- Total segment revenue of $2,234
million, up 11% reported(a), up 9% on a comparable accounting
basis(b), up 6% on an organic constant currency basis(c)
- Consolidated revenue of $2,448 million,
impacted by the adoption of ASC 606
- Net income attributable to First Data
diluted EPS of $0.36
- Adjusted diluted EPS of $0.39
- Total segment EBITDA of $864 million,
up 10% reported(a), up 10% on a comparable accounting basis(b), up
8% on an organic constant currency basis(c)
- Cash flow from operations of $604
million; free cash flow of $378 million
- Total borrowings declined $395 million;
net debt declined $344 million in quarter
- Raising full year 2018 guidance for
segment revenue growth
- Signed agreement to divest businesses
in Greece and Central/Eastern Europe for €375 million
First Data Corporation (NYSE: FDC), a global leader in
commerce-enabling technology, today reported financial results for
the second quarter ended June 30, 2018.
“We delivered another strong quarter of financial results,
driven by solid contributions from each of our business segments.
Our continued investment in technology aimed at helping our
customers grow with cutting-edge solutions continues to pay off,
resulting in excellent performance in several businesses,” said
First Data Chairman and CEO Frank Bisignano. “Looking ahead, First
Data is positioned to build on our first half momentum with
continued strong performance in the second half of the year and
beyond, supported by our market-leading products and services,
strong positioning in key global markets, and commitment to driving
value through strategic capital allocation,” Bisignano added.
Total segment revenue was $2,234 million for the quarter, up 11%
versus the prior year period on a reported basis(a), up 9% on a
comparable accounting basis(b), or up 6% on an organic constant
currency basis(c). Consolidated revenue for the second quarter was
$2,448 million, impacted by the adoption of ASC 606.
Net income attributable to First Data for the second quarter of
2018 was $341 million, or $0.36 per diluted share, up 84% and 80%,
respectively, from comparable figures in the second quarter of
2017. The increase in net income attributable to First Data was
primarily driven by a $107 million tax benefit related to a
previously disclosed settlement of an IRS audit, as well as
improved operating results in the current period.
Adjusted net income, which modifies net income for items such as
debt extinguishment charges, stock-based compensation, amortization
of acquisition intangibles, restructuring costs, certain discrete
tax items and other items, was $371 million, or $0.39 per diluted
share, down 1% and 3%, respectively, from comparable figures in the
second quarter of 2017. The decrease was driven by a normalized
adjusted effective tax rate in the current period, largely offset
by improved operating results.
Total segment earnings before interest, taxes, depreciation, and
amortization (total segment EBITDA) in the second quarter of 2018
was $864 million, up 10% versus the prior year period on both a
reported basis(a) and comparable accounting basis(b), or up 8% on
an organic constant currency basis(c). Total segment EBITDA margin
was 38.7%, up 18 basis points on a comparable accounting basis(b),
or up 78 basis points on an organic constant currency basis(c).
Segment Results
Global Business Solutions (GBS)
Second quarter 2018 GBS segment revenue was $1,449 million, up
18% versus the prior year period on a reported basis(a), up 14% on
a comparable accounting basis(b), or up 8% on an organic constant
currency basis(c). Within geographic regions, North America revenue
of $1,134 million was up 18% versus the prior year period on a
reported basis(a), up 13% on a comparable accounting basis(b), or
up 6% on an organic constant currency basis(c). Performance in
North America reflected strong growth in the ISV and agent
businesses within the Partner Solutions channel, combined with good
growth in the Direct channel. The JV channel saw a slight revenue
decline, comparable to its performance in the first quarter of
2018. EMEA revenue was $180 million, up 15% on a reported basis(a),
up 13% on a comparable accounting basis(b), or up 5% on an organic
constant currency basis(c), driven by growth in the U.K. Latin
America revenue was $85 million, up 32% on a reported basis, up 20%
on a comparable accounting basis(b), or up 47% on an organic
constant currency basis(c), driven by strong growth in Brazil and
Argentina. APAC revenue was $50 million, up 20% on a reported
basis(a), up 21% on a comparable accounting basis(b), or up 19% on
an organic constant currency basis(c), driven by good growth
throughout the region.
Second quarter 2018 GBS segment EBITDA was $544 million, up 13%
versus the prior year period on both a reported basis and
comparable accounting basis(a)(b), or up 10% on an organic constant
currency basis(c). GBS Segment EBITDA margin was 37.5%, down 28
basis points on a comparable accounting basis(b), or up 70 basis
points on an organic constant currency basis(c).
