Attached files
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| 8-K - 8-K - Worldpay, Inc. | q32014form8-k.htm |
Exhibit 99.1
Vantiv Reports Third Quarter 2014 Results
Vantiv’s Strong Position in the Payments Market and Key Strategic Assets
Enabled Third Quarter Net Revenue to Increase 29% to $381 Million and
Pro Forma Adjusted Net Income per Share to Increase 23% to $0.49
CINCINNATI - October 30, 2014 - Vantiv, Inc. (NYSE: VNTV) (“Vantiv” or the “Company”) today announced financial results for the third quarter ended September 30, 2014. Given Vantiv’s strong position in the payments market and assembly of key strategic assets, revenue increased 31% to $697.1 million in the third quarter as compared to $532.3 million in the prior year period, and net revenue increased 29% to $380.5 million in the third quarter as compared to $294.2 million in the prior year period as transactions increased by 26% over the prior year period. On a GAAP basis, net income attributable to Vantiv, Inc. was $30.0 million or $0.20 per diluted share during the third quarter, as compared with $35.7 million or $0.24 per diluted share in the prior year period. Pro forma adjusted net income increased 21% in the third quarter to $96.9 million as compared to $80.0 million in the prior year period. Pro forma adjusted net income per share increased 23% to $0.49 for the third quarter as compared to $0.40 in the prior year period. (See Schedule 2 for pro forma adjusted net income and Schedule 6 for GAAP net income reconciliation to pro forma adjusted net income.)
Vantiv continues to generate superior profitability as reflected by its third quarter adjusted EBITDA margin of 48%, including impacts from the acquisition of key strategic assets. Adjusted EBITDA increased 21% to $181.5 million in the third quarter from $149.5 million in the prior year period. (See Schedule 8 for a reconciliation of GAAP net income to adjusted EBITDA.)
“This was a strong quarter,” said Charles Drucker, president and chief executive officer at Vantiv. “We are assembling strategic assets and technology capabilities to expand into high growth areas of the market, and our performance this quarter shows that our strategy is working. The payments industry is changing rapidly, and we have positioned Vantiv as a leader in the future of payments.”
Merchant Services
Merchant Services net revenue increased 42% to $297.7 million in the third quarter as compared to $209.7 million in the prior year period, primarily due to a 31% increase in transactions and an 8% increase in net revenue per transaction. Excluding the impact of recent acquisitions, net revenue growth expanded to 7% on an organic basis over the prior year period, due primarily to increased new business as well as the company’s strategic expansion into high growth channels and verticals, including Merchant Bank, eCommerce and Integrated Payments. Sales and marketing expenses increased by 44% above the prior year period, to $104.5 million, primarily due to the impact of acquisitions.
Financial Institution Services
Given the continued shift in the mix of our client portfolio, Financial Institution Services net revenue decreased slightly to $82.9 million in the third quarter from $84.5 million in the prior year period as a 4% increase in transactions was offset by lower average net revenue per transaction. Sales and marketing expenses decreased by 3% from the prior year period, to $6.8 million.
Fourth Quarter Financial Outlook
Based on the current level of transaction trends and new business activity, net revenue for the fourth quarter of 2014 is expected to be $394 to $400 million, representing growth of 28% to 30% above the prior year period. Pro forma adjusted net income per share for the fourth quarter of 2014 is expected to be $0.50 to $0.53, an increase of 11% to 18% above the prior year period. GAAP net income per share attributable to Vantiv, Inc. is expected to be $0.21 to $0.24 for the fourth quarter of 2014.
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Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss the third quarter 2014 financial results today at 8:00 AM ET. Hosting the call will be Charles Drucker, president and chief executive officer and Mark Heimbouch, chief financial officer. The conference call can be accessed live over the phone by dialing (888) 661-5167, or for international callers (913) 312-1431, and referencing conference code 2652938. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (888) 203-1112, or for international callers (719) 457-0820, and entering replay passcode 2652938. The replay will be available through Thursday, November 13, 2014. The call will also be webcast live from the company's investor relations website at http://investors.vantiv.com. Following completion of the call, a recorded replay of the webcast will be available on the website.
About Vantiv, Inc.
Vantiv, Inc. (NYSE: VNTV) is a leading, integrated payment processor differentiated by a single, proprietary technology platform. Vantiv offers a comprehensive suite of traditional and innovative payment processing and technology solutions to merchants and financial institutions of all sizes in the U.S., enabling them to address their payment processing needs through a single provider. We build strong relationships with our customers, helping them become more efficient, more secure and more successful. Vantiv is the third largest merchant acquirer and the largest PIN debit acquirer based on number of transactions in the U.S. The company's growth strategy includes expanding further into high growth payment segments, such as integrated payments, payment facilitation (PayFacTM), mobile, prepaid and information solutions, and attractive industry verticals such as business-to-business, ecommerce, healthcare, gaming, government and education. For more information, visit www.vantiv.com.
