Q1 consolidated revenue of $2.7 billion, up 2%
YoY; adjusted revenue of $1.7 billion, up 2% or up 5% excluding
currency impacts
Q1 adjusted EBITDA of $563 million, down 8% or
down 6% excluding currency impacts, primarily driven by
growth-related investments
Q1 net loss of $112 million improved by $89
million, or 44%; adjusted net income of $40 million improved by $49
million
Implementing strategic expense management
initiative to generate annualized savings of $200 million
First Data Corporation today reported financial results for the
first quarter ended March 31, 2015. Consolidated revenue for
the first quarter was $2.7 billion, up 2% versus the prior year
period. Adjusted revenue, modified for items such as the exclusion
of pass-through debit network fees and postage, was up 2% versus
the prior year period to $1.7 billion or 5% excluding currency
impacts, compared to 4% for full year 2014.
Adjusted earnings before interest, taxes, depreciation, and
amortization (adjusted EBITDA) was $563 million, down 8% versus the
prior year period or down 6% excluding currency impacts, as revenue
growth was offset by increased expenses as a result of continued
growth-related investments and the non-recurrence of $17 million of
expense credits in the prior year period. EBITDA margin for the
quarter was 34%, down 3 percentage points versus the prior year
period.
“Our first quarter reflected good business momentum and
validated our strategy," said Chairman and CEO Frank Bisignano. “We
continue to invest aggressively in key areas of our business such
as distribution and new products, and are beginning to see the
revenue growth associated with those investments.”
First Data also announced a strategic expense management
initiative to optimize its annualized expense base by $200 million
by mid-2016. Anticipated restructuring costs will be $75 million,
mainly cash, and will be recognized beginning in the second quarter
of 2015. The company will continue to invest in strategic growth
initiatives across all segments.
For the first quarter, the net loss attributable to First Data
was $112 million, a 44% improvement from the $201 million loss in
the prior year period. Driving the year over year improvement were
reductions in interest expense and income taxes as well as an
increase in other income. The quarter over quarter change from net
income to net loss was largely driven by the seasonal variance in
revenue.
Adjusted net income, which modifies net income for items such as
the amortization of acquisition intangibles, stock-based
compensation, restructuring costs, and other items was $40 million,
up $49 million versus the prior year period.
For the first quarter, the company had a net use of $102 million
in cash flow from operations after $561 million in cash interest
payments. The company finished the quarter with $687 million in
unrestricted liquidity.
Segment Results
Merchant Solutions segment revenue for the first quarter
was $888 million, up 4% versus the prior year period, adversely
impacted by one percentage point (or $13 million) due to the sale
of Electronic Funds Source (EFS). Merchant acquiring revenue
increased 6% versus the prior year period due to transaction growth
and revenue from our merchant suite of solutions. Product revenue
declined 3% versus the prior year period, adversely impacted by 6
percentage points due to the sale of EFS; strength in equipment
revenue was partially offset by the continued decline in check
processing. Segment EBITDA was $368 million, roughly flat versus
the prior year period, primarily due to investments in distribution
and innovation and adversely impacted by $6 million due to the EFS
sale. EBITDA margin for the first quarter was 41%, down 2
percentage points versus the prior year period.
Financial Services segment revenue for the first quarter
was $372 million, up 7% versus the prior year period, driven by the
continued benefit from new business wins, growth in existing
portfolios and network revenue. Segment EBITDA was $180 million, up
4% versus the prior year period. EBITDA margin for the first
quarter was 48%, down 2 percentage points versus the prior year
period due to investments.
International segment revenue for the first quarter was
$398 million, down 5% versus the prior year period. On a constant
currency basis, revenue was up 7% versus the prior year period. On
a constant currency basis, merchant acquiring revenue was up 11%
due to volume growth and issuing revenue was up 3%. Segment EBITDA
was $97 million, down 24% versus the prior year period and down 16%
on a constant currency basis due to increased investments, most
notably in Brazil. EBITDA margin for the first quarter was 24%,
down 6 percentage points versus the prior year period. The prior
year period was impacted favorably by expense credits which
positively impacted prior year period margin by 4 percentage points
and EBITDA by $17 million.