Global Financial Solutions (GFS)
Second quarter 2018 GFS segment revenue was $414 million, up 3%
versus the prior year period on a reported basis(a), up 2% on a
comparable accounting basis(b), or up 4% on an organic constant
currency basis(c). Within geographic regions, North America revenue
of $233 million was flat on a reported basis(a), or down 1% on both
a comparable accounting basis(b) and on an organic constant
currency basis(c), driven by recent long-term renewals. EMEA
revenue was $119 million, up 6% versus the prior year period on a
reported basis(a), up 7% on a comparable accounting basis(b), or up
7% on an organic constant currency basis(c), driven by healthy
growth in the U.K. Latin America revenue was $36 million, up 6%
versus the prior year period on a reported basis, flat on a
comparable accounting basis(b), or up 13% on an organic constant
currency basis(c), driven by growth in Argentina. APAC revenue was
$26 million, up 7% versus the prior year period on a reported
basis, up 27% on a comparable accounting basis(b), or up 25% on an
organic constant currency basis(c), driven by strong growth across
the region.
Second quarter 2018 GFS segment EBITDA was $176 million, up 7%
versus the prior year period on a reported basis(a), up 5% on a
comparable accounting basis(b), or up 7% on an organic constant
currency basis(c). GFS Segment EBITDA margin was 42.5%, up 58 basis
points on a comparable accounting basis(b), or up 111 basis points
on an organic constant currency basis(c).
Network & Security Solutions (NSS)
Second quarter 2018 NSS segment revenue was $371 million, down
3% versus the prior year period on a reported basis(a), up 1% on a
comparable accounting basis(b), or up 3% on an organic constant
currency basis(c). Within NSS's primary businesses, both Stored
Value and EFT revenue grew mid-single digits in the quarter.
Security and Fraud revenue was flat as high-single digit growth in
the core security and fraud businesses was offset by a decline in
TeleCheck revenue in the quarter.
Second quarter 2018 NSS segment EBITDA was $193 million, up 7%
versus the prior year period on a reported basis(a), comparable
accounting basis(b), and organic constant currency basis(c). NSS
Segment EBITDA margin was 52.0%, up 298 basis points on a
comparable accounting basis(b), or up 202 basis points on an
organic constant currency basis(c).
Cash Flow
In the second quarter 2018, cash flow from operations was $604
million, up $24 million compared to $580 million in the prior year
period. Free cash flow, which the Company defines as cash flow from
operations less capital expenditures, distributions to minority
interests and other, was $378 million in the current quarter, down
$70 million compared to $448 million in the prior year period,
primarily driven by the non-recurrence of a $90 million swap
settlement in the prior year period, partially offset by improved
operating results.
In the first six months of 2018, cash flow from operations was
$1.14 billion, up $137 million compared to $1.00 billion in the
prior year six-month period. Free cash flow was $746 million in the
current six-month period, up $37 million compared to $709 million
in the prior year period.
Capital Structure
First Data's total borrowings at June 30, 2018 decreased by
$581 million to $18,617 million, from $19,198 million at
December 31, 2017. The decrease was driven by debt paydowns
during the period. Net debt at June 30, 2018 decreased by $583
million to $18,038 million, from $18,621 million at
December 31, 2017.
Divestitures
In the second quarter of 2018, First Data entered into an
agreement to divest its card processing businesses (reported within
GFS EMEA) in Greece and Central/Eastern Europe for €375
million. The deal is expected to close before year end.
Updated 2018 Full Year Revenue Guidance
The updated guidance provided below holds foreign exchange rates
constant versus the year-ago comparable period ("constant
currency"), and applies the New Reporting Standards to the
referenced year ago period.
- Total segment revenue growth: 7% to 8%,
compared to previously disclosed guidance of 6% to 7%. Both ranges
include a net benefit attributable to the full year impact of
closed major acquisitions and dispositions of approximately 2
percentage points.
Segment EBITDA growth, adjusted EPS, and free cash flow guidance
remains unchanged from previously disclosed guidance.
See "2018 Non-GAAP Guidance Reconciliation" in the financial
tables of this press release for reconciliations of non-GAAP
guidance measures to the most directly comparable GAAP
measures.
Investor Conference Call
The Company will host a conference call and webcast on Monday,
July 30, 2018, at 8 a.m. ET to review the second quarter 2018
financial results.
To listen to the call, dial +1 (844) 826-3033 (U.S.) or +1 (412)
317-5172 (outside the U.S.) at least 10 minutes prior to the start
of the call. The call will also be webcast on the “Investor
Relations” section of the First Data website at
investor.firstdata.com along with a slide presentation to accompany
the call.
A replay of the call will be available through August 30, 2018,
at +1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the
U.S.); passcode 10121737 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.
Non-GAAP Measures
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles, or GAAP, the Company uses non-GAAP measures of certain
financial performance. These non-GAAP measures include total
segment revenue, total segment expense, total segment EBITDA,
adjusted net income, adjusted net income per diluted share, free
cash flow and net debt. The Company has included non-GAAP measures
because management believes that they help to facilitate
comparisons of the Company's operating results between periods. The
Company believes the non-GAAP measures provide useful information
to both management and users of our financial statements by
excluding certain expenses, gains and losses that may not be
indicative of its core operating results and business outlook.