Non-GAAP and Pro Forma Financial Measures
This earnings release presents non-GAAP and pro forma financial information including net revenue, adjusted EBITDA, pro forma adjusted net income, and pro forma adjusted net income per share. These are important financial performance measures for the Company, but are not financial measures as defined by GAAP. The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP and pro forma financial performance measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Reconciliations of these measures to the most directly comparable GAAP financial measures are presented in the attached schedules.
Forward-Looking Statements
This release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this release are forward-looking statements including any statements regarding guidance and statements of a general economic or industry specific nature. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, guidance, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements contained in this release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider information presented herein, you should understand that these statements are not guarantees of future performance or results. They depend upon future events and are subject to risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual future performance or results and cause them to differ materially from those anticipated in the forward-looking statements. Certain of these factors and other risk factors are discussed in the Company's filings with the U.S. Securities and Exchange Commission and include, but are not limited to: (i) the ability to keep pace with rapid developments and change in our industry and provide new services to our clients; (ii) competition within our industry; (iii) disclosure of unauthorized data and security breaches that expose us to liability, litigation and reputational damage; (iv) failures of our systems or systems of our third party providers; (v) our inability to expand our market share in existing markets or expand into new markets; (vi) our ability to identify acquisition, joint venture and partnership candidates and finance or integrate businesses, services or technologies that we acquire; (vii) failure to comply with applicable requirements of Visa, MasterCard or other payment networks; (viii) changes in payment network rules or standards; (ix) our ability to pass fee
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increases along to merchants; (x) termination of sponsorship or clearing services provided to us; (xi) increased attrition of our merchants or referral partners; (xii) inability to successfully renew or renegotiate agreements with our clients or referral partners; (xiii) reductions in overall consumer, business and government spending; (xiv) fraud by merchants or others; (xv) a decline in the use of credit, debit or prepaid cards; (xvi) consolidation in the banking and retail industries; and (xvii) the effects of governmental regulation, changes in laws and outcomes of future litigation or investigations. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements. More information on potential factors that could affect the Company’s financial results and performance is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s periodic reports filed with the SEC, including the Company’s Form 10-K for the year ended December 31, 2013 and its subsequent filings with the SEC.
Any forward-looking statement made by us in this release speaks only as of the date of this release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Contacts:
Investors
Nathan Rozof, CFA
Senior Vice President, Investor Relations
(866) 254-4811
(513) 900-4811
IR@vantiv.com
Media
Andrew Ciafardini
Director of Public Relations
(513) 900-5308
Andrew.Ciafardini@vantiv.com
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Schedule 1
Vantiv, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except share data)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||
Revenue | $ | 697,109 | $ | 532,347 | 31 | % | $ | 1,843,418 | $ | 1,549,722 | 19 | % | ||||||||||
Network fees and other costs | 316,592 | 238,141 | 33 | % | 843,030 | 685,708 | 23 | % | ||||||||||||||
Net revenue | 380,517 | 294,206 | 29 | % | 1,000,388 | 864,014 | 16 | % | ||||||||||||||
Sales and marketing | 111,233 | 79,551 | 40 | % | 280,184 | 231,963 | 21 | % | ||||||||||||||
Other operating costs | 60,659 | 48,340 | 25 | % | 177,782 | 148,168 | 20 | % | ||||||||||||||
General and administrative | 45,422 | 27,489 | 65 | % | 126,580 | 88,450 | 43 | % | ||||||||||||||
Depreciation and amortization | 65,289 | 48,604 | 34 | % | 204,176 | 136,428 | 50 | % | ||||||||||||||
Income from operations | 97,914 | 90,222 | 9 | % | 211,666 | 259,005 | (18 | )% | ||||||||||||||
Interest expense—net | (28,039 | ) | (10,724 | ) | 161 | % | (52,089 | ) | (30,317 | ) | 72 | % | ||||||||||
Non-operating expenses(1) | (6,594 | ) | — | NM | (34,250 | ) | (20,000 | ) | 71 | % | ||||||||||||
Income before applicable income taxes | 63,281 | 79,498 | (20 | )% | 125,327 | 208,688 | (40 | )% | ||||||||||||||
Income tax expense | 20,436 | 24,893 | (18 | )% | 38,078 | 63,650 | (40 | )% | ||||||||||||||
Net income | 42,845 | 54,605 | (22 | )% | 87,249 | 145,038 | (40 | )% | ||||||||||||||
Less: Net income attributable to non-controlling interests | (12,859 | ) | (18,894 | ) | (32 | )% | (30,536 | ) | (54,300 | ) | (44 | )% | ||||||||||
Net income attributable to Vantiv, Inc. | $ | 29,986 | $ | 35,711 | (16 | )% | $ | 56,713 | $ | 90,738 | (37 | )% | ||||||||||
Net income per share attributable to Vantiv, Inc. Class A common stock: | ||||||||||||||||||||||
Basic | $ | 0.21 | $ | 0.26 | (19 | )% | $ | 0.40 | $ | 0.66 | (39 | )% | ||||||||||
Diluted(2) | $ | 0.20 | $ | 0.24 | (17 | )% | $ | 0.40 | $ | 0.62 | (35 | )% | ||||||||||
Shares used in computing net income per share of Class A common stock: | ||||||||||||||||||||||
Basic | 144,632,010 | 139,968,417 | 141,127,560 | 138,142,146 | ||||||||||||||||||
Diluted | 199,698,988 | 201,011,014 | 199,074,819 | 207,843,165 | ||||||||||||||||||
0 | ||||||||||||||||||||||
Non Financial Data: | ||||||||||||||||||||||
Transactions (in millions) | 5,360 | 4,266 | 26 | % | 14,420 | 12,435 | 16 | % | ||||||||||||||
(1) Non-operating expenses consists of charges incurred with the refinancing of our debt in June 2014 and May 2013 and the change in fair value of a tax receivable agreement ("TRA") entered into in June 2014.