Non-GAAP Measures
In certain circumstances, results have been presented that are
non-GAAP (generally accepted accounting principles) measures and
should be viewed in addition to, and not in lieu of, the company's
reported results. Reconciliations to comparable GAAP measures are
available in the accompanying schedules and in the "Investor
Relations" section of the company's website at
investor.firstdata.com.
Investor Conference Call
The company will host a live conference call and webcast with a
question and answer session on Monday, May 4, 2015, at 5 p.m. EDT
to review the first quarter 2015 financial results.
To listen to the call, dial (800) 708-4540 (U.S.) or (847)
619-6397 (outside the U.S.); passcode 39273201, at least 10 minutes
prior to the start of the call. The call will be webcast on the
“Investor Relations” section of the First Data website at
investor.firstdata.com and a slide presentation to accompany the
call will also be available on the website.
A replay of the call will be available through May 19, 2015, at
(888) 843-7419 (U.S.) or (630) 652-3042 (outside the U.S.);
passcode 39273201 and via webcast at investor.firstdata.com.
Please note: Other than the replay, First Data has not
authorized, and disclaims responsibility for any recording, replay
or distribution of any transcription of this call.
About First Data
First Data is the global leader in payment technology and
services solutions. With 23,000 owner-associates and operations in
34 countries, the company provides secure and innovative payment
technology and services to more than six million merchants and
financial institutions around the world, from small businesses to
the world’s largest corporations. Today, businesses around the
world trust First Data to secure and process over 2,000 financial
transactions per second. First Data’s unparalleled infrastructure
and partnerships go “beyond the transaction” with next-generation
point-of-sale technology fueled by powerful analytics to detect
fraud, gain insights into consumer spending, and strengthen
customer loyalty. All day, every day, First Data helps its clients
thrive in the evolving world of commerce.
First Data Corporation Consolidated Statements of
Operations (Unaudited) (in millions)
Three Months Ended March
31, 2015 2014 % Change Revenues:
Transaction and processing service fees (a): Merchant related
services $ 975 $ 942 4% Check services 59 66 -11% Card services 447
437 2% Other services 124 116 7% Product sales and other 217
204 6% Total revenues (excluding reimbursable
items) 1,822 1,765 3% Reimbursable debit network fees, postage and
other 873 875 —% Total revenues
2,695 2,640 2% Expenses: Cost of
services (exclusive of items shown below) 734 646 14% Cost of
products sold 77 80 -4% Selling, general and administrative 499 486
3% Depreciation and amortization 251 265 -5% Other operating
expenses: Restructuring, net 1 3 -67%
Total expenses (excluding reimbursable items) 1,562 1,480 6%
Reimbursable debit network fees, postage and other 873
875 —% Total expenses 2,435
2,355 3% Operating profit 260
285 -9% Interest income 1 3 -67% Interest expense
(407 ) (467 ) -13% Other income (b) 35 1
NM (371 ) (463 ) -20% Loss before
income taxes and equity earnings in affiliates (111 ) (178 ) -38%
Income tax expense 3 37 -92% Equity earnings in affiliates
(a) 51 50 2% Net loss (63 ) (165 ) -62%
Less: Net income attributable to noncontrolling interests and
redeemable noncontrolling interest 49 36
36% Net loss attributable to First Data Corporation
($112 ) ($201 ) -44% (See accompanying notes)
First Data Corporation Summary Segment Data
(Unaudited) (in millions)
Three Months Ended March 31, 2015
2014 % Change
Segment Revenues
(c):
Merchant Solutions $ 888 $ 856 4% Financial Services 372 349 7%
International 398 421 -5% Subtotal
segment revenues 1,658 1,626 2% All Other and Corporate 35 32 9%
Adjustments to reconcile to Adjusted revenues: Official check and
money order revenues (d) — (1 ) NM Eliminations of intersegment
revenues (15 ) (16 ) -6% Adjusted revenues
1,678 1,641 2% Adjustments to reconcile to