These non-GAAP measures are not in accordance with, or an
alternative to, measures prepared in accordance with GAAP and may
be different from non-GAAP measures used by other companies. In
addition, these non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. These measures
should only be used to evaluate the Company's results of operations
in conjunction with the corresponding GAAP measures. Additional
information about non-GAAP financial measures, including a
reconciliation to the most directly comparable GAAP measure of all
non-GAAP measures can be found in the tables included in this press
release.
About First Data
First Data (NYSE: FDC) is a global leader in commerce-enabling
technology and solutions, serving approximately six million
business locations and 4,000 financial institutions in more than
100 countries around the world. The Company’s 22,000
owner-associates are dedicated to helping companies, from start-ups
to the world’s largest corporations, conduct commerce every day by
securing and processing more than 3,000 transactions per second and
$2.4 trillion per year.
(a) GAAP growth rate -- Consolidated revenue, segment
revenue and segment EBITDA reflect New Reporting Standards,
including the modified retrospective application of ASC 606 (the
New Revenue Standard). See Form 8-K filed on April 16, 2018, for
full description of the New Reporting Standards and their impact on
2017 results. (b) Non-GAAP growth rate -- Growth rate adjusted to
retrospectively apply ASC 606 to the prior year period, providing a
consistent basis of accounting to both periods. (c) Non-GAAP growth
rate -- Organic constant currency growth (“Organic CC growth”) is
defined as reported growth adjusted for the following: (1) excludes
the impacts of year-over-year currency rate changes in the current
period; (2) excludes the results of significant divestitures in the
prior year period; (3) includes the results of significant
acquisitions in the prior year period; and (4) is adjusted to
retrospectively apply ASC 606 to the prior year period.
First Data Corporation Consolidated
Statements of Operations (Unaudited) (in millions,
except per share data) Three months ended June
30, Six months ended June 30, 2018
2017 2018 2017 Revenues: Revenues
excluding reimbursable items $ 2,244 $ 2,035 $ 4,328 $ 3,917
Reimbursable items 204 990 402 1,909
Total revenues 2,448 3,025 4,730 5,826
Expenses: Cost of revenues (exclusive of items shown below) 751 782
1,530 1,562 Selling, general, and administrative 683 520 1,330
1,046 Depreciation and amortization 255 237 505 465 Other operating
expenses 17 29 77 51 Total expenses
(excluding reimbursable items) 1,706 1,568 3,442 3,124 Reimbursable
items 204 990 402 1,909 Total expenses
1,910 2,558 3,844 5,033 Operating
profit 538 467 886 793 Interest
expense, net (234 ) (236 ) (467 ) (469 ) Loss on debt
extinguishment (1 ) (15 ) (1 ) (71 ) Other income (expense) 2
(2 ) (1 ) (3 ) Income before income taxes and equity
earnings in affiliates 305 214 417 250 Income tax (benefit) expense
(37 ) 28 (10 ) 40 Equity earnings in affiliates 60 57
109 112 Net income 402 243 536 322 Less: Net income
attributable to noncontrolling interests and redeemable
noncontrolling interest 61 58 94 101
Net income attributable to First Data Corporation $ 341 $
185 $ 442 $ 221 Net income attributable
to First Data Corporation per share: Basic $ 0.37 $ 0.20 $ 0.48 $
0.24 Diluted $ 0.36 $ 0.20 $ 0.47 $ 0.24 Weighted-average
common shares outstanding: Basic 928 915 926 913 Diluted 954 938
950 935 The 2018 results include the impact of adopting ASC
606 (the New Revenue Standard), while the 2017 results are stated
under ASC 605 (the Legacy Revenue Standard).
First
Data Corporation Selected Consolidated Balance Sheet and
Cash Flow Data (Unaudited) (in millions)
SELECTED CONSOLIDATED BALANCE SHEET DATA As of
As of June 30, 2018 December 31, 2017
Cash and cash equivalents $ 544 $ 498 Settlement assets 16,982
20,363 Total assets 44,447 48,269 Short-term and current
portion of long-term borrowings 900 1,271 Settlement obligations
16,982 20,363 Long-term borrowings 17,717 17,927 Total liabilities
37,962 42,183 Redeemable noncontrolling interest 78 72
Total First Data Corporation stockholders' equity 3,583
3,152 Noncontrolling interests 2,824 2,862 Total equity 6,407 6,014
SELECTED CONSOLIDATED CASH FLOW DATA Three
months ended Six months ended June 30, June
30, 2018 2017 2018
2017 Source/(Use) of cash Net cash provided by
operating activities $ 604 $ 580 $ 1,138 $ 1,001 Net cash used in
investing activities (147 ) (125 ) (290 ) (241 ) Net cash used in
financing activities (480 ) (475 ) (784 ) (662 )
Supplemental
cash flow data Cash interest payments(a) $ 215 $ 208 $ 452 $
453 (a) For purposes of this schedule, cash interest
payments excludes interest on capital leases and interest on
foreign lines of credit.