(2) Due to our structure as a C corporation and Vantiv Holding's structure as a pass-through entity for tax purposes, the numerator in the diluted net income per share calculation is adjusted to reflect our income tax expense at an expected effective tax rate assuming the conversion of the Class B units of Vantiv Holding into shares of our Class A common stock. The expected effective tax rate for the three and nine months ended September 30, 2014 was 36.5% compared to 38.5% for the three and nine months ended September 30, 2013. The components of the diluted net income per share calculation are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Income before applicable income taxes | $ | 63,281 | $ | 79,498 | $ | 125,327 | $ | 208,688 | ||||||||
Taxes | 23,098 | 30,607 | 45,744 | 80,345 | ||||||||||||
Net income | $ | 40,183 | $ | 48,891 | $ | 79,583 | $ | 128,343 | ||||||||
Diluted shares | 199,698,988 | 201,011,014 | 199,074,819 | 207,843,165 | ||||||||||||
Diluted EPS | $ | 0.20 | $ | 0.24 | $ | 0.40 | $ | 0.62 | ||||||||
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Schedule 2
Vantiv, Inc.
Pro Forma Adjusted Net Income
(Unaudited)
(in thousands, except share data)
See schedule 6 and 7 for a reconciliation of GAAP net income to pro forma adjusted net income.
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||
Revenue | $ | 697,109 | $ | 532,347 | 31 | % | $ | 1,843,418 | $ | 1,549,722 | 19 | % | ||||||||||
Network fees and other costs | 316,592 | 238,141 | 33 | % | 843,030 | 685,708 | 23 | % | ||||||||||||||
Net revenue | 380,517 | 294,206 | 29 | % | 1,000,388 | 864,014 | 16 | % | ||||||||||||||
Sales and marketing | 111,233 | 79,551 | 40 | % | 280,184 | 231,963 | 21 | % | ||||||||||||||
Other operating costs | 57,955 | 46,076 | 26 | % | 165,359 | 141,951 | 16 | % | ||||||||||||||
General and administrative | 29,865 | 19,116 | 56 | % | 78,032 | 64,080 | 22 | % | ||||||||||||||
Adjusted EBITDA(1) | 181,464 | 149,463 | 21 | % | 476,813 | 426,020 | 12 | % | ||||||||||||||
Depreciation and amortization | 20,143 | 16,636 | 21 | % | 56,681 | 43,554 | 30 | % | ||||||||||||||
Adjusted income from operations | 161,321 | 132,827 | 21 | % | 420,132 | 382,466 | 10 | % | ||||||||||||||
Interest expense—net | (28,039 | ) | (10,724 | ) | 161 | % | (52,089 | ) | (30,317 | ) | 72 | % | ||||||||||
Non-GAAP adjusted income before applicable income taxes | 133,282 | 122,103 | 9 | % | 368,043 | 352,149 | 5 | % | ||||||||||||||
Pro Forma Adjustments: | ||||||||||||||||||||||
Income tax expense(2) | 48,648 | 47,010 | 3 | % | 134,336 | 135,577 | (1 | )% | ||||||||||||||
Tax adjustments(3) | (12,418 | ) | (4,875 | ) | 155 | % | (34,005 | ) | (13,511 | ) | 152 | % | ||||||||||
Less: JV non-controlling interest(4) | (186 | ) | — | NM | (487 | ) | — | NM | ||||||||||||||
Pro forma adjusted net income(5) | $ | 96,866 | $ | 79,968 | 21 | % | $ | 267,225 | $ | 230,083 | 16 | % | ||||||||||
Pro forma adjusted net income per share(6) | $ | 0.49 | $ | 0.40 | 23 | % | $ | 1.34 | $ | 1.11 | 21 | % | ||||||||||
Adjusted shares outstanding | 199,698,988 | 201,011,014 | 199,074,819 | 207,843,165 | ||||||||||||||||||
Non Financial Data: | ||||||||||||||||||||||
Transactions (in millions) | 5,360 | 4,266 | 26 | % | 14,420 | 12,435 | 16 | % | ||||||||||||||
Non-GAAP and Pro Forma Financial Measures
This schedule presents non-GAAP and pro forma financial measures, which are important financial performance measures for the Company, but are not financial measures as defined by GAAP. Such financial measures should not be considered as alternatives to GAAP net income, and such measures may not be comparable to those reported by other companies.
