• Michael Capellas Joins KKR as Senior Advisor Focusing on Technology
• First Data Names Joe Forehand as Chairman and Interim CEO
• Renewed and Extended Sovereign Bank Merchant Acquiring Agreement
• Renewed Agreements with 157 Financial Institutions
ATLANTA, March 11, 2010 – First Data Corp. today reported its financial results for the fourth quarter and full year ended Dec. 31, 2009. Consolidated revenue for the quarter was up 12% to $2.6 billion. Consolidated revenue growth was primarily driven by the formation of the Bank of America Merchant Services alliance, which substantially extended First Data’s leadership in merchant acquiring. Adjusted Revenue increased 1% for the quarter due mainly to growth in International Segment Revenue helped by a weaker U.S. dollar.
For the fourth quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $530 million compared to $645 million for the fourth quarter of 2008. Several items unfavorably affected Adjusted EBITDA including; higher credit losses and warranty expense of $26 million, the timing of incentive compensation accruals which increased quarterly expenses by $29 million, a $9 million impact from lost business due to Washington Mutual’s acquisition by J.P. Morgan Chase, and lower royalty revenues of $6 million. For the quarter, the net loss attributable to First Data was $369 million which includes after-tax interest expense of $281 million.
For the full year, consolidated revenue was up 6% to $9.3 billion. Full-year Adjusted Revenue declined 7%. Adjusted Revenue declined primarily due to lower revenue in the Retail and Alliance Services segment and the stronger U.S. dollar. For 2009, Adjusted EBITDA was $2.1 billion compared to $2.6 billion for 2008. Adjusted EBITDA was unfavorably impacted by the weaker economy, a stronger U.S. dollar and lower royalty revenues. The full-year net loss attributable to First Data was $1.1 billion, which includes after-tax interest expense of $1.1 billion.
“In 2009 First Data improved its solid competitive position in the U.S. and around the globe,” said Michael Capellas, chairman and CEO. “We remain focused on leveraging our strengths in distribution and product innovation as we emerge from a challenging 2009 economic environment.”
Retail and Alliance Services
Retail and Alliance Services reported Segment Revenue of $820 million, which was unchanged compared to the fourth quarter of 2008. Favorable drivers of Segment Revenue included strong transaction growth, the addition of 15 independent sales organizations, nine referral partners and one revenue share agreement. This growth was offset by a decline in average ticket sizes and continued economic weakness affecting consumer spending. Segment EBITDA was $298 million, compared to $366 million for the fourth quarter of 2008. Segment EBITDA declined due to changes in revenue mix, increased merchant credit losses, additional check warranty expense and an increase in product development expense. Margin was 36.4%.
Full-year Segment Revenue was $3.1 billion, down 7%. Favorable drivers of Segment Revenue included 5% merchant transaction growth and the significant expansion of merchant distribution channels through alliances, revenue share agreements and independent sales organizations. This growth was more than offset by declining average tickets, continued economic weakness affecting consumer spending and lower interest income on deposits. For 2009, Segment EBITDA was $1.2 billion, compared to $1.4 billion for 2008. Segment EBITDA declined mainly due to lower revenue. In addition Retail and Alliance Services experienced higher credit losses from merchant failures. Margin was 39.0%.
Financial Services reported Segment Revenue of $353 million for the fourth quarter, down 7%. Growth from new business was more than offset by the previously disclosed loss of Washington Mutual as well as price compression on certain renewals. Segment EBITDA was $148 million, compared to $196 million for the fourth quarter of 2008. Segment EBITDA declined due to lower revenue and an increase in technology costs partially related to compliance with new regulations. Margin was 41.9%.
Full-year Segment Revenue was $1.4 billion, down 5%. Growth from new business was more than offset by lost business, primarily the loss of Washington Mutual, and price compression on certain renewals. For 2009, Segment EBITDA was $645 million, compared to $753 million for 2008. Segment EBITDA declined due to lower revenue and an increase in technology costs. Margin was 44.7%.
