- Total segment revenue of $2,158
million, up 4% reported(a), up 3% on a comparable accounting
basis(b), up 5% on an organic constant currency basis(c)
- Consolidated revenue of $2,369 million,
impacted by the adoption of ASC 606
- Net income attributable to First Data
diluted EPS of $0.42
- Adjusted diluted EPS of $0.35, includes
$0.02 of adverse foreign exchange
- Total segment EBITDA of $815 million,
up 4% reported(a), up 5% on a comparable accounting basis(b), up 7%
on an organic constant currency basis(c)
- Cash flow from operations of $671
million; free cash flow of $444 million
- Total borrowings declined $862 million;
net debt declined $855 million in quarter
- $6 billion refinancing reduces
annualized interest expense by approximately $90 million
- Full year 2018 organic constant
currency segment revenue and EBITDA growth guidance unchanged
- Revising full year 2018 EPS guidance
primarily to reflect recent adverse foreign currency movements
First Data Corporation (NYSE: FDC), a global leader in
commerce-enabling technology, today reported financial results for
the third quarter ended September 30, 2018.
“This was another quarter of strong operational execution and
performance,” said First Data Chairman and CEO Frank Bisignano. “We
generated solid top-line contributions from our core merchant
acquiring and card issuance businesses as we ramped up new mandates
and saw continued strong performance from high-growth businesses
including ISV, Clover and our international markets. We also
continued to take steps that will enhance our long-term performance
by divesting non-core businesses and remain on track to achieve our
leverage goals. Heading into the final months of 2018, we expect to
close out our best year as a public company with good momentum into
2019 and beyond,” Bisignano added.
Total segment revenue was $2,158 million for the quarter, up 4%
versus the prior year period on a reported basis(a), up 3% on a
comparable accounting basis(b), or up 5% on an organic constant
currency basis(c). Consolidated revenue for the third quarter was
$2,369 million, impacted by the adoption of ASC 606.
Net income attributable to First Data for the third quarter of
2018 was $401 million, or $0.42 per diluted share, up 35% and 33%,
respectively, from comparable figures in the third quarter of 2017
primarily driven by gains on divestitures of certain businesses
during the quarter (see "Divestitures," below) and improved
operating performance, partly offset by unfavorable foreign
currency movements during the quarter.
Adjusted net income, which modifies net income for items such as
gains/losses from divestitures, debt extinguishment charges,
stock-based compensation, amortization of acquisition intangibles,
restructuring costs, certain discrete tax items and other items,
was $340 million, or $0.35 per diluted share, down 9% and 13%,
respectively, from comparable figures in the third quarter of 2017.
The decrease was primarily driven by a normalized adjusted
effective tax rate in the current period and unfavorable foreign
currency movements during the quarter, offset by improved operating
results. Unfavorable year-over-year foreign currency movements
negatively impacted adjusted net income per diluted share by $0.02
in the quarter.
Total segment earnings before interest, taxes, depreciation, and
amortization (total segment EBITDA) in the third quarter of 2018
was $815 million, up 4% 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). Total segment EBITDA margin was
37.8%, up 50 basis points on a comparable accounting basis(b), or
up 60 basis points on an organic constant currency basis(c).
Segment Results
Global Business Solutions (GBS)
Third quarter 2018 GBS segment revenue was $1,384 million, up
10% versus the prior year period on a reported basis(a), up 7% on a
comparable accounting basis(b), or up 6% on an organic constant
currency basis(c). Within geographic regions, North America revenue
of $1,079 million was up 11% versus the prior year period on a
reported basis(a), up 7% on a comparable accounting basis(b), or up
4% 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 modest revenue decline,
roughly in line with its performance in the first half of the year.
