Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number: 001-38504 EVO Payments, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 82-1304484State or Other Jurisdiction of Incorporation or Organization I.R.S. Employer Identification No. Ten Glenlake ParkwaySouth Tower, Suite 950Atlanta, Georgia 30328Address of Principal Executive Offices Zip Code (516) 479-9000 Registrant’s telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A Common Stock, par value $0.0001 per share Nasdaq Global Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will notbe contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 ofthe Exchange Act. Large accelerated filer ☐Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common equity held by non-affiliates, based on the closing sale price as reported on the Nasdaq GlobalMarket system on June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $338,281,610. As of March11, 2019, there were 26,491,110 shares of the registrant’s Class A common stock, par value $0.0001 per share, issued and outstanding, 35,913,538 shares of theregistrant’s Class B Common Stock, par value $0.0001 per share, issued and outstanding, 2,455,055 shares of the registrant’s Class C Common Stock, par value$0.0001 per share, issued and outstanding, and 16,323,954 shares of the registrant’s Class D Common Stock, par value $0.0001 per share, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE:Specifically identified portions of the registrant’s proxy statement for the 2019 annual meeting of stockholders, which will be filed no later than 120 days after theclose of the registrant’s fiscal year ended December 31, 2018, are incorporated by reference into Part III of this report. Table of ContentsEVO PAYMENTS, INC. AND SUBSIDIARIESTABLE OF CONTENTS Cautionary Note Regarding Forward-Looking Statements 3Basis of Presentation 5PART I Item 1Business 6 Item 1ARisk Factors 23 Item 1BUnresolved Staff Comments 48 Item 2Properties 48 Item 3Legal Proceedings 48 Item 4Mine Safety Disclosure 49 PART II Item 5Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities 49 Item 6Selected Financial Data 51 Item 7Management’s Discussion and Analysis of Financial Condition and Results of Operations 53 Item 7AQuantitative and Qualitative Disclosures About Market Risk 68 Item 8Financial Statements and Supplementary Data 70 Item 9Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 122 Item 9AControls and Procedures 122 Item 9BOther Information 122 PART III Item 10Directors, Executive Officers and Corporate Governance 122 Item 11Executive Compensation 123 Item 12Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 123 Item 13Certain Relationships and Related Transactions, and Director Independence 123 Item 14Principal Accountant Fees and Services 123 PART IV Item 15Exhibits and Financial Statement Schedules 123 Signatures 129 2 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains statements about future events and expectations that constitute forward-lookingstatements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-lookingstatements 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 accountthe information currently available to us and are not guarantees of future results or performance. None of the forward-lookingstatements in this Annual Report on Form 10-K are statements of historical fact. Forward-looking statements involve risksand uncertainties that may cause our actual results to differ materially from the expectations of future results we express orimply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that couldcontribute to these differences include the following: (1) our ability to anticipate and respond to changing industry trendsand the needs and preferences of our customers and consumers; (2) the impact of substantial and increasingly intensecompetition; (3) the impact of changes in the competitive landscape, including disintermediation from other participants inthe payments chain; (4) the effects of global economic, political and other conditions; (5) our compliance with governmentalregulations and other legal obligations, particularly related to privacy, data protection and information security, andconsumer protection laws; (6) our ability to protect our systems and data from continually evolving cybersecurity risks orother 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 ourability to successfully complete, integrate and realize the expected benefits of acquisitions; (10) continued consolidation inthe banking and payment services industries; (11) increased customer, referral partner, or sales partner attrition; (12) theincurrence of chargebacks; (13) failure to maintain or collect reimbursements; (14) fraud by merchants or others; (15) thefailure of our third-party vendors to fulfill their obligations; (16) failure to maintain merchant and sales relationships andfinancial 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 reputationof 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 asa payment mechanism or other adverse developments with respect to the card industry in general; (24) increases in cardnetwork fees; (25) failure to comply with card networks requirements; (26) a requirement to purchase our eService subsidiaryin Poland; (27) changes in foreign currency exchange rates; (28) future impairment charges; (29) risks relating to ourindebtedness, including our ability to raise additional capital to fund our operations on economized terms or at all andexposure to interest rate risks; (30) changes to, or the potential phasing out of, LIBOR; (31) restrictions imposed by our creditfacilities and outstanding indebtedness; (32) participation in accelerated funding programs; (33) failure to enforce andprotect our intellectual property rights; (34) failure to comply with, or changes in, laws, regulations and enforcementactivities, including those relating to corruption, anti-money laundering, data privacy and financial institutions; (35) impactof new or revised tax regulations; (36) legal proceedings; (37) our dependence on distributions from EVO, LLC (as defined in“Basis of Presentation”) to pay our taxes and expenses, including certain payments to the Continuing LLC Owners (asdefined in “Basis of Presentation”) and, in the event that any tax benefits are disallowed, our inability to be reimbursed forpayments made to the Continuing LLC Owners; (38) our organizational structure, including benefits available to theContinuing LLC Owners that are not available to holders of our Class A common stock to the same extent; (39) the risk thatwe could be deemed an investment company under the 1940 Act (as defined in Item 1A “Risk Factors”); (40) the significantinfluence the Continuing LLC Owners continue to have over us, including control over decisions that require the approval ofstockholders; (41) certain provisions of Delaware law and antitakeover provisions in our organizational documents coulddelay or prevent a change of control; (42) the effect of the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”)which allows us to reduce our SEC disclosure and postpone compliance with certain laws and regulations intended to protectinvestors; (43) certain provision in our organizational documents, including those that provide Delaware as the exclusiveforum for litigation matters and that renounce the doctrine of corporate opportunity; (44) our ability to establish andmaintain effective internal control over financial reporting and disclosure controls and procedures; (45) changes in our stockprice, including relating to downgrades, analyst reports, and future sales by us or by existing stockholders; and (46) the otherrisks and uncertainties listed under “Risk Factors” contained in Part I of this Annual Report on Form 10-K.3 Table of Contents 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 are intended to identifysuch forward-looking statements. 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 materiallyfrom those projected in any forward-looking statements we make. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.4 Table of ContentsBASIS OF PRESENTATION As used in this Annual Report on Form 10-K, unless the context otherwise requires, references to:·“EVO,” “we,” “us,” “our,” the “Company” and similar references refer (1) on or prior to the completion of theReorganization Transactions, including our initial public offering, to EVO, LLC and, unless otherwise stated, all ofits direct and indirect subsidiaries, and (2) following the consummation of the Reorganization Transactions,including our initial public offering, to EVO, Inc., and, unless otherwise stated, all of its direct and indirectsubsidiaries, including EVO, LLC.·“EVO, Inc.” refers to EVO Payments, Inc., a Delaware corporation, and, unless otherwise stated, all of its direct andindirect subsidiaries.·“EVO, LLC” refers to EVO Investco, LLC, a Delaware limited liability company, and, unless otherwise stated, all ofits direct and indirect subsidiaries.·“Continuing LLC Owners” refers collectively to the holders of our Class B common stock, Class C common stockand Class D common stock immediately following our initial public offering, which includes Blueapple, MDP, ourexecutive officers and certain of our current and former employees.·“LLC Interests” refers to the single class of common membership interests of EVO, LLC.·“Blueapple” refers to Blueapple, Inc., a Delaware S corporation, which is controlled by entities affiliated with ourfounder and Chairman of our board of directors, Rafik R. Sidhom.·“MDP” refers to entities controlled by Madison Dearborn Partners, LLC.·“markets” refers to countries and territories where we are authorized by card networks to acquire transactions. Forpurposes of determining our markets, territories refers to non-sovereign geographic areas that fall under the authorityof another government. As an example, we consider Gibraltar (a territory of the United Kingdom) and the UnitedKingdom to be two distinct markets as our licensing agreements with the card networks gives us the ability toacquire transactions in both markets.·“merchant” refers to an organization that accepts electronic payments, including for-profit, not-for-profit andgovernmental entities.·“Reorganization Transactions” refers to the series of reorganization transactions described herein that wereundertaken in connection with our initial public offering to implement our “Up-C” capital structure.·“transactions processed” refers to the number of transactions we processed during any given period of time and is ameaningful indicator of our business and financial performance, as a significant portion of our revenue is driven bythe number of transactions we process. In addition, transactions processed provides a valuable measure of the levelof economic activity across our merchant base. In our North America segment, transactions include acquired Visaand Mastercard credit and signature debit, American Express, Discover, UnionPay, PIN-debit, electronic benefittransactions and gift card transactions. In our Europe segment, transactions include acquired Visa and Mastercardcredit and signature debit, other card network merchant acquiring transactions and ATM transactions.5 Table of Contents PART I ITEM 1. BUSINESS Founded in 1989, we are a global merchant acquirer and payment processor servicing more than 550,000 merchants in NorthAmerica and Europe and processing more than 950 million transactions in North America and 2.1 billion transactions inEurope annually. We operate at the center of global electronic commerce with local operations in 11 countries and the abilityto serve 50 markets around the world through our three proprietary, in-house processing platforms that are connected by asingle point of integration. We differentiate ourselves from our competitors through (1) a highly productive and scaled salesdistribution network, including exclusive global financial institution referral partnerships, (2) our three proprietary, in-house processing platforms, and (3) a comprehensive suite of payment and commerce solutions. We believe these points ofdifferentiation allow us to deliver strong organic growth, increase market share, and attract additional financial institution,technology and other strategic partner relationships.Our business, both domestically and abroad, is supported by partnerships with independent software vendors (“ISVs”),integrated software dealers, enterprise resource planning (“ERP”) software dealers and eCommerce gateway providers whichwe refer to as our “Tech-enabled” division. These partnerships function by way of a technical integration between us and thethird party in which the third party seamlessly passes information to our systems to streamline the merchant boarding process.We have emerged as a preferred partner for these third-party referral partners because of the ease of integration through ourproprietary solutions, high merchant satisfaction levels driven by the quality of our service, the ease and speed of ourboarding systems for new merchants, and our consistent and transparent approach to risk and underwriting.Our business is also supported by our “Direct” division, which includes our referral relationships with fourteen leadingfinancial institutions, many of which are long-term and on an exclusive basis. In the aggregate, these banks represent morethan 12,000 branch locations which actively pursue new merchant relationships on our behalf every day. These financialinstitutions provide us with access to their brands, significantly enhancing our credibility and recognition. We build andmaintain a direct relationship with our merchants in order to control our sales, price negotiation, underwriting, boarding andsupport processes. Our Direct division also includes our extensive direct sales capabilities and relationships. Finally, our“Traditional” division is our heritage U.S. portfolio composed primarily of independent sales organization (“ISO”)relationships.We are focused on delivering products and services that provide the most value and convenience to our merchants. Ourpayment and commerce solutions consist of our own products as well as services that we enable through technicalintegrations with third-party providers. Our value-added solutions include gateway solutions, online fraud prevention andmanagement reporting, online hosted payments page capabilities, security tokenization and encryption solutions at thepoint-of-sale (“POS”) and online, dynamic currency conversion (“DCC”), loyalty offers and other ancillary solutions. Weoffer processing capabilities tailored to specific industries and provide merchants with recurring billing, multi-currencyauthorization and settlement, and cross-border processing. Our global footprint and ease of integration consistently attractnew partner relationships, allowing us to develop a robust integrated solutions partner network and uniquely positioning usto stay ahead of major trends in each of our markets.We operate three proprietary, in-house processing platforms, all connected via our EVO Snap solution and each supporting adifferent geographic region. EVO Snap provides a technical connection to our regional processing systems and a centralpoint of integration for all third-party product partners. Importantly, our platforms allow us to address the specific needs ofspecific payment markets and to control the entire customer experience. In-house processing also allows us to directlyaddress merchant and regulatory concerns regarding the flow of cardholder data and other sensitive information. Our systemsalso provide scale efficiencies which minimize our variable costs as merchant counts and transaction volumes increase.6 Table of ContentsOrganizational structure and corporate informationEVO, Inc. was incorporated under the laws of the State of Delaware on April 20, 2017. On May 25, 2018, we completed aninitial public offering of 16,100,000 shares of our Class A common stock at a public offering price of $16.00 per share, ofwhich 15,433,333 shares were sold by us and 666,667 shares were sold by one of our stockholders (the “IPO”). The sharesbegan trading on the Nasdaq Global Market system (“Nasdaq”) on May 23, 2018 under the symbol “EVOP.” In connectionwith the IPO, we completed the Reorganization Transactions to implement an “Up-C” capital structure. As a result of theReorganization Transactions and the IPO, EVO, Inc. is the sole managing member of EVO, LLC and a holding companywhose principal asset is the LLC Interests.On September 20, 2018, we completed a secondary offering of an aggregate 8,075,558 shares of Class A common stock at aprice of $24.50 per share (the “Secondary Offering”). The Secondary Offering consisted of 7,000,000 shares of Class Acommon stock offered and sold by us, with the net proceeds used to purchase an equivalent number of LLC Interests andshares of Class D common stock (which shares were then canceled) from affiliates of MDP, and 22,225 shares of Class Acommon stock offered and sold by certain individual selling stockholders. We also offered and sold 1,053,333 shares ofClass A common stock as part of an option granted to the underwriters to purchase additional shares of Class A commonstock in the Secondary Offering.We maintain a website with the address www.evopayments.com. We are not including the information contained in ourwebsite as part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available, free of chargethrough our website, our filings with the Securities and Exchange Commission (the “SEC”), including our annual proxystatements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.Our competitive strengthsGlobal footprint enables us to serve clients around the worldWe have operations in 11 countries and the ability to service merchants in 50 markets around the world. Our customersinclude large national and multi-national corporations as well as small and medium sized enterprises (“SMEs”) spanningacross most industry verticals. Our global merchant footprint is diversified among retail, restaurants, petroleum, government,transit and telecom industries, among others.We have established sales channels and relationships in large developed economies, such as the United States, Canada andWestern Europe, where the penetration of electronic payments is high. In addition, we have investments and partnerships infast-growing developing and emerging markets with lower penetration rates of electronic payments, such as Mexico andEastern Europe.We believe our global footprint is a significant competitive advantage as we compete for large, multi-national clients as wellas ISVs, integrated software and ERP dealers, and other partners. Large, multi-national merchants choose us because we canact as a single acquirer and processor in the markets in which they operate. Additionally, because of our global footprint, ourreferral partners can reach new markets by leveraging their connection with us to access our global processing services.Due to our broad distribution, diversified product offering, market leading integrated solutions and outstanding clientservice, we have built “sticky” relationships with our merchants and referral partners. These merchants rely on our “one stop”product offerings, including our payment processing, on-boarding, underwriting, technical support, secure infrastructure andsettlement services, and our technology is often heavily embedded in our merchants’ infrastructure. Due to these factors, it iscostly and disruptive for our merchants to terminate our products and services and switch their entire payment system toanother provider.Strategic distribution partnerships with financial institutions and Tech-enabled referral partnersAcross Europe and Mexico, our exclusive financial institution distribution relationships represent more than 12,000 bankbranches, including retail and corporate banking locations. We are highly selective in identifying optimal distribution7 Table of Contentspartners and we seek to align ourselves with financial institutions that have strong networks, a high-quality client portfolioand a trusted brand name. After forming these relationships, we introduce our sales and technology capabilities to the localmarket, identify new merchant recruitment opportunities and strengthen our relationships with existing merchant clients. Wehave experienced significant success in all of our financial institution alliances in attracting new customers on behalf of ourbank partners. We frequently leverage our financial institutional partners’ brands to provide higher quality services tomerchants, thus strengthening the goodwill between our partners and their merchants. We have demonstrated success inintegrating and cross-selling our services to this expanded merchant base as well as generating new banking customers forour partners through our direct sales strategies.We have also established deep relationships with a large network of Tech-enabled referral partners including ISVs, integratedsoftware dealers, eCommerce providers and other membership or distribution partners that wish to offer payment processingservices to their merchant customers. We believe our expertise in serving Tech-enabled referral partners is differentiated andenabled by our three proprietary, in-house processing platforms and service-oriented culture. Through a single, easyintegration point, partners gain access to our global processing platform and solutions. Furthermore, our commitment tocustomer service drives high merchant satisfaction levels and has established our strong reputation as a reliable and trustedpartner around the world. We believe our expertise in serving Tech-enabled distribution partners is a competitive advantageand will position us for continued growth.Comprehensive suite of payment and commerce solutionsWe are focused on delivering the products and services that provide optimal value and convenience to our merchants. Assuch, we continuously survey the competitive landscape and our merchants and leverage our experience in marketsthroughout the world to develop products, services, pricing, promotions and partnering strategies for each region that webelieve best suits the current and future needs of each market. Our wide-ranging experience serving multi-national merchantsin markets around the world, as well as our close relationships with large merchants and various card networks, includingVisa, Mastercard, American Express, Discover, UnionPay and other card networks, uniquely position us to stay ahead ofmajor trends in each of our markets.We intend to maximize the number of merchants we serve in each of the markets in which we operate. To accomplish thisobjective, we offer a broad portfolio of products, services and pricing solutions with functionality that appeals to a broadrange of merchants and that are specifically designed for particular vertical markets. Our extensive product offerings enableus to provide multiple solutions to each of our merchants, allowing our merchants to tailor our offerings to their needs.In addition, because we operate in markets around the world and have a global perspective, we are able to export best-in-class strategies and solutions from one market into another. Specifically, EVO Snap provides a technical connection to ourproprietary processing systems and a single point of integration for technology partners and merchants across all our marketsand geographies. We believe this capability differentiates us from our competitors.Best-in-class technology and securityOur processing platforms are supported by full back office security and monitoring infrastructures. Our EVO Snap productline is focused on providing a collection of integrated solution offerings, which allow integrated partners to connect to oursystems via a simple, single integration, giving them access to our platforms. This product line includes (1) a proprietaryeCommerce marketplace solution that allows online merchants to leverage our global suite of products, including paperlessreporting and boarding, (2) an ISV platform that offers merchants a variety of direct connections to software companiesthrough various integrated software dealers, and (3) a full eCommerce gateway solution that provides a comprehensivepayments solution.Our EVO Snap platform is fully EMV compliant and provides an extensive menu of advanced features to our current andprospective integrated software partners, including tokenization, point-to-point encryption and real-time fraud scoring. Webelieve this platform also allows us to deliver outsized value to our merchants by providing them with access to a broadrange of industry-specific business management software tools at the POS (e.g., inventory management, advanced accountingfunctions and real-time promotions), even if the software vendor that created the tool is located across the8 Table of Contentsglobe. Without EVO Snap, a merchant would have to hire a third party to develop and maintain the software necessary tointegrate the merchant’s POS system with a merchant acquirer in order to accept card payments.Uninterrupted services are mission-critical to our merchants and bank partners. As such, we have invested in creating a world-class technology infrastructure designed to prioritize both efficiency and security. In addition, everything we bring to marketis designed and implemented with security as a primary requirement. Our technology infrastructure is supported byprofessionals with decades of experience in operating high-volume, real-time processing systems and has been developedaround state-of-the-art data centers located in North America and Europe. We have also designed our environments with theability to redirect processing to the most appropriate operating location at any given time. This flexibility enables us tocontinue to offer processing services during catastrophic events and disasters that would otherwise adversely affect ourclients.In addition, we have implemented a formal program, EVO Secure, to address threats to our infrastructure. This multi-layeredprogram, led by a team of dedicated security professionals, ensures that we evaluate, protect against, monitor and react topotential threats in a consistent manner across our global network.Proven management team with strong track record of value-creating acquisitionsOur senior leadership team includes highly experienced payment technology professionals based in the United States andEurope, allowing us to operate successfully both domestically and internationally. Many of our executives have previouslyworked together in the industry, and have extensive experience in developing and managing a global payments company. Aswe have expanded our international operations, we have invested substantial resources to attract and retain experiencedtalent with significant in-country experience to further develop and support our current markets and enter new ones.Our senior leadership team has also demonstrated exceptional execution capabilities around developing new markets andsales distribution channels, consolidating and insourcing operations, and leading multi-cultural dispersed teams. They havecompleted eight platform migrations resulting in over 360,000 merchants being migrated to our proprietary platforms. Theteam has also successfully structured and maintained complex alliance relationships with many large financial institutions,which provide a significant number of merchant referrals to our business.Our growth strategiesWe believe our competitive strengths will continue to generate significant growth opportunities in both existing and newmarkets. We plan to grow our business and improve our operations by executing the following strategies:Organically growing existing marketsWe believe there is considerable opportunity for growth not only in new markets, but in our existing markets as well. Since2012, our international operations have grown considerably, accounting for approximately 65% of our revenue in the yearended December 31, 2018.Many of our international markets are less mature than the U.S. with respect to the growth drivers of our business.Specifically, these markets exhibit higher overall consumer expenditure growth, provide more opportunity for cash-to-card conversion, offer more penetration of integrated and eCommerce solutions and present upside growth opportunities withnew financial institution partners.We believe there is significant growth potential in the U.S. and Canada due to market share shifts stemming fromtechnological advancements in the electronic payments industry. We are focused on integrated payments, business-to-business and eCommerce solutions, all of which currently comprise a significant portion of our business. These solutionscurrently have a growth rate that is superior to that of traditional POS systems, and we expect this trend to continue for theforeseeable future.9 Table of ContentsTo continue growing our merchant base we focus primarily on the following strategies:·Supporting our existing portfolio and adding new customers. Our existing distribution partners currently servicemerchants that do not utilize our services, which presents new business opportunities within these existingrelationships.·Introducing our comprehensive, global set of payment and commerce solutions to our existing markets. Withindustry leading products and services, such as our proprietary DCC technology, our state-of-the-art integratedplatform and our eCommerce gateway solution, we believe we are uniquely positioned to enable our distributionpartners to offer their merchants the broadest product offering in the market.·Leveraging our global infrastructure to ensure efficiency and competitiveness. As a result of having a singleproprietary integrated platform, we are able to efficiently manage, update and maintain our technology, increasecapacity and speed, and realize significant operating leverage.·Customizing solutions to meet in-market needs. We design our products and services to meet the needs of our localcustomer base and partners. We also enable our systems to utilize local alternative payment mechanisms that arepresent in particular markets, such as Blik in Poland and Paydirekt in Germany.By implementing these strategies, we believe we will increase adoption of our payment and commerce solutions, continue togrow our merchant base and offer merchants the broadest set of solutions in the market.Expanding our global footprintOur partnership strategy has been a source of significant growth, and we believe it will continue to facilitate growth in thefuture. Since 2012, we have established fourteen exclusive bank partnerships in ten countries. While we have mademeaningful headway in penetrating new markets, we believe considerable opportunities remain in both establishingadditional partnerships in our current markets, as well as entirely new markets around the world.In determining which markets to enter, we evaluate a wide range of factors, including the reputation of our potential bankpartner, the size of the domestic economy, card usage penetration, growth prospects, profitability, commerce and technologytrends, regulatory and other risks, required investments, management resources and the likely return on investment. Thisstrategy drives us to expand into select international markets that we believe present attractive investment opportunities forlong-term, sustainable merchant growth, as supported by factors such as:·low penetration of cards-per capita among consumers;·high volume growth supported by cash-to-card conversion;·regulatory initiatives implemented with an aim to accelerate card acceptance among merchants;·less differentiated competitive landscape, given the prevalence of bank-owned acquiring businesses;·increased adoption of integrated point-of-sale, eCommerce and integrated technologies;·embedded distribution through partner retail and corporate branch footprint; and·ability to launch our product suite and customer-centric services to accelerate end-market growth and acceptancepenetration.We generally enter new markets by creating distribution partnerships with leading financial institutions that possess a highdegree of market knowledge, brand recognition and large distribution networks. These distribution partnerships enable us toaccess a diverse group of merchants and expand the reach of our products and services.10 Table of ContentsBroadening our distribution networkWe aim to grow our business and broaden our global reach by generating new distribution relationships that add merchantsto our portfolio. We reach new merchants primarily through our direct sales force and referral relationships. Our focus is tobuild these relationships across all channels, including financial institutions, software vendors, POS dealers, gatewayproviders and agents. In addition to developing these growth channels, we are able to leverage our infrastructure both inservicing our existing markets and in expanding to new markets. For example, we have introduced EVO Snap into ourEuropean operations, extending our ability for merchants to tap into EVO Snap as a single, global integration platform. Wealso have the ability to support U.S.-based integrated software dealers and distributors as they enter new markets. We plan tocontinue to broaden our distribution network by identifying and securing new distribution opportunities within both ourexisting markets and future markets.Growing and enhancing our innovative payments and commerce solutionsWe believe our innovative payments and commerce solutions represent one of our competitive advantages. Throughstrategic acquisitions and internal development, we have made significant investments in both technology and personnel topropel our product innovation forward. In order to continue to expand, we believe we must continue to offer ourcustomers state-of-the-art products and services. Through a combination of building products organically, partnering withleading technology innovators and selectively pursuing acquisitions, we are constantly driving innovation to enhance ourproducts and services.Through acquisitions and internal development, we have invested heavily in supporting a diverse network of integrated POSproviders, ISVs, and integrated software and ERP dealers. These investments have strengthened our ability to support thesoftware community in the markets where we operate, including POS, mobile and eCommerce developers, by providing thesedevelopers with the tools necessary to develop a broader suite of multi-channel, multi-service solutions for merchants. Thisdistribution-centric strategy has created our key, global technology solution, in which software developers can integrate toour proprietary processing platforms and we can sign up Tech-enabled solutions providers as strategic distribution partners.Capitalizing on our operating leverageOur focus on cost optimization is a part of our culture that allows us to pursue other growth strategies. The deep industry andoperating expertise of our management team enables us to identify opportunities to improve the operating efficiencies of ourtechnology, product and operations infrastructure. With in-house processing solutions and proprietary internal systems inNorth America and Europe, we have significant operating leverage as we grow overall volumes and transactions. With eachnewly acquired business, we utilize this infrastructure to optimize costs and efficiencies. Through the support and reportingcapabilities of our global systems, we eliminate redundancies and improve operating efficiencies post-acquisition.Our sales and distribution networkWe have developed a network of highly successful sales distribution channels to drive growth of our merchant portfolio. Acentral component of our growth strategy is our strategic investment in new products and distribution channels and theseamless introduction of these assets to our global markets. These proven sales distribution networks consist of our Tech-enabled division, which includes our integrated, business-to-business and eCommerce businesses, as well as our Direct andTraditional divisions.Through our diverse channels, we target merchants across a wide variety of industries and sizes. Our network of over 1,500integrated partnerships allows us to target SME merchants who desire an integrated software solution for their physicallocations. We also target larger business-to-business merchants with our differentiated product offerings. Our Tech-enableddivision represents approximately 33% of our North America revenue. In Europe, our Tech-enabled division representsapproximately 33% of segment revenue as of December 31, 2018.11 Table of ContentsIn our direct sales business, we target SME merchants via referrals from our financial institution and other partners. We arealso able to utilize our direct sales force to target these merchants. We also target large merchants through a coordinated salesapproach with our financial institution partners. Our direct sales business is our largest channel as the Mexico and Europemarkets are dominated by referrals from our financial institution partners. This business represents approximately 60% of ourtotal revenue in North America and 67% in Europe as of December 31, 2018.Tech-enabledOur business, both domestically and abroad, is supported by partnerships with ISVs, integrated software dealers, ERPsoftware dealers and eCommerce gateway providers, which we refer to as our “Tech-enabled” division. These partnershipsfunction by way of a technical integration between us and the third party in which the third party seamlessly passesinformation to our systems to streamline the merchant boarding process.Over the past several years, we have invested in an infrastructure that allows integrated software providers to offer multipleintegrated payment solutions to merchants throughout the markets we serve. For example, software developers can access asimple yet powerful connection point through our EVO Snap platform allowing them to fully leverage their integratedsolutions by connecting to all of our processing platforms—thereby expanding their reach to include merchants in all of ourgeographic markets. Through our acquisition of Sterling Payment Technologies, LLC (“Sterling”) in 2017, we acquired aportfolio of existing integrated software merchants and hundreds of integrated software and dealer partners in the UnitedStates.Our integration solutions offering also includes our business-to-business offering, which allows us to target larger merchantsoperating in this space. We believe that business-to-business merchants are increasingly striving to eliminate paper invoicesfrom receivable collections. By using our proprietary processing platforms, we can offer various interchange managementand reporting solutions specially created for these larger merchants.In May 2018, we acquired Nodus Technologies, Inc. (“Nodus”) which develops proprietary integrations to ERP solutionssuch as Microsoft AX and Microsoft Great Plains. The Nodus acquisition enables our merchants to seamlessly integratepayment solutions into third party ERP solutions by leveraging existing Nodus technologies. In October 2018, we acquiredClearONE, S.L. (“ClearONE”), a leading POS payments platform integrated to over one hundred software solutions servingmore than 10,000 merchants across Europe. Our domestic and multinational gateway partners refer merchants to us and often board merchants utilizing our eCommerceboarding tool. Our eCommerce business accounts for a significant portion of our U.S. business and our eCommerce toolshave also been successfully deployed in our European operations. We expect this business to continue to grow as it isdeployed across international markets, especially as those markets experience further penetration and growth in eCommercetransactions. We are able to deploy our proprietary eCommerce gateway solution through our various sales channels to reacha diverse base of multi-channel, integrated and eCommerce-only merchants throughout our global footprint. DirectOur Direct division consists of our direct sales force and our financial institution partner relationships and we believe thesebusinesses provide substantial growth opportunities. We have a long history of operating as a direct sales organization andhave succeeded by aggressively pursuing customers through our direct sales efforts and retaining merchants by deliveringhigh levels of customer satisfaction. We view our direct sales force as complementary to our financial institutionrelationships, as our direct sales force generates new merchant opportunities in addition to the referrals we receive from ourvarious partners. In addition, our financial institution partners benefit from our direct sales force network, as we regularlyrefer new banking business to them when we successfully recruit merchants though this network.12 Table of ContentsOur direct sale capabilities have recently proven beneficial in the support of our integration solutions channel. We offer oursales distribution channels to our Tech-enabled partners, extending their sales reach by actively recruiting merchants on theirbehalf as well as cross-selling their services to our customer base. As we have expanded internationally, we have exported ourdirect sale expertise and capabilities into Ireland, the United Kingdom and Mexico, using tools and sales practices developedin the United States.Our Direct division includes our bank referral relationships, through which our financial institution partners refer theirmerchant customers to us, often on an exclusive basis, and we provide payment processing solutions to those merchants.Since 2012, we have established partnerships with leading international financial institutions, including with Deutsche BankUSA, Deutsche Bank Group, Deutsche Postbank, Banco Popular / Grupo Santander, PKO Bank Polski, Bank of Ireland,Raiffeisen Polbank, Raiffeisen Bank, Moneta, Citibanamex, Sabadell, Liberbank, Caixa Guissona and BNP Paribas. Ourpending joint venture and exclusive referral relationship with EuroBic in Portugal is expected to be completed in the summerof 2019, subject to regulatory approvals and other customary conditions.A key component of our Direct division is our highly customized lead management, merchant boarding and risk managementsoftware tool. This technology allows us to quickly and efficiently accept leads from sales representatives and bank partners,board merchants online and manage transaction risks.TraditionalIn our Traditional division, we partner with traditional, independent feet-on-the-street agents, ISOs and other partners acrossmultiple markets both domestic and international. These partners allow us to further penetrate niche segments, verticals,geographies or selected strategic markets and broaden our merchant base without incremental investment obligations or anycannibalization of our financial institution partner relationships. While most of our relationships are commercialpartnerships, in select situations we have retained an equity stake in a partner. Historically, we invested in ISOs and receivedcontrolling or non-controlling interests in the companies in exchange for a processing relationship with the ISOs. While ourlegacy relationships in this division are profitable, we expect this business to decline over time.Our products and servicesWe offer a comprehensive portfolio of card-present and card-not-present payment solutions for a variety of industry types andbusiness sizes to facilitate merchants accepting credit, debit, prepaid and other alternative payment types. Our portfolio ofsolutions includes EMV, chip and signature enabled POS terminals, virtual POS terminals for desktops, mobile acceptanceand mobile point-of-sale, or mPOS, solutions for mobile devices and tablets, online hosted payments, and PSP for card-not-present bankcard, direct debit and alternative payment scheme processing. We also offer value-added solutions such asonline fraud prevention and management solutions, online hosted payments page capabilities, gateway solutions, securitytokenization and encryption solutions at the POS and online, DCC, and loyalty offers, among others. Other industry-specificprocessing capabilities are also in our product suite, such as recurring billing, multi-currency authorization, and cross-borderprocessing and settlement.Our solutions enable merchants of all sizes to accept and settle cards, ACH, closed loop gift, pre-paid and other paymentcapabilities. This spectrum of solutions includes:·EMV chip, magnetic swipe readers, contactless, chip and signature, chip debit and gift services for hardwareterminals;·Our mPOS solutions and services for integrators and merchants for global processing;·a variety of eCommerce solutions including hosted payments, payment link, shopping cart-plug-ins and gateway/PSP products;·comprehensive real-time digital and signatureless merchant boarding systems (from application to merchantprocessing);13 Table of Contents·market-specific business models for partners, including PSP and referral programs; and·online reporting systems for partners, integrators and merchants providing access to our platforms worldwide.In addition, as a merchant acquirer, we provide in-house customer service utilizing in-market call centers, as we believecustomers need to be served locally in market. We also have developed a consolidated shared services operational capability,for back-office services, including credit underwriting, risk, chargebacks, and terminal deployment and repair. Ourcapabilities also include a regionally based merchant boarding system, risk management and ISV technology developmentcenters, supporting North America and Europe.Our diverse offerings are supported by our two unique underlying global products, EVO Snap and our proprietary customerrelationship management (“CRM”) solutions. EVO Snap is a highly customized, EMV compliant technology platform thatallows merchants to easily access our products in all of the markets we service with one single integration, including bothcore (settlement and authorization) and value-added (ACH, Level 3 processing, DCC) services in many of the markets inwhich we operate. Our merchants and partners benefit from a single global certification and common interface in NorthAmerica and Europe, a key feature for retail and eCommerce merchants and referral partners with a global customer base. Thiscommon application programming interface (“API”) allows ISVs and developers to seamlessly integrate to EVO Snap andaccess all of its new features.Our global, state-of-the-art CRM solutions enable all merchants, whether they are recruited through our financial institutions,direct sales or partner channels, to be seamlessly managed from lead to live. We provide all partners and agents access tothese tools to ensure effective digital customer lifecycle management, thus streamlining the boarding and management ofcustomers and complementing our digital payment product and service strategy.TechnologyAs the rate of innovation has increased dramatically, providing payment and commerce solutions to merchants of all typeshas become increasingly dependent upon a strong foundation of secure and flexible technology. We have designed ourtechnology, platforms, applications and networks with a singular focus in mind—to provide the products and services ourmerchants want in the most secure, efficient and effective manner possible.Underpinning this focus is a worldwide team of professionals from multiple disciplines, dedicated to continuously improvingour service levels while expanding our offerings to merchants across the various regions in which we operate.SystemsOur strategy is to own and operate the technology we use wherever possible. We believe that this approach allows us todeliver the products and services that are most in demand by our merchants throughout our global footprint and differentiatesus from our competitors. In many markets, we provide cutting-edge solutions that merchants are unable to obtain from othersources and we constantly seek to leverage successful products, services, platforms and applications across all of our markets—providing a consistent experience for our multinational customers.We believe that a key success factor for our technology is its ability to scale efficiently. This ability is built into ourtechnology infrastructure, and we continuously monitor both our current capacity and our forecasted volumes to ensure thatwe maintain the ability to process peak volumes.Additionally, our footprint enables us to adapt to new opportunities and challenges in a manner that many of our competitorsare unable to match due to their geographically limited reach. We develop local expertise in key markets and work toidentify untapped or underserved opportunities as well as tailor our products and services to the unique needs of ourmerchants in each region.14 Table of ContentsPlatformsWe operate three separate processing platforms located in Poland, the United States and Mexico. These three platforms are alldesigned with resiliency and security in mind and they are all managed locally with centralized oversight to maintainconsistency of delivery. These three processing platforms share a common CRM for boarding and a common reportinginfrastructure, and are all accessible in a consistent manner due to their integrations to our EVO Snap platform.Our infrastructure is comprised of platforms that have been validated and rigorously tested, while being based upon the mostrecent technologies and architectural concepts available in the marketplace. Our design engineers are focused on providingenvironments that our delivery organizations can rely upon to operate their applications in the most efficient and effectivemanner possible, and our computer operations group monitors our entire platform infrastructure from our command centerslocated in Europe and North America. This monitoring enables us to plan our delivery capacity efficiently and accurately,resulting in an extremely high focus on service availability levels for our customers. At any time of day or night, dedicatedresources split across two continents are capable of responding to any potential issue or event—whether natural or man-made. We regularly shift processing loads between our multiple regional data centers to minimize any possibility ofnegatively impacting our merchants or their downstream customers—a capability that is even more critical now in the age ofround-the-clock eCommerce processing.ApplicationsWe utilize a combination of proprietary and commercial applications in line with our philosophy of using technology as akey differentiator from our competitors. Many customer-facing products and services, from boarding to billing, areapplications created or acquired by us, while our core processing engines are a mixture of internal and commercialapplications selected for their capabilities and industrial strength. Each application undergoes rigorous review and testing—to ensure that it meets the needs of our customers while maintaining the highest standards of security and availability, and wehave delivery teams distributed across our various markets that are experts in providing for the unique needs of eachmerchant population. This focus results in a portfolio of products and services that provides merchants across the world withthe ability to accept the broad range of payment types that customers demand, along with advanced data analytics andreporting options to make managing their businesses as seamless as possible. In all cases, we look to provide the bestavailable functionality to all of our merchants all of the time.We have also developed an extensive set of proprietary interfaces that enable our partners to integrate with our systems inmultiple ways. Each partner can select the options that best meet their needs and capabilities.NetworksWe manage our own network with the help of leading telecommunication partners in each of our markets. This networkenables us to provide secure communications for our merchants in whatever form they desire—whether via a dedicated phoneline, a wireless connection, a cellular provider, a fixed circuit or the Internet. A critical component of this service is the factthat we provide multiple, locally-based options to all of our merchants so they can process with the confidence that they areusing well-known, familiar providers in the most cost-efficient manner possible. Our proprietary encryption offerings,coupled with our diverse security options, allow us to partner with both small and large corporate merchants alike.SecurityWe have developed and implemented a formal program, EVO Secure, to address threats to our infrastructure. This multi-layered program, led by a team of dedicated security professionals, ensures that we evaluate, protect against, monitor andreact to potential threats in a consistent manner across our global network. We extend our security knowledge and programsto our merchants and partners to ensure a common and mutually coordinated approach to data security. We also collaboratewith local, national and international law enforcement, industry experts and cyber threat specialists to leverage