First Data posts Q2 profit

Source: First Data

First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology and solutions, today reported financial results for the second quarter ended June 30, 2016.

Consolidated revenue for the second quarter was $2.9 billion, up 2% versus the prior year period, or up 3% excluding currency impacts. Total segment revenue was $1.8 billion for the quarter, up 2% versus the prior year period, or up 4% excluding currency impacts.

For the second quarter 2016, net income attributable to First Data was $152 million, which compares to a net loss of $26 million in the prior year period. 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 $323 million (or $0.35 per diluted share), up $179 million versus 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 second quarter 2016 was $746 million, up $44 million, or 6%, versus the prior year period, driven by revenue growth and expense management. Total segment EBITDA margin improved 170 basis points to 41.5% in the quarter.

“This quarter's results were highlighted by net income growth, healthy margin expansion and strong cash flow generation. We saw impressive growth in Global Financial Solutions and in Latin America, and continued client momentum in the enterprise space,” said First Data Chairman and CEO Frank Bisignano. “We continue to implement and scale a number of strategic initiatives in our North American merchant business and remain confident these will drive visible improvement,” Bisignano added.

Segment Results

Global Business Solutions(GBS)

Second quarter 2016 GBS segment revenue was $1.0 billion, down 2% versus the prior year period, or flat on a constant currency basis. Within geographic regions, North America revenue of $815 million declined 2% versus the prior year period as 7% transaction growth was offset by a decline in blended yield. EMEA revenue was $140 million, up 1%, or up 2% on a constant currency basis, primarily driven by transaction growth offset by a lower blended yield. Latin America revenue was up 5%, or up 44% on a constant currency basis, driven by strong results in Brazil and Argentina. APAC revenue was down 7%, or down 2% on a constant currency basis.

Second quarter 2016 GBS segment expenses were $589 million, down 2% versus the prior year period, benefiting from foreign exchange and expense reduction actions.

Second quarter 2016 GBS segment EBITDA was $448 million, down 1% versus the prior year period. Segment EBITDA margin improved 20 basis points to 43.2% in the quarter.

Global Financial Solutions(GFS)

Second quarter 2016 GFS segment revenue was $395 million, up 12% versus the prior year period, or up 14% on a constant currency basis. Within geographic regions, North America revenue of $236 million was up 14%, driven by new business and internal growth in credit and retail processing and output services. North America GFS card accounts on file grew 14% year over year. EMEA revenue was $108 million, up 5%, or up 8% on a constant currency basis. Latin America revenue was up 24%, or up 46% on a constant currency basis, driven by growth in Argentina. APAC revenue was up 11%, or up 14% on a constant currency basis.

Second quarter 2016 GFS segment expenses were $235 million, up 3% versus the prior year period, as variable expense growth was partially offset by foreign exchange and expense reduction actions.

Second quarter 2016 GFS segment EBITDA was $160 million, up 29% versus the prior year period. Segment EBITDA margin improved 540 basis points to 40.5% in the quarter.

Network & Security Solutions(NSS)

Second quarter 2016 NSS segment revenue was $366 million, up 3% versus the prior year period. Revenue growth in the quarter was primarily driven by growth in security solutions and stored value. EFT network revenue was down modestly as growth in STAR network revenue was offset by a decline in debit/ATM processing revenues.

Second quarter 2016 NSS segment expenses were $200 million, flat versus the prior year period.

Second quarter 2016 NSS segment EBITDA was $166 million, up 6% versus the prior year period. Segment EBITDA margin improved 160 basis points to 45.4% in the quarter.

Cash Flow

In the second quarter 2016, cash flow from operations was $522 million, versus $555 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, was $308 million in the current quarter, versus $316 million in the prior year period. The benefits from improved operating results, working capital, lower capital expenditures and a lower average cost of debt in the current period were offset by a $109 million increase in cash interest payments due to the change in timing of semi-annual coupon payments.

In the first six months of 2016, cash flow from operations was $908 million, up $455 million from $453 million in the first six months of 2015. In the first six months of 2016, free cash flow was $519 million, up $513 million from $6 million in the first six months of 2015. The increase in both measures was primarily driven by improved operating results and reduced cash interest payments.

Capital Structure

During the second quarter, First Data refinanced $1.4 billion of its 2018 term loans, extending the maturities to 2022. The company now has no material maturities until 2020.

Total borrowings at June 30, 2016 were reduced to $19.1 billion, from $19.6 billion at year end 2015. Net debt at June 30, 2016 was reduced to $19.0 billion, from $19.3 billion at year end 2015.

First Data estimates 2016 full year cash interest expense of approximately $1.0 billion. 

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