First Data
Corporation Summary Segment Data (Unaudited)
(in millions) Three months ended June 30,
Six months ended June 30,
%
Organic CC %
%
Organic CC % 2018 2017
Change
Change(c)
2018 2017
Change
Change(c)
Consolidated Revenues $ 2,448 $ 3,025 (19 )% $ 4,730 $ 5,826 (19 )%
Adjustments: Non wholly owned entities(a) (10 ) (25 ) (60 )% (14 )
(35 ) (60 )% Reimbursable items (204 ) (990 ) (79 )% (402 ) (1,909
) (79 )% Total Segment Revenues $ 2,234 $ 2,010 11 %
6 % $ 4,314 $ 3,882 11 % 6 % Segment
Revenues: Global Business Solutions $ 1,449 $ 1,227 18 % 8 % $
2,767 $ 2,345 18 % 7 % Global Financial Solutions 414 402 3 % 4 %
814 795 2 % 2 % Network & Security Solutions 371 381
(3 )% 3 % 733 742 (1 )% 5 % Total Segment
Revenues $ 2,234 $ 2,010 11 % 6 % $ 4,314 $
3,882 11 % 6 %
Three months ended June
30, Six months ended June 30,
%
Organic CC %
%
Organic CC % 2018 2017
Change
Change(c)
2018 2017
Change
Change(c)
Net income attributable to First Data Corporation $ 341 $ 185 84 %
$ 442 $ 221 100 % Adjustments: Non wholly owned entities(a) (4 ) (6
) (33 )% (22 ) (12 ) 83 % Depreciation and amortization 255 237 8 %
505 465 9 % Interest expense, net 234 236 (1 )% 467 469 — % Loss on
debt extinguishment 1 15 (93 )% 1 71 (99 )% Other items(b) 15 33
(55 )% 78 59 32 % Income tax (benefit) expense (37 ) 28 (232 )% (10
) 40 (125 )% Stock-based compensation 59 56 5 % 133
121 10 % Total Segment EBITDA $ 864 $ 784
10 % 8 % $ 1,594 $ 1,434 11 % 9 %
Segment EBITDA: Global Business Solutions $ 544 $ 483 13 % 10 % $
978 $ 865 13 % 10 % Global Financial Solutions 176 165 7 % 7 % 342
319 7 % 7 % Network & Security Solutions 193 180 7 % 7 % 368
336 10 % 10 % Corporate (49 ) (44 ) (11 )% (11 )% (94 ) (86 ) (9 )%
(9 )% Total Segment EBITDA $ 864 $ 784 10 % 8 % $
1,594 $ 1,434 11 % 9 %
NM represents not meaningful
(a) Net adjustment to reflect our proportionate share
of the results of our investments in businesses accounted for under
the equity method and consolidated subsidiaries with noncontrolling
ownership interests. Segment revenue for our significant affiliates
is reflected based on our proportionate share of the results of our
investments in businesses accounted for under the equity method and
consolidated subsidiaries with noncontrolling ownership interests.
For other affiliates, we include equity earnings in affiliates,
excluding amortization expense, in segment revenue. (b) Includes
restructuring, non-normal course litigation and regulatory
settlements, debt issuance expenses, deal and deal integration
costs, Other expense as presented in the unaudited consolidated
statements of operations, which includes divestitures, derivative
gains (losses), non-operating foreign currency gains (losses), and
other as applicable to the periods presented. (c) Organic constant
currency growth (“Organic CC growth”) is defined as reported growth
adjusted for the following: (1) excludes the impacts of
year-over-year currency rate changes in the current period; (2)
excludes the results of significant divestitures in the prior year
period; (3) includes the results of significant acquisitions in the
prior year period; and (4) is adjusted to retrospectively apply New
Reporting Standards to the prior year period.