EMEA revenue was $180 million, up 8% on a reported basis(a), up 7%
on a comparable accounting basis(b), or up 8% on an organic
constant currency basis(c), driven by growth in the U.K. Latin
America revenue was $76 million, up 7% on a reported basis(a), down
2% on a comparable accounting basis(b), or up 37% on an organic
constant currency basis(c), driven by strong growth in Brazil and
Argentina. APAC revenue was $49 million, up 12% on a reported
basis(a), up 10% on a comparable accounting basis(b), or up 13% on
an organic constant currency basis(c), driven by good growth in
India.
Third quarter 2018 GBS segment EBITDA was $503 million up 8%
versus the prior year period on a reported basis(a), up 8% on a
comparable accounting basis(b), or up 10% on an organic constant
currency basis(c). GBS Segment EBITDA margin was 36.3%, up 80 basis
points on a comparable accounting basis(b), or up 110 basis points
on an organic constant currency basis(c).
Global Financial Solutions (GFS)
Third quarter 2018 GFS segment revenue was $407 million, down 2%
versus the prior year period on a reported basis(a), down 1% on a
comparable accounting basis(b), or up 6% on an organic constant
currency basis(c). Within geographic regions, North America revenue
of $233 million was down 2% on a reported basis(a), down 1% on a
comparable accounting basis(b), or up 4% on an organic constant
currency basis(c), driven by strong new business, partly offset by
recent long-term renewals. EMEA revenue was $114 million, down 6%
versus the prior year period on a reported basis(a), down 5% on a
comparable accounting basis(b), or up 1% on an organic constant
currency basis(c), driven by new business in the U.K. and Germany,
largely offset by the non-recurrence of software revenue in the
prior year period. Latin America revenue was $33 million, up 2%
versus the prior year period on a reported basis(a), up 2% on a
comparable accounting basis(b), or up 23% on an organic constant
currency basis(c), driven by growth in Argentina and Colombia. APAC
revenue was $27 million, up 9% versus the prior year period on a
reported basis(a), up 23% on a comparable accounting basis(b), or
up 30% on an organic constant currency basis(c), driven by strong
growth across the region.
Third quarter 2018 GFS segment EBITDA was $161 million, down 10%
versus the prior year period on a reported basis(a), down 8% on a
comparable accounting basis(b), or down 2% on an organic constant
currency basis(c), primarily driven by added costs associated with
ramping new deals. GFS Segment EBITDA margin was 39.6%, down 310
basis points on a comparable accounting basis(b), or down 370 basis
points on an organic constant currency basis(c).
Network & Security Solutions (NSS)
Third quarter 2018 NSS segment revenue was $367 million, down 7%
versus the prior year period on a reported basis(a), down 4% on a
comparable accounting basis(b), or down 2% on an organic constant
currency basis(c). Within NSS' primary businesses, EFT revenue grew
mid-single digits in the quarter while Stored Value revenue
declined high-single digits, but was up double digits excluding the
impact of the previously disclosed non-renewal of a low-margin
plastics contract.
Third quarter 2018 NSS segment EBITDA was $195 million, up 6%
versus the prior year period on a reported, comparable accounting
and organic constant currency basis(a)(b)(c), driven by improved
revenue mix and focused management of fixed costs. NSS Segment
EBITDA margin was 53.1%, up 500 basis points on a comparable
accounting basis(b), or up 410 basis points on an organic constant
currency basis(c).
Cash Flow
In the third quarter of 2018, cash flow from operations was $671
million, up $90 million compared to $581 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 $444 million in the current quarter, up
$74 million compared to $370 million in the prior year period,
primarily driven by improved operating results and the favorable
conclusion of a prior period tax-related matter.
In the first nine months of 2018, cash flow from operations was
$1,809 million, up $227 million compared to $1,582 million in the
prior year nine-month period. Free cash flow was $1,190 million in
the current nine-month period, up $111 million compared to $1,079
million in the prior year period.
Capital Structure
First Data's total borrowings at September 30, 2018
decreased by $1,443 million to $17,755 million, from $19,198
million at December 31, 2017. The decrease was driven by debt
paydowns during the period. Net debt at September 30, 2018
decreased by $1,438 million to $17,183 million, from $18,621
million at December 31, 2017.
