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"Our revenue base held steady in the quarter as we added new merchant and bank customers," said Michael Capellas, chairman and CEO of First Data. "We will continue to invest in new product development to fuel long-term growth while driving cost efficiencies to sustain profitability."
Segment Results
Retail and Alliance Services
Retail and Alliance Services reported revenue of $1.2 billion, up 7%. Retail and Alliance Services signed 117,000 merchant locations in the quarter. In addition, 21 new independent sales organizations, 12 new referral partners and two new revenue share agreements were added to the distribution network. Excluding debit network fees, segment revenue was down 7% and was primarily affected by weakness in the overall economy and continued transaction mix shifts. EBITDA was $242 million, down 19%, and EBITDA margin excluding debit network fees was 33.2%. Operating profit was $54 million, compared with $83 million in the first quarter of 2008. Operating profit margin was 4.7%.
Financial Services
For the quarter, Financial Services revenue was $544 million, down 3%. Revenue excluding reimbursables was down 1%. Financial Services renewed 130 contracts in the quarter. EBITDA was $158 million, down 6%, and EBITDA margin excluding reimbursables was 42.5%. Operating profit was $76 million, compared with $90 million in the first quarter of 2008. Operating profit margin was 13.9%.
International
For the quarter, International generated revenue of $369 million, down 16%. Revenue on a constant currency basis, excluding acquisitions and divestitures, was up 1%. Transactions and point-of-sale locations each showed healthy growth at 10% and 9%, respectively. EBITDA was $73 million, down 9%, and EBITDA margin was 19.9%. On a constant currency basis, EBITDA was $91 million, up 13%, and EBITDA margin was 20.4%. Operating profit was $7 million, compared with $19 million in the first quarter of 2008. Operating profit margin was 1.8%.
Other Matters
Segment Realignment
Effective Jan. 1, 2009, First Data adopted a revised segment reporting structure. The company's segments include Retail and Alliance Services, Financial Services, International and Integrated Payment Systems. For applicable prior year and quarterly periods, the company has provided financials realigned to these segments in connection with our first quarter 2009 Securities and Exchange Commission Form 10-Q filing.
Non-GAAP Measures
In certain circumstances, results have been presented that are non-GAAP measures and should be viewed in addition to, and not in lieu of, the company's reported results. Reconciliations to comparable GAAP (generally accepted accounting principles) measures are available in the accompanying schedules and in the "Investor Relations" section of the company's web site at www.firstdata.com.
Investor and Analyst Conference Call
The company will host a conference call and webcast on Friday, May 15, at 8 a.m. EDT to review first quarter 2009 financial results. Michael Capellas, chairman and CEO of First Data, will lead the call. Also participating will be Phil Wall, chief financial officer, and Silvio Tavares, senior vice president, investor relations.
To listen to the call, dial 877-795-3635 (U.S.) or +1-719-325-4765 (outside the U.S.) 10 minutes prior to the start of the call. The call will also be webcast on the "Investor Relations" section of the First Data Web site, http://ir.firstdatacorp.com/events.cfm. Please click on the webcast link at least 15 minutes prior to the call. A slide presentation to accompany the call will be included in the webcast and also will be available under the "Investor Relations" section of the Web site.
A replay of the call will be available through May 20, 2009, at 888-203-1112 (U.S.) or +1-719-457-0820 (outside the U.S.), replay pass code 9703413, and via webcast at http://ir.firstdatacorp.com/events.cfm.
Please note: All statements made by First Data officers on this call are the property of First Data and subject to copyright protection. 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 powers the global economy by making it easy, fast and secure for people and businesses to buy goods and services using virtually any form of electronic payment. Whether the choice of payment is a gift card, a credit or debit card or a check, First Data securely processes the transaction and harnesses the power of the data to deliver intelligence and insight for millions of merchant locations and thousands of card issuers in 36 countries. For more information, visit www.firstdata.com.
