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First Data Corp (FDC) SEC Filing 8-K Material Event for the period ending Monday, February 12, 2018

First Data Corp

CIK: 883980 Ticker: FDC
EXHIBIT 99.1
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First Data Reports Fourth Quarter and Full Year 2017 Financial Results

Q4 consolidated revenue of $3,150 million, up 7%; Full year consolidated revenue of $12,052 million, up 4%

Q4 total segment revenue of $1,949 million, up 7%, or up 4% on an organic constant currency basis(a); Full year total segment revenue of $7,428 million, up 4% on both a reported and organic constant currency basis

Q4 net income of $948 million, improved $756 million, diluted EPS of $1.00; Full year net income of $1,465 million, improved $1,045 million, diluted EPS of $1.56

Q4 adjusted net income of $416 million, adjusted diluted EPS of $0.44, up 13%; Full year adjusted net income of $1,425 million, adjusted diluted EPS of $1.52, up 15%

Q4 total segment EBITDA of $848 million, up 10%, or up 8% on an organic constant currency basis; Full year total segment EBITDA of $3,072 million, up 6% on both a reported and organic constant currency basis

Q4 cash flow from operations of $465 million, free cash flow of $280 million; Full year cash flow from operations of $2,047 million, free cash flow of $1,359 million

2018 guidance provided


NEW YORK, FEBRUARY 12, 2018 - First Data Corporation (NYSE: FDC), a global leader in commerce-enabling technology and solutions, today reported financial results for the fourth quarter and full year ended December 31, 2017. Consolidated revenue for the fourth quarter was $3,150 million, up 7% versus the prior year period. Total segment revenue was $1,949 million for the quarter, up 7% versus the prior year period, or up 4% on an organic constant currency basis.

Net income attributable to First Data for the fourth quarter of 2017 was $948 million, or $1.00 per diluted share, up significantly from $192 million, or $0.21 per diluted share, in the fourth quarter of 2016. The increase was primarily driven by significant discrete tax items in the current period, described below in "Income Tax (Benefit) / Expense", improved operating results and lower interest expense.


(a)
Organic constant currency growth (“Organic CC growth”) is defined as reported growth adjusted for the following: (1) excludes the impacts of year-over-year currency rate changes in the current period; (2) excludes the results of significant divestitures (including the impact of our Digital Banking Joint Venture) in the prior year period; and (3) includes the results of significant acquisitions in the prior year period.



Adjusted net income, which modifies net income attributable to First Data for items such as debt extinguishment charges, stock-based compensation, amortization of acquisition intangibles, restructuring costs, discrete tax items and other items, was $416 million, or $0.44 per diluted share, up 14% and 13%, respectively, from fourth quarter of 2016, primarily driven by improved operating results and lower interest expense.

Total segment earnings before interest, taxes, depreciation, and amortization (total segment EBITDA) in the fourth quarter 2017 was $848 million, up 10% versus the prior year period, or up 8% on an organic constant currency basis, driven by revenue growth and expense management.

“The fourth quarter capped a solid year of performance for First Data as we executed across all aspects of our strategy and delivered financial results that met our guidance," said First Data Chairman and CEO Frank Bisignano. “We generated growth, invested in innovation and strategic M&A to further enhance our industry-leading products and services, and generated substantial cash flow, while maintaining our focus on expense management. As we enter 2018, we are well positioned as a technology leader with the right capabilities to help our customers grow their business and generate solid revenue growth and cash flow for our shareholders," Bisignano added.

Segment Results

Global Business Solutions (GBS)

Fourth quarter 2017 GBS segment revenue was $1,131 million, up 10% versus the prior year period, or up 4% on an organic constant currency basis. Within geographic regions, North America revenue of $852 million was up 6% versus the prior year period, or flat on an organic constant currency basis. Within GBS North America, revenue growth in non-JV channels was offset by softness in JV channel revenue. EMEA revenue was $158 million, up 19% versus the prior year period, or up 10% on an organic constant currency basis, primarily driven by strong growth in the United Kingdom and Germany. Latin America revenue was $78 million, up 44% versus the prior year period, or up 52% on an organic constant currency basis, driven by continued strong results in Brazil and Argentina. APAC revenue was $43 million, up 26% versus the prior year period, or up 24% on an organic constant currency basis primarily driven by growth in India.

Fourth quarter 2017 GBS segment expenses were $637 million, up 10% versus the prior year period, or up 3% on an organic constant currency basis.

Fourth quarter 2017 GBS segment EBITDA was $494 million, up 11% versus the prior year period, or up 7% on an organic constant currency basis. Segment EBITDA margin improved 20 basis points to 43.7% in the quarter.