Pro forma adjusted net income is derived from GAAP net income, adjusting for the following items: (a) amortization of intangible assets acquired in business combinations and customer portfolio and related asset acquisitions, and the write down of a trade name in June 2014; (b) non-operating expenses primarily associated with the refinancing of our debt in June 2014 and May 2013; (c) adjustments to income tax expense assuming conversion of the Fifth Third Bank non-controlling interest into shares of Class A common stock; (d) share-based compensation; (e) acquisition and integration costs incurred in connection with our acquisitions, costs associated with our separation from Fifth Third Bank and charges related to employee termination benefits; and (f) tax benefits due to the amortization of intangible assets and other tax attributes resulting from or acquired with our acquisitions, and to the tax basis step up associated with our separation from Fifth Third Bank and the purchase or exchange of Class B units of Vantiv Holding, net of payment obligations under tax receivable agreements established at the time of our initial public offering.
(1) See schedule 8 for a reconciliation of GAAP net income to adjusted EBITDA.
(2) Represents income tax expense at an effective tax rate of 36.5% for the three and nine months ended September 30, 2014 and 38.5% for the three and nine months ended September 30, 2013, assuming the conversion of the Class B units of Vantiv Holding into shares of Class A common stock, including the tax effect of adjustments described above. The effective tax rate is expected to remain at 36.5% for the remainder of 2014.
(3) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from or acquired with our acquisitions, and to the tax basis step up associated with our separation from Fifth Third Bank and the purchase or exchange of Class B units of Vantiv Holding, net of payment obligations under tax receivable agreements established at the time of our initial public offering.
(4) Represents the non-controlling interest, net of pro forma income tax expense discussed in (2) above, associated with a consolidated joint venture formed in May 2014.
(5) Pro forma adjusted net income assumes the conversion of the Fifth Third Bank non-controlling interest into shares of Class A common stock.
(6) Pro forma adjusted net income per share is calculated as pro forma adjusted net income divided by adjusted shares outstanding.
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Schedule 3
Vantiv, Inc.
Segment Information
(Unaudited)
(in thousands)
Three Months Ended September 30, 2014 | ||||||||||||
Financial Institution | ||||||||||||
Merchant Services | Services | Total | ||||||||||
Total revenue | $ | 580,082 | $ | 117,027 | $ | 697,109 | ||||||
Network fees and other costs | 282,431 | 34,161 | 316,592 | |||||||||
Net revenue | 297,651 | 82,866 | 380,517 | |||||||||
Sales and marketing | 104,460 | 6,773 | 111,233 | |||||||||
Segment profit | $ | 193,191 | $ | 76,093 | $ | 269,284 | ||||||
Non-financial data: | ||||||||||||
Transactions (in millions) | 4,398 | 962 | 5,360 | |||||||||
Net revenue per transaction | $ | 0.0677 | $ | 0.0861 | $ | 0.0710 | ||||||
Three Months Ended September 30, 2013 | ||||||||||||
Financial Institution | ||||||||||||
Merchant Services | Services | Total | ||||||||||
Total revenue | $ | 413,360 | $ | 118,987 | $ | 532,347 | ||||||
Network fees and other costs | 203,642 | 34,499 | 238,141 | |||||||||
Net revenue | 209,718 | 84,488 | 294,206 | |||||||||
Sales and marketing | 72,534 | 7,017 | 79,551 | |||||||||
Segment profit | $ | 137,184 | $ | 77,471 | $ | 214,655 | ||||||
Non-financial data: | ||||||||||||
Transactions (in millions) | 3,345 | 921 | 4,266 | |||||||||
Net revenue per transaction | $ | 0.0627 | $ | 0.0917 | $ | 0.0690 | ||||||
Nine Months Ended September 30, 2014 | ||||||||||||
Financial Institution | ||||||||||||
Merchant Services | Services | Total | ||||||||||
Total revenue | $ | 1,486,991 | $ | 356,427 | $ | 1,843,418 | ||||||
Network fees and other costs | 738,440 | 104,590 | 843,030 | |||||||||
Net revenue | 748,551 | 251,837 | 1,000,388 | |||||||||
Sales and marketing | 260,225 | 19,959 | 280,184 | |||||||||
Segment profit | $ | 488,326 | $ | 231,878 | $ | 720,204 | ||||||
Non-financial data: | ||||||||||||
Transactions (in millions) | 11,575 | 2,845 | 14,420 | |||||||||
Net revenue per transaction | $ | 0.0647 | $ | 0.0885 | $ | 0.0694 | ||||||
Nine Months Ended September 30, 2013 | ||||||||||||
Financial Institution | ||||||||||||
Merchant Services | Services | Total | ||||||||||
Total revenue | $ | 1,197,497 | $ | 352,225 | $ | 1,549,722 | ||||||
Network fees and other costs | 585,364 | 100,344 | 685,708 | |||||||||
Net revenue | 612,133 | 251,881 | 864,014 | |||||||||
Sales and marketing | 213,034 | 18,929 | 231,963 | |||||||||
Segment profit | $ | 399,099 | $ | 232,952 | $ | 632,051 | ||||||
Non-financial data: | ||||||||||||
Transactions (in millions) | 9,741 | 2,694 | 12,435 | |||||||||
Net revenue per transaction | $ | 0.0628 | $ | 0.0935 | $ | 0.0695 | ||||||
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Schedule 4
Vantiv, Inc.
