First Data Reports Fourth Quarter and Full Year 2017 Financial Results

  • Q4 consolidated revenue of $3,150 million, up 7%;
    Full year consolidated revenue of $12,052 million, up 4%
  • Q4 total segment revenue of $1,949 million, up 7%, or up 4% on an organic constant currency basis(a);
    Full year total segment revenue of $7,428 million, up 4% on both a reported and organic constant currency basis
  • Q4 net income of $948 million, improved $756 million, diluted EPS of $1.00;
    Full year net income of $1,465 million, improved $1,045 million, diluted EPS of $1.56
  • Q4 adjusted net income of $416 million, adjusted diluted EPS of $0.44, up 13%;
    Full year adjusted net income of $1,425 million, adjusted diluted EPS of $1.52, up 15%
  • Q4 total segment EBITDA of $848 million, up 10%, or up 8% on an organic constant currency basis;
    Full year total segment EBITDA of $3,072 million, up 6% on both a reported and organic constant currency basis
  • Q4 cash flow from operations of $465 million, free cash flow of $280 million;
    Full year cash flow from operations of $2,047 million, free cash flow of $1,359 million
  • 2018 guidance provided

NEW YORK, FEBRUARY 12, 2018 - First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology and solutions, today reported financial results for the fourth quarter and full year ended December 31, 2017. Consolidated revenue for the fourth quarter was $3,150 million, up 7% versus the prior year period. Total segment revenue was $1,949 million for the quarter, up 7% versus the prior year period, or up 4% on an organic constant currency basis.

Net income attributable to First Data for the fourth quarter of 2017 was $948 million, or $1.00 per diluted share, up significantly from $192 million, or $0.21 per diluted share, in the fourth quarter of 2016. The increase was primarily driven by significant discrete tax items in the current period, described below in "Income Tax (Benefit) / Expense", improved operating results and lower interest expense.

Adjusted net income, which modifies net income attributable to First Data for items such as debt extinguishment charges, stock-based compensation, amortization of acquisition intangibles, restructuring costs, discrete tax items and other items, was $416 million, or $0.44 per diluted share, up 14% and 13%, respectively, from fourth quarter of 2016, primarily driven by improved operating results and lower interest expense.

Total segment earnings before interest, taxes, depreciation, and amortization (total segment EBITDA) in the fourth quarter 2017 was $848 million, up 10% versus the prior year period, or up 8% on an organic constant currency basis, driven by revenue growth and expense management.

"The fourth quarter capped a solid year of performance for First Data as we executed across all aspects of our strategy and delivered financial results that met our guidance," said First Data Chairman and CEO Frank Bisignano. "We generated growth, invested in innovation and strategic M&A to further enhance our industry-leading products and services, and generated substantial cash flow, while maintaining our focus on expense management. As we enter 2018, we are well positioned as a technology leader with the right capabilities to help our customers grow their business and generate solid revenue growth and cash flow for our shareholders," Bisignano added.

Segment Results

Global Business Solutions (GBS)

Fourth quarter 2017 GBS segment revenue was $1,131 million, up 10% versus the prior year period, or up 4% on an organic constant currency basis. Within geographic regions, North America revenue of $852 million was up 6% versus the prior year period, or flat on an organic constant currency basis. Within GBS North America, revenue growth in non-JV channels was offset by softness in JV channel revenue. EMEA revenue was $158 million, up 19% versus the prior year period, or up 10% on an organic constant currency basis, primarily driven by strong growth in the United Kingdom and Germany. Latin America revenue was $78 million, up 44% versus the prior year period, or up 52% on an organic constant currency basis, driven by continued strong results in Brazil and Argentina. APAC revenue was $43 million, up 26% versus the prior year period, or up 24% on an organic constant currency basis primarily driven by growth in India.

Fourth quarter 2017 GBS segment expenses were $637 million, up 10% versus the prior year period, or up 3% on an organic constant currency basis.

Fourth quarter 2017 GBS segment EBITDA was $494 million, up 11% versus the prior year period, or up 7% on an organic constant currency basis. Segment EBITDA margin improved 20 basis points to 43.7% in the quarter.

