1% for the three months endedJune 30, 2022 , compared to 37.7% for the three months endedJune 30, 2021 . Corporate expenses not allocated to a segment were$7.4 million for the three months endedJune 30, 2022 , compared to$10.2 million for the three months endedJune 30, 2021 . The decrease was primarily due to a decrease in professional
fees.
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Comparison of results for the six months ended
The following table sets forth the unaudited condensed consolidated statements
of operations in dollars and as a percentage of revenue for the period
presented.
Six Months Ended Six Months Ended
(dollar amounts in
thousands) June 30, 2022 % of revenue June 30, 2021 % of revenue $ change % change
Segment revenue:
Americas $ 158,552 59.9% $ 147,406 64.5% $ 11,146 7.6%
Europe 106,045 40.1% 81,009 35.5% 25,036 30.9%
Revenue $ 264,597 100.0% $ 228,415 100.0% $ 36,182 15.8%
Operating expenses:
Cost of services and
products $ 44,447 16.8% $ 35,155 15.4% $ 9,292 26.4%
Selling, general, and
administrative 143,215 54.1% 126,068 55.2% 17,147 13.6%
Depreciation and
amortization 39,317 14.9% 41,621 18.2% (2,304) (5.5%)
Total operating expenses 226,979 85.8% 202,844 88.8% 24,135 11.9%
Income from operations $ 37,618 14.2% $ 25,571 11.2% $ 12,047 47.1%
Segment profit:
Americas $ 68,609 25.9% $ 67,757 29.7% $ 852 1.3%
Europe $ 32,120 12.1% $ 26,181 11.5% $ 5,939 22.7%
Revenue
Revenue was
The increase in both
Operating expenses
Cost of services and products
Cost of services and products was
Selling, general, and administrative expenses
Selling, general, and administrative expenses were$143.2 million for the six months endedJune 30, 2022 , an increase of$17.1 million , or 13.6%, compared to the six months endedJune 30, 2021 . The increase was primarily due to increases in personnel costs, due to growth in headcount, and incentive compensation expenses based on business performance. 51
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Depreciation and amortization
Depreciation and amortization was$39.3 million for the six months endedJune 30, 2022 , a decrease of$2.3 million , or 5.5%, compared to the six months endedJune 30, 2021 . This decrease was primarily driven by lower amortization due to the accelerated amortization method of merchant contract portfolios and the impact of foreign exchange rates.
Interest expense
Interest expense was
Income tax expense Income tax expense represents federal, state, local and foreign taxes based on income in multiple domestic and foreign jurisdictions. Historically, as a limited liability company treated as a partnership forU.S. federal income tax purposes,EVO, LLC's income was not subject to corporate tax inthe United States , but only on income earned in foreign jurisdictions. Inthe United States , our members were taxed on their proportionate share of income ofEVO, LLC . However, following the Reorganization Transactions, we incur corporate tax on our share of taxable income ofEVO, LLC . Our income tax expense reflects suchU.S. federal, state, and local income tax as well as taxes payable in foreign jurisdictions by certain of our subsidiaries. For the six months endedJune 30, 2022 , we recorded a tax expense of$11.1 million and for the six months endedJune 30, 2021 , we recorded an income tax expense of$11.6 million , which included a net discrete tax expense of$3.3 million primarily related to a valuation allowance recorded to reduce the deferred tax assets not expected
to be realized inSpain . Segment performanceAmericas segment profit for the six months endedJune 30, 2022 was$68.6 million , compared to$67.8 million for the six months endedJune 30, 2021 , an increase of 1.3%. The increase was primarily due to the increase in revenue, growth in our merchant portfolio, processing volumes and transactions, and sales-related activity, including the expansion of tech-enabled partners, partially offset by an increase of employee compensation, as a result of headcount growth.Americas segment profit margin was 43.3% for the six months endedJune 30, 2022 , compared to 46.0% for the six months endedJune 30, 2021 .Europe segment profit was$32.1 million for the six months endedJune 30, 2022 , compared to$26.2 million for the six months endedJune 30, 2021 , an increase of 22.7%. The increase was primarily due to the increase in revenue, growth in our merchant portfolio, processing volumes and transactions, and sales-related activity, including the expansion of tech-enabled partners, and the increase in economic activity from the abatement of COVID-19 related restrictions. This was partially offset by the impact of the strongU.S. dollar on foreign exchange rates.Europe segment profit margin was 30.3% for the six months endedJune 30, 2022 , compared to 32.3% for the six months endedJune 30, 2021 . Corporate expenses not allocated to a segment were$18.0 million for the six months endedJune 30, 2022 , compared to$16.1 million for the six months endedJune 30, 2021 . The increase was primarily due to increases in employee compensation and insurance costs, partially offset by a decrease in professional fees.