FIRST DATA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions)
Three months ended March 31,
2009 2008 Change
Revenues:
Transaction and processing service fees (a):
Merchant related services $ 621.5 $ 634.9 -2 %
Check services 86.5 100.6 -14 %
Card services 470.4 508.3 -7 %
Other services 128.4 135.9 -6 %
Investment income, net 5.8 56.0 -90 %
Product sales and other 174.0 212.0 -18 %
Reimbursable debit network fees, postage and other 589.6 478.8 23 %
2,076.2 2,126.5 -2 %
Expenses:
Cost of services (exclusive of items shown below) 786.5 756.8 4 %
Cost of products sold 63.5 70.9 -10 %
Selling, general and administrative 254.3 304.3 -16 %
Reimbursable debit network fees, postage and other 589.6 478.8 23 %
Depreciation and amortization 329.5 319.1 3 %
Other operating expenses:
Restructuring, net 25.1 - NM
Litigation and regulatory settlements (2.7 ) - NM
2,045.8 1,929.9 6 %
Operating profit 30.4 196.6 -85 %
Interest income 3.3 9.0 -63 %
Interest expense (448.2 ) (517.7 ) -13 %
Other income (expense) (b) 23.3 (43.2 ) NM
(421.6 ) (551.9 ) -24 %
Loss before income taxes and equity earnings in affiliates (391.2 ) (355.3 ) 10 %
Income tax benefit (144.8 ) (130.5 ) 11 %
Equity earnings in affiliates (a) 18.5 32.1 -42 %
Consolidated net loss (227.9 ) (192.7 ) 18 %
Less: Net income attributable to noncontrolling interests 3.4 29.0 -88 %
Net loss attributable to First Data Corporation $ (231.3 ) $ (221.7 ) 4 %
(See accompanying notes)
FIRST DATA CORPORATION
SUMMARY SEGMENT DATA
(Unaudited)
(in millions)
Three months ended March 31,
2009 2008 Change
Revenues:
Retail and Alliance Services $ 1,156.0 $ 1,081.1 7 %
Financial Services (f) 544.2 558.5 -3 %
International (f) 368.7 439.1 -16 %
Integrated Payment Systems 3.3 45.0 -93 %
Subtotal segment revenues 2,072.2 2,123.7 -2 %
All Other and Corporate 68.6 102.1 -33 %
2,140.8 2,225.8 -4 %
Adjustments for items included in segment and All Other and
Corporate revenues: (c)
Equity earnings in affiliates (d) (36.7 ) (80.3 ) -54 %
Eliminations (e) (27.9 ) (29.8 ) NM
Divested businesses (f) - 10.8 NM
Consolidated revenue $ 2,076.2 $ 2,126.5 -2 %
Operating profit: (g)
Retail and Alliance Services $ 54.2 $ 83.3 -35 %
Financial Services (f) 75.9 89.9 -16 %
International (f) 6.6 19.4 -66 %
Integrated Payment Systems (2.5 ) 34.0 NM
Subtotal segment operating profit 134.2 226.6 -41 %
All Other and Corporate (66.1 ) (27.9 ) 137 %
68.1 198.7 -66 %
Adjustments for items included in segment and All Other and
Corporate operating profit: (c)
Equity earnings in affiliates (18.5 ) (32.1 ) -42 %
Net income attributable to noncontrolling interest from segment 3.4 29.0 -88 %
operations (h)
Eliminations (0.2 ) - NM
Divested businesses (f) - 1.0 NM
Interest expense (448.2 ) (517.7 ) -13 %
Interest income 3.3 9.0 -63 %
Items excluded from segment operations (i) 0.9 (43.2 ) NM
Loss before income taxes and equity earnings in affiliates $ (391.2 ) $ (355.3 ) 10 %
Depreciation and amortization: (a)
Retail and Alliance Services $ 188.1 $ 214.8 -12 %
Financial Services (f) 82.4 79.1 4 %
International (f) 66.7 61.5 8 %
Integrated Payment Systems 0.2 0.1 100 %
All Other and Corporate 14.7 11.7 26 %
Divested businesses (f) - 1.2 NM
Total consolidated depreciation and amortization $ 352.1 $ 368.4 -4 %
(See accompanying notes)
FIRST DATA CORPORATION
NOTES TO FINANCIAL SCHEDULES
(Unaudited)
Effective January 1, 2009, the Company re-aligned the business and
began making strategic and operating decisions with regards to
assessing performance and allocating resources based on a new
segment structure. Results for 2008 have been adjusted to reflect
the new structure.