the mostrecent intelligence and best practices concerning potential threats to the financial ecosystem. EVO Secure is supported by anin-house security operations center with round-the-clock staffing that enables us to react quickly to any perceived threats toour systems, networks or data.15 Table of ContentsOur marketsIn recent years we have significantly grown our international operations and currently operate in North America and Europe,with the ability to provide processing services to merchants in 50 markets around the world. We experience seasonalfluctuations in our revenue, which can vary by region. In North America, our revenue has been strongest in our fourth quarterand weakest in our first quarter. In Europe, our revenue has been strongest in our third quarter and weakest in our first quarter.We classify our business into two segments: North America and Europe. The alignment of our segments is designed toestablish lines of business that support the geographical markets we operate in and allow us to further globalize our solutionswhile working seamlessly with our teams across these markets. Both segments provide businesses with merchant acquiringsolutions, including integrated solutions for retail transactions at physical business locations, as well as eCommerce andmobile transactions.North AmericaIn 2018, our North America segment, which includes our operations in the United States, Canada and Mexico, processedmore than 950 million transactions. We believe the changing trends in payment technologies, including the adoption ofmore integrated payment solutions and the ongoing cash-to-card conversion will continue to drive growth in this market.Card penetration in the United States and Canada is among the highest in the world. The largest growth opportunity in thesemarkets is arising from the shift to integrated payment solutions. This includes integrated solutions, business-to-business andeCommerce, as merchants are making an effort to enhance the payments experience for their customers. Merchant acquirersare capitalizing on this trend by entering into referral arrangements with technology companies and integrating acquiringservices into their software. We have been particularly active in this market, including with the development of our EVOSnap platform, through which we provide our partners integrated solutions with a single connection point that is fullyintegrated with our front-end authorization systems. EVO Snap, along with other innovations in our integrated products, hasbeen accretive to our growth in North America. In addition, the acquisition of Sterling in 2017 provided us with a significantnumber of new integrated relationships.We believe that the merchant acquiring market in Mexico represents a very attractive growth opportunity. As overall cardpenetration continues to increase, we believe we will enjoy outsized benefits because of our status as the only scaledindependent acquirer in the market. We see significant opportunity to differentiate from our competitors, which is principallycomprised of financial institutions who view acquiring as a tertiary product necessary to attract core banking business.EuropeWe have significant operations throughout Europe. In 2018, we processed over 2.1 billion transactions through our officeslocated in Germany, Spain, Ireland, Poland, the United Kingdom and the Czech Republic, as well as supporting merchants inFrance, Austria, Italy, the Nordics and many central and eastern European countries.The European merchant acquiring market has certain unique structural characteristics including self-sponsoring with themajor card schemes, penetration of local debit networks, terminal-centric SME markets, pooled in-country processing withcompetitors and a bank-centric acquiring model, which we believe provide us with future opportunities for growth.Europe’s payment infrastructure was historically built upon local debit card networks rather than the credit card based modeltypical of the United States. In recent years, Europe has instituted a single payments area and has enacted comprehensiveinterchange reform of the European cross-border pricing schedule with the two major international card networks. Thesechanges have generally lowered the major card schemes’ domestic and cross-border interchange rates across Europe. This hasincentivized local in-country debit schemes and banks to lower their rates to levels at or below these new interchange rates asa defensive move to protect their businesses. This “leveling of the playing field” across European markets encouragesseamless cross-border international credit and debit acquiring. It has also caused local in-country schemes to evolve or faceelimination in the face of direct competition from the two primary international card16 Table of Contentsnetworks. This market shift, which continues as follow-on legislation further encourages a consistent approach to paymentsthroughout Europe, provides us with the opportunity to leverage our existing technology and product infrastructure withoutthe burden of certifying to a myriad of local schemes. Prior to these changes, acquirers seeking to offer merchants a globalacceptance model would have needed to invest significantly greater resources to certify to these in-country debit networks.While still evolving, we anticipate this developing uniformity to continue to be a positive, long-term change for theEuropean market.We believe these factors, our positioning across Europe, the organic cash-to-card conversion in many markets and theopportunity to launch new products and services at the early stage of merchant adoption of market innovations such asgateway integrations and ISV solutions, provide significant opportunities for existing in-market growth coupled with futureinvestment opportunities in adjacent countries.Many financial institutions across Europe entered the acquiring business decades ago by pooling their capital with theirdirect, in-country bank competitors to set up “captive” shared processing businesses. These businesses were generally ownedby the same banks that utilized the processor services, and the processors were therefore designed to provide each of theowners/users with common card issuing and merchant acquiring processing solutions. While financially efficient andinitially successful, over time this structure has caused a lack of innovation and investment in payments generally. As such,the banks find themselves with limited differentiating solutions given the evolution of their local markets and now facestiffening competition from cross-border mono-line acquirers. Our European-based platform, coupled with an array of marketleading payments products, including integrated solutions for all of our operating markets, allows our partners and customersto access these solutions as part of our long-term exclusive relationships.We are an authorized Payments Institution (“PI”), under the European Payment Services Directive of 2007, whichenables non-financial institutions to participate in the payments industry provided they can meet the regulatory requirementsof the licensing jurisdiction’s regulators. We currently hold PI licenses in three markets: Germany, Poland and Spain, whichenable us to operate as a direct member of the payment card networks. In some markets outside the EU, applicable regulationsand the local and international networks generally require non-financial institutions similar to us to be sponsored by a bankto become an acquirer. The ability to participate in the EU payments industry with direct licenses and without therequirement for third-party sponsorship provides us with greater flexibility and control of our European business.CompetitionWe believe the primary competitive factors in our markets are trust, brand, data security, product features and functionality,strength of financial institution partnerships, technology, price and servicing capability.We compete with a variety of merchant acquirers that have different business models, go-to-market strategies and technicalcapabilities in the markets in which we operate. Our competitors range in both size and geographic reach. In the United Statesand Canada, we compete with independent merchant acquirers including First Data, Global Payments, Worldpay, TSYS andmany others, in addition to financial institutions that provide acquiring and processing services on their own, includingChase Paymentech Solutions and Elavon (a subsidiary of U.S. Bancorp). We also face competition from ISOs that resellproducts of independent merchant processors, as well as earlier stage integrated software providers. In Europe (excluding theUnited Kingdom) and Mexico, financial institutions remain the primary providers of payment processing services tomerchants, although outsourcing is becoming more prevalent. In the United Kingdom, we compete primarily with Worldpay,Barclaycard, Global Payments, First Data and Elavon.Our broad and differentiated product offerings, service proposition, pricing and distribution strategies in our geographicallydiverse markets drive our ability to compete effectively through the acceptance and use of our payment and commercesolutions by merchants. We specifically focus on the primary customer needs of speed, reliability and reconciliation,ensuring that at a minimum, our systems, solutions, products and service models are designed to put these customerexpectations at the top of the priority list.17 Table of ContentsIntellectual propertyOur products and services utilize a combination of proprietary software and hardware that we own and license from thirdparties. Our owned intellectual property is protected by federal patent, trademark, trade secret and copyright law, as well asstate trade secret laws, as appropriate. We generally control access to and use of our proprietary software and otherconfidential information through the use of internal and external controls, including entering into non-disclosure andconfidentiality agreements with both our employees and third parties.As of December 31, 2018, we had one patent application pending related to our EVO Snap product. In addition, we own aportfolio of trademarks in multiple jurisdictions around the world, including for our primary mark, EVO.RegulatoryVarious aspects of our service areas are subject to U.S. federal, state and local regulation, as well as regulation outside theUnited States. Certain of our services also are subject to rules promulgated by various card networks and banking and otherauthorities as more fully described below.The Dodd-Frank ActIn July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was signedinto law in the United States. The Dodd-Frank Act has resulted in significant structural and other changes to the regulation ofthe financial services industry. Among other things, Title X of the Dodd-Frank Act established a new, independent regulatoryagency known as the Consumer Financial Protection Bureau (the “CFPB”) to regulate consumer financial products andservices. The CFPB enforces prohibitions against unfair, deceptive or abusive acts or practices under the Dodd-Frank Act andmay have authority over us as a provider of services to regulated financial institutions in connection with consumer financialproducts. Separately, under the Dodd-Frank Act, debit interchange transaction fees are regulated by the Board of Governorsof the Federal Reserve System (the “Federal Reserve Board”) and must be “reasonable and proportional” to the cost incurredby the card issuer in authorizing, clearing and settling the transaction. In particular, the Federal Reserve Board has cappeddebit interchange rates for card issuers operating in the United States with assets of $10 billion or more at the sum of $0.21per transaction and an ad valorem component of 5 basis points to reflect a portion of the issuer’s fraud losses plus, forqualifying issuers, an additional $0.01 per transaction in debit interchange for fraud prevention costs. In addition, the Dodd-Frank Act contains provisions that ban debit card networks from entering into exclusivity arrangements, prohibit card issuersand card networks from imposing transaction routing requirements and require card issuers to enable at least two unaffiliatednetworks on each debit card.In addition, the Dodd-Frank Act permits merchants to set minimum dollar amounts (not to exceed $10) for the acceptance ofa credit card (while federal governmental entities and institutions of higher education may set maximum amounts for theacceptance of credit cards) and to provide discounts or incentives to consumers who pay with alternative payment methods,such as cash, checks or debit cards.Association and network rulesWe are subject to the rules of Mastercard, Visa, INTERAC and other credit and debit networks. In order to provide processingservices, a number of our subsidiaries are registered with Visa or Mastercard as service providers for member institutions.Various subsidiaries of ours are also processor level members of numerous debit and electronic benefits transaction networksor are otherwise subject to various network rules in connection with processing services and other services we provide. Assuch, we are subject to applicable network rules. Card networks and their member financial institutions regularly update, andgenerally expand, security expectations and requirements related to the security of cardholder data and environments. We arealso subject to network operating rules promulgated by the National Automated Clearing House Association relating topayment transactions processed by us using the Automated Clearing House Network and to various state federal and foreignlaws regarding such operations, including laws pertaining to electronic benefits transactions.18 Table of ContentsFinancial services regulationsAs a result of the implementation of the Payment Services Directive of 2007 in the European Union (the “EU”), a number ofour subsidiaries in our European segment hold a PI license which allows them to operate in the EU member states in whichsuch subsidiaries do business. As a PI, we are subject to regulation and oversight in the applicable EU member states, whichincludes, among other obligations, a requirement to maintain specified regulatory capital and adhere to certain rulesregarding the conduct of our business. In July 2013, the European Commission proposed legislation in two parts, covering awide range of proposed regulatory reforms affecting the payments industry across the EU. The first part was an EU-wideregulation on interchange fees for card-based payment transactions (the “Interchange Fee Regulation”). The Interchange FeeRegulation (2015/751) went into effect in June 2015. The second part consisted of a recasting of the Payment ServicesDirective (the “PSD2”). The European Commission’s PSD2 proposal has been considered by the two other main EUlegislative institutions, the Council of the European Union and the European Parliament. The PSD2 entered into force inJanuary 2016 and replaced the current Payment Services Directive in January 2018.Further, several of our international subsidiaries provide services that make them subject to regulation by local bankingagencies and other regulatory authorities.Privacy and information security regulationsWe provide services that may be subject to various state, federal and foreign privacy laws and regulations, including, amongothers, the Financial Services Modernization Act of 1999 (the “Gramm-Leach-Bliley Act”), Directive 95/46/EC (the “DataProtection Directive”), and the Personal Information Protection and Electronic Documents Act in Canada. These laws andtheir implementing regulations restrict certain collection, processing, storage, use and disclosure of personal information,require notice to individuals of privacy practices and provide individuals with certain rights to prevent use and disclosure ofprotected information. These laws also impose requirements for the safeguarding and proper destruction of personalinformation through the issuance of data security standards or guidelines. Certain federal, state and foreign laws andregulations impose similar privacy obligations and, in certain circumstances, obligations to notify affected individuals, stateofficers or other governmental authorities, the media and consumer reporting agencies, as well as businesses andgovernmental agencies, of security breaches affecting personal information. In addition, there are state and foreign lawsrestricting the ability to collect and utilize certain types of information such as Social Security and driver’s license numbers.In July 2016, the European Parliament adopted an EU-wide directive on security of network and information systems (the“NIS Directive”). The NIS Directive provides legal measures intended to boost the overall level of cybersecurity in the EUand required that EU member states enact national laws to enforce certain cybersecurity obligations in 2018.As a processor of personal data of EU data subjects, we are also subject to regulation and oversight in the applicable EUmember states with regard to data protection legislation. The existing Data Protection Directive, contains various obligationson the processing of personal data in the EU including restrictions on transferring personal data outside of the EU tocountries which have not been recognized as having adequate data protection standards, unless specific conditions are met.Our EU operations are currently operating in accordance with these standards. In May 2018, a new European-wideRegulation on data privacy came into force. The General Data Protection Regulation (“GDPR”), contains additionalobligations on data controllers and data processors operating in the EU or offering services to consumers within the EU.While the core rules contained in the Data Protection Directive are retained in GDPR, there are significant enhancements withregard to the rights of data subjects (which include the right to be forgotten and the right of data portability), stricterregulation on obtaining consent to processing of personal data and sensitive personal data, stricter obligations with regard tothe information to be included in privacy notices and significant enhanced requirements with regard to compliance,including a regime of “accountability” for processors and controllers and a requirement to embed compliance with GDPRinto the fabric of an organization by developing appropriate policies and practices, to achieve a standard of data protectionby “design and default.” The GDPR includes enhanced data security obligations (to run in parallel to those contained in NISregulations), requiring data processors and controllers to take appropriate technical and organizational measures to protectthe data they process and their systems. Organizations that process significant amounts of data may be required to appoint aData Protection Officer responsible for reporting to the highest level of management within the business. There are greatlyenhanced sanctions under GDPR for failing to comply with the core principles of the GDPR or failing to secure data.19 Table of ContentsUnfair trade practice regulationsWe and our clients are subject to various federal, state and international laws prohibiting unfair or deceptive trade practices,such as Section 5 of the Federal Trade Commission Act. Various regulatory agencies, including the Federal TradeCommission, various consumer protection agencies in Europe and other international markets, the CFPB, and state attorneysgeneral, have authority to take action against parties that engage in unfair or deceptive trade practices or violate other laws,rules and regulations. To the extent we are processing payments for a client that may be in violation of laws, rules andregulations, we may be subject to enforcement actions by those agencies.Anti-money laundering, anti-bribery, sanctions and counter-terrorist regulationsWe are subject to anti-money laundering laws and regulations, including certain sections of the USA PATRIOT Act of 2001.We are also subject to anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (the “FCPA”)and other laws, that prohibit the making or offering of improper payments to foreign government officials and politicalfigures and include anti-bribery provisions enforced by the Department of Justice and accounting provisions enforced by theSEC. The FCPA has a broad reach and requires maintenance of appropriate records and adequate internal controls to preventand detect possible FCPA violations. Many other jurisdictions where we conduct business also have similar anti-corruptionlaws and regulations. We have policies, procedures, systems, and controls designed to identify and address potentiallyimpermissible transactions under such laws and regulations.We are also subject to certain economic and trade sanctions programs that are administered by the Office of Foreign AssetsControl (“OFAC”), which prohibit or restrict transactions to or from, or dealings with, specified countries, their governmentsand, in certain circumstances, their nationals, and with individuals and entities that are specially-designated nationals ofthose countries, narcotics traffickers, and terrorists or terrorist organizations. Other group entities may be subject toadditional local sanctions requirements in other relevant jurisdictions.Similar anti-money laundering, counter terrorist financing and proceeds of crime laws apply to electronic currencytransactions and to dealings with persons specified in lists maintained by the country equivalents to OFAC lists in certainother countries. These laws require specific data retention obligations to be observed by intermediaries in the paymentprocess and our businesses in those jurisdictions are subject to such data retention obligations. For example, in the EU,certain of our businesses are subject to requirements under the Fourth Money Laundering Directive ((EU) 2015/849).EmployeesAs of December 31, 2018, we employed approximately 2,200 professionals. A majority of these employees are located in theUnited States, however many are also concentrated outside the United States, primarily in Mexico, Poland, Germany andIreland. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We considerour relationship with our employees to be good.20 Table of ContentsEXECUTIVE OFFICERS OF THE REGISTRANTThe following table sets forth information regarding our executive officers as of December 31, 2018: NameAgePosition(s) James G. Kelly56Chief Executive Officer and Director Brendan F. Tansill40President, North America Darren Wilson51President, International Kevin M. Hodges40Executive Vice President, Chief Financial Officer and Treasurer Steven J. de Groot60Executive Vice President, General Counsel and Secretary Michael L. Reidenbach56Executive Vice President, Chief Information Officer Catherine E. Lafiandra55Chief Human Resources Officer David L. Goldman36Executive Vice President, Business Development and Strategy James G. Kelly has served as EVO, Inc.’s Chief Executive Officer since its formation, as a member of our board of directorssince May 2018, and as Chief Executive Officer and a member of the board of managers of the EVO, LLC since January 2012.Before joining EVO, Mr. Kelly served as President of Global Payments Inc., as Senior Executive Vice President of GlobalPayments Inc. and as Chief Financial Officer of Global Payments Inc. Prior to that, Mr. Kelly served as managing director ofAlvarez & Marsal, a global professional services firm, and as manager of Ernst & Young’s mergers and acquisitions/auditgroups. Mr. Kelly is a graduate of the University of Massachusetts, Amherst.Brendan F. Tansill has served as EVO, Inc.’s President, North America since its formation, and as President, North America ofEVO, LLC since January 2016. Prior to his current role, Mr. Tansill served as Executive Vice President, BusinessDevelopment and Strategy of EVO, LLC from April 2012 until December 2015, where he was responsible for EVO, Inc.’sglobal mergers and acquisitions activity and corporate strategy. Before joining EVO, Mr. Tansill was an investmentprofessional at CCMP Capital Advisors. Mr. Tansill received his Masters of Business Administration from the KelloggSchool of Management at Northwestern University and his Bachelor of Arts from the University of Virginia.Darren Wilson has served as EVO, Inc.’s President, International since its formation, and as President, International of EVO,LLC since April 2014. Before joining EVO, Mr. Wilson served as Managing Director of Streamline (a WorldPay company)and as CEO/President of Global Payments’ Western European business. Mr. Wilson has also held various positions at HSBCBank. Mr. Wilson has the Associate of the Chartered Institute of Bankers degree and has studied at Birmingham and WarwickUniversities.Kevin M. Hodges has served as EVO, Inc.’s Executive Vice President, Chief Financial Officer and Treasurer since itsformation, and as Executive Vice President, Chief Financial Officer and Treasurer of EVO, LLC since December 2012. Beforejoining EVO, Mr. Hodges held various senior leadership positions at Global Payments Inc., serving as Vice President ofGlobal Finance, Vice President of International Finance and External Reporting, and Director of Corporate Development andStrategy. Mr. Hodges received his Masters of Professional Accountancy from Georgia State University and his Bachelor ofScience from the Wharton School at the University of Pennsylvania. Mr. Hodges is a Certified Public Accountant and holds aChartered Financial Analyst designation.21 Table of ContentsSteven J. de Groot has served as EVO, Inc.’s Executive Vice President, General Counsel and Secretary since its formation, andas Executive Vice President, General Counsel and Secretary of EVO, LLC since March 2013. Before joining EVO, Mr. deGroot was a partner in the corporate group at DLA Piper LLP from October 2009 until October 2012 and a partner in thecorporate group at King & Spalding LLP from March 1992 until October 2009. Mr. de Groot received his Juris Doctorate andBachelor of Business Administration from the University of Notre Dame.Michael L. Reidenbach has served as EVO, Inc.’s Executive Vice President, Chief Information Officer since its formation, andas Executive Vice President, Chief Information Officer of EVO, LLC since March 2013. Before joining EVO, Mr. Reidenbachserved as Executive Vice President, Chief Information Officer of Global Payments Inc. Mr. Reidenbach is a former U.S. AirForce instructor pilot and aircraft commander. Mr. Reidenbach received his Master in Business Administration/Finance fromGeorgia College and his Bachelor of Science from the U.S. Air Force Academy.Catherine E. Lafiandra has served as EVO, Inc.’s Chief Human Resources Officer since its formation, and as Chief HumanResources Officer of EVO, LLC since March 2016. Before joining EVO, Ms. Lafiandra served as Vice President of HumanResources of Beazer Homes USA, Inc. from October 2014 to March 2016 and as Senior Vice President of Human Resources ofPRGX Global, Inc. from March 2010 to March 2014. Ms. Lafiandra received her Juris Doctorate from the University ofVirginia School of Law and her Bachelor of Arts from Southern Methodist University.David L. Goldman has served as EVO, Inc.’s Executive Vice President of Business Development and Strategy since itsformation, and as Executive Vice President of Business Development and Strategy of EVO, LLC since June 2016. Beforejoining EVO, Mr. Goldman served as Managing Director of PointState Capital LP from January 2011 to April 2014 and asVice President of Duquesne Capital Management, LLC from April 2007 to December 2010. Prior to that, Mr. Goldman servedas an Associate at TPG Capital, L.P. and as an investment banking analyst at Morgan Stanley. Mr. Goldman received hisBachelor of Business Administration from the University of Michigan. 22 Table of Contents ITEM 1A. RISK FACTORSThe risks described below are not the only risks facing us. Please be aware that additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial could also materially and adversely affect our business,results of operations, financial condition, cash flows or prospects. You should also refer to the other information containedin our periodic reports, including the Forward-Looking Statements section, our consolidated financial statements and therelated notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations for a furtherdiscussion of the risks, uncertainties and assumptions relating to our business.Business risksOur ability to anticipate and respond to changing industry trends and the needs and preferences of our merchants andconsumers may adversely affect our competitiveness or the demand for our products and services.The financial services and payment technology industries are subject to rapid technological advancements, resulting innew products and services, including mobile payment applications and customized integrated software payment solutions,and an evolving competitive landscape, as well as changing industry standards and merchant and consumer needs andpreferences. We expect that new services and technologies applicable to the financial services and payment technologyindustries will continue to emerge and that our merchants and consumers will continue to adopt new technology forbusiness and personal uses. These changes may limit the competitiveness of and demand for our services. We mustanticipate and respond to these changes in order to remain competitive within our relative markets. In addition, failure todevelop value-added services that meet the needs and preferences of our merchants could adversely affect our ability tocompete effectively in our industry. Furthermore, potential negative reactions to our products and services by merchants orconsumers can spread quickly and damage our reputation before we have the opportunity to respond. If we are unable toanticipate or respond to technological or industry changes on a timely basis, our ability to remain competitive could beadversely affected.Substantial and increasingly intense competition worldwide in the financial services and payment technology industriesmay adversely affect our overall business and operations.The financial services and payment technology industries are highly competitive and our payment services and solutionscompete against various financial services and payment systems, including cash and checks, and electronic, mobile,eCommerce and integrated payment platforms. If we are unable to differentiate ourselves from our competitors and drivevalue for our merchants, we may not be able to compete effectively. Our competitors may introduce their own value-addedor other innovative services or solutions more effectively than we do, which could adversely impact our currentcompetitive position and prospects for growth. They also may be able to offer and provide services that we do not. Inaddition, in certain of the markets in which we operate, we process “on-us” transactions whereby we receive fees as amerchant acquirer and for processing services for the issuing bank. As competition in these markets grows, the number oftransactions in which we receive fees for both of these roles may decrease, which could reduce our revenue and margins inthese jurisdictions. We also compete against new entrants that have developed alternative payment systems, eCommercepayment systems, payment systems for mobile devices and customized integrated software payment solutions. Failure tocompete effectively against any of these competitive threats could adversely affect our business, financial condition orresults of operations. In addition, some of our competitors are larger and have greater financial resources than we do,enabling them to maintain a wider range of product offerings, mount extensive promotional campaigns and be moreaggressive in offering products and services at lower rates, which may adversely affect our business, financial condition orresults of operations.Potential changes in the competitive landscape, including disintermediation from other participants in the paymentschain, could harm our business.We expect that the competitive landscape will continue to undergo changes, including:·rapid and significant changes in technology, resulting in new and innovative payment methods and programs, thatcould place us at a competitive disadvantage and reduce the use of our products and services;23 Table of Contents·competitors, merchants and other industry participants may develop products and services that compete with orreplace our products and services, including products and services that enable card networks and banks to transactwith consumers directly; and·participants in the financial services and payment technology industries may merge, create joint ventures or formother business combinations that may improve their existing business services, or create new payment services thatcompete with our services.Failure to compete effectively against any of these or other competitive threats could adversely affect our business, financialcondition or results of operations. Global economic, political and other conditions may adversely affect trends in consumer, business and governmentspending, which may adversely impact the demand for our services and our revenue and profitability.The financial services and payment technology industries in which we operate depend heavily upon the overall level ofconsumer, business and government spending. A sustained deterioration in general economic conditions (includingdistress in financial markets, turmoil in specific economies around the world and additional government intervention),particularly in North America or Europe, or increases in interest rates in key countries in which we operate, may adverselyaffect our financial performance by reducing the number or average purchase amount of transactions we process. Areduction in the amount of consumer spending could result in a decrease of our revenue and profits.Adverse economic trends may accelerate the timing, or increase the impact of, risks to our financial performance. Thesetrends could include:·declining economies, foreign currency fluctuations and the pace of economic recovery can change consumerspending behaviors, such as cross-border travel patterns, on which a significant portion of our revenue and growth isdependent;·low levels of consumer and business confidence typically associated with recessionary environments may result indecreased spending by cardholders;·high unemployment may result in decreased spending by cardholders;·budgetary concerns in the United States and other countries could affect sovereign credit ratings, and impactconsumer confidence and spending;·emerging market economies tend to be more sensitive to adverse economic trends than the more established marketswe serve;·financial institutions may restrict credit lines to cardholders or limit the issuance of new cards to mitigate cardholdercredit concerns;·uncertainty and volatility in the performance of our merchants’ businesses;·cardholders may decrease spending for services we market and sell; and·government intervention, including the effect of laws, regulations and government investments in our merchants,may have potential negative effects on our business and our relationships with our merchants or otherwise alter theirstrategic direction away from our products and services.24 Table of ContentsWe are subject to governmental regulation and other legal obligations, particularly related to privacy, data protectionand information security, as well as consumer protection laws across different markets where we conduct our business.Our actual or perceived failure to comply with such obligations could harm our business.Privacy and data security have become significant issues in North America, Europe and in many other jurisdictions wherewe may in the future conduct our operations. As we receive, collect, process, use and store personal and confidential data,we are subject to diverse laws and regulations relating to data privacy and security, including, in the United States, localstate laws such as the California Consumer Privacy Act, and, in the EU and the European Economic Area (the “EEA”),GDPR. GDPR generally took effect in Europe in May 2018. GDPR is directly applicable in each EU member state andapplies to companies established in the EU as well as companies that collect and use personal data to offer goods or servicesto, or monitor the behavior of, individuals in the EU. GDPR applies more stringent data protection obligations forprocessors and controllers of personal data, and penalties and fines for failure to comply with GDPR are significant,including fines of up to €20 million or 4% of total worldwide annual turnover (revenue), whichever is higher. Compliancewith these privacy and data security requirements is rigorous and time-intensive and may increase our cost of doingbusiness. Failure to comply may expose us to fines and other penalties, litigation and reputational harm, any of which couldmaterially and adversely affect our business, financial condition and results of operations.The regulatory framework for the receipt, collection, processing, use, safeguarding, sharing and transfer of personal andconfidential data is rapidly evolving and is likely to remain uncertain for the foreseeable future as new global privacy rulesare enacted and existing ones are updated and strengthened. New or evolving regulations could require us to modify oursystems, products or processes, possibly in a material manner, and could limit our ability to develop new services andfeatures.Our inability to protect our systems and data from continually evolving cybersecurity risks or other technological riskscould affect our reputation among merchants, issuers, financial institution, partners, cardholders and may expose us topenalties, fines, liabilities and legal claims.In order to provide our services, we process, transmit and store sensitive business information and personal informationabout our merchants, merchants’ customers, vendors, partners and other parties. This information may include credit anddebit card numbers, bank account numbers, personal identification numbers, names and addresses, and other types ofpersonal information or sensitive business information. Some of this information is also processed and stored by ourmerchants, third-party service providers to whom we outsource certain functions and other agents (which we refer tocollectively as our “associated third parties”).We have certain responsibilities to the card networks and their member financial institutions for any failure by us or by anyof our associated third parties to protect this information. We are a regular target of malicious third party attempts toidentify and exploit system vulnerabilities and penetrate or bypass our security measures. While plans and procedures are inplace to protect this sensitive data, we cannot be certain that these measures will be successful and will be sufficient tocounter all current and emerging technology threats that are designed to breach our systems in order to gain access toconfidential information.Our computer systems are subject to penetration and our data protection measures may not prevent unauthorized access. Thetechniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and areoften difficult to detect. Threats to our systems and our associated third parties’ systems can derive from human error, fraudor malice on the part of employees or third parties, or may result from accidental technological failure. Computer virusesand other malware can be distributed and could infiltrate our systems or those of our associated third parties. In addition,denial of service or other attacks could be launched against us for a variety of purposes, including to interfere with ourservices or create a diversion for other malicious activities. Our defensive measures may not prevent unauthorized access oruse of sensitive data. While we maintain insurance coverage that may cover certain aspects of cyber risks and incidents, ourinsurance coverage may be insufficient to cover all losses. Further, we do not control the actions of our third party partnersand customers or their systems. These third parties have experienced security breaches in the past and any future problemsexperienced by these third parties, including those resulting from cyberattacks or25 Table of Contentsother breakdowns or disruptions in services, could adversely affect our ability to conduct our business or expose us toliability.In addition, following an acquisition, we take steps to ensure our data and system security protection measures cover theacquired business as part of our integration process. As such, there may be a period of increased cybersecurity risk duringthe period between closing an acquisition and the completion of our data and system security integration.We may also be subject to liability for claims relating to misuse of personal information, such as unauthorized marketingpurposes and violation of data privacy laws. We cannot provide assurance that the contractual requirements related tosecurity and privacy that we impose on our service providers who have access to merchant and customer data will befollowed or will be adequate to prevent the unauthorized use or disclosure of data. In addition, we have agreed in certainagreements to take certain protective measures to ensure the confidentiality of merchant and consumer data. The costs ofsystems and procedures associated with such protective measures may increase and could adversely affect our ability tocompete effectively. Any failure to adequately enforce or provide these protective measures could result in litigation,governmental and card network intervention and fines, lost revenue and other liabilities and reputational harm.Any type of security breach, attack or misuse of data described above or otherwise, could harm our reputation and deterexisting and prospective merchants and partners from using our services, deter customers from making electronic paymentsgenerally, increase our operating expenses in order to contain and remediate the incident, expose us to unbudgeted oruninsured liability, disrupt our operations (including potential service interruptions), distract our management, increase ourrisk of regulatory scrutiny, result in the imposition of regulatory or card network fines and other penalties, and adverselyaffect our continued card network registration and financial institution sponsorship. For example, if we were to be removedfrom the card networks’ lists of PCI Data Security Standard compliant service providers, our existing merchants, sales andfinancial institution partners or other third parties may terminate their relationship with us or cease using or referring ourservices. Also, prospective merchants, sales partners, financial institution partners or other third parties may delay or choosenot to consider us for their processing needs. In addition, card networks could refuse to allow us to process through theirnetworks. Any of the foregoing could adversely impact our business, financial condition or results of operations.We may experience failures in our processing systems due to software defects, computer viruses and development delays,which could damage customer relations and expose us to liability.Our core business depends on the reliability of our processing systems. A system outage or other failure could adverselyaffect our business, financial condition or results of operations, including by damaging our reputation or exposing us tothird-party liability. Certain laws, regulations and card network rules allow for penalties if our systems do not meet certainoperating standards. To successfully operate our business, we must be able to protect our systems from interruption,including from events that may be beyond our control. Events that could cause system interruptions include fire, naturaldisaster, unauthorized entry, power loss, telecommunications failure, computer viruses, terrorist acts and war. Although wehave taken steps to protect against data loss and system failures, there is still risk that we may lose critical data orexperience system failures. In addition, we utilize select third parties for certain disaster recovery operations, particularlyoutside of the United States. To the extent we outsource any disaster recovery functions, we could be adversely impacted inthe event of the vendor’s unresponsiveness or other failures. In addition, our insurance may not be adequate to compensateus for all losses or failures that may occur.Our products and services are based on sophisticated software and computing systems that are constantly evolving. Weoften encounter delays and cost overruns in developing and implementing changes to our systems. In addition, theunderlying software may contain undetected errors, viruses or defects. Defects in our software products and errors or delaysin our processing of electronic transactions could result in additional development costs, diversion of technical and otherresources from our other development efforts, loss of credibility with current or potential merchants, harm to our reputationor other liabilities. In addition, we rely on technologies supplied to us by third parties that may contain undetected errors,viruses or defects that could adversely affect our business, financial condition or results of operations. Although we attemptto limit our potential liability through disclaimers in our software documentation and limitation of26 Table of Contentsliability provisions in our licenses and other agreements with our merchants and partners, we cannot assure that thesemeasures will be successful in limiting our liability.Degradation of the quality of the products and services we offer, including support services, could adversely impact ourability to attract and retain merchants and partners.Our merchants and partners expect a consistent level of quality in the provision of our products and services, which are asignificant element of the value proposition we offer to them. If the reliability or functionality of our products and servicesis compromised or the quality or support of such products and services is otherwise degraded, we could lose existingmerchants and partners and find it harder to attract new merchants and partners. If we are unable to scale our supportfunctions to address the growth of our merchant portfolio and partner network, the quality of our support may decrease,which could also adversely affect our ability to attract and retain merchants and partners.Acquisitions create certain risks and may adversely affect our business, financial condition or results of operations.We have actively acquired businesses and expect to continue to make acquisitions of businesses or assets in the future. Theacquisition and integration of businesses or assets involve a number of risks. These risks include valuation (determining afair price for the business or assets), integration (managing the process of integrating the acquired business’ people,products, technology and other assets to extract the value and synergies projected to be realized in connection with theacquisition), regulation (obtaining regulatory or other government approvals that may be necessary to complete theacquisition) and due diligence (including identifying risks to the prospects of the business, including undisclosed orunknown liabilities or restrictions to be assumed in the acquisition).In addition, acquisitions outside of the United States often involve additional or increased risks including:·managing geographically separated organizations, systems and facilities;·integrating personnel with diverse business backgrounds and organizational cultures;·complying with non-U.S. legal and regulatory requirements;·addressing financial and other impacts to our business resulting from fluctuations in currency exchange rates;·enforcing intellectual property rights in non-U.S. countries;·difficulty entering new non-U.S. markets due to, among other things, consumer acceptance and business knowledgeof these markets; and·general economic and political conditions.The failure to avoid or mitigate the risks described above or other risks associated with acquisitions could have a materialadverse effect on our results of operations, cash flows and financial condition.In addition, we may not be able to successfully integrate any businesses that we acquire or do so within the intendedtimeframe. We could face significant challenges in managing and integrating our acquisitions, including acquired assets,operations and personnel. In addition, the expected cost synergies associated with our acquisitions may not be fully realizedin the anticipated amount or within the contemplated timeframe or cost expectations, which could result in increased costsand have an adverse effect on our prospects, results of operations, cash flows, financial condition and prospects.Further, there may be material risks we are unable to identify or quantify through due diligence. If significant liabilities,including those relating to violations of applicable law, arise at one of our joint ventures or acquired subsidiaries, we may beexposed to material liabilities or our business may be materially and adversely affected.27 Table of ContentsFinally, future acquisition opportunities may not be available on acceptable terms, or at all, and we may not be able to obtainnecessary financing or regulatory approvals to complete potential acquisitions. If we are unable to continue to completesuccessful acquisitions, our growth and prospects could be adversely impacted. Continued consolidation in the banking industry could adversely affect our growth.The banking industry continues to experience consolidation regardless of overall economic conditions. For example, inOctober of 2018, BNP Paribas Group acquired one of our financial institutional referral partners, Raiffeisen Bank Polska, inPoland. In addition, in times of economic distress, various regulators in the markets we serve have acquired, and in thefuture may acquire, financial institutions, including banks with which we partner. If a current financial institution referralpartner of ours is acquired by another bank, the acquiring bank may seek to terminate our agreement and impose its ownmerchant services program on the acquired bank. If a financial institution referral partner acquires another bank, ourfinancial institution referral partner may take the opportunity to conduct a competitive bidding process to determinewhether to maintain our merchant acquiring services or switch to another provider. In either situation, we may be unable toretain the relationship post-acquisition, or may have to offer financial concessions to do so, which could adversely affectour results of operations or growth. In addition, if a current financial institution referral partner of ours is acquired by aregulator, the regulator may seek to alter the terms or terminate our existing agreement with the acquired financialinstitution.One of our financial institution referral partners, Grupo Banco Popular, was acquired by Banco Santander SA in June 2017.Following the acquisition, we believe our referral relationship remains in full force and effect and will continue to provideus with referrals during the remainder of the term of the underlying agreement. However, we cannot assure you that theacquisition will not have an adverse impact on our referral relationship during the remaining term of the agreement. If ourreferral relationship was to be adversely impacted, it could have a material adverse effect on our business.Additionally, the payments industry has also been experiencing consolidation. In January 2018, Vantiv, Inc. acquiredWorldpay Group plc, creating one of the largest payments institutions in our industry. In addition, in January 2019, it wasannounced that Fiserv had entered into an agreement to acquire First Data Corporation and, in March 2019, it was announcedthat Fidelity National Information Services had entered into an agreement to acquire Worldpay, Inc. Continuedconsolidation in the payments industry may impact our ability to compete for merchants and financial partners.Increased customer, referral partner or sales partner attrition could cause our financial results to decline.We experience attrition in merchant transaction processing volume due to several factors, including business closures,transfers of merchants’ accounts to our competitors, unsuccessful contract renewal negotiations and account closures thatwe initiate for various reasons, such as heightened credit risks or contract breaches by merchants. In addition, if an existingsales partner switches to another payment processor, terminates our services, internalizes payment processing functions thatwe perform, merges with or is acquired by one of our competitors, or shuts down or becomes insolvent, we may no longerreceive new customer referrals from the sales partner and we risk losing existing merchants that were originally enrolled bythe sales partner. We cannot predict the level of attrition that may