First Data Corporation Summary Segment Data
(Unaudited) (in millions)
SEGMENT REVENUE
RECONCILIATION
Three months ended June 30, Six months
ended June 30, 2018 2017 %
B/(W)(b) 2018 2017 %
B/(W)(b) Reported FDC segment revenue $ 2,234 $ 2,010 11
% $ 4,314 $ 3,882 11 % New revenue standard adjustments (ASC 606) —
29 — 46 FDC segment revenue (comparable accounting) 2,234 2,039 9 %
4,314 3,928 10 % Currency impact 1 — (26 ) — FDC CC adjusted
segment revenue 2,235 2,039 10 % 4,288 3,928 9 %
Acquisitions/Divestitures(c) — 61 — 119
Organic CC FDC segment revenue growth(a) $ 2,235 $ 2,100
6 % $ 4,288 $ 4,047 6 % Reported GBS
segment revenue $ 1,449 $ 1,227 18 % $ 2,767 $ 2,345 18 % New
revenue standard adjustments (ASC 606) — 42 — 74 GBS segment
revenue (comparable accounting) 1,449 1,269 14 % 2,767 2,419 14 %
Currency impact 4 — (11 ) — Acquisitions/Divestitures(c) —
74 — 145 Organic CC GBS segment revenue
growth(a) $ 1,453 $ 1,343 8 % $ 2,756 $ 2,564
7 % Reported GBS NA segment revenue $ 1,134 $ 965 18
% $ 2,148 $ 1,845 16 % New revenue standard adjustments (ASC 606) —
34 — 60 GBS NA segment revenue (comparable accounting) 1,134 999 13
% 2,148 1,905 13 % Currency impact (1 ) — (2 ) —
Acquisitions/Divestitures(c) — 74 — 145
Organic CC GBS NA segment revenue growth(a) $ 1,133 $ 1,073
6 % $ 2,146 $ 2,050 5 % Reported GBS
EMEA segment revenue $ 180 $ 156 15 % $ 348 $ 296 17 % New revenue
standard adjustments (ASC 606) — 2 — 3 GBS EMEA segment revenue
(comparable accounting) 180 158 13 % 348 299 16 % Currency impact
(14 ) — (34 ) — Acquisitions/Divestitures(c) — — —
— Organic CC GBS EMEA segment revenue growth(a) $ 166
$ 158 5 % $ 314 $ 299 5 %
Reported GBS APAC segment revenue $ 50 $ 42 20 % $ 98 $ 81 21 % New
revenue standard adjustments (ASC 606) — — — — GBS APAC segment
revenue (comparable accounting) 50 42 21 % 98 81 21 % Currency
impact — — (3 ) — Acquisitions/Divestitures(c) — — —
— Organic CC GBS APAC segment revenue growth(a) $ 50
$ 42 19 % $ 95 $ 81 17 %
Reported GBS LATAM segment revenue $ 85 $ 64 32 % $ 173 $ 123 40 %
New revenue standard adjustments (ASC 606) — 6 — 11 GBS LATAM
segment revenue (comparable accounting) 85 70 20 % 173 134 28 %
Currency impact 19 — 28 — Acquisitions/Divestitures(c) — —
— — Organic CC GBS LATAM segment revenue
growth(a) $ 104 $ 70 47 % $ 201 $ 134
49 % Reported GFS segment revenue $ 414 $ 402 3 % $ 814 $
795 2 % New revenue standard adjustments (ASC 606) — 1 — — GFS
segment revenue (comparable accounting) 414 403 2 % 814 795 3 %
Currency impact (3 ) — (15 ) — Acquisitions/Divestitures(c) —
(6 ) — (12 ) Organic CC GFS segment revenue growth(a)
$ 411 $ 397 4 % $ 799 $ 783 2 %
Three months ended June 30, Six months ended June
30, 2018 2017 % B/(W)(b)
2018 2017 % B/(W)(b) Reported GFS NA
segment revenue $ 233 $ 233 — % $ 461 $ 469 (2 )% New revenue
standard adjustments (ASC 606) — 2 — — GFS NA segment revenue
(comparable accounting) 233 235 (1 )% 461 469 (2 )% Currency impact
— — — — Acquisitions/Divestitures(c) — — — —
Organic CC GFS NA segment revenue growth(a) $ 233 $
235 (1 )% $ 461 $ 469 (2 )% Reported
GFS EMEA segment revenue $ 119 $ 110 6 % $ 229 $ 211 9 % New
revenue standard adjustments (ASC 606) — 1 — — GFS EMEA segment
revenue (comparable accounting) 119 111 7 % 229 211 9 % Currency
impact (7 ) — (20 ) — Acquisitions/Divestitures(c) — (6 ) —
(12 ) Organic CC GFS EMEA segment revenue growth(a) $ 112
$ 105 7 % $ 209 $ 199 6 %
Reported GFS APAC segment revenue $ 26 $ 25 7 % $ 57 $ 48 19
% New revenue standard adjustments (ASC 606) — (4 ) — (6 ) GFS APAC
segment revenue (comparable accounting) 26 21 27 % 57 42 36 %
Currency impact (1 ) — (2 ) — Acquisitions/Divestitures(c) —
— — — Organic CC GFS APAC segment revenue
growth(a) $ 25 $ 21 25 % $ 55 $ 42 32 %
Reported GFS LATAM segment revenue $ 36 $ 34 6 % $ 67 $ 67 —
% New revenue standard adjustments (ASC 606) — 2 — 6 GFS LATAM
segment revenue (comparable accounting) 36 36 — % 67 73 (8 )%
Currency impact 5 — 7 — Acquisitions/Divestitures(c) — —
— — Organic CC GFS LATAM segment revenue
growth(a) $ 41 $ 36 13 % $ 74 $ 73 1 %
Reported NSS segment revenue $ 371 $ 381 (3 )% $ 733 $ 742
(1 )% New revenue standard adjustments (ASC 606) — (14 ) — (28 )
NSS segment revenue (comparable accounting) 371 367 1 % 733 714 3 %
Currency impact — — — — Acquisitions/Divestitures(c) — (7 )
— (14 ) Organic CC NSS segment revenue growth(a) $ 371
$ 360 3 % $ 733 $ 700 5 %
SEGMENT EBITDA
RECONCILIATION
Three months ended June 30, Six months ended June 30,
