Fiserv Reports Second Quarter 2020 Results
GAAP revenue growth of 129% in the quarter and 140% year to date;
GAAP EPS decrease of 100% in the quarter and 49% year to date;
Internal revenue decline of 7% in the quarter and 2% year to date;
Adjusted EPS decrease of 4% in the quarter and increase of 6% year to date;
Operating cash flow up 400% in the quarter and 231% year to date;
Free cash flow up 23% in the quarter and 13% year to date;
Company expects 2020 adjusted EPS growth of at least 10%
Second Quarter 2020 GAAP Results
On a GAAP basis, the financial results of First Data Corporation ("First Data") are included in the consolidated results of
GAAP net income was
GAAP operating margin was 4.7% and 11.0% in the second quarter and first six months of 2020, respectively, compared to 25.4% and 25.1% in the second quarter and first six months of 2019, respectively. GAAP operating margin in the second quarter and the first six months of 2020 included the operating margin impacts from integration costs and acquired intangible asset amortization associated with the acquisition of First Data. GAAP operating margin in the first six months of 2020 also included the operating margin impact from a gain resulting from the Investment Services Transaction.
Net cash provided by operating activities increased by 400% to
"We demonstrated the strength and resilience of our business model during the quarter, producing significant free cash flow while delivering value for our clients. Our results also included excellent sales performance which provides strong market momentum entering the second half of the year," said
Second Quarter 2020 Non-GAAP Results and Additional Information
On an adjusted non-GAAP basis, the company's financial performance measures in this release, including adjusted revenue, internal revenue, internal revenue growth, adjusted operating margin, adjusted net income, adjusted earnings per share and free cash flow, have been recalculated to provide current and historical results on a combined company basis to enhance investors' ability to evaluate the company's operating performance including First Data.
-
Adjusted revenue declined 12% to
$3.22 billion in the second quarter and 6% to$6.70 billion in the first six months of 2020 compared to the prior year periods. - Internal revenue declined 7% in the second quarter, with declines of 15% in the Acceptance segment, 1% in the Fintech segment and 3% in the Payments segment compared to the prior year period.
- Internal revenue declined 2% in the first six months of 2020, with a 5% decline in the Acceptance segment, and relatively consistent performance in both the Fintech and Payments segments compared to the prior year.
-
Adjusted earnings per share decreased 4% to
$0.93 in the second quarter and increased 6% to$1.92 in the first six months of 2020 compared to the prior year periods. -
Free cash flow increased by 23% to
$895 million and by 13% to$1.66 billion in the second quarter and first six months of 2020, respectively, compared to$728 million and$1.47 billion in the prior year periods. - Adjusted operating margin decreased 90 basis points to 28.8% in the second quarter and 50 basis points to 28.3% in the first six months of 2020 compared to the prior year periods.
- Sales results increased 38% in the second quarter and 20% in the first six months of 2020 compared to the prior year periods.
-
The company repurchased 5.7 million shares of common stock for
$550 million in the second quarter, and 14.3 million shares of common stock for$1.44 billion in the first six months of 2020. -
The company refinanced
$2.0 billion of its debt through aMay 2020 public offering of 7-year and 10-year senior notes with a weighted average interest rate of 2.45% and term of 8.5 years. -
The
Banc of America Merchant Services joint venture was successfully dissolved effectiveJuly 1, 2020 .Fiserv received its share of the customers from the joint venture and signed a five-year agreement to provide processing and other services for new merchant clients ofBank of America .
Outlook for 2020
While the COVID-19 pandemic continues to drive significant uncertainty over market conditions for the remainder of the year,
"Given the strength of the results to date and improving performance trends around the world, we expect to deliver our 35th consecutive year of double digit adjusted earnings per share growth and are well-positioned for 2021," said Bisignano.