occur in the future and it could increase. Higher thanexpected attrition could adversely affect our business, financial condition or results of operations. Our referral partners are asignificant source of new business. In addition, in certain of the markets in which we conduct business, a substantial portionof our revenue is derived from long-term contracts. If we are unable to renew our referral partner and merchant contracts onfavorable terms, or at all, our business, financial condition or results of operations could be adversely affected.We incur chargeback liability when our merchants refuse to or cannot reimburse chargebacks resolved in favor of theircustomers. Any increase in chargebacks not paid by our merchants may adversely affect our business, financial conditionor results of operations.In the event that a dispute between a cardholder and a merchant is not resolved in favor of the merchant, the transaction isnormally charged back to the merchant and the purchase price is credited or otherwise refunded to the cardholder. If28 Table of Contentswe are unable to collect such amounts from the merchant’s account or reserve account (if applicable), or if the merchantrefuses or is unable, due to closure, bankruptcy or other reasons, to reimburse us for a chargeback, we are responsible for theamount of the refund paid to the cardholder. The risk of chargebacks is typically greater with those merchants that promisefuture delivery of goods and services, rather than delivering goods or rendering services at the time of payment, as well as“card not present” transactions in which consumers are not physically present, such as eCommerce, telephonic and mobiletransactions. We may experience significant losses from chargebacks in the future. Any increase in chargebacks not paid byour merchants could have a material adverse effect on our business, financial condition or results of operations. We havepolicies and procedures to manage merchant-related credit risks, such as requiring merchant cash reserve accounts andmonitoring transaction activity. Notwithstanding our policies and procedures for managing credit risk, it is possible that adefault on such obligations by one or more of our merchants could adversely affect our business, financial condition orresults of operations.In addition, in certain cases, governmental authorities may seek to freeze or take possession of merchant cash reserves aspart of an investigation or regulatory proceeding. When that happens, we may be unable to satisfy chargeback losses fromthe merchant cash reserves and may experience significant losses if we are required to satisfy chargeback losses from ourown funds.Failure to maintain or collect reimbursements from our financial institution referral partners could adversely affect ourbusiness.Certain of our long-term referral arrangements with our financial institution partners permit our partners to offer theirmerchant customers lower rates for processing services than we typically provide to the general market. If one of our bankpartners elects to offer these lower rates, they are contractually required to reimburse us for the full amount of the discountprovided to their merchant customers. Notwithstanding such contractual commitments, there can be no assurance that thesecontractual provisions will fully protect us from potential losses should a bank partner default on its obligations toreimburse us or seek to discontinue such reimbursement obligations in the future. If we are unable to collect the full amountof any such reimbursements for any reason, we may incur losses. In addition, any discount provided by our financialinstitution partner may cause merchants in these markets to demand lower rates for our services in the future, which couldfurther reduce our margins or cause us to lose merchants, either of which could adversely affect our business, financialcondition or results of operations.Fraud by merchants or others could adversely affect our business, financial condition or results of operations.We may be liable for certain fraudulent transactions and credits initiated by merchants or others. For example, to the extentwe were to process payments for a merchant that engaged in unfair or deceptive trade practices, we may be subject toenforcement actions by the Federal Trade Commission, other consumer protection agencies or state attorneys general.Examples of merchant fraud include merchants or other parties knowingly using a stolen or counterfeit credit or debit card,card number, or other credentials to record a false sales or credit transaction, processing an invalid card, or intentionallyfailing to deliver goods or services sold in an otherwise valid transaction. Criminals are using increasingly sophisticatedmethods to engage in illegal activities such as counterfeiting and fraud, especially through eCommerce transactions. Failureto effectively manage risk and prevent fraud could increase our chargeback liability or cause us to incur other liabilities,including if we are subject to enforcement action by a regulatory authority. It is possible that incidents of fraud couldincrease in the future. Increases in chargebacks or other liabilities could adversely affect our business, financial condition orresults of operations.Because we rely on third-party vendors to provide products and services, we could be adversely impacted if they fail tofulfill their obligations.We depend on third-party vendors and partners to provide us with certain products and services, including components ofour computer systems, software, data centers and telecommunications networks, to conduct our business. For example, werely on third parties for services such as organizing and accumulating certain daily transaction data from each merchant andcard issuer and forwarding the data to the relevant card network. We also rely on third parties for specific software andhardware used in providing our products and services. Some of these organizations and service providers are our29 Table of Contentscompetitors or provide similar services and technology to our competitors, and we do not have long-term or exclusivecontracts with them. In addition, we rely on various financial institutions to provide clearing services in connection with oursettlement activities. If these financial institutions stop providing clearing services, we would need to find other financialinstitutions to provide those services. If we were unable to do so we would no longer be able to provide processing servicesto certain merchants, which could adversely affect our business, financial condition or results of operations.The systems and operations of our third-party vendors and partners could be exposed to damage or interruption from, amongother things, fire, natural disaster, power loss, telecommunications failure, unauthorized access, computer viruses, denial-of-service attacks, acts of terrorism, human error, vandalism or sabotage, financial insolvency, bankruptcy and similar events.In addition, we may be unable to renew our existing contracts with our most significant vendors and partners or our vendorsand partners may stop providing or otherwise supporting the products and services we obtain from them, and we may not beable to obtain these or similar products or services on the same or similar terms as our existing arrangements, if at all. Thefailure of our vendors and partners to perform their obligations and provide the products and services we obtain from themin a timely manner for any reason could adversely affect our operations and profitability due to, among other consequences:·loss of revenues;·loss of merchants and partners;·loss of merchant and cardholder data;·fines imposed by card networks;·reputational harm;·exposure to fraud losses or other liabilities;·additional operating and development costs; or·diversion of management, technical and other resources.We depend, in part, on our merchant and strategic relationships with various financial institutions and referral partnersto grow our business. If we are unable to maintain these relationships, our business may be adversely affected.We depend, in part, on our merchant relationships to grow our business. Our merchant processing agreements are our mainsource of revenue. Our failure to maintain or grow these relationships could adversely affect our business and result in areduction of our revenue and profit.We also rely on our various financial institution relationships, including our partnerships with Deutsche Bank, DeutschePostbank, PKO Bank Polski, Banco Popular/Grupo Santander, Bank of Ireland, Raiffeisen, Citibanamex, Sabadell,Liberbank, Moneta, Caixa Guissona and BNP Paribas, to grow our business. These relationships are structured in variousways, such as commercial alliance relationships, equity method investments and joint ventures. We enter into long-termrelationships with our bank partners where these partners typically provide exclusive referrals and credit facilities to fundour daily settlement obligations. These facilities are generally short term and at preferential interest rates. In some cases,our bank partners provide us with card association sponsorship.In addition, we rely on our various referral partners to grow our business. Our sales divisions work with a diverse mix ofreferral partners including ISVs, software dealers and independent sales agents. These relationships generally consist ofnon-exclusive referral arrangements pursuant to which we pay our partners a referral fee based on profit generated by themerchants attributable to their referral. 30 Table of ContentsWe rely on the growth of our financial institution and referral partner relationships, and our ability to maintain theserelationships, to support and grow our business. If we fail to maintain these relationships, or our financial institutionpartners fail to maintain their brands or decrease the size of their branded networks, or our referral partners fail to penetratetheir target markets or fail to remain competitive in such markets, our business may be adversely affected. Furthermore,failure to maintain our financial institution relationships may prevent us from obtaining settlement facilities at preferentialterms and we may be forced to secure alternative arrangements on less favorable terms. The loss of financial institutionrelationships or referral partners could adversely affect our business and result in a reduction of our revenue and profit.Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all marketenvironments or against all types of risk.We operate in a rapidly changing industry. Accordingly, our risk management policies and procedures may not be fullyeffective to identify, monitor and manage all risks our business encounters. If our policies and procedures are not fullyeffective or we are not successful in identifying and mitigating the risks to which we are or may be exposed, we may sufferuninsured liability or harm to our reputation, or be subject to litigation or regulatory actions that could adversely affect ourbusiness, financial condition or results of operations.A significant number of our merchants are small- and medium-sized businesses or small affiliates of large companies,which can be more difficult and costly to retain than larger enterprises and may increase the impact of economicfluctuations on us.We market and sell our products and services to, among others, SMEs and small affiliates of large companies. To continueto grow our revenue, we must add merchants, sell additional services to existing merchants and encourage existingmerchants to continue doing business with us. However, retaining SMEs can be more difficult than retaining largeenterprises as SME merchants:·often have higher rates of business failures and more limited resources;·are typically less sophisticated in their ability to make technology-related decisions based on factors other thanprice;·may have decisions related to the choice of payment processor dictated by their affiliated parent entity; and·are more able to change their payment processors than larger organizations dependent on our services.SMEs are typically more susceptible to the adverse effects of economic fluctuations. Adverse changes in the economicenvironment or business failures of our SME merchants may have a greater impact on us than on our competitors who do notfocus on SMEs to the extent that we do. As a result, we may need to attract and retain new merchants at an accelerated rate ordecrease our expenses to mitigate negative impacts in the event our SME merchants experience business declines due toeconomic trends or otherwise, failure of which may negatively impact our results of operations, financial condition, cashflows or prospects.Our business depends on a strong and trusted brand and damage to our reputation, or the reputation of our partners,could adversely affect our business, financial condition or results of operations.We market our products and services under our brand, the brand of our partners or both, and we must protect and grow thevalue of our brand to continue to be successful in the future. If an incident were to occur that damaged our reputation, or thereputation of our partners, the value of our brand could be adversely affected and our business could be damaged.31 Table of ContentsOur operating results and operating metrics are subject to seasonality and volatility, which could result in fluctuations inour quarterly revenues and operating results or in perceptions of our business prospects.We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenue, which canvary by region. In North America, our revenue has typically been strongest in our fourth quarter and weakest in our firstquarter. In Europe, our revenue has typically been strongest in our third quarter and weakest in our first quarter. Somevariability results from seasonal retail events and the number of business days in a month or quarter. We also experiencevolatility in certain other metrics, such as number of transactions processed and payment processing volumes. Volatility inour key operating metrics or their rates of growth could result in fluctuations in financial condition or results of operationsand may lead to adverse inferences about our prospects, which could result in declines in our stock price.Our ability to recruit, retain and develop qualified personnel is critical to our success and growth.All of our businesses function at the intersection of rapidly changing technological, social, economic and regulatoryenvironments that require a wide range of expertise and intellectual capital. For us to successfully compete and grow, wemust recruit, retain and develop personnel who can provide the necessary expertise across a broad spectrum of intellectualcapital needs. In addition, we must develop, maintain and, as necessary, implement appropriate succession plans to assurewe have the necessary human resources capable of maintaining continuity in our business. The market for qualifiedpersonnel is competitive and we may not succeed in recruiting additional personnel or may fail to effectively replacecurrent personnel who depart with qualified or effective successors. Our efforts to retain and develop personnel may alsoresult in significant additional expenses, which could adversely affect our profitability. We cannot assure that keypersonnel, including our executive officers, will continue to be employed or that we will be able to attract and retainqualified personnel in the future. Failure to recruit, retain or develop qualified personnel could adversely affect ourbusiness, financial condition or results of operations.Our business may be adversely affected by geopolitical and other risks associated with operations outside of the UnitedStates and, as we continue to expand internationally, we may become more susceptible to these risks.We offer merchant acquiring and processing services in many geographies outside of the United States, including inCanada, the Czech Republic, Germany, Ireland, Mexico, Poland, Spain and the United Kingdom. We are subject to risksassociated with operations in international markets, including changes in foreign governmental policies and requirementsapplicable to our business. In particular, some countries where we operate lack well-developed legal systems or have notadopted clear regulatory frameworks for the payment services industry. This lack of legal certainty exposes our operationsto increased risks, including difficulty enforcing our agreements in those jurisdictions and increased risks of adverseactions by local government authorities, such as expropriations. As we continue to expand internationally, we may facechallenges due to the presence of more established competitors and our lack of experience in certain non-U.S. markets.In addition, our current and future financial institution partners in foreign jurisdictions, particularly in Europe, may beacquired, reorganized or otherwise disposed of in the event of further market turmoil or losses in their loan portfolio thatresult in such financial institutions becoming less than adequately capitalized. Our revenue derived from these and othernon-U.S. operations is subject to additional risks, including those resulting from social and geopolitical instability andunfavorable political or diplomatic developments, all of which could adversely affect our business, financial condition orresults of operations. Certain of our partners in foreign jurisdictions are also state-controlled entities, which may adverselyaffect our ability to seek redress for any contractual breach to the extent these partners can successfully claim sovereignimmunity. In addition, in the event ongoing or future sovereign debt concerns in a particular country impact any suchpartner, our business could be negatively impacted.We have significant operations in the United Kingdom and throughout Europe more generally. In June 2016, the UnitedKingdom held a referendum in which a majority of voters elected to withdraw from the EU, commonly referred to as“Brexit.” As a result of the referendum, the United Kingdom has until March 29, 2019 to negotiate the terms of itswithdrawal from the EU. After extensive negotiations, a deal was reached between the United Kingdom and the EU, but thisdeal was recently rejected by the House of Commons in the United Kingdom. It is unclear whether a revised32 Table of Contentsagreement will be approved by the House of Commons or whether the United Kingdom could be forced to leave the EUwithout an agreement in place regarding the various trade, immigration and other laws currently negotiated by the EU onbehalf of its member states. As a result, Brexit has created significant uncertainty about the future relationship between theUnited Kingdom and the EU and has given rise to calls for certain regions within the United Kingdom to preserve theirplace in the EU by separating from the United Kingdom, as well as for the governments of other EU member states toconsider withdrawal. The uncertainty surrounding the exact terms of any Brexit, or whether there will be a negotiatedagreement at all, has rippled through the global economy and may in the future have a material adverse effect on globaleconomic conditions and the stability of the global financial markets. Asset valuations, currency exchange rates and creditratings may be especially subject to increased market volatility as a result. Lack of clarity about applicable future laws,regulations or treaties as the United Kingdom finalizes its withdrawal, including financial laws and regulations, tax and freetrade agreements, intellectual property rights, immigration and employment laws, and other rules that would apply to us andour subsidiaries, could increase our costs. If the United Kingdom and the EU are unable to negotiate acceptable withdrawalterms or if other EU member states pursue withdrawal, barrier-free access between the United Kingdom and other EU memberstates or within the EEA overall could be diminished or eliminated. Any of these factors could have a material adverse effecton our business, financial condition and results of operations.If we are unable to successfully manage the foregoing risks relating to our business outside the U.S, our business, prospects,financial condition and results of operations could be adversely impacted.A decline in the use of cards as a payment mechanism for consumers or other adverse developments with respect to thecard industry in general may adversely impact us.In order to consistently increase and maintain our profitability, consumers and businesses must continue to use electronicpayment methods that we process, including credit and debit cards, and various factors may impact levels of use. Forexample, consumer credit risk may make it more difficult or expensive for consumers to gain access to credit facilities suchas credit cards. Financial institutions may seek to charge their customers additional fees for use of credit or debit cardswhich could result in decreased use of credit or debit cards. Any other development that impacts the cost, convenience orquality of services of electronic payments could result in a decline in the use of credit and debit cards or other electronicpayments. Any such decline may adversely impact our business, prospects, financial condition and results of operations.Increases in card network fees and other changes to fee arrangements may result in the loss of merchants or a reductionin our earnings.From time to time, card networks, including Visa and Mastercard, increase the fees that they charge processors. We couldattempt to pass these increases along to our merchants but this strategy might result in the loss of merchants to ourcompetitors who do not pass along the increases. If competitive practices prevent us from passing along the higher fees toour merchants in the future, we may have to absorb all or a portion of such increases, which may increase our operating costsand reduce our earnings.In addition, in certain of our markets, card issuers pay merchant acquirers fees based on debit card usage in an effort toencourage debit card use. If this practice were discontinued, our revenue and margins in jurisdictions where we receivethese fees would be adversely affected.If we fail to comply with the applicable requirements of card networks, they could seek to fine us, suspend us or terminateour registrations. If our merchants or sales partners incur fines or penalties that we cannot collect from them, we mayhave to bear the cost of such fines or penalties.In order to provide our transaction processing services, several of our subsidiaries are registered with Visa and Mastercardand other card networks as members or service providers for member institutions. Visa, Mastercard and other card networksset rules and standards with which we must comply.33 Table of ContentsThe card network rules subject us and our merchants to a variety of fines or penalties, including termination of ourregistrations or status as a certified service provider, for certain acts or omissions by us or our merchants. The rules of cardnetworks are set by their boards, which include members that are card issuers that directly or indirectly sell processingservices to merchants in competition with us. There is a risk that these members could use their influence to enact changesto the card network rules or policies that are detrimental to us. Any changes in network rules or standards that increase thecost of doing business or limit our ability to provide processing services to our merchants will adversely affect the operationof our business. In addition, if a merchant or sales partner fails to comply with the applicable requirements of card networks,it could be subject to a variety of fines or penalties that may be levied by card networks. We may have to bear the cost ofsuch fines or penalties if we are unable to collect them from the applicable merchant or sales partner. The termination of ourmember registration, any change in our status as a service provider or merchant processor, or any changes in network rules orstandards could prevent us from providing processing services relating to the affected card network and could adverselyaffect our business, financial condition or results of operationsFinancial risksWe may be required to purchase the remainder of our eService subsidiary in Poland.In December 2013, we acquired a 66% ownership interest in Centrum Elektronicznych Uslug Platniczych eService Sp. zo.o., or eService, from PKO Bank Polski. In connection with the purchase, we granted a put option to PKO Bank Polski that,if exercised, could force us to buy the remainder of the business at the then-current market price. If we are forced to purchasethe remainder of our eService subsidiary at a time in which it is not otherwise in our best interest to do so, our business,including our liquidity, could be adversely affected.Our results of operations may be adversely affected by changes in foreign currency exchange rates.Revenue and profit generated by our non-U.S. operations will increase or decrease compared to prior periods as a result ofchanges in foreign currency exchange rates and the impact may be significant. For example, revenue generated by our non-U.S. operations represented approximately 65% of our total revenue for the year ended December 31, 2018, and ahypothetical uniform 10% weakening of the local currencies of our non-U.S. operations would result in a decrease ofapproximately $3.3 million in pretax income for the year ended December 31, 2018. In addition, we may become subject toexchange control regulations that restrict or prohibit the conversion of our other revenue currencies into U.S. dollars. Anyof these factors could decrease the value of revenues and earnings we derive from our non-U.S. operations and adverselyaffect our business. A greater portion of our revenue is generated outside the U.S. as compared to certain of our competitorsand, as such, foreign currency exchange rates will have a more significant impact on our results.While we currently have limited diversification in foreign currency, we may seek to reduce our exposure to fluctuations inforeign currency exchange rates in the future through the use of hedging arrangements. To the extent that we hedge ourforeign currency exchange rate exposure in the future, we will forgo the benefits we would otherwise experience if foreigncurrency exchange rates changed in our favor. No strategy can completely insulate us from risks associated with suchfluctuations and our currency exchange rate risk management activities could expose us to substantial losses if such ratesmove materially differently from our expectations.Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significantportion of these assets would negatively affect our business, financial condition or results of operations.As a result of our prior acquisitions, a significant portion of our total assets consists of intangible assets (includinggoodwill). Goodwill and intangible assets, net of amortization, together accounted for approximately 42% of total assets onour balance sheet as of December 31, 2018. To the extent we engage in additional acquisitions we may recognize additionalintangible assets and goodwill. We evaluate on a regular basis whether all or a portion of our goodwill and other intangibleassets may be impaired. Under current accounting rules, any determination that impairment has occurred would require us torecord an impairment charge, which would adversely affect our earnings. An impairment of a significant portion of goodwillor intangible assets could adversely affect our business, financial condition or results of operations.34 Table of ContentsOur substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limitour ability to react to changes in the economy or our industry, expose us to interest rate risk and prevent us from meetingour debt obligations.Our substantial indebtedness could have adverse consequences, including:·increasing our vulnerability to adverse economic, industry or competitive developments;·requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and intereston our indebtedness, thereby reducing our ability to use cash flow to fund our operations, capital expenditures andfuture business opportunities;·making it more difficult for us to satisfy our obligations with respect to our indebtedness, including restrictivecovenants and borrowing conditions, which could result in an event of default under the agreements governing suchindebtedness;·restricting us from making strategic acquisitions or causing us to make nonstrategic divestitures;·making it more difficult for us to obtain network sponsorship and clearing services from financial institutions or toobtain or retain other business with financial institutions;·limiting our ability to obtain additional financing for working capital, capital expenditures, product development,debt service requirements, acquisitions and general corporate or other purposes; or·limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us ata competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may beable to take advantage of opportunities that our leverage prevents us from exploiting.Successful execution of our business strategy is dependent in part upon our ability to manage our capital structure to reduceinterest expense and enhance free cash flow generation. We have entered into a first lien senior secured credit facility and asecond lien senior secured credit facility pursuant to a credit agreement dated December 22, 2016, and amended on October24, 2017, April 3, 2018, and June 14, 2018 (our “Senior Secured Credit Facilities”). As of December 31, 2018, our SeniorSecured Credit Facilities include revolver commitments of $200.0 million and a term loan of $665.0 million that arescheduled to mature in June 2023 and December 2023, respectively. We may not be able to refinance our Senior SecuredCredit Facilities or our other existing indebtedness at or prior to their maturity at attractive rates of interest because of ourhigh levels of debt, debt incurrence restrictions under our debt agreements or because of adverse conditions in creditmarkets generally.In addition, certain of our borrowings, including borrowings under our Senior Secured Credit Facilities, are at variable ratesof interest. If interest rates increase, the interest payment obligations under our variable rate indebtedness will increase evenif the amount borrowed remains the same. The condition of the financial and credit markets and prevailing interest rateshave fluctuated in the past and are likely to fluctuate in the future. In addition, developments in our business andoperations could lead to a ratings downgrade for us or our subsidiaries. As of December 31, 2018, we had $697.0 millionaggregate principal amount of variable rate indebtedness. As a result, as of December 31, 2018, the impact of a 100 basispoint increase in interest rates would increase our annual interest expense by approximately $7.0 million.Any such fluctuation in the financial and credit markets, or in the rating of us or our subsidiaries, may impact our ability toaccess debt markets in the future or increase our cost of current or future debt, which could adversely affect our business,financial condition or results of operations.35 Table of ContentsChanges in the method pursuant to which the London Interbank Offered Rate (“LIBOR”) is determined and potentialphasing out of LIBOR after 2021 may adversely affect our results of operations.LIBOR and certain other “benchmarks” are the subject of recent national, international and other regulatory guidance andproposals for reform. These reforms may cause such benchmarks to perform differently than in the past or have otherconsequences which cannot be predicted. In particular, in July 2017, the United Kingdom’s Financial Conduct Authority,which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR ratesafter 2021. It is unclear whether, at that time, LIBOR will cease to exist or if new methods of calculating LIBOR will beestablished. As of December 31, 2018, approximately $697.0 million of our outstanding indebtedness had interest rate paymentsdetermined directly or indirectly based on LIBOR. Any uncertainty regarding the continued use and reliability of LIBOR asa benchmark interest rate could adversely affect the performance of LIBOR relative to its historic values. If the methods ofcalculating LIBOR change from current methods for any reason, or if LIBOR ceases to perform as it has historically, ourinterest expense associated with our outstanding indebtedness or any future indebtedness we incur may increase. Further, ifLIBOR ceases to exist, we may be forced to substitute an alternative benchmark rate, such as a different interest rate, or relyon base rate borrowings in lieu of LIBOR under our current and future indebtedness. At this point, it is not clear what, ifany, alternative benchmark rate may be adopted to replace LIBOR, however, any such alternative benchmark rate may becalculated differently than LIBOR and may increase the interest expense associated with our existing or futureindebtedness.Any of these occurrences could materially and adversely affect our borrowing costs, business and results of operations.Restrictions imposed by our Senior Secured Credit Facilities and our other outstanding indebtedness may materiallylimit our ability to operate our business and finance our future operations or capital needs.The terms of our Senior Secured Credit Facilities restrict us and our restricted subsidiaries, which currently include all ofour operating subsidiaries, from engaging in specified types of transactions. These covenants restrict our ability, andthat of our restricted subsidiaries, to, among other things:·incur indebtedness;·create liens;·engage in mergers or consolidations;·make investments, loans and advances;·pay dividends and distributions and repurchase capital stock;·sell assets;·engage in certain transactions with affiliates;·enter into sale and leaseback transactions;·make certain accounting changes; and·make prepayments on junior indebtedness.In addition, the credit agreements governing our Senior Secured Credit Facilities contain a springing maximum totalleverage ratio financial covenant. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition andResults of Operations.” A breach of any of these covenants (or any other covenant in the documents governing our SeniorSecured Credit Facilities) could result in a default or event of default under our Senior Secured Credit Facilities.36 Table of ContentsIn the event of any event of default under our Senior Secured Credit Facilities, the applicable lenders or agents could electto terminate borrowing commitments and declare all borrowings and loans outstanding thereunder, together with accruedand unpaid interest and any fees and other obligations, to be immediately due and payable. In addition, or in the alternative,the applicable lenders or agents could exercise their rights under the security documents entered into in connection with ourSenior Secured Credit Facilities. We have pledged substantially all of our U.S. assets as collateral securing our SeniorSecured Credit Facilities and any such exercise of remedies on any material portion of such collateral would materially andadversely affect our financial condition and our ability to continue operations.If we were unable to repay or otherwise refinance these borrowings and loans when due, and the applicable lenders proceededagainst the collateral granted to them to secure that indebtedness, we may be forced into bankruptcy or liquidation. In theevent the applicable lenders accelerate the repayment of our borrowings, we may not have sufficient assets to repay thatindebtedness. Any acceleration of amounts due under our Senior Secured Credit Facilities would likely have a materialadverse effect on us.Accelerated funding programs increase our working capital requirements and expose us to incremental credit risk, and ifwe are unable to access or raise sufficient liquidity to address these funding programs we may be exposed to additionalcompetitive risk.In response to demand from our merchants and competitive offerings, we offer certain of our merchants various acceleratedfunding programs which are designed to enable qualified participating merchants to receive their deposits from credit cardtransactions in an expedited manner. These programs increase our working capital requirements and expose us toincremental credit risk related to our merchants, which could constrain our ability to raise additional capital to fund ouroperations and adversely affect our growth, financial condition and results of operations. Our inability to access or raisesufficient liquidity to address our needs in connection with the anticipated expansion of such advance funding programscould put us at a competitive disadvantage by restricting our ability to offer programs to all of our merchants similar tothose made available by our various competitors.Legal and regulatory risksFailure to comply with the FCPA, anti-money laundering, economic and trade sanctions regulations, and similar lawsand regulations could subject us to penalties and other adverse consequences.We operate our business in several foreign countries where companies often engage in business practices that are prohibitedby U.S. and other laws and regulations applicable to us. We are subject to anti-corruption laws and regulations, includingthe FCPA, the U.K. Bribery Act and other laws that prohibit the making or offering of improper payments, including anti-bribery provisions enforced by the Department of Justice and accounting provisions enforced by the SEC. These lawsprohibit improper payments or offers, including payments to foreign governments, officials and business entities for thepurpose of obtaining or retaining business. We have implemented policies, procedures, systems and controls designed toidentify and address potentially impermissible transactions under such laws and regulations; however, there can be noassurance that our employees, consultants and agents, including those that may be based in or from countries wherepractices that violate U.S. or other laws may be customary, will not take actions in violation of our policies for which wemay be ultimately responsible.In addition, we are subject to certain anti-money laundering laws and regulations. In some jurisdictions, we are directlysubject to these regulations. In other cases, we are contractually required to comply with certain regulations to which ourbank partners are subject. These regulations, including the Bank Secrecy Act, as amended by the USA PATRIOT Act of2001, typically require businesses to develop and implement risk-based anti-money laundering programs, report large cashtransactions and suspicious activity, and maintain transaction records.We are also subject to certain economic and trade sanctions programs administered by OFAC, which prohibit or restricttransactions with specified countries, governments, and, in certain circumstances, nationals, as well as narcotics traffickersand terrorists or terrorist organizations. Other group entities may be subject to additional foreign or local sanctionsrequirements in other relevant jurisdictions.37 Table of ContentsSimilar anti-money laundering and counter terrorist financing and proceeds of crime laws apply to movements of currencyand payments through electronic transactions and to dealings with persons specified in lists maintained by the countryequivalents to OFAC lists in several other countries and require specific data retention obligations to be observed byintermediaries in the payment process. Our businesses in those jurisdictions are subject to those data retention obligations.Failure to comply with any of these laws or regulations or changes in this legal or regulatory environment, includingchanging interpretations and the implementation of new or varying regulatory requirements by the government, may resultin significant financial penalties, reputational harm or change the manner in which we currently conduct some aspects ofour business, which could adversely affect our business, financial condition or results of operations.Failure to enforce and defend our intellectual property rights may diminish our competitive advantages or interfere withour ability to market and promote our products and services.Our trademarks, trade names, trade secrets, know-how, proprietary technology and other intellectual property are importantto our future success, including the rights associated with our EVO, BOIPA and eService trademarks and trade names, amongothers. We believe our trademarks and trade names are widely recognized and associated with quality and reliable service.While it is our policy to vigorously defend our intellectual property, there can be no assurance that the steps we have takento protect our intellectual property will be adequate to prevent infringement, misappropriation or other violations. We alsocannot guarantee that others will not independently develop technology with the same or similar functions as theproprietary technology we rely on to conduct our business and differentiate ourselves from our competitors. Furthermore, wemay face claims of infringement of third-party intellectual property that could interfere with our ability to market andpromote our products and services. Any litigation to enforce our intellectual property rights or defend ourselves againstclaims of infringement of third-party intellectual property rights could be costly, divert attention of management and maynot ultimately be resolved in our favor. Moreover, if we are unable to successfully defend against claims that we haveinfringed the intellectual property rights of others, we may be prevented from using certain intellectual property and may beliable for damages, which in turn could have a material adverse effect on our business, financial condition or results ofoperations. In addition, the laws of certain non-U.S. countries where we do business or may do business in the future maynot recognize intellectual property rights or protect them to the same extent as do the laws of the United States.We may be adversely impacted by new or revised tax regulations or their interpretations, or by becoming subject toadditional foreign or U.S. federal, state or local taxes that cannot be passed through to our merchants or partners.We are subject to tax laws in each jurisdiction where we do business. Changes in tax laws or their interpretation coulddecrease the amount of revenues we receive, the value of any tax loss carry-forwards and tax credits recorded on our balancesheet and the amount of our cash flow or net income, and adversely affect our business, financial condition or results ofoperations. In addition, our financial results could be adversely impacted if we become subject to new or additional taxesthat cannot be passed through to our merchants or partners.Recently enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of U.S. corporations,including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing ofcertain capital expenditures, adopting elements of a territorial tax system, imposing a one-time transition tax, or repatriationtax, on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revising the rules governing netoperating losses and the rules governing foreign tax credits, and introducing new anti-base erosion provisions. Many ofthese changes became effective immediately, without any transition periods or grandfathering of existing transactions. Thelegislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well asinterpretations and implementing regulations by the Internal Revenue Service (the “IRS”), any of which could lessen orincrease certain adverse impacts of the legislation. In addition, it is unclear how these changes will affect state and localtaxation, which often use federal taxable income as a starting point for computing state and local tax liabilities. While someof the changes made by the recent tax legislation may adversely affect us in one or more reporting periods andprospectively, other changes may be beneficial on a going forward basis.38 Table of ContentsIn addition to changes in tax regulations or interpretations, our future effective tax rates could be subject to volatility oradversely affected by a number of factors, including:·allocation of expenses to and among different jurisdictions;·changes in the valuation of our deferred tax assets and liabilities;·expected timing and amount of the release of any tax valuation allowances;·tax effects of stock-based compensation; and·mix of future earnings and tax liabilities recognized in foreign jurisdictions at varying rates versus U.S. federal, stateand local income taxes.In addition, we may be subject to audits of our income, sales and other taxes by U.S. federal, state and local as well asforeign taxing authorities. Outcomes from these audits could have an adverse effect on our operating results and financialcondition.Failure to comply with, or changes in, laws, regulations and enforcement activities may adversely affect the products,services and markets in which we operate.We and our merchants are subject to laws and regulations that affect the electronic payments industry in the many countriesin which our services are used. In particular, our merchants are subject to numerous laws and regulations applicable tobanks, financial institutions and card issuers in the United States and abroad, and, consequently, we are at times affected bythese foreign, federal, state, and local laws and regulations. In addition, the U.S. government has increased its scrutiny of anumber of credit card practices from which some of our merchants derive significant revenue. Regulation of the paymentsindustry, including regulations applicable to us and our merchants, has also increased significantly in recent years.We are also subject to U.S. and international financial services regulations, a myriad of consumer protection laws,including economic sanctions, laws and regulations, anticorruption laws, escheat regulations and privacy and informationsecurity regulations. In addition, certain of our alliance partners are subject to regulation by federal and state authoritiesand, as a result, could pass through some of those compliance obligations to us, which could adversely affect our business,financial condition or results of operations.In particular, the Dodd-Frank Act has significantly changed the U.S. financial regulatory system. Under the Dodd-FrankAct, the Federal Reserve Board regulates debit interchange transaction fees. In addition, Title X of the Dodd- Frank Actestablished the CFPB to regulate consumer financial products and services. The CFPB enforces prohibitions against unfair,deceptive or abusive acts or practices under the Dodd-Frank Act and may have authority over us as a provider of servicesto regulated financial institutions in connection with consumer financial products. The CFPB rules, examinations andenforcement actions may require us to adjust our activities and may increase our compliance costs. Separately, the Dodd-Frank Act restricts card network exclusivity arrangements and transaction routing requirements and limits the ability ofcard networks to impose certain restrictions on merchants. Failure to comply with laws and regulations could damage our reputation, result in the suspension or revocation oflicenses and registrations, and subject us to enforcement or criminal actions or penalties, including fines. Any of theforegoing could adversely affect our ability to operate our business, our financial condition or results of operations.Changes to regulations that are applicable to us, our merchants or the card networks could require us to make capitalinvestments to modify our processes or services and could reduce the fees we are able to charge our merchants. Regulationscould also result in greater pricing transparency and increased price-based competition leading to lower margins andhigher rates of merchant attrition. Furthermore, any regulatory change that results in modifications to our merchants’business practices could change the demand for our services and alter the type or volume of transactions39 Table of Contentsthat we process on behalf of our merchants. Any of the foregoing could adversely impact our business, financial conditionor results of operations.From time to time we are subject to various legal proceedings which could adversely affect our business, financialcondition or results of operations.We are involved in various litigation matters. We are also involved in, or are the subject of, governmental or regulatoryagency inquiries or investigations and make voluntary self-disclosures to government or regulatory agencies from time totime. Our insurance or indemnities may not cover all claims that may be asserted against us and any claims asserted againstus, regardless of merit or eventual outcome, may harm our reputation. If we are unsuccessful in our defense in theselitigation matters, or any other legal proceeding, we may be forced to pay damages or fines, enter into consent decrees orchange our business practices, any of which could adversely affect our business, financial condition or resultsof operations.In particular, in May 2017 an indictment by a grand jury in the U.S. District Court for the Southern District of New Yorkwas unsealed. The indictment charges two former managers—the chief executive officer and a senior sales person—of oneof our U.S. subsidiaries with mail fraud, wire fraud and conspiracy to commit mail fraud and wire fraud based on allegationsthat the managers were engaged in a scheme to overbill the subsidiary’s customers. We are not named in the indictment andare not suspected of wrongdoing. In addition, the indictment alleges that the managers actively concealed the fraudulentscheme from us, including by deceiving our internal credit and risk auditors who reviewed certain of the subsidiary’s salesand billing procedures. In January 2019, the former senior sales person of our subsidiary pled guilty to one count ofconspiracy to commit mail fraud and wire fraud in connection with the allegations set forth in the indictment. The trial forthe former chief executive officer of the subsidiary is currently scheduled for April 2019.We initially acquired an interest in this subsidiary in 2009, and the subsidiary operated its business independently sincethat time. Immediately upon learning of the investigation in July 2015, we shifted control of the subsidiary’s ongoingoperations to EVO senior management, terminated all employees (including all management) of the subsidiary, and haveactively worked to remedy any misconduct that is the subject of the investigation and charges. We are not currently a focusof any investigation or proceeding relating to this matter and are cooperating fully with the U.S. Attorney’s Office handlingthe matter. Although we are not currently the target of any investigation or proceeding relating to this matter, we may in thefuture be subject to investigation, legal proceedings or enforcement actions due to our ownership and control of thissubsidiary. Any such investigation, legal proceeding or enforcement action may result in payments, fines, activityrestrictions, or liabilities, any of which may materially and adversely affect our financial condition, results of operations orliquidity. In addition, our continued cooperation with the current investigation and criminal charges, or any futureinvestigation, legal proceeding or enforcement action relating to this matter, may divert management’s attention from theoperation of our business.Risks related to our organizational structureOur principal asset is our interest in EVO, LLC, and, as a result, we depend on distributions from EVO, LLC to pay ourtaxes and expenses, including payments under the tax receivable agreement with the Continuing LLC Owners (the“TRA”). EVO, LLC’s ability to make such distributions may be subject to various limitations and restrictions.We are a holding company and have no material assets other than our ownership of LLC Interests. As such, we have noindependent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses or declareand pay dividends in the future, if any, will be dependent upon the financial results and cash flows of EVO, LLC and itssubsidiaries and distributions we receive from EVO, LLC. There can be no assurance that our subsidiaries will generatesufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negativecovenants in our debt instruments, will permit such distributions. Although EVO, LLC is not currently subject to any debtinstruments or other agreements that would restrict its ability to make distributions to EVO, Inc., the terms of our SeniorSecured Credit Facilities restrict the ability of our subsidiary, EVO Payments International, LLC, and certain of itssubsidiaries to pay dividends to EVO, LLC.40 Table of ContentsEVO, LLC will continue to report as a partnership for U.S. federal income tax purposes and, as such, will