Condensed Consolidated Statements of Financial Position
(Unaudited)
(in thousands)
September 30, 2014 | December 31, 2013 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 371,447 | $ | 171,427 | ||||
Accounts receivable—net | 529,441 | 472,196 | ||||||
Related party receivable | 6,017 | 5,155 | ||||||
Settlement assets | 116,694 | 127,144 | ||||||
Prepaid expenses | 29,670 | 18,059 | ||||||
Other | 12,571 | 13,932 | ||||||
Total current assets | 1,065,840 | 807,913 | ||||||
Customer incentives | 37,925 | 30,808 | ||||||
Property, equipment and software—net | 279,024 | 217,333 | ||||||
Intangible assets—net | 1,114,843 | 795,332 | ||||||
Goodwill | 3,272,907 | 1,943,613 | ||||||
Deferred taxes | 454,811 | 362,785 | ||||||
Other assets | 47,978 | 31,769 | ||||||
Total assets | $ | 6,273,328 | $ | 4,189,553 | ||||
Liabilities and equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 261,600 | $ | 233,383 | ||||
Related party payable | 3,201 | 2,381 | ||||||
Settlement obligations | 434,053 | 333,649 | ||||||
Current portion of note payable | 116,501 | 92,500 | ||||||
Current portion of tax receivable agreement obligations to related parties | 23,333 | 8,639 | ||||||
Deferred income | 8,005 | 9,053 | ||||||
Current maturities of capital lease obligations | 8,118 | 4,326 | ||||||
Other | 5,242 | 1,382 | ||||||
Total current liabilities | 860,053 | 685,313 | ||||||
Long-term liabilities: | ||||||||
Note payable | 3,305,989 | 1,718,750 | ||||||
Tax receivable agreement obligations to related parties | 637,766 | 551,061 | ||||||
Tax receivable agreement obligations | 144,793 | — | ||||||
Capital lease obligations | 17,013 | 12,044 | ||||||
Deferred taxes | 43,053 | 37,963 | ||||||
Other | 21,437 | 8,100 | ||||||
Total long-term liabilities | 4,170,051 | 2,327,918 | ||||||
Total liabilities | 5,030,104 | 3,013,231 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Total equity (1) | 1,243,224 | 1,176,322 | ||||||
Total liabilities and equity | $ | 6,273,328 | $ | 4,189,553 | ||||
(1) Includes equity attributable to non-controlling interests.
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Schedule 5
Vantiv, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended | ||||||||
September 30, 2014 | September 30, 2013 | |||||||
Operating Activities: | ||||||||
Net income | $ | 87,249 | $ | 145,038 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization expense | 169,909 | 136,428 | ||||||
Write-off of intangible asset | 34,267 | — | ||||||
Amortization of customer incentives | 8,094 | 7,466 | ||||||
Amortization and write-off of debt issuance costs | 30,416 | 23,256 | ||||||
Share-based compensation expense | 30,797 | 21,352 | ||||||
Other non-cash items | 8,311 | — | ||||||
Change in operating assets and liabilities: | ||||||||
Accounts receivable and related party receivable | (15,946 | ) | 25,734 | |||||
Net settlement assets and obligations | 109,402 | 13,910 | ||||||
Customer incentives | (11,581 | ) | (10,548 | ) | ||||
Prepaid and other assets | (10,321 | ) | (7,535 | ) | ||||
Accounts payable and accrued expenses | 22,628 | (14,508 | ) | |||||
Payable to related party | 733 | 1,038 | ||||||
Other liabilities | (1,161 | ) | 132 | |||||
Net cash provided by operating activities | 462,797 | 341,763 | ||||||
Investing Activities: | ||||||||
Purchases of property and equipment | (76,984 | ) | (46,970 | ) | ||||
Acquisition of customer portfolios and related assets | (27,399 | ) | (6,555 | ) | ||||
Purchase of investments | (7,487 | ) | (3,174 | ) | ||||
Cash used in acquisitions, net of cash acquired | (1,658,694 | ) | (155,654 | ) | ||||
Net cash used in investing activities | (1,770,564 | ) | (212,353 | ) | ||||
Financing Activities: | ||||||||
Proceeds from issuance of long-term debt | 3,443,000 | 1,850,000 | ||||||
Repayment of debt and capital lease obligations | (1,838,906 | ) | (1,280,366 | ) | ||||
Payment of debt issuance costs | (38,069 | ) | (26,288 | ) | ||||
Proceeds from exercise of Class A common stock options | 2,774 | — | ||||||
Repurchase of Class A common stock | (34,366 | ) | (400,592 | ) | ||||
Repurchase of Class A common stock (to satisfy tax withholding obligations) | (16,699 | ) | (12,739 | ) | ||||
Payments under tax receivable agreements | (8,639 | ) | — | |||||
Tax benefit from employee share-based compensation | 11,845 | 6,754 | ||||||
Distribution to non-controlling interests | (13,153 | ) | (28,978 | ) | ||||
Net cash provided by financing activities | 1,507,787 | 107,791 | ||||||
Net increase in cash and cash equivalents | 200,020 | 237,201 | ||||||
Cash and cash equivalents—Beginning of period | 171,427 | 67,058 | ||||||
Cash and cash equivalents—End of period | $ | 371,447 | $ | 304,259 | ||||
Cash Payments: | ||||||||
Interest | $ | 44,611 | $ | 28,141 | ||||
Taxes | 18,422 | 43,041 | ||||||
Non-cash Items: | ||||||||
Issuance of tax receivable agreements to related parties | $ | 109,400 | $ | 328,900 | ||||
Issuance of tax receivable agreement as contingent consideration | 137,120 | — | ||||||
8
Schedule 6
Vantiv, Inc.