Consolidated revenues (e): Adjustments for non-wholly-owned
entities (f) 20 1 NM Official check and money order revenues (d) —
1 NM Independent Sales Organization (ISO) commission expense (g)
124 122 2% Reimbursable debit network fees, postage and other
873 875 —% Consolidated revenues $
2,695 $ 2,640 2%
Segment EBITDA
(h):
Merchant Solutions $ 368 $ 370 -1% Financial Services 180 173 4%
International 97 128 -24% Subtotal
segment EBITDA 645 671 -4% All Other and Corporate (82 )
(57 ) 44% Adjusted EBITDA 563 614
-8% Adjustments to reconcile to Net loss attributable to
First Data Corporation (e): Adjustments for non-wholly-owned
entities (f) 7 2 250% Depreciation and amortization (251 ) (265 )
-5% Interest expense (407 ) (467 ) -13% Interest income 1 3 -67%
Other items (i) (5 ) (7 ) -29% Income tax expense (3 ) (37 ) -92%
Stock based compensation (7 ) (29 ) -76% Official check and money
order EBITDA (d) — 1 NM Costs of alliance conversions (j) (3 ) (7 )
-57% Kohlberg Kravis Roberts & Co. (KKR) related items (k) (6 )
(6 ) —% Debt issuance costs (l) (1 ) (3 ) -67% Net
loss attributable to First Data Corporation ($112 )
($201 ) -44%
Segment depreciation
and amortization (a):
Merchant Solutions $ 93 $ 108 -14% Financial Services 80 80 —%
International 56 63 -11% Subtotal
segment depreciation and amortization 229 251 -9% All Other and
Corporate 16 11 45% Total segment
depreciation and amortization 245 262
-6% Adjustments to reconcile to consolidated depreciation and
amortization: Adjustments for non-wholly-owned entities (f) 21 19
11% Amortization of initial payments for new contracts 11
11 —% Total consolidated depreciation and
amortization per Consolidated Statements of Cash Flows 277
292 -5% Less: Amortization of equity method
investments (15 ) (16 ) -6% Less: Amortization of initial payments
for new contracts (11 ) (11 ) —% Total consolidated
depreciation and amortization per Consolidated Statements of
Operations $ 251 $ 265 -5% (See accompanying
notes)
First Data Corporation
Notes to Financial Schedules (Unaudited)
(a) Includes amortization of initial payments for new
contracts (presented in "Summary Segment Data"), which is recorded
as a contra-revenue within "Transaction and processing service
fees" and amortization related to equity method investments, which
is netted within the "Equity earnings in affiliates" line of $15
million and $16 million for the three months ended March 31, 2015
and 2014, respectively. (b) Other income includes derivative
financial instruments gains and (losses), divestitures, net, and
non-operating foreign currency gains and (losses) as applicable to
the periods presented. (c) Segment revenues is adjusted to exclude
reimbursable debit network fees, postage and other. Merchant
Solutions segment revenues is further adjusted to present results
on a proportionate consolidation basis and to reflect the
Independent Sales Organization commissions classified as expense on
a contra-revenue basis. (d) Represents an adjustment to exclude the
official check and money order businesses from revenues and EBITDA
due to the Company’s wind down of these businesses. (e) Reconciles
"Adjusted revenues" to "Consolidated revenues" or "Adjusted EBITDA"
to "Net loss attributable to First Data Corporation" as reported on
the Consolidated Statements of Operations. (f) Net adjustment to
reflect First Data Corporation's proportionate share of alliance
revenues and EBITDA within the Merchant Solutions segment, equity
earnings in affiliates included in International segment revenues,
and amortization related to equity method investments not included
in segment EBITDA. (g) Independent Sales Organization commissions
are presented as contra-revenues for Merchant Solutions segment
revenues reporting purposes while certain of such commissions are
reflected as expense in the Consolidated Statements of Operations.
(h) Segment EBITDA represents earnings before net interest expense,
income taxes, depreciation and amortization. Merchant Solutions
segment EBITDA is presented on a proportionate consolidation basis.