On October 26, 2018, First Data closed a new $6 billion credit
facility bearing a rate of Libor plus 150 basis points, maturing in
October 2023. The proceeds were used to refinance the Company's
existing revolver, existing Term Loan A at closing, and will be
used to refinance other indebtedness at a later date. The Company
anticipates estimated interest cost savings resulting from these
actions of approximately $90 million in 2019.
Divestitures
On September 28, 2018, First Data closed the previously
announced divestiture of its card processing businesses in Greece
and Central/Eastern Europe (reported within GFS EMEA) for €387
million. On August 16, 2018, the Company closed the divestiture of
its check remittance processing business (reported within GFS North
America) for approximately $100 million.
2018 Full Year Revenue Guidance Revision
The updated growth rate 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.
- Revenue: Organic constant currency
segment revenue growth guidance remains unchanged at 5% to 6%.
Reported constant currency segment revenue growth was revised to
6.3% to 7.3%, strictly to reflect the impact of divestitures
completed in the third quarter of 2018 – this compares to
previously disclosed reported constant currency segment revenue
growth guidance of 7% to 8%.
- EBITDA: Organic constant currency
segment EBITDA growth guidance remains unchanged at 6.5% to 8.5%.
Reported constant currency segment EBITDA growth was revised to
7.6% to 9.6%, strictly to reflect the impact of divestitures
completed in the third quarter of 2018 – this compares to
previously disclosed reported constant currency segment EBITDA
growth guidance of 8% to 10%.
- Adjusted diluted EPS: $1.38 to $1.40.
This compares to previously disclosed guidance of $1.42 to $1.47.
The revision to the EPS guidance primarily reflects the negative
impacts associated with certain significant and recent foreign
currency movements, and a modest dilutive impact from recently
closed divestitures. This current guidance includes an estimated
year-over-year adverse impact from foreign currency movements on
reported segment EBITDA of approximately $60 million in the second
half of 2018 (which was approximately flat in the first half of
2018).
- Free cash flow: $1.4+ billion guidance
remains unchanged.
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,
October 29, 2018, at 8 a.m. ET to review the third 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 November 29,
2018, at +1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the
U.S.); passcode 10124584 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 EPS, free cash flow and net debt, and
growth rates for these metrics compared to prior periods. 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 September 30, Nine
months ended September 30, 2018 2017
2018 2017 Revenues: Revenues excluding
reimbursable items $ 2,158 $ 2,081 $ 6,486 $ 5,998 Reimbursable
items 211 995 613 2,904 Total revenues
2,369 3,076 7,099 8,902 Expenses: Cost
of revenues (exclusive of items shown below) 741 794 2,271 2,356
Selling, general, and administrative 665 565 1,995 1,611
Depreciation and amortization 248 248 753 713 Other operating
expenses 29 57 106 108 Total expenses
(excluding reimbursable items) 1,683 1,664 5,125 4,788 Reimbursable
items 211 995 613 2,904 Total expenses
