First Data Reports First Quarter 2017 Financial Results
- Q1 consolidated revenue of $2.8 billion, up 1%; up 1% excluding currency impacts
- Q1 total segment revenue of $1.7 billion, up 2%; up 3% excluding impacts from currency and Australian ATM divestiture
- Q1 net income of $36 million, improved $92 million; diluted EPS of $0.04
- Q1 adjusted net income of $258 million, up 17%; adjusted diluted EPS of $0.28
- Q1 total segment EBITDA of $651 million, up 2%; up 4% excluding impacts from currency and Australian ATM divestiture
- Q1 cash flow from operations of $421 million; free cash flow of $261 million
NEW YORK, MAY 8, 2017 - First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology and solutions, today reported financial results for the first quarter ended March 31, 2017. Consolidated revenue for the first quarter was $2.8 billion, up 1% versus the prior year period, both as reported and excluding currency impacts. Total segment revenue was $1.7 billion for the quarter, up 2% versus the prior year period, or up 3% excluding the impacts from currency and the divestiture of the Australian ATM business that occurred at the end of the third quarter of 2016.
For the first quarter 2017, net income attributable to First Data was $36 million (or $0.04 per diluted share), which compares to a net loss of $56 million in the prior year period. First quarter 2017 results include $56 million of debt extinguishment charges, while the prior year period included $46 million of debt extinguishment charges and $52 million of IPO-triggered stock-based compensation costs.
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 $258 million (or $0.28 per diluted share), up $38 million or 17% compared to $220 million in the prior year period, driven by improved operating results and lower interest expense.
Total segment earnings before interest, taxes, depreciation, and amortization (total segment EBITDA) in the first quarter 2017 was $651 million, up 2% versus the prior year period, or up 4% excluding impacts from currency and the Australian ATM divestiture. Total reported segment EBITDA margin improved 10 basis points to 37.7% in the quarter.
“We delivered another quarter of solid earnings growth as our efforts to increase revenue, manage costs, and improve our capital structure are showing up in our bottom line,” said First Data Chairman and CEO Frank Bisignano. “We continue to make steady progress across key initiatives such as expanding our presence in the enterprise space, steadily improving the foundations of our SMB direct business in North America, and growing our international franchise. We reiterate our previously provided financial guidance for 2017 and over the medium term," Bisignano added.
Global Business Solutions (GBS)
First quarter 2017 GBS segment revenue was $971 million, up 2% versus the prior year period, or up 3% excluding the impacts from currency and the Australian ATM divestiture. Within geographic regions, North America revenue of $751 million was up 2% versus the prior year period benefiting from 7% transaction growth. EMEA revenue was $127 million, down 9%, or down 3% excluding currency impacts, primarily driven by the non-recurrence of beneficial interchange rate changes in the prior year period, partially offset by transaction growth. Latin America revenue was $59 million, up 59%, or up 52% excluding currency impacts, driven by strong results in Brazil and Argentina. APAC revenue was $34 million, down 17%, or up 10% excluding impacts from currency and the Australian ATM divestiture, primarily driven by growth in India.
First quarter 2017 GBS segment expenses were $589 million, up 2% versus the prior year period, or up 4% excluding the impacts from currency and the Australian ATM divestiture.
First quarter 2017 GBS segment EBITDA was $382 million, up 2% versus the prior year period, or up 3% excluding impacts from currency and the Australian ATM divestiture. Segment EBITDA margin declined 10 basis points to 39.3% in the quarter.
Global Financial Solutions (GFS)
First quarter 2017 GFS segment revenue was $393 million, up 2% versus the prior year period, or up 5% excluding currency impacts. Within geographic regions, North America revenue of $236 million was up 1%, with growth in processing and print revenue partially offset by a decline in card personalization revenue. North America GFS card accounts on file grew 7% year over year. EMEA revenue was $101 million, down 2%, or up 9% excluding currency impacts, primarily driven by new business and internal growth primarily in the United Kingdom. Latin America revenue was $33 million, up 6%, or up 8% excluding currency impacts, driven by growth in Argentina and Colombia, partially offset by the non-recurrence of a previously disclosed license fee resolution in the prior year period. APAC revenue was $23 million, up 28%, or up 25% excluding currency impacts, primarily driven by growth in Australia.
First quarter 2017 GFS segment expenses were $238 million, up 3% versus the prior year period, or up 6% excluding currency impacts.
First quarter 2017 GFS segment EBITDA was $155 million, flat versus the prior year period, or up 3% excluding currency impacts. Segment EBITDA margin declined 80 basis points to 39.4% in the quarter.
Network & Security Solutions (NSS)
First quarter 2017 NSS segment revenue was $361 million, up 3% versus the prior year period. The Stored Value revenue grew mid-single digits, Security and Fraud revenue grew low single digits and EFT revenues were flat.
First quarter 2017 NSS segment expenses were $205 million, up 2% versus the prior year period.
First quarter 2017 NSS segment EBITDA was $156 million, up 3% versus the prior year period. Segment EBITDA margin improved 30 basis points to 43.2% in the quarter.
In the first quarter 2017, cash flow from operations was $421 million, up 9% compared to $386 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 $261 million in the current quarter, up 24% compared to $211 million in the prior year period, primarily driven by improved operating results and working capital.
Total borrowings at March 31, 2017 were increased to $18.6 billion, from $18.5 billion at December 31, 2016 driven by capital lease formation during the quarter. Net debt at March 31, 2017 declined $30 million to $18.1 billion, from $18.2 billion at December 31, 2016.
As previously disclosed, in January 2017, the company closed on a new amortizing term loan totaling $1.3 billion with an interest rate of LIBOR plus 200 basis points and maturing in June 2020. 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. In connection with this transaction, the company recorded approximately $56 million in loss on debt extinguishment.
On April 26, 2017, First Data closed on a new term loan totaling $4.2 billion with an interest rate of LIBOR plus 250 basis points maturing in April, 2024. The proceeds of the term loan was used to redeem a $4.2 billion term loan with an interest rate of LIBOR plus 300 basis points maturing in March, 2021.
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 additional insight on performance. Adjusted net income excludes amortization of acquisition-related intangibles, stock-based compensation, restructuring costs and other items affecting comparability and, therefore, provides a more complete understanding 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, May 8, 2017, at 8 a.m. ET to review the first 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 also be webcast on the “Investor Relations” section of the First Data website at investor.firstdata.com along with a slide presentation to accompany the call.
A replay of the call will be available through June 8, 2017, at +1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the U.S.); passcode 10104877 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 Corporation (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.