Global Financial Solutions (GFS)

Fourth quarter 2017 GFS segment revenue was $412 million, down 1% versus the prior year period on both a reported and organic constant currency basis. Within geographic regions, North America revenue of $242 million was down 3% versus the prior year period on both a reported and organic constant currency basis, largely driven by the non-recurrence of a previously disclosed termination fee in the prior year period. North America card accounts on file grew 6% year over year. EMEA revenue was $112 million, up 3% versus the prior year period, or up 2% on an organic constant currency basis, driven by growth in the United Kingdom. Latin America revenue was $32 million, down 3% versus the prior year period, or up 2% on an organic constant currency basis, primarily driven by growth in Argentina, partly offset by the non-recurrence of a prior year benefit from a client contract modification. APAC revenue was $26 million, up 13% versus the prior year period, or up 6% on an organic constant currency basis primarily driven by new and existing client growth across the region.

Fourth quarter 2017 GFS segment expenses were $228 million, down 6% versus the prior year period on both a reported and organic constant currency basis, driven by solid expense management.

Fourth quarter 2017 GFS segment EBITDA was $184 million, up 6% versus the prior year period on both a reported and organic constant currency basis. Segment EBITDA margin improved 300 basis points to 44.7% in the quarter.

Network & Security Solutions (NSS)

Fourth quarter 2017 NSS segment revenue was $406 million, up 4% versus the prior year period, or up 6% on an organic constant currency basis. Within NSS's primary businesses, Stored Value revenue grew 19% in the quarter benefiting from strong growth in both its open and closed loop gift card businesses and a client contract modification; Security and Fraud revenue grew 4%; and EFT revenue was flat.

Fourth quarter 2017 NSS segment expenses were $197 million, down 4% versus the prior year period, or down 1% on an organic constant currency basis.

Fourth quarter 2017 NSS segment EBITDA was $209 million, up 14% versus the prior year period on both a reported and organic constant currency basis. Segment EBITDA margin improved 450 basis points to 51.5% in the quarter.

Income Tax (Benefit) / Expense

Fourth quarter 2017 income tax (benefit) / expense was ($663) million, representing a change of $687 million from expense of $24 million in the prior year period. The change in income taxes in the current year period was driven by multiple discrete tax items, primarily the non-cash effects of the reversal of the valuation allowance against deferred tax assets associated with U.S. federal net operating loss carryforwards ("U.S. federal NOLs") and the net write down of deferred tax accounts upon the enactment of the Tax Cuts and Jobs Act.

Full year 2017 income tax (benefit) / expense was ($729) million, representing a change of $810 million from expense of $81 million in the prior year period. The change in income taxes in 2017 was driven by multiple discrete tax items including the discrete tax items discussed above.

The effective tax rate in calculating adjusted net income in the fourth quarter and full year 2017, was approximately 12% and 10%, respectively.

Cash Flow

In the fourth quarter 2017, cash flow from operations was $465 million, up $14 million compared to $451 million in the prior year period. Free cash flow, which First Data defines as cash flow from operations, less capital expenditures, distributions to minority interests and other, was $280 million in the current quarter, up $10 million from $270 million in the prior year period as increased segment EBITDA and lower cash interest payments were largely offset by the unfavorable timing impact of settlement flows on working capital.

Full year 2017 cash flow from operations was $2,047 million, down $64 million from $2,111 million in 2016. Full year free cash flow was $1,359 million, up $143 million from $1,216 million in 2016. The increase in full year free cash flow was primarily driven by growth in total segment EBITDA and a reduction in cash interest paid in 2017 compared to 2016, partially offset by increased cash taxes and capital expenditures in 2017 compared to the prior year, and the unfavorable timing impact of settlement flows on working capital.

Capital Structure

Total borrowings at December 31, 2017 increased to $19.2 billion from $18.5 billion a year ago, reflecting increased borrowings related to the acquisitions of BluePay, CardConnect and Acculynk in 2017, partially offset by debt paydowns and divestitures that occurred throughout the year. Net debt of $18.6 billion at December 31, 2017, increased by $445 million in 2017.