1,894 2,659 5,738 7,692 Operating
profit 475 417 1,361 1,210 Interest
expense, net (231 ) (233 ) (698 ) (702 ) Loss on debt
extinguishment (2 ) (1 ) (3 ) (72 ) Other income (expense) 202
(4 ) 201 (7 ) Income before income taxes and equity
earnings in affiliates 444 179 861 429 Income tax (benefit) expense
54 (106 ) 44 (66 ) Equity earnings in affiliates 58 55
167 167 Net income 448 340 984 662 Less: Net
income attributable to noncontrolling interests and redeemable
noncontrolling interest 47 44 141 145
Net income attributable to First Data Corporation $ 401 $
296 $ 843 $ 517 Net income attributable
to First Data Corporation per share: Basic $ 0.43 $ 0.32 $ 0.91 $
0.57 Diluted $ 0.42 $ 0.31 $ 0.88 $ 0.55 Weighted-average
common shares outstanding: Basic 932 918 928 915 Diluted 965 944
956 938
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 9/30/2018 12/31/2017 Cash
and cash equivalents $ 601 $ 498 Settlement assets 20,735 20,363
Total assets 47,603 48,269 Short-term and current portion of
long-term borrowings 806 1,271 Settlement obligations 20,735 20,363
Long-term borrowings 16,949 17,927 Total liabilities 40,659 42,183
Redeemable noncontrolling interest 78 72 Total First
Data Corporation stockholders' equity 4,058 3,152 Noncontrolling
interests 2,808 2,862 Total equity 6,866 6,014
SELECTED CONSOLIDATED CASH FLOW
DATA
Three months ended
Nine months ended
September 30,
September 30,
2018 2017 2018 2017
Source/(Use) of cash Net cash provided by operating
activities $ 671 $ 581 $ 1,809 $ 1,582 Net cash provided by (used
in) investing activities 348 (819 ) 58 (1,060 ) Net cash (used in)
provided by financing activities (955 ) 252 (1,739 ) (410 )
Supplemental cash flow data Cash interest payments(a) $ 237
$ 215 $ 689 $ 668 (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 September 30, Nine
months ended September 30,
%
Organic CC
%
Organic CC
2018 2017
Change
% Change(c)
2018 2017
Change
% Change(c)
Consolidated Revenues $ 2,369 $ 3,076 (23)% $ 7,099 $ 8,902 (20)%
Adjustments: Non wholly owned entities(a) — (14 ) (103)% (14 ) (49
) (71)% Reimbursable items (211 ) (995 ) (79)% (613 ) (2,904 )
(79)% Total Segment Revenues $ 2,158 $ 2,067 4% 5% $
6,472 $ 5,949 9% 6% Segment Revenues:
Global Business Solutions $ 1,384 $ 1,256 10% 6% $ 4,151 $ 3,601
15% 7% Global Financial Solutions 407 416 (2)% 6% 1,221 1,211 1% 3%
Network & Security Solutions 367 395 (7)% (2)%
1,100 1,137 (3)% 2% Total Segment Revenues $ 2,158
$ 2,067 4% 5% $ 6,472 $ 5,949 9% 6%
Three months ended September 30, Nine months ended
September 30,
%
Organic CC
%
Organic CC
2018 2017
Change
% Change(c)
2018 2017
Change
% Change(c)
Net income attributable to First Data Corporation $ 401 $ 296 35% $
843 $ 517 63% Adjustments: Non wholly owned entities(a) (7 ) (9 )
(22)% (29 ) (21 ) 38% Depreciation and amortization 248 248 —% 753
713 6% Interest expense, net 231 233 (1)% 698 702 (1)% Loss on debt
extinguishment 2 1 100% 3 72 (96)% Other items(b) (173 ) 61 NM (95
) 120 NM Income tax (benefit) expense 54 (106 ) NM 44 (66 ) NM
Stock-based compensation 59 62 (5)% 192 183
5% Total Segment EBITDA $ 815 $ 786 4% 7% $
2,409 $ 2,220 9% 8% Segment EBITDA: Global
Business Solutions $ 503 $ 465 8% 10% $ 1,481 $ 1,330 11% 10%
Global Financial Solutions 161 179 (10)% (2)% 503 498 1% 4% Network