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 160, "Noncontrolling Interests in Consolidated
Financial Statements" ("SFAS No. 160"), effective January 1, 2009
which requires that earnings attributed to noncontrolling interests
be reported as part of consolidated earnings and not as a separate
component of income or expense. The Company's Consolidated Statement
of Operations for 2008 has been revised to conform to the
presentation requirements of SFAS No. 160.
(a) Includes amortization of the initial payments for contracts which is
recorded as a contra-revenue within "Transaction and processing
service fees" of $5.0 million and $1.5 million for the three months
ended March 31, 2009 and 2008, respectively, and amortization
related to equity method investments described in note (d) below
which is netted within the "Equity earnings in affiliates" line of
$17.6 million and $47.8 million for the three months ended March 31,
2009 and 2008, respectively.
(b) Other income (expense) includes investment gains and (losses),
derivative financial instruments gains and (losses), divestitures,
net and non-operating foreign currency gains and (losses).
(c) Reconciles the total segment and All Other and Corporate revenue to
consolidated revenue or total segment and All Other and Corporate
operating profit to loss before income taxes and equity earnings in
affiliates as reported on the Consolidated Statements of Operations.
(d) Excludes equity losses that were recorded in expense and the
amortization related to the excess of the investment balance over
the Company's proportionate share of the investee's net book value.
(e) Represents elimination of intersegment revenue.
(f) The Company sold its ownership interests in Active Business
Services, Ltd ("Active"), reported within the International segment,
in July 2008 and Peace Software ("Peace"), reported within the
Financial Services segment, in October 2008. Revenue and operating
profit associated with Active and Peace are excluded from segment
results. The International and Financial Services segment revenue
and operating profit were adjusted for 2008 to exclude the results
of Active and Peace.
(g) Segment and All Other and Corporate operating profit excludes net
income attributable to noncontrolling interests from segment
operations and includes equity earnings in affiliates. Segment and
All Other and Corporate operating profit excludes other operating
expenses, interest expense, interest income and other income
(expense).
(h) Excludes net income attributable to noncontrolling interests
attributable to items excluded from segment operations discussed in
note (i) below.
(i) Includes restructuring charges, asset impairments, significant
litigation and regulatory settlements, other charges and other
income (expense).
FIRST DATA CORPORATION
SUMMARY SEGMENT DATA - ADJUSTED FOR SEGMENT REALIGNMENT
(Unaudited)
(in millions)
Predecessor Successor
Period from Period from Three Three Three Three
January 1, 2007 through September 25, 2007 through months ended months ended months ended months ended
September December 31, 2007 March 31, 2008 June 30, 2008 September 30, 2008 December 31, 2008
24, 2007
Revenues:
Retail and $ 3,178.1 $ 1,238.3 $ 1,081.1 $ 1,185.5 $ 1,176.0 $ 1,316.9
Alliance Services
Financial Services 1,644.0 613.9 558.5 556.6 559.0 560.0
International 1,126.2 490.6 439.1 467.3 487.0 434.0
Integrated 71.5 34.3 45.0 26.7 (32.9 ) 4.3
Payment
Systems
Subtotal 6,019.8 2,377.1 2,123.7 2,236.1 2,189.1 2,315.2
segment
revenues
All Other and 243.5 85.7 102.1 81.2 87.8 68.3
Corporate
6,263.3 2,462.8 2,225.8 2,317.3 2,276.9 2,383.5
Adjustments for
items included in
segment and All
Other
and
Corporate
revenues:
Equity earnings (248.6 ) (105.7 ) (80.3 ) (94.5 ) (88.3 ) (39.7 )
in affiliates
Eliminations (276.8 ) (91.4 ) (29.8 ) (30.1 ) (30.3 ) (28.0 )
Divested 35.0 12.8 10.8 11.6 5.7 0.7
businesses
Consolidated $ 5,772.9 $ 2,278.5 $ 2,126.5 $ 2,204.3 $ 2,164.0 $ 2,316.5
revenue
Operating profit:
Retail and $ 783.6 $ 114.4 $ 83.3 $ 124.3 $ 106.8 $ 116.9
Alliance Services
Financial Services 369.8 95.9 89.9 92.2 101.4 100.7