On November 15, 2017, the Company closed on new term loans totaling approximately $3.9 billion with an interest rate of LIBOR plus 225 basis points maturing in April 2024. The proceeds of the term loans were used to redeem approximately $3.9 billion of term loans with an interest rate of LIBOR plus 250 basis points. The interest rate on the new term loans may be reduced by 25 basis points in the future based on the Company's corporate family debt rating. The expected annualized cash interest savings derived from this transaction is approximately $10 million.

On November 29, 2017, the Company incurred an aggregate principal amount of $250 million in new term loans with an interest rate of LIBOR plus 175 basis points maturing in June 2020. The proceeds of the new term loans, together with cash on hand and other available financing, were used to acquire BluePay Holdings, Inc.

2018 Guidance

The guidance provided below holds foreign exchange rates constant versus the year-ago comparable period ("constant currency").

Key metric guidance for full year 2018:

  • Total segment revenue: 5% to 7% (range includes a net benefit attributable to the full year impact of previously announced major acquisitions and dispositions of approximately 2 percentage points)
  • Total segment EBITDA: 7% to 9% (range includes a net benefit attributable to the full year impact of previously announced major acquisitions and dispositions of approximately 1.5 percentage points)
  • Adjusted diluted EPS: $1.35 to $1.40
  • Effective tax rate: 27% to 29%
  • Free cash flow: $1.4 billion+

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.

The effective tax rate range of 27% to 29% in 2018 is significantly higher than the effective tax rate achieved in 2017 as a result of the reversal of the valuation allowance against deferred tax assets associated with U.S. federal NOLs in the fourth quarter of 2017, as discussed in "Income Tax (Benefit) / Expense", above. The reversal of the valuation allowance has no impact on First Data's U.S. federal NOL balance, and the company estimates that it will be largely shielded from U.S. federal cash taxes through the end of 2020.

Investor Conference Call

The company will host a conference call and webcast on Monday, February 12, 2018, at 8 a.m. ET to review the fourth quarter 2017 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 be webcast on the "Investor Relations" section of the First Data website at investor.firstdata.com where an accompanying slide presentation will also be available.

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. In disclosing year-over-year comparisons, the company has chosen to present non-GAAP measures because it believes that these measures provide users of our financial statements a consistent basis for reviewing the company's performance across different periods.

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. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the company's results of operations in conjunction with the corresponding GAAP measures.

Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures can be found in the tables included in this press release.

The company excludes certain items and other adjustments from total segment revenue, total segment expense, total segment EBITDA, adjusted net income and adjusted net income per diluted share. See reconciliations for a complete list of items excluded from non-GAAP measures.

Adjusted net income is a non-GAAP financial measure used by management that provides an alternative view of performance. Adjusted net income excludes amortization of acquisition-related intangibles, stock-based compensation, restructuring costs and other items affecting comparability and, therefore, are not reflective of continuing operating performance. Management believes that the presentation of adjusted net income provides users of our financial statements greater transparency into ongoing results of operations allowing them to better compare our results from period to period.

The company uses free cash flow, a non-GAAP measure. Free cash flow is defined as cash flow used in/provided by operating activities less capital expenditures, distributions to minority interest, and other. The company considers free cash flow to be a liquidity measure that provides useful information to management and users of our financial statements about the amount of cash generated by the business which can then be used to, among other things, reduce debt outstanding.

The company also uses net debt, a non-GAAP measure. Net debt is defined as total long-term borrowings plus short-term and current portion of long-term borrowings, at par value, excluding lines of credit used for settlement purposes, less cash and cash equivalents. The company believes that net debt provides additional insight on its level and management of leverage.

Certain financial measures (revenue, expenses and EBITDA) in this release are presented excluding the estimated impact of foreign currency changes (constant currency). To present this information, monthly results in the current period for entities reporting in currencies other than United States dollars are translated into United States dollars at the average exchange rates in effect during the corresponding month of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Once translated, each month in the period is added together to calculate the constant currency current period results. The company believes that such non-GAAP constant currency financial measures are useful to investors, lenders and other creditors because such information enables them to measure the impact of currency fluctuations on these measures from period to period.

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) 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 (including the impact of our Digital Banking Joint Venture) in the prior year period; and (3) includes the results of significant acquisitions in the prior year period.

Contact

Peter Poillon

Investor Relations

First Data

212-266-3565

 

Liidia Liuksila

Public Relations

First Data

212-515-0174

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