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First Data Reports Second Quarter 2018 Financial Results and Raises Full Year Revenue Guidance

July 30, 2018

NEW YORK--(BUSINESS WIRE)--Jul 30, 2018--First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology, today reported financial results for the second quarter ended June 30, 2018.

“We delivered another strong quarter of financial results, driven by solid contributions from each of our business segments. Our continued investment in technology aimed at helping our customers grow with cutting-edge solutions continues to pay off, resulting in excellent performance in several businesses,” said First Data Chairman and CEO Frank Bisignano. “Looking ahead, First Data is positioned to build on our first half momentum with continued strong performance in the second half of the year and beyond, supported by our market-leading products and services, strong positioning in key global markets, and commitment to driving value through strategic capital allocation,” Bisignano added.

Total segment revenue was $2,234 million for the quarter, up 11% versus the prior year period on a reported basis (a), up 9% on a comparable accounting basis (b), or up 6% on an organic constant currency basis (c). Consolidated revenue for the second quarter was $2,448 million, impacted by the adoption of ASC 606.

Net income attributable to First Data for the second quarter of 2018 was $341 million, or $0.36 per diluted share, up 84% and 80%, respectively, from comparable figures in the second quarter of 2017. The increase in net income attributable to First Data was primarily driven by a $107 million tax benefit related to a previously disclosed settlement of an IRS audit, as well as improved operating results in the current period.

Adjusted net income, which modifies net income for items such as debt extinguishment charges, stock-based compensation, amortization of acquisition intangibles, restructuring costs, certain discrete tax items and other items, was $371 million, or $0.39 per diluted share, down 1% and 3%, respectively, from comparable figures in the second quarter of 2017. The decrease was driven by a normalized adjusted effective tax rate in the current period, largely offset by improved operating results.

Total segment earnings before interest, taxes, depreciation, and amortization (total segment EBITDA) in the second quarter of 2018 was $864 million, up 10% versus the prior year period on both a reported basis (a) and comparable accounting basis (b), or up 8% on an organic constant currency basis (c). Total segment EBITDA margin was 38.7%, up 18 basis points on a comparable accounting basis (b), or up 78 basis points on an organic constant currency basis (c).

Segment Results

Global Business Solutions (GBS)

Second quarter 2018 GBS segment revenue was $1,449 million, up 18% versus the prior year period on a reported basis (a), up 14% on a comparable accounting basis (b), or up 8% on an organic constant currency basis (c). Within geographic regions, North America revenue of $1,134 million was up 18% versus the prior year period on a reported basis (a), up 13% on a comparable accounting basis (b), or up 6% on an organic constant currency basis (c). Performance in North America reflected strong growth in the ISV and agent businesses within the Partner Solutions channel, combined with good growth in the Direct channel. The JV channel saw a slight revenue decline, comparable to its performance in the first quarter of 2018. EMEA revenue was $180 million, up 15% on a reported basis (a), up 13% on a comparable accounting basis (b), or up 5% on an organic constant currency basis (c), driven by growth in the U.K. Latin America revenue was $85 million, up 32% on a reported basis, up 20% on a comparable accounting basis (b), or up 47% on an organic constant currency basis (c), driven by strong growth in Brazil and Argentina. APAC revenue was $50 million, up 20% on a reported basis (a), up 21% on a comparable accounting basis (b), or up 19% on an organic constant currency basis (c), driven by good growth throughout the region.

Second quarter 2018 GBS segment EBITDA was $544 million, up 13% versus the prior year period on both a reported basis and comparable accounting basis (a)(b), or up 10% on an organic constant currency basis (c). GBS Segment EBITDA margin was 37.5%, down 28 basis points on a comparable accounting basis (b), or up 70 basis points on an organic constant currency basis (c).