Segment EBITDA excludes the adjustments to reconcile to "Net loss
attributable to First Data Corporation" as reported on the
Consolidated Statements of Operations. (i) Includes restructuring,
litigation and regulatory settlements, derivative gains and
(losses), non-operating foreign currency gains and (losses),
divestitures, and impairments as applicable to the periods
presented and "Other income" as presented in the Consolidated
Statements of Operations. (j) Costs of alliance conversions
primarily represent costs directly associated with the strategy to
have First Data Corporation operate the Bank of America N.A.'s (the
Bank) legacy settlement platform and costs associated with the
termination of the Chase Paymentech alliance. (k) Represents KKR
annual sponsorship fees for management, financial and other
advisory services. (l) Debt issuance costs represent costs
associated with issuing debt and modifying First Data Corporation's
debt structure.
First Data Corporation Selected
Consolidated Balance Sheet and Cash Flow Data
(Unaudited) (in millions)
SELECTED CONSOLIDATED BALANCE SHEET DATA As of
As of March 31, 2015 December 31, 2014
Cash and cash equivalents $ 340 $ 358 Current settlement assets
7,688 7,555 Total assets 34,138 34,269 Short-term and
current portion of long-term borrowings 496 161 Settlement
obligations 7,689 7,557 Long-term borrowings 20,641 20,711 Total
liabilities 31,708 31,551 Redeemable noncontrolling interest
78 70 Total First Data Corporation stockholder's deficit
(723 ) (452 ) Noncontrolling interests 3,075 3,100 Total equity
2,352 2,648
SELECTED CONSOLIDATED CASH FLOW DATA
Three Months Ended Three Months Ended March
31, 2015 March 31, 2014 Source/(Use) of
cash Net cash used by operating activities ($102 ) ($44 )
Net cash used in investing activities (167 ) (112 )
Net cash provided by financing activities 253 146
Supplemental cash flow data Cash interest payments on
long-term debt (a) $ 561 $ 603
(a) For purposes of this schedule,
long-term debt excludes interest on capital leases.
First Data Corporation Financial Covenant
Calculation (Unaudited) (in millions) As
of March 31, 2015, the Company is in compliance with all applicable
covenants, including its sole financial covenant with Consolidated
Senior Secured Debt of $12,180 million, Consolidated EBITDA of
$3,019 million, and a Ratio of 4.03 to 1.00. The calculation
of Consolidated EBITDA under the senior secured term loan facility
is as follows (in millions):
Last twelve months ended
March 31, 2015 Net loss attributable to First Data Corporation
($369) Interest expense, net (1) 1,684 Income tax expense 48
Depreciation and amortization (2) 1,148
EBITDA (17) 2,511
Stock based compensation (3) 28 Restructuring, net (4) 48
Non-operating foreign currency (gains) and losses (5) (97)
Investment (gains) and losses (6) (100) Derivative financial
instruments (gains) and losses (7) 5 Cost of alliance conversions
and other technology initiatives (8) 17 KKR related items (9) 21
Debt issuance costs (10) 1 Litigation and regulatory settlements
(11) 22 Projected near-term cost savings and revenue enhancements
(12) 56 Net income attributable to noncontrolling interests and
redeemable noncontrolling interest (13) 206 Equity entities taxes,
depreciation and amortization (14) 11 Loss on debt extinguishment
(15) 260 Other (16) 30
Consolidated EBITDA (17)
$3,019 (1) Includes interest expense and interest
income. (2) Includes amortization of initial payments for new
contracts which is recorded as a contra-revenue within "Transaction
and processing service fees" of $11 million and amortization
related to equity method investments, which is netted within the
"Equity earnings in affiliates" line of $15 million. (3) Stock
based compensation recognized as expense. (4) Restructuring charges
in connection with management's alignment of the business with
strategic objectives and the departure of executive officers. (5)
Represents net gains and losses related to currency translations on
certain intercompany loans and euro-denominated debt. (6) Reflects
investment gains and losses, principally $98 million gain on sale
of minority interest, Electronic Funds Source. (7) Represents fair
market value adjustments for cross-currency swaps and interest rate
swaps that are not designated as accounting hedges. (8) Represents
costs directly associated with the strategy to have First Data
Corporation operate Bank of America N.A.'s legacy settlement
platform and costs associated with the termination of the Chase
Paymentech alliance, both of which are considered business
optimization projects, and other technology initiatives. (9)
Represents KKR annual sponsorship fees for management, financial
and other advisory services. (10) Debt issuance costs represent
costs associated with issuing debt and modifying First Data
Corporation's debt structure. (11) Represents settlements of
litigation or regulatory matters. (12) Reflects cost savings and
revenue enhancements projected to be realized as a result of
specific actions as if they were achieved on the first day of the
period. Includes cost savings initiatives associated with the
business optimization projects and other technology initiatives
described in Note 8, operations and technology initiatives,
headcount reductions and other addressable spend reductions as of
March 31, 2015. These cost savings and revenue enhancements do not
include our expense optimization program discussed earlier in this
release. (13) Net income attributable to noncontrolling interests
and redeemable noncontrolling interest in restricted subsidiaries.