2018 2017 % B/(W)(b) 2018
2017 % B/(W)(b) Reported FDC segment EBITDA $
864 $ 784 10 % $ 1,594 $ 1,434 11 % New revenue standard
adjustments (ASC 606) — 1 — (7 ) FDC segment EBITDA (comparable
accounting) 864 785 10 % 1,594 1,427 12 % Currency impact 7 — 2 —
FDC CC adjusted segment EBITDA 871 785 11 % 1,596 1,427 12 %
Acquisitions/Divestitures(c) — 17 — 35
Organic CC FDC segment EBITDA growth(a) $ 871 $ 802 8
% $ 1,596 $ 1,462 9 % Reported GBS segment
EBITDA $ 544 $ 483 13 % $ 978 $ 865 13 % New revenue standard
adjustments (ASC 606) — (3 ) — (11 ) GBS segment EBITDA (comparable
accounting) 544 480 13 % 978 854 14 % Currency impact 6 — 4 —
Acquisitions/Divestitures(c) — 19 — 39
Organic CC GBS segment EBITDA growth(a) $ 550 $ 499
10 % $ 982 $ 893 10 % Reported GFS segment
EBITDA $ 176 $ 165 7 % $ 342 $ 319 7 % New revenue standard
adjustments (ASC 606) — 4 — 4 GFS segment EBITDA (comparable
accounting) 176 169 5 % 342 323 6 % Currency impact 1 — (2 ) —
Acquisitions/Divestitures(c) — (2 ) — (4 ) Organic CC
GFS segment EBITDA growth(a) $ 177 $ 167 7 % $ 340
$ 319 7 % Reported NSS segment EBITDA $ 193 $
180 7 % $ 368 $ 336 10 % New revenue standard adjustments (ASC 606)
— — — — NSS segment EBITDA (comparable accounting) 193 180 7 % 368
336 10 % Currency impact — — — — Acquisitions/Divestitures(c) —
— — — Organic CC NSS segment EBITDA
growth(a) $ 193 $ 180 7 % $ 368 $ 336
10 % (a) Organic constant currency growth (“Organic
CC growth”) is defined as reported growth adjusted for the
following: (1) excludes the impacts of year-over-year currency rate
changes in the current period; (2) excludes the results of
significant divestitures in the prior year period; (3) includes the
results of significant acquisitions in the prior year period; and
(4) is adjusted to retrospectively apply New Reporting Standards to
the prior year period. (b) “B” means results in 2018 are better
than results in 2017 “(W)” means results are worse. (c)
“Acquisitions/Divestitures" includes the following 2017 activity:
the acquisitions of CardConnect and BluePay in GBS North America;
the formation of the digital banking JV in NSS (treated as a 50%
digital banking revenue divestiture), and the divestiture of the
GFS Baltics business.
First Data Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited) (in millions) ADJUSTED NET
INCOME RECONCILIATION Three months ended June
30, Six months ended June 30, 2018
2017 % Change 2018 2017
% Change Net income attributable to First Data
Corporation $ 341 $ 185 84 % $ 442 $ 221 100 % Adjustments:
Stock-based compensation 59 56 5 % 133 121 10 % Loss on debt
extinguishment 1 15 (93 )% 1 71 (99 )% Amortization of acquisition
intangibles and deferred financing costs(a) 104 94 11 % 210 189 11
% Loss on disposal of businesses 1 — NM 2 — NM Restructuring 16 16
— % 48 39 23 % Intercompany foreign exchange gain (loss) (7 ) 3 NM
(4 ) 4 NM Impairment, litigation, and other(b) 8 4 100 % 18 3 NM
Deal and integration costs (4 ) 5 NM 3 5 (40 )% (Gain)/loss on
investments 3 — NM 2 — NM Fees paid on debt modification — 9 NM — 9
NM Discrete tax adjustment(c) — (4 ) NM — (4 ) NM Discrete tax
items(d) (107 ) (7 ) NM (101 ) (7 ) NM Income tax on above items
and discrete tax items(e) (44 ) (2 ) NM (104 ) (19 ) NM Adjusted
net income attributable to First Data Corporation $ 371 $
374 (1 )% $ 650 $ 632 3 % Income tax
(benefit) expense (37 ) 28 NM (10 ) 40 NM Discrete tax items(d) 107
7 NM 101 7 NM Income tax on above items and discrete tax items(e)
44 2 NM 104 19 NM Adjusted pre-tax net
income attributable to First Data Corporation $ 485 $ 411
18 % $ 845 $ 698 21 % Adjusted net
income per share: Basic $ 0.40 $ 0.41 (2 )% $ 0.70 $ 0.69 1 %
Diluted $ 0.39 $ 0.40 (3 )% $ 0.68 $ 0.68 1 %
Weighted-average common shares used to compute adjusted net income
per share: Basic 928 915 1 % 926 913 1 % Diluted 954 938 2 % 950
935 2 % NMrepresents not meaningful (a)
Represents amortization of intangibles established in connection
with the 2007 merger and acquisitions we have made since 2007,
excluding the percentage of our consolidated amortization of
acquisition intangibles related to non-wholly owned consolidated
alliances equal to the portion of such alliances owned by our
alliance partners. This line also includes amortization related to
deferred financing costs of $4 million and $4 million for the three
months ended June 30, 2018 and 2017, respectively, and $9 million
and $8 million for the six months ended June 30, 2018 and 2017,
respectively. (b) Represents impairments, non-normal course