Reconciliation of GAAP Net Income to Pro Forma Adjusted Net Income
(Unaudited)
(in thousands)
Three Months Ended September 30, 2014 | |||||||||||||||||||||||||||||||
Non-GAAP Adjustments | Pro Forma Adjustments | ||||||||||||||||||||||||||||||
GAAP | Transition, Acquisition and Integration(1) | Share-Based Compensation | Amortization of Intangible Assets(2) | Non Operating Expenses(3) | Non-controlling Interest(4) | Tax Adjustments | Pro Forma Adjusted Net Income | ||||||||||||||||||||||||
Revenue | $ | 697,109 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 697,109 | |||||||||||||||
Network fees and other costs | 316,592 | — | — | — | — | — | — | 316,592 | |||||||||||||||||||||||
Net revenue | 380,517 | — | — | — | — | — | — | 380,517 | |||||||||||||||||||||||
Sales and marketing | 111,233 | — | — | — | — | — | — | 111,233 | |||||||||||||||||||||||
Other operating costs | 60,659 | (2,704 | ) | — | — | — | — | — | 57,955 | ||||||||||||||||||||||
General and administrative | 45,422 | (4,804 | ) | (10,753 | ) | — | — | — | — | 29,865 | |||||||||||||||||||||
Depreciation and amortization | 65,289 | — | — | (45,146 | ) | — | — | — | 20,143 | ||||||||||||||||||||||
Income from operations | 97,914 | 7,508 | 10,753 | 45,146 | — | — | — | 161,321 | |||||||||||||||||||||||
Interest expense—net | (28,039 | ) | — | — | — | — | — | — | (28,039 | ) | |||||||||||||||||||||
Non-operating expenses | (6,594 | ) | — | — | — | 6,594 | — | — | — | ||||||||||||||||||||||
Income before applicable income taxes | 63,281 | 7,508 | 10,753 | 45,146 | 6,594 | — | — | 133,282 | |||||||||||||||||||||||
Income tax expense | 20,436 | — | — | — | — | — | 28,212 | (5) | 48,648 | ||||||||||||||||||||||
Tax adjustments | — | — | — | — | — | — | (12,418 | ) | (6) | (12,418 | ) | ||||||||||||||||||||
Less: JV non-controlling interest | — | — | — | — | — | (186 | ) | — | (186 | ) | |||||||||||||||||||||
Net income | $ | 42,845 | $ | 7,508 | $ | 10,753 | $ | 45,146 | $ | 6,594 | $ | (186 | ) | $ | (15,794 | ) | $ | 96,866 | |||||||||||||
Three Months Ended September 30, 2013 | |||||||||||||||||||||||||||||||
Non-GAAP Adjustments | Pro Forma Adjustments | ||||||||||||||||||||||||||||||
GAAP | Transition, Acquisition and Integration(1) | Share-Based Compensation | Amortization of Intangible Assets(2) | Non Operating Expenses(3) | Non-controlling Interest(4) | Tax Adjustments | Pro Forma Adjusted Net Income | ||||||||||||||||||||||||
Revenue | $ | 532,347 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 532,347 | |||||||||||||||
Network fees and other costs | 238,141 | — | — | — | — | — | — | 238,141 | |||||||||||||||||||||||
Net revenue | 294,206 | — | — | — | — | — | — | 294,206 | |||||||||||||||||||||||
Sales and marketing | 79,551 | — | — | — | — | — | — | 79,551 | |||||||||||||||||||||||
Other operating costs | 48,340 | (2,264 | ) | — | — | — | — | — | 46,076 | ||||||||||||||||||||||
General and administrative | 27,489 | (951 | ) | (7,422 | ) | — | — | — | — | 19,116 | |||||||||||||||||||||
Depreciation and amortization | 48,604 | — | — | (31,968 | ) | — | — | — | 16,636 | ||||||||||||||||||||||
Income from operations | 90,222 | 3,215 | 7,422 | 31,968 | — | — | — | 132,827 | |||||||||||||||||||||||
Interest expense—net | (10,724 | ) | — | — | — | — | — | — | (10,724 | ) | |||||||||||||||||||||
Non-operating expenses | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Income before applicable income taxes | 79,498 | 3,215 | 7,422 | 31,968 | — | — | — | 122,103 | |||||||||||||||||||||||
Income tax expense | 24,893 | — | — | — | — | — | 22,117 | (5) | 47,010 | ||||||||||||||||||||||
Tax adjustments | — | — | — | — | — | — | (4,875 | ) | (6) | (4,875 | ) | ||||||||||||||||||||
Less: JV non-controlling interest | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net income | $ | 54,605 | $ | 3,215 | $ | 7,422 | $ | 31,968 | $ | — | $ | — | $ | (17,242 | ) | $ | 79,968 | ||||||||||||||
9
Pro Forma Financial Measures
This schedule presents pro forma financial measures, which are important financial performance measures for the Company, but are not financial measures as defined by GAAP. Such financial measures should not be considered as alternatives to GAAP net income, and such measures may not be comparable to those reported by other companies.