(14) Represents First Data Corporation’s proportional share of
income taxes, depreciation and amortization on equity method
investments. (15) Loss incurred due to early extinguishment of
debt. (16) Includes items such as impairments and other as
applicable to the period presented. (17) EBITDA is defined as net
income (loss) attributable to First Data Corporation before net
interest expense, income taxes, depreciation and amortization.
EBITDA is not a recognized term under U.S. generally accepted
accounting principles ("GAAP") and does not purport to be an
alternative to net income (loss) attributable to First Data
Corporation as a measure of operating performance or to cash flows
from operating activities as a measure of liquidity. Additionally,
EBITDA is not intended to be a measure of free cash flow available
for management’s discretionary use as it does not consider certain
cash requirements such as interest payments, tax payments and debt
service requirements. The presentation of EBITDA has limitations as
an analytical tool and should not be considered in isolation or as
a substitute for analysis of First Data Corporation's results as
reported under GAAP. Management believes EBITDA is helpful in
highlighting trends because EBITDA excludes the results of
decisions that are outside the control of operating management and
can differ significantly from company to company depending on
long-term strategic decisions regarding capital structure, the tax
jurisdictions in which companies operate and capital investments.
Management compensates for the limitations of using non-GAAP
financial measures by using them to supplement GAAP results to
provide a more complete understanding of the factors and trends
affecting the business than GAAP results alone.
Consolidated EBITDA (or debt covenant
EBITDA) is defined as EBITDA adjusted to exclude certain non-cash
items, non-recurring items that First Data Corporation does not
expect to continue at the same level in the future and certain
items management believes will impact future operating results and
adjusted to include near-term cost savings projected to be achieved
within twelve months on an annualized basis (see Note 12 above).
Consolidated EBITDA is further adjusted to add net income
attributable to noncontrolling interests and redeemable
noncontrolling interest of certain non-wholly-owned subsidiaries
and exclude other miscellaneous adjustments that are used in
calculating covenant compliance under the agreements governing
First Data Corporation's senior unsecured debt and/or senior
secured credit facilities. The Company believes that the inclusion
of supplementary adjustments to EBITDA are appropriate to provide
additional information to investors about items that will impact
the calculation of EBITDA that is used to determine covenant
compliance under the agreements governing First Data Corporation's
senior unsecured debt and/or senior secured credit facilities.
Since not all companies use identical calculations, this
presentation of Consolidated EBITDA may not be comparable to other
similarly titled measures of other companies.
First Data Corporation Reconciliation of Non-GAAP
Measures (Unaudited) (in millions)
Management believes the following non-GAAP measures provide
meaningful supplemental information to assist investors in
understanding our financial results and to better analyze trends in
our underlying business as well as evaluate our ability to service
our debt. Management uses these measures to evaluate our operating
performance and our segments. Management believes these non-GAAP
measurements are useful in highlighting trends because they exclude
the results of decisions that are outside the control of operating
management and can differ significantly from company to company
depending on long-term strategic decisions regarding capital
structure, the tax jurisdictions in which companies operate and
capital investments. Management compensates for the limitations of
using non-GAAP financial measures by using them to supplement GAAP
results to provide a more complete understanding of the factors and
trends affecting the business than GAAP results alone. Since
management finds these measures useful, we believe that our
investors will benefit from seeing the Company's results through
the eyes of management in addition to seeing our GAAP results.