Earnings Conference Call
The company will discuss its second quarter 2020 results on a conference call and webcast at
About
Use of Non-GAAP Financial Measures
Due to the financial impact of the First Data acquisition, the company's non-GAAP financial performance measures have been recalculated in this news release on a combined company basis reflecting its new reportable segments as realigned during the first quarter of 2020. The combined financial information has been prepared by making certain adjustments to the sum of historical First Data financial information determined in accordance with generally accepted accounting principles ("GAAP") and historical
The company supplements its and First Data's historical reporting of information determined in accordance with GAAP, such as revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities, with "combined revenue," "adjusted revenue," "internal revenue," "internal revenue growth," "combined operating income," "adjusted operating income," "adjusted operating margin," "combined net income attributable to
Examples of non-cash or other items may include, but are not limited to, non-cash deferred revenue adjustments arising from acquisitions; non-cash intangible asset amortization expense associated with acquisitions; non-cash impairment charges; severance and restructuring costs; net charges associated with debt financing activities including foreign currency transaction gains or losses, early debt extinguishment and bridge financing costs; merger and integration costs; gains or losses from the sale of businesses; and certain discrete tax benefits and expenses. The company excludes these items to more clearly focus on the factors management believes are pertinent to the company's operations, and management uses this information to make operating decisions, including the allocation of resources to the company's various businesses.
The company adjusts its non-GAAP results to exclude amortization of acquisition-related intangible assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible asset amortization supplements GAAP information with a measure that can be used to assess the comparability of operating performance. Although the company excludes amortization from acquisition-related intangible assets from its non-GAAP expenses, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
Management believes internal revenue growth is useful because it presents combined adjusted revenue growth including deferred revenue purchase accounting adjustments and excluding the impact of foreign currency fluctuations, acquisitions, dispositions and the company's Output Solutions postage reimbursements. Management believes free cash flow is useful to measure the funds generated in a given period that are available for debt service requirements and strategic capital decisions. Management believes this supplemental information enhances shareholders' ability to evaluate and understand the company's core business performance.
These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should be considered in addition to, and not as a substitute for, revenue, operating income, operating margin, net income, earnings per share and net cash provided by operating activities or any other amount determined in accordance with GAAP.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the strength and resilience of the company's business model and anticipated adjusted earnings per share growth. Statements can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “could,” “should,” or words of similar meaning. Statements that describe the company's future plans, objectives or goals are also forward-looking statements.