International reported Segment Revenue of $452 million for the fourth quarter, up 12%. Segment Revenue on a constant currency basis was up 2%, due in part to increased license sales and revenue growth in the Asia Pacific region. Segment EBITDA was $122 million, compared to $109 million for the fourth quarter of 2008. Margin was 27.1%. On a constant currency basis, Segment EBITDA was $112 million, up 3% and margin was 27.2%. Constant currency Segment EBITDA grew primarily due to an increase in license sales and cost reduction initiatives.
Full-year International Segment Revenue was $1.6 billion, down 7%. Segment Revenue on a constant currency basis was up 1%. For 2009, Segment EBITDA was $399 million, compared to $433 million for 2008. Margin was 25.4%. Segment EBITDA was unfavorably impacted by the stronger U.S. dollar. On a constant currency basis, Segment EBITDA was $446 million, up 3% and margin was 26.0%. Constant currency Segment EBITDA increased primarily due to cost reduction initiatives.
Senior Management Changes
First Data today announced the appointment of board member Joe Forehand, as chairman and interim CEO effective March 31, 2010. Forehand succeeds Michael Capellas, who after serving three years with the company has accepted a new role as a senior advisor to Kohlberg Kravis Roberts & Co. focusing on technology.
Forehand has been a member of First Data’s board of directors since September 2009. Mr. Forehand retired as chairman of the board of directors of Accenture Ltd in 2006. In his more than 30 years with Accenture, Forehand served as the CEO from 1999-2004, prior to that, as chief executive of the Communications and High Technology Operating Group, and as chairman of the board of directors from 2001-2006. Since Sept. 2007, Forehand has been a member of the Portfolio Management Committee for Kohlberg Kravis Roberts & Co.
Sovereign Merchant Services Renewal
On Dec. 3, 2009, First Data announced that Sovereign Bank, a wholly owned subsidiary of Banco Santander, S.A., had agreed to extend their existing merchant services agreement. Sovereign and First Data began their cooperation to offer merchant services programs in 2001.
Globalization of First Data Business Lines
In order to increase operating efficiencies and accelerate product commercialization, the International business will now be aligned with the company's two global lines of business: Financial Services, and Retail and Alliance Services. The company does not currently intend to revise its segment reporting structure.
In certain circumstances, results have been presented that are non-GAAP measures and should be viewed in addition to, and not in lieu of, the company's reported results. Reconciliations to comparable GAAP (generally accepted accounting principles) measures are available in the accompanying schedules and in the "Investor Relations" section of the company's Web site at www.firstdata.com.
Investor Conference Call
The company will host a conference call and webcast on Thursday, March 11, at 8 a.m. EST to review fourth quarter and full year 2009 financial results. Michael Capellas, chairman and CEO of First Data, will lead the call. Also participating will be Pat Shannon, chief financial officer, and Silvio Tavares, senior vice president, investor relations.
To listen to the call, dial 888-378-4350 (U.S.) or +1-719-457-2734 (outside the U.S.) 10 minutes prior to the start of the call. The call will also be webcast on the “Investor Relations” section of the First Data Web site, http://ir.firstdatacorp.com/events.cfm. Please click on the webcast link at least 15 minutes prior to the call. A slide presentation to accompany the call will be included in the webcast and also will be available under the “Investor Relations” section of the Web site.
Please note: All statements made by First Data officers on this call are the property of First Data and subject to copyright protection. Other than the replay, First Data has not authorized, and disclaims responsibility for any recording, replay or distribution of any transcription of this call.
About First Data
First Data powers the global economy by making it easy, fast and secure for people and businesses to buy goods and services using virtually any form of electronic payment. Whether the choice of payment is a gift card, a credit or debit card or a check, First Data securely processes the transaction and harnesses the power of the data to deliver intelligence and insight for millions of merchant locations and thousands of card issuers in 36 countries. For more information, visit www.firstdata.com.