Adjusted revenues represents the sum of Segment revenue (as
defined in Note (c) to the Financial Schedules) and All Other and
Corporate revenue as adjusted to exclude revenue related to the
official check and money order businesses due to the wind down of
these businesses and to reflect elimination of intersegment
revenues. Adjusted EBITDA represents the sum of Segment EBITDA (as
defined in Note (h) to the Financial Schedules) and All Other and
Corporate EBITDA. Adjusted revenue and Adjusted EBITDA are
reconciled to the most directly comparable GAAP financial measures
on the Summary Segment Data schedules. Non-GAAP measures for the
International segment adjust for the change in foreign currency
exchange rates. Adjusted net income (loss) is intended to be an
approximation of recurring cash earnings, which management uses to
monitor the health of the company. Management believes that these
non-GAAP measures provide insight into the Company's core
performance. These non-GAAP financial measures should not be
considered in isolation or as a substitute for the most comparable
GAAP financial measures. The non-GAAP financial measures reflect an
additional way of viewing aspects of our operations that, when
viewed with our GAAP results and the reconciliation to the
corresponding GAAP financial measures, provide a more complete
understanding of our business. Investors are strongly encouraged to
review our financial statements and publicly-filed reports in their
entirety and not to rely on any single financial measure. A
reconciliation of the non-GAAP measures to the most directly
comparable GAAP financial measures is included below.
Three Months Ended March 31,
2015
2014
% Change
First Data
Corporation
Adjusted Net income (loss) $ 40 ($9 ) NM Adjustments to reconcile
to Net loss attributable to First Data Corporation: Stock based
compensation (7 ) (29 ) -76 % Amortization of acquisition
intangibles (153 ) (169 ) -9 % Mark-to-Market of Derivatives (2 ) 3
NM Mark-to-Market of Euro denominated Debt 68 1 NM Restructurings,
litigation, impairments, and other (58 ) 2 NM
Net loss attributable to First Data Corporation ($112 )
($201 ) -44 %
Three Months Ended March 31,
Three Months Ended March 31, 2015 2014 %
Change 2015 2014 % Change
First Data
Corporation
First Data
Corporation
Consolidated adjusted revenue $ 1,678 $ 1,641 2 % Consolidated
adjusted EBITDA $ 563 $ 614 -8 % Foreign exchange impact (1)
52 — Foreign exchange impact (1) 11
— Consolidated adjusted revenue on a constant currency basis
$ 1,730 $ 1,641 5 % Consolidated adjusted EBITDA on a
constant currency basis $ 574 $ 614 -6 %
Three Months
Ended March 31, Three Months Ended March 31, 2015
2014 % Change 2015 2014 % Change
International
International
Segment revenue $ 398 $ 421 -5 % Segment EBITDA $ 97 $ 128 -24 %
Foreign exchange impact (1) 52 —
Foreign exchange impact (1) 11 — Segment revenue on a
constant currency basis $ 450 $ 421 7 % Segment
EBITDA on a constant currency basis $ 108 $ 128 -16 %
Three Months Ended March 31, Three Months Ended March
31, 2015 2014 % Change 2015
2014 % Change
International
International
Segment revenue - merchant acquiring $ 203 $ 208 -2 % Segment
revenue - card issuing $ 195 $ 213 -8 % Foreign exchange impact (1)
27 — Foreign exchange impact (1)
25 — Segment revenue - merchant acquiring on a constant
currency basis $ 230 $ 208 11 % Segment revenue -
card issuing on a constant currency basis $ 220 $ 213 3 %
(1) Foreign exchange impact represents the difference between
actual 2015 revenue and EBITDA and 2015 revenue and EBITDA
calculated using 2014 exchange rates.
Glenn Fodor, CFAInvestor RelationsFirst
Data212-515-0278investor@firstdata.comorLiidia LiuksilaPublic
RelationsFirst Data212-515-0174Liidia.Liuksila@firstdata.com