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Global Financial Solutions (GFS)

Fourth quarter 2017 GFS segment revenue was $412 million, down 1% versus the prior year period on both a reported and organic constant currency basis. Within geographic regions, North America revenue of $242 million was down 3% versus the prior year period on both a reported and organic constant currency basis, largely driven by the non-recurrence of a previously disclosed termination fee in the prior year period. North America card accounts on file grew 6% year over year. EMEA revenue was $112 million, up 3% versus the prior year period, or up 2% on an organic constant currency basis, driven by growth in the United Kingdom. Latin America revenue was $32 million, down 3% versus the prior year period, or up 2% on an organic constant currency basis, primarily driven by growth in Argentina, partly offset by the non-recurrence of a prior year benefit from a client contract modification. APAC revenue was $26 million, up 13% versus the prior year period, or up 6% on an organic constant currency basis primarily driven by new and existing client growth across the region.

Fourth quarter 2017 GFS segment expenses were $228 million, down 6% versus the prior year period on both a reported and organic constant currency basis, driven by solid expense management.

Fourth quarter 2017 GFS segment EBITDA was $184 million, up 6% versus the prior year period on both a reported and organic constant currency basis. Segment EBITDA margin improved 300 basis points to 44.7% in the quarter.

Network & Security Solutions (NSS)

Fourth quarter 2017 NSS segment revenue was $406 million, up 4% versus the prior year period, or up 6% on an organic constant currency basis. Within NSS's primary businesses, Stored Value revenue grew 19% in the quarter benefiting from strong growth in both its open and closed loop gift card businesses and a client contract modification; Security and Fraud revenue grew 4%; and EFT revenue was flat.

Fourth quarter 2017 NSS segment expenses were $197 million, down 4% versus the prior year period, or down 1% on an organic constant currency basis.

Fourth quarter 2017 NSS segment EBITDA was $209 million, up 14% versus the prior year period on both a reported and organic constant currency basis. Segment EBITDA margin improved 450 basis points to 51.5% in the quarter.

Income Tax (Benefit) / Expense

Fourth quarter 2017 income tax (benefit) / expense was ($663) million, representing a change of $687 million from expense of $24 million in the prior year period. The change in income taxes in the current year period was driven by multiple discrete tax items, primarily the non-cash effects of the reversal of the valuation allowance against deferred tax assets associated

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with U.S. federal net operating loss carryforwards ("U.S. federal NOLs") and the net write down of deferred tax accounts upon the enactment of the Tax Cuts and Jobs Act.

Full year 2017 income tax (benefit) / expense was ($729) million, representing a change of $810 million from expense of $81 million in the prior year period. The change in income taxes in 2017 was driven by multiple discrete tax items including the discrete tax items discussed above.

The effective tax rate in calculating adjusted net income in the fourth quarter and full year 2017, was approximately 12% and 10%, respectively.

Cash Flow

In the fourth quarter 2017, cash flow from operations was $465 million, up $14 million compared to $451 million in the prior year period. Free cash flow, which First Data defines as cash flow from operations, less capital expenditures, distributions to minority interests and other, was $280 million in the current quarter, up $10 million from $270 million in the prior year period as increased segment EBITDA and lower cash interest payments were largely offset by the unfavorable timing impact of settlement flows on working capital.

Full year 2017 cash flow from operations was $2,047 million, down $64 million from $2,111 million in 2016. Full year free cash flow was $1,359 million, up $143 million from $1,216 million in 2016. The increase in full year free cash flow was primarily driven by growth in total segment EBITDA and a reduction in cash interest paid in 2017 compared to 2016, partially offset by increased cash taxes and capital expenditures in 2017 compared to the prior year, and the unfavorable timing impact of settlement flows on working capital.
 
Capital Structure

Total borrowings at December 31, 2017 increased to $19.2 billion from $18.5 billion a year ago, reflecting increased borrowings related to the acquisitions of BluePay, CardConnect and Acculynk in 2017, partially offset by debt paydowns and divestitures that occurred throughout the year. Net debt of $18.6 billion at December 31, 2017, increased by $445 million in 2017.

On November 15, 2017, the Company closed on new term loans totaling approximately $3.9 billion with an interest rate of LIBOR plus 225 basis points maturing in April 2024. The proceeds of the term loans were used to redeem approximately $3.9 billion of term loans with an interest rate of LIBOR plus 250 basis points. The interest rate on the new term loans may be reduced by 25 basis points in the future based on the Company's corporate family debt rating. The expected annualized cash interest savings derived from this transaction is approximately $10 million.

On November 29, 2017, the Company incurred an aggregate principal amount of $250 million in new term loans with an interest rate of LIBOR plus 175 basis points maturing in June 2020.

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The proceeds of the new term loans, together with cash on hand and other available financing, were used to acquire BluePay Holdings, Inc.