not be subject to anyentity-level U.S. federal income tax. Instead, any taxable income of EVO, LLC will be allocated to holders of LLC Interests,including us. Accordingly, we will incur income taxes on our allocable share of any net taxable income of EVO, LLC. Underthe terms of its limited liability company agreement, EVO, LLC will be obligated to make tax distributions to holders of LLCInterests, including us. In addition to tax expenses, we will also incur expenses related to our operations, including paymentsunder the TRA, which we expect could be significant. We intend, as its managing member, to cause EVO, LLC to make cashdistributions to the owners of LLC Interests in an amount sufficient to (1) fund all or part of their tax obligations in respect oftaxable income allocated to them and (2) cover our operating expenses, including payments under the TRA. However, EVO,LLC’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions ondistributions that would violate applicable law or any agreement to which EVO, LLC is then a party, including debtagreements, or that would have the effect of rendering EVO, LLC insolvent. If we do not have sufficient funds to pay taxes orother liabilities or to fund our operations, we may have to borrow funds, which could materially and adversely affect ourliquidity and financial condition and subject us to various restrictions imposed by lenders. To the extent we are unable tomake timely payments under the TRA for any reason, such payments generally will be deferred and will accrue interest untilpaid; provided, however, that nonpayment for a specified period may constitute a material breach that would acceleratepayments due under the TRA. In addition, if EVO, LLC does not have sufficient funds to make distributions, our ability todeclare and pay cash dividends will also be restricted or impaired. See “—Risks related to ownership of our Class A commonstock” and “Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of EquitySecurities—Dividend policy.”The TRA requires us to make cash payments to the Continuing LLC Owners in respect of certain tax benefits to which wemay become entitled, and we expect that those payments will be substantial.Under the TRA, we are required to make cash payments to the Continuing LLC Owners equal to 85% of the tax benefits, ifany, that we actually realize, or in certain circumstances are deemed to realize, as a result of (1) the increases in our share ofthe tax basis of assets of EVO, LLC resulting from any purchases or redemptions of LLC Interests from the Continuing LLCOwners and (2) certain other tax benefits related to our making payments under the TRA. We expect that the amount of thecash payments required under the TRA will be significant. Any payments made by us to the Continuing LLC Owners underthe TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us. Furthermore,our future obligation to make payments under the TRA could make us a less attractive target for an acquisition, particularlyin the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the TRA.The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including thetiming of redemptions or exchanges by the holders of LLC Interests, the amount of gain recognized by such holders of LLCInterests, the amount and timing of the taxable income allocated to us or otherwise generated by us in the future, and thefederal tax rates then applicable.Our organizational structure, including the TRA, confers certain benefits upon the Continuing LLC Owners that do notbenefit holders of our Class A common stock to the same extent that they benefit the Continuing LLC Owners.Our organizational structure, including the TRA, confers certain benefits upon the Continuing LLC Owners that do notbenefit the holders of our Class A common stock to the same extent, such as the payment by EVO, Inc. to the ContinuingLLC Owners of 85% of the amount of certain tax benefits, discussed above. Although EVO, Inc. retains 15% of the amount ofsuch tax benefits, this and other aspects of our organizational structure that benefit the Continuing LLC Owners mayadversely impact the future trading market for the Class A common stock.In certain cases, payments under the TRA to the Continuing LLC Owners may be accelerated or significantly exceed anyactual benefits we realize in respect of the tax attributes subject to the TRA.The TRA provides that, upon certain mergers, asset sales, business combinations or changes of control transactions, or theearly termination of the TRA at our election, payments to the Continuing LLC Owners under the TRA are based on certainassumptions, including an assumption that we will have sufficient taxable income to fully utilize the potential future taxbenefits that are subject to the TRA.41 Table of ContentsAs a result, (1) we could be required to make payments under the TRA that are greater than the specified percentage of anyactual tax benefits we ultimately realize and (2) if we elect to terminate the TRA early, we would be required to make animmediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the TRA,based on certain assumptions, which payment may occur significantly in advance of the actual realization of such future taxbenefits, if any. In these situations, our obligations under the TRA could have a substantial negative impact on our liquidityand could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of businesscombinations or other changes of control. There can be no assurance that we will be able to fund or finance our obligationsunder the TRA.We will not be reimbursed for any payments made to the Continuing LLC Owners under the TRA in the event that any taxbenefits are disallowed.Payments under the TRA will be based on the tax reporting positions that we determine. The IRS or another tax authoritymay challenge all or part of the tax basis increases or other tax benefits we claim, as well as other related tax positions wetake, and a court could sustain such challenge. If the outcome of any such challenge would reasonably be expected tomaterially affect a recipient’s payments under the TRA, then we will not be permitted to settle or fail to contest suchchallenge without the consent (not to be unreasonably withheld or delayed) of each Continuing LLC Owner that owns atleast 10% of the outstanding LLC Interests. The interests of the Continuing LLC Owners in any such challenge may differfrom or conflict with our interests or the interests of holders of our Class A common stock and therefore the exercise of theirconsent rights may be adverse to our interests and the interests of holders of our Class A common stock. We will not bereimbursed for any cash payments previously made to the Continuing LLC Owners under the TRA in the event that any taxbenefits initially claimed by us and for which payment has been made to a Continuing LLC Owner are subsequentlychallenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to aContinuing LLC Owner will be netted against any future cash payments that we might otherwise be required to make to suchContinuing LLC Owner under the terms of the TRA. However, we may not determine that we have effectively made an excesscash payment to a Continuing LLC Owner for a number of years following the initial time of such payment and, if any of ourtax reporting positions are challenged by a taxing authority, we will not be permitted to reduce any future cash paymentsunder the TRA until any such challenge is finally settled or determined. Moreover, the excess cash payments we previouslymade under the TRA could be greater than the amount of future cash payments against which we would otherwise bepermitted to net such excess. As a result, payments could be made under the TRA significantly in excess of any tax savingsthat we realize in respect of the tax attributes with respect to a Continuing LLC Owner that are the subject of the TRA.If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940Act”), as a result of our ownership of EVO, LLC, applicable restrictions could make it impractical for us to continue ourbusiness as contemplated and could have a material adverse effect on our business.Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” forpurposes of the 1940 Act if it (1) is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in thebusiness of investing, reinvesting or trading in securities or (2) engages, or proposes to engage, in the business of investing,reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a valueexceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidatedbasis. We do not believe that we are an “investment company,” as such term is defined under the 1940 Act.As the sole managing member of EVO, LLC, we control and operate EVO, LLC. On that basis, we believe that our interest inEVO, LLC is not an “investment security” as that term is used in the 1940 Act. However, if we were to cease participation inthe management of EVO, LLC, our interest in EVO, LLC could be deemed an “investment security” for purposes of the 1940Act.We and EVO, LLC intend to conduct our operations so that we will not be deemed an investment company. However, if wewere to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capitalstructure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplatedand could have a material adverse effect on our business.42 Table of ContentsRisks related to ownership of our Class A common stockThe Continuing LLC Owners have significant influence over us, including control over decisions that require theapproval of stockholders.The Continuing LLC Owners control a majority of the voting power represented by all our outstanding classes of stock. As aresult, the Continuing LLC Owners exercise significant influence over all matters requiring stockholder approval, includingthe election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions,and will continue to have significant control over our management and policies. Four members of our board of directors areContinuing LLC Owners or are affiliated with our Continuing LLC Owners. The Continuing LLC Owners can take actionsthat have the effect of delaying or preventing a change of control of us or discouraging others from making tender offers forour shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even ifother stockholders oppose them. In addition, the concentration of voting power with the Continuing LLC Owners may havean adverse effect on the price of our Class A common stock and the interests of the Continuing LLC Owners may not beconsistent with the interests of our Class A stockholders.Certain provisions of Delaware law and antitakeover provisions in our organizational documents could delay or preventa change of control.Certain provisions of Delaware law and our amended and restated certificate of incorporation and amended and restatedbylaws may have an antitakeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attemptor other change of control transaction that a stockholder might consider in its best interest, including those attempts thatmight result in a premium over the market price for the shares held by our stockholders. These provisions provide for, amongother things:·a multi-class common stock structure;·a classified board of directors with staggered three-year terms;·the ability of our board of directors to issue one or more series of preferred stock;·advance notice for nominations of directors by stockholders and for stockholders to include matters to be consideredat our annual meetings;·certain limitations on convening special stockholder meetings;·a prohibition on cumulative voting in the election of directors;·the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% of thevoting power represented by our then-outstanding common stock; and·amendment of certain provisions of our certificate of incorporation only by the affirmative vote of at least 66 2/3%of the voting power represented by our then-outstanding common stock.These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer was consideredbeneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium fortheir shares.In addition, we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), but ouramended and restated certificate of incorporation provides that engaging in any of a broad range of business combinationswith any “interested” stockholder (any stockholder with 15% or more of our voting stock) for a period of three yearsfollowing the date on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions.43 Table of ContentsThe JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations intended toprotect investors and to reduce the amount of information we provide in our reports filed with the SEC. We cannot becertain if this reduced disclosure will make our Class A common stock less attractive to investors.The JOBS Act is intended to reduce the regulatory burden on “emerging growth companies.” As defined in the JOBS Act, apublic company whose initial public offering of common equity securities occurs after December 8, 2011 and whose annualgross revenues are less than $1.07 billion will, in general, qualify as an “emerging growth company” until the earliest of:·the last day of its fiscal year following the fifth anniversary of the date of its initial public offering of commonequity securities;·the last day of its fiscal year in which it has annual gross revenue of $1.07 billion or more;·the date on which it has, during the previous three-year period, issued more than $1.00 billion in nonconvertibledebt; and·the date on which it is deemed to be a “large accelerated filer,” which will occur at such time as the company (1) hasan aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more asof the last business day of its most recently completed second fiscal quarter, (2) has been required to file annual andquarterly reports under the Exchange Act for a period of at least 12 months, and (3) has filed at least one annualreport pursuant to the Exchange Act.Under this definition, we are an “emerging growth company” and could remain an “emerging growth company” until as lateas December 31, 2023. For so long as we are an “emerging growth company,” we will, among other things:·not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act;·not be required to hold a nonbinding advisory stockholder vote on executive compensation pursuant to Section14A(a) of the Exchange Act;·not be required to seek stockholder approval of any golden parachute payments not previously approved pursuantto Section 14A(b) of the Exchange Act;·be exempt from any rule adopted by the Public Company Accounting Oversight Board, requiring mandatory auditfirm rotation or a supplemental auditor discussion and analysis; and·be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxystatements.In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition periodprovided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits anemerging growth company to delay the adoption of certain accounting standards until those standards would otherwiseapply to private companies. We have elected to use this extended transition period and, as a result, our consolidated financialstatements may not be comparable to the financial statements of issuers who are required to comply with the effective datesfor new or revised accounting standards that are applicable to public companies.We cannot predict if investors will find our Class A common stock less attractive as a result of the reduced disclosurerequirements above. If some investors find our Class A common stock less attractive as a result, there may be a less activetrading market for our Class A common stock and our stock price may be more volatile.44 Table of ContentsBecause we have no current plans to pay regular cash dividends on our Class A common stock, you may not receive anyreturn on investment unless you sell your Class A common stock for a price greater than that which you paid for it.We do not anticipate paying any regular cash dividends on our Class A common stock. Any decision to declare and paydividends in the future will be made at the discretion of our board of directors and will depend on, among other things, ourresults of operations, financial condition, cash requirements, contractual restrictions and other factors that our board ofdirectors may deem relevant. In addition, our ability to pay dividends is, and may be, limited by covenants of existing andany future outstanding indebtedness we or our subsidiaries incur, including under our existing Senior Secured CreditFacilities. Therefore, any return on investment in our Class A common stock is solely dependent upon the appreciation of theprice of our Class A common stock on the open market, which may not occur.Our amended and restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chanceryof the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limitour stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees orstockholders.Our amended and restated certificate of incorporation provides, subject to limited exceptions, that unless we consent to theselection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law,be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of our Company, (2) claim ofbreach of a fiduciary duty owed by any director, officer, employee or stockholder to the Company or the Company’sstockholders, (3) claim against the Company or any director or officer of the Company arising pursuant to any provision ofthe DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) action asserting aclaim against the Company or any director or officer of the Company governed by the internal affairs doctrine.Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to havenotice of and consented to the forum provisions in our amended and restated certificate of incorporation. This choice offorum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes withus or any of our directors, officers, other employees or stockholders which may discourage lawsuits with respect to suchclaims. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificateof incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolvingsuch action in another jurisdiction, which could adversely affect our business, financial condition or results of operations.We have renounced the doctrine of corporate opportunity to the fullest extent permitted by applicable law.Our amended and restated certificate of incorporation provides that the corporate opportunity doctrine will not apply, to theextent permitted by applicable law, against any of our officers, directors or stockholders or their respective affiliates (otherthan those officers, directors, stockholders or affiliates acting in their capacity as our employee or director) in a manner thatwould prohibit them from investing or participating in competing businesses. To the extent any of our officers, directors orstockholders or their respective affiliates invest in such other businesses, they may have differing interests than our otherstockholders. For example, subject to any contractual limitations, our officers, directors or stockholders or their respectiveaffiliates’ funds may currently invest, and may choose in the future to invest, in other companies within the electronicpayments industry which may compete with our business. Accordingly, in certain circumstances, the interests of our officers,directors or stockholders or their respective affiliates may compete against us or pursue opportunities instead of us, for whichwe have no recourse. These actions on the part of our officers, directors or stockholders or their respective affiliates couldadversely impact our business, financial condition or results of operations.If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector,the price and trading volume of our Class A common stock could decline.The trading market for our Class A common stock relies, in part, on the research and reports that industry or financial analystspublish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts45 Table of Contentswho cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate orunfavorable research about our business, the price of our stock could decline. If one or more of these analysts stops coveringus or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause the stock priceor trading volume of our Class A common stock to decline.As a public reporting company, we are subject to rules and regulations established from time to time by the SEC andNasdaq regarding our internal control over financial reporting. If we fail to establish and maintain effective internalcontrol over financial reporting and disclosure controls and procedures, we may not be able to accurately report ourfinancial results, or report them in a timely manner.We are a public reporting company subject to the rules and regulations established from time to time by the SEC and Nasdaq.These rules and regulations require, among other things, that we establish and periodically evaluate procedures with respectto our internal control over financial reporting. Public company reporting obligations place a considerable burden on ourfinancial and management systems, processes and controls, as well as on our personnel.In addition, as a public company we will be required to document and test our internal control over financial reportingpursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internalcontrol over financial reporting by the time our second annual report is filed with the SEC and thereafter, which will requireus to document and make significant changes to our internal control over financial reporting. Likewise, our independentregistered public accounting firm will be required to provide an attestation report on the effectiveness of our internal controlover financial reporting at such time as we cease to be an “emerging growth company,” as defined in the JOBS Act, and webecome an accelerated or large accelerated filer although, as described above, we could potentially qualify as an “emerginggrowth company” until as late as December 31, 2023.We expect to incur costs related to implementing an internal audit and compliance function in the upcoming years to furtherimprove our internal control environment. If we identify deficiencies in our internal control over financial reporting or if weare unable to comply with the requirements applicable to a public company, including the requirements of Section 404 of theSarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within thetimeframes required by the SEC. If this occurs, we could become subject to sanctions or investigations by the SEC or otherregulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or ifour independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internalcontrol over financial reporting, or express an adverse opinion, investors may lose confidence in the accuracy andcompleteness of our financial reports, we may face restricted access to the capital markets and the market price for our Class Acommon stock may be adversely affected.Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause themarket price for our Class A common stock to decline.The sale of a significant amount of shares of our Class A common stock in the public market, or the perception that such salescould occur, could harm the prevailing market price of shares of our Class A common stock. These sales, or the possibilitythat these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at aprice that we deem appropriate.As part of the Reorganization Transactions, the Continuing LLC Owners received certain sale and exchange rights.Specifically, Blueapple has a sale right providing that, upon our receipt of a sale notice from Blueapple, we will use ourcommercially reasonable best efforts to pursue a public offering of shares of our Class A common stock and use the netproceeds therefrom to purchase LLC Interests from Blueapple. In addition, pursuant to an exchange agreement (the“Exchange Agreement”) each Continuing LLC Owner (other than Blueapple) has an exchange right providing that, uponreceipt of an exchange notice from such Continuing LLC Owner, we will exchange the applicable LLC Interests from suchContinuing LLC Owner for newly issued shares of our Class A common stock on a one-for-one basis. Each Continuing LLCOwner (other than Blueapple) also received certain registration rights pursuant to a registration rights agreement, includingcustomary piggyback registration rights, which include the right to participate on a pro rata basis in any public offering weconduct in response to our receipt of a sale notice from Blueapple. In addition, MDP received customary demand registrationrights that require us to register shares of Class A common stock held by it, including any Class A46 Table of Contentscommon stock received upon our exchange of Class A common stock for its LLC Interests. Blueapple has the right, inconnection with any public offering we conduct (including any offering conducted as a result of an exercise by MDP of itsregistration rights), to request that we use our commercially reasonable best efforts to pursue a public offering of shares of ourClass A common stock and use the net proceeds therefrom to purchase a pro rata portion of its LLC Interests. The marketprice of shares of our Class A common stock could decline, potentially significantly, if any of these stockholders exercisetheir registration, sale or exchange rights. In the future, we may also issue securities in connection with investments, acquisitions or capital raising activities. Inparticular, the number of shares of our Class A common stock issued in connection with an investment or acquisition, or toraise additional equity capital, could constitute a material portion of our then-outstanding shares of our Class A commonstock. In addition, we have reserved over 7 million shares of Class A common stock for issuance under our 2018 OmnibusEquity Incentive Plan (the “2018 Plan”) to our employees, directors, officers and consultants. Any issuance of additionalsecurities in the future may result in additional dilution to the holders of our Class A common stock or may adversely impactthe price of our Class A common stock.The market price for our Class A common stock may change significantly, and holders of our Class A common stock maynot be able to resell shares at or above the price they paid or at all.It is possible that an active trading market for our Class A common stock will not be sustained, which could make it difficultfor holders of our Class A common stock to sell their shares at an attractive price or at all. In addition, volatility in the marketprice of our Class A common stock may prevent shareholders from selling shares of our Class A common stock at or abovethe price they paid for them. Many factors, which are outside our control, may cause the market price of our Class A commonstock to fluctuate significantly, including those described elsewhere in this “Risk Factors” section and elsewhere in thisAnnual Report on Form 10-K, as well as the following: ·results of operations that vary from those of our competitors or the expectations of securities analysts and investors;·changes in expectations as to our future financial performance, including financial estimates and investmentrecommendations by securities analysts and investors;·technology changes, changes in consumer behavior or changes in merchant relationships in our industry;·security breaches related to our systems or those of our merchants, affiliates or strategic partners;·changes in market valuations of, or earnings and other announcements by, companies in our industry;·declines in the market prices of stocks generally, particularly those of global payment companies;·announcements by us, our competitors or our strategic partners of significant contracts, new products, acquisitions,joint marketing relationships, joint ventures, other strategic relationships or capital commitments;·changes in business, regulatory, economic or market conditions affecting our industry or the economy as a wholeand, in particular, in the consumer spending environment;·investor perceptions of the investment opportunity associated with our Class A common stock relative to otherinvestment alternatives;·announcements relating to litigation or governmental investigations;·guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance;·the development and sustainability of an active trading market for our Class A common stock;·changes in accounting principles; and47 Table of Contents·other events or factors, including those resulting from system failures and disruptions, natural disasters, war, acts ofterrorism or responses to these events.Furthermore, the stock market may experience extreme volatility that, in some cases, may be unrelated or disproportionate tothe operating performance of particular companies. These broad market and industry fluctuations may adversely affect themarket price of our Class A common stock, regardless of our actual operating performance. In addition, price volatility maybe greater if the public float and trading volume of our Class A common stock is low. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES We are headquartered in Atlanta, Georgia. Our other principal operations are located in Melville, New York; Portland, Maine;Addison, Texas; Denver, Colorado; Tampa, Florida; Edison, New Jersey; Cincinnati, Ohio; Omaha, Nebraska; Dublin,Ireland; Cologne, Germany; Madrid, Spain; Prague, Czech Republic; Mexico City, Mexico; Malta; Gibraltar; Montreal,Canada and Warsaw, Poland. We lease all of the real property used in our business. The following table lists each of our material facilities and its location,use and approximate square footage. Facility Use Approximate Size (Square Feet)United States Addison, Texas Operations and customer support 74,000Melville, New York North America headquarters 65,000Portland, Maine Operations and customer support 56,000Tampa, Florida Integrated solutions development and support 43,000Edison, New Jersey Data center 19,000Cincinnati, Ohio Business-to-business solutions developmentand support 15,000Atlanta, Georgia Global headquarters 12,000Denver, Colorado Integrated solutions development and support 9,000 International Warsaw, Poland Sales, operations and customer support 40,000Cologne, Germany Sales, operations and customer support 16,000Dublin, Ireland Sales, operations and customer support 13,000Montreal, Canada Sales, operations and customer support 11,000Mexico City, Mexico Sales, operations and customer support 7,000Madrid, Spain Sales, operations and customer support 7,000Prague, Czech Republic Sales and customer support 1,500 We also lease a number of additional facilities, including local sales and other offices. We believe that our facilities aresuitable and adequate for our current business. However, we periodically review our space requirements and may acquire newspace to meet the needs of our businesses or consolidate and dispose of or sublet facilities which are no longer required. ITEM 3. LEGAL PROCEEDINGS The Company is party to various claims and lawsuits incidental to its business. The Company does not believe the ultimateoutcome of such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financialposition, results of operations or cash flows.48 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES Market information Our Class A common stock is traded on the Nasdaq under the symbol “EVOP.” There is currently no established publictrading market for our Class B common stock, Class C common stock or Class D common stock. Holders There were approximately 8 stockholders of record of our Class A common stock, 1 stockholder of record of our Class Bcommon stock, 7 stockholders of record of our Class C common stock and 13 stockholders of record of our Class D commonstock as of January 31, 2019. The number of beneficial owners of our Class A common stock is substantially greater than thenumber of record holders because a large portion of our Class A common stock is held in “street name” by banks and brokers. Issuer purchases of equity securities In connection with the vesting of restricted stock awards, shares of Class A common stock are delivered to the Company byemployees to satisfy tax withholding obligations. The following table summarizes such purchases of Class A common stockfor the year ended December 31, 2018: Total Number of Shares Purchased asPart of Publicly Approximate Dollar Value of Shares Total Number Average Price Announced that May Yet Be Purchased Under of Shares Paid per Plans or the Plans or ProgramsPeriod Purchased Share Programs (in millions) May 1, 2018 to May 31, 2018 52,476 $16.00 — $ —June 1, 2018 to June 30, 2018 451 $22.70 — $ —October 1, 2018 to October 31, 2018 702 $23.19 — $ —November 1, 2018 to November 30,2018 410 $27.29 — $ —December 1, 2018 to December 31,2018 259 $24.38 — $ — (1)Shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of restrictedstock awards issued to employees.49 (1) Table of ContentsDividend policy Since the IPO, we have not declared or paid any cash dividends on our common stock, and we have no current plan to do so.Because a significant portion of our operations is through our subsidiaries, our ability to pay dividends depends in part onour receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as aresult of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants under any existing andfuture outstanding indebtedness we or our subsidiaries incur. The terms of our Senior Secured Credit Facilities restrict theability of EVO Payments International, LLC (“EPI”), controlled subsidiary of EVO, Inc. and certain of its subsidiaries frompaying dividends to EVO, LLC. In addition, our ability to pay dividends may also be restricted by the terms of any futurecredit agreement or any future debt or preferred equity securities of us or our subsidiaries. Recent sales of unregistered securities There were no unregistered sales of equity during the year ended December 31, 2018, except as otherwise previously reportedand for shares of Class A common stock issued to the Continuing LLC Owners in satisfaction of the exchange rights grantedto them in connection with the IPO. From time to time following the IPO, the Continuing LLC Owners (other than Blueapple) have the right to require us toexchange all or a portion of their LLC Interests and related shares of Class C common stock or Class D common stock fornewly-issued shares of Class A common stock on a one-for-one basis, with their shares of Class C common stock or Class Dcommon stock, as applicable, being cancelled upon any such exchange. We may, under certain circumstances, elect toredeem the LLC Interests from any exchanging holder under the EVO LLC Agreement in lieu of any such exchange. Equity compensation plan information For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12,“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Stock performance graph The following graph compares the total shareholder return from May 23, 2018, the date on which our Class A common sharescommenced trading on the Nasdaq, through December 31, 2018 of (i) our Class A common stock, (ii) the Standard and Poor's500 Stock Index (“S&P 500 Index”) and (iii) the Standard and Poor's 500 Information Technology Index (“S&P InformationTechnology”). The table assume an initial investment of $100 on May 23, 2018. The performance graph and table are not intended to be indicative of future performance. The performance graph and tableshall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities50 Table of ContentsExchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to beincorporated by reference into any of the Company’s filings under the Securities Act of 1933 or the Exchange Act. May 23,2018 June 30,2018 September 30,2018 December 31,2018EVO Payments, Inc. $100.00 $108.20 $125.66 $129.71S&P 500 Index 100.00 99.45 106.61 91.72S&P Information Technology 100.00 99.57 108.02 88.92 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected historical consolidated financial data for the periods beginning on and after January 1,2016. EVO Payments, Inc. was formed on April 20, 2017 and, prior to the consummation of the Reorganization Transactionsand our IPO, did not conduct any activities other than those incident to its formation and the IPO. Our consolidated financialstatements reflect, for all the periods prior to May 23, 2018, the operations of EVO, LLC and its consolidated subsidiaries,and for all periods on or after May 23, 2018, the operations of the Company and its consolidated subsidiaries (includingEVO, LLC). The consolidated statements of operations data for the years ended December 31, 2018, 2017, and 2016 andconsolidated balance sheet data as of December 31, 2018 and 2017 have been derived from our consolidated financialstatements included elsewhere in this Form 10-K. 51 Table of ContentsThe following selected historical financial and other data should be read in conjunction with “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and our respective consolidated financial statements and thenotes to the accompanying consolidated financial statements included elsewhere in this Form 10-K. Year Ended December 31, 2018 2017 2016Statement of operations data: Revenue $ 564,754 $ 504,750 $ 419,221(Loss) income from operations (37,785) 45,163 40,352Net (loss) income (98,850) (32,348) 57,451Net (loss) attributable to EVO Payments, Inc. (14,712) Per share data: Earnings per share Basic $(0.70) Diluted (0.70) Balance sheet data: Total assets $1,534,387 $1,508,298 Settlement lines of credit 41,819 28,563 Total debt 697,041 855,633 Total deficit (862,682) (166,531) 52 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS Introduction This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) is intended toprovide an understanding of our financial condition, changes in financial condition, cash flow, liquidity and results ofoperations. This MD&A should be read in conjunction with our consolidated financial statements and the notes to theaccompanying consolidated financial statements appearing elsewhere in this Form 10-K and the Risk Factors included inPart I, Item 1A of this Form 10-K, as well as other cautionary statements and risks described elsewhere in this Form 10-K. The following discussion and analysis reflects the historical results of operations and financial position of EVO, LLC andits consolidated subsidiaries prior to the Reorganization Transactions and that of EVO, Inc. and its consolidatedsubsidiaries (including EVO, LLC) following the completion of the Reorganization Transactions. The historical results ofoperations and financial condition of EVO, LLC prior to the completion of the Reorganization Transactions, including theIPO, do not reflect certain items that affected our results of operations and financial condition after giving effect to theReorganization Transactions and the use of proceeds from the IPO. Overview We are a leading payments technology and services provider offering an array of payment solutions to merchants rangingfrom small and mid-size enterprises to multinational companies and organizations across North America and Europe. As afully integrated merchant acquirer and payment processor in over 50 markets and 150 currencies worldwide, we providecompetitive solutions that promote business growth, increase customer loyalty and enhance data security in the markets weserve. Executive overview ·Revenue for the year ended December 31, 2018 increased 11.9% to $564.8 million from $504.8 million in 2017,driven by an 18.7% increase in Europe segment revenue and a 7.2% increase in North America segment revenue.·North America segment profit for the year ended December 31, 2018 was $85.4 million, 3.2% higher than the yearended December 31, 2017.·Europe segment profit for the year ended December 31, 2018 was $61.2 million, 11.6% higher than the year endedDecember 31, 2017. Recent acquisitions See Note 4, “Acquisitions” in the notes to the accompanying consolidated financial statements for further information aboutrecent acquisitions. Our segments We classify our business into two segments: North America and Europe. The alignment of our segments is designed toestablish lines of business that support the geographical markets in which we operate and allow us to further globalize oursolutions while working seamlessly with our teams across these markets. Both segments provide businesses with merchantacquiring solutions, including integrated solutions for retail transactions at physical business locations, as well aseCommerce and mobile transactions. 53 Table of ContentsThe business segment measurements provided to and evaluated by the segment leaders are computed in accordance with theprinciples listed below: ·The accounting policies of the operating segments are the same as those described in the summary of the significantaccounting policies. ·Segment profit, which is the measure used by our chief operating decision maker to evaluate the performance of andto allocate resources to our segments, is calculated as segment revenue less (1) segment expenses, plus (2) segmentincome from unconsolidated investees, plus (3) segment other income, net, less (4) segment non-controllinginterests. Certain corporate-wide governance functions, as well as depreciation and amortization, are not allocated toour segments. North America Our North America segment is comprised of the United States, Canada and Mexico. We distribute our products and servicesthrough a combination of bank referrals, a direct sales force, specialized integrated solution companies, sales agents andISOs. Europe Our Europe segment is comprised of Western Europe (Spain, United Kingdom, Ireland, Germany and Malta) and EasternEurope (Poland and the Czech Republic). We distribute our products and services through a combination of bank referrals, adirect sales force, specialized integrated solution companies and ISOs. We also provide ATM processing services to afinancial institution and third-party ATM providers. Key financial definitions Revenue consists primarily of fees derived from the monetary value of and number of transactions processed for ourmerchants, as defined through contractual agreements with the merchants. We also receive revenues related to other fees forcertain services and products. We follow guidance provided in Accounting Standards Codification (“ASC”) 605-45, Principal Agent Considerations,which establishes guidance for whether revenue is recognized based on the gross amount billed to a customer or the netamount retained. Through the evaluation of ASC 605-45, certain revenues are presented net of interchange fees paid to issuers, certain fees andassessments paid to the card networks (e.g., Visa, Mastercard, American Express and Discover), as these costs are controlledby the networks in which we effectively act as a clearing house collecting and remitting fees, and commissions paid to ourdistribution partners. Revenues earned from processing merchant transactions are recognized at the time merchanttransactions are processed. These revenues include a rate charged to the merchant based on the percentage of the value of thetransaction processed, a rate per transaction or some combination thereof. Cost of services and products, exclusive of depreciation and amortization shown separately below consists primarily of feespaid to card networks, front- and back-end fees paid to third-party network service providers and hardware vendors (such asvendors selling terminals or mobile devices) and payments to third parties for other product offerings. These fees arepresented on a gross basis as we contract directly with the end customer, assume the risk of loss and have pricing flexibility.These expenses exclude any depreciation or amortization, which is described below. Selling, general and administrative consists primarily of sales, customer support, advertising and other administrative costs.Sales expenses are comprised of salaries, commissions for internal sales personnel, payroll-related benefits and officeinfrastructure expenses. General and administrative expenses are comprised of compensation, benefits and other expensesassociated with corporate management, finance, human resources, shared services, information technology and otheractivities. 54 Table of ContentsDepreciation and amortization consists of depreciation and amortization expenses related to card processing, officeequipment, computer software, leasehold improvements, furniture and fixtures, merchant contract portfolios, marketingalliance agreements, finite-lived trademarks, internally developed software, and non-competition agreements. Interest income consists of interest earned by investing excess cash balances. Interest expense consists of interest cost incurred from our borrowings and the amortization of financing costs. Income from investment in unconsolidated investees consists of income earned from the investment in businesses in whichwe have a minority ownership stake and under which our share in the investees’ financial results are not consolidated forreporting purposes. Other income consists primarily of other income items not considered part of the normal course of business operations. Income tax (expense) benefit represents federal, state, local and foreign taxes based on income in multiple domestic andforeign jurisdictions. Net income attributable to non-controlling interests arises from net income from the non-owned portion of businesses wherewe have a controlling interest but less than 100% ownership. This represents both the non-controlling interests that areconsolidating entities of EVO, LLC and EVO, LLC non-controlling interests, which is comprised of the income allocated toContinuing LLC Owners as a result of their proportional ownership of LLC Interests. 