International 93.7 46.9 19.4 29.7 48.5 33.1
Integrated 30.1 21.3 34.0 16.3 (42.3 ) (2.5 )
Payment
Systems
Subtotal 1,277.2 278.5 226.6 262.5 214.4 248.2
segment
operating profit
All Other and (420.9 ) (60.9 ) (27.9 ) (55.0 ) (56.3 ) (67.4 )
Corporate
856.3 217.6 198.7 207.5 158.1 180.8
Adjustments for
items included in
segment and All
Other
and
Corporate
operating profit:
Equity (223.0 ) (46.8 ) (32.1 ) (41.6 ) (35.0 ) (14.3 )
earnings in
affiliates
Net income 106.3 39.0 29.0 40.3 47.5 39.5
attributable to
noncontrolling
interest
from
segment
operations
Eliminations (176.6 ) (55.7 ) - - - -
Divested 0.7 0.7 1.0 0.5 (1.1 ) (0.1 )
businesses
Interest expense (103.6 ) (584.7 ) (517.7 ) (451.1 ) (497.7 ) (498.4 )
Interest income 30.8 17.9 9.0 6.6 5.9 4.5
Items excluded (18.4 ) (73.8 ) (43.2 ) 6.5 24.9 (3,258.2 )
from segment
operations
Income (loss) $ 472.5 $ (485.8 ) $ (355.3 ) $ (231.3 ) $ (297.4 ) $ (3,546.2 )
before income
taxes, equity
earnings
in
affiliates and
discontinued
operations
FIRST DATA CORPORATION
RECONCILIATION OF NON-GAAP
MEASURES
(Unaudited)
($ in millions)
Management believes the following non-GAAP measures provide
meaningful supplemental information to assist investors in
understanding our financial results and to better analyze trends in
our underlying business. These non-GAAP financial measures should
not be considered in isolation or as a substitute for the most
comparable GAAP financial measures. The non-GAAP financial measures
reflect 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. A
reconciliation of the non-GAAP measures to the most directly
comparable GAAP financial measures is included below.
Non-GAAP measures for the company's domestic segments exclude
revenue earned from reimbursements of pass-through costs such as
debit network fees and postage and exclude depreciation and
amortization from operating profit for purposes of calculating
EBITDA. Non-GAAP measures for the company's international segment
exclude acquisitions less than a year old, divestitures and foreign
exchange impact from revenue. Non-GAAP measures for the company's
international segment also exclude foreign exchange impact from
operating profit and depreciation and amortization for purposes of
calculating EBITDA.
For the purpose of analyzing the company's liquidity an "Adjusted
EBITDA" metric is used. "Adjusted EBITDA" is different than
"Consolidated EBITDA" (or "Debt Covenant EBITDA") as defined in the
Credit Agreement dated September 24, 2007 ("Senior Secured Credit
Facilities") among the company, the lenders or other entities that
are a party thereto from time to time and Credit Suisse, Cayman
Islands Branch, as Administrative Agent and Collateral Agent. The
differences primarily relate to adjustments for cost savings
projected to be achieved within twelve months on an annualized
basis, noncontrolling interests, losses on equity method
investments, certain non capitalized acquisition expenses, and
depreciation, amortization and income taxes within the company's
equity method investments.
Management believes that these non-GAAP measures provide insight
into the company's core performance.
Three Months Ended March 31,
Consolidated 2009 2008 Change
Revenue $ 2,076.2 $ 2,126.5 -2 %
Foreign exchange impact (1) 78.8 -
Revenue on a constant currency basis $ 2,155.0 $ 2,126.5 1 %
Three Months Ended March 31,
2009 2008 Change
Net loss attributable to First Data Corporation $ (231.3 ) $ (221.7 ) -4 %
Interest expense, net (2) 444.9 508.7
Income tax benefit (144.8 ) (130.5 )
Depreciation and amortization 352.1 368.4
EBITDA $ 420.9 $ 524.9 -20 %
Stock based compensation (3) 4.5 4.4
Other items (4) 2.7 44.2
Official check and money order EBITDA (5) 2.3 (34.1 )
Cost of data center, technology and savings initiatives (6) 53.9 32.3
Transaction related fees - 2.0
Purchase accounting (7) 0.9 6.2
Sponsor's annual management fee 5.3 5.0
Pre-acquisition EBITDA of acquired or divested businesses (8) - (10.2 )
Adjusted EBITDA $ 490.5 $ 574.7 -15 %
Note: Excluding foreign exchange impact(1) of $22.3
million for the first quarter of 2009, Adjusted EBITDA was down 11%.