2018 Guidance

The guidance provided below holds foreign exchange rates constant versus the year-ago comparable period ("constant currency").

Key metric guidance for full year 2018:

Total segment revenue: 5% to 7% (range includes a net benefit attributable to the full year impact of previously announced major acquisitions and dispositions of approximately 2 percentage points)
Total segment EBITDA: 7% to 9% (range includes a net benefit attributable to the full year impact of previously announced major acquisitions and dispositions of approximately 1.5 percentage points)
Adjusted diluted EPS: $1.35 to $1.40
Effective tax rate: 27% to 29%
Free cash flow: $1.4 billion+

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.

The effective tax rate range of 27% to 29% in 2018 is significantly higher than the effective tax rate achieved in 2017 as a result of the reversal of the valuation allowance against deferred tax assets associated with U.S. federal NOLs in the fourth quarter of 2017, as discussed in "Income Tax (Benefit) / Expense", above. The reversal of the valuation allowance has no impact on First Data's U.S. federal NOL balance, and the company estimates that it will be largely shielded from U.S. federal cash taxes through the end of 2020.

Investor Conference Call

The company will host a conference call and webcast on Monday, February 12, 2018, at 8 a.m. ET to review the fourth quarter 2017 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 be webcast on the “Investor Relations” section of the First Data website at investor.firstdata.com where an accompanying slide presentation will also be available.





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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. In disclosing year-over-year comparisons, the company has chosen to present non-GAAP measures because it believes that these measures provide users of our financial statements a consistent basis for reviewing the company's performance across different periods.

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. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the company's results of operations in conjunction with the corresponding GAAP measures.

Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures can be found in the tables included in this press release.

The company excludes certain items and other adjustments from total segment revenue, total segment expense, total segment EBITDA, adjusted net income and adjusted net income per diluted share. See reconciliations for a complete list of items excluded from non-GAAP measures.

Adjusted net income is a non-GAAP financial measure used by management that provides an alternative view of performance. Adjusted net income excludes amortization of acquisition-related intangibles, stock-based compensation, restructuring costs and other items affecting comparability and, therefore, are not reflective of continuing operating performance. Management believes that the presentation of adjusted net income provides users of our financial statements greater transparency into ongoing results of operations allowing them to better compare our results from period to period.

The company uses free cash flow, a non-GAAP measure. Free cash flow is defined as cash flow used in/provided by operating activities less capital expenditures, distributions to minority interest, and other. The company considers free cash flow to be a liquidity measure that provides useful information to management and users of our financial statements about the

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amount of cash generated by the business which can then be used to, among other things, reduce debt outstanding.

The company also uses net debt, a non-GAAP measure. Net debt is defined as total long-term borrowings plus short-term and current portion of long-term borrowings, at par value, excluding lines of credit used for settlement purposes, less cash and cash equivalents. The company believes that net debt provides additional insight on its level and management of leverage.

Certain financial measures (revenue, expenses and EBITDA) in this release are presented excluding the estimated impact of foreign currency changes (constant currency). To present this information, monthly results in the current period for entities reporting in currencies other than United States dollars are translated into United States dollars at the average exchange rates in effect during the corresponding month of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Once translated, each month in the period is added together to calculate the constant currency current period results. The company believes that such non-GAAP constant currency financial measures are useful to investors, lenders and other creditors because such information enables them to measure the impact of currency fluctuations on these measures from period to period.

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.

Contact
Peter Poillon
Investor Relations
First Data
212-266-3565
Peter.Poillon@firstdata.com 
Liidia Liuksila
Public Relations
First Data
212-515-0174
Liidia.Liuksila@firstdata.com

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First Data Corporation
Consolidated Statements of Operations
(Unaudited)
(in millions, except shares and per share data)


 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% Change
 
Constant Currency % Change
 
2017
 
2016
 
% Change
 
Constant Currency % Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction and processing service fees (a)
$
1,775

 
$
1,647

 
8
 %
 
7
 %
 
$
6,757

 
$
6,600

 
2
 %
 
2
 %
Product sales and other (a)
356

 
346

 
3
 %
 
2
 %
 
1,372

 
1,239

 
11
 %
 
11
 %
Total revenues (excluding reimbursable items)
2,131

 
1,993

 
7
 %
 
6
 %
 
8,129

 
7,839

 
4
 %
 
4
 %
Reimbursable debit network fees, postage, and other
1,019

 
950

 
7
 %
 
7
 %
 
3,923

 
3,745

 
5
 %
 
5
 %
Total revenues
3,150

 
2,943

 
7
 %
 
6
 %
 
12,052

 
11,584

 
4
 %
 
4
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Cost of services (exclusive of items shown below)
674