Forward-looking statements are subject to assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that could cause the company’s actual results to differ materially include, among others, the following, many of which are, and will be, amplified by the COVID-19 pandemic: the duration and intensity of the COVID-19 pandemic; governmental and private sector responses to the COVID-19 pandemic and the impact of such responses on the company; the impact of the COVID-19 pandemic on the company's employees, clients, vendors, operations and sales; the possibility that the company may be unable to achieve expected synergies and operating efficiencies from the acquisition of First Data within the expected time frames or at all or to successfully integrate the operations of First Data into the company's operations; such integration may be more difficult, time-consuming or costly than expected; profitability following the transaction may be lower than expected, including due to unexpected costs, charges or expenses resulting from the transaction; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the transaction; unforeseen risks relating to the company's liabilities or those of First Data may exist; the company's ability to meet expectations regarding the accounting and tax treatments of the transaction; the company's ability to compete effectively against new and existing competitors and to continue to introduce competitive new products and services on a timely, cost-effective basis; changes in customer demand for the company's products and services; the ability of the company's technology to keep pace with a rapidly evolving marketplace; the successful management of the company's merchant alliance program which involves several alliances not under its sole control; the impact of a security breach or operational failure on the company's business including disruptions caused by other participants in the global financial system; the failure of the company's vendors and merchants to satisfy their obligations; the successful management of credit and fraud risks in the company's business and merchant alliances; changes in local, regional, national and international economic or political conditions and the impact they may have on the company and its customers; the effect of proposed and enacted legislative and regulatory actions affecting the company or the financial services industry as a whole; the company's ability to comply with government regulations and applicable card association and network rules; the protection and validity of intellectual property rights; the outcome of pending and future litigation and governmental proceedings; the company's ability to successfully identify, complete and integrate acquisitions, and to realize the anticipated benefits associated with the same; the impact of the company's strategic initiatives; the company's ability to attract and retain key personnel; volatility and disruptions in financial markets that may impact the company's ability to access preferred sources of financing and the terms on which the company is able to obtain financing or increase its costs of borrowing; adverse impacts from currency exchange rates or currency controls; and other factors included in “Risk Factors” in the company's Quarterly Report on Form 10-Q for the quarter ended
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Condensed Consolidated Statements of Income |
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(In millions, except per share amounts, unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
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|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Revenue |
|
|
|
|
|
|
|
||||||||
|
Processing and services |
$ |
2,890 |
|
|
$ |
1,328 |
|
|
$ |
5,965 |
|
|
$ |
2,621 |
|
|
Product |
575 |
|
|
184 |
|
|
1,269 |
|
|
393 |
|
||||
|
Total revenue |
3,465 |
|
|
1,512 |
|
|
7,234 |
|
|
3,014 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Expenses |
|
|
|
|
|
|
|
||||||||
|
Cost of processing and services |
1,466 |
|
|
617 |
|
|
3,101 |
|
|
1,241 |
|
||||
|
Cost of product |
454 |
|
|
168 |
|
|
986 |
|
|
342 |
|
||||
|
Selling, general and administrative |
1,377 |
|
|
343 |
|
|
2,781 |
|
|
684 |
|
||||
|
(Gain) loss on sale of businesses |
3 |
|
|
— |
|
|
(428 |
) |
|
(10 |
) |
||||
|
Total expenses |
3,300 |
|
|
1,128 |
|
|
6,440 |
|
|
2,257 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Operating income |
165 |
|
|
384 |
|
|
794 |
|
|
757 |
|
||||
|
Interest expense, net |
(174 |
) |
|
(58 |
) |
|
(361 |
) |
|
(115 |
) |
||||
|
Debt financing activities |
— |
|
|
(37 |
) |
|
— |
|
|
(96 |
) |
||||
|
Other income |
1 |
|
|
2 |
|
|
21 |
|
|
3 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) before income taxes and loss
|
(8 |
) |
|
291 |
|
|
454 |
|
|
549 |
|
||||
|
Income tax (provision) benefit |