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 ofadoption of commerce-enablement and payment solutions, acquisitions and dispositions, types and quantities of productsand services provided to enterprises, timing and length of contract renewals, new enterprise wins, retention rates, mix ofpayment solution types employed by consumers, changes in card network fees including interchange rates and size ofenterprises served. In addition, we may pursue acquisitions from time to time. These acquisitions could result in redundantcosts, such as increased interest expense resulting from any indebtedness incurred to finance any acquisitions, or couldrequire us to incur losses 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 revenue as a result of consumerspending patterns. In North America, our revenue has been strongest in our fourth quarter and weakest in our first quarter asmany of our merchant categories experience a seasonal lift during the traditional vacation and holiday months. In Europe,our revenue has been strongest in our third quarter and weakest in our first quarter. Operating expenses do not typicallyfluctuate seasonally. Foreign currency translation impact on our operations Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation onrevenues recognized and expenses incurred by our non-U.S. operations. It is difficult to predict the future fluctuations offoreign currency exchange rates and how those fluctuations will impact our consolidated statements of operations andcomprehensive loss in the future. As a result of the relative size of our international operations, these fluctuations may bematerial on individual balances. Our revenues and expenses from our international operations are generally denominated inthe local currency of the country in which they are derived or incurred. Therefore, the impact of currency fluctuations on ouroperating results and margins is partially mitigated. Key performance indicators “Transactions processed” refers to the number of transactions we processed during any given period of time and is ameaningful indicator of our business and financial performance, as a significant portion of our revenue is driven by the55 Table of Contentsnumber of transactions we process. In addition, transactions processed provides a valuable measure of the level of economicactivity across our merchant base. In our North America segment, transactions include acquired Visa and Mastercard creditand signature debit, American Express, Discover, UnionPay, PIN-debit, electronic benefit transactions and gift cardtransactions. In our Europe segment, transactions include acquired Visa and Mastercard credit and signature debit, other cardnetwork merchant acquiring transactions, and ATM transactions. For the year ended December 31, 2018, we processed more than 950 million transactions in North America andapproximately 2.1 billion transactions in Europe, an aggregate increase of 17.0% December 31, 2017, driven by organicgrowth and the impact of acquisitions. Transactions processed in North America accounted for 31% of the total transactionswe processed in 2018. For the year ended December 31, 2017, we processed more than 900 million transactions in North America andapproximately 1.7 billion transactions in Europe, an aggregate increase of 22.3% compared to the year ended December 31,2016, driven by organic growth and the impact of acquisitions. Excluding the impact of acquisitions, transactions processedgrew 15.5% from 2016 to 2017. Transactions processed in North America accounted for 35% of the total transactions weprocessed in 2017. For the year ended December 31, 2016, we processed more than 760 million transactions in North America andapproximately 1.4 billion transactions in Europe, an aggregate increase of 36.8% compared to the year ended December 31,2015, driven by organic growth and the impact of acquisitions. Excluding the impact of acquisitions, transactions processedgrew 17.2% from 2015 to 2016. Transactions processed in North America accounted for 35% of the total transactions weprocessed in 2016. Comparison of results for the years ended December 31, 2018 and 2017 The following table sets forth the consolidated statements of operations in dollars and as a percentage of revenue for theperiod presented. Year Ended Year Ended (dollar amounts in thousands) December 31, 2018 % of revenue December 31, 2017 % of revenue $ change % changeSegment revenue: North America $ 320,481 56.7% $ 299,034 59.2% $ 21,447 7.2%Europe 244,273 43.3% 205,716 40.8% 38,557 18.7%Revenue $564,754 100.0% $504,750 100.0% $60,004 11.9% Operating expenses: Cost of services and products, exclusive of depreciation and amortization shown separately below $189,375 33.5% $164,480 32.6% $24,895 15.1%Selling, general andadministrative 311,353 55.1% 220,971 43.8% 90,382 40.9%Depreciation and amortization 87,184 15.4% 74,136 14.7% 13,048 17.6%Impairment of intangible assets 14,627 2.6% — 0.0% 14,627 100.0%Total operating expenses 602,539 106.7% 459,587 91.1% 142,952 31.1%Income (loss) from operations $(37,785) (6.7%) $45,163 8.9% $(82,948) (183.7%) Segment profit: North America $85,377 15.1% $82,759 16.4% $2,618 3.2%Europe $61,195 10.8% $54,842 10.9% $6,353 11.6% 56 Table of ContentsRevenue Revenue was $564.8 million for the year ended December 31, 2018, an increase of $60.0 million, or 11.9%, compared torevenue of $504.8 million for the year ended December 31, 2017. This increase was driven primarily by organic growth inour European segment, Mexico and the U.S. Tech-enabled division. North America segment revenue was $320.5 million for the year ended December 31, 2018, an increase of $21.4 million, or7.2%, compared to the year ended December 31, 2017. The increase was driven by organic growth in our U.S. Tech-enableddivision and Mexico. North America transactions increased 4.6% for the year ended December 31, 2018, compared to theyear ended December 31, 2017, primarily driven by organic growth in Mexico, revenue from the acquisition of FederatedPayment Systems, LLC and Federated Payment Canada Corporation (“Federated”) and our U.S. Tech-enabled division,partially offset by declines in transactions in the U.S. Direct and Traditional divisions. Changes in foreign currency exchangerates decreased reported revenue by $2.3 million for the year ended December 31, 2018. Europe segment revenue was $244.3 million for the year ended December 31, 2018, an increase of $38.6 million, or 18.7%,compared to the year ended December 31, 2017, driven by strong growth in Europe transactions. Europe transactionsincreased 23.6%, as compared to the year ended December 31, 2017. Changes in foreign currency exchange rates increasedreported revenue by $9.1 million for the year ended December 31, 2018. Operating expenses Cost of services and products, exclusive of depreciation and amortizationCost of services and products, exclusive of depreciation and amortization, was $189.4 million for the year endedDecember 31, 2018, an increase of $24.9 million, or 15.1%, compared to the year ended December 31, 2017. This increasewas due primarily to the increase in transactions processed and increases in card network fees. Our cost of services andproducts includes both fixed and variable components, with variable components dependent upon transactions processed,among other secondary measures. The increase in cost was due to the variable component from the increase in transactionsprocessed. Selling, general and administrative expensesSelling, general and administrative expenses were $311.4 million for the year ended December 31, 2018, an increase of $90.4million, or 40.9%, compared to the year ended December 31, 2017. The increase was due primarily to share-basedcompensation expense incurred in the current period and other transition, acquisition and integration costs. At the consummation of the IPO and through the year ended December 31, 2018, the Company recognized one-time, non-cash compensation expenses of approximately $51.4 million in connection with (i) the Company waiving all time-based andperformance-based vesting requirements applicable to EVO, LLC’s outstanding unvested Class D units that were reclassifiedas LLC interests and issuing Class C common stock or Class D common stock and (ii) the Company waiving all performance-based vesting and performance-based forfeiture requirements and issuing of shares of Class A common stock to members ofour management and certain of our current and former employees upon conversion of the outstanding unit appreciationawards held by these individuals. We also incurred $4.1 million of compensation expense representing the amountrecognized in connection with the grant of stock options and restricted stock units to our directors, officers and certainemployees in connection with the IPO. We had no such expense for the year ended December 31, 2017. Depreciation and amortizationDepreciation and amortization was $87.2 million for the year ended December 31, 2018, an increase of $13.0 million, or17.6%, compared to the year ended December 31, 2017. This increase was due primarily to purchases of POS terminals tosupport growth in certain of our international markets and other hardware and software purchases as well as the amortizationof intangible assets acquired during the year ended December 31, 2018. Impairment of intangible assetsFor the year ended December 31, 2018, we recognized a non-cash impairment charge of $14.6 million relating to trademarks,indefinite-lived, primarily related to the accelerated integration of the Sterling tradename into the EVO portfolio inNovember 2018.57 Table of Contents Interest expenseInterest expense was $59.8 million for the year ended December 31, 2018, compared to $62.9 million for the year endedDecember 31, 2017. The decrease was due to reductions in borrowings from the use of IPO proceeds raised in the secondquarter of 2018, partially offset by debt extinguishment costs and a prepayment penalty associated with the paydown of thesecond lien term loan. Gain on acquisition of unconsolidated investeeGain on acquisition of unconsolidated investee was $8.4 million for the year ended December 31, 2018, related to the fairvalue mark-up on the acquisition of a previously minority owned subsidiary. Income tax expenseHistorically, as a limited liability company treated as a partnership for U.S. federal income tax purposes, EVO, LLC’s incomewas not subject to corporate tax in the U.S., but only on income earned in foreign jurisdictions. In the U.S., our members weretaxed on their proportionate share of income of EVO, LLC. However, following the Reorganization Transactions, we incurcorporate tax at the U.S. federal income tax rate on our share of taxable income of EVO, LLC. Our income tax expense reflectssuch U.S. federal, state and local income tax as well as taxes payable in foreign jurisdictions by certain of our subsidiaries.Our income tax expense was $10.4 million for the year ended December 31, 2018, compared to income tax expense of $16.6million for the year ended December 31, 2017. Net lossNet loss was $98.9 million for the year ended December 31, 2018, an increase of $66.5 million, compared to net loss of $32.3million for the year ended December 31, 2017. This increase was due to higher selling, general and administrative expenses,primarily due to the impact of share-based compensation, higher professional fees related to integration and acquisitionactivities in the current period, and the $14.6 million impairment of the Sterling trademark in the current period. Thesedrivers in net loss were partially offset by the $8.4 million gain on the acquisition of an unconsolidated investee. Net loss attributable to non-controlling interests of EVO Investco, LLCNet loss attributable to non-controlling interests of EVO Investco, LLC was $90.8 million for the year endedDecember 31, 2018. There was no net loss attributable to non-controlling interests of EVO Investco, LLC for the year endedDecember 31, 2017 as it was prior to the IPO and reorganization activities. Segment performanceNorth America segment profit for the year ended December 31, 2018 was $85.4 million, 3.2% higher than the year endedDecember 31, 2017. The increase is primarily due to organic growth in Mexico and the U.S. Tech-enabled division and theimpact of cost reduction programs in the United States. North America segment profit margin was 26.6% for the year endedDecember 31, 2018, compared to 27.7% for the year ended December 31, 2017. Europe segment profit was $61.2 million for the year ended December 31, 2018, compared to $54.8 million for the yearended December 31, 2017. The increase is primarily due to organic growth and the impact of acquisitions. Europe segmentprofit margin was 25.1% for the year ended December 31, 2018, compared to 26.7% for the year ended December 31, 2017. Corporate expenses not allocated to a segment were $41.4 million for the year ended December 31, 2018, compared to $25.7million for the year ended December 31, 2017. The increase in expense is due to additional public company costs related toinsurance, board of directors fees, certain related party transactions as described in Note 9 “Related Party Transactions” andan increase in consulting and advisor fees, including legal fees. 58 Table of ContentsComparison of results for the years ended December 31, 2017 and 2016 The following table sets forth the consolidated statements of operations in dollars and as a percentage of revenue for theperiod presented. Year Ended Year Ended (dollar amounts in thousands) December 31, 2017 % of revenue December 31, 2016 % of revenue $ change % changeSegment revenue: North America $ 299,034 59.2% $ 241,083 57.5% $ 57,951 24.0%Europe 205,716 40.8% 178,138 42.5% 27,578 15.5%Revenue $504,750 100.0% $419,221 100.0% $85,529 20.4% Operating expenses: Cost of services and products, exclusive of depreciation and amortization shown separately below $164,480 32.6% $140,659 33.6% $23,821 16.9%Selling, general and administrative 220,971 43.8% 174,198 41.6% 46,773 26.9%Depreciation and amortization 74,136 14.7% 64,012 15.3% 10,124 15.8%Total operating expenses 459,587 91.1% 378,869 90.4% 80,718 21.3%Income from operations $45,163 8.9% $40,352 9.6% $4,811 11.9% Segment profit: North America $82,759 16.4% $66,066 15.8% $16,693 25.3%Europe $54,842 10.9% $127,966 30.5% $(73,124) (57.1%) Revenue Revenue was $504.8 million for the year ended December 31, 2017, an increase of $85.5 million, or 20.4%, compared torevenue of $419.2 million for the year ended December 31, 2016. This increase was driven primarily by the inclusion ofrevenue from the Sterling acquisition and organic growth in our Mexico market and European segment. North America segment revenue was $299.0 million for the year ended December 31, 2017, an increase of $58.0 million, or24.0%, compared to the year ended December 31, 2016. The acquisition of the Sterling business on January 4, 2017contributed $50.5 million, while organic growth in our North America sales channels contributed $7.4 million. NorthAmerica transactions increased 17.8% for the year ended December 31, 2017, compared to the year ended December 31,2016, primarily driven by the Sterling acquisition and organic growth in Mexico. Changes in foreign currency exchangerates decreased revenue by $1.2 million. Europe segment revenue was $205.7 million for the year ended December 31, 2017, an increase of $27.6 million, or 15.5%,compared to the year ended December 31, 2016. Europe transactions increased 24.7% from double digit growth across allcountries. The number of transactions processed increased faster than revenue due to certain one-time incentive paymentsreceived in the year ended December 31, 2016. Changes in foreign currency exchange rates increased revenue by $6.7million for the year ended December 31, 2017. Operating expenses Cost of services and products, exclusive of depreciation and amortizationCost of services and products, exclusive of depreciation and amortization was $164.5 million for the year ended December31, 2017, an increase of $23.8 million, or 16.9%, compared to the year ended December 31, 2016. This increase was due tothe increase in transactions processed and the inclusion of costs from Sterling. Our cost of services and products includesboth fixed and variable components, with variable components dependent upon transactions processed, among othersecondary measures. The increase in cost was due to the variable component from the increase in transactions processed andthe inclusion of costs from Sterling.59 Table of Contents Selling, general and administrative expensesSelling, general and administrative expenses was $221.0 million for the year ended December 31, 2017, an increase of $46.8million, or 26.9%, compared to the year ended December 31, 2016. The increase was due primarily to the inclusion ofexpenses from Sterling, severance charges incurred and other strategic investments to support continued growth. Depreciation and amortizationDepreciation and amortization was $74.1 million for the year ended December 31, 2017, an increase of $10.1 million, or15.8%, compared to the year ended December 31, 2016. This increase was due primarily to the inclusion of expenses fromSterling. Interest expenseInterest expense was $62.9 million for the year ended December 31, 2017, an increase of $22.2 million compared to interestexpense of $40.7 million for the year ended December 31, 2016. This increase was due primarily to higher debt balancesrelated to the Sterling acquisition and higher interest rates applicable to the Senior Secured Credit Facilities. Income tax expenseIncome tax expense was $16.6 million for the year ended December 31, 2017, a decrease of $0.4 million, compared to anincome tax expense of $17.0 million for the year ended December 31, 2016. This decrease was due primarily to higherincome before income tax for the prior year period resulting from the one-time gain on the sale of the company’s membershipinterest in Visa Europe. The taxation of this gain was limited due to German tax exemption on a significant majority of thegain on sale. Net lossNet loss was $32.3 million for the year ended December 31, 2017, a decrease of $89.8 million compared to net income of$57.5 million for the year ended December 31, 2016. This decrease was due primarily to the one-time gain on the sale of thecompany’s membership interest in Visa Europe in the prior year period, the increase in operating expenses related to strategicinvestments and the increase in interest expense from higher debt balances related to the Sterling acquisition. Net income attributable to non-controlling interests of EVO Investco, LLCNet loss attributable to the Members of EVO Investco, LLC was $40.2 million for the year ended December 31, 2017,compared to net income of $47.7 million for the year ended December 31, 2016. The decrease was due primarily to the one-time gain on the sale of the company’s membership interest in Visa Europe in the prior year period, the increase in operatingexpenses related to strategic investments and the increase in interest expense from higher debt balances related to theSterling acquisition. Segment performanceNorth America segment profit for the year ended December 31, 2017 was $82.8 million, 25.3% higher than the year endedDecember 31, 2016, primarily due to the inclusion of Sterling results in the current period, organic growth in the Mexicomarket and the impact of cost reduction programs in the United States. North America segment profit margin was 27.7% inthe year ended December 31, 2017, compared to 27.4% for the year ended December 31, 2016. Europe segment profit was $54.8 million for the year ended December 31, 2017, a decrease of $73.1 million compared to theyear ended December 31, 2016. This decrease was driven by the one-time gain on the sale of our Visa Europe membershipinterest in the prior year period. Europe segment profit margin was 26.7% for the year ended December 31, 2017, compared to71.8% for the year ended December 31, 2016. The prior year segment profit margin includes the impact of the one-time gainon sale of our membership interest in Visa Europe and one-time incentive payments received in 2016. The current yearsegment profit margin includes the impact of strategic investments, including additional gateway capabilities acquired withthe purchase of Intelligent Payments Gateway (“IPG”) in December 2016. Corporate expenses not allocated to a segment was $25.7 million for the years ended December 31, 2017, and 2016,respectively. 60 Table of ContentsLiquidity and capital resources 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, capitalexpenditures, working capital and funds required to finance acquisitions. We expect to continue to use capital to innovateand advance our products as new technologies emerge. We expect these strategies to be funded primarily through cash flowfrom operations and borrowings from our Senior Secured Credit Facilities, as needed. Short-term liquidity needs willprimarily be funded through the revolving credit facility portion of our Senior Secured Credit Facilities. As ofDecember 31, 2018, our capacity under the revolving credit facility portion of our Senior Secured Credit Facilities was$200.0 million, with availability of $157.7 million for additional borrowings. To the extent that additional funds arenecessary 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. We have structured our operations in a manner to allow for cash to be repatriated through tax-efficient methods usingdividends from foreign jurisdictions as our main source of repatriation. We follow local government regulations andcontractual restrictions which regulate the nature of cash as well as how much and when dividends can be repatriated. As ofDecember 31, 2018, cash and cash equivalents of $350.7 million includes cash in the United States of $143.7 million and$207.0 million in foreign jurisdictions. Of the foreign cash balances, $31.9 million is available for general purposes. Theremaining $175.1 million is considered settlement and merchant reserves related cash and is therefore unable to berepatriated. We do not intend to pay cash dividends on our Class A common stock in the foreseeable future. EVO, Inc. is a holdingcompany that does not conduct any business operations of its own. As a result, EVO, Inc.’s ability to pay cash dividends onits common stock, if any, is dependent upon cash dividends and distributions and other transfers from EVO, LLC. Theamounts available to EVO, Inc. to pay cash dividends are subject to the covenants and distribution restrictions in itssubsidiaries’ loan agreements. In connection with our IPO, we entered into the Exchange Agreement with certain of the Continuing LLC Owners, underwhich these Continuing LLC Owners have the right, from time to time, to exchange their units in EVO, LLC and relatedshares of EVO, Inc. for shares of our Class A common stock or, at our option, cash. If we choose to satisfy the exchange incash, we anticipate that we will fund such exchange through cash from operations, funds available under the revolvingportion of our Senior Secured Credit Facilities, equity or debt issuances or a combination thereof. In addition, in connection with the IPO, we entered into a TRA with the Continuing LLC Owners. Although the actual timingand amount of any payments that may be made under the TRA will vary, we expect that the payments that we will berequired to make to the Continuing LLC Owners will be significant. Any payments made by us to non-controlling LLCowners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to usand, to the extent that we are unable to make payments under the TRA for any reason, the unpaid amounts generally will bedeferred and will accrue interest until paid by us. The following table sets forth summary cash flow information for the years ended December 31, 2018 and 2017: Year Ended December 31, (in thousands) 2018 2017 2016Net cash provided by operating activities $201,998 $8,210 $32,753Net cash used in investing activities (125,565) (58,116) (117,247)Net cash provided by financing activities 80,643 38,471 42,180Effect of exchange rate changes on cash and cash equivalents (11,521) 13,253 (8,062)Net increase in cash and cash equivalents $145,555 $1,818 $(50,376)61 Table of ContentsOperating activities Net cash provided by operating activities was $202.0 million for the year ended December 31, 2018, an increase of $193.8million compared to cash provided by operating activities of $8.2 million for the year ended December 31, 2017. Thisincrease was due primarily to changes in working capital, including the timing of settlement-related assets and liabilities. Net cash provided by operating activities was $8.2 million for the year ended December 31, 2017, a decrease of $24.5 millioncompared to operating activities of $32.8 million for the year ended December 31, 2016. This decrease was due to changes inworking capital, including the timing of settlement-related assets and liabilities and deferred taxes. Investing activities Net cash used in investing activities was $125.6 million for the year ended December 31, 2018, an increase of $67.4 millioncompared to net cash used in investing activities of $58.1 million or the year ended December 31, 2017. The increase wasprimarily due to POS terminal purchases and acquisition-related investments during 2018. During 2017, restricted cash inescrow was used to fund the January 2017 acquisition of Sterling in the amount of $125.0 million. We purchased $48.8 million in equipment and improvements for the year ended December 31, 2018, an increase of $6.8million compared to $42.0 million for the year ended December 31, 2017. The increase was due primarily to terminalspurchased to support Poland’s cashless program, growth in Mexico terminal placements, internally developed softwareinitiatives and the Liberbank acquisition accounted for as an acquisition of assets under ASC 805. Capital expenditures of$31.1 million primarily relate to the purchase of POS terminals that are installed at merchant locations outside of the UnitedStates. As is customary in those markets, we provide the POS terminal hardware to merchants and charge associated feesrelated to this hardware. Additionally, our capital expenditures include hardware and software necessary for our data centers,processing platforms, and information security initiatives. During the year ended December 31, 2018, we spent $56.2 millionon assets associated with our business combinations, inclusive of terminals, office equipment, computer software, merchantcontract portfolios, trademarks, internally developed software and non-competition agreements. Net cash used in investing activities was $58.1 million for the year ended December 31, 2017, a decrease of $59.1 millioncompared to net cash used in investing activities of $117.2 million for the year ended December 31, 2016. This decrease wasdue primarily to the gain on the sale of the company’s interest in Visa Europe in the prior year period. During 2016, restrictedcash was held in escrow in the amount of $125.0 million in order to fund the January 2017 Sterling acquisition. Cashproceeds received related to our sale of Visa Europe equity reduced the net cash used in investing activities in the prior yearperiod. Capital expenditures were $42.0 million for the year ended December 31, 2017, an increase of $10.3 million compared tocapital expenditures of $31.7 million for the year ended December 31, 2016. The increase was due primarily to terminalspurchased to support Poland’s terminalization initiative, as well as additional hardware and software investments. Capitalexpenditures primarily relate to the purchase of POS terminals that are installed at merchant locations outside of the UnitedStates. As is customary in those markets, we provide the POS terminal hardware to merchants and charge associated feesrelated to this hardware. POS terminal purchases totaled $23.1 million for the year ended December 31, 2017, an increase of$5.1 million over the year ended December 31, 2016. Additionally, our capital expenditures include hardware and softwarenecessary for our data centers, processing platforms, and information security initiatives. Financing activities Net cash provided by financing activities was $80.6 million for the year ended December 31, 2018, an increase of $42.2million, compared to net cash provided by financing activities of $38.5 million for the year ended December 31, 2017. Thisincrease was primarily due to the net proceeds from the IPO and the Secondary Offering, partially offset by debt repaymentsand the early repayment of deferred purchase price under the Sterling acquisition. Net cash provided by financing activities was $38.5 million for the year ended December 31, 2017, a decrease of $3.7million, compared to net cash provided by financing activities of $42.2 million for the year ended December 31, 2016. Thisdecrease was due primarily to contributions by members and lower 2017 net borrowings.62 Table of Contents Senior Secured Credit Facilities On December 22, 2016, we (through our subsidiary EPI) entered into a new borrowing arrangement, referred to as our SeniorSecured Credit Facilities, which includes the following: ·A first lien senior secured credit facility, comprised of a $100.0 million revolving credit facility maturing onDecember 22, 2021, and a $570.0 million term loan maturing on December 22, 2023, with SunTrust Bank, asadministrative agent, swingline lender and issuing bank; and·A second lien senior secured credit facility, comprised of a $175.0 million term loan maturing on December 22,2024, with SunTrust Bank, as administrative agent.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 therevolving loans and term loans, subject to certain limitations and terms. On October 24, 2017, we entered into an incremental amendment agreement to the first lien credit facility, pursuant to whichwe increased the existing multicurrency revolving credit facility to $135.0 million. On April 3, 2018, we entered into asecond incremental amendment agreement to the first lien credit facility, pursuant to which we increased the existing loancredit facility to $665.0 million. We used the proceeds from the increase to complete acquisitions and provide liquidity. OnMay 25, 2018, we repaid all outstanding amounts under the second lien credit facility using a portion of the proceeds fromthe IPO. On June 14, 2018, we entered into a restatement agreement which extended the maturity of the first lien seniorsecured credit facility to June 2023, increased the revolving commitment by $65.0 million to $200.0 million and decreasedthe interest rate margins for loans under the Senior Secured Credit Facilities as described below. Borrowings under the first lien senior secured credit facility bear interest at an annual rate equal to, at EPI’s option, (a) a baserate, plus an applicable margin or (b) LIBOR, plus an applicable margin. The applicable margin for base rate revolving loansranges from 0.75% to 2.00% per annum and for LIBOR revolving loans ranges from 1.75% to 3.00% per annum, in each casebased upon achievement of certain consolidated leverage ratios. The applicable margin for base rate term loans is 3.25% andfor LIBOR term loans is 2.25%, subject to a 25 basis point reduction upon an upgrade to the Company’s credit rating. Inaddition to paying interest on outstanding principal, EPI is required to pay a commitment fee to the lenders in respect of theunutilized revolving commitments thereunder ranging from 0.25% to 0.5% per annum based upon achievement of certainconsolidated leverage ratios. The first lien senior secured credit facility requires prepayment of outstanding loans with: (1) 100% of the net cash proceedsof non-ordinary course asset sales or other dispositions of assets (including casualty events) by EPI and its restrictedsubsidiaries, subject to reinvestment rights and certain other exceptions, and (2) 50% of the excess cash flow (subject to step-downs to 25% and 0% based on achievement of certain first lien leverage ratios). Upon a change of control, EPI is required tooffer to prepay the loans at par. EPI may voluntarily repay outstanding loans under the first lien senior secured credit facility at any time, without premium,subject to a 1% premium in the event of a repricing event within the six-month anniversary of the date of the RestatementAgreement. All obligations under the first lien senior secured credit facility are unconditionally guaranteed by most of EPI’s direct andindirect, wholly-owned material domestic subsidiaries, subject to certain exceptions. All obligations under the first liensenior secured credit facility, and the guarantees of such obligations, are secured, subject to permitted liens and otherexceptions, by: ·a first-priority lien on the capital stock owned by EPI or by any guarantor in each of EPI’s or their respectivesubsidiaries (limited, in the case of capital stock of foreign subsidiaries, to 65% of the voting stock and 100% of thenon-voting stock of first tier foreign subsidiaries); and63 Table of Contents·a first-priority lien on substantially all of EPI’s and each guarantor’s present and future intangible and tangibleassets (subject to customary exceptions).The first lien senior secured credit facility contains a number of significant negative covenants. These covenants, amongother things, restrict, subject to certain exceptions, EPI’s and its restricted subsidiaries’ ability to incur indebtedness; createliens; engage in mergers or consolidations; make investments, loans and advances; pay dividends and distributions andrepurchase capital stock; sell assets; engage in certain transactions with affiliates; enter into sale and leaseback transactions;make certain accounting changes; and make prepayments on junior indebtedness. The first lien senior secured credit facility also contains a springing financial covenant that requires EPI to remain under amaximum consolidated leverage ratio determined on a quarterly basis. In addition, the first lien senior secured credit facility contains certain customary representations and warranties, affirmativecovenants and events of default. If an event of default occurs, the lenders under the first lien senior secured credit facility willbe entitled to take various actions, including the acceleration of amounts due thereunder and the exercise of the remedies onthe collateral. Refer to Note 11, “Long-Term Debt and Lines of Credit” in the notes to the accompanying consolidated financial statementsfor additional information on our long-term debt and settlement lines of credit. Sterling acquisition deferred purchase price In connection with the acquisition of Sterling on January 4, 2017, we agreed to a deferred purchase price of $70.0 million,which we refer to as the deferred purchase price. The deferred purchase price accrued interest at a rate of 5% per annum, andwas payable in quarterly installments of $5.0 million, plus accrued and unpaid interest, beginning September 30, 2017. InMay 2018, the Company paid in full the outstanding balance of the Sterling deferred purchase price, utilizing proceeds fromthe IPO and funds drawn from the revolving credit facility portion of our Senior Secured Credit Facilities. Settlement lines of credit We have specialized lines of credit which are restricted for use in funding settlement. The settlement lines of credit generallyhave variable interest rates and are subject to annual review. As of December 31, 2018, we had $41.8 million outstandingunder these lines of credit with additional capacity of $57.9 million as of December 31, 2018 to fund settlement. Theweighted average interest rate on these borrowings was 4.5% at December 31, 2018. Contractual obligations The following table summarizes our contractual obligations as of December 31, 2018. Payments due by period Less than More than( in thousands) Total 1 year 1-3 years 3-5 years 5 years Long-term debt $697,041 $7,191 $19,779 $670,071 $ -Interest payments 179,079 38,086 106,940 34,053 -Operating leases 42,386 7,944 17,780 4,823 11,840Settlement lines of credit 41,819 41,819 - - -Other long-term liabilities 8,189 6,760 1,429 - -Total $968,514 $101,799 $145,928 $708,947 $11,840 (1)Interest on long-term debt is based on rates effective and amounts borrowed as of December 31, 2018. Since thecontractual rates for our long-term debt and settlements are variable, actual cash payments may differ from theestimates provided.64 (1)(2)(3) Table of Contents(2)As of December 31, 2018, we are obligated under non-cancelable operating leases for our premises, which expirethrough 2036. Rent expense, inclusive of real estate taxes, utilities and maintenance incurred under operatingleases, which totaled $15.4 million during the year ended December 31, 2018, is included in selling, general andadministrative in our consolidated statements of operations and comprehensive loss.(3)Deferred consideration related to acquisitions.Note: Due to the fact that the timing of certain amounts to be paid cannot be determined or for other reasons discussedbelow, the following contractual commitments have not been presented in the table above.(4)As noted previously, we have entered into a tax receivable agreement with our Continuing LLC Owners whichrequires us to pay to our Continuing LLC Owners 85% of any tax savings received by us from our step-up in taxbasis. The tax savings achieved may not ensure that we have sufficient cash available to pay this liability and wemight be required to incur additional debt to satisfy this liability. Off-balance sheet transactions During 2018, 2017, and 2016, we did not engage in any off-balance sheet financing activities other than operating leasesincluded in the “Contractual Obligations” discussion above and those reflected in Note 16, “Commitments andContingencies” in our consolidated financial statements in Part II, Item 8 of this Form 10-K. Critical accounting policies Our discussion and analysis of our historical financial condition and results of operations for the periods described is basedon our audited consolidated financial statements and our unaudited interim condensed consolidated financial statements,each of which have been prepared in accordance with U.S. GAAP. The preparation of these historical financial statements inconformity with U.S. GAAP requires management to make estimates, assumptions and judgments in certain circumstancesthat affect the reported amounts of assets, liabilities and contingencies as of the date of the consolidated financial statementsand the reported amounts of revenue and expenses during the reporting periods. We evaluate our assumptions and estimateson an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to bereasonable under the circumstances, the results of which form the basis for making judgments about the carrying values ofassets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. We have provided a summary of our significant accounting policies, as well as adiscussion of our evaluation of the impact of recent accounting pronouncements regarding goodwill, cash flows, revenuerecognition and leases, in Note 1, “Description of Business and Summary of Significant Accounting Policies” in the notes tothe accompanying consolidated financial statements. The following critical accounting discussion pertains to accountingpolicies management believes are most critical to the portrayal of our historical financial condition and results of operationsand that require significant, difficult, subjective or complex judgments. Other companies in similar businesses may usedifferent estimation policies and methodologies, which may impact the comparability of our financial condition, results ofoperations and cash flows to those of other companies. Revenue recognition Our primary revenue sources consist of fees for payment processing services. Payment processing service revenue is primarilybased on a percentage of transaction value or on a specified amount per transaction or related services. Our arrangements areconsidered multiple element arrangements. We follow the guidance in ASC 605-25, Revenue Recognition – Multiple-Element Arrangements. However, because the elements are primarily accounted for as services or rentals with a similardelivery pattern, the elements have the same revenue recognition timing. We recognize revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery hasoccurred or services have been rendered; (3) the sales price is fixed or determinable; and (4) collectability is reasonablyassured. 65 Table of ContentsWe follow the guidance in ASC 605-45, Principal Agent Consideration. ASC 605-45 states that the determination ofwhether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is amatter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should beconsidered in the evaluation. Revenue is generally reported net of interchange and card network fees, commissions andnetwork processing costs and other fees. In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers,with amendments in 2015, 2016 and 2017, which creates new ASC Topic 606 (“Topic 606”) that will replace most existingrevenue recognition guidance in GAAP when it becomes effective. Topic 606 requires an entity to recognize the amount ofrevenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard willbe adopted in our first quarter of fiscal year 2019 with the cumulative effect recognized as of the date of initial application(modified retrospective transition method). The Company currently expects the most significant ongoing impact of adopting the new revenue standard in 2019 to bedriven by changes in principal versus agent considerations, with the majority of the change overall in total net revenueattributable to the Company reflecting network processing fees on a net basis prospectively, as opposed to our grosspresentation of $91.6 million in 2018. The Company does not expect the adoption of the new revenue standard to have amaterial impact on net income. The Company will include additional disclosures of the amount by which each financialstatement line item is affected during 2019, as compared to the guidance that was in effect before the change, and anexplanation of the reasons for significant changes. Refer to Note 1, “Description of Business and Summary of Significant Accounting Policies” in the notes to theaccompanying consolidated financial statements for additional information on our revenue recognition policy and Topic606. Goodwill and intangible assets We regularly evaluate whether events and circumstances have occurred that indicate the carrying amounts of goodwill,acquired merchant portfolios and other intangible assets may not be recoverable. Goodwill represents the excess of theconsideration transferred over fair value of identifiable tangible net assets and intangible assets acquired throughacquisitions. We evaluate our goodwill and indefinite-lived intangible assets, consisting of certain unamortized trade names,for impairment annually as of October 1, or more frequently as circumstances warrant. For 2018, in assessing whether our goodwill and indefinite-lived intangibles were impaired in connection with its annualimpairment test performed during the fourth quarter of 2018 using October 1, 2018 carrying values, we performed aqualitative assessment to determine whether it would be necessary to perform a quantitative analysis, as prescribed by ASC350, Intangibles - Goodwill and Other, to assess our goodwill and indefinite-lived intangible assets for indicators ofimpairment. A qualitative assessment includes consideration of macroeconomic conditions, industry and marketconsiderations, changes in certain costs, overall financial performance and other relevant entity specific events. Inperforming the qualitative assessment, we considered the results of the step-one test performed in 2017 and the financialperformance of the North America and Europe reporting units during 2018. Based upon such assessment, we also determinedthat it was more likely than not that the fair values of these reporting units exceeded their carrying amounts for 2018. As ofDecember 31, 2018, there were no significant events since the timing of our annual impairment test that would have triggeredthe need for a further assessment for indicators of impairment. For 2017, we utilized the two-step approach to determine whether events or circumstances have occurred giving rise to theneed for further quantitative testing. In the first step, the fair value for the reporting unit is compared to its carrying value,including goodwill. In the event that the fair value of the reporting unit was determined to be less than the carrying value, asecond step is performed which compares the implied fair value of the reporting unit’s goodwill to the carrying value of thegoodwill. The implied fair value for the goodwill is determined based on the difference between the fair value of thereporting unit and the fair value of the net identifiable assets. If the implied fair value of the goodwill is less than its carryingvalue, the difference is recognized as an impairment. As a result of the annual impairment testing for 2017, we did notrecognize any impairment. As of the date of the 2017 impairment test, the fair values of the North America and Europereporting units exceeded their carrying values by approximately $500 million and $300 million, respectively.66 Table of Contents Finite-lived assets include merchant contract portfolios, marketing alliance agreements, trademarks and internally developedsoftware stated net of accumulated amortization or impairment charges and foreign currency translation adjustments. Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to estimatedundiscounted future cash flows expected to be generated by the respective asset. Estimated future cash flows for merchantcontract portfolios, represented by merchant contracts acquired from third parties that will generate revenue for us, marketingalliance agreements and trademarks are based on estimates of revenue, expenses and merchant attrition associated with theunderlying portfolio of merchant accounts or expected merchant referrals from our referral partners. Estimating merchantattrition involves analysis of historical attrition rates adjusted for management’s assumptions about future business closures,transfers of merchants’ accounts to our competitors, unsuccessful contract renewal and changes in our relationships withreferral partners. For internally developed software, assigning estimated useful lives involves significant judgment andincludes an analysis of potential obsolescence due to new technology, competition and other economic factors. Indefinite-life intangible assets include other trademarks and are evaluated for impairment annually comparing the estimatedfair value with its carrying value. When factors indicate that long-lived assets should be evaluated for possible impairment,we assess our recoverability by determining whether the carrying value will be recovered through its future undiscountedcash flows and its eventual disposition. When the carrying value exceeds its fair value, an impairment loss is recognized inan amount equal to the difference. The determination of fair values requires significant judgment and is subject to changes inunderlying assumptions. For the year ended December 31, 2018, the Company recognized a non-cash impairment charge of $14.6 million relating toindefinite-lived trademarks, primarily related to the accelerated integration of the Sterling tradename into the EVO portfolioin November 2018. No goodwill impairment was recognized in the year ended December 31, 2018. Refer to Note 1, “Description of Business and Summary of Significant Accounting Policies” and Note 6, “Goodwill andIntangible Assets” in the notes to the accompanying consolidated financial statements for further discussion of theCompany's goodwill and intangible assets. Income taxes EVO, LLC is considered a pass-through entity for U.S. federal and most applicable state and local income tax purposes. As apass-through entity, taxable income or loss is passed through to and included in the taxable income of its members. EVO, Inc. is subject to U.S. federal, state, and local income taxes with respect to our allocable share of taxable income ofEVO, LLC and is taxed at the prevailing corporate tax rates. In addition to tax expenses, we also make payments under theTRA, which we expect to be significant. We account for the income tax effects and corresponding TRA’s effects resultingfrom future taxable purchases or redemptions of LLC Interests of the Continuing LLC Owners by recognizing an increase inour deferred tax assets based on enacted tax rates at the date of the purchase or redemption. Further, we evaluate thelikelihood that we will realize the benefit represented by the deferred tax asset and, to the extent that we estimate that it ismore likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with avaluation allowance. The amounts to be recorded for both the deferred tax assets and the liability for our obligations underthe TRA are estimated at the time of any purchase or redemption as a reduction to shareholders’ equity, and the effects ofchanges in any of our estimates after this date are included in net income. Similarly, the effect of subsequent changes in theenacted tax rates are included in net income. We currently believe our deferred tax assets will be recovered based upon theprojected profitability of our operations, with the exception of our deferred tax assets in certain European jurisdictions.Judgement is required in assessing the future tax consequences of events that will be recognized in EVO, Inc.’s consolidatedfinancial statements. A change in the assessment of such consequences (e.g., realization of deferred tax assets, changes in taxlaws or interpretations thereof) could materially impact our results. 67 Table of ContentsRedeemable non-controlling interests Redeemable non-controlling interests (“RNCI”) relate to the portion of equity in a consolidated subsidiary not attributable,directly or indirectly, to us, which is realizable upon the occurrence of an event that is not solely within our control. Suchinterests are reported in the mezzanine section between total liabilities and permanent shareholders’ equity in ourconsolidated balance sheets, as temporary equity. We adjust the RNCI to reflect our estimate of the maximum redemptionamount against our shareholders’ equity (deficit). Such estimate is based on the conditions that exist as of a balance sheetdate, including the current fair value. Depending on the underlying non-controlling interest, fair value estimate may be basedon projected operating performance and satisfying other conditions specified in the related agreements, or our stock value,and may not be what we will eventually pay for the business. Refer to Note 13, “Redeemable Non-controlling Interests” in the notes to the accompanying consolidated financialstatements for additional information on RNCI. Stock compensation plans and share-based compensation awards For our stock options, we utilize the Black-Scholes option-pricing model to compute the estimated fair value. The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected lives and risk-free interestrates. These assumptions reflect our best estimates but these items involve uncertainties based on market and otherconditions outside of our control. As a result, if other assumptions had been used, stock-based compensation expense couldhave been materially affected. Furthermore, if different assumptions are used in future periods, share-based compensationexpense could be materially affected in future years. Refer to Note 19, “Stock Compensation Plans and Share-Based Compensation Plans” in the notes to the accompanyingconsolidated financial statements for further discussion of stock compensation plans and share-based compensation awards. New accounting pronouncements For information regarding new accounting pronouncements, and the impact of these pronouncements on our consolidatedfinancial statements, if any, refer to Note 1, “Description of Business and Summary of Significant Accounting Policies” in thenotes to the accompanying consolidated financial statements. Inflation While inflation may impact our revenue and expenses, we believe the effects of inflation, if any, on our results of operationsand financial condition have not been significant. However, there can be no assurance that our results of operations andfinancial condition will not be materially impacted by inflation in the future. JOBS Act We qualify as an “emerging growth company” under the JOBS Act, which enables us to postpone complying with certainreporting and other obligations under securities laws. In addition, Section 102 of the JOBS Act provides that an emerginggrowth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act forcomplying with new or revised accounting standards. We are electing to delay the adoption of new or revised accountingstandards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on whichadoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not becomparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISKS Our future income, cash flows and fair values relevant to financial instruments are subject to risks relating to interest rates andforeign currency exchange rates.68 Table of ContentsInterest rate risk We are subject to interest rate risk in connection with our long-term debt and settlement facilities, which have variableinterest rates. The interest rates on these facilities are based on a fixed margin plus a market interest rate, which can fluctuateaccordingly but is subject to a minimum rate. Interest rate changes could impact the amount of our interest payments, andaccordingly, our future earnings and cash flows, assuming other factors are held constant. As of December 31, 2018, we had approximately $697.0 million of variable rate debt, none of which was subject to aninterest rate hedge. In the future, the interest rate may increase and we may be subject to interest rate risk. Based on theamount outstanding on our Senior Secured Credit Facilities on December 31, 2018, an increase of 100 basis points in theapplicable interest rate would increase our annual interest expense by approximately $7.0 million. A decrease of 100 basispoints in the applicable rate (assuming such reduction would not be below the minimum rate) would reduce our annualinterest expense by approximately $7.0 million. Foreign currency risk We are exposed to changes in foreign currency rates as a result of our significant foreign operations. Revenue and incomegenerated by international operations will increase or decrease compared to prior periods as a result of changes in foreigncurrency exchange rates. A hypothetical uniform 10% weakening in the value of the U.S. dollar relative to all the currenciesin which our revenue and income are denominated would result in an increase to pretax income of approximately $3.3million on an annualized basis. The increase results from revenue and income earned in foreign currencies, primarilydenominated in the Euro, Polish Zloty and Mexican Peso offset by foreign currency-denominated expenses, primarilydenominated in the Euro and British Pound. Similarly, a hypothetical uniform 10% strengthening in the value of the U.S.dollar relative to all the currencies in which our revenue and income are denominated would result in a decrease to pretaxincome of approximately $3.3 million on an annualized basis. The decrease results from revenue and income earned inforeign currencies, primarily denominated in the Euro, Polish Zloty and Mexican Peso offset by foreign currency-denominated expenses, primarily denominated in the Euro and British Pound. There are inherent limitations in thesensitivity analysis presented, primarily due to the assumption that foreign exchange rate movements are linear andinstantaneous. As a result, the analysis is unable to reflect the potential effects of more complex market changes that couldarise, which may positively or negatively affect income. 69 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 71Consolidated Balance Sheets as of December 31, 2018 and 2017 72Consolidated Statements of Operations and Comprehensive Loss for each of the three years ended December 31,2018, 2017 and 2016 73Consolidated Statements of Changes in Equity for each of the years ended December 31, 2018, 2017 and 2016 74Consolidated Statements of Cash Flows for each of the years ended December 31, 2018, 2017 and 2016 77Notes to Consolidated Financial Statements 78Schedule I – Condensed Financial Information of Registrant 116Schedule II – Valuation and Qualifying Accounts 121 70 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of EVO Payments, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of EVO Payments, Inc. and subsidiaries (the "Company") asof December 31, 2018 and2017, the related consolidated statements of operations and comprehensive loss, changes inequity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and theschedules listed in the Index to Consolidated Financial Statements (collectively referred to as the “consolidated financialstatements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of theCompany as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years inthe period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States ofAmerica. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firmregistered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free of materialmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an auditof its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internalcontrol over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Ouraudits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonablebasis for our opinion. /s/DELOITTE & TOUCHE LLP New York, New YorkMarch 25, 2019 We have served as the Company’s auditor since 2016. 71 Table of Contents EVO PAYMENTS, INC. AND SUBSIDIARIESConsolidated Balance Sheets(In thousands, except share and unit data) December 31, December 31, 2018 2017Assets Current assets: Cash and cash equivalents $350,697 $205,142Accounts receivable, net 13,248 15,881Other receivables 56,518 55,345Due from related parties 1,871 2,625Inventory 8,867 11,210Settlement processing assets 248,330 439,269Other current assets 11,817 20,941Total current assets 691,348 750,413Equipment and improvements, net 103,046 96,587Goodwill 353,011 311,678Intangible assets, net 290,139 313,483Investment in unconsolidated investees 1,753 1,379Due from related parties 915 109Deferred tax asset 72,296 9,057Other assets 21,879 25,592Total assets $1,534,387 $1,508,298 Liabilities and Shareholders'/Members’ Equity (Deficit) Current liabilities: Settlement lines of credit $41,819 $28,563Current portion of long-term debt 7,191 75,008Accounts payable 48,935 61,149Accrued expenses 112,281 89,601Settlement processing obligations 428,328 484,518Due to related parties 4,824 7,847Total current liabilities 643,378 746,686Long-term debt, net of current portion 676,865 760,946Due to related parties 385 675Deferred tax liability 13,519 11,011Tax receivable agreement obligations, inclusive of related party liability of $40.7 million andzero at December 31, 2018 and 2017, respectively. 47,221 —ISO reserves 2,684 2,611Other long-term liabilities 2,924 4,634Total liabilities 1,386,976 1,526,563Commitments and contingencies Redeemable non-controlling interests 1,010,093 148,266Shareholders'/members' equity (deficit): Shareholders'/members' equity (deficit): Class A Units, Outstanding - 0 and 6,374 units at December 31, 2018 and 2017, respectively. — 54,453Class B Units, Outstanding - 0 and 3,506 units at December 31, 2018 and 2017, respectively. — —Class C Units, Outstanding - 0 and 375 units at December 31, 2018 and 2017, respectively. — 9,463Class D Units, Outstanding - 0 and 1,104 units at December 31, 2018 and 2017, respectively. — —Class E Units, Outstanding - 0 and 1,012 units at December 31, 2018 and 2017, respectively. — 71,250Class A common stock (par value, $0.0001 per share), Authorized - 200,000,000 and 0shares, Issued and Outstanding - 26,025,189 and 0 shares at December 31, 2018 and 2017,respectively. 3 —Class B common stock (par value, $0.0001 per share), Authorized - 40,000,000 and 0 shares,Issued and Outstanding - 35,913,538 and 0 shares at December 31, 2018 and 2017,respectively. 