 
715

 
(6
)%
 
(7
)%
 
2,763

 
2,855

 
(3
)%
 
(3
)%
Cost of products sold
92

 
86

 
7
 %
 
7
 %
 
359

 
337

 
7
 %
 
7
 %
Selling, general, and administrative
571

 
472

 
21
 %
 
20
 %
 
2,178

 
2,035

 
7
 %
 
7
 %
Depreciation and amortization
259

 
236

 
10
 %
 
8
 %
 
972

 
949

 
2
 %
 
2
 %
Other operating expenses
35

 
4

 
NM

 
NM

 
143

 
61

 
NM

 
NM

Total expenses (excluding reimbursable items)
1,631

 
1,513

 
8
 %
 
7
 %
 
6,415

 
6,237

 
3
 %
 
3
 %
Reimbursable debit network fees, postage, and other
1,019

 
950

 
7
 %
 
7
 %
 
3,923

 
3,745

 
5
 %
 
5
 %
Total expenses
2,650

 
2,463

 
8
 %
 
7
 %
 
10,338

 
9,982

 
4
 %
 
4
 %
Operating profit
500

 
480

 
4
 %
 
 
 
1,714

 
1,602

 
7
 %
 
 
Interest expense, net
(231
)
 
(258
)
 
(10
)%
 
 
 
(937
)
 
(1,068
)
 
(12
)%
 
 
Loss on debt extinguishment
(8
)
 
(12
)
 
(33
)%
 
 
 
(80
)
 
(70
)
 
14
 %
 
 
Other income
23

 
3

 
NM

 
 
 
16

 
17

 
(6
)%
 
 
Income before income taxes and equity earnings in affiliates
284

 
213

 
33
 %
 
 
 
713

 
481

 
48
 %
 
 
Income tax (benefit) expense
(663
)
 
24

 
NM

 
 
 
(729
)
 
81

 
NM

 
 
Equity earnings in affiliates
55

 
62

 
(11
)%
 
 
 
222

 
260

 
(15
)%
 
 
Net income
1,002

 
251

 
299
 %
 
 
 
1,664

 
660

 
152
 %
 
 
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interest
54

 
59

 
(8
)%
 
 
 
199

 
240

 
(17
)%
 
 
Net income attributable to First Data Corporation
$
948

 
$
192

 
394
 %
 
 
 
$
1,465

 
$
420

 
249
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.03

 
$
0.21

 
390
 %
 
 
 
$
1.60

 
$
0.47

 
240
 %
 
 
Diluted
$
1.00

 
$
0.21

 
376
 %
 
 
 
$
1.56

 
$
0.46

 
239
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
918,726,777

 
905,966,452

 
 
 
 
 
915,870,759

 
901,671,872

 
 
 
 
Diluted
945,035,811

 
929,375,020

 
 
 
 
 
939,767,019

 
921,001,863

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NM represents not meaningful

(a)
Includes processing fees, administrative service fees, and other fees charged to merchant alliances accounted for under the equity method of $53 million and $215 million for the three and twelve months ended December 31, 2017, respectively, and $48 million and $198 million for the comparable periods in 2016.

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First Data Corporation
Selected Consolidated Balance Sheet and Cash Flow Data
(Unaudited)
(in millions)


SELECTED CONSOLIDATED BALANCE SHEET DATA
 
 
 
 
 
 
 
As of
 
As of
 
 
December 31, 2017
 
December 31, 2016
 
 
 
 
 
Cash and cash equivalents
 
$
498

 
$
385

Settlement assets
 
20,363

 
14,795

Total assets
 
48,269

 
40,292

 
 
 
 
 
Short-term and current portion of long-term borrowings
 
1,271

 
358

Settlement obligations
 
20,363

 
14,795

Long-term borrowings
 
17,927

 
18,131

Total liabilities
 
42,183

 
36,088

 
 
 
 
 
Redeemable noncontrolling interest
 
72

 
73

 
 
 
 
 
Total First Data Corporation stockholders' equity
 
3,152

 
1,220

Noncontrolling interests
 
2,862

 
2,911

Total equity
 
6,014

 
4,131

 
 
 
 
 

SELECTED CONSOLIDATED CASH FLOW DATA
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
2017
 
2016
Source/(Use) of cash
 
 
 
 
 
 
 
Net cash provided by operating activities (a)
$
465

 
$
451

 
$
2,047

 
$
2,111

Net cash used in investing activities
(893
)
 
(49
)
 
(1,950
)
 
(387
)
Net cash provided by (used in) financing activities
419

 
(476
)
 
9

 
(1,734
)
Supplemental cash flow data
 
 
 
 
 
 
 
Cash interest payments on long-term debt (b)
$
205

 
$
249

 
$
889

 
$
1,008


(a)
The twelve months ended December 31, 2016 includes a $102 million reclassification related to settlement activities to conform certain domestic and international businesses to our global policies, which increased "Cash and cash equivalents" and decreased "Accounts receivable, net" in our consolidated balance sheet.