27 |
|
|
(60 |
) |
|
(52 |
) |
|
(91 |
) |
||||
|
Loss from investments in unconsolidated affiliates |
(10 |
) |
|
(8 |
) |
|
(16 |
) |
|
(10 |
) |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net income |
9 |
|
|
223 |
|
|
386 |
|
|
448 |
|
||||
|
Net income (loss) attributable to noncontrolling interests |
7 |
|
|
— |
|
|
(8 |
) |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net income attributable to |
$ |
2 |
|
|
$ |
223 |
|
|
$ |
394 |
|
|
$ |
448 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP earnings per share attributable to |
$ |
— |
|
|
$ |
0.56 |
|
|
$ |
0.57 |
|
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted shares used in computing earnings per share attributable to |
680.8 |
|
|
399.6 |
|
|
686.0 |
|
|
399.4 |
|
||||
|
|
|
|
|
|
|
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|
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Earnings per share is calculated using actual, unrounded amounts. |
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Reconciliation of GAAP to |
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Adjusted Net Income and Adjusted Earnings Per Share |
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(In millions, except per share amounts, unaudited) |
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|
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|
Three Months Ended
|
|
Six Months Ended
|
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|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP net income |
$ |
2 |
|
|
$ |
223 |
|
|
$ |
394 |
|
|
$ |
448 |
|
|
GAAP net income attributable to First Data 1 |
— |
|
|
275 |
|
|
— |
|
|
444 |
|
||||
|
Combined net income attributable to |
2 |
|
|
498 |
|
|
394 |
|
|
892 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Merger and integration costs 2 |
229 |
|
|
38 |
|
|
463 |
|
|
102 |
|
||||
|
Severance and restructuring costs 3 |
32 |
|
|
17 |
|
|
79 |
|
|
38 |
|
||||
|
Amortization of acquisition-related intangible assets 4 |
521 |
|
|
144 |
|
|
1,046 |
|
|
289 |
|
||||
|
Debt financing activities 5 |
— |
|
|
41 |
|
|
— |
|
|
101 |
|
||||
|
Impact of divestitures 6 |
— |
|
|
(12 |
) |
|
— |
|
|
(29 |
) |
||||
|
Non wholly-owned entity activities 7 |
36 |
|
|
(6 |
) |
|
19 |
|
|
(18 |
) |
||||
|
Tax impact of adjustments 8 |
(191 |
) |
|
(52 |
) |
|
(370 |
) |
|
(112 |
) |
||||
|
(Gain) loss on sale of businesses 6 |
3 |
|
|
2 |
|
|
(428 |
) |
|
(7 |
) |
||||
|
Tax impact of (gain) loss on sale of businesses 8 |
(1 |
) |
|
— |
|
|
112 |
|
|
2 |
|
||||
|
Adjusted net income |
$ |
631 |
|
|
$ |
670 |
|
|
$ |
1,315 |
|
|
$ |
1,258 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted average common shares outstanding - diluted |
680.8 |
|
|
399.6 |
|
|
686.0 |
|
|
399.4 |
|
||||
|
Issuance of shares for combination |
— |
|
|
286.3 |
|
|
— |
|
|
286.3 |
|
||||
|
Dilutive impact of exchanged equity awards |
— |
|
|
7.8 |
|
|
— |
|
|
7.8 |
|
||||
|
Combined weighted average common shares outstanding - diluted 9 |
680.8 |
|
|
693.7 |
|
|
686.0 |
|
|
693.5 |
|
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|
|
|
|
|
|
|
|
|
||||||||
|
GAAP earnings per share 9 |
$ |
— |
|
|
$ |
0.56 |
|
|
$ |
0.57 |
|
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Combined earnings per share 9 |
$ |
— |
|
|
$ |
0.72 |
|
|
$ |
0.57 |
|
|
$ |
1.29 |
|
|
Combined adjustments - net of income taxes: |
|
|
|
|
|
|
|
||||||||
|
Merger and integration costs 2 |
0.26 |
|
|
0.04 |
|
|
0.52 |
|
|
0.11 |
|
||||
|
Severance and restructuring costs 3 |
0.04 |
|
|
0.02 |
|
|
0.09 |
|
|
0.04 |
|
||||
|
Amortization of acquisition-related intangible assets 4 |
0.59 |
|
|
0.16 |
|
|
1.17 |
|
|
0.32 |
|
||||
|
Debt financing activities 5 |
— |
|
|
0.05 |
|
|
— |
|
|
0.11 |
|
||||
|
Impact of divestitures 6 |
— |
|
|
(0.01 |
) |
|
— |
|
|
(0.03 |
) |
||||
|
Non wholly-owned entity activities 7 |
0.04 |
|
|
(0.01 |
) |
|
0.02 |
|
|
(0.02 |
) |
||||
|
(Gain) loss on sale of businesses 6 |
— |
|
|
— |
|
|
(0.46 |
) |
|
(0.01 |
) |
||||
|
Adjusted earnings per share |
$ |
0.93 |
|
|
$ |
0.97 |
|
|
$ |
1.92 |
|
|
$ |
1.81 |
|
See pages 3-5 for disclosures related to the use of non-GAAP financial measures.
Earnings per share is calculated using actual, unrounded amounts.