& Security Solutions 195 184 6% 6% 563 520 8% 8% Corporate (44
) (42 ) (5)% (5)% (138 ) (128 ) (8)% (8)% Total Segment EBITDA $
815 $ 786 4% 7% $ 2,409 $ 2,220 9% 8%
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 September 30, Nine
months ended September 30, 2018 2017
% B/(W)(b) 2018 2017
% B/(W)(b) Reported FDC segment revenue $
2,158 $ 2,067 4% $ 6,472 $ 5,949 9% New revenue standard
adjustments (ASC 606) — 26 — 72 FDC segment revenue (comparable
accounting) 2,158 2,093 3% 6,472 6,021 8% Currency impact 45 — 19 —
FDC CC adjusted segment revenue 2,203 2,093 5% 6,491 6,021 8%
Acquisitions/Divestitures(c) — 10 — 129
Organic CC FDC segment revenue growth(a) $ 2,203 $ 2,103
5% $ 6,491 $ 6,150 6% Reported GBS
segment revenue $ 1,384 $ 1,256 10% $ 4,151 $ 3,601 15% New revenue
standard adjustments (ASC 606) — 45 — 119 GBS segment revenue
(comparable accounting) 1,384 1,301 7% 4,151 3,720 12% Currency
impact 36 — 25 — Acquisitions/Divestitures(c) — 35 —
180 Organic CC GBS segment revenue growth(a) $ 1,420
$ 1,336 6% $ 4,176 $ 3,900 7%
Reported GBS NA segment revenue $ 1,079 $ 973 11% $ 3,227 $ 2,818
15% New revenue standard adjustments (ASC 606) — 35 — 95 GBS NA
segment revenue (comparable accounting) 1,079 1,008 7% 3,227 2,913
11% Currency impact 2 — — — Acquisitions/Divestitures(c) —
35 — 180 Organic CC GBS NA segment revenue
growth(a) $ 1,081 $ 1,043 4% $ 3,227 $ 3,093
4% Reported GBS EMEA segment revenue $ 180 $ 167 8% $
528 $ 463 14% New revenue standard adjustments (ASC 606) — 2 — 5
GBS EMEA segment revenue (comparable accounting) 180 169 7% 528 468
13% Currency impact 1 — (33 ) — Acquisitions/Divestitures(c) —
— — — Organic CC GBS EMEA segment
revenue growth(a) $ 181 $ 169 8% $ 495 $ 468
6% Reported GBS APAC segment revenue $ 49 $ 44 12% $
147 $ 125 18% New revenue standard adjustments (ASC 606) — 1 — 1
GBS APAC segment revenue (comparable accounting) 49 45 10% 147 126
17% Currency impact 1 — (2 ) — Acquisitions/Divestitures(c) —
— — — Organic CC GBS APAC segment
revenue growth(a) $ 50 $ 45 13% $ 145 $ 126
16% Reported GBS LATAM segment revenue $ 76 $ 72 7% $
249 $ 195 28% New revenue standard adjustments (ASC 606) — 7 — 18
GBS LATAM segment revenue (comparable accounting) 76 79 (2)% 249
213 17% Currency impact 32 — 60 — Acquisitions/Divestitures(c) —
— — — Organic CC GBS LATAM segment
revenue growth(a) $ 108 $ 79 37% $ 309 $ 213
45% Reported GFS segment revenue $ 407 $ 416 (2)% $
1,221 $ 1,211 1% New revenue standard adjustments (ASC 606) — (6 )
— (6 ) GFS segment revenue (comparable accounting) 407 410 (1)%
1,221 1,205 1% Currency impact 9 — (6 ) —
Acquisitions/Divestitures(c) — (18 ) — (30 ) Organic
CC GFS segment revenue growth(a) $ 416 $ 392 6% $
1,215 $ 1,175 3%
Three months ended
September 30, Nine months ended September 30,
2018 2017 % B/(W)(b) 2018
2017 % B/(W)(b) Reported GFS NA segment
revenue $ 233 $ 238 (2)% $ 694 $ 707 (2)% New revenue standard
adjustments (ASC 606) — (2 ) — (2 ) GFS NA segment revenue
(comparable accounting) 233 236 (1)% 694 705 (1)% Currency impact —
— — — Acquisitions/Divestitures(c) — (11 ) — (11 )
Organic CC GFS NA segment revenue growth(a) $ 233 $ 225
4% $ 694 $ 694 —% Reported GFS EMEA
segment revenue $ 114 $ 121 (6)% $ 343 $ 332 3% New revenue
standard adjustments (ASC 606) — (1 ) — (1 ) GFS EMEA segment
revenue (comparable accounting) 114 120 (5)% 343 331 4% Currency