(b)
For purposes of this schedule, cash interest payments on long-term debt excludes interest on capital leases and interest on foreign lines of credit.

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First Data Corporation
Summary Segment Data
(Unaudited)
(in millions)


 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% Change B/(W)
 
Organic CC % Change(e) B/(W)
 
2017
 
2016
 
% Change B/(W)
 
Organic CC % Change(e) B/(W)
Total segment revenue
$
1,949

 
$
1,830

 
7
 %
 
4
 %
 
$
7,428

 
$
7,141

 
4
 %
 
4
 %
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non wholly owned entities (a)
15

 
21

 
(29
)%
 
 
 
64

 
80

 
(20
)%
 
 
Independent Sales Organization (ISO) commission expense (b)
167

 
142

 
18
 %
 
 
 
637

 
618

 
3
 %
 
 
Reimbursable debit network fees, postage, and other
1,019

 
950

 
7
 %
 
 
 
3,923

 
3,745

 
5
 %
 
 
Consolidated revenue
$
3,150

 
$
2,943

 
7
 %
 
 
 
$
12,052

 
$
11,584

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Business Solutions
$
1,131

 
$
1,026

 
10
 %
 
4
 %
 
$
4,262

 
$
4,063

 
5
 %
 
4
 %
Global Financial Solutions
412

 
415

 
(1
)%
 
(1
)%
 
1,623

 
1,593

 
2
 %
 
3
 %
Network & Security Solutions
406

 
389

 
4
 %
 
6
 %
 
1,543

 
1,485

 
4
 %
 
4
 %
Total segment revenue
$
1,949

 
$
1,830

 
7
 %
 
4
 %
 
$
7,428

 
$
7,141

 
4
 %
 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% Change B/(W)
 
Organic CC % Change(e) B/(W)
 
2017
 
2016
 
% Change B/(W)
 
Organic CC % Change(e) B/(W)
Total segment expenses
$
1,101

 
$
1,059

 
(4
)%
 
(1
)%
 
$
4,356

 
$
4,249

 
(3
)%
 
(2
)%
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non wholly owned entities (a)
19

 
18

 
(6
)%
 
 
 
69

 
70

 
1
 %
 
 
Independent Sales Organization (ISO) commission expense (b)
167

 
142

 
(18
)%
 
 
 
637

 
618

 
(3
)%
 
 
Reimbursable debit network fees, postage and other
1,019

 
950

 
(7
)%
 
 
 
3,923

 
3,745

 
(5
)%
 
 
Depreciation and amortization
259


236

 
(10
)%
 
 
 
972

 
949

 
(2
)%
 
 
Stock-based compensation
62

 
49

 
(27
)%
 
 
 
245

 
263

 
7
 %
 
 
Other (c)
23

 
9

 
(156
)%
 
 
 
136

 
88

 
(55
)%
 
 
Consolidated expenses
$
2,650

 
$
2,463

 
(8
)%
 
 
 
$
10,338

 
$
9,982

 
(4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Business Solutions
$
637


$
580

 
(10
)%
 
(3
)%
 
$
2,438

 
$
2,338

 
(4
)%
 
(3
)%
Global Financial Solutions
228


242

 
6
 %
 
6
 %
 
937

 
947

 
1
 %
 
 %
Network & Security Solutions
197


206

 
4
 %
 
1
 %
 
814

 
819

 
1
 %
 
 %
Corporate
39


31

 
(26
)%
 
(26
)%
 
167

 
145

 
(15
)%
 
(15
)%
Total segment expenses
$
1,101

 
$
1,059

 
(4
)%
 
(1
)%
 
$
4,356

 
$
4,249

 
(3
)%
 
(2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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First Data Corporation
Summary Segment Data
(Unaudited)
(in millions)


 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% Change B/(W)
 
Organic CC % Change(e) B/(W)
 
2017
 
2016
 
% Change B/(W)
 
Organic CC % Change(e) B/(W)
Total Segment EBITDA
$
848

 
$
771

 
10
 %
 
8
 %
 
$
3,072

 
$
2,892

 
6
 %
 
6
 %
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non wholly owned entities (a)
9

 
6

 
50
 %
 
 
 
30

 
30

 
 %
 
 
Depreciation and amortization
(259
)
 
(236
)
 
10
 %
 
 
 
(972
)
 
(949
)
 
2
 %
 
 
Interest expense, net
(231
)
 
(258
)
 
(10
)%
 
 
 
(937
)
 
(1,068
)
 
(12
)%
 
 
Loss on debt extinguishment
(8
)
 