|
1 |
Represents the financial results of First Data prior to the date of acquisition. For the three and six months ended |
|
2 |
Represents acquisition and related integration costs incurred as a result of the company's various acquisitions. Merger and integration costs include |
|
3 |
Represents severance and other costs associated with the achievement of ongoing expense management initiatives, including real estate and data center consolidation activities. Amounts during the second quarter of 2020 consisted entirely of severance costs. |
|
4 |
Represents amortization of intangible assets acquired through various acquisitions, including customer relationships, software/technology, and trade names. This adjustment does not exclude the amortization of other intangible assets such as contract assets (sales commissions and deferred conversion costs), capitalized and purchased software, and financing costs and debt discounts. See additional information on page 17 for an analysis of the company's amortization expense. |
|
5 |
Represents expenses associated with entering into and maintaining a bridge term loan facility for the purpose of refinancing certain indebtedness of First Data upon the closing date of the acquisition. |
|
6 |
Represents the earnings attributable to divested businesses and the gain/loss on the associated divestiture transactions, including two businesses acquired as part of the First Data acquisition that were sold in |
|
7 |
Represents the company’s share of amortization of acquisition-related intangible assets at its unconsolidated affiliates, as well as the minority interest share of amortization of acquisition-related intangible assets at its subsidiaries in which it holds a controlling financial interest. |
|
8 |
The tax impact of adjustments is calculated using a tax rate of 23%, which approximates the combined company's annual effective tax rate, exclusive of the actual tax impacts associated with the gain/loss on sale of businesses. |
|
9 |
GAAP earnings per share is computed by dividing GAAP net income by the weighted average common shares outstanding - diluted during the period. Combined earnings per share is computed by dividing combined net income attributable to |
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Financial Results by Segment |
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(In millions, unaudited) |
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|
|
|
|
|
||||||||
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|
Three Months Ended
|
|
Six Months Ended
|
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|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
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|
|
|
|
|
|
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|
||||||||
|
Revenue |
$ |
3,465 |
|
|
$ |
1,512 |
|
|
$ |
7,234 |
|
|
$ |
3,014 |
|
|
First Data revenue 1 |
— |
|
|
2,485 |
|
|
— |
|
|
4,801 |
|
||||
|
Combined revenue |
3,465 |
|
|
3,997 |
|
|
7,234 |
|
|
7,815 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Intercompany eliminations 2 |
— |
|
|
(2 |
) |
|
— |
|
|
(4 |
) |
||||
|
Output Solutions postage reimbursements |
(198 |
) |
|
(243 |
) |
|
(433 |
) |
|
(493 |
) |
||||
|
Deferred revenue purchase accounting adjustments |
11 |
|
|
— |
|
|
23 |
|
|
— |
|
||||
|
Merchant Services adjustment 3 |
(58 |
) |
|
(109 |
) |
|
(126 |
) |
|
(202 |
) |
||||
|
Adjusted revenue |
$ |
3,220 |
|
|
$ |
3,643 |
|
|
$ |
6,698 |
|
|
$ |
7,116 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating income |
$ |
165 |
|
|
$ |
384 |
|
|
$ |
794 |
|
|
$ |
757 |
|
|
