First Data Reports Fourth Quarter and Full Year 2016 Financial Results

  • Q4 consolidated revenue of $2.9 billion, down 1% or up 1% excluding impacts from currency; $11.6 billion for full year 2016, up 1% or up 2% excluding impacts from currency
  • Q4 total segment revenue of $1.8 billion, flat or up 3% excluding impacts from currency and Australian ATM divestiture; $7.1 billion for full year 2016, up 1% or up 4% excluding impacts from currency and Australian ATM divestiture
  • Q4 net income of $192 million, improved $1.4 billion, diluted EPS of $0.21; $420 million for full year 2016, improved $1.9 billion, diluted EPS of $0.46
  • Q4 adjusted net income of $365 million, up 35%; adjusted diluted EPS of $0.39; $1.2 billion for full year 2016, up 96%, adjusted diluted EPS of $1.32
  • Q4 total segment EBITDA of $771 million, up 1% or up 4% excluding impacts from currency and Australian ATM divestiture; $2.9 billion for full year 2016, up 6% or up 9% excluding impacts from currency and Australian ATM divestiture
  • Q4 cash flow from operations of $451 million, free cash flow of $270 million; Full year 2016 cash flow from operations of $2.1 billion, free cash flow of $1.2 billion
  • Refinanced $9.4 billion of debt in Q4 2016 and YTD 2017 helping further reduce interest costs
  • Full year 2016 total borrowings and net debt reduced $1.1 billion

NEW YORK, FEBRUARY 13, 2017 - First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology and solutions, today reported financial results for the fourth quarter ended December 31, 2016. Consolidated revenue for the fourth quarter was $2.9 billion, down 1% versus the prior year period, or up 1% excluding currency impacts. Total segment revenue was $1.8 billion for the quarter, flat over the prior year period, or up 3% excluding the impacts from currency and divestiture of the Australian ATM business that occurred in the third quarter of 2016.

For the fourth quarter 2016, net income attributable to First Data was $192 million (or $0.21 per diluted share), which compares to a net loss of $1.2 billion in the prior year period. The prior year period included debt extinguishment charges and one-time IPO-triggered expenses totaling approximately $1.3 billion. Adjusted net income, which modifies net income for items such as debt extinguishment charges, stock-based compensation, amortization of acquisition intangibles, restructuring costs and other items, was $365 million (or $0.39 per diluted share), up $94 million or 35% versus the prior year period, primarily driven by lower interest expense.

Total segment earnings before interest, taxes, depreciation, and amortization (total segment EBITDA) in the fourth quarter 2016 was $771 million, up 1% versus the prior year period, or up 4% excluding impacts from currency and the Australian ATM divestiture, driven by revenue growth and expense management. Total segment EBITDA margin improved 50 basis points to 42.1% in the quarter.

“First Data delivered a full-year profit, generating a nearly $2 billion improvement from our 2015 net income. We’re proud of that turnaround, but we’re intensely focused on the hard work still ahead," said First Data Chairman and CEO Frank Bisignano. “Throughout this year and beyond, our team is aligned to deliver solid earnings growth, disciplined expense management, strong cash generation, and continued organic deleveraging, all while strengthening service and driving innovation to serve and expand our client base," Bisignano added.

Segment Results

Global Business Solutions (GBS)

Fourth quarter 2016 GBS segment revenue was $1.0 billion, down 1% versus the prior year period, or up 2% excluding the impacts from currency and the Australian ATM divestiture. Within geographic regions, North America revenue of $805 million was flat versus the prior year period as 7% transaction growth was offset by a decline in blended yield. EMEA revenue was $133 million, down 8% versus the prior year period, or flat excluding currency impacts, as transaction growth was largely offset by lower hardware revenue and a prior year interchange pricing benefit. Latin America revenue was $54 million, up 17% versus the prior year period, or up 45% excluding currency impacts, driven by strong results in Brazil and Argentina. APAC revenue was $34 million, down 28% versus the prior year period, or down 3% excluding impacts from currency and the Australian ATM divestiture.

Fourth quarter 2016 GBS segment expenses were $580 million, down 4% versus the prior year period, or flat excluding impacts from currency and the Australian ATM divestiture.

Fourth quarter 2016 GBS segment EBITDA was $446 million, up 2% versus the prior year period, or up 6% excluding impacts from currency and the Australian ATM divestiture. Segment EBITDA margin improved 150 basis points to 43.5% in the quarter.

Global Financial Solutions (GFS)

Fourth quarter 2016 GFS segment revenue was $415 million, up 5% versus the prior year period, or up 10% excluding currency impacts. Within geographic regions, North America revenue of $250 million was up 7% versus the prior year period, largely driven by growth in processing and print revenue partially offset by a decline in card personalization revenue. North America card accounts on file grew 5% year over year. EMEA revenue was $109 million, down 7% versus the prior year period, or up 6% excluding currency impacts, primarily driven by new business and internal growth. Latin America revenue was $33 million, up 32% versus the prior year period, or up 50% excluding currency impacts, driven by growth primarily in Argentina and Colombia. APAC revenue was $23 million, up 28% versus the prior year period, or up 25% excluding currency impacts, primarily driven by growth in Australia.

Fourth quarter 2016 GFS segment expenses were $242 million, up 4% versus the prior year period, or up 9% excluding currency impacts.

Fourth quarter 2016 GFS segment EBITDA was $173 million, up 7% versus the prior year period, or up 11% excluding currency impacts. Segment EBITDA margin improved 60 basis points to 41.7% in the quarter.