(12
)
 
(33
)%
 
 
 
(80
)
 
(70
)
 
14
 %
 
 
Other items (d)
(12
)
 
(6
)
 
100
 %
 
 
 
(132
)
 
(71
)
 
86
 %
 
 
Income tax expense
663

 
(24
)
 
NM

 
 
 
729

 
(81
)
 
NM

 
 
Stock-based compensation
(62
)
 
(49
)
 
27
 %
 
 
 
(245
)
 
(263
)
 
(7
)%
 
 
Net income (loss) attributable to First Data Corporation
$
948

 
$
192

 
394
 %
 
 
 
$
1,465

 
$
420

 
249
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Business Solutions
$
494

 
$
446

 
11
 %
 
7
 %
 
$
1,824

 
$
1,725

 
6
 %
 
5
 %
Global Financial Solutions
184

 
173

 
6
 %
 
6
 %
 
686

 
646

 
6
 %
 
8
 %
Network & Security Solutions
209

 
183

 
14
 %
 
14
 %
 
729

 
666

 
9
 %
 
9
 %
Corporate
(39
)

(31
)
 
(26
)%
 
(26
)%
 
(167
)

(145
)
 
(15
)%
 
(15
)%
Total Segment EBITDA
$
848

 
$
771

 
10
 %
 
8
 %
 
$
3,072

 
$
2,892

 
6
 %
 
6
 %
NM represents not meaningful
“B” means results in 2017 are better than results in 2016 “(W)” means results are worse

(a)
Net adjustment to reflect our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. Segment revenue for our significant affiliates is reflected based on our proportionate share of the results of our investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. For other affiliates, we include equity earnings in affiliates, excluding amortization expense, in segment revenue. In addition, our segment measures reflect revenue-based commission payments to Independent Sales Organizations (ISOs).
(b)
Retail Independent Sales Organization commissions are presented within Selling, general, and administrative expense in the unaudited consolidated statements of operations but are netted in segment revenues for segment reporting.
(c)
Includes restructuring, certain retention bonuses, non-normal course litigation and regulatory settlements, asset impairments, debt issuance costs, and acquisition integration costs.
(d)
Items noted within (c) above and "Other income (expense)" as presented in the unaudited consolidated statements of operations, which includes divestitures, derivative gains (losses), non-operating foreign currency gains (losses) and the gain on Visa Europe share sale.
(e)
Organic constant currency growth (“Organic CC growth”) is defined as reported growth adjusted for the following: (1) excludes the impacts of year-over-year currency rate changes in the current period; (2) excludes the results of significant divestitures (including the impact of our Digital Banking Joint Venture) in the prior year period; and (3) includes the results of significant acquisitions in the prior year period.




11


First Data Corporation
Organic Constant Currency Growth
(Unaudited)
(in millions)


 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% B/(W)
 
2017
 
2016
 
% B/(W)
Total segment revenue
$
1,949

 
$
1,830

 
7
 %
 
$
7,428

 
$
7,141

 
4
 %
Currency impact
(17
)
 

 


 
16

 

 


Acquisitions/Divestitures(a)

 
34

 


 

 
40

 


Organic constant currency(b) segment revenue growth
$
1,932

 
$
1,864

 
4
 %
 
$
7,444

 
$
7,181

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
GBS revenue
$
1,131

 
$
1,026

 
10
 %
 
$
4,262

 
$
4,063

 
5
 %
Currency impact
(11
)
 

 


 
2

 

 


Acquisitions/Divestitures(a)

 
47

 


 

 
53

 


Organic constant currency(b) GBS revenue growth
$
1,120

 
$
1,073

 
4
 %
 
$
4,264

 
$
4,116

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
GBS NA revenue
$
852

 
$
805

 
6
 %
 
$
3,262

 
$
3,176

 
3
 %
Currency impact
(1
)
 

 
 
 
(1
)
 

 
 
Acquisitions/Divestitures(a)

 
47

 
 
 

 
84

 
 
Organic constant currency(b) GBS NA revenue growth
$
851

 
$
852

 
 %
 
$
3,261

 
$
3,260

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
GBS APAC revenue
$
43

 
$
34

 
26
 %
 
$
152

 
$
159

 
(4
)%
Currency impact
(1
)
 

 
 
 
(3
)
 

 
 
Acquisitions/Divestitures(a)

 

 
 
 

 
(31
)
 
 
Organic constant currency(b) GBS APAC revenue growth
$
42

 
$
34

 
24
 %
 
$
149

 
$
128

 
16
 %
 
 
 
 
 
 
 
 
 


 
 
GFS revenue
$
412

 
$
415

 
(1
)%
 
$
1,623

 
$
1,593

 
2
 %
Currency impact
(7
)
 