4 —Class C common stock (par value, $0.0001 per share), Authorized - 4,000,000 and 0 shares,Issued and Outstanding - 2,461,055 and 0 shares at December 31, 2018 and 2017,respectively. — —Class D common stock (par value, $0.0001 per share), Authorized - 32,000,000 and 0 shares,Issued and Outstanding - 16,785,552 and 0 shares at December 31, 2018 and 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) 3,312Total deficit (862,682) (166,531)Total liabilities and deficit $1,534,387 $1,508,298 See accompanying notes to audited consolidated financial statements. 72 Table of Contents EVO PAYMENTS, INC. AND SUBSIDIARIESConsolidated Statements of Operations and Comprehensive Income/(Loss) (In thousands, except share and per share data) Year Ended December 31, 2018 2017 2016Revenue $564,754 $504,750 $419,221Operating expenses: Cost of services and products, exclusive of depreciation and amortizationshown separately below 189,375 164,480 140,659Selling, general and administrative 311,353 220,971 174,198Depreciation and amortization 87,184 74,136 64,012Impairment of intangible assets 14,627 — —Total operating expenses 602,539 459,587 378,869(Loss) income from operations (37,785) 45,163 40,352Other (expense) income: Interest income 2,219 1,489 1,096Interest expense (59,759) (62,876) (40,658)Income from investment in unconsolidated investees 1,513 941 1,547Gain on acquisition of unconsolidated investee 8,404 — —Other (expense) income, net (2,998) (477) 72,147Total other (expense) income (50,621) (60,923) 34,132(Loss) income before income taxes (88,406) (15,760) 74,484Income tax expense (10,444) (16,588) (17,033)Net (loss) income (98,850) (32,348) 57,451Less: Net income attributable to non-controlling interests in consolidated entities (6,696) (7,894) (9,746)Net (loss) income attributable to EVO Investco, LLC $(40,242) $47,705Less: Net loss attributable to non-controlling interests of EVO Investco, LLC 90,834 Net loss attributable to EVO Payments, Inc. $(14,712) Earnings per share Basic $(0.70) Diluted $(0.70) Weighted average Class A common stock outstanding Basic 21,081,447 Diluted 21,081,447 Comprehensive (loss) income: Net (loss) income $(98,850) $(32,348) $57,451Unrealized (loss) gain on defined benefit pension plan, net of tax (228) 530 294Unrealized (loss) gain on foreign currency translation adjustment, net of tax (18,545) 69,917 (52,454)Other comprehensive (loss) income (18,773) 70,447 (52,160)Comprehensive (loss) income (117,623) 38,099 5,291Less: Comprehensive income attributable to non-controlling interests inconsolidated entities (2,224) (18,556) (9,685)Comprehensive income (loss) attributable to EVO Investco, LLC $19,543 $(4,394)Less: Other comprehensive loss attributable to non-controlling interests of EVOInvestco, LLC 102,821 Comprehensive loss attributable to EVO Payments, Inc. $(17,026) (1)Net of tax benefit of less than $0.1 million for 2018.(2)Net of tax benefit of $0.7 million for 2018.See accompanying notes to audited consolidated financial statements. 73 (1)(2) Table of ContentsEVO PAYMENTS, INC. AND SUBSIDIARIESConsolidated Statements of Changes in Equity (In thousands) Total Accumulated EVO other Payments, Non-redeemable Redeemable Class A LLC Units Class B LLC Units Class C LLC Units Class D LLC Units Class E LLC Units Accumulated comprehensive Inc. non-controlling Total non-controlling Interests Amounts Interests Amounts Interests Amounts Interests Amounts Interests Amounts deficit loss deficit interests deficit interests TotalBalance, January 1,2016 6,374 $54,453 3,506 $ — 381 $9,893 1,115 $ — — $ — $(152,936) $(75,365) $(163,955) $(8,995) $(172,950) $77,878 $(95,072) Net income — — — — — — — — — — 47,705 — 47,705 3,641 51,346 6,104 57,451Foreign currencytranslationadjustment — — — — — — — — — — — (52,393) (52,393) (61) (52,454) — (52,454)Defined benefitpension plan — — — — — — — — — — — 294 294 — 294 — 294Redeemable non-controlling interestsadjustment — — — — — — — — — — (16,548) — (16,548) — (16,548) 16,548 —Unitpurchase/redemption/forfeiture/grants — — — — (6) (430) (30) — — — — — (430) — (430) — (430)Distributions — — — — — — — — — — (2,249) — (2,249) (4,772) (7,021) — (7,021)Balance, December31, 2016 6,374 $54,453 3,506 $ — 375 $9,463 1,085 $ — — $ — $(124,028) $(127,464) $(187,576) $(10,187) $(197,763) $100,530 $(97,233) Net (loss) income — — — — — — — — — — (40,242) — (40,242) 2,429 (37,813) 5,465 (32,348)Foreign currencytranslation and otheradjustments — — — — — — — — — — (29,948) 59,255 29,307 16,234 45,541 10,662 56,203Defined benefitpension plan — — — — — — — — — — — 530 530 — 530 — 530Acquisition ofadditional shares ina consolidatedsubsidiary — — — — — — — — — — (6,401) — (6,401) (2,817) (9,218) — (9,218)Redeemable non-controlling interestsadjustment — — — — — — — — — — (34,985) — (34,985) — (34,985) 34,985 —Unitpurchase/redemption/forfeiture/grants — — — — — — 22 — 1,012 71,250 — — 71,250 — 71,250 — 71,250Distributions — — — — — — — — — — (1,726) — (1,726) (2,347) (4,073) (3,376) (7,449)Balance,December 31, 2017 6,374 $54,453 3,506 $ — 375 $9,463 1,107 $ — 1,012 $71,250 $(237,330) $(67,679) $(169,843) $3,312 $(166,531) $148,266 $(18,265) See accompanying notes to audited consolidated financial statements.74 Table of Contents Class A LLC Units Class B LLC Units Class C LLC Units Class D LLC Units Class E LLC Units Class A CommonStock Class B CommonStock Interests Amounts Interests Amounts Interests Amounts Interests Amounts Interests Amounts Shares Amounts Shares AmountsBalance, January 1, 2018 6,374 $54,453 3,506 $ — 375 $9,463 1,107 $ — 1,012 $71,250 — $ — — $ — Net income prior toReorganizationTransactions — — — — — — — — — — — — — —Cumulative translationadjustment prior toReorganizationTransactions — — — — — — — — — — — — — —Distributions prior toReorganizationTransactions — — — — — — — — — — — — — —Acquisition of additionalshares in a consolidatedsubsidiary — — — — — — — — — — — — — —Legacy deficit /accumulatedcomprehensive lossallocation (Class C&D) — — — — — — — — — — — — — —Legacy deficit /accumulatedcomprehensive lossallocation (Class B) — — — — — — — — — — — — — —Equity issued inconnection withacquisition prior toReorganizationTransactions (6,374) (54,453) (3,506) — (375) (9,463) (1,107) — (1,012) (71,250) 1,319 — 35,914 4Share-based compensationprior to ReorganizationTransactions, net of sharesettlement — — — — — — — — — — 494 — — —Class B redeemable non-controlling interests fairvalue adjustment inconnection toReorganizationTransactions — — — — — — — — — — — — — — Effect of ReorganizationTransactions — — — — — — — — — — 1,813 — 35,914 4 Sale of Class A commonstock in initial publicoffering, net ofunderwriter fees — — — — — — — — — — 15,434 2 — —Contingent considerationsettled in Class Acommon stock — — — — — — — — — — 48 — — —Deferred taxes inconnection with theReorganizationTransaction, andsubsequent conversionsof shares of Class Ccommon stock and ClassD common stock. — — — — — — — — — — — — — —Tax receivable agreementin connection with theReorganizationTransaction, andsubsequent conversionsof shares of Class Ccommon stock and ClassD common stock. — — — — — — — — — — — — — —Net income subsequent tothe ReorganizationTransactions — — — — — — — — — — — — — —Cumulative translationadjustment subsequent tothe ReorganizationTransactions — — — — — — — — — — — — — —Distributions subsequentto the ReorganizationTransactions — — — — — — — — — — — — — —Acquisition of additionalshares in a consolidatedsubsidiary — — — — — — — — — — — — — —eService redeemable non-controlling interest fairvalue adjustment — — — — — — — — — — — — — —Sale of EmployeeOwnership — — — — — — — — — — 22 — — —Sale of Class A commonstock in SecondaryOffering, net ofunderwriter fees — — — — — — — — — — 8,053 1 — —Sale of MDP Class DShares — — — — — — — — — — — — — —Share-based compensation — — — — — — — — — — 57 — — —Conversion of Class C &D shares to Class A — — — — — — — — — — 598 — — —Revaluation of definedbenefit pension plan — — — — — — — — — — — — — —Blueapple redeemablenon-controlling interestsubsequent to theReorganizationTransactions — — — — — — — — — — — — — —Balance,December 31, 2018 — $ — — $ — — $ — — $ — — $ — 26,025 $ 3 35,914 $ 4 See accompanying notes to audited consolidated financial statements.75 Table of Contents Accumulated Accumulated Total deficit deficit Accumulated EVO Additional attributableto attributableto other Payments, Nonredeemable Redeemable Class C CommonStock Class D CommonStock paid-in Class A members of comprehensive Inc.(deficit) non-controlling Total non-controlling Shares Amounts Shares Amounts capital commonstock EVOInvestco,LLC loss /equity interests deficit interests TotalBalance, January 1,2018 — $ — — $ — $ — $ — $(237,330) $(67,679) $(169,843) $3,312 $(166,531) $148,266 $(18,265) Net income priorto ReorganizationTransactions — — — — — — (24,412) — (24,412) — (24,412) 1,291 (23,121)Cumulativetranslationadjustment prior toReorganizationTransactions — — — — — — — (6,337) (6,337) — (6,337) (2,104) (8,441)Distributions priorto ReorganizationTransactions — — — — — — — — — (1,334) (1,334) (3,770) (5,104)Acquisition ofadditional sharesin a consolidatedsubsidiary — — — — — — (20,924) — (20,924) (1,141) (22,065) — (22,065)Legacy deficit /accumulatedcomprehensiveloss allocation(Class C&D) — — — — — — 132,181 34,612 166,793 (166,793) — — —Legacy deficit /accumulatedcomprehensiveloss allocation(Class B) — — — — — — 150,485 39,404 189,889 — 189,889 (189,889) —Equity issued inconnection withacquisition priorto ReorganizationTransactions 2,561 — 24,305 2 135,160 — — — — — — — —Share-basedcompensationprior toReorganizationTransactions, netof share settlement — — — — 51,339 — — — 51,339 — 51,339 — 51,339Class B redeemablenon-controllinginterests fair valueadjustment inconnection toReorganizationTransactions — — — — — — — — — (735,775) (735,775) 735,775 — Effect ofReorganizationTransactions 2,561 — 24,305 2 186,499 — — — 186,505 (901,731) (715,226) 689,569 (25,657) Sale of Class Acommon stock ininitial publicoffering, net ofunderwriter fees — — — — 219,020 — — — 219,022 — 219,022 — 219,022Contingentconsiderationsettled in Class Acommon stock — — — — 771 — — — 771 — 771 — 771Deferred taxes inconnection withthe ReorganizationTransaction, andsubsequentconversions ofshares of Class Ccommon stock andClass D commonstock. — — — — 6,714 — — 26 6,740 — 6,740 — 6,740Tax receivableagreement inconnection withthe ReorganizationTransaction, andsubsequentconversions ofshares of Class Ccommon stock andClass D commonstock. — — — — 8,333 — — — 8,333 — 8,333 — 8,333Net incomesubsequent to theReorganizationTransactions — — — — — (14,712) — — (14,712) (26,802) (41,514) (34,215) (75,729)Cumulativetranslationadjustmentsubsequent to theReorganizationTransactions — — — — — — — (2,942) (2,942) (1,540) (4,482) (6,303) (10,785)Distributionssubsequent to theReorganizationTransactions — — — — — — — — — (92) (92) (2,380) (2,472)Acquisition ofadditional sharesin a consolidatedsubsidiary — — — — — (58) — — (58) (45) (103) — (103)eServiceredeemable non-controllinginterest fair valueadjustment — — — — — 6,325 — — 6,325 4,677 11,002 (11,002) —Sale of EmployeeOwnership — — (22) — (857) — — — (857) 857 — — —Sale of Class Acommon stock inSecondaryOffering, net ofunderwriter fees — — — — 190,161 — — — 190,162 — 190,162 — 190,162Sale of MDP ClassD Shares — — (7,000) (1) (435,850) — — — (435,851) 269,924 (165,927) — (165,927)Share-basedcompensation — — — — 3,385 — — — 3,385 — 3,385 — 3,385Conversion ofClass C & D sharesto Class A (100) — (497) — — — — — — — — — —Revaluation ofdefined benefitpension plan — — — — — — — (77) (77) (60) (137) (192) (329)Blueappleredeemable non-controllinginterestsubsequent to theReorganizationTransactions — — — — — (215,354) — — (215,354) (159,262) (374,616) 374,616 —Balance,December 31, 2018 2,461 $ — 16,786 $ 1 $178,176 $(223,799) $ — $(2,993) $(48,608) $(814,074) $(862,682) $1,010,093 $147,411 See accompanying notes to audited consolidated financial statements. 76 Year Ended December 31, 2018 2017 2016Cash flows from operating activities: Net (loss) income $(98,850) $(32,348) $57,451Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 87,184 74,136 64,012Loss (gain) on sale of investments — 1,308 (72,360)Amortization of deferred financing costs 8,528 3,197 5,922Loss 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 (1,770)Other 1 2,260 5,263Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, net 3,141 (10,243) 16,569Other receivables (1,563) 5,898 (17,196)Inventory 2,049 (1,378) (2,160)Other current assets (4,018) (9,407) (2,573)Other assets 2,948 7,093 (702)Related parties (498) (5,155) 3,307Accounts payable (12,426) 2,330 4,535Accrued expenses 15,509 6,907 7,573Settlement processing funds, net 137,898 (48,080) (35,222)Other 76 178 104Net cash provided by operating activities 201,998 8,210 32,753Cash flows from investing activities: Restricted cash — 125,000 (125,000)Acquisition of businesses, net of cash acquired (56,193) (124,964) (13,984)Purchase of equipment and improvements (48,751) (42,021) (31,708)Acquisition of intangible assets (20,704) (17,310) (290)Net proceeds from sale of investments — 205 53,161Issuance of notes receivable (37) — (15)Collections of notes receivable 120 974 589Net cash used in investing activities (125,565) (58,116) (117,247)Cash flows from financing activities: Proceeds from long-term debt 774,359 854,135 763,554Repayments of long-term debt (853,487) (868,990) (687,294)Deferred financing costs paid (3,903) (1,232) (21,200)Contingent consideration paid (2,505) (282) (5,859)Deferred cash consideration (65,000) (5,000) —Consideration paid for additional shares in a consolidated subsidiary — (3,962) —Acquisition of additional non-controlling interest (16,916) — —Distribution to non-controlling interests holders (7,577) (5,722) (4,772)IPO proceeds, net of underwriter fees 231,500 — —Secondary offering proceeds, net of underwriter fees 24,967 — —Tax withholdings related to net share settlement of share-based payments (795) — —Contributions by members — 71,250 —Distribution to members — (1,726) (2,249)Net cash provided by financing activities 80,643 38,471 42,180Effect of exchange rate changes on cash and cash equivalents (11,521) 13,253 (8,062)Net increase (decrease) in cash and cash equivalents 145,555 1,818 (50,376)Cash and cash equivalents, beginning of year 205,142 203,324 253,700Cash and cash equivalents, end of year $350,697 $205,142 $203,324Table of ContentsEVO PAYMENTS, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows (In thousands) See accompanying notes to consolidated financial statements. 77 Table of ContentsEVO PAYMENTS, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (1)Description of Business and Summary of Significant Accounting Policies(a)Description of BusinessEVO Payments, Inc. (“EVO, Inc.” or the “Company”) is a Delaware corporation whose primary asset is itsownership of approximately 32.1% of the membership interests of EVO Investco, LLC (“EVO, LLC”) as ofDecember 31, 2018. EVO, Inc. was incorporated on April 20, 2017 for the purpose of completing a series ofreorganization transactions (the “Reorganization Transactions”), in order to consummate the initial publicoffering of EVO, Inc.’s Class A common stock (the “IPO”), and to carry on the business of EVO, LLC. OnSeptember 20, 2018, EVO, Inc. completed a secondary offering (the “Secondary Offering”), which consisted ofthe issuance of 8,075,558 shares of Class A common stock. EVO, Inc. is the sole managing member of EVO,LLC and operates and controls all of the businesses and affairs conducted by EVO, LLC and its subsidiaries (the“Group”).The Company is a leading payment technology and services provider, offering an array of innovative, reliable,and secure payment solutions to merchants across North America and Europe. The Company supports all majorcard types in the markets it serves. The Company provides card-based payment processing services to small and middle market merchants,multinational corporations, government agencies, and other business and nonprofit enterprises locatedthroughout North America and Europe. These services enable merchants to accept credit and debit cards andother electronic payment methods as payment for their products and services by providing terminal devices,card authorization, data capture, funds settlement, risk management, fraud detection, and chargeback services.As of December 31, 2018, the Company serviced over 550,000 merchants, had the ability to process across 50markets and operated two reportable segments: North America and Europe.Since 2012, the Company has acquired and established various interests in entities that expanded theCompany’s presence in North America and Europe. Most of these acquisitions were financed by an increase inthe Company’s bank credit facilities.(b)Basis of Presentation and Use of EstimatesThe preparation of the consolidated financial statements in conformity with generally accepted accountingprinciples in the United States (“U.S. GAAP”) requires management to make certain estimates and assumptionsthat affect the reported assets and liabilities, the disclosure of contingent assets and liabilities at the date of theconsolidated financial statements, and the reported amounts of revenue and expenses during the period.Accordingly, actual results could differ from those estimates. Estimates are used for accounting purposesincluding, but not limited to, calculating redeemable non-controlling interests (“RNCI”), calculating incometaxes, certain assumptions related to the valuation of acquired intangible long-lived assets and therecoverability of goodwill.During 2018, the Company has separately presented settlement lines of credit amounts on the consolidatedbalance sheets. These settlement lines of credit were previously presented as a component of the current portionof long-term debt. Prior year amounts have been reclassified to conform to the current presentation. (c)Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of the Company. As sole managingmember of EVO, LLC, the Company exerts control over the Group. In accordance with Accounting StandardsCodification (“ASC”) 810, Consolidation, EVO, Inc. consolidates the Group’s consolidated financialstatements and records the interests in EVO, LLC that it does not own as non-controlling interests. Allintercompany accounts and transactions have been eliminated in consolidation. The Company accounts forinvestments over which it has significant influence but not a controlling financial interest using the equitymethod of accounting.78 Table of Contents (d)Cash and Cash Equivalents and Merchant ReservesCash and cash equivalents include all cash balances and highly liquid securities with original maturities ofthree months or less when acquired. Cash balances often exceed federally insured limits; however,concentration of credit risk is limited due to the payment of funds on the day following receipt in satisfaction ofthe settlement process. Included in cash and cash equivalents are merchant reserve cash balances, whichrepresent funds collected from the Company’s merchants that serve as collateral to minimize contingentliabilities associated with any losses that may occur under the respective merchant agreements (“MerchantReserves”). While this cash is not restricted in its use, the Company believes that maintaining the MerchantReserves to collateralize merchant losses strengthens its fiduciary standings with its card network sponsors(“Member Banks”) and is in accordance with the guidelines set by the card networks. As of December 31, 2018and 2017, Merchant Reserves were $107.8 million and $111.3 million, respectively. (e)Accounts Receivable and Other ReceivablesReceivable balances are stated net of allowance for doubtful accounts. Accounts receivable consists of amountsof foreign value added taxes to be recovered during regular business operation and amounts due fromindependent sales organizations (“ISO”) and merchants related to the sale of point-of-sale (“POS”) equipmentand peripherals. Included in other receivables as of December 31, 2018 and 2017, is an amount of value added taxes of $32.0million and $32.1 million, respectively, due from the Mexican tax authority as part of the business acquisitionin Mexico with a corresponding liability that has been included in accounts payable to be paid to the seller.Also included in other receivables are advances to merchants and other revenues due to the Company. The Company periodically evaluates its accounts receivable and other receivables for collectability. TheCompany reviews historical loss experience, the financial position of its customers and known or expectedtrends when estimating the allowance for doubtful accounts. As of December 31, 2018 and 2017, allowance fordoubtful accounts were $0.4 million and zero, respectively. (f)InventoryInventory, consisting primarily of electronic POS terminals and prepaid mobile phone cards, is stated at thelower of cost or net realizable value. Cost is determined by using the first in first out (“FIFO”) method. (g)Earnings Per ShareBasic earnings per Class A common stock is computed by dividing the net income attributable to EVO, Inc. bythe weighted average number of Class A common stock outstanding from May 23, 2018 to December 31, 2018.Diluted earnings per Class A common stock is calculated by dividing the net income attributable to EVO, Inc.by the diluted weighted average Class A common stock outstanding during the period, which includesunvested stock options, restricted stock units (“RSUs”), and restricted stock awards (“RSAs”), and commonmembership interests of EVO, LLC (“LLC Interests”) corresponding to each Class C common share and Class Dcommon share that are exchangeable for shares of Class A common stock for the period after the closing of theIPO, excluding anti-dilutive securities. The dilutive effect of outstanding share-based compensation awards, ifany, is reflected in diluted earnings per Class A common stock by application of the treasury stock method or if-converted method, as applicable. Refer to Note 2, “Earnings Per Share,” for further information. 79 Table of Contents(h)Settlement Processing Assets and LiabilitiesIn certain markets, the Company is a member of various card networks, allowing it to process and fundtransactions without third party sponsorship. In other markets, the Company has Member Banks for whom theCompany facilitates payment transactions. These arrangements allow the Company to route transactions underthe Member Banks’ control and identification numbers to clear card transactions through card networks.Funds settlement refers to the process of transferring funds for sales and credits between card issuers andmerchants. The standards of the card networks restrict non-members from performing funds settlement oraccessing merchant settlement funds, and, instead, require that these funds be in the possession of the MemberBanks until the merchant is funded. However, in certain markets and in accordance with the terms of theCompany’s Bank Sponsorship Agreements with its Member Banks, funds settlement generally follows a netsettlement process.Timing differences, interchange expense, Merchant Reserves, and exception items cause differences betweenthe amount the Member Banks receives from the card networks and the amount funded to the merchants.Settlement processing assets and obligations represent intermediary balances arising in the settlement process.A summary of these amounts are as follows: December 31, December 31, 2018 2017 (In thousands)Settlement processing assets: Receivable from card networks $195,817 $342,803Receivable from merchants 52,513 96,466Totals $248,330 $439,269 Settlement processing obligations: Settlement liabilities $(320,492) $(372,642)Merchant reserves (107,836) (111,876)Totals $(428,328) $(484,518) (i)Equipment and ImprovementsEquipment and improvements are stated at cost less accumulated depreciation. Card processing, officeequipment, computer software, and furniture and fixtures are depreciated over their respective estimated usefullives, on a straight line basis. Leasehold improvements are depreciated over the lesser of the estimated usefullife of the asset or the lease term. Maintenance and repairs, which do not extend the useful life of the respectiveassets, are charged to expense as incurred.(j)Deferred Financing CostsThe costs associated with obtaining debt financing are capitalized and amortized over the term of the relateddebt. Such costs are shown as a reduction of the long-term debt.80 Table of Contents(k)Goodwill and Intangible AssetsThe Company regularly evaluates whether events and circumstances have occurred that indicate the carryingamounts of goodwill, acquired merchant contract portfolios and other intangible assets may not be recoverable.Goodwill represents the excess of the consideration transferred over fair value of identifiable tangible net assetsand intangible assets acquired through acquisitions. The Company evaluates its goodwill and indefinite-livedintangible assets, consisting of certain unamortized trade names, for impairment annually as of October 1, ormore frequently as circumstances warrant.For 2018, in assessing whether goodwill and indefinite-lived intangibles were impaired in connection with itsannual impairment test performed during the fourth quarter of 2018 using October 1, 2018 carrying values, theCompany performed a qualitative assessment to determine whether it would be necessary to perform aquantitative analysis, as prescribed by ASC 350, Intangibles - Goodwill and Other, to assess the Company'sgoodwill and indefinite-lived intangible assets for indicators of impairment. A qualitative assessment includesconsideration of macroeconomic conditions, industry and market considerations, changes in certain costs,overall financial performance, and other relevant entity specific events. In performing its qualitative assessment,the Company considered the results of the step-one test performed in 2017 and the financial performance of theNorth America and Europe reporting units during 2018. Based upon such assessment, the Company alsodetermined that it was more likely than not that the fair values of these reporting units exceeded their carryingamounts for 2018. As of December 31, 2018, there were no significant events since the timing of the Company’sannual impairment test that would have triggered the need for a further assessment for indicators of impairment.For 2017, the Company utilized the two-step approach to determine whether events or circumstances haveoccurred giving rise to the need for further quantitative testing. In the first step, the fair value for the reportingunit is compared to its carrying value including goodwill. In the event that the fair value of the reporting unitwas determined to be less than the carrying value, a second step is performed which compares the implied fairvalue of the reporting unit’s goodwill to the carrying value of the goodwill. The implied fair value for thegoodwill is determined based on the difference between the fair value of the reporting unit and the fair value ofthe net identifiable assets. If the implied fair value of the goodwill is less than its carrying value, the differenceis recognized as an impairment.Finite-lived assets include merchant contract portfolios, marketing alliance agreements, trademarks, internallydeveloped software and non-competition agreements stated net of accumulated amortization or impairmentcharges and foreign currency translation adjustments.Merchant contract portfolios consist of merchant contracts acquired from third parties that will generate revenuefor the Company. The useful lives of merchant contract portfolios are determined using forecasted cash flows,based on, among other factors, estimates of revenue, expenses, and merchant attrition associated with theunderlying portfolio of merchant accounts. The useful lives are determined based upon the period of time overwhich a significant portion of the economic value of such assets are expected to be realized. The useful life ofmerchant contract portfolios is 7 to 19 years. Amortization of merchant contract portfolios is accelerated basedon the present value of the portfolios’ forecasted cash flows.Acquired marketing alliance agreements and certain acquired trademarks are amortized on a straight-line basisover 5 to 21 years.Internally developed software has a useful life of 3 to 7 years using the straight-line method. Factors such asobsolescence, technology, competition, and other economic factors have been considered when determiningthe useful life of internally developed software. Internally developed software is capitalized during thedevelopmental phase of a project, and amortization commences when the software is ready to be placed into useby the Company. Expenses incurred before the completion of the preliminary project stage are expensed asincurred.81 Table of ContentsNon-competition agreements are amortized on a straight-line basis over 2 to 4 years based on the term of theagreement.When factors indicate that long-lived assets should be evaluated for possible impairment, the Company assessesits recoverability by determining whether the carrying value will be recovered through its future undiscountedcash flows and from its ongoing use, and if applicable, its eventual disposition. When the carrying valueexceeds its fair value, an impairment loss is recognized in an amount equal to the difference.For the year ended December 31, 2018, the Company recognized a non-cash impairment charge of $14.6million relating to indefinite-lived trademarks, primarily related to the accelerated integration of the SterlingPayment Technologies, LLC (“Sterling”) tradename into the EVO portfolio in November 2018. No goodwillimpairment was recognized in the year ended December 31, 2018.For the years ended December 31, 2017 and 2016, there was no goodwill or long-lived asset impairment.(l)Revenue RecognitionThe Company recognizes revenue when (1) it is realized or realizable and earned, (2) there is persuasiveevidence of an arrangement, (3) delivery and performance has occurred, (4) there is a fixed or determinable salesprice, and (5) collection is reasonably assured. The Company primarily earns revenue from payment processing services. Payment processing service revenueis based on a percentage of transaction value and on specified amounts per transaction or service, and isrecognized as such services are performed.The Company also earns revenue from the sale and rental of electronic POS equipment. Revenue from the saleof these products is recognized when goods are shipped and title passes to the customer. Revenue from therental of electronic POS equipment is recognized monthly as earned. These revenues are presented in“Processing and other revenue” in the below table and totaled $44.0 million, $36.2 million and $36.5 millionfor the years ended December 31, 2018, 2017 and 2016, respectively. Such rental arrangements are consideredmultiple element arrangements. The Company follows guidance in ASC 605-25, Revenue Recognition –Multiple-Element Arrangements. However, because the non-processing elements are primarily accounted for asrentals with a similar delivery pattern, the elements have the same revenue recognition timing. Commissions,payable to referral and reseller partners, are recognized as incurred.A summary of revenue is as follows: Year Ended December 31, 2018 2017 2016 (In thousands) Processing and other revenue $1,889,375 $1,744,520 $1,404,392Interchange and card network fees (1,099,504) (1,012,167) (769,221)Subtotal 789,871 732,353 635,171Commissions (159,396) (159,314) (146,225)Card network processing costs and other (65,721) (68,289) (69,725)Revenue $564,754 $504,750 $419,221 82 Table of ContentsDepending on the country, the Company enters into a Bank Sponsorship Agreement with Member Banks inorder to provide processing services to its merchants, as either a member of the card networks or as an ISOthrough a processor. The Member Banks’ sponsorship authorizes the Company to process card networktransactions under the applicable guidelines of the Member Banks. The Member Banks are ultimatelyresponsible for the merchant relationship but, under this agreement, passes the initial responsibility forsettlement processing and risk of loss to the Company. As a member of the card networks, the Company has theultimate responsibility for the merchant relationship, settlement processing and risk of loss. As a member of thecard networks or under the ISO relationship, receipts from processors and merchants are presented in“Processing and other revenue” in the above table.The Company does not determine interchange rates; they are set by the card networks. These fees are presentedas “Interchange and card network fees” in the above table.The rights of the Company to earn service fee revenue from the receipt of fees from merchants are generated by anegotiated agreement with ISOs or other third parties. The ISO or third party acts as supplier a of products orservices by achieving most of the shared risks and rewards as principal in the merchant agreement; theCompany passes the ISO’s share of merchant receipts to them as “Commissions” as presented in the above table.Card network processing costs and other are assessed by the card networks for authorization, settlement, andcard network access services. The Company collects these amounts through the processing cycle and reimbursesthe card networks. The Company is not responsible for the fulfilment or acceptance of these services andpresents these costs as “Card network processing costs and other” in the above table.The Company follows the requirements of ASC 605-45, Principal Agent Considerations, which states that thedetermination of whether a company should recognize revenue based on the gross amount billed to a customeror the net amount retained is a matter of judgment that depends on the facts and circumstances of thearrangement and that certain factors should be considered in the evaluation in determining the paymentprocessing service revenue reporting.The determination of gross versus net recognition for interchange and card network fees, commissions and cardnetwork processing costs and other fees requires judgment that depends on the relevant facts and circumstances.The Company recognizes its processing and other revenue on a gross basis as the Company is the primaryobligor for providing processing services. The Company recognizes its fees charged to customers net ofinterchange and card network fees, commissions, and card network processing costs and other fees because thefees are assessed to the Company’s merchant customers by other entities as it is not the primary obligor.83 Table of Contents(m)Share-Based CompensationThe Company accounts for share-based compensation transactions with employees in accordance with ASC718, Compensation: Stock Compensation. ASC 718 requires a share-based compensation transaction withemployees to be measured based on the fair value of the awards issued. The Company granted equity awardsprior to the IPO (“pre-IPO awards”). These pre-IPO awards contained a performance condition contingent on aliquidity event, as well as other metrics. These pre-IPO awards were modified on the IPO date by thecompensation committee of the board of directors and the fair value of the modified awards were determinedbased on the IPO price per share of the Class A common stock. The majority of these awards were fully time-vested and the Company recorded share-based compensation expense to fully recognize the value of theseawards on that date. With respect to equity awards issued as compensation in connection with theReorganization Transactions and the IPO pursuant to the 2018 Omnibus Equity Incentive Plan (the “2018Plan”), the fair value of the stock option awards are determined through the application of the Black-Scholesmodel. The fair values of RSUs and RSAs were determined based on the IPO per share price or the market priceat the time of grant. The fair value of awards granted to employees is expensed based on the vesting conditionsof the awards. The Company has elected to recognize forfeitures at the time they occur. Refer to Note 19, “StockCompensation Plans and Share-Based Compensation Awards,” for further information on the share-basedcompensation awards. (n)Income TaxesSubsequent to consummation of the Reorganization Transactions and the IPO, the Company is subject to U.S.federal, state and local income taxes on its taxable income. The Company's subsidiaries are subject to incometaxes in the respective jurisdictions (including foreign jurisdictions) in which they operate. Prior to theconsummation of the Reorganization Transactions and the IPO, provision for United States federal, state andlocal income tax was not material, as EVO, LLC is a limited liability company and is treated as a pass-throughentity for United States federal, state, and local income tax purposes. EVO, LLC’s domestic or foreign subsidiary’s income tax filings are periodically audited by the local taxauthorities. EVO, LLC’s open tax years by jurisdiction are as follows as of December 31, 2018: Jurisdiction YearsCanada 2015-2017Czech Republic 2016-2017Germany 2014-2017Gibraltar 2016-2017Ireland 2014-2017Malta 2016-2017Mexico 2015-2017Poland 2013-2017Spain 2014-2017United Kingdom 2014-2017 Initial years shown open to income tax audit reflect the first taxable year of organization or the first year inwhich the Company has total or partial ownership of the legal entity in the Czech Republic, Gibraltar, Malta,and Mexico.84 Table of ContentsDeferred TaxesThe Company accounts for income taxes under the asset and liability method, which requires the recognition ofdeferred tax assets and liabilities for the expected future tax consequences of events that have been included inthe consolidated financial statements. Under this method, deferred tax assets and liabilities are determined onthe basis of the differences between the consolidated financial statements and tax basis of assets and liabilitiesusing enacted tax rates in effect for the year in which the differences are expected to reverse.The Company recognizes deferred tax assets to the extent that it is expected these assets are more likely thannot to be realized. In making such a determination, the Company considers all available positive and negativeevidence, including future reversals of existing taxable temporary differences, projected future taxable income,tax-planning strategies, and results of recent operations. If the Company determines that it would be able torealize our deferred tax assets in the future in excess of their net recorded amount, the Company would make anadjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.Deferred tax assets and deferred tax liabilities are measured using tax rates expected to apply for the periodwhen the asset will be recovered or the liability will be settled, based on jurisdictional tax rates (and taxregulations) in effect. The effect of a change in tax rates is recognized in the consolidated statements ofoperations and comprehensive loss in the period that includes the enactment date.Management assesses the available positive and negative evidence to estimate if sufficient future taxableincome will be generated to use existing deferred tax assets in each individual tax jurisdiction. A significantpiece of objective negative evidence evaluated was the cumulative loss incurred over the three-year periodended December 31, 2018. Such objective evidence limits the ability to consider other subjective evidencesuch as our projections of future growth. On the basis of this evaluation, as of December 31, 2018 and 2017, a valuation allowance of $18.9 million and$15.9 million, respectively, has been established to reduce the carrying amount of the deferred tax to an amountthat is more than likely than not to be realized in various European jurisdictions. The amount of the deferredtax asset considered realizable, however, could be adjusted if estimates of future taxable income during thecarryforward period are reduced or increased or if objective negative evidence in the form of cumulative lossesis no longer present and additional weight may be given to subjective evidence such as our projections forgrowth.Uncertain Tax PositionsThe Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process:(1) determine whether it is more likely than not that the tax positions will be sustained on the basis of thetechnical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognitionthreshold, recognize the largest amount of tax benefit that is more than 50 percent likely to be realized uponultimate settlement with the related tax authority. The Company is subject to tax audits in various jurisdictionsand regularly assesses the likely outcome of such audits in order to determine the need for liabilities foruncertain tax benefits. As of December 31, 2018 and 2017, the Company’s management believed that, based onits evaluation of the tax positions including its filed tax returns, there were no uncertain tax positions thatrequired recognition or disclosure in the consolidated financial statements. The Company’s managementcontinually evaluates the appropriateness of liabilities for uncertain tax positions considering factors such asstatutes of limitations, audits, proposed settlements, and changes in tax law.85 Table of ContentsThe Company recognizes interest and penalties related to unrecognized tax benefits within the income taxexpense line in the accompanying consolidated statements of operations. Accrued interest and penalties areincluded within the related tax liability line in the consolidated balance sheets.(o)Nonredeemable Non-controlling Interests and Redeemable Non-controlling InterestsNon-controlling interests relate to the portion of equity in a consolidated subsidiary not attributable, directly orindirectly, to the Company. Where redemption of such non-controlling interests are solely within the control ofthe Company, such interests are reflected in the consolidated balance sheets as “Nonredeemable non-controlling interests” and in the consolidated statements of operations and comprehensive loss as “Net incomeattributable to non-controlling interests.”RNCI relates to non-controlling interests that are redeemable upon the occurrence of an event that is not solelywithin the Company’s control and are reported in the mezzanine section between total liabilities andshareholders’ deficit, as temporary equity in the Company’s consolidated balance sheets. The Company adjustsRNCI to reflect its estimate of the maximum redemption amount each year against the Company’s shareholders’deficit.Refer to Note 13, “Redeemable Non-controlling Interests,” for further information on the components of RNCI.(p)Foreign-Currency TranslationThe Company has operations in foreign countries whose functional currency is the local currency. Gains andlosses on transactions denominated in currencies other than the functional currency are included in determiningnet income (loss) for the period.The assets and liabilities of subsidiaries whose functional currency is a foreign currency are translated at theperiod end exchange rate. Income statement items are translated at the average monthly rates prevailing duringthe year. The resulting translation adjustment is recorded as a component of other comprehensive income (loss)and is included in shareholders’ deficit.(q)Fair-Value MeasurementsThe Company follows ASC 820, Fair Value Measurements, which defines fair value as the price to sell an assetor paid to transfer a liability in an orderly transaction between market participants at the measurement date. Thedetermination of fair value is based on the principal or most advantageous market in which the Company couldparticipate and considers assumptions that market participants would use when pricing the asset or liability,such as inherent risk, transfer restrictions, and risk of nonperformance. Also, determination of fair value assumesthat market participants will consider the highest and best use of the asset.The Company uses the hierarchy prescribed in the aforementioned accounting guidance for fair valuemeasurements, based on the available inputs to the valuation and the degree to which they are observable or notobservable in the market.The three levels of the hierarchy are as follows:Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities accessible to thereporting entity at the measurement date,Level 2 Inputs—Other than quoted prices included in Level 1 inputs that are observable for the asset orliability, either directly or indirectly, for substantially the full term of the asset or liability, andLevel 3 Inputs—Unobservable inputs for the asset or liability used to measure fair value allowing for inputsreflecting the Company’s assumptions about what other market participants would use in pricing the asset orliability, including assumptions about risk.86 Table of Contents(r)Segment ReportingThe Company has two operating segments: North America and Europe. Additionally, the Company hasdetermined that the reportable segments are the same as the operating segments. The alignment of theCompany’s segments is designed to establish lines of business that support the geographical markets theCompany operates in and allow the Company to further globalize the Company’s solutions while workingseamlessly with the Company’s teams across these markets.The North America segment comprises the geographical markets of the United States, Canada and Mexico. TheEurope segment comprises the geographical markets of Western Europe (Spain, United Kingdom, Ireland andGermany) and Eastern Europe (Poland and Czech Republic). The Company also provides general corporateservices to its segments through a corporate function, which are not allocated. Such costs are reported as“Corporate.” Refer to Note 17, “Segment Information,” for further information on segment reporting.(s)Treasury StockThe Company accounts for treasury stock activities under the cost method whereby the cost of the acquiredstock is recorded as treasury stock. All shares of treasury stock reside as Class A common stock.(t)Recent Accounting PronouncementsNew accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”) orother standards setting bodies that are adopted by the Company are adopted as of the specified effective date.Unless otherwise discussed, management believes that the impact of recently issued standards that are not yeteffective will not have a material impact on the Company’s consolidated financial statements uponadoption. As the Company is considered an emerging growth company under the JOBS Act adoption of newaccounting standards will be consistent with private company effective dates.Recently Adopted Accounting PronouncementsIn March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Compensation-StockCompensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This updatesimplifies several aspects of the accounting for share-based payments, including the accounting for excess taxbenefits and deficiencies, forfeitures, and statutory tax withholding requirements, as well as classification on thestatement of cash flows related to excess tax benefits and employee taxes paid when an employer withholdsshares for tax-withholding purposes. The ASU is effective for annual periods beginning after December 15,2017, and interim periods within those annual periods beginning after December 15, 2018. Early adoption ispermitted. An entity that elects early adoption must adopt all of the amendments in the same period. TheCompany has early adopted ASU 2016-09 on a prospective basis effective July 1, 2018. The adoption of thisstandard did not have an impact on the Company’s consolidated financial statements.In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other. This update simplifies thesubsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Theamendments in this update are effective for annual or interim goodwill impairment tests in fiscal yearsbeginning after December 15, 2021. The Company has early adopted ASU 2017-04 on a prospective basis,effective January 1, 2018. The adoption of this standard did not have a material impact on the Company’sconsolidated financial statements.87 Table of ContentsRecently Issued Accounting Pronouncements Not Yet AdoptedIn March, April and May 2016, the FASB issued ASU 2016-08, 2016-10 and 2016-12, Revenue from Contractswith Customers. These updates clarify certain definitions and topics with respect to ASU 2014-09. In May 2014,the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenuerecognition requirements in ASC 605, Revenue Recognition. The new standard provides a five-step analysis oftransactions to determine when and how revenue is recognized, based upon the core principle that revenue isrecognized to depict the transfer of goods or services to customers in an amount that reflects the considerationto which the entity expects to be entitled in exchange for those goods or services. The new standard alsorequires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flowsarising from contracts with customers. The new standard, as amended, is effective for the Company for fiscalyears beginning after December 15, 2018, and interim periods within those fiscal years. Companies arepermitted to either apply the requirements retrospectively to all prior periods presented, or apply therequirements in the year of adoption, through a cumulative adjustment.The Company has performed a review of the requirements of the new revenue standard and have monitored theactivity of the FASB and the transition resource group as it relates to specific interpretive guidance. TheCompany assessed the effects of the new revenue standard in a multi-phase approach. In the first phase, the teamanalyzed customer contracts for our most significant contract categories, applied the five-step model of the newstandard to each contract category and compared the results to current accounting practices. In the secondphase, the Company quantified the potential effects, assessed additional contract categories and principal agentconsiderations, revised accounting policies and considered the effects on related disclosures and/or internalcontrol over financial reporting. The third phase, which will complete the adoption and implementation of thenew revenue standard, includes quantifying the cumulative-effect adjustment (including tax effects).The new standard will change the amount and timing of certain revenue and expenses to be recognized undervarious arrangement types. In addition, it could increase the administrative burden on the Company’soperations to properly account for customer contracts and provide the more expansive required disclosures.More judgment and estimates will be required when applying the requirements of the new standard than arerequired under existing GAAP, such as identifying performance obligations in contracts, estimating the amountof variable consideration to include in transaction price, allocating transaction price to each separateperformance obligation and estimating expected periods of benefit for certain costs. The Company expects thetiming of revenue to be recognized under ASU 2014-09 for the Company’s most significant contract category,core payment services, will be similar to the timing of revenue recognized under current accounting practices.The Company will evaluate, on an ongoing basis, costs to obtain contracts with customers, as well as certainimplementation and set-up costs, and, in some cases, may be required to amortize these costs. Finally, the newstandard requires additional disclosures regarding revenues and related capitalized contract costs, if any.The Company is adopting the new revenue standard using a modified retrospective basis on January 1, 2019.The Company does not expect the adoption to result in a material cumulative adjustment to retained earnings. The Company currently expects the most significant ongoing impact of adopting the new revenue standard in2019 to be driven by changes in principal versus agent considerations, with the majority of the change overallin total net revenue attributable to the Company reflecting our network processing fees on a net basisprospectively, as opposed to our gross presentation of $91.6 million in 2018. The Company does not expect theadoption of the new revenue standard to have a material impact on net income. The Company will includeadditional disclosures of the amount by which each consolidated financial statement line item is affectedduring 2019, as compared to the guidance that was in effect before the change, and an explanation of thereasons for any significant changes. 