First Data operating income 1 |
— |
|
|
565 |
|
|
— |
|
|
989 |
|
||||
|
Combined operating income |
165 |
|
|
949 |
|
|
794 |
|
|
1,746 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Merger and integration costs |
229 |
|
|
38 |
|
|
463 |
|
|
102 |
|
||||
|
Severance and restructuring costs |
32 |
|
|
17 |
|
|
79 |
|
|
38 |
|
||||
|
Amortization of acquisition-related intangible assets |
521 |
|
|
144 |
|
|
1,046 |
|
|
289 |
|
||||
|
Merchant Services adjustment 3 |
(23 |
) |
|
(66 |
) |
|
(59 |
) |
|
(121 |
) |
||||
|
(Gain) loss on sale of businesses |
3 |
|
|
2 |
|
|
(428 |
) |
|
(7 |
) |
||||
|
Adjusted operating income |
$ |
927 |
|
|
$ |
1,084 |
|
|
$ |
1,895 |
|
|
$ |
2,047 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating margin |
4.7 |
% |
|
25.4 |
% |
|
11.0 |
% |
|
25.1 |
% |
||||
|
Adjusted operating margin |
28.8 |
% |
|
29.7 |
% |
|
28.3 |
% |
|
28.8 |
% |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Merchant Acceptance ("Acceptance") |
|
|
|
|
|
|
|
||||||||
|
Revenue |
$ |
1,223 |
|
|
$ |
— |
|
|
$ |
2,624 |
|
|
$ |
— |
|
|
First Data revenue 1 |
— |
|
|
1,576 |
|
|
— |
|
|
3,003 |
|
||||
|
Combined revenue |
1,223 |
|
|
1,576 |
|
|
2,624 |
|
|
3,003 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Deferred revenue purchase accounting adjustments |
2 |
|
|
— |
|
|
4 |
|
|
— |
|
||||
|
Merchant Services adjustment 3 |
(58 |
) |
|
(109 |
) |
|
(126 |
) |
|
(202 |
) |
||||
|
Adjusted revenue |
$ |
1,167 |
|
|
$ |
1,467 |
|
|
$ |
2,502 |
|
|
$ |
2,801 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating income |
$ |
245 |
|
|
$ |
— |
|
|
$ |
562 |
|
|
$ |
— |
|
|
First Data operating income 1 |
— |
|
|
486 |
|
|
— |
|
|
882 |
|
||||
|
Combined operating income |
245 |
|
|
486 |
|
|
562 |
|
|
882 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Merger and integration costs |
1 |
|
|
— |
|
|
3 |
|
|
— |
|
||||
|
Merchant Services adjustment 3 |
(23 |
) |
|
(66 |
) |
|
(59 |
) |
|
(121 |
) |
||||
|
Adjusted operating income |
$ |
223 |
|
|
$ |
420 |
|
|
$ |
506 |
|
|
$ |
761 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating margin |
20.0 |
% |
|
— |
|
|
21.4 |
% |
|
— |
|
||||
|
Adjusted operating margin |
19.1 |
% |
|
28.6 |
% |
|
20.2 |
% |
|
27.2 |
% |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|||||||||||||||
|
Financial Results by Segment (cont.) |
|||||||||||||||
|
(In millions, unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Financial Technology ("Fintech") 4 |
|
|
|
|
|
|
|
||||||||
|
Revenue |
$ |
714 |
|
|
$ |
731 |
|
|
$ |
1,432 |
|
|
$ |
1,456 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating income |
$ |
252 |
|
|
$ |
221 |
|
|
$ |
456 |
|
|
$ |
424 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating margin |
35.4 |
% |
|
30.2 |
% |
|
31.9 |
% |
|
29.1 |
% |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Payments and Network ("Payments") |
|
|
|
|
|
|
|
||||||||
|
Revenue |
$ |
1,320 |
|
|
$ |
662 |
|
|
$ |
2,706 |
|
|
$ |
1,313 |
|
|
First Data revenue 1 |
— |
|
|
732 |
|
|
— |
|
|
1,448 |
|
||||
|
Combined revenue |
1,320 |
|
|
1,394 |
|
|
2,706 |
|
|
2,761 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Intercompany eliminations 2 |
— |
|
|
(2 |
) |
|
— |
|
|
(4 |
) |
||||
|
Deferred revenue purchase accounting adjustments |
9 |
|
|
— |
|
|
19 |
|
|
— |
|
||||
|
Adjusted revenue |
$ |
1,329 |
|
|
$ |
1,392 |
|
|
$ |
2,725 |
|
|
$ |
2,757 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating income |
$ |
548 |
|
|
$ |
288 |
|
|
$ |
1,113 |
|
|
$ |
562 |
|
|
First Data operating income 1 |
— |
|
|
267 |
|
|
— |
|
|
516 |
|
||||
|