Liquidity and capital resources for the six months ended
Overview
We have historically funded our operations primarily with cash flow from
operations and, when needed, with borrowings, including under our Senior Secured
Credit Facilities. Our principal uses for liquidity have been debt service,
capital expenditures, working capital, and funds required to finance
acquisitions. However, the Merger Agreement with Global Payments imposes certain
limitations on how we conduct our business during the period between the
execution of the Merger Agreement and the effective time of the Merger,
including limitations on our ability to, among other things, engage in certain
acquisitions, incur indebtedness or issue or sell new debt securities.
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We expect to continue to use capital to innovate and advance our products as new technologies emerge and to accommodate new regulatory requirements in the markets in which we operate. We expect these strategies to be funded primarily through cash flow from operations and borrowings from our Senior Secured Credit Facilities. Short-term liquidity needs will primarily be funded through the revolving credit facility portion of our Senior Secured Credit Facilities.
To the extent that additional funds are necessary to finance future acquisitions, and to meet our long-term liquidity needs as we continue to execute on our strategy, we anticipate that they will be obtained through additional indebtedness, equity, or debt issuances, or both.
As ofJune 30, 2022 , our capacity under the revolving credit facility portion of our Senior Secured Credit Facilities was$200.0 million , with availability of$191.9 million for additional borrowings and utilization of$6.7 million and$1.4 million in revolver and standby letters of credit, respectively. We have structured our operations in a manner to allow for cash to be repatriated through tax-efficient methods using dividends or long-term loans from foreign jurisdictions as our main source of repatriation. We follow local government regulations and contractual restrictions on cash as well as how much and when dividends can be repatriated. As ofJune 30, 2022 , cash and cash equivalents of$438.7 million includes cash inthe United States of$107.3 million and$331.4 million in foreign jurisdictions, respectively. Ofthe United States cash balances,$1.8 million is available for general purposes, and the remaining$105.5 million is considered merchant reserves and settlement-related cash and is therefore unavailable for our general use. Of the foreign cash balances,$197.6 million is available for general purposes, and the remaining$133.8 million is considered merchant reserves and settlement-related cash and is therefore unable to be repatriated. Refer to Note 1, "Description of Business and Summary of Significant Accounting Policies," in the notes to the accompanying unaudited condensed consolidated financial statements for additional information on our cash and cash equivalents. We do not intend to pay cash dividends on our Class A common stock in the foreseeable future.EVO, Inc. is a holding company that does not conduct any business operations of its own. As a result,EVO, Inc.'s ability to pay cash dividends on its common stock, if any, is dependent upon cash dividends and distributions and other transfers fromEVO, LLC . The amounts available toEVO, Inc. to pay cash dividends are subject to the covenants and distribution restrictions in our Senior Secured Credit Facilities. Further,EVO, Inc. may not pay cash dividends to holders of Class A common stock unless it concurrently pays full participating dividends to holders of the Preferred Stock on an "as converted" basis. In connection with our IPO, we entered into the Exchange Agreement with certain of the Continuing LLC Owners, under which these Continuing LLC Owners have the right, from time to time, to exchange their units inEVO, LLC and related Class D common shares ofEVO, Inc. for shares of our Class A common stock or, at our option, cash. If we choose to satisfy the exchange in cash, we anticipate that we will fund such exchange through cash from operations, funds available under the revolving portion of our Senior Secured Credit Facilities, equity, or debt issuances or a combination thereof. In addition, in connection with the IPO, we entered into the TRA with the Continuing LLC Owners. Payments required under the TRA are generally funded by taxable income and represent the tax benefit from the step-up in tax basis that is passed on to the TRA holders. Any payments made by us to non-controlling LLC owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us and, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts generally will be deferred and will accrue interest in accordance with the terms of the TRA until paid by us. Refer to Note 5, "Tax Receivable Agreement," in the notes to the accompanying unaudited condensed consolidated financial statements for additional information on the TRA. 53