(1) Represents acquisition and integration costs incurred in connection with our acquisitions, costs associated with our separation from Fifth Third Bank and charges related to employee termination benefits.
(2) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.
(3) Represents non-operating expenses primarily relating to the change in fair value of a TRA entered into in June 2014.
(4) Represents the non-controlling interest, net of pro forma income tax expense discussed in (5) below, associated with a consolidated joint venture formed in May 2014.
(5) Represents adjustments to income tax expense to reflect an effective tax rate of 36.5% for the three months ended September 30, 2014 and 38.5% for the three months ended September 30, 2013, assuming the conversion of the Class B units of Vantiv Holding into shares of Class A common stock, including the tax effect of adjustments described above. The effective tax rate is expected to remain at 36.5% for the remainder of 2014.
(6) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from or acquired with our acquisitions, and to the tax basis step up associated with our separation from Fifth Third Bank and the purchase or exchange of Class B units of Vantiv Holding, net of payment obligations under tax receivable agreements established at the time of our initial public offering.
10
Schedule 7
Vantiv, Inc.
Reconciliation of GAAP Net Income to Pro Forma Adjusted Net Income
(Unaudited)
(in thousands)
Nine Months Ended September 30, 2014 | |||||||||||||||||||||||||||||||
Non-GAAP Adjustments | Pro Forma Adjustments | ||||||||||||||||||||||||||||||
GAAP | Transition, Acquisition and Integration(1) | Share-Based Compensation | Amortization of Intangible Assets(2) | Non Operating Expenses(3) | Non-controlling Interest(4) | Tax Adjustments | Pro Forma Adjusted Net Income | ||||||||||||||||||||||||
Revenue | $ | 1,843,418 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,843,418 | |||||||||||||||
Network fees and other costs | 843,030 | — | — | — | — | — | — | 843,030 | |||||||||||||||||||||||
Net revenue | 1,000,388 | — | — | — | — | — | — | 1,000,388 | |||||||||||||||||||||||
Sales and marketing | 280,184 | — | — | — | — | — | — | 280,184 | |||||||||||||||||||||||
Other operating costs | 177,782 | (12,423 | ) | — | — | — | — | — | 165,359 | ||||||||||||||||||||||
General and administrative | 126,580 | (17,751 | ) | (30,797 | ) | — | — | — | — | 78,032 | |||||||||||||||||||||
Depreciation and amortization | 204,176 | — | — | (147,495 | ) | — | — | — | 56,681 | ||||||||||||||||||||||
Income from operations | 211,666 | 30,174 | 30,797 | 147,495 | — | — | — | 420,132 | |||||||||||||||||||||||
Interest expense—net | (52,089 | ) | — | — | — | — | — | — | (52,089 | ) | |||||||||||||||||||||
Non-operating expenses | (34,250 | ) | — | — | — | 34,250 | — | — | — | ||||||||||||||||||||||
Income before applicable income taxes | 125,327 | 30,174 | 30,797 | 147,495 | 34,250 | — | — | 368,043 | |||||||||||||||||||||||
Income tax expense | 38,078 | — | — | — | — | — | 96,258 | (5) | 134,336 | ||||||||||||||||||||||
Tax adjustments | — | — | — | — | — | — | (34,005 | ) | (6) | (34,005 | ) | ||||||||||||||||||||
Less: JV non-controlling interest | — | — | — | — | — | (487 | ) | — | (487 | ) | |||||||||||||||||||||
Net income | $ | 87,249 | $ | 30,174 | $ | 30,797 | $ | 147,495 | $ | 34,250 | $ | (487 | ) | $ | (62,253 | ) | $ | 267,225 | |||||||||||||
Nine Months Ended September 30, 2013 | |||||||||||||||||||||||||||||||
Non-GAAP Adjustments | Pro Forma Adjustments | ||||||||||||||||||||||||||||||
GAAP | Transition, Acquisition and Integration(1) | Share-Based Compensation | Amortization of Intangible Assets(2) | Non Operating Expenses(3) | Non-controlling Interest(4) | Tax Adjustments | Pro Forma Adjusted Net Income | ||||||||||||||||||||||||
Revenue | $ | 1,549,722 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,549,722 | |||||||||||||||
Network fees and other costs | 685,708 | — | — | — | — | — | — | 685,708 | |||||||||||||||||||||||
Net revenue | 864,014 | — | — | — | — | — | — | 864,014 | |||||||||||||||||||||||
Sales and marketing | 231,963 | — | — | — | — | — | — | 231,963 | |||||||||||||||||||||||
Other operating costs | 148,168 | (6,217 | ) | — | — | — | — | — | 141,951 | ||||||||||||||||||||||
General and administrative | 88,450 | (3,018 | ) | (21,352 | ) | — | — | — | — | 64,080 | |||||||||||||||||||||