Combined operating income |
548 |
|
|
555 |
|
|
1,113 |
|
|
1,078 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Merger and integration costs |
10 |
|
|
— |
|
|
20 |
|
|
— |
|
||||
|
Adjusted operating income |
$ |
558 |
|
|
$ |
555 |
|
|
$ |
1,133 |
|
|
$ |
1,078 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating margin |
41.5 |
% |
|
43.4 |
% |
|
41.2 |
% |
|
42.8 |
% |
||||
|
Adjusted operating margin |
42.0 |
% |
|
39.8 |
% |
|
41.6 |
% |
|
39.1 |
% |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Corporate and Other |
|
|
|
|
|
|
|
||||||||
|
Revenue |
$ |
208 |
|
|
$ |
119 |
|
|
$ |
472 |
|
|
$ |
245 |
|
|
First Data revenue 1 |
— |
|
|
177 |
|
|
— |
|
|
350 |
|
||||
|
Combined revenue |
208 |
|
|
296 |
|
|
472 |
|
|
595 |
|
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Output Solutions postage reimbursements |
(198 |
) |
|
(243 |
) |
|
(433 |
) |
|
(493 |
) |
||||
|
Adjusted revenue |
$ |
10 |
|
|
$ |
53 |
|
|
$ |
39 |
|
|
$ |
102 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating loss |
$ |
(880 |
) |
|
$ |
(125 |
) |
|
$ |
(1,337 |
) |
|
$ |
(229 |
) |
|
First Data operating loss 1 |
— |
|
|
(188 |
) |
|
— |
|
|
(409 |
) |
||||
|
Combined operating loss |
(880 |
) |
|
(313 |
) |
|
(1,337 |
) |
|
(638 |
) |
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
||||||||
|
Merger and integration costs |
218 |
|
|
38 |
|
|
440 |
|
|
102 |
|
||||
|
Severance and restructuring costs |
32 |
|
|
17 |
|
|
79 |
|
|
38 |
|
||||
|
Amortization of acquisition-related intangible assets |
521 |
|
|
144 |
|
|
1,046 |
|
|
289 |
|
||||
|
(Gain) loss on sale of businesses |
3 |
|
|
2 |
|
|
(428 |
) |
|
(7 |
) |
||||
|
Adjusted operating loss |
$ |
(106 |
) |
|
$ |
(112 |
) |
|
$ |
(200 |
) |
|
$ |
(216 |
) |
|
|
|
|
|
|
|
|
|
||||||||
|
See pages 3-5 for disclosures related to the use of non-GAAP financial measures. |
|||||||||||||||
|
Operating margin percentages are calculated using actual, unrounded amounts. |
|||||||||||||||
|
1 |
Represents the financial results of First Data prior to the date of acquisition. For the three and six months ended |
|
2 |
Represents the elimination of intercompany revenue and expense between First Data and the company. |
|
3 |
Represents an adjustment primarily related to the company's joint venture with |
|
4 |
For all periods presented in the Fintech segment, there were no adjustments to GAAP measures presented and thus the adjusted measures are equal to the GAAP measures presented. |
|
|
|||||||
|
Condensed Consolidated Statements of Cash Flows |
|||||||
|
(In millions, unaudited) |
|||||||
|
|
Six Months Ended
|
||||||
|
|
2020 |
|
2019 |
||||
|
Cash flows from operating activities |
|
|
|
||||
|
Net income |
$ |
386 |
|
|
$ |
448 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
|
Depreciation and other amortization |
550 |
|
|
202 |
|
||
|
Amortization of acquisition-related intangible assets |
1,099 |
|
|
89 |
|
||
|
Amortization of financing costs, debt discounts and other |
24 |
|
|
105 |
|
||
|
Share-based compensation |
202 |
|
|
34 |
|
||
|
Deferred income taxes |
(94 |
) |
|
12 |
|
||
|
Gain on sale of businesses |
(428 |
) |
|
(10 |
) |
||
|
Loss from investments in unconsolidated affiliates |
16 |
|
|
10 |
|
||
|
Distributions from unconsolidated affiliates |
12 |
|
|
— |
|
||
|
Settlement of interest rate hedge contracts |
— |
|
|
(183 |
) |
||
|
Non-cash impairment charge |
40 |
|
|
— |
|
||
|
Other operating activities |
(3 |
) |
|
(3 |
) |
||
|
Changes in assets and liabilities, net of effects from acquisitions and dispositions: |
|
|
|
||||
|
Trade accounts receivable |
