First Data Corporation today reported its financial results for the fourth quarter ended Dec. 31, 2013. Consolidated revenue for the fourth quarter was $2.8 billion, up $40 million, or 1%, compared to a year ago, primarily driven by a $47 million increase in reimbursable debit network fees, postage and other.
Adjusted revenue, which excludes certain items including debit network fees, was flat, year-over-year at $1.8 billion.
For the fourth quarter, the net loss attributable to First Data was $123 million, compared to a loss of $179 million a year ago, driven by a $44 million favorable change in the provision for income taxes. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $669 million, up $13 million, or 2%, compared to $656 million in the fourth quarter of 2012, driven by a modest improvement in operating expenses.
Consolidated revenue for the full year 2013 was $10.8 billion, up 1%. Full-year adjusted revenue increased $14 million to $6.8 billion. The full-year net loss attributable to First Data was $869 million, $168 million higher than the loss reported a year ago. Improved operating profit, other income and lower interest expense were offset by a $311 million change in the provision for income taxes. The change in income taxes is attributable to the establishment of valuation allowances against operating loss carry- forwards. For 2013, adjusted EBITDA was $2.45 billion, up $14 million, or 1%, compared to $2.44 billion in 2012.
First Data generated $673 million in operating cash flow, after $1.8 billion in cash interest payments for the full year. For the quarter, First Data generated $341 million in operating cash flow, after $301 million in cash interest payments, and finished the quarter with $1.1 billion in unrestricted liquidity.
"During the fourth quarter, First Data launched Clover Station™, its next-generation point-of-sale business solution; acquired Perka, a customer loyalty application, both of which are aimed at small-to-midsized merchants; and established a preferred supplier relationship with Oberthur for EMV chip and PIN cards for the United States," said First Data CEO Frank Bisignano. "In early January, we signed a merchant-alliance agreement in Brazil with Bancoob. These initiatives represent exciting future growth opportunities."
Retail and Alliance Services
segment revenue for the fourth quarter was $933 million, up $2 million, compared to $931 million in the same quarter of 2012. Merchant Services revenue was up 2% on higher volumes offset by lower yield. Transaction growth was 4%, and credit mix was 71%. Average ticket was $77, up 3% compared to a year ago. Product revenue was down 3% due to the continued decline in check processing, offset by growth in prepaid. Segment EBITDA was $436 million, up 4% compared to $418 million in the same quarter of 2012. Cost reductions in core operations more than offset investment in new products. Margin for the fourth quarter was 47%.
Full-year Retail and Alliance Services segment revenue was $3.6 billion, up $37 million, or 1% compared to 2012. Revenue was driven by 4% transaction growth, offset by lower yield. Growth in prepaid was offset by continued declines in check processing. For 2013, segment EBITDA was $1.6 billion, up $35 million or 2%, compared to 2012. Margin improved to 45%. During the year, the company added 40 new independent sales organizations, 75 bank referral agreements and 14 new revenue sharing agreements.
Financial Services segment revenue for the fourth quarter was $354 million, up 2% compared to the same quarter of 2012, as new business and volume growth outpaced lost business and pricing. Revenues were impacted 1 point by the divestiture of two small businesses. Average active card accounts on file were up 14% compared to the prior year, primarily driven by organic growth and customer conversions that occurred during the third quarter. Debit issuer transactions were flat year-over-year. Segment EBITDA was $171 million, up $25 million or 17%, compared to $146 million in the same quarter of 2012, as a result of cost reductions. Margin for the fourth quarter improved to 48%.
Full-year Financial Services segment revenue was $1.4 billion, down $22 million, or 2%, compared to 2012, as new business and volume growth was offset by lost business and pricing. Segment EBITDA for 2013 was $618 million, up $15 million or 2%, compared to $603 million in 2012. Margin improved to 45%. During the year, the company renewed more than 1,300 contracts with financial institutions.
International segment revenue for the fourth quarter was $454 million, down $8 million, or 2%, compared to $462 million in the same quarter of 2012. On a constant currency basis, segment revenue was up $2 million. Merchant acquiring revenue grew 7% on higher volumes while issuing revenue decreased 5%, as new business was offset by prior year software license fees. Segment EBITDA was $134 million, down $18 million or 12%, compared to the same quarter of 2012, impacted by software license fees. On a constant currency basis, segment EBITDA was down 9%. Margin for the fourth quarter was 29%.
Full-year International segment revenue was $1.7 billion, flat compared to 2012. Segment revenue on a constant currency basis was up 2%. Segment EBITDA was $475 million, down $9 million or 2%, compared to $484 million for 2012. On a constant currency basis, segment EBITDA was up $5 million or 1%. Margin remained steady at 28%.
On Jan. 15, 2014, First Data announced its entry into the Brazilian merchant acquiring business through an alliance with Bancoob (Banco Cooperativo do Brasil S.A.), a private bank specializing in services for cooperatives. The partnership will further develop holistic services for the world's second largest payment card market by combining the complementary strengths of First Data's robust, end-to-end payment acceptance and processing services with Bancoob's local market experience and access to more than 2.5 million cooperative members and 300,000 cooperative merchants.
In October 2013, First Data announced the acquisition of Perka, a mobile marketing and consumer loyalty platform that helps small to medium-sized merchants engage their customers with location-based smartphone apps. Perka is an easy-to-use alternative to paper-punch cards. Business owners can deliver custom messages and special offers directly to customers' phones that encourage repeat visits and additional sales.
During the fourth quarter and January 2014, in three separate actions, First Data refinanced and extended the remaining 2016 debt maturities. Now, all of the original debt maturities, which resulted from the merger of First Data with an entity controlled by affiliates of Kohlberg Kravis Roberts & Co., LP in 2007, have been amended and extended to 2017 and beyond.
- In October, First Data Holdings Inc. ("Holdings") reached an agreement with existing debt holders to repay a portion of its approximately $2 billion 11.5% senior payable-in-kind ("PIK") notes due 2016 (the "existing notes"), and exchange the remainder for new 14.5% senior PIK notes of Holdings due 2019 (the "new notes"). In the refinancing, Holdings: (1) Issued $300 million of new convertible preferred equity in Holdings with a maturity date of December 2021 to existing shareholders; (2) Used the proceeds from the new preferred equity investment to repay approximately $300 million of the existing notes; and (3) Issued approximately $1.4 billion of new notes in exchange for all of the remaining existing notes.
- In November, the company issued and sold $1 billion of 11.75% senior subordinated notes due 2021.
- In December, the company offered an additional $725 million of similar notes, from which proceeds together with cash on hand was used to redeem the outstanding 11.25% senior subordinated notes due 2016 and pay related fees and expenses; the December offering was completed on Jan. 6, 2014.
Full figures available here.