Depreciation and amortization | 136,428 | — | — | (92,874 | ) | — | — | — | 43,554 | ||||||||||||||||||||||
Income from operations | 259,005 | 9,235 | 21,352 | 92,874 | — | — | — | 382,466 | |||||||||||||||||||||||
Interest expense—net | (30,317 | ) | — | — | — | — | — | — | (30,317 | ) | |||||||||||||||||||||
Non-operating expenses | (20,000 | ) | — | — | — | 20,000 | — | — | — | ||||||||||||||||||||||
Income before applicable income taxes | 208,688 | 9,235 | 21,352 | 92,874 | 20,000 | — | — | 352,149 | |||||||||||||||||||||||
Income tax expense | 63,650 | — | — | — | — | — | 71,927 | (5) | 135,577 | ||||||||||||||||||||||
Tax adjustments | — | — | — | — | — | — | (13,511 | ) | (6) | (13,511 | ) | ||||||||||||||||||||
Less: JV non-controlling interest | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net income | $ | 145,038 | $ | 9,235 | $ | 21,352 | $ | 92,874 | $ | 20,000 | $ | — | $ | (58,416 | ) | $ | 230,083 | ||||||||||||||
11
Pro Forma Financial Measures
This schedule presents pro forma financial measures, which are important financial performance measures for the Company, but are not financial measures as defined by GAAP. Such financial measures should not be considered as alternatives to GAAP net income, and such measures may not be comparable to those reported by other companies.
(1) Represents acquisition and integration costs incurred in connection with our acquisitions, costs associated with our separation from Fifth Third Bank and charges related to employee termination benefits.
(2) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions. The nine months ended September 30, 2014 also includes the write-down of a trade name of $34,267.
(3) Represents non-operating expenses associated with the refinancing of our debt in June 2014 and May 2013 and the change in fair value of a TRA entered into in June 2014.
(4) Represents the non-controlling interest, net of pro forma income tax expense discussed in (5) below, associated with a consolidated joint venture formed in May 2014.
(5) Represents adjustments to income tax expense to reflect an effective tax rate of 36.5% for the nine months ended September 30, 2014 and 38.5% for the nine months ended September 30, 2013, assuming the conversion of the Class B units of Vantiv Holding into shares of Class A common stock, including the tax effect of adjustments described above. The effective tax rate is expected to remain at 36.5% for the remainder of 2014.
(6) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from or acquired with our acquisitions, and to the tax basis step up associated with our separation from Fifth Third Bank and the purchase or exchange of Class B units of Vantiv Holding, net of payment obligations under tax receivable agreements established at the time of our initial public offering.
12
Schedule 8
Vantiv, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(Unaudited)
(in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Net income | $ | 42,845 | $ | 54,605 | (22 | )% | $ | 87,249 | $ | 145,038 | (40 | )% | |||||||||
Income tax expense | 20,436 | 24,893 | (18 | )% | 38,078 | 63,650 | (40 | )% | |||||||||||||
Non-operating expenses(1) | 6,594 | — | NM | 34,250 | 20,000 | 71 | % | ||||||||||||||
Interest expense—net | 28,039 | 10,724 | 161 | % | 52,089 | 30,317 | 72 | % | |||||||||||||
Share-based compensation | 10,753 | 7,422 | 45 | % | 30,797 | 21,352 | 44 | % | |||||||||||||
Transition, acquisition and integration costs(2) | 7,508 | 3,215 | 134 | % | 30,174 | 9,235 | 227 | % | |||||||||||||
Depreciation and amortization | 65,289 | 48,604 | 34 | % | 204,176 | 136,428 | 50 | % | |||||||||||||
Adjusted EBITDA | $ | 181,464 | $ | 149,463 | 21 | % | $ | 476,813 | $ | 426,020 | 12 | % | |||||||||
Non-GAAP Financial Measures
This schedule presents adjusted EBITDA, which is an important financial performance measure for the Company, but is not a financial measure as defined by GAAP. Such financial measure should not be considered as an alternative to GAAP net income, and such measure may not be comparable to those reported by other companies.
(1) Represents non-operating expenses associated with the refinancing of our debt in June 2014 and May 2013 and the change in fair value of a TRA entered into in June 2014.
(2) Represents acquisition and integration costs incurred in connection with our acquisitions, costs associated with our separation from Fifth Third Bank and charges related to employee termination benefits.
13