impact 1 — (19 ) — Acquisitions/Divestitures(c) — (7 ) —
(19 ) Organic CC GFS EMEA segment revenue growth(a) $ 115
$ 113 1% $ 324 $ 312 4%
Reported GFS APAC segment revenue $ 27 $ 24 9% $ 84 $ 72 16%
New revenue standard adjustments (ASC 606) — (3 ) — (9 ) GFS APAC
segment revenue (comparable accounting) 27 21 23% 84 63 32%
Currency impact 2 — — — Acquisitions/Divestitures(c) — —
— — Organic CC GFS APAC segment revenue
growth(a) $ 29 $ 21 30% $ 84 $ 63 31%
Reported GFS LATAM segment revenue $ 33 $ 33 2% $ 100 $ 100
1% New revenue standard adjustments (ASC 606) — — — 6 GFS LATAM
segment revenue (comparable accounting) 33 33 2% 100 106 (5)%
Currency impact 6 — 13 — Acquisitions/Divestitures(c) — —
— — Organic CC GFS LATAM segment revenue
growth(a) $ 39 $ 33 23% $ 113 $ 106 7%
Reported NSS segment revenue $ 367 $ 395 (7)% $ 1,100 $
1,137 (3)% New revenue standard adjustments (ASC 606) — (13 ) — (41
) NSS segment revenue (comparable accounting) 367 382 (4)% 1,100
1,096 —% Currency impact — — — — Acquisitions/Divestitures(c) —
(7 ) — (21 ) Organic CC NSS segment revenue growth(a)
$ 367 $ 375 (2)% $ 1,100 $ 1,075 2%
SEGMENT EBITDA
RECONCILIATION
Three months ended September 30, Nine months ended
September 30, 2018 2017 % B/(W)(b)
2018 2017 % B/(W)(b) Reported FDC
segment EBITDA $ 815 $ 786 4% $ 2,409 $ 2,220 9% New revenue
standard adjustments (ASC 606) — (6 ) — (13 ) FDC segment EBITDA
(comparable accounting) 815 780 5% 2,409 2,207 9% Currency impact
23 — 25 — FDC CC adjusted segment EBITDA 838 780
8%
2,434 2,207 10% Acquisitions/Divestitures(c) — 8 —
43 Organic CC FDC segment EBITDA growth(a) $ 838
$ 788 7% $ 2,434 $ 2,250 8%
Reported GBS segment EBITDA $ 503 $ 465 8% $ 1,481 $ 1,330 11% New
revenue standard adjustments (ASC 606) — (2 ) — (13 ) GBS segment
EBITDA (comparable accounting) 503 463 8% 1,481 1,317 12% Currency
impact 18 — 22 — Acquisitions/Divestitures(c) — 12 —
51 Organic CC GBS segment EBITDA growth(a) $ 521
$ 475 10% $ 1,503 $ 1,368 10%
Reported GFS segment EBITDA $ 161 $ 179 (10)% $ 503 $ 498 1% New
revenue standard adjustments (ASC 606) — (4 ) — — GFS segment
EBITDA (comparable accounting) 161 175 (8)% 503 498 1% Currency
impact 5 — 3 — Acquisitions/Divestitures(c) — (4 ) —
(8 ) Organic CC GFS segment EBITDA growth(a) $ 166 $ 171
(2)% $ 506 $ 490 4% Reported NSS
segment EBITDA $ 195 $ 184 6% $ 563 $ 520 8% New revenue standard
adjustments (ASC 606) — — — — NSS segment EBITDA (comparable
accounting) 195 184 6% 563 520 8% Currency impact — — — —
Acquisitions/Divestitures(c) — — — —
Organic CC NSS segment EBITDA growth(a) $ 195 $ 184
6% $ 563 $ 520 8% (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 September 30, Nine months ended
September 30, 2018 2017 %
Change 2018 2017 % Change
Net income attributable to First Data Corporation $ 401 $ 296 36% $
843 $ 517 63% Adjustments: Stock-based compensation 59 62 (5)% 192
183 5% Loss on debt extinguishment 2 1 NM 3 72 NM Amortization of
acquisition intangibles and deferred financing costs(a) 102 106
(4)% 312 295 6% Other(b) (173 ) 61 NM (95 ) 115 (182)% Non
wholly-owned entities — (3 ) NM (9 ) 3 NM Discrete tax
adjustment(c) — 3 NM — (1 ) NM
Income tax on above items and discrete tax
items(d)(e)
(51
)
(150
)
66%
(256
) (176 )
(45)%
Adjusted net income attributable to First
Data Corporation