litigation and regulatory settlements, divestitures, and other, as
applicable to the periods presented. (c) Prior to January 1, 2018,
we excluded the impact of all discrete tax items from Adjusted Net
Income and Diluted Adjusted Net Income per Share. We will no longer
exclude certain discrete items which were deemed to be recurring in
nature. We retrospectively adjusted the prior period results
presented in these unaudited consolidated financial statements. (d)
We exclude from Adjusted net income certain discrete tax item, such
as tax law changes, tax impact of mergers and acquisitions,
valuation allowance releases, tax reserves related to issues that
arose before KKR acquired us greater than $5 million within a
quarter. Adjusted net income for the three and six months ended
June 30, 2018 includes discrete tax benefits in the amount of $14
million and $31 million, respectively, and the comparable periods
in 2017 included discrete tax expense in the amount of $2 million
and $4 million for the three and six months ended June 30, 2017,
respectively. (e) The tax effect of the adjustments between our
GAAP and adjusted results takes into account the tax treatment and
related tax rate(s) that apply to each adjustment in the applicable
tax jurisdiction(s). Generally, this results in a tax impact at the
U.S. effective tax rate for certain adjustments, including the
majority of amortization of intangible assets, deferred financing
costs, stock compensation, and loss on debt extinguishment; whereas
the tax impact of other adjustments, including restructuring
expense, depends on whether the amounts are deductible in the
respective tax jurisdictions and the applicable effective tax
rate(s) in those jurisdictions.
First Data Corporation
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
(in millions)
FREE CASH FLOW RECONCILIATION Six months
ended June 30, 2018 2017 Change
Net cash provided by operating activities $ 1,138 $ 1,001 $
137 Capital expenditures (290 ) (256 ) (34 ) Distribution and
dividends paid to noncontrolling interests and redeemable
noncontrolling interest and other (102 ) (36 ) (66 ) Free cash flow
$ 746 $ 709 $ 37
NET DEBT
RECONCILIATION As of As of June 30,
2018 December 31, 2017 Total long-term borrowings $
17,717 $ 17,927 Total short-term and current portion of long-term
borrowings 900 1,271 Total borrowings 18,617 19,198
Unamortized discount and unamortized deferred financing costs 112
126 Total borrowings at par 18,729 19,324 Less: Settlement
lines of credit and other arrangements 147 205 Gross debt
excluding settlement lines of credit and other arrangements 18,582
19,119 Less: Cash and cash equivalents 544 498 Net debt $
18,038 $ 18,621
First Data
Corporation Operating Data (Unaudited) (in
millions) Three months ended June 30, Six
months ended June 30, 2018 2017
% Change 2018 2017 %
Change GBS: North America merchant transactions(a)
13,482 12,494 8 % 25,603 23,977 7 % International merchant
transactions(b) 2,748 2,397 15 % 5,245 4,624 13 %
GFS: North America card accounts on file(c) 923 878 5 %
International card accounts on file(d) 193 160 20 %
NSS: Network transactions (EFT Network and Stored Value)(e)
6,295 5,352 18 % 12,245 10,466 17 % (a) North American
merchant transactions include acquired Visa and MasterCard credit
and signature debit, American Express and Discover, PIN-debit,
electronic benefits transactions, processed-only and gateway
customer transactions at the POS. North American merchant
transactions reflect 100% of alliance transactions. (b)
International transactions include Visa, MasterCard, and other
payment network merchant acquiring transactions for clients outside
the U.S. and Canada. Transactions include credit, signature debit,
PIN-debit POS, POS gateway, and ATM transactions. International
merchant transactions reflect 100% of alliance transactions. (c)
North America card accounts on file reflect the total number of
bankcard credit and retail credit accounts as of the end of the
periods presented. (d) International card accounts on file reflect
the total number of bankcard and retail accounts outside the United
States and Canada as of the end of the periods presented. (e)
Network transactions include the debit issuer processing
transactions, STAR Network issuer transactions, Payroll and Gift
Solutions and POS transactions.
First Data
Corporation 2018 Non-GAAP Guidance Reconciliation
(Unaudited) (in millions) Consolidated
Revenue to Total Segment Revenue FY 2018 vs.