 
 
 
13

 

 
 
Acquisitions/Divestitures(a)

 
(6
)
 
 
 

 
(6
)
 
 
Organic constant currency(b) GFS revenue growth
$
405

 
$
409

 
(1
)%
 
$
1,636

 
$
1,587

 
3
 %
 
 
 
 
 
 
 
 
 
 
 
 
GFS EMEA revenue
$
112

 
$
109

 
3
 %
 
$
444

 
$
433

 
3
 %
Currency impact
(7
)
 

 
 
 
13

 

 
 
Acquisitions/Divestitures(a)

 
(6
)
 
 
 

 
(6
)
 
 
Organic constant currency(b) GFS EMEA revenue growth
$
105

 
$
103

 
2
 %
 
$
457

 
$
427

 
7
 %
 
 
 
 
 
 
 
 
 
 
 
 
NSS revenue
$
406

 
$
389

 
4
 %
 
$
1,543

 
$
1,485

 
4
 %
Acquisitions/Divestitures(a)

 
(7
)
 
 
 

 
(7
)
 
 
Organic constant currency(b) NSS revenue growth
$
406

 
$
382

 
6
 %
 
$
1,543

 
$
1,478

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% B/(W)
 
2017
 
2016
 
% B/(W)
Total segment expense
$
1,101


$
1,059

 
(4
)%
 
$
4,356

 
$
4,249

 
(3
)%
Currency impact
(11
)


 
 
 
3

 

 
 
Acquisitions/Divestitures(a)


22

 
 
 

 
22

 
 
Organic constant currency(b) segment expense growth
$
1,090

 
$
1,081

 
(1
)%
 
$
4,359

 
$
4,271

 
(2
)%
 
 
 
 
 
 
 
 
 
 
 
 
GBS expense
$
637

 
$
580

 
(10
)%
 
$
2,438

 
$
2,338

 
(4
)%
Currency impact
(8
)
 

 
 
 
(4
)
 

 
 
Acquisitions/Divestitures(a)

 
33

 
 
 

 
33

 
 
Organic constant currency(b) GBS expense growth
$
629

 
$
613

 
(3
)%
 
$
2,434

 
$
2,371

 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

12


First Data Corporation
Organic Constant Currency Growth
(Unaudited)
(in millions)


 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% B/(W)
 
2017
 
2016
 
% B/(W)
 
 
 
 
 
 
 
 
 
 
 
 
GFS expense
$
228

 
$
242

 
6
 %
 
$
937

 
$
947

 
1
 %
Currency impact
(4
)
 

 
 
 
7

 

 
 
Acquisitions/Divestitures(a)

 
(4
)
 
 
 

 
(4
)
 
 
Organic constant currency(b) GFS expense growth
$
224

 
$
238

 
6
 %
 
$
944

 
$
943

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
NSS expense
$
197

 
$
206

 
4
 %
 
$
814

 
$
819

 
1
 %
Acquisitions/Divestitures(a)

 
(7
)
 
 
 

 
(7
)
 
 
Organic constant currency(b) NSS expense growth
$
197

 
$
199

 
1
 %
 
$
814

 
$
812

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
% B/(W)
 
2017
 
2016
 
% B/(W)
Total segment EBITDA
$
848

 
$
771

 
10
 %
 
$
3,072

 
$
2,892

 
6
 %
Currency impact
(5
)
 

 
 
 
13

 

 
 
Acquisitions/Divestitures(a)

 
13

 
 
 

 
18

 
 
Organic constant currency(b) Segment EBITDA growth
$
843

 
$
784

 
8
 %
 
$
3,085

 
$
2,910

 
6
 %
 
 
 
 
 
 
 
 
 
 
 
 
GBS EBITDA
$
494

 
$
446

 
11
 %
 
$
1,824

 
$
1,725

 
6
 %
Currency impact
(3
)
 

 
 
 
6

 

 
 
Acquisitions/Divestitures(a)

 
14

 
 
 

 
20

 
 
Organic constant currency(b) GBS EBITDA growth
$
491

 
$
460

 
7
 %
 
$
1,830

 
$
1,745

 
5
 %
 
 
 
 
 
 
 
 
 
 
 
 
GFS EBITDA
$
184

 
$
173

 
6
 %
 
$
686

 
$
646

 
6
 %
Currency impact
(2
)
 

 
 
 
7

 

 
 
Acquisitions/Divestitures(a)

 
(2
)
 
 
 

 
(2
)
 
 
Organic constant currency(b) GFS EBITDA growth
$
182

 
$
171

 
6
 %
 
$
693

 
$
644

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
NSS EBITDA
$
209

 
$
183

 
14
 %
 
$
729

 
$
666

 
9
 %
Acquisitions/Divestitures(a)