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The following table sets forth summary cash flow information for the six months
ended
Six Months Ended June 30 ,
(in thousands) 2022 2021
Net cash provided by operating activities$ 95,577 $ 11,586 Net cash used in investing activities (36,952)
(38,581)
Net cash used in financing activities (10,936)
(10,844)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (19,404)
(4,285)
Net increase (decrease) in cash, cash equivalents, and restricted cash$ 28,285 $ (42,124) Operating activities Net cash provided by operating activities was$95.6 million for the six months endedJune 30, 2022 , an increase of$84.0 million compared to net cash provided by operating activities of$11.6 million for the six months endedJune 30, 2021 . The increase was primarily due to net income and increases in working capital, including the timing of settlement-related assets and liabilities.
Investing activities
Net cash used in investing activities was$37.0 million for the six months endedJune 30, 2022 , a decrease of$1.6 million compared to net cash used in investing activities of$38.6 million for the six months endedJune 30, 2021 . The decrease was primarily due to the acquisition of Pago Fácil in the prior year, partially offset by the purchases of North49 and intellectual property in the current year.
Financing activities
Net cash used in financing activities was
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash are impacted by the fluctuation of foreign exchange rates upon translation of non-U.S. currencies toU.S. dollars. The foreign exchange rate volatility in the current year, due to the strengthening of theU.S. dollar relative to other currencies, impacted the translation during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 .
Senior Secured Credit Facilities
The Company (through its subsidiary EPI) entered into the Restatement Agreement inNovember 2021 to amend and restate our senior secured credit facilities (as amended and restated by the Restatement Agreement, the "Senior Secured Credit Facilities"). The Senior Secured Credit Facilities are comprised of a$200.0 million revolving credit facility maturing inNovember 2026 and a$588.0 million term loan maturing inNovember 2026 . In addition, our Senior Secured Credit Facilities also provide us with the option to access incremental credit facilities, refinance the loans with debt incurred outside our Senior Secured Credit Facilities, and extend the maturity date of the revolving loans and term loans, subject to certain limitations and terms.
Refer to Note 13, "Long-Term Debt and Lines of Credit," in the notes to the accompanying unaudited condensed consolidated financial statements for additional information on our long-term debt and settlement lines of credit.
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Settlement lines of credit
We have specialized lines of credit which are restricted for use in funding
settlement. The settlement lines of credit generally have variable interest
rates and are subject to annual review. As of
Contractual obligations
Other than changes which occur in the ordinary course of business, as ofJune 30, 2022 , there were no significant changes to the contractual obligations reported as ofDecember 31, 2021 in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Critical accounting policies and estimates
Our critical accounting policies have not changed from those reported as of
New accounting pronouncements
For information regarding new accounting pronouncements, and the impact of these pronouncements on our unaudited condensed consolidated financial statements, if any, refer to Note 1, "Description of Business and Summary of Significant Accounting Policies," in the notes to the accompanying unaudited condensed consolidated financial statements.
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