• Q3 GAAP Consolidated revenue of $2.9 billion, up 5% YoY
• Q3 Segment revenue of $1.8 billion, up 4%, or up 7% excluding currency impacts
• Q3 GAAP Operating profit of $402 million, up 14%
• Q3 Adjusted EBITDA of $703 million, up 7%
• Q3 Adjusted EBITDA margin expands 130 basis points to 39.1%
• Q3 GAAP Net loss improved by $109 million to $126 million; Adjusted net income of $191 million
• Strengthening balance sheet through $2.8 billion IPO and debt refinancings
NEW YORK, OCTOBER 26, 2015 - First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology and solutions, today reported financial results for the third quarter ended September 30, 2015. Consolidated revenue for the third quarter was $2.9 billion, up 5% versus the prior year period. Segment revenue, which modifies consolidated revenue for pass-through items and other impacts, was $1.8 billion for the quarter, up 4% versus the prior year period, or up 7% excluding currency impacts.
For the third quarter, the net loss attributable to First Data was $126 million, a $109 million improvement from the $235 million loss in the prior year period. Adjusted net income, which modifies net income for items such as debt extinguishment charges, amortization of acquisition intangibles, stock-based compensation, restructuring costs and other non-normal course items, was $191 million, up $5 million versus the prior year period as improved operating performance and reduced interest expense was largely offset by the non-recurrence of tax benefits in the year-ago period.
Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $703 million, up 7% versus the prior year period. Adjusted EBITDA margin for the quarter was 39.1%, up 130 basis points versus the prior year period.
“We are pleased to report healthy growth in both revenue and adjusted EBITDA coupled with margin expansion,” said Frank Bisignano, First Data Chairman and CEO. “We have made significant investments in innovative solutions, geographic expansion, our sales force, controls and infrastructure, each of them important steps in our ongoing transformation. The third quarter and the past few weeks also marked additional milestones in our efforts to transform our balance sheet with the $2.8 billion IPO and further debt refinancings."
Global Business Solutions (GBS) 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. Approximately 75% of GBS revenue is generated in North America.
Segment revenue for the third quarter was $1.0 billion, up 2% versus the prior year period, or up 6% on a constant currency basis. Within geographic regions, North America revenue of $813 million increased 4% versus the prior year period primarily due to growth in product sales and transactions. EMEA revenue was $134 million, down 8%, or up 6% on a constant currency basis, driven primarily by increased transaction growth.
Segment EBITDA was $431 million, up 4% versus the prior year period. Segment EBITDA margin for the third quarter was 41.8%, up 80 basis points versus the prior year period.
Global Financial Solutions (GFS) 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. Approximately 55% of GFS revenue is generated in North America and approximately 30% is generated in EMEA.
Segment revenue for the third quarter was $391 million, up 3% versus the prior year period, or up 9% on a constant currency basis. Within geographic regions, North America revenue of $232 million was up 11% primarily due to growth from existing clients and increased card personalization volume due to EMV demand. EMEA revenue was $114 million, down 5%, or up 8% on a constant currency basis, due to growth from existing clients and higher professional services fees.
Segment EBITDA was $145 million, up 9% versus the prior year period. Segment EBITDA margin for the third quarter was 37.1%, up 190 basis points versus the prior year period.
Network & Security Solutions (NSS) 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. Virtually all of NSS revenue is generated in North America.
Segment revenue for the third quarter was $374 million, up 9% versus the prior year period. Revenue growth in the quarter was primarily driven by transaction growth in EFT Network Solutions, growth in merchant security solutions and increased stored value volume.
Segment EBITDA was $162 million, up 7% versus the prior year period. Segment EBITDA margin for the third quarter was 43.3%, down 70 basis points versus the prior year period.
For the third quarter, the company generated $234 million in cash flow from operations, up $24 million versus the prior year period. The company finished the quarter with approximately $1.0 billion in unrestricted liquidity.
Improvements to Capital Structure
As previously announced, on July 10, 2015, First Data closed on new term loans totaling approximately $1 billion comprising $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.
Additionally, on August 11, 2015, First Data issued $1.2 billion in first lien senior secured notes with an interest rate of 5.375%. The proceeds of these notes were used to call the remaining $640 million, 7.375% senior secured first lien notes due 2019 and the entire $510 million, 8.875% senior secured first lien notes due in 2020, along with fees and expenses. The new notes mature in August 2023.
$2.8 billion Initial Public Offering
In October 2015, First Data will have raised approximately $2.8 billion from issuing approximately 176,000,000 shares of Class A common stock at a price of $16 per share.
The company intends to use the net proceeds from the offering to redeem all $510 million aggregate principal amount of its 11.25% senior unsecured notes due 2021, approximately $1.8 billion aggregate principal amount of its 12.625% senior unsecured notes due 2021, and to pay applicable premiums and related fees and expenses, and for general corporate purposes.
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. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measure reflects an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the reconciliation to the corresponding GAAP financial measures, provide a more complete understanding of our business. Investors are strongly encouraged to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
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. Additionally, Adjusted Net Income is not intended to be a measure of free cash flow available for management’s discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Management believes that Adjusted Net Income is helpful in highlighting trends because Adjusted Net Income excludes the results of items that may mask underlying trends in the business. 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 conference call and webcast on Tuesday, October 27, 2015, at 8 a.m. EDT to review the third 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 40850206, 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 November 11, 2015, at +1 (888) 843-7419 (U.S.) or +1 (630) 652-3042 (outside the U.S.); passcode 40850206 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 4,000 financial institutions in 118 countries around the world. The company’s 23,000 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 2,300 transactions per second and $1.9 trillion per year.