Q2 consolidated revenue of $2.9 billion, up 1% YoY; segment revenue of $1.8 billion,
up 1%, or up 5% excluding currency impacts
Q2 net loss of $26 million improved by $8 million, up 24%; Adjusted net income of
$150 million improved by $63 million, up 72%
Q2 Adjusted EBITDA of $702 million, up 3%, or up 5% excluding currency impacts
Strengthened capital structure with new revolving credit facility and new term loans
NEW YORK, JULY 29, 2015 - First Data Corporation today reported financial results for the second quarter ended June 30, 2015. Consolidated revenue for the second quarter was $2.9 billion, up 1% versus the prior year period. Segment revenue, which modifies consolidated revenue for the exclusion of various pass through items and other impacts, was $1.8 billion for the quarter, up 1% versus the prior year period, or up 5% excluding currency impacts.
For the second quarter, the net loss attributable to First Data was $26 million, a 24% improvement from the $34 million loss in the prior year period. The prior year period was positively impacted by an $80 million after-tax gain on the sale of Electronic Funds Source, LLC (EFS). Adjusted net income, which modifies net income for items such as the amortization of acquisition intangibles, stock-based compensation, restructuring costs and other impacts, was $150 million, up $63 million versus the prior year period due to improvements in interest expense and operating profit.
“We are pleased with our second quarter results which showed solid constant currency revenue growth,” said Chairman and CEO Frank Bisignano. “During the quarter we further strengthened our capital structure, rolled out the Clover® Mini integrated POS solution, and acquired Transaction Wireless, a leading digital gift card distribution platform. We incurred $19 million in restructuring costs during the quarter to fund part of our recently announced strategic expense management initiative, and remain focused on achieving our objective of $200 million in annualized savings by mid-2016.”
Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $702 million, up 3% versus the prior year period, or up 5% excluding currency impacts. EBITDA margin for the quarter was 40%, up 70 basis points versus the prior year period.
For the second quarter, the Company generated $555 million in cash flow from operations, up $128 million versus the prior year period. The Company finished the quarter with $1.1 billion in unrestricted liquidity.
In the second quarter of 2015, the Company realigned its operating segments. Following the realignment, the Company is now reporting results of operations in the following three reportable segments: Global Business Solutions (GBS), Global Financial Solutions (GFS), and Network & Security Solutions (NSS). All segment information has been retroactively adjusted to reflect this change.
Global Business Solutions provides retail point-of-sale merchant acquiring and eCommerce services, next-generation offerings such as mobile payment services, as well as the Company's cloud-based Clover® point-of-sale operating system and its marketplace of proprietary and third-party business apps. GBS segment revenue for the second quarter was $1.1 billion, up 2% versus the prior year period, or up 5% on a constant currency basis. North America revenue of $835 million increased 3% versus the prior year period due to increased hardware sales and revenue from its merchant suite of solutions. EMEA revenue was $139 million, down 6%, or up 11% on a constant currency basis due to transaction growth and yield expansion. GBS segment EBITDA was $454 million, up 1% versus the prior year period, or up 2% on a constant currency basis. GBS segment EBITDA margin for the second quarter was 43%, which was down 40 basis points versus the prior year period.
Global Financial Solutions provides credit and retail private-label card processing, output services and next-generation offerings, such as its VisionPLUS Flex software, which enables card issuers to manage all of their payments-related products and services as a single, integrated “one-stop-shop” solution. GFS segment revenue for the second quarter was $353 million, down 3% versus the prior year period, or up 3% on a constant currency basis. North America revenue of $207 million was up 5% due to internal growth and increased card personalization volume related to EMV demand. EMEA revenue was $103 million, down 16%, or down 2% on a constant currency basis due to yield pressure on renewed contracts. GFS segment EBITDA was $124 million, down 2% versus the prior year period, or up 4% on a constant currency basis. GFS Segment EBITDA margin for the second quarter was 35%, which was up 60 basis points versus the prior year period.