$ 340 $ 376 (9)% $ 990 $ 1,008 (2)%
Adjusted net income per share: Basic $ 0.36 $ 0.41 (12)% $
1.07 $ 1.10 (3)% Diluted $ 0.35 $ 0.40 (13)% $ 1.04 $ 1.07 (4)%
Weighted-average common shares used to compute adjusted net
income per share: Basic 932 918 2% 928 915 1% Diluted 965 944 2%
956 938 2%
NM represents 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 $5 million
for the three months ended September 30, 2018 and 2017,
respectively, and $13 million and $13 million for the nine months
ended September 30, 2018 and 2017, respectively.
(b) See "Other operating expense, net" and "Other income (expense)"
in our unaudited consolidated statements of income in Part I of
this form 10-Q. (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, and tax reserves related to issues that arose
before KKR acquired us within a quarter. (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 Nine months
ended September 30, 2018 2017
Change Net cash provided by operating activities $
1,809 $ 1,582 $ 227 Capital expenditures (452 ) (390 ) (62 )
Distribution and dividends paid to noncontrolling interests and
redeemable noncontrolling interest and other (167 ) (113 ) (54 )
Free cash flow $ 1,190 $ 1,079 $ 111
NET DEBT RECONCILIATION
As of As of 9/30/2018 12/31/2017
Total long-term borrowings $ 16,949 $ 17,927 Total short-term and
current portion of long-term borrowings 806 1,271 Total
borrowings 17,755 19,198 Unamortized discount and unamortized
deferred financing costs 105 126 Total borrowings at par
17,860 19,324 Less: Settlement lines of credit and other
arrangements 76 205 Gross debt excluding settlement lines of
credit and other arrangements 17,784 19,119 Less: Cash and cash
equivalents 601 498 Net debt $ 17,183 $ 18,621
First Data Corporation
Operating Data
(Unaudited)
(in millions)
Three months ended September 30, Nine
months ended September 30, 2018 2017
% Change 2018 2017 %
Change GBS: North America merchant transactions(a)
13,606 12,517 9% 39,209 36,494 7% International merchant
transactions(b) 2,830 2,453 15% 8,075 7,173 13%
GFS:
North America card accounts on file(c) 944 894 6% International
card accounts on file(d) 201 166 21%
NSS: Network
transactions (EFT Network and Stored Value)(e) 6,205 5,539 12%
18,450 16,005 15% (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. North America card
accounts on file are adjusted to exclude the impact of new
education loan processing accounts.
(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
+Currency
Memo: Total segment revenue (at constant currency)
~6.3-7.3%
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
~(30%) - (40%)
Adjustments +Depreciation and amortization +Interest Expense, net
+Income tax (benefit) expense +Stock Based Compensation +ASC 606
Adjustments + Other(2)
+Currency
Memo: total segment EBITDA (at constant currency)
~7.6-9.6%
Net Income to Adj. Net Income
FY 2018 Net income attributable to FDC(1)
$0.98-$1.00 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
$1.38-$1.40
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 Corporation
Forward 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/20181029005228/en/
Peter PoillonInvestor RelationsFirst
Data212-266-3565Peter.Poillon@firstdata.comorAndrea
DuffyPublic RelationsFirst
Data212-515-0174Andrea.Duffy@firstdata.com
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