88 Table of ContentsIn August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Cash Receipts andCash Payments. This update addresses eight specific cash flow issues with the objective of reducing theexisting diversity in cash flow presentation practices. The amendment is effective for fiscal years beginningafter December 15, 2018, and interim periods within those fiscal years. The Company has evaluated the impactof this ASU and concluded there is no resulting material impact to the presentation on the Company’sconsolidated statements of cash flows.In July 2018, the FASB issued ASU 2018-10 and 2018-11, Leases. These updates clarify certain definitions andtopics with respect to ASU 2016-02. In February 2016, the FASB issued ASU 2016-02, Leases. This standardaims to increase transparency and comparability among organizations by recognizing lease assets and leaseliabilities on the balance sheet and disclosing key information about leasing arrangements. The new standard iseffective for the Company for fiscal years beginning after December 15, 2019, and interim periods within thosefiscal years. Early application of this ASU is permitted for all entities. The Company is in the process ofevaluating the impact of this ASU on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. This update provides clarificationand modifies the disclosure requirements on fair value measurement in Topic 820, Fair Value Measurement.The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2019, with early adoption permitted. The adoption of this ASU is not expected to have a materialimpact on the Company’s consolidated financial statements. (2)Earnings Per ShareAs described in Note 18, “Shareholders’ Equity,” on May 22, 2018, EVO, LLC’s limited liability company agreementwas amended and restated effective as of May 25, 2018, to, among other things, reclassify all of the then existingmembership interests of EVO, LLC into a new single class of common membership interests. Additionally, theCompany entered into a series of transactions that resulted in the issuance of Class A common stock, Class B commonstock, Class C common stock and Class D common stock to the holders of LLC Interests and commenced the IPOresulting in the public issuance of additional shares of the Company’s Class A common stock. Earnings per shareinformation for the year ended December 31, 2018 has been presented on a prospective basis and reflects only the netincome (loss) available for holders of the Company’s Class A common stock, as well as both basic and dilutedweighted average Class A common stock outstanding, for the period from May 23, 2018 through December 31, 2018.Earnings per share information prior to May 23, 2018 is not presented since the ownership structure of EVO, LLC isnot a common unit of ownership of the Company. 89 Table of ContentsThe following table sets forth the computation of the Company's basic and diluted net income per Class A commonshare (in thousands, except share and per share data): May 23 - December 31 2018 Numerator: Net loss attributable to EVO Payments, Inc. $(14,712) Denominator: Weighted average Class A common stock outstanding 21,081,447Effect of dilutive securities —Total dilutive securities 21,081,447 Earnings per share: Basic $(0.70)Diluted $(0.70) Antidilutive securities: Stock options 2,086,153RSUs 505,975Convertible Class C common stock 2,461,055Convertible Class D common stock 16,785,552RSAs 42,087 Earnings per share is not separately presented for Class B common stock, Class C common stock and Class D commonstock since they have no economic rights to the income or loss of the Company. Class B common stock is notconsidered when calculating dilutive EPS as this class of common stock may not convert to Class A common stock.Class C common stock and Class D common stock are considered in the calculation of dilutive EPS on an if-convertedbasis as these classes, together with the related LLC Interests, have exchange rights into Class A common stock thatcould result in additional Class A common stock being issued. However, the Company is in a net loss position and, assuch, Class C common stock and Class D common stock are therefore anti-dilutive. All other potentially dilutivesecurities are determined based on the treasury stock method. Refer to Note 18, “Shareholders’ Equity,” for furtherinformation on rights to each class of stock. (3)Tax Receivable AgreementIn connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”) that requires theCompany to make payments to the Continuing LLC Owners, as defined in Note 18, “Shareholders’ Equity,” that aregenerally equal to 85% of the applicable cash tax savings, if any, realized as a result of favorable tax attributes thatwill be available to the Company as a result of the Reorganization Transactions, exchanges of EVO, LLC interests forClass A common stock, and payments made under the TRA. Payments will occur only after the filing of U.S. federaland state income tax returns and realization of cash tax savings from the favorable tax attributes. The first payment isdue between 95 to 125 days after the filing of the Company’s tax return for the year ended December 31, 2018 whichis due April 15, 2019, however, the due date can be extended until October 15, 2019. 90 Table of ContentsAs a result of the exchange of LLC Interests and shares of Class C common stock and Class D common stock for sharesof Class A common stock sold in connection with the IPO, the Secondary Offering and other member exchanges, theCompany recorded a deferred tax asset of $55.6 million associated with the increase in tax basis. Payments to theContinuing LLC Owners related to the purchases, the exchanges as described in Note 17, “Shareholders’ Equity,” willaggregate to approximately $47.2 million, ranging from zero to $3.8 million per year over the next 15 years. TheCompany recorded a corresponding increase to paid-in capital for the difference between the TRA liability and therelated deferred tax asset. As of December 31, 2018, the Company’s remaining deferred tax asset and payment liabilitypursuant to the TRA were approximately $54.6 million and $47.2 million, respectively. The amounts recorded as ofDecember 31, 2018, approximate the current estimate of expected tax savings and are subject to change after the filingof the Company’s U.S. federal and state income tax returns for the year ended December 31, 2018. Future paymentsunder the TRA with respect to subsequent exchanges would be in addition to these amounts. For the TRA, the cash savings realized by the Company are computed by comparing the actual income tax liability ofthe Company to the amount of such taxes the Company would have been required to pay had there been no increase tothe tax basis of the assets of EVO, LLC as a result of the purchase or exchange of LLC Interests: no tax benefit from thetax basis in the intangible assets of EVO, LLC on the date of the IPO, and no tax benefit as a result of the NetOperating Losses (“NOLs”) generated by the increase in our tax basis of the assets in EVO, LLC. Subsequentadjustments of the TRA obligations due to certain events (e.g., changes to the expected realization of NOLs or changesin tax rates) will be recognized within operating expenses in the consolidated statements of operations andcomprehensive loss. (4)Acquisitions 2018 Acquisitions(a)EVO Payments International Corp. - CanadaIn February 2018, a subsidiary of EVO, Inc. acquired the remaining 30% membership interest in EVO PaymentsInternational Corp. - Canada (“EVO Canada”) from 7097794 Canada, Inc. for $0.9 million of contingentconsideration. This transaction resulted in a reduction to members’ deficit and nonredeemable non-controllinginterests of $0.4 million and $0.5 million, respectively. EVO Canada is presented in the Company’s NorthAmerica segment.(b)Nationwide Payment Solutions, LLCIn March 2018, a subsidiary of EVO, Inc. acquired the remaining 38% membership interest in NationwidePayment Solutions, LLC (“NPS”) for an upfront payment of $16.9 million and contingent consideration of $3.8million to be paid in April 2019. This transaction resulted in a reduction to members’ deficit andnonredeemable non-controlling interests of $20.1 million and $0.6 million, respectively. NPS is presented inthe Company’s North America segment.(c)Liberbank, S.A.In April 2018, a subsidiary of EVO, Inc. acquired a portion of the merchant acquiring assets of Liberbank, S.A.and Banco de Castilla la Mancha, S.A. for €7.9 million ($9.5 million, based on the foreign exchange rate at thetime of the acquisition). This asset acquisition is presented in the Company’s Europe segment. Equipment andintangible assets acquired consist of card processing equipment, merchant contract portfolios, marketingalliance agreements, and trademarks with useful lives of 3 years, 5 years, 15 years, and 15 years, respectively.91 Table of Contents(d)Nodus Technologies, Inc.In May 2018, a subsidiary of EVO, Inc. acquired 100% of the outstanding shares of Nodus Technologies, Inc.(“Nodus”) for $18.0 million. The total consideration includes a holdback liability of $0.8 million. Nodus ispresented in the Company’s North America segment. The pro forma impact of this acquisition was not materialto the Company’s historical consolidated operating results and is, therefore, not separately presented.Equipment and intangible assets consist of office equipment, computer software, merchant contract portfolios,trademarks, internally developed software, and non-competition agreements with useful lives of 5 to 7 years, 3years, 15 years, 20 years, 10 years and 3 years, respectively.(e)Federated Payment Systems, LLC/Federated Payment Canada Corp.In September 2018, a subsidiary of EVO, Inc. acquired the remaining 67% of the outstanding membershipinterests of Federated Payment Systems, LLC (“Federated US”) and 100% of the outstanding shares of FederatedPayment Canada Corporation (“Federated Canada,” together with Federated US, “Federated”) for $38.2million. The total consideration includes an aggregate holdback liability of $0.5 million. Certain acquisition-related expenses were incurred in conjunction with the Federated acquisition in the amount of $0.4 million.Federated maintains diverse sales channels which will complement the Company’s strategic distributionrelationships. As a result of this acquisition, the Company recognized goodwill. Federated is presented in theCompany’s North America segment.The Company accounted for the Federated acquisition as a business combination during the third quarter of2018. During the fourth quarter of 2018, the Company finalized its allocation of the purchase price to acquiredassets and liabilities assumed, which resulted in certain adjustments to previously disclosed estimates.Based upon the purchase price, the Company’s understanding of the Federated business and valuation, theallocation is as follows: Estimated Fair Value Measurement asPreviously Period Fair Value Reported Adjustments as Adjusted 9/30/2018 12/31/2018 (In thousands)Tangible assets acquired $1,863 $(161) $1,702Deferred tax liability — (1,357) (1,357)Amortizable intangible assets Trademarks 2,650 (1,450) 1,200Merchant contract portfolios 19,036 (7,636) 11,400Goodwill 23,328 10,349 33,677Total net assets acquired $46,877 $(255) $46,622 Intangible assets of $12.6 million have been allocated to amortizable intangible assets consisting of trademarksand merchant contract portfolios, with estimated useful lives of 5 years and 10 years, respectively. The changein the estimated values of amortizable intangible assets is primarily due to obtaining information related to themerchant portfolio acquired from Federated and therefore revising certain estimates in determining fair value.On the date of acquisition, the book value of the investment in Federated US was zero. The Company recordeda gain on the acquisition of unconsolidated investee of $8.4 million to step up carrying value of the investmentto fair value as of the acquisition date. The gain on acquisition of unconsolidated investee has been recorded onthe consolidated statements of operations and comprehensive loss.92 Table of ContentsGoodwill totaling $33.7 million represents the excess of the purchase price over the fair value of the nettangible and intangible assets acquired. Goodwill generated from the Federated acquisition is deductible forincome tax purposes. Pro forma information has not been presented because the effect of this acquisition wasnot material on the Company’s consolidated operating results.(f)ClearONE, S.L.In October 2018, a subsidiary of EVO, Inc. acquired 100% of the outstanding shares of ClearONE for €5.4million ($6.3 million based on the foreign exchange rate at the time of the acquisition). The total considerationincludes a holdback liability of $0.5 million. ClearONE is presented in the Company’s Europe segment. Thepro forma impact of this acquisition was not material to the Company’s historical consolidated operating resultsand is, therefore, not separately presented. Equipment and intangible assets consist of card processing, merchantcontract portfolios, trademarks, internally developed software, and non-competition agreements with usefullives of 3 to 5 years, 5 years, 5 years, 5 years, and 2 to 3 years, respectively.2017 Acquisitions(g)Sterling Payment Technologies, LLCIn January 2017, a subsidiary of EVO, Inc. acquired 100% of outstanding units of Sterling for $196.8 million,including deferred purchase price of $71.2 million, a holdback liability of $0.2 million and an estimatedworking capital adjustment of $0.3 million. The Company agreed to a deferred purchase price of $70.0 millionwhich was paid in full in May 2018. Total costs incurred in connection with this acquisition were $1.3 millionand are presented in selling, general and administrative expenses. Sterling is presented in the Company’s NorthAmerica segment.The table below presents the allocation of the purchase price of Sterling to the assets acquired and liabilitiesassumed based on their fair values. As of the acquisition date (In thousands)Cash and cash equivalents $601Accounts receivable 945Prepaid expenses and other 905Inventory 851Equipment and improvements 2,711Amortizable intangible assets Trademarks 14,400Internally developed software 7,300Non-competition agreements 6,200Merchant contract portfolios 27,300Marketing alliance agreements 30,200Accounts payable and accrued expenses (2,626)Total net fair value excluding goodwill 88,787Goodwill 107,978Total purchase price $196,765 Intangible assets consist of an indefinite-lived trade name, internally developed software, non-competitionagreements, marketing alliance agreements and merchant contract portfolios with useful lives of 7 years, 2 to 4years, 18 to 21 years, and 12 to 18 years, respectively. Multiple assets were acquired for each of the followingclasses of asset resulting in variability in the assets useful life: non-competition agreements, marketing allianceagreements and merchant contract portfolios. Acquired goodwill is expected to be tax deductible.93 Table of ContentsThe Company views this acquisition as an important part of its long-term strategy of expanding the Company’sbusiness domestically and the goodwill arising from the acquisition was attributable to strategic benefit andgrowth opportunities, including alternative sales channels and operating synergies that the Company expects torealize.(h)Vision Payments Solutions, LLCIn March 2017, a subsidiary of EVO, Inc. acquired the remaining 25% membership interest in Vision PaymentsSolutions, LLC (“VPS”) from Vision Payments Solutions, Inc., resulting in a reduction to members’ deficit andnonredeemable non-controlling interests of $0.4 million. VPS is presented in the Company’s North Americasegment.(i)Pineapple Payments, LLCIn April 2017, a subsidiary of EVO, Inc. acquired the remaining 75% of the units of Pineapple Payments, LLC(“Pineapple”) for $8.4 million, inclusive of contingent consideration of $0.7 million. Pineapple is presented inthe Company’s North America segment. The pro forma impact of this acquisition was not material to theCompany’s historical consolidated operating results and is, therefore, not presented. Intangible assets consist ofmerchant contract portfolios and marketing alliance agreements with useful lives of 7 years and 5 years,respectively.(j)Zenith Merchant Services, LLCIn May 2017, a subsidiary of EVO, Inc. acquired the remaining 49% membership interest in Zenith MerchantServices, LLC (“Zenith”) for $9.2 million, inclusive of contingent consideration of $2.8 million. Thetransaction resulted in an increase to members’ deficit and reduction to nonredeemable non-controllinginterests of $6.8 million and $2.4 million, respectively. Zenith is presented in the Company’s North Americasegment. (5)Equipment and ImprovementsEquipment and improvements consisted of the following: Estimated Useful Lives in December 31, December 31, Years 2018 2017 (In thousands)Card processing 3-5 $128,244 $102,789Office equipment 3-5 41,771 37,476Computer software 3 44,373 38,669Leasehold improvements various 16,234 12,764Furniture and fixtures 5-7 5,673 5,410Totals 236,295 197,108Less accumulated depreciation (136,947) (106,889)Foreign currency translation adjustment 3,698 6,368Totals $103,046 $96,587 Depreciation expense related to equipment and improvements was $38.5 million, $29.1 million and $25.4 million forthe years ended December 31, 2018, 2017 and 2016, respectively. In the year ended December 31, 2018, equipment and improvements and accumulated depreciation were each reducedby $9.8 million and $8.5 million, respectively, and in the year ended December 31, 2017 by $7.4 million and $7.0million, respectively, primarily related to asset retirements. The Company infrequently sells or disposes of assets thatare not fully depreciated, and this activity represents an insignificant portion of the total reduction.94 Table of Contents (6)Goodwill and Intangible AssetsIntangible assets, net consist of the following: December 31, December 31, 2018 2017 (In thousands)Intangible assets with finite lives: Merchant contract portfolios: Gross carrying value $293,069 $274,780Accumulated amortization (139,159) (113,747)Accumulated impairment losses (5,658) (5,658)Foreign currency translation adjustment (27,975) (26,057)Net 120,277 129,318 Marketing alliance agreements: Gross carrying value 191,879 187,758Accumulated amortization (47,777) (35,509)Accumulated impairment losses (7,585) (7,585)Foreign currency translation adjustment (18,634) (15,561)Net 117,883 129,103 Trademarks, finite-lived: Gross carrying value 28,657 25,084Accumulated amortization (10,748) (8,485)Foreign currency translation adjustment (4,446) (3,701)Net 13,463 12,898 Internally developed software: Gross carrying value 60,876 42,442Accumulated amortization (15,794) (9,760)Accumulated impairment losses (9,324) (9,324)Foreign currency translation adjustment (2,260) (3,247)Net 33,498 20,111 Non-competition agreements: Gross carrying value 6,462 6,200Accumulated amortization (5,316) (2,633)Net 1,146 3,567Total finite-lived, net 286,267 294,997Trademarks, indefinite-lived: Gross carrying value 18,499 18,486Accumulated impairment losses (14,627) —Net 3,872 18,486Total intangible assets, net $290,139 $313,483 Amortization expense related to intangible assets was $48.7 million, $45.0 million and $38.6 million for the yearsended December 31, 2018, 2017 and 2016, respectively. Refer to Note 1, “Description of Business and Summary ofSignificant Accounting Policies,” for further information on the impairment losses for indefinite-lived trademarks. 95 Table of ContentsEstimated amortization expense to be recognized during each of the five years subsequent to December 31, 2018: Amount (In thousands)Years ending: 2019 $48,5402020 43,7422021 38,9192022 28,8212023 25,2812024 and thereafter 100,964Total $286,267 The following represents net intangible assets by segment: December 31, December 31, 2018 2017 (In thousands)Intangible assets, net: North America Merchant contract portfolios $88,141 $89,045Marketing alliance agreements 76,590 82,604Trademarks, finite-lived 2,585 —Internally developed software 20,167 10,431Non-competition agreements 1,089 3,567Trademarks, indefinite-lived 3,872 18,486Total 192,444 204,133 Europe Merchant contract portfolios 32,136 40,273Marketing alliance agreements 41,293 46,499Trademarks, finite-lived 10,878 12,898Internally developed software 13,331 9,680Non-competition agreements 57 —Total 97,695 109,350 Total intangible assets, net $290,139 $313,483 96 Table of ContentsGoodwill activity for the years ended December 31, 2018, 2017 and 2016, in total and by reportable segment, was asfollows: Reportable Segment North America Europe Total (In thousands)Goodwill, gross, as of December 31, 2016 $86,409 $122,366 $208,775Accumulated impairment losses — (24,291) (24,291)Goodwill, net, as of December 31, 2016 86,409 98,075 184,484Business combinations 107,978 — 107,978Foreign currency translation adjustment 1,739 17,477 19,216Goodwill, net as of December 31, 2017 196,126 115,552 311,678 Goodwill, gross, as of December 31, 2017 $196,126 $139,843 $335,969Accumulated impairment losses — (24,291) (24,291)Goodwill, net, as of December 31, 2017 196,126 115,552 311,678Business combinations 44,664 3,636 48,300Foreign currency translation adjustment 47 (7,014) (6,967)Goodwill, net as of December 31, 2018 $240,837 $112,174 $353,011 (7)Other AssetsMembership Interest in Visa Europe Limited Through certain of the Company’s subsidiaries in Europe, the Company was a member of Visa Europe Limited (“VisaEurope”). On June 21, 2016, Visa Inc. (“Visa”) acquired all of the membership interests in Visa Europe. In connection with the acquisition, the Company received approximately €64.0 million ($72.4 million based on theforeign exchange rate at the time of the acquisition) in proceeds from the sale of its membership interest in VisaEurope. Substantially all of the proceeds were recorded as a gain as the carrying value of the Company’s interest wasnominal. The consideration included cash of €47.0 million ($53.2 million based on the foreign exchange rate at thetime of the acquisition), Visa Series C preferred stock which is convertible into Visa common shares of €12.9 million($14.6 million based on the foreign exchange rate at the time of the acquisition) and deferred cash consideration of€4.1 million ($4.6 million based on the foreign exchange rate at the time of the acquisition) as of June 21, 2016. TheVisa Series C preferred stock and deferred cash consideration have been recorded in “Other assets” at their fair valuesas of the date of this transaction. The discount rate used to determine the fair value of the deferred cash considerationwas 2.2%, which was based upon the risk-adjusted borrowing rate of Visa for long-term instruments of a similar tenor.The Company expects to receive the deferred cash consideration shortly after the third anniversary of the sale, or June21, 2019. The fair value of the Visa Series C preferred stock was determined using inputs classified as Level 3 withinthe fair value hierarchy due to the absence of quoted market prices, lack of liquidity and the fact that inputs used tomeasure fair value are unobservable and require management’s judgment. The Visa Series C preferred stock willconvert into Visa common shares at periodic intervals over a 12 year period at Visa’s discretion. Additionally, thedeferred cash consideration could be reduced, and the conversion factor of the Visa Series C preferred stock could beadjusted down based on the outcome of potential litigation in Europe such that the number of Visa common sharesultimately received could be as low as zero. The Visa Series C preferred stock is accounted for prospectively under thecost method. 97 Table of Contents(8)Accounts Payable and Accrued ExpensesThe Company’s accounts payable and accrued expenses consisted of the following: December 31, December 31, 2018 2017 (In thousands)Compensation and related benefits $22,280 $17,465Third-party processing and payment network fees 37,702 36,801Trade accounts payable 44,581 50,545Taxes payable 16,292 8,418Commissions payable to third parties and agents 13,141 10,877Unearned revenue 4,579 2,836Other 22,641 23,808 $161,216 $150,750 (9)Related Party TransactionsRelated party commission expense incurred with minority held subsidiaries of the Company amounted to $32.2million, $38.6 million and $45.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. Thesale of equipment and services to these subsidiaries amounted to $0.4 million, $0.5 million and $0.5 million for theyears ended December 31, 2018, 2017 and 2016, respectively. Related party balances consist of the following: December 31, December 31, 2018 2017 (In thousands)Receivables from sale of POS devices and peripherals $303 $1,609Receivables from related companies 1,560 974Notes receivable, short term 8 42Due from related parties, short term $1,871 $2,625 Notes receivable, long term 915 109Due from related parties, long term $915 $109 Liabilities to related companies 4,824 7,847Due to related parties, short term $4,824 $7,847 ISO commission reserve 385 675Due to related parties, long term $385 $675 Madison Dearborn Partners, LLC (“MDP”), a member of EVO, LLC and shareholder of EVO, Inc., provides theCompany with consulting services related to business development, financing matters, and potential acquisitionactivities on an as needed basis. In addition, the Company reimburses MDP for certain out of pocket expenses. TheCompany made payments of less than $0.1 million, $5.7 million and $0.1 million to MDP for the years endedDecember 31, 2018, 2017 and 2016, respectively, for consulting services and expense reimbursement.Additionally, the Company provides certain professional and other services to Blueapple Inc. (“Blueapple”), amember of EVO, LLC and owner of all outstanding shares of Class B common stock of EVO, Inc. The expense relatedto these services was $0.2 million for each of the years ended December 31, 2018, 2017 and 2016. In connection withthe IPO, the Company paid Blueapple $2.4 million in satisfaction of the obligation to pay any further commissionsassociated with processing revenue to Blueapple and all such future revenue will be retained by the Company.98 Table of ContentsPrior to the Company’s acquisition of the remaining 67% membership interests of Federated US and 100% of theoutstanding shares of Federated Canada in September 2018, the Company chairman owned one-third of the shares ofFederated Canada and an entity wholly owned by relatives of the Company’s chairman owned one-third of themembership interests of Federated US. As a result of the ownership interests, the Company’s chairman and relativesreceived $15.5 million of the purchase price. In addition, prior to the acquisition, the Company provided card-basedprocessing services and risk assessment services to Federated US in the ordinary course of business for a nominal fee.For the years ended December 31, 2018, 2017 and 2016, the Company received $0.4 million, $0.5 million and $0.5million, respectively, in revenues in connection with providing services to Federated US. In addition, prior to theacquisition, Federated Canada provided certain marketing services to the Company’s business in Canada. For theyears ended December 31, 2018, 2017 and 2016, the Company paid $5.8 million, $8.6 million and $7.6 million,respectively, in fees to Federated Canada for these services. Due to the acquisition of Federated, all accrued liabilities have been excluded from the schedule above as this activityhas been eliminated in consolidation. Prior period amounts continue to reflect balances between the Company andFederated as related party. The Company leases office space located at 515 Broadhollow Road in Melville, New York for $0.1 million per monthfrom 515 Broadhollow, LLC. 515 Broadhollow, LLC is majority owned, directly and indirectly, by the Company’schairman. Receivables from related companies include amounts receivable from members of EVO, LLC and shareholders of theCompany of $0.7 million and $0.8 million and receivables from minority held affiliates of zero and $0.3 million as ofDecember 31, 2018 and 2017, respectively. Liabilities held by related companies include payables to a minority heldaffiliate of $3.0 million and $4.3 million as of December 31, 2018 and 2017, respectively. In connection with thevesting of certain RSAs, the Company issued loans to certain employees for the purposes of paying withholding taxes.As of December 31, 2018, the amount receivable from certain employees was $0.9 million.A portion of the TRA obligation is payable to members of management and current employees. Refer to Note 3, “TaxReceivable Agreement,” for further information on the tax receivable agreement.The Company, through one wholly owned subsidiary and one minority held affiliate, conducts business under ISOagreements with a relative of the Company’s chairman pursuant to which the relative of the Company’s chairmanprovides certain marketing services and equipment in exchange for a commission based on the volume of transactionsprocessed for merchants acquired by the relative of the Company’s chairman. For the years ended December 31, 2018,2017 and 2016, the Company paid commissions of $0.6 million, $0.2 million and zero, respectively, related to thisactivity. NFP is the Company’s benefit broker and 401(k) manager. NFP is a portfolio company of MDP and one of theCompany’s executive officer owns a minority interest in NFP. For the years ended December 31, 2018, 2017 and 2016,the Company paid $0.3 million, $0.4 million and $0.4 million, respectively, in commissions and other expenses toNFP.(10)Income TaxesDomestic and foreign (loss) income before income taxes is as follows for the years ended December 31: 2018 2017 2016 (In thousands) Domestic $(122,699) $(76,255) $20,193Foreign 34,293 60,495 54,291(Loss) income before income taxes $(88,406) $(15,760) $74,484 99 Table of ContentsIncome tax expense is comprised as follows for the years ended December 31: 2018 2017 2016 (In thousands) Current: Foreign $12,735 $4,711 $22,193Federal 146 306 —State (43) 57 (105)Total current income tax expense 12,838 5,074 22,088 Deferred: Foreign 4,217 11,294 (5,055)Federal (5,821) 220 —State (790) — —Total deferred income tax expense (2,394) 11,514 (5,055)Totals $10,444 $16,588 $17,033 The Company’s effective tax rate, as applied to income before income taxes, differ from federal statutory rates asfollows for the years ended December 31: 2018 2017 2016 Federal statutory rate 21.0% —% —%State taxes, net of federal tax 1.0 (0.4) (0.1) Non-controlling interest (14.1) — — Other miscellaneous permanent differences (0.3) — — Undistributed earnings of foreign subsidiaries (2.6) (17.9) 2.4 U.S. federal tax related to foreign effectively connectedincome (0.2) (3.1) — Canadian income tax provision (0.4) (0.6) 0.4 Mexico income tax provision (6.3) (29.6) 9.1 Poland income tax provision (5.9) (29.2) 6.7 Czech Republic income tax provision — (1.1) (0.1) Ireland and United Kingdom income tax provision (0.1) (0.1) — Germany income tax provision — — (1.8) Spain income tax provision (3.9) (23.2) 6.5 Effective tax rate (11.8)% (105.2)%23.1%100 Table of ContentsThe primary components of deferred tax items were as of December 31 were as follows: 2018 2017 (In thousands)Deferred tax assets: Foreign net operating losses $20,850 $18,157U.S. net operating losses 4,499 —Partnership basis 64,443 —Intangibles 2,627 1,958Accrued expenses and other temporary differences 4,330 4,134 96,749 24,249Valuation allowance (21,379) (15,934)Deferred tax asset 75,370 8,315 Deferred tax liabilities: Intangibles (3,811) —Accrued tax on unremitted earnings (8,399) (5,992)Equipment and improvements (4,383) (4,277)Deferred tax liability (16,593) (10,269)Net $58,777 $(1,954) The following table includes the valuation allowance associated with the deferred tax assets including additionsrecognized as expense in the consolidated statements of operations and comprehensive loss for the years endedDecember 31, 2018, 2017 and 2016. Valuation Allowance (In thousands) Beginning balance, January 1, 2016 $10,0592016 Additions 1,475December 31, 2016 11,534 2017 Additions 4,400December 31, 2017 15,934 2018 Additions 5,445December 31, 2018 $21,379 The following table includes the total net operating losses carryforwards by country and years which they areavailable to offset future taxable income as of December 31, 2018: Net Operating Available Losses Years (In thousands) Germany $57,236 IndefinitePoland 4,714 2020-2022United Kingdom 368 IndefiniteIreland 6,532 IndefiniteCzech Republic 3,147 2021-2022Gibraltar 3,920 Indefinite 101 Table of Contents(11)Long-Term Debt and Lines of CreditCredit Facility On December 22, 2016, EVO Payments International, LLC (“EPI”), a subsidiary of EVO, Inc., entered into a creditagreement (“Senior Secured Credit Facilities”). The Senior Secured Credit Facilities consisted of a first lien seniorsecured credit facility totaling $670.0 million (comprised of a $100.0 million revolver (“First Lien Revolver”) and a$570.0 million term loan (“First Lien Term Loan”)) and a second lien senior secured credit facility comprised of a$175.0 million term loan (“Second Lien Term Loan”). On October 24, 2017, the Company entered into an incremental amendment agreement to upsize the existing FirstLien Revolver from $100.0 million to $135.0 million. On April 3, 2018, the Company entered into a secondincremental amendment agreement to the first lien senior secured credit facility, which increased the existing termloan by $95.0 million to $665.0 million. As a result of this second incremental amendment agreement, $0.9 million inexisting deferred financing was expensed as debt extinguishment loss related to the significant modification of acertain lender’s commitment within the syndicate and is classified as other expense in the consolidated statements ofoperations and comprehensive loss. On May 25, 2018, the Company paid in full the Second Lien Term Loan in theamount of $178.2 million, including $1.5 million of accrued interest and $1.8 million of prepayment penalty. On June 14, 2018, the Company entered into a restatement agreement (the “Restatement Agreement”) whereby thesyndicate lenders agreed to replace their existing term loans with replacement term loans. In addition, the RestatementAgreement increased the First Lien Revolver by $65.0 million to $200.0 million and extended the maturity date of theFirst Lien Revolver to June 14, 2023. As a result of the Restatement Agreement, $1.2 million in existing deferredfinancing costs were expensed as debt extinguishment loss related to the significant modification of a certain lender’scommitment within the syndicate and is classified as other expense in the consolidated statements of operations andcomprehensive loss. EVO, LLC utilized the net proceeds from the Secondary Offering to pay down the First LienRevolver and to pay the installment payment on the First Lien Term Loan which was paid on September 27, 2018. The Senior Secured Credit Facilities provide the Company with the capacity to support both domestic andinternational growth, as well as fund general operating needs. The loans under the Senior Secured Credit Facilitiesbear interest, at the Company’s election, at the prime rate or London Interbank Offered Rate (LIBOR), plus leveragebased margin. Under the Restatement Agreement, the lenders agreed to reduce the applicable leverage basedmargins. As of December 31, 2018, the loans under the Senior Secured Credit Facilities had an interest rate of 7.25%for First Lien Revolver and 5.76% for First Lien Term Loan. The Senior Secured Credit Facilities requires quarterlyprincipal payments of the First Lien Term Loan of $1.6 million commencing on June 30, 2018 through September 30,2023. The First Lien Revolver and First Lien Term Loan mature on June 14, 2023 and December 22, 2023,respectively. All amounts outstanding under the Senior Secured Credit Facilities are secured by a pledge of certain assets of EPI, aswell as secured guarantees provided by certain of EPI’s controlled subsidiaries. The Senior Secured Credit Facilitiesalso contain a number of significant negative covenants. These covenants, among other things, restrict, subject tocertain exceptions, EPI’s and its controlled subsidiaries ability to: incur indebtedness; create liens; engage in mergersor consolidations; make investments, loans and advances; pay dividends or other distributions and repurchase capitalstock; sell assets; engage in certain transactions with affiliates; enter into sale and leaseback transactions; make certainaccounting changes; and make prepayments on junior indebtedness. The first lien senior secured credit facility alsocontains a springing financial covenant that requires EPI to remain under a maximum consolidated leverage ratiodetermined on a quarterly basis. As a result of these restrictions, approximately $676.5 million of the net assets of EPI at December 31, 2018 wererestricted from distribution to EVO, LLC or any of its members. The Company currently intends to retain all availablefunds and any future earnings for use in the operation of its business. 102 Table of ContentsIn addition, the Senior Secured Credit Facilities contain certain customary representations and warranties, affirmativecovenants and events of default. If an event of default occurs, the lenders under the Senior Secured Credit Facilitieswill be entitled to take various actions, including the acceleration of amounts due thereunder and exercise of theremedies on the collateral. As of December 31, 2018 and 2017, the Company was in compliance with all its financialcovenants. In conjunction with the acquisition of Sterling, a subsidiary of the Company agreed to a deferred purchase price of$70.0 million which accrued interest at a rate of 5% per annum and was payable in quarterly installments of $5.0million, plus accrued and unpaid interest. In May 2018, the Company paid in full the outstanding balance of $57.4million of the Sterling deferred purchase price, utilizing proceeds from the IPO and funds drawn from the revolvingcredit facility of $4.8 million. Long-term debt consists of the following: December 31, December 31, 2018 2017 (In thousands)First lien term loan $654,775 $566,075Second lien term loan — 175,206First lien revolver 42,266 44,632Deferred purchase price — 68,720Letter of credit — 1,000Less debt issuance costs (12,985) (19,679)Total long-term debt 684,056 835,954Less current portion of long-term debt (7,191) (75,008)Total long-term debt, net of current portion $676,865 $760,946 Principal payment requirements on the above obligations in each of the years remaining subsequent toDecember 31, 2018 are as follows: Amounts (In thousands)Years ending December 31: 2019 $7,1912020 6,5932021 6,5932022 6,5932023 47,2112024 and thereafter 622,860 $697,041 Settlement Lines of Credit The Company maintains intraday and overnight facilities to fund its settlement obligations. These facilities are short-term in nature. During the year ended December 31, 2018, the Company had the following settlement lines of credit. 103 Table of ContentsOn August 31, 2015, a subsidiary of the Company entered into an overdraft facility with Bank BGZ BNP Paribas S.A.,as the lender, and Centrum Elektronicznych Uslug Platniczych eService Sp. z o. o. (“eService”), as the guarantor. Thefacility provides the Company with access to settlement-related funding. Under the facility, the Company can draw upto PLN 20.0 million. The loans drawn under the facility bear interest at the Warsaw Interbank Offered Rate (“WIBOR”)plus 0.7% (total drawdowns below PLN 10 million) and at WIBOR plus 1.25% (total drawdowns above PLN 10million). At December 31, 2018, the interest rates are 2.34% and 2.89%, respectively. The loans drawn under thefacility have a maturity date of February 15, 2019. As of December 31, 2018 and 2017, the loan amounts drawn underthe facility were $2.9 million and $0.8 million, respectively. On February 15, 2019, the Company extended the line ofcredit facility until July 31, 2019. On February 26, 2016, a subsidiary of the Company entered into a line of credit facility with Raiffeisen Bank PolskaS.A., as the lender, and eService, as the guarantor. The facility provides the Company with access to settlement-relatedfunding. Under the facility, the Company can draw up to CZK 400.0 million. The loans drawn under the facility bearinterest at the Prague Interbank Offered Rate (“PRIBOR”) plus 0.8% for CZK, Euro Overnight Index Average(“EONIA”) plus 0.8% for EUR and LIBOR plus 0.8% for GBP and USD. At December 31, 2018, all balances weredenominated in CZK resulting in an interest rate of 2.55%. The loans drawn under the facility have a maturity date ofJanuary 31, 2019. As of December 31, 2018 and 2017, the loan amounts drawn under the facility were $14.9 millionand $5.2 million, respectively. On January 31, 2019, the Company extended the facility until January 31, 2020 andamended the margin rate to 1.0%. On June 10, 2016, a subsidiary of the Company entered into an overdraft facility with PKO Bank Polski, as the lender,and eService, as the guarantor. The facility provides the Company with access to settlement-related funding. Underthe facility, the Company can draw up to CZK 239.1 million. The loans drawn under the facility bear interest at thePRIBOR plus 1.25%. At December 31, 2018, this interest rate was 3.14%. The loans drawn under the facility have amaturity date of June 8, 2019. As of December 31, 2018 and 2017, the loan amounts drawn under the facility were $6.1million and $1.8 million, respectively. On December 1, 2017, a subsidiary of the Company entered into a revolving line of credit facility with Deutsche BankA.G., as the lender, and EVO, LLC, as the guarantor. The facility provides the Company with access to settlement-related funding. Under the facility, the Company can draw up to the lesser of $35.0 million or 90% of the aggregatedollar amount of eligible settlement receivables due. The loans drawn under the facility bear interest at the prime rateplus 1.5%. At December 31, 2018, this interest rate was 7.00%. The loans drawn under the facility do not have amaturity date. As of December 31, 2018 and 2017, the loan amounts drawn under the facility were $17.8 million and$12.6 million, respectively. On December 19, 2017, a subsidiary of the Company entered into a revolving line of credit facility with Wells FargoBank N.A., as the lender, and EVO, LLC, as the guarantor. The facility provides the Company with access tosettlement-related funding. Under the facility, the Company can draw up to $10.0 million. On May 29, 2018, theCompany entered into an incremental amendment agreement to the facility, pursuant to which the maximum amountthat can be drawn was increased to $15.0 million. The loans drawn under the facility bear interest at the prime rateplus 1.0%. At December 31, 2018, this interest rate was 6.50%. The loans drawn under the facility mature onDecember 19, 2019. As of December 31, 2018 and 2017, the loan amounts drawn under the facility were zero and $9.9million, respectively. On September 6, 2018, a subsidiary of the Company entered into an overdraft facility with PKO Bank Polski, as thelender, and eService and EPI, as the guarantors. The facility provides the Company with access to settlement-relatedfunding. Under the facility, the Company can draw up to CZK 100.0 million. The loans drawn under the facility bearinterest at PRIBOR plus 1.5%. At December 31, 2018, this interest rate was 3.38%. The loans drawn under the facilityhave a maturity date of September 9, 2019. As of December 31, 2018, the loan amount drawn under the facility was$0.1 million. 104 Table of ContentsOn November 12, 2018, a subsidiary of the Company entered into a revolving line of credit facility with BancoSantander, S.A., as the lender, and UniversalPay Entidad De Pago SL, as the guarantor. The facility provides theCompany with access to settlement-related funding. Under the facility, the Company can draw up to €10.0 million,with certain restrictions related to the timing of such funding. The loans drawn under the facility bear a fixed interestrate of 3.00%. The loans drawn under the facility have a maturity date of May 12, 2019. As of December 31, 2018, theloan amount drawn under the facility was zero. (12)Supplemental Cash Flows InformationSupplemental cash flow disclosures and noncash investing and financing activities are as follows for the years endedDecember 31: 2018 2017 2016 (In thousands)Supplemental disclosure of cash flow data: Interest paid $48,305 $53,723 $27,583Income taxes paid, net of refunds 7,025 12,305 21,711 Supplemental disclosure of noncash investing and financingactivities: Contingent consideration payable 7,485 3,564 —Contingent consideration settled with the issuance of Class Acommon stock 771 — —Deferred purchase price $ — $71,200 $ — (13)Redeemable Non-controlling Interests The Company owns 66% of eService, the Company’s Polish subsidiary. The eService shareholders’ agreementincludes a provision whereby PKO Bank Polski, beginning on January 1, 2018, has the option to compel the Companyto purchase 14% of the shares of eService held by PKO Bank Polski, at a price per share based on their fair value.Commencing on January 1, 2020, PKO Bank Polski may exercise an option to sell all of its remaining shares ofeService to the Company. Because the exercise of this option is not solely within the Company’s control, theCompany has classified this interest as RNCI and presents the redemption value as temporary within the mezzanineequity section of the consolidated balance sheets. At each balance sheet date, the RNCI will be reported at itsredemption value, which represents fair value, with a corresponding adjustment to accumulated deficit. As of December 31, 2018, EVO, Inc. owns 32.1% of EVO, LLC. The EVO, LLC operating agreement includes aprovision whereby Blueapple may deliver a sale notice to EVO, Inc., upon receipt of which EVO, Inc. will use itscommercially reasonable best efforts to pursue a public offering of shares of its Class A common stock and use the netproceeds therefrom to purchase LLC Interests from Blueapple. Upon receipt of such a sale notice, the Company mayelect, at the Company’s option (determined solely by its independent directors (within the meaning of the rules of theNASDAQ stock market (“Nasdaq”)) who are disinterested), to cause EVO, LLC to instead redeem the applicable LLCInterests for cash; provided that Blueapple consents to any election by the Company to cause EVO, LLC to redeem theLLC Interests based on the fair value of the Company’s Class A common shares on such date. Because this option isnot solely within the Company’s control, the Company has classified this interest as RNCI and reports the redemptionvalue as temporary within the mezzanine equity section of the consolidated balance sheets and will be reported atredemption value, which represents fair value, with a corresponding adjustment to accumulated deficit. 105 Table of ContentsThe following table details the components of RNCI for the years ended December 31, 2018, 2017 and 2016: Post-IPO Pre-IPO December 31, May 23, December 31, December 31, 2018 2018 2017 2016 (In thousands)Beginning balance $689,569 $148,266 $100,530 $77,878Net income attributable to RNCI - eService 4,914 1,291 5,465 6,104Net income attributable to RNCI - Blueapple (39,129) — — —Gain (loss) on OCI - eService (2,368) (2,104) 10,662 —Gain (loss) on OCI - Blueapple (3,935) — — —Gain (loss) on pension revaluation - Blueapple (192) — — —Legacy accumulated deficit allocation —(150,485) — —Legacy AOCI allocation — (39,404) — —Increase (decrease) in the maximum redemption amount of RNCI - eService (19,741) — 34,985 16,548RNCI - Blueapple 374,616 735,775 — —Allocation of eService fair value RNCI adjustment to Blueapple 8,739 — — —Distributions - eService (2,380) (3,770) (3,376) —Ending balance $1,010,093 $689,569 $148,266 $100,530 As a result of the above activity, the RNCI attributable to eService and Blueapple were $124.1 million and $886.0million as of December 31, 2018, respectively, $148.3 million and zero as of December 31, 2017, respectively and$100.5 million and zero as of December 31, 2016.(14)Fair ValueThe table below presents information about items, which are carried at fair value on a recurring basis: December 31, 2018 (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $106,164 $ — $ — $106,164Contingent consideration — — 8,189 8,189RNCI - Blueapple 885,986 — — 885,986RNCI - eService — — 124,107 124,107Total $992,150 $ — $132,296 $1,124,446 December 31, 2017 (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $110,537 $ — $ — $110,537Contingent consideration — — 3,957 3,957RNCI - eService — — 148,266 148,266Total $110,537 $ — $152,223 $262,760 Cash equivalents consist of a money market fund that is valued using a market price in an active market (Level 1).Level 1 instrument valuations are obtained from real‑time quotes for transactions in active exchange marketsinvolving identical assets.106 Table of Contents Contingent consideration relates to potential payments that the Company may be required to make associated withacquisitions. To the extent that the valuation of these liabilities are based on inputs that are less observable or notobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgmentexercised in determining fair value is greatest for measures categorized in Level 3. In the determination of the fair value of the RNCI in eService, the Company used an income approach based oninternal forecasts of expected future cash flows. Significant unobservable inputs included the Weighted Average Costof Capital (“WACC”) used to discount the future cash flows, which was 15.5%, based on the markets in which thebusiness operates and growth rate used within the future cash flows, which were between 3.0% and 17.8%, based onhistoric trends, current and expected market conditions, and management’s forecast assumptions. A future increase inthe WACC would result in a decrease in the fair value of RNCI in eService. The lock-up period to which the Class Bcommon stock was subject to expired during the fourth quarter of 2018. As such, the fair value of the related RNCI wastransferred from Level 3 to Level 1. The fair value is derived from the closing stock price of the Company’s Class Acommon stock on the last day of the period. The carrying amounts of receivables, settlement processing assets and liabilities, due from related parties, due torelated parties, settlement lines of credit, long-term debt and deferred cash considerations associated with acquisitions,approximate their fair value given the short-term nature or bearing at market interest rate value approximating carryingvalue. Visa Series C preferred stock are carried at cost. The estimated fair value of the Visa Series C preferred stock of$25.0 million as of December 31, 2018 is based upon inputs classified as Level 3 of the fair value hierarchy using thefair value of Visa Series C preferred stock as of December 31, 2018 and disclosed conversion factor as ofDecember 31, 2018, inclusive of a discount rate due to the lack of liquidity, which represents a measure of fair valuethat are unobservable or require management’s judgement. Refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” for further information onthe fair value indefinite-lived trademarks. (15)Employee Benefit PlansThe Company maintains pension plans for employees in various countries where the Company maintains an office.Each plan is subject to allowable contributions and limitations based on local country laws and regulations coveringretirement plans. In each location and plan, the Company, at its discretion, may contribute to the plan and, dependingon location, the Company matches a percentage of the employee contributions. The Company’s contributions arevested over time, at different rates depending on location. The Company incurred a contribution expense of $1.6million, $1.3 million, and $1.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. 107 Table of Contents(16)Commitments and Contingencies(a)LeasesAs of December 31, 2018, the Company is obligated under various non-cancelable operating leases, the last ofwhich expires in 2036. Minimum annual lease payments in each of the years subsequent to December 31, 2018are as follows: Amount (In thousands)Years ending December 31: 2019 $7,9442020 6,9672021 5,9622022 4,8512023 2,7872024 and thereafter 13,875Total $42,386 Rent expense, inclusive of real estate taxes, utilities, and maintenance incurred under operating leases totaled$15.4 million, $12.6 million and $9.6 million for the years ended December 31, 2018, 2017 and 2016,respectively, and is included in selling, general, and administrative expenses in the consolidated statements ofoperations and comprehensive loss.(b)LitigationThe Company is party to various claims and lawsuits incidental to its business. The Company does not believethe ultimate outcome of such matters, individually or in the aggregate, will have a material adverse effect on theCompany’s financial position, results of operations or cash flows. 