Network & Security Solutions (NSS)

Fourth quarter 2016 NSS segment revenue was $389 million, down 2% versus the prior year period. NSS revenue growth was partly impacted by the non-recurrence of a previously disclosed change in contract terms for one client that benefited the prior period by $10 million.

Fourth quarter 2016 NSS segment expenses were $206 million, flat versus the prior year period.

Fourth quarter 2016 NSS segment EBITDA was $183 million, down 4% versus the prior year period. Segment EBITDA margin declined 100 basis points to 47.0% in the quarter.

Full Year Results Summary

Total Company Results

Full year 2016 consolidated revenue was $11.6 billion, up 1% versus the prior year, or up 2% excluding currency impacts. Total segment revenue was $7.1 billion for the full year, up 1% versus the prior year, or up 4% excluding impacts from currency and the Australian ATM divestiture.

Full year net income attributable to First Data was $420 million (or $0.46 per diluted share), up $1.9 billion versus a net loss of $1.5 billion in the full year 2015. Adjusted net income was $1.2 billion (or $1.32 per diluted share), up $599 million or 96% versus the prior year, primarily driven by lower interest expense and improved operating results.

Full year total segment EBITDA was $2.9 billion, up 6% versus the prior year, or up 9% excluding impacts from currency and the Australian ATM divestiture, driven by revenue growth and expense management. Total full year segment EBITDA margin improved 180 basis points to 40.5% in the quarter.

Segments Results

Full year 2016 GBS segment revenue was $4.1 billion, down 1% versus full year 2015, or up 2% excluding impacts from currency and the Australian ATM divestiture. Full year 2016 segment expenses were $2.3 billion, down 3% versus the prior year, or flat excluding impacts from currency and the Australian ATM divestiture. Full year segment EBITDA was $1.7 billion, up 3% versus the prior year, or up 6% excluding impacts from currency and the Australian ATM divestiture. Segment EBITDA margin improved 140 basis points to 42.5% for the full year.

Full year 2016 GFS segment revenue was $1.6 billion, up 7% versus full year 2015, or up 10% excluding currency impacts. Full year 2016 segment expenses were $947 million, flat versus the prior year, or up 4% excluding currency impacts. Full year segment EBITDA was $646 million, up 17% versus the prior year, or up 21% excluding currency impacts. Segment EBITDA margin improved 380 basis points to 40.6% for the full year.

Full year 2016 NSS segment revenue was $1.5 billion, up 1% versus full year 2015. Full year 2016 segment expenses were $819 million, down 1% versus the prior year. Full year segment EBITDA was $666 million, up 4% versus the prior year. Segment EBITDA margin improved 120 basis points to 44.8% for the full year.

Cash Flow

In the fourth quarter 2016, cash flow from operations was $451 million, up $343 million compared to $108 million in the prior year period. Free cash flow, which First Data defines as cash flow from operations, less capital expenditures and distributions to minority interests and other, was $270 million in the current quarter, up $387 million compared to $(117) million in the prior year period.

Full year 2016 cash flow from operations was $2.1 billion, up $1.3 billion from $795 million in 2015. The 2016 cash flow from operations includes a reclassification of $102 million (see footnote (a) on Selected Consolidated Cash Flow Data table for additional detail). Full year free cash flow was $1.2 billion, up $1.3 billion from $(119) million in 2015. The increase in full year free cash flow was driven by a nearly $0.8 billion reduction in cash interest paid in 2016 compared to 2015, as well as growth in total segment EBITDA, improved working capital and lower capital expenditures in the current year.

Capital Structure

Total borrowings at December 31, 2016 were reduced to $18.5 billion, from $18.9 billion at September 30, 2016 and $19.6 billion at year end 2015. Net debt at December 31, 2016 was reduced to $18.2 billion, from $18.5 billion at September 30, 2016 and $19.3 billion at year end 2015.

As previously disclosed, on October 14, 2016, First Data refinanced approximately $4.5 billion of term loans due in 2021, which reduced the interest rate on these loans by 100 basis points from LIBOR plus 400 basis points to LIBOR plus 300 basis points.

On December 5, 2016, First Data refinanced approximately $3.6 billion of term loans due in 2022, reducing the interest rate on $2.8 billion of U.S. dollar term loans from LIBOR plus 375 basis points to LIBOR plus 300 basis points, and €0.8 billion of Euro term loans from Euro LIBOR plus 375 basis points to Euro LIBOR plus 325 basis points.

On January 23, 2017, First Data closed on new amortizing term loans totaling $1.3 billion with an interest rate of LIBOR plus 200 basis points. The proceeds of these term loans and other funds were used to redeem all of the $1.4 billion 6.75% senior secured first lien notes due 2020, along with associated fees and expenses. The new term loans mature in June, 2020.

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, total segment EBITDA margin, 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, total segment EBITDA margin, 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 revenue 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. The company believes that revenue growth is a key indication of how First Data is progressing from period to period and the non-GAAP constant currency financial measure is useful to investors, lenders and other creditors because such information enables them to measure the impact of currency fluctuations on the company's revenue from period to period.

Investor Conference Call

The company will host a conference call and webcast on Monday, February 13, 2017, at 8 a.m. ET to review the fourth quarter 2016 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.

A replay of the call will be available through March 13, 2017, at +1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the U.S.); passcode 10100166 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 (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 24,000 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 2,800 transactions per second and $2.2 trillion per year.

Media Relations

 

Peter Poillon
Investor Relations
First Data
212-266-3565
Peter.Poillon@firstdata.com

Liidia Liuksila
Public Relations
First Data
212-515-0174
Liidia.Liuksila@firstdata

 

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