Market Overview

First Data Reports Second Quarter 2018 Financial Results and Raises Full Year Revenue Guidance

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  • 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 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.

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