Network & Security Solutions provides a wide range of network services such as Electronic Funds Transfer (EFT) Network Solutions, Stored Value Network Solutions, and Security and Fraud Management Solutions. NSS segment revenue for the second quarter was $356 million, up 6% versus the prior year period. EFT Network Solutions revenue of $123 million increased 6% due to new business. Security and Fraud Management Solutions revenue of $98 million increased 7% due to growth in business security solutions. Stored Value Network Solutions revenue of $80 million declined 1% due to the EFS sale in the prior year period. Excluding the EFS sale, Stored Value Network Solutions revenue was up 10% due to increased transaction growth. NSS segment revenue in the quarter was adversely impacted by $8 million due to the sale of EFS. NSS segment EBITDA was $156 million, up 2% versus the prior year period, which was adversely impacted by $4 million due to the sale of EFS. NSS segment EBITDA margin for the second quarter was 44%, which was down 160 basis points versus the prior year period.
Acquisition of Transaction Wireless
On June 9, 2015, First Data acquired Transaction Wireless Inc. (TWI), a San Diego-based provider of digital stored value products that offer gift card programs, loyalty incentives, and integrated marketing solutions for retailers, partners, and consumers. The acquisition complements First Data’s 2014 acquisition of GyftTM, a consumer-facing digital platform that enables consumers to buy, send, reload, manage, and redeem virtual closed-loop cards using mobile devices.
Improvements to Capital Structure
On June 2, 2015, First Data closed on a new five-year, $1.25 billion revolving credit facility, replacing First Data’s existing $1.0 billion facility which was due to mature in September 2016. The new revolver has a principal interest rate of LIBOR plus 350 basis points, a reduction of 50 basis points from the rate on the previous facility. The new revolving credit facility matures in June 2020.
On July 10, 2015, First Data closed on new term loans totaling approximately $1 billion - $725 million in dollar denominated loans and €250 million in euro denominated loans - with an interest rate of LIBOR plus 375 basis points. The proceeds of these term loans were used to repay a portion of the $1.6 billion, 7.375% senior secured first lien notes due 2019 along with fees and expenses. The new term loans mature in July 2022.
In certain circumstances, results have been presented that are non-GAAP (generally accepted accounting principles) measures and should be viewed in addition to, and not in lieu of, the Company's reported results.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain items and other adjustments and is used by management as a measure of operating performance. The Company believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about non-recurring items that the Company does not expect to continue at the same level in the future. Adjusted Net Income, a measure used by management to measure operating performance, is not a recognized term under GAAP and does not purport to be an alternative to net income (loss) attributable to First Data as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Management believes that Adjusted Net Income is helpful in highlighting trends because Adjusted Net Income excludes the results of decisions that are outside the control of operating management. Because not all companies use identical calculations, this presentation of Adjusted EBITDA and Adjusted Net Income may not be comparable to other similarly titled measures of other companies.
Certain measures 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.
Reconciliations to comparable GAAP measures are available in the accompanying schedules and in the "Investor Relations" section of the Company's website at investor.firstdata.com.
Investor Conference Call
The Company will host a pre-recorded conference call and webcast on Wednesday, July 29, 2015, at 5 p.m. EDT to review the second quarter 2015 financial results.
To listen to the call, dial +1 (800) 708-4540 (U.S.) or +1 (847) 619-6397 (outside the U.S.); passcode 40086236, 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 and a slide presentation to accompany the call will also be available on the website.
A replay of the call will be available through August 12, 2015, at +1 (888) 843-7419 (U.S.) or +1 (630) 652-3042 (outside the U.S.); passcode 40086236 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.
About First Data
First Data is a global leader in commerce-enabling technology and solutions, serving approximately six million business locations and over 4,000 financial institutions in 118 countries around the world. The Company has 23,000 owner-associates and processes more than 2,300 transactions per second and $1.9 trillion in transaction volume per year.
Glenn Fodor, CFA