 

 
 
 

 

 
 
Organic constant currency(b) NSS EBITDA growth
$
209

 
$
183

 
14
 %
 
$
729

 
$
666

 
9
 %
 
 
 
 
 
 
 
 
 
 
 
 
“B” means results in 2017 are better than results in 2016 “(W)” means results are worse
(a)
“Acquisitions/Divestitures" pertains to the following 2017 activity: the acquisitions of CardConnect and BluePay in GBS North America; the formation of the Digital Banking JV in NSS (treated as a 50% Digital Banking revenue divestiture); and the divestiture of the GFS Baltics business. This line also pertains to the Australian ATM divestiture in GBS APAC in 2016.
(b)
Organic constant currency growth (“Organic CC growth”) is defined as reported growth adjusted for the following: (1) excludes the impacts of year-over-year currency rate changes in the current period; (2) excludes the results of significant divestitures (including the impact of our Digital Banking Joint Venture) in the prior year period; and (3) includes the results of significant acquisitions in the prior year period.



13


First Data Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(in millions, except shares and per share data)


ADJUSTED NET INCOME RECONCILIATION
 
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Net income attributable to First Data Corporation
 
$
948

 
$
192

 
394
 %
 
$
1,465

 
$
420

 
249
 %
Adjustments:
 
 
 
 
 
 
 
 
 
 
 

Stock based compensation
 
62

 
49

 
27
 %
 
245

 
263

 
(7
)%
Loss on debt extinguishment
 
8

 
12

 
(33
)%
 
80

 
70

 
14
 %
Amortization of acquisition intangibles and deferred financing costs(a)
 
108

 
104

 
4
 %
 
403

 
422

 
(5
)%
Loss (gain) of disposal of businesses
 
(18
)
 
3

 
NM

 
(18
)
 
34

 
NM

Visa Europe settlement gain
 

 

 
NM

 

 
(29
)
 
NM

Restructuring
 
20

 
(2
)
 
NM

 
83

 
49

 
69
 %
Intercompany foreign exchange (loss) gain
 
(5
)
 
2

 
NM

 
1

 
(19
)
 
NM

Fees paid on debt modification
 

 
11

 
(100
)%
 
10

 
29

 
(66
)%
Impairments, litigation, and other(b)
 
11

 
(2
)
 
NM

 
24

 
11

 
118
 %
Deal integration costs
 
1

 

 
NM

 
27

 

 
NM

Mark-to-market adjustment for derivatives and euro-denominated debt(c)
 

 

 
NM

 

 
5

 
NM

Income tax on above items and discrete tax items(d)
 
(719
)
 
(4
)
 
NM

 
(895
)
 
(35
)
 
NM

Adjusted net income
 
$
416


$
365


14
 %

$
1,425


$
1,220

 
17
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.45


$
0.40

 
13
 %
 
$
1.56

 
$
1.35

 
16
 %
Diluted
 
$
0.44


$
0.39

 
13
 %
 
$
1.52

 
$
1.32

 
15
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares used to compute adjusted net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
918,726,777

 
905,966,452

 


 
915,870,759

 
901,671,872

 

Diluted
 
945,035,811

 
929,375,020

 


 
939,767,019

 
921,001,863

 

NM represents not meaningful


(a)
Represents amortization of intangibles established in connection with the 2007 Merger and acquisitions we have made since 2007, excluding the percentage of our consolidated amortization of acquisition intangibles related to non wholly owned consolidated alliances equal to the portion of such alliances owned by our alliance partners. This line also includes amortization related to deferred financing costs of $5 million and $6 million for the three months ended December 31, 2017 and 2016, respectively, and $17 million and $17 million, respectively, for the twelve months ended December 31, 2017 and 2016.
(b)
Represents impairments, non-normal course litigation and regulatory settlements, investments gains (losses), divestitures, and other, as applicable to the periods presented.
(c)
Represents mark-to-market activity related to our undesignated hedges.
(d)
The tax effect of the adjustments between our GAAP and adjusted results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact at the U.S. effective tax rate for certain adjustments, including the majority of amortization of intangible assets, deferred financing costs, stock compensation, and loss on debt extinguishment; whereas the tax impact of other adjustments, including restructuring expense, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions. "Income tax on above items and discrete tax items" also includes the impact of significant discrete tax items impacting Net income attributable to First Data Corporation.






14

First Data Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(in millions)


FREE CASH FLOW RECONCILIATION
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
465

 
$
451

 
14

 
$
2,047

 
$
2,111

 
(64
)
Capital expenditures
(128
)
 
(126
)
 
(2
)
 
(518
)
 
(477
)
 
(41
)
Distribution to minority interest and other
(57
)
 
(55
)
 
(2
)
 
(170
)