FY 2017 Consolidated revenue (at reported rates) 2018 at ASC
606 vs. 2017 at ASC 605
~(20%) Adjustments: +Non wholly
owned entities +Reimbursable postage and other +ASC 606 Adjustments
Total segment revenue (reported)
~6-7% Memo: Total segment
revenue (at constant currency)
~7-8% Net Income to
Total Segment EBITDA FY 2018 vs. FY 2017 Net
income attributable to FDC(1) 2018 at ASC 606 vs. 2017 at ASC 605
~(35%) - (45%) Adjustments +Depreciation and amortization
+Interest Expense, net +Income tax (benefit) expense +Stock Based
Compensation +ASC 606 Adjustments + Other(2) Total segment EBITDA
(reported)
~6-8% Memo: total segment EBITDA (at constant
currency)
~8-10% Net Income to Adj. Net Income
FY 2018 Net income attributable to FDC(1)
$0.90-$0.95 Adjustments (note: adjustments represent
positive balances) +Stock-based compensation +Amortization of
acquisition intangibles and deferred financing cost +ASC 606
Adjustments +Other(3) Adjusted Net Income
$1.42-$1.47
Cash Flow From Operations to Free Cash Flow FY
2018 Cash / provided by operating activities
$2.1B+
+Adjustments(4) Free cash flow source
$1.4B+ (1)
Reflects a significant increase in tax expense in 2018
primarily driven by the Q4 2017 release of a valuation allowance
against deferred tax assets associated with the U.S. federal NOL.
The reversal of the valuation allowance resulted in a significant
non-cash tax benefit in Q4 2017 and the recording of a normalized
book tax rate in 2018. (2) Includes non wholly owned entities
adjustment, loss on debt extinguishment, as well as other items.
(3) Includes loss on debt extinguishment, gain/loss on
divestitures, restructuring, impairment, litigation and other, as
well as the impact of tax expense/(benefit) of the adjusted items.
(4) Includes capital expenditures and distributions to minority
interest and other.
First Data CorporationForward Looking
Statements
Notice to Investors, Prospective Investors and the Investment
Community; Cautionary Information Regarding Forward-Looking
Statements
Certain matters we discuss in our public statements may
constitute forward-looking statements. You can identify
forward-looking statements because they contain words such as
“believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,”
“plans,” “estimates,” or “anticipates” or similar expressions which
concern our strategy, plans, projections or intentions. Examples of
forward-looking statements include, but are not limited to, all
statements we make relating to revenue, earnings before net
interest expense, income taxes, depreciation, and amortization
(EBITDA), earnings, margins, growth rates, and other financial
results for future periods. By their nature, forward-looking
statements speak only as of the date they are made; are not
statements of historical fact or guarantees of future performance;
and are subject to risks, uncertainties, assumptions or changes in
circumstances that are difficult to predict or quantify. Actual
results could differ materially and adversely from our
forward-looking statements due to a variety of factors, including
the following: (1) adverse impacts from global economic, political,
and other conditions affecting trends in consumer, business, and
government spending; (2) our ability to anticipate and respond to
changing industry trends, including technological changes and
increasing competition; (3) our ability to successfully renew
existing client contracts on favorable terms and obtain new
clients; (4) our ability to prevent a material breach of security
of any of our systems; (5) our ability to implement and improve
processing systems to provide new products, improve functionality,
and increase efficiencies; (6) the successful management of our
merchant alliance program which involves several alliances not
under our sole control and each of which acts independently of the
others; (7) our successful management of credit and fraud risks in
our business units and merchant alliances, particularly in the
context of eCommerce and mobile markets; (8) consolidation among
financial institution clients or other client groups that impacts
our client relationships; (9) our ability to use our net operating
losses without restriction to offset income for US tax purposes;
(10) our ability to improve our profitability and maintain
flexibility in our capital resources through the implementation of
cost savings initiatives; (11) the acquisition or disposition of
material business or assets; (12) our ability to successfully value
and integrate acquired businesses; (13) our high degree of
leverage; (14) adverse impacts from currency exchange rates or
currency controls imposed by any government or otherwise; (15)
changes in the interest rate environment that increase interest on
our borrowings or the interest rate at which we can refinance our
borrowings; (16) the impact of new or changes in current laws,
regulations, credit card association rules, or other industry
standards; and (17) new lawsuits, investigations, or proceedings,
or changes to our potential exposure in connection with pending
lawsuits, investigations or proceedings, and various other factors
set forth in our Annual Report on Form 10-K for the period ended
December 31, 2017, including but not limited to, Item 1 - Business,
Item 1A - Risk Factors, and Item 7 - Management’s Discussion and
Analysis of Financial Condition and Results of
Operations. Except as required by law, we do not intend to
revise or update any forward-looking statement as a result of new
information, future developments or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180730005193/en/
Peter PoillonInvestor RelationsFirst
Data212-266-3565Peter.Poillon@firstdata.comorAndrea
DuffyPublic RelationsFirst
Data212-515-0174Andrea.Duffy@firstdata.com
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