Excluding foreign exchange impact(1) of $22.3 million and
the incremental decrease in royalty revenue of $29.1 million for the
first quarter of 2009, Adjusted EBITDA was down 6%.
Three months ended March 31,
2009 2008 Change
Retail and Alliance Services
Revenue $ 1,156.0 $ 1,081.1 7 %
Reimbursable debit network fees (DNF) (425.3 ) (298.4 )
Revenue excluding DNF $ 730.7 $ 782.7 -7 %
Operating profit $ 54.2 $ 83.3 -35 %
Depreciation and amortization 188.1 214.8
EBITDA $ 242.3 $ 298.1 -19 %
Profit margin 4.7 % 7.7 %
EBITDA margin, excluding DNF 33.2 % 38.1 %
Three months ended March 31,
2009 2008 Change
Financial Services
Revenue $ 544.2 $ 558.5 -3 %
Reimbursable postage and other (171.6 ) (182.4 )
Revenue excluding reimbursable postage and other $ 372.6 $ 376.1 -1 %
Operating profit $ 75.9 $ 89.9 -16 %
Depreciation and amortization 82.4 79.1
EBITDA $ 158.3 $ 169.0 -6 %
Profit margin 13.9 % 16.1 %
EBITDA margin, excluding reimbursables 42.5 % 44.9 %
Three months ended March 31,
2009 2008 Change
International
Revenue $ 368.7 $ 439.1 -16 %
Foreign exchange impact (1) 78.8 -
Revenue on a constant currency basis $ 447.5 $ 439.1
Operating profit $ 6.6 $ 19.4 -66 %
Depreciation and amortization 66.7 61.5
EBITDA $ 73.3 $ 80.9 -9 %
Operating profit $ 6.6 $ 19.4 -66 %
Depreciation and amortization 66.7 61.5
Foreign exchange impact (1) 18.0 -
EBITDA on a constant currency basis $ 91.3 $ 80.9 13 %
Profit margin 1.8 % 4.4 %
EBITDA margin 19.9 % 18.4 %
EBITDA margin on a constant currency basis 20.4 % 18.4 %
Organic Revenue Constant Currency
Revenue $ 368.7 $ 439.1 -16 %
Acquisitions less than a year old (3.8 ) -
Foreign exchange impact (1) 78.8 -
Organic revenue on a constant currency basis $ 443.7 $ 439.1 1 %
(1) Foreign exchange impact represents the difference between actual
2009 and 2009 calculated using 2008 exchange rates.
(2) Includes interest expense and interest income.
(3) Stock based compensation recognized as expense.
(4) Other items include net restructuring, investment gains and
losses, derivative financial instruments gains and losses, net
divestitures, litigation and regulatory settlements, non-operating
foreign currency gains and losses and other.
(5) Represents an adjustment to exclude the official check and money
order businesses from EBITDA due to the company's wind down of these
businesses.
(6) Represents implementation costs associated with initiatives to
reduce operating expenses including items such as platform and data
center consolidation initiatives in the International segment,
expense related to the reorganization of global application
development resources, expense associated with domestic data center
consolidation initiatives and planned workforce reduction expenses,
as well as certain platform development costs directly associated
with the termination of the Chase Paymentech alliance, all of which
are considered one-time projects (excludes costs accrued in purchase
accounting).
(7) Represents the effect of purchase accounting associated with the
merger of the company with affiliates of Kohlberg Kravis Roberts &
Co. on EBITDA which is primarily the result of revenue recognition
adjustments.
(8) Reflects the EBITDA of companies acquired or divested after
December 31, 2007 through March 31, 2009, as if these companies had
been acquired or divested on January 1, 2008.
FDC-1
SOURCE: First Data Corporation
First Data Investor and Analyst Relations: Silvio Tavares, 303-967-8276 silvio.tavares@firstdata.com
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