108 Table of Contents(17)Segment InformationInformation on segments and reconciliations to revenue and net income attributable to the shareholders of EVO, Inc.and members of EVO, LLC are as follows: Year Ended December 31, 2018 2017 2016 (In thousands) Segment revenue: North America $320,481 $299,034 $241,083Europe 244,273 205,716 178,138Revenue $564,754 $504,750 $419,221 Segment profit: North America $85,377 $82,759 $66,066Europe 61,195 54,842 127,966Total segment profit 146,572 137,601 194,032Corporate (41,431) (25,732) (25,720)Depreciation and amortization (87,184) (74,136) (64,012)Net interest expense (57,540) (61,387) (39,562)Provision for income tax expense (10,444) (16,588) (17,033)Share-based compensation expense (55,519) — —Net (loss) income attributable to EVO Investco, LLC $(40,242) $47,705Net loss attributable to non-controlling interests of EVOInvestco, LLC 90,834 Net loss attributable to EVO Payments, Inc. $(14,712) Capital expenditures: North America $18,901 $13,893 $9,830Europe 29,850 28,128 21,878Consolidated total capital expenditures $48,751 $42,021 $31,708For the purpose of discussing segment operations, the Company refers to “segment profit” which is segment revenueless (1) segment expenses plus (2) segment income from unconsolidated investees plus (3) segment other income, netless (4) segment non-controlling interests of EVO, LLC consolidating entities. The expenses related to certainCompany-wide governance functions, depreciation and amortization, and EVO, LLC non-controlling interests are notallocated to segments; they are reported in the captions “Corporate” and “Net income attributable to non-controllinginterest of EVO Investco, LLC,” respectively.109 Table of ContentsInformation on total assets by segment is as follows: December 31, December 31, 2018 2017 (In thousands) Segment total assets: North America $994,952 $1,010,859Europe 539,435 497,439Total assets $1,534,387 $1,508,298Revenue from external customers is attributed to individual countries based on the location where the relationship ismanaged. For the year ended December 31, 2018, revenue from external customers in the United States, Poland andMexico, as a percentage of revenue, were 36.1%, 24.1%, and 20.1%, respectively. For the year endedDecember 31, 2017, revenue from external customers in the United States, Poland and Mexico, as a percentage ofrevenue, were 37.9%, 21.5%, and 20.4%, respectively. For the year ended December 31, 2016, revenue from externalcustomers in the United States, Poland and Mexico, as a percentage of revenue, 35.0%, 21.7%, and 21.3%,respectively. For the years ended December 31, 2018, 2017 and 2016, there is no one customer that represents morethan 10% of revenue in the segments. (18)Shareholders’ EquityStructure prior to the Reorganization TransactionsPrior to the completion of the Reorganization Transactions, EVO, LLC had limited liability company interestsoutstanding in the form of Class A units, Class B units, Class C units, Class D units and Class E units. EVO, LLC alsogranted unit appreciation rights (“UARs”) to certain of its officers and certain current and former employees.Immediately prior to the completion of the Reorganization Transactions, the limited liability company interests ofEVO, LLC were beneficially owned as set forth below. The percentage of economic interest in EVO, LLC set forthbelow is based on a hypothetical liquidation of EVO, LLC based on the IPO price per share of $16.00 and theunderwriting discounts and commission paid in the IPO.·Blueapple owned 6,374,245 Class A units, representing a 54.0% economic interest in EVO, LLC on a fully-diluted basis.·MDP owned an aggregate of 3,506,087 Class B units, representing a 29.7% economic interest in EVO, LLCon a fully-diluted basis.·Current and former management and employees owned an aggregate of 374,559 Class C units and 1,106,528Class D units, representing a combined 6.9% economic interest in EVO, LLC on a fully-diluted basis. TheClass D units were granted pursuant to the EVO, LLC Incentive Equity Plan and contained certain vestingrestrictions, including time-based and performance-based conditions. The Class D units also contained aparticipation threshold used to determine if a particular grant was eligible to participate in distributions,including distributions made in connection with a sale, liquidation event or public offering.·Blueapple, MDP and certain members of management and current and former employees owned an aggregateof 1,011,931 Class E units, representing a combined 8.6% economic interest in EVO, LLC on a fully-dilutedbasis.·Management and current and former employees owned 297,121 vested unit appreciation rights awards. Theunit appreciations rights awards were granted pursuant to the EVO, LLC Unit Appreciation Equity Plan andprovided a right to the recipient to receive an amount in cash or other consideration equal to the value of ahypothetical Class D unit in connection with a sale, liquidation event or public offering.110 Table of ContentsOrganizational structure following our IPO and Secondary OfferingEVO, Inc. is a holding company and its principal asset is the LLC Interests in EVO, LLC that we hold. As the solemanaging member of EVO, LLC, EVO, Inc. operates and controls all of the business and affairs of EVO, LLC and itssubsidiaries. Although EVO, Inc. has a minority economic interest in EVO, LLC, the Company has the sole votinginterest in, and controls the management of, EVO, LLC. Therefore, EVO, Inc. has consolidated the financial results ofEVO, LLC and its subsidiaries.The Company has four classes of common stock outstanding: Class A Common stock, Class B Common stock, Class CCommon stock and Class D Common stock. The voting and economic rights associated with our classes of commonstock are summarized in the following table:Class of CommonStock Holders Voting rights* Economicrights Class A commonstock Public, MDP, Executive Officersand Current and FormerEmployees One vote per share YesClass B commonstock Blueapple 15.9% NoClass C commonstock Executive Officers 3.5 votes pershare, subject toaggregate cap NoClass D commonstock MDP and Current and FormerEmployees One vote per share No *Subject to certain ownership requirements, on the third anniversary of the consummation ofthe IPO the voting rights of our Class B common stock will cease and each share of ourClass C common stock will automatically convert into a share of our Class D commonstock. Blueapple has a sale right under the EVO LLC Agreement that provides that, upon the receipt of a sale notice fromBlueapple, the Company will use its commercially reasonable best efforts to pursue a public offering of shares of ClassA common stock and use the net proceeds therefrom to purchase LLC Interests from Blueapple. Upon our receipt ofsuch a sale notice, the Company may elect, at its option (determined solely by its independent directors (within themeaning of the rules of NASDAQ) who are disinterested), to cause EVO LLC to instead redeem the applicable LLCInterests for cash; provided that Blueapple consents to any election by the Company to cause EVO LLC to redeem theLLC Interests.Continuing LLC Owners (other than Blueapple) have an exchange right providing that, upon receipt of an exchangenotice from such Continuing LLC Owners, the Company will exchange the applicable LLC Interests from suchContinuing LLC Owners for newly issued shares of its Class A common stock on a one-for-one basis pursuant to theExchange Agreement. Upon its receipt of such an exchange notice, the Company may elect, at its option (determinedsolely by its independent directors (within the meaning of the rules of NASDAQ)) who are disinterested, to cause EVO,LLC to instead redeem the applicable LLC Interests for cash; provided that such Continuing LLC Owners consents toany election by the Company to cause EVO, LLC to redeem the LLC Interests. In the event that Continuing LLCOwners do not consent to an election by the Company to cause EVO, LLC to redeem the LLC Interests, the Companyis required to exchange the applicable LLC Interests for newly issued shares of Class A common stock.111 Table of ContentsIf the Company elects to cause EVO, LLC to redeem LLC Interests in lieu of exchanging LLC Interests for newlyissued shares of its Class A common stock, the Company will offer the other Continuing LLC Owners the right to havetheir respective LLC Interests redeemed in an amount up to such person’s pro rata share of the aggregate LLC Intereststo be redeemed. The Company is not required to redeem any LLC Interests from Blueapple or any other ContinuingLLC Owners in response to a sale notice from Blueapple if the Company elects to pursue, but is unable to complete, apublic offering of shares of its Class A common stock.Continuing LLC Owners also hold certain registration rights pursuant to a registration rights agreement. MDP holdsdemand registration rights that require the Company to register shares of Class A common stock held by it, includingany Class A common stock received upon its exchange of Class A common stock for its LLC Interests. All ContinuingLLC Owners (other than Blueapple) hold customary piggyback registration rights, which includes the right toparticipate on a pro rata basis in any public offering the Company conducts in response to its receipt of a sale noticefrom Blueapple. Blueapple also has the right, in connection with any public offering the Company conducts(including any offering conducted as a result of an exercise by MDP of its registration rights), to request that theCompany uses its commercially reasonable best efforts to pursue a public offering of shares of its Class A commonstock and use the net proceeds therefrom to purchase a like amount of Blueapple’s LLC Interests.Use of ProceedsIPO Upon consummation of the IPO, the total net proceeds of the offering were $231.5 million, including proceedsresulting from the underwriters’ exercise of their option to purchase additional shares of the Company’s Class Acommon stock in connection with the IPO. Of the proceeds, $178.2 million was used to repay the Second Lien TermLoan under the Senior Secured Credit Facilities, including principal, interest and prepayment fees and $52.6 millionwas used to repay a portion of the deferred purchase price under the Sterling acquisition. The remaining $0.6 millionof proceeds was used for working capital and general corporate purposes. Other offering costs incurred wereapproximately $10.3 million. Secondary Offering The Company received net proceeds of $165.9 million from the sale of 7,000,000 shares of Class A common stocksold in the Secondary Offering (exclusive of shares sold as part of the underwriter option to purchase additional shares)and used these proceeds to purchase LLC Interests and an equivalent number of shares of Class D common stock(which shares will then be canceled) from MDP (including through the purchase and exercise of a portion of the calloption held by MDCP VI-C) pursuant to the Exchange Agreement. The Company received net proceeds of $25.0million from the sale of 1,053,333 shares of Class A common stock sold to the underwriter upon exercise of theiroption and used these proceeds to purchase an equivalent number of LLC Interests directly from EVO, LLC at apurchase price per LLC Interest equal to the public offering price per share of Class A common stock less underwritingdiscounts and commissions paid. EVO, LLC utilized the net proceeds from the Secondary Offering to pay down theFirst Lien Revolver and to pay the installment payment on the First Lien Term Loan, which was paid on September 27,2018. (19)Stock Compensation Plans and Share-Based Compensation AwardsThe Company provides share-based compensation awards to its employees under the 2018 Plan, which the Companyadopted in conjunction with its IPO. The 2018 Plan became effective on May 22, 2018. A total of 7,792,162 shares ofthe Company’s Class A common stock are reserved for issuance under the 2018 Plan. 112 Table of ContentsThe following table summarizes share-based compensation expense, and the related income tax benefit recognized forshare-based compensation awards: Year Ended December 31, 2018 2017 2016 Share-based compensation expense $55,519 $ — $ —Income tax benefit $3,347 $ — $ — For share-based compensation awards, the Company recognized share-based compensation expense of $55.5 millionduring the year ended December 31, 2018. The 2018 Plan provides for accelerated vesting under certain conditions. Class D awards The Company modified the Class D awards in connection with the IPO whereby all vesting conditions were waived,including performance and service vesting conditions. On the modification date, the Company recorded share-basedcompensation expense based on the modification date fair value of $16.00 per share. As a result, share-basedcompensation expense of $42.8 million was recognized for the year ended December 31, 2018, which represented thevesting of all 2,672,666 awarded shares. Prior to the consummation of the IPO, no liquidity event was probable and assuch no share-based compensation expense had previously been recognized for these awards. On the modificationdate there were 15 employees or former employees who held Class D awards. Unit appreciation rights/Restricted stock awards The Company assumed EVO, LLC’s obligations under the EVO, LLC Unit Appreciation Rights Plan (“UAR Plan”)and converted all of the outstanding UARs held by members of management and current and former employees at theconsummation of the IPO to restricted Class A common stock (RSAs). In connection with the Company’s assumptionof EVO, LLC’s obligation under the UAR Plan and the issuance of the RSAs, on the IPO date, the Company recordedshare-based compensation expense based on the modification date fair value of the RSAs of $16.00 per share. As aresult, share-based compensation expense of $9.2 million was recognized for the year ended December 31, 2018. Priorto the consummation of the IPO, no liquidity event was probable and as such no share-based compensation expensehad been recognized for these awards. On the modification date, there were 35 members of management and currentand former employees who held UARs. A summary of RSAs activity is as follows (in thousands, except per share data): Numberof RSAs Weightedaveragegrant datefair value Balance at December 31, 2017 — $ —Granted 607 16.00Vested (564) 16.00Forfeited (1) 16.00Balance at December 31, 2018 42 $16.00 113 Table of ContentsRestricted stock units The Company recognized share-based compensation expense for RSUs granted of $1.4 million for the year endedDecember 31, 2018.A summary of RSUs activity is as follows (in thousands, except per share data): Number ofRSUs Weightedaveragegrant datefair value Balance at December 31, 2017 — $ —Granted 527 16.29Vested — —Forfeited (21) 16.00Balance at December 31, 2018 506 $16.30 As of December 31, 2018, total unrecognized share-based compensation expense related to outstanding RSUs was$6.9 million. Each RSU vests in equal annual vesting installments over a period of four years from the grant date andwill settle in Class A common stock. The weighted average period outstanding for unvested RSUs is 3.3 years. Stock options The Company recognized share-based compensation expense for the stock options granted of $2.1 million for the yearended December 31, 2018. A summary of stock option activity is as follows (in thousands, except per share and term data): NumberofOptions Weightedaveragegrant datefair value Weightedaverageexerciseprice Weightedaverageremainingcontractualterm Balance at December 31, 2017 — $ — $ — Granted 2,179 7.06 16.93 Exercised — — — Forfeited (93) 6.68 16.00 Balance at December 31, 2018 2,086 $6.77 $16.22 9.41 114 Table of ContentsAs of December 31, 2018, total unrecognized share-based compensation expense related to unvested stock optionswas $12.0 million. The weighted average period outstanding for unvested stock options is 3.4 years. Each stockoption vests in equal annual installments over a period of four years from grant date, and stock options expire no laterthan 10 years from the date of grant. For the purpose of calculating share-based compensation expense, the fair valueof the stock option grants was determined through the application of the Black-Scholes model with the followingassumptions: Year EndedDecember 31, 2018 Expected life (in years) 7.00Weighted average risk-free interest rate 3.02Expected volatility 33.98Dividend yield 0.00Weighted average fair value at grant date $7.06 The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to theexpected life of the stock option from the date of the grant. The assumption for expected volatility is based on thehistorical volatility of a peer group of market participants as the Company has no established historical volatility. It isthe Company’s intent to retain all profits for the operations of the business for the foreseeable future, as such thedividend yield assumption is zero. The Company applied the simplified method in determining the expected life ofthe stock options as the Company has no historical basis upon which to determine historical exercise periods. TheCompany based the assumptions of the expected term of the options as the expected term plus half of the remaininglife through expiration. All stock options exercised will be settled in Class A common stock. (20)Selected Quarterly Financial Data (Unaudited)The following tables sets forth certain unaudited quarterly results of operations for 2018 and 2017 (in thousands,except per share data): Three Months Ended March 31,2018 June 30,2018 September30, 2018 December31, 2018Revenue $128,282 $140,891 $144,758 $150,823Income (loss) from operations 4,269 (45,973) 9,519 (5,600)Net loss (15,025) (40,667) (23,878) (19,280)Net income (loss) attributable to EVO Payments, Inc. — 16,713 (27,389) (4,036)Earnings per share(1) Basic — 0.97 (1.51) (0.16)Diluted — 0.96 (1.51) (0.16) Three Months Ended March 31,2017 June 30,2017 September30, 2017 December31, 2017Revenue $109,620 $123,899 $132,646 $138,585Income from operations 4,889 12,597 11,020 16,657Net loss (13,355) (7,871) (10,094) (1,028)Net loss attributable to EVO Investco, LLC (14,606) (9,474) (12,259) (3,903) (1)The sum of the quarterly earnings per share amounts may not equal the full year amount reported since per shareamounts are computed independently for each quarter and for the full year based upon the respective weightedaverage common shares outstanding and other dilutive potential common shares for each respective period. 115 Table of ContentsSCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANTEVO PAYMENTS, INC.(Parent Company Only)Condensed Statements of Balance Sheets(In thousands) December 31, December 31, 2018 2017Assets Cash and cash equivalents $ — $127Other receivable — 42Due from related parties — 59Other current assets — 23Total current assets — 251Deferred tax asset, net 68,941 —Total assets $68,941 $251 Liabilities and Shareholders'/Members' Deficit Accounts payable $ — $25Accrued expenses — 615Tax receivable agreement obligations, inclusive of related party liability of $40.7 million and zeroat December 31, 2018 and 2017, respectively. 47,221 —Net deficit in investment in a subsidiary 70,328 158,112Due to related parties — 11,342Total liabilities 117,549 170,094 Shareholders'/members' deficit: Class A Units, Outstanding - 0 and 6,374 units at December 31, 2018 and 2017, respectively. — 54,453Class B Units, Outstanding - 0 and 3,506 units at December 31, 2018 and 2017, respectively. — —Class C Units, Outstanding - 0 and 375 units at December 31, 2018 and 2017, respectively. — 9,463Class D Units, Outstanding - 0 and 1,104 units at December 31, 2018 and 2017, respectively. — —Class E Units, Outstanding - 0 and 1,012 units at December 31, 2018 and 2017, respectively. — 71,250Class A common stock (par value, $0.0001 per share), Authorized - 200,000,000 and 0shares, Issued and Outstanding - 26,025,189 and 0 shares at December 31, 2018 and 2017,respectively. 3 —Class B common stock (par value, $0.0001 per share), Authorized - 40,000,000 and 0 shares,Issued and Outstanding - 35,913,538 and 0 shares at December 31, 2018 and 2017,respectively. 4 —Class C common stock (par value, $0.0001 per share), Authorized - 4,000,000 and 0 shares,Issued and Outstanding - 2,461,055 and 0 shares at December 31, 2018 and 2017,respectively. — —Class D common stock (par value, $0.0001 per share), Authorized - 32,000,000 and 0 shares,Issued and Outstanding - 16,785,552 and 0 shares at December 31, 2018 and 2017,respectively. 1 —Additional paid-in capital 178,176 —Accumulated deficit attributable to Class A common stock (223,799) (237,330)Accumulated other comprehensive loss (2,993) (67,679)Total deficit (48,608) (169,843)Total liabilities and deficit $68,941 $251 See accompanying notes to condensed financial statements. 116 Table of ContentsSCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANTEVO PAYMENTS, INC.(Parent Company Only)Condensed Statements of Operations and Comprehensive Income (Loss)(In thousands) Year Ended December 31, 2018 2017 2016Net revenue $ — $ — $ —Operating expenses: Cost of services and products, exclusive of depreciation and amortization shownseparately below — 2 —Selling, general and administrative 8,107 1,308 7,842Total operating expenses 8,107 1,310 7,842Loss from operations (8,107) (1,310) (7,842)Other (expense) income: Interest expense — (211) (4,441)(Loss) income from investment in a unconsolidated investee (45,060) (38,635) 59,882Other income (expense) 7,095 (36) —Total other (expense) income (37,965) (38,882) 55,441(Loss) income before income taxes (46,072) (40,192) 47,599Income tax benefit (expense) 6,709 (50) 106Net (loss) income (39,363) $(40,242) $47,705Net loss attributable to EVO Payments, Inc. $(14,712) Comprehensive (loss) income: Net (loss) income $(39,363) $(40,242) $47,705Unrealized loss on defined benefit pension plan, net of tax (59) 530 294Unrealized loss on foreign currency translation adjustment, net of tax (8,599) 59,255 (52,393)Other comprehensive (loss) income (8,658) 59,785 (52,099)Comprehensive (loss) income (48,021) $19,543 $(4,394)Comprehensive loss attributable to EVO Payments, Inc. $(17,026) (1)Net of tax benefit of less than $0.1 million for 2018.(2)Net of tax benefit of $0.7 million for 2018. See accompanying notes to condensed financial statements. 117 (1)(2) Table of ContentsSCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANTEVO PAYMENTS, INC.(Parent Company Only)Condensed Statements of Cash Flows(In thousands) Year Ended December 31, 2018 2017 2016 Cash flows from operating activities: Change in operating assets and liabilities, net — (4,369) 2,280Net cash provided by operating activities — (4,369) 2,280Cash flows from investing activities: Distribution from equity method subsidiary — — 35,000Investment in unconsolidated investee (255,672) — —Net cash used in investing activities (255,672) — 35,000Cash flows from financing activities: Repayments of long-term debt — (65,208) (35,000)Direct costs incurred in conjunction with the IPO — — —IPO Proceeds, net of underwriter fees 231,500 — —Secondary offering proceeds, net of underwriter fees 24,967 — —Tax withholdings related to net share settlement of share-based payments (795) — —Contributions by members — 71,250 —Distribution to members — (1,726) (2,249)Net cash provided by financing activities 255,672 4,316 (37,249)Effect of exchange rate changes on cash and cash equivalents — — —Net increase in cash and cash equivalents — (53) 31Cash and cash equivalents, beginning of year — 180 149Cash and cash equivalents, end of year $ — $127 $180 See accompanying notes to condensed financial statements. 118 Table of ContentsSCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANTEVO PAYMENTS, INC.(Parent Company Only)Notes to the Condensed Financial Statements(In thousands) (1)Basis of PresentationEVO Payments, Inc. (“EVO, Inc.,” “Parent Company” or the “Company”) is a Delaware corporation whose value isdriven by its ownership of approximately 32.1% of the membership interests of EVO Investco, LLC (“EVO, LLC”) asof December 31, 2018. EVO, Inc. was incorporated on April 20, 2017 for the purpose of completing a series ofreorganization transactions (the “Reorganization Transactions”), in order to consummate the initial public offering ofEVO, Inc.’s Class A common stock (the “IPO”), and to carry on the business of EVO, LLC. The accompanyingcondensed parent-only financial statements are required in accordance with Rule 5-04 of Regulation S-X. Thesecondensed financial statements have been presented on a standalone basis for EVO Payments, Inc. The condensedfinancial statement of EVO, Inc. reflect the historical results of operations and the financial position of EVO, Inc.,commencing on May 23, 2018. Prior to May 23, 2018, the condensed financial statements included herein representthe financial statements of EVO, LLC on a standalone basis. EVO, Inc. is a holding company that does not conduct any business operations of its own and therefore its assetsconsist primarily of investments in subsidiaries. In the ordinary course of business EVO, Inc. will incur certainexpenses which are paid on behalf of EVO, Inc. by EVO, LLC and recognized as guaranteed payments in other income.Additionally, EVO, Inc. anticipates the settlement of certain future tax liabilities will require future distributions fromEVO, LLC. EVO, Inc. may not be able to access cash generated by its subsidiaries in order to fulfill cash commitmentsor to pay cash dividends on its common stock. The amounts available to EVO, Inc. to fulfill cash commitments or topay cash dividends are also subject to the covenants and distribution restrictions in its subsidiaries’ loan agreements.For a discussion on the tax receivable agreements, see Note 3, “Tax Receivable Agreement” in the consolidatedfinancial statements and notes of EVO, Inc. appearing in this Annual Report on Form 10-K. Net loss attributable toEVO Payments, Inc. and comprehensive loss attributable to EVO Payments, Inc. represent the amount of loss andcomprehensive attributable to EVO, Inc. exclusive of loss incurred prior to the Reorganization Transactions, which isallocable to EVO, LLC and, therefore, the members of EVO, LLC. This loss has been excluded as EVO, Inc. was not amember of EVO, LLC prior to the Reorganization Transactions. For purposes of this condensed financial information, the Parent Company’s investment in its consolidated subsidiaryis presented under the equity method of accounting. Under the equity method, investment in its subsidiary is stated atcost plus contributions and equity in undistributed income (loss) of subsidiary less distributions received. As ofDecember 31, 2018 and 2017, the Parent Company’s subsidiary was in a net deficit due to the accumulation of netlosses to date, therefore it is presented as a liability in the balance sheet. The Parent Company financial statementsshould be read in conjunction with the Company's consolidated financial statements appearing in this Annual Reporton Form 10-K. (2)DistributionsThere were no distributions made to the Company, from the Company's subsidiary, for the year ended December 31,2018 and 2017. There was $35.0 million in distributions for the year ended December 31, 2016. 119 Table of ContentsSCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANTEVO PAYMENTS, INC.(Parent Company Only)Notes to the Condensed Financial Statements(In thousands) (3)Long-term debt and credit facilitiesAs of December 31, 2018 and 2017 the Company’s indebtedness was zero and zero, respectively. Certain subsidiariesof the Company are subject to debt agreements: 2018 2017 (In thousands)Subsidiary debt: First lien term loan $654,775 $566,075Second lien term loan — 175,206First lien revolver 42,266 44,632Deferred purchase price — 68,720Letter of credit — 1,000Deferred financing costs (12,985) (19,679)Total subsidiary debt $684,056 $835,954 Settlement lines of credit $41,819 $28,563 For further discussion on the nature and terms of these agreements, refer to Note 11 to the Company’s consolidatedfinancial statements. (4)Commitments and ContingenciesFor a discussion of commitments and contingencies, see Note 16 to the Company’s consolidated financial statements. 120 Table of ContentsSCHEDULE IIEVO PAYMENTS, INC. Valuation & Qualifying Accounts(In thousands) Balance at Additions: Deductions: Balance at Beginning of Charged to Costs Uncollectible Accounts End ofDescription Period and Expenses Write-Offs (Recoveries) Period Allowance for doubtful accounts Year ended December 31, 2018 $ — $2,169 $1,789 $380Year ended December 31, 2017 — — — —Year ended December 31, 2016 — — — — Deferred income tax asset valuation allowance Year ended December 31, 2018 $15,934 $5,643 $198 $21,379Year ended December 31, 2017 11,534 4,401 1 15,934Year ended December 31, 2016 10,059 2,613 1,138 11,534 121 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including the Chief Executive Officer and ChiefFinancial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term isdefined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Basedon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that informationrequired to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms and that such information is accumulated andcommunicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisionsregarding required disclosure. Management’s Report on Internal Control over Financial Reporting This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control overfinancial reporting due to a transition period established by the SEC for newly public companies. In addition, because we are an “emerging growth company” under the JOBS Act, our independent registered publicaccounting firm will not be required to attest to the effectiveness of our internal control over financial reporting for so long aswe are an emerging growth company. Changes to Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the year ended December 31, 2018that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION On March 25, 2019, the Board of Directors of the Company appointed Anthony Radesca as Senior Vice President and ChiefAccounting Officer of the Company, effective April 1, 2019. In this role, Mr. Radesca will serve as the Company’s principalaccounting officer. Mr. Radesca, age 49, served as the Senior Vice President and Chief Accounting Officer of CATechnologies from May 2016 until February 2019. Prior to that, he served as Vice President of Accounting of CATechnologies. Mr. Radesca will be eligible to participate in the Company’s long-term and short-term incentive plans andbenefit plans available to the Company’s other executive officers. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information relating to our executive officers is included in Part I, Item 1 of this Form 10-K. The other information withrespect to this Item will be set forth in our proxy statement for the 2019 annual meeting of stockholders (the “2019 ProxyStatement”), which will be filed with the SEC no later than 120 days after December 31, 2018. For the limited purpose ofproviding the information necessary to comply with this Item 10, the 2019 Proxy Statement is incorporated herein by thisreference. 122 Table of ContentsOur board of directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors and employees,which is available on our website (www.evopayments.com) under “Corporate Governance.” We intend to satisfy thedisclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code ofBusiness Conduct and Ethics by posting such information on our website at the address and location specified. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this Item will be set forth in our 2019 Proxy Statement, which will be filed with the SEC no laterthan 120 days after December 31, 2018. For the limited purpose of providing the information necessary to comply with thisItem 11, the 2019 Proxy Statement is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS Information with respect to this Item will be set forth in our 2019 Proxy Statement, which will be filed with the SEC no laterthan 120 days after December 31, 2018. For the limited purpose of providing the information necessary to comply with thisItem 12, the 2019 Proxy Statement is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information with respect to this Item will be set forth in our 2019 Proxy Statement, which will be filed with SEC no later than120 days after December 31, 2018. For the limited purpose of providing the information necessary to comply with this Item13, the 2019 Proxy Statement is incorporated herein by this reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information with respect to this Item will be set forth in our 2019 Proxy Statement, which will be filed with the SEC no laterthan 120 days after December 31, 2018. For the limited purpose of providing the information necessary to comply with thisItem 14, the 2019 Proxy Statement is incorporated herein by this reference. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 1. Consolidated Financial Statements Our consolidated financial statements are included in Part II, Item 8, “Financial Statements and Supplementary Data.” 2. Financial Statement Schedules Schedules I and II to our consolidated financial statements are included in Part II, Item 8, “Financial Statements andSupplementary Data.” 3. Exhibits aawExhibit No. Description 3.1 Amended and Restated Certificate of Incorporation of EVO Payments, Inc. (incorporated by reference toExhibit 3.1 to our Quarterly Report on Form 10-Q filed with the Commission on August 10, 2018). 123 Table of Contents3.2 Amended and Restated Bylaws of EVO Payments, Inc., effective as of May 25, 2018 (incorporated byreference to Exhibit 3.2 to our Registration Statement on Form S-1/A filed with the Commission on May 7,2018). 4.1 Specimen Stock Certificate for Class A Common Stock of EVO Payments, Inc. (incorporated by reference toExhibit 4.1 to our Registration Statement on Form S-1/A filed with the Commission on May 7, 2018). 10.1 Tax Receivable Agreement, dated as of May 25, 2018, by and among EVO Payments, Inc., EVO Investco,LLC and the members of EVO Investco, LLC from time to time party thereto (incorporated by reference toExhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Commission on August 10, 2018). 10.2 LLC Agreement of EVO Investco, LLC, dated as of May 22, 2018, by and among EVO Investco, LLC and itsmembers (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with theCommission on August 10, 2018). 10.3 Registration Rights Agreement, dated as of May 22, 2018, by and among EVO Payments, Inc., each of thepersons listed on Schedules I and II thereto, such other persons that from time to time become parties theretoand Blueapple, Inc. (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filedwith the Commission on August 10, 2018). 10.4 Exchange Agreement, dated as of May 22, 2018, by and among EVO Investco, LLC, EVO Payments, Inc., theholders of common units in EVO Investco, LLC and shares of Class C common stock or Class D commonstock of EVO Payments, Inc. and the Call Option Holder, as defined therein, from time to time party thereto(incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the Commissionon August 10, 2018). 10.5 Amendment Number One to Exchange Agreement, dated as of November 5, 2018, by and among EVOInvestco, LLC, EVO Payments, Inc., the holders of common units in EVO Investco, LLC and shares of Class Ccommon stock or Class D common stock of EVO Payments, Inc. and the Call Option Holder, as definedtherein, from time to time party thereto (incorporated by reference to Exhibit 10.1 to our Quarterly Report onForm 10-Q filed with the Commission on November 8, 2018). 10.6 Director Nomination Agreement, effective as of May 25, 2018, by and among EVO Payments, Inc., MadisonDearborn Partners, LLC, Madison Dearborn Partners VI-A&C, L.P., Madison Dearborn Capital Partners VI-C,L.P., Madison Dearborn Partners VI-B, L.P., Madison Dearborn Capital Partners VI-B, L.P., Madison DearbornCapital Partners VI Executive-B, L.P., MDCP VI-C Cardservices Splitter, L.P., MDCP Cardservices LLC andMDCP VI-C Cardservices Blocker Corp. (incorporated by reference to Exhibit 10.5 to our Quarterly Report onForm 10-Q filed with the Commission on August 10, 2018). 10.7 Credit and Security Agreement, dated as of May 30, 2012, among EVO Payments International, LLC, asborrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrust Bank, as AdministrativeAgent and Swingline Lender and Issuing Bank, the lenders from time to time party thereto (incorporated byreference to Exhibit 10.6 to our Registration Statement on Form S-1/A filed with the Commission on May 7,2018). 10.8 First Amendment to Credit Agreement and Security Agreement, dated as of June 7, 2013, among EVOPayments International, LLC, as borrower, the guarantors identified therein, the lenders identified therein andSunTrust Bank, as Administrative Agent (incorporated by reference to Exhibit 10.7 to our RegistrationStatement on Form S-1/A filed with the Commission on May 7, 2018). 124 Table of Contents10.9 Second Amendment to Credit Agreement, dated as of December 24, 2013, among EVO PaymentsInternational, LLC, as borrower, the guarantors identified therein, the lenders identified therein and SunTrustBank, as Administrative Agent (incorporated by reference to Exhibit 10.8 to our Registration Statement onForm S-1/A filed with the Commission on May 7, 2018). 10.10 Third Amendment to Credit Agreement, dated as of May 8, 2014, among EVO Payments International, LLC,as borrower, the guarantors identified therein, the lenders identified therein and SunTrust Bank, asAdministrative Agent (incorporated by reference to Exhibit 10.9 to our Registration Statement on Form S-1/Afiled with the Commission on May 7, 2018). 10.11 Fourth Amendment to Credit Agreement, dated as of May 7, 2015, among EVO Payments International, LLC,as borrower, the guarantors identified therein, the lenders identified therein and SunTrust Bank, asAdministrative Agent (incorporated by reference to Exhibit 10.10 to our Registration Statement on Form S-1/A filed with the Commission on May 7, 2018). 10.12 Fifth Amendment to Credit Agreement and Waiver Agreement, dated as of July 29, 2015, among EVOPayments International, LLC, as borrower, the guarantors identified therein, the lenders identified therein andSunTrust Bank, as Administrative Agent (incorporated by reference to Exhibit 10.11 to our RegistrationStatement on Form S-1/A filed with the Commission on May 7, 2018). 10.13 Sixth Amendment to Credit Agreement, dated as of August 25, 2015, among EVO Payments International,LLC, as borrower, the guarantors identified therein, the lenders identified therein, SunTrust Bank, asAdministrative Agent, and SunTrust Robinson Humphrey, Inc., Fifth Third Bank, BMO Capital MarketsCorp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC and Regions CapitalMarkets, as joint lead arrangers (incorporated by reference to Exhibit 10.12 to our Registration Statement onForm S-1/A filed with the Commission on May 7, 2018). 10.14 Seventh Amendment to Credit Agreement, dated as of March 22, 2016, among EVO Payments International,LLC, as borrower, the guarantors identified therein, the lenders identified therein and SunTrust Bank, asAdministrative Agent (incorporated by reference to Exhibit 10.13 to our Registration Statement on Form S-1/A filed with the Commission on May 7, 2018). 10.15 First Lien Credit Agreement, dated as of December 22, 2016, among EVO Payments International, LLC, asborrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrust Bank, as AdministrativeAgent, Swingline Lender and Issuing Bank, the lenders from time to time party thereto and Citibank, N.A. andRegions Bank, as Co-Syndication Agents (incorporated by reference to Exhibit 10.14 to our RegistrationStatement on Form S-1/A filed with the Commission on May 7, 2018). 10.16 Incremental Amendment Agreement, dated as of October 24, 2017, among EVO Payments International, LLCas borrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrust Bank, asAdministrative Agent, Swingline Lender, and Issuing Bank, the lenders from time to time party thereto, andCitibank N.A. and Regions Bank as Co-Syndication Agents (incorporated by reference to Exhibit 10.15 to ourRegistration Statement on Form S-1/A filed with the Commission on May 7, 2018). 10.17 Second Incremental Amendment Agreement, dated as of April 3, 2018, among EVO Payments International,LLC as borrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrust Bank, asAdministrative Agent, Swingline Lender, and Issuing Bank, the lenders from time to time party thereto andCitibank, N.A. and Regions Bank as Co-Syndication Agents (incorporated by reference to Exhibit 10.16 toour Registration Statement on Form S-1/A filed with the Commission on May 7, 2018). 125 Table of Contents10.18 First Repricing Amendment to First Lien Credit Agreement, dated as of December 22, 2017, among EVOPayments International, LLC, as borrower, the subsidiaries of the borrower identified therein, as guarantors,SunTrust Bank, as Administrative Agent, Swingline Lender and Issuing Bank, the lenders from time to timeparty thereto and Citibank, N.A. and Regions Bank, as Co-Syndication Agents (incorporated by reference toExhibit 10.17 to our Registration Statement on Form S-1/A filed with the Commission on May 7, 2018). 10.19 Second Lien Credit Agreement, dated as of December 22, 2016, among EVO Payments International, LLC, asborrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrust Bank, as AdministrativeAgent, Swingline Lender and Issuing Bank, the lenders from time to time party thereto and Citibank, N.A. andRegions Bank, as Co-Syndication Agents (incorporated by reference to Exhibit 10.18 to our RegistrationStatement on Form S-1/A filed with the Commission on May 7, 2018). 10.20 First Amendment to First Lien Credit Agreement, dated as of December 22, 2017, among EVO PaymentsInternational, LLC, as borrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrustBank, as Administrative Agent, Swingline Lender and Issuing Bank, the lenders from time to time partythereto and Citibank, N.A. and Regions Bank, as Co-Syndication Agents (incorporated by reference toExhibit 10.19 to our Registration Statement on Form S-1/A filed with the Commission on May 7, 2018). 10.21 Amended and Restated Employment Agreement, dated April 1, 2018, by and between EVO Investco, LLC andJames G. Kelly (incorporated by reference to Exhibit 10.20 to our Registration Statement on Form S-1 filedwith the Commission on April 25, 2018).# 10.22 Employment Agreement, as amended, dated January 1, 2015, by and between EVO Payments InternationalUK Ltd and Darren Wilson (incorporated by reference to Exhibit 10.21 to our Registration Statement on FormS-1 filed with the Commission on April 25, 2018).# 10.23 Amended and Restated Employment Agreement, dated April 1, 2018, by and between EVO Investco, LLC andBrendan F. Tansill (incorporated by reference to Exhibit 10.22 to our Registration Statement on Form S-1filed with the Commission on April 25, 2018).# 10.24 Form of Indemnification Agreement for Executive Officers and Directors (incorporated by reference to Exhibit10.23 to our Registration Statement on Form S-1/A filed with the Commission on May 21, 2018).# 10.25 EVO Payments, Inc. 2018 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to ourRegistration Statement on Form S-8 filed with the Commission on May 23, 2018).# 10.26 Form of Restricted Stock Award for EVO Payments, Inc. 2018 Omnibus Equity Incentive Plan (incorporatedby reference to Exhibit 10.25 to our Registration Statement on Form S-1/A filed with the Commission on May7, 2018).# 10.27 Form of Time-Based Restricted Stock Unit Award for EVO Payments, Inc. 2018 Omnibus Equity IncentivePlan (Cash Settled (incorporated by reference to Exhibit 10.26 to our Registration Statement on Form S-1/Afiled with the Commission on May 7, 2018).# 10.28 Form of Time-Based Restricted Stock Unit Award for EVO Payments, Inc. 2018 Omnibus Equity IncentivePlan (Share Settled) (incorporated by reference to Exhibit 10.27 to our Registration Statement on Form S-1/Afiled with the Commission on May 7, 2018).# 10.29 Form of Performance-Based Restricted Stock Unit for EVO Payments, Inc. 2018 Omnibus Equity IncentivePlan (incorporated by reference to Exhibit 10.28 to our Registration Statement on Form S-1/A filed with theCommission on May 7, 2018).#126 Table of Contents 10.30 Form of Stock Option Award for EVO Payments, Inc. 2018 Omnibus Equity Incentive Plan (incorporated byreference to Exhibit 10.29 to our Registration Statement on Form S-1/A filed with the Commission on May 7,2018).# 10.31 Form of Nonqualified Stock Option Award for EVO Payments, Inc. 2018 Omnibus Equity Incentive Plan(incorporated by reference to Exhibit 10.30 to our Registration Statement on Form S-1/A filed with theCommission on May 7, 2018).# 10.32 Form of Restricted Stock Award for EVO Payments, Inc. 2018 Omnibus Equity Incentive Plan (with change incontrol vesting provisions) (incorporated by reference to Exhibit 10.31 to our Registration Statement on FormS-1/A filed with the Commission on May 21, 2018).# 10.33 Form of Time-Based Restricted Stock Unit Award for EVO Payments, Inc. 2018 Omnibus Equity IncentivePlan (share settled, with change in control vesting provisions) (incorporated by reference to Exhibit 10.32 toour Registration Statement on Form S-1/A filed with the Commission on May 21, 2018).# 10.34 Form of Nonqualified Stock Option Award for EVO Payments, Inc. 2018 Omnibus Equity Incentive Plan (withchange in control vesting provisions) (incorporated by reference to Exhibit 10.33 to our RegistrationStatement on Form S-1/A filed with the Commission on May 21, 2018).# 10.35 EVO Investco, LLC Unit Appreciation Equity Plan (incorporated by reference to Exhibit 10.34 to ourRegistration Statement on Form S-1/A filed with the Commission on May 21, 2018).# 10.36 Assignment and Assumption Agreement of EVO Investco, LLC Unit Appreciation Equity Plan, dated as ofMay 25, 2018, by and between EVO Investco, LLC and EVO Payments, Inc. (incorporated by reference toExhibit 10.7 to our Quarterly Report on Form 10-Q filed with the Commission on August 10, 2018).# 10.37 Form of Conversion to Restricted Stock Award under EVO Investco, LLC Unit Appreciation Equity Plan(incorporated by reference to Exhibit 10.36 to our Registration Statement on Form S-1/A filed with theCommission on May 21, 2018).# 10.38 Chairman and Consulting Agreement, dated as of May 25, 2018, by and between Rafik R. Sidhom and EVOPayments, Inc. (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q filed with theCommission on August 10, 2018). 10.39 Restatement Agreement to First Lien Credit Agreement, dated as of June 14, 2018, among EVO PaymentsInternational, LLC, as borrower, the subsidiaries of the borrower identified therein, as guarantors, SunTrustBank, as Existing Administrative Agent, Citibank, N.A., as a closing documentation agent and the lendersfrom time to time party thereto (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-Kfiled with the Commission on June 14, 2018). 21.1 List of Subsidiaries of EVO Payments, Inc. 23.1 Consent of Deloitte & Touche LLP as to EVO Payments, Inc. 31.1 Certification of Chief Executive Officer required by Rule 13a-14(a). 31.2 Certification of Chief Financial Officer required by Rule 13a-14(a). 32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.127 Table of Contents 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document# Indicates management contract or compensatory plan. 128 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to besigned on its behalf by the undersigned hereunto duly authorized. NameTitleDate /S/ JAMES G. KELLYChief Executive Officer and DirectorMarch 25, 2019James G. Kelly(principal executive officer) /S/ KEVIN M. HODGESExecutive Vice President, Chief Financial OfficerMarch 25, 2019Kevin M. Hodges(principal financial and accounting officer) /S/ RAFIK R. SIDHOM Chairman of the Board and Director March 25, 2019Rafik R. Sidhom /S/ VAHE A DOMBALAGIANDirectorMarch 25, 2019Vahe A. Dombalagian /S/ MATTHEW W. RAINODirectorMarch 25, 2019Matthew W. Raino /S/ DAVID W. LEEDSDirectorMarch 25, 2019David W. Leeds /S/ GREGORY S. POPEDirectorMarch 25, 2019Gregory S. Pope /S/ JOHN GARABEDIANDirectorMarch 25, 2019John Garabedian 129 EXHIBIT 21.1 LIST OF SUBSIDIARIES OF EVO PAYMENTS, INC.EVO Payments, Inc. has the following subsidiaries and ownership interests. NAMEJURISDICTION OF ORGANIZATIONEVO Merchant Services Canada Co.CanadaEVO Payments International Corp. – CanadaCanadaFederated Payment Canada CorporationCanadaZenith Merchant Services, Inc.CanadaNodus Technologies (Suzhou) Co., Ltd.ChinaEVO Czech Republic s.r.oCzech RepublicEVO Payments International s.r.o. (66% owned)Czech RepublicEVO Kartenakzeptanz GmbH GermanyEVO Payments International Acquisition GmbHGermanyEVO Payments International GmbHGermanyEVO Payments International Holding GmbH & Co. KGGermanyEVO Payments International Verwaltungs GmbHGermanyIntelligent Payments Group LimitedGibraltarMyriad Payments LimitedGibraltarBriconi Holdings LimitedIrelandEVO Payments International GmbH, Irish BranchIrelandInternational Transaction Payment Solutions, LimitedIrelandInternational Transaction Payment Solutions (Malta) LimitedMaltaCMAS Adquirente, S.A. de C.V.MexicoEMS Payments Mexico, S. de R.L. de C.V.MexicoEMS Servicios de Pago, S. de R.L. de C.V.MexicoEVO Payments Mexico , S. de R.L. de C.V.MexicoCentrum Elektronicznych Usług Płatniczych eService Sp. z.o.o. (66%owned)PolandEVO Payments International Sp. z o.o. (66% owned)PolandUniversalpay, Entidad De Pago, S.L.SpainClear One, S.L.SpainEVO Merchant Services UK 1 Ltd.United KingdomEVO Merchant Services UK 2 Ltd.United KingdomEVO Payments International GmbH, UK BranchUnited KingdomEVO Payments International UK Ltd.United KingdomCommerce Payment Group, LLC (80% owned)DelawareEncore Payment Systems, LLCDelawaree-Onlinedata, LLCDelawareEPSG, LLC (35% owned)DelawareeZPay, LLC (33.33% owned)DelawareEVO Group Management, IncDelaware EVO International Europe, LLCDelawareEVO Investco, LLCDelawareEVO Merchant Services, LLCDelawareEVO NA Holdings 1 LLCDelawareEVO NA Holdings 2 LLCDelawareEVO Payments International, LLCDelawareFederated Payment Systems, LLCDelawareNationwide Payment Solutions, LLCDelawareNodus Technologies, Inc.DelawareOmega Processing Solutions, LLCKentuckyPineapple Payments, LLCDelawarePowerPay, LLCMaineSterling Payment Technologies, LLCFloridaVision Payment Solutions, LLCDelawareZenith Merchant Services, LLCDelawareWay2Pay LimitedIreland EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in (i) the Registration Statement on Form S-8, No. 333-225124 and (ii) the RegistrationStatement on Form S-8, No. 333-225123, of our report dated March 25, 2019, relating to the consolidated financial statements of EVOPayments, Inc. and its subsidiaries, appearing in this Annual Report on Form 10-K of EVO Payments Inc. for the year ended December 31,2018. /s/ Deloitte & Touche LLP New York, New YorkMarch 25, 2019 EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. 1350) I, James G. Kelly, certify that:1. I have reviewed this annual report on Form 10-K of EVO Payments, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; andc. Disclosed in this report any change in the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant's internal controlover financial reporting; and5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (orpersons performing the equivalent functions):a. All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarizeand report financial information; andb. Any fraud, whether or not material, that involves management or other employees who have a significant role inthe registrant's internal control over financial reporting. Dated: March 25, 2019By:/s/ James G. Kelly James G. Kelly Chief Executive Officer EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. 1350) I, Kevin M. Hodges, certify that:1. I have reviewed this annual report on Form 10-K of EVO Payments, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; andc. Disclosed in this report any change in the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant's internal controlover financial reporting; and5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (orpersons performing the equivalent functions):a. All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarizeand report financial information; andb. Any fraud, whether or not material, that involves management or other employees who have a significant role inthe registrant's internal control over financial reporting. Dated: March 25, 2019By:/s/ Kevin M. Hodges Kevin M. Hodges Chief Financial Officer EXHIBIT 32 CERTIFICATION OF CHIEF EXECUTIVE OFFICERAND CHIEF FINANCIAL OFFICERPURSUANT TOSECTION 906 OF THE SARBANES-OXLEYACT OF 2002 (18 U.S.C. 1350) In connection with the Annual Report of EVO Payments, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2018, asfiled with the Securities and Exchange Commission (the “Report”), the undersigned, James G. Kelly, Chief Executive Officer of EVOPayments, Inc., and Kevin M. Hodges, Chief Financial Officer of the Company, hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that, to the best of our knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company./s/ James G. Kelly James G. Kelly Chief Executive Officer March 25, 2019 /s/ Kevin M. Hodges Kevin M. Hodges Chief Financial Officer March 25, 2019
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