Global Financial Solutions (GFS)

Second quarter 2018 GFS segment revenue was $414 million, up 3% versus the prior year period on a reported basis (a), up 2% on a comparable accounting basis (b), or up 4% on an organic constant currency basis (c). Within geographic regions, North America revenue of $233 million was flat on a reported basis (a), or down 1% on both a comparable accounting basis (b) and on an organic constant currency basis (c), driven by recent long-term renewals. EMEA revenue was $119 million, up 6% versus the prior year period on a reported basis (a), up 7% on a comparable accounting basis (b), or up 7% on an organic constant currency basis (c), driven by healthy growth in the U.K. Latin America revenue was $36 million, up 6% versus the prior year period on a reported basis, flat on a comparable accounting basis (b), or up 13% on an organic constant currency basis (c), driven by growth in Argentina. APAC revenue was $26 million, up 7% versus the prior year period on a reported basis, up 27% on a comparable accounting basis (b), or up 25% on an organic constant currency basis (c), driven by strong growth across the region.

Second quarter 2018 GFS segment EBITDA was $176 million, up 7% versus the prior year period on a reported basis (a), up 5% on a comparable accounting basis (b), or up 7% on an organic constant currency basis (c). GFS Segment EBITDA margin was 42.5%, up 58 basis points on a comparable accounting basis (b), or up 111 basis points on an organic constant currency basis (c).

Network & Security Solutions (NSS)

Second quarter 2018 NSS segment revenue was $371 million, down 3% versus the prior year period on a reported basis (a), up 1% on a comparable accounting basis (b), or up 3% on an organic constant currency basis (c). Within NSS’s primary businesses, both Stored Value and EFT revenue grew mid-single digits in the quarter. Security and Fraud revenue was flat as high-single digit growth in the core security and fraud businesses was offset by a decline in TeleCheck revenue in the quarter.

Second quarter 2018 NSS segment EBITDA was $193 million, up 7% versus the prior year period on a reported basis (a), comparable accounting basis (b), and organic constant currency basis (c). NSS Segment EBITDA margin was 52.0%, up 298 basis points on a comparable accounting basis (b), or up 202 basis points on an organic constant currency basis (c).

Cash Flow

In the second quarter 2018, cash flow from operations was $604 million, up $24 million compared to $580 million in the prior year period. Free cash flow, which the Company defines as cash flow from operations less capital expenditures, distributions to minority interests and other, was $378 million in the current quarter, down $70 million compared to $448 million in the prior year period, primarily driven by the non-recurrence of a $90 million swap settlement in the prior year period, partially offset by improved operating results.

In the first six months of 2018, cash flow from operations was $1.14 billion, up $137 million compared to $1.00 billion in the prior year six-month period. Free cash flow was $746 million in the current six-month period, up $37 million compared to $709 million in the prior year period.

Capital Structure

First Data’s total borrowings at June 30, 2018 decreased by $581 million to $18,617 million, from $19,198 million at December 31, 2017. The decrease was driven by debt paydowns during the period. Net debt at June 30, 2018 decreased by $583 million to $18,038 million, from $18,621 million at December 31, 2017.

Divestitures

In the second quarter of 2018, First Data entered into an agreement to divest its card processing businesses (reported within GFS EMEA) in Greece and Central/Eastern Europe for €375 million. The deal is expected to close before year end.

Updated 2018 Full Year Revenue Guidance

The updated guidance provided below holds foreign exchange rates constant versus the year-ago comparable period (“constant currency”), and applies the New Reporting Standards to the referenced year ago period.

Total segment revenue growth: 7 % to 8%, compared to previously disclosed guidance of 6% to 7%. Both ranges include a net benefit attributable to the full year impact of closed major acquisitions and dispositions of approximately 2 percentage points.

Segment EBITDA growth, adjusted EPS, and free cash flow guidance remains unchanged from previously disclosed guidance.

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.

Investor Conference Call

The Company will host a conference call and webcast on Monday, July 30, 2018, at 8 a.m. ET to review the second quarter 2018 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 August 30, 2018, at +1 (877) 344-7529 (U.S.) or +1 (412) 317-0088 (outside the U.S.); passcode 10121737 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.

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. 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. These measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. Additional information about non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measure of all non-GAAP measures can be found in the tables included in this press release.

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.

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