First Data Reports Third Quarter 2012 Financial Results

First Data Reports Third Quarter 2012 Financial Results

• Third quarter 2012 consolidated revenue of $2.7 billion, down 2%; adjusted revenue of $1.7 billion, up 2%

• Third quarter net loss attributable to First Data $212 million; adjusted EBITDA of $608 million, up 8%

• Extended maturities on additional $3.1 billion in debt; total refinancings of $18 billion since June 2010

• Ended the quarter with $1.7 billion in unrestricted liquidity

ATLANTA--(BUSINESS WIRE)-- First Data Corporationtoday reported its financial results for the third quarter ended September 30, 2012. Consolidated revenue for the third quarter was $2.7billion, down $58 million, or 2%, compared to a year ago on a $73 million decline in debit network fees partially offset by an increase in merchant acquiring revenue. Debit network fees are passed directly to customers and therefore did not impact operating income. Adjusted revenue, which excludes certain items including debit network fees, increased $34 million, or 2%, year-over-year to $1.7 billion.

For the third quarter, the net loss attributable to First Data was $212 million, compared to a loss of $54 million a year ago. The change was primarily due to a $147 million pre-tax decline in other income and expense mainly from mark-to-market losses related to changes in the fair value of interest rate swaps. In addition, the prior year period included a $55 million pre-tax benefit to depreciation and amortization expenses. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $608 million, up $44 million, or 8%, compared to $565 million in the third quarter of 2011, driven by revenue growth in the U.S. business and lower overall expense.

For the quarter, First Data generated $143 million in operating cash flow, after $500 million in cash interest payments. The company finished the quarter with $1.7 billion in unrestricted liquidity—$212 million in cash available for corporate use plus $1.5 billion under the revolving credit facility.

"First Data continues to grow, driven by global merchant acquiring growth and continued growth in adjusted EBITDA," said Chief Executive Officer Jonathan J. Judge. "We are well-positioned to capitalize on the convergence of offline, online and mobile payments by bringing new products to market that address the changing needs of our customers."

Segment Results

Retail and Alliance Services segment revenue for the third quarter was $910 million, up $62 million, or 7%, compared to $848 million in 2011. Merchant revenue was up 9% driven by lower debit interchange rates, new processing revenue from the Bank of America Merchant Services alliance and volume growth. Transaction growth was 5% and credit mix was 72%. Regional average ticket was $68, down slightly compared to a year ago. Product revenue was up 2% as growth in prepaid open-loop was offset by declining check-processing. Segment EBITDA was $409 million, up $55 million, or 16%, compared to 2011 driven primarily by revenue growth. Margin for the third quarter improved to 45%, up 300 basis points. During the quarter, Retail and Alliance Services added two new revenue sharing agreements, four bank referral agreements, and seven new independent sales organizations.

Financial Services segment revenue for the third quarter was $347 million, up $3 million, or 1%, compared to $344 million in the same quarter of 2011, as new business and volume growth offset lost business and price compression. Active card accounts on file were up 16% compared to the prior year, primarily driven by a new customer conversion during the first quarter of 2012. Absent this impact, active card accounts on file were up 4%. Debit issuer transactions were down 11%, impacted by a previously disclosed customer deconversion. Absent this impact, debit issuer transactions were up 12% on new STAR network business and continued growth from existing customers partially offset by lost business. Segment EBITDA was $149 million, down $6 million or 4%, compared to $156 million in 2011 which included the benefit of a $9 million sales tax recovery. Margin for the third quarter was 43%. During the quarter, Financial Services renewed more than 440 contracts with financial institutions.

International segment revenue for the third quarter was $427 million, down $26 million, or 6%, compared to $453 million in the prior year. On a constant currency basis, segment revenue was up 1%. Merchant acquiring revenue, on a constant currency basis, grew 7% on higher transaction volumes and growth in terminal sales in Latin America partially offset by exiting lower margin business. Issuing revenue, on a constant currency basis, declined 4% as lost business and product mix shifts away from lower margin revenue was partially offset by a software license fee and new business. Segment EBITDA was $119 million, up $7 million or 7%, compared to $112 million in 2011 which was negatively impacted by $12 million in purchase accounting adjustments. Changes in foreign currency rates resulted in a $7 million unfavorable impact to EBITDA. Margin improved to 28%, up 300 basis points.

Recent Events

Debt Extension

During the quarter, First Data issued $2.15 billion of 6¾% senior secured notes due in 2020, $750 million of LIBOR+500 term loans due in 2018 and extended approximately $295 million U.S. dollar equivalent term loans from 2014 to 2017. The Company used the net proceeds from these transactions to repay a portion of the term loans under the senior secured credit facilities, thus extending $3.1 billion of 2014 term loans.

Non-GAAP Measures

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. 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 an investor conference call and webcast on Friday, November 2, 2012 at 10 a.m. EDT to review third quarter 2012 financial results. First Data Chief Financial Officer Ray Winborne will lead the call and will be joined by Chief Executive Officer Jonathan J. Judge.

The webcast of the call and accompanying slide presentation will be available on the "Investor Relations" section of the First Data website at investor.firstdata.com.

To listen to the call, dial 888-771-4371 (U.S.) or 847-585-4405 (outside the U.S.); pass code 33379512, at least 10 minutes prior to the start of the call.

A replay of the call will be available through November 16, 2012, at 888-843-7419 (U.S.) or 630-652-3042 (outside the U.S.); pass code 33379512# and via webcast at investor.firstdata.com.

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.

Around the world, every second of every day, First Data makes payment transactions secure, fast and easy for merchants, financial institutions and their customers. First Data leverages its vast product portfolio and expertise to drive customer revenue and profitability. Whether the choice of payment is by debit or credit card, gift card, check or mobile phone, online or at the checkout counter, First Data takes every opportunity to go beyond the transaction.