278 |
|
|
60 |
|
||
|
Prepaid expenses and other assets |
62 |
|
|
(62 |
) |
||
|
Contract costs |
(158 |
) |
|
(93 |
) |
||
|
Accounts payable and other liabilities |
(54 |
) |
|
(28 |
) |
||
|
Contract liabilities |
(13 |
) |
|
(2 |
) |
||
|
Net cash provided by operating activities |
1,919 |
|
|
579 |
|
||
|
|
|
|
|
||||
|
Cash flows from investing activities |
|
|
|
||||
|
Capital expenditures, including capitalization of software costs |
(488 |
) |
|
(210 |
) |
||
|
Proceeds from sale of businesses |
584 |
|
|
10 |
|
||
|
Payments for acquisition of businesses, net of cash acquired and including working capital adjustments |
(136 |
) |
|
54 |
|
||
|
Distributions from unconsolidated affiliates |
66 |
|
|
7 |
|
||
|
Purchases of investments |
— |
|
|
(3 |
) |
||
|
Other investing activities |
— |
|
|
6 |
|
||
|
Net cash provided by (used in) investing activities |
26 |
|
|
(136 |
) |
||
|
|
|
|
|
||||
|
Cash flows from financing activities |
|
|
|
||||
|
Debt proceeds |
5,812 |
|
|
9,894 |
|
||
|
Debt repayments |
(6,219 |
) |
|
(2,018 |
) |
||
|
Short-term borrowings, net |
(1 |
) |
|
— |
|
||
|
Payments of debt financing, redemption and other costs |
(16 |
) |
|
(164 |
) |
||
|
Proceeds from issuance of treasury stock |
86 |
|
|
56 |
|
||
|
Purchases of treasury stock, including employee shares withheld for tax obligations |
(1,574 |
) |
|
(185 |
) |
||
|
Distributions paid to noncontrolling interests and redeemable noncontrolling interests |
(52 |
) |
|
— |
|
||
|
Other financing activities |
5 |
|
|
— |
|
||
|
Net cash (used in) provided by financing activities |
(1,959 |
) |
|
7,583 |
|
||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(12 |
) |
|
— |
|
||
|
Net change in cash, cash equivalents and restricted cash |
(26 |
) |
|
8,026 |
|
||
|
Cash, cash equivalents and restricted cash, beginning balance |
933 |
|
|
415 |
|
||
|
Cash, cash equivalents and restricted cash, ending balance |
$ |
907 |
|
|
$ |
8,441 |
|
|
|
|||||||
|
Condensed Consolidated Balance Sheets |
|||||||
|
(In millions, unaudited) |
|||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
Assets |
|
|
|
||||
|
Cash and cash equivalents |
$ |
869 |
|
|
$ |
893 |
|
|
Trade accounts receivable – net |
2,512 |
|
|
2,782 |
|
||
|
Prepaid expenses and other current assets |
1,114 |
|
|
1,503 |
|
||
|
Settlement assets |
12,987 |
|
|
11,868 |
|
||
|
Total current assets |
17,482 |
|
|
17,046 |
|
||
|
|
|
|
|
||||
|
Property and equipment – net |
1,688 |
|
|
1,606 |
|
||
|
Customer relationships – net |
12,897 |
|
|
14,042 |
|
||
|
Other intangible assets – net |
3,739 |
|
|
3,600 |
|
||
|
|
36,088 |
|
|
36,038 |
|
||
|
Contract costs – net |
606 |
|
|
533 |
|
||
|
Investments in unconsolidated affiliates |
2,763 |
|
|
2,720 |
|
||
|
Other long-term assets |
1,830 |
|
|
1,954 |
|
||
|
Total assets |
$ |
77,093 |
|
|
$ |
77,539 |
|
|
|
|
|
|
||||
|
Liabilities and Equity |
|
|
|
||||
|
Accounts payable and accrued expenses |
$ |
2,933 |
|
|
$ |
3,080 |
|
|
Short-term and current maturities of long-term debt |
359 |
|
|
287 |
|
||
|
Contract liabilities |
481 |
|
|
492 |
|
||
|
Settlement obligations |
12,987 |
|
|
11,868 |
|
||
|
Total current liabilities |
16,760 |
|
|
15,727 |
|
||
|
|
|
|
|
||||
|
Long-term debt |
21,515 |
|
|
21,612 |
|
||
|
Deferred income taxes |
4,481 |
|
|
4,247 |
|
||
|
Long-term contract liabilities |
159 |
|
|
155 |
|
||
|
Other long-term liabilities |
892 |
|
|
941 |
|
||
|
Total liabilities |
43,807 |
|
|
42,682 |
|
||
|
|
|
|
|
||||
|
Redeemable noncontrolling interests |
258 |
|
|
262 |
|
||
|
|
|
|
|
||||
|
|
31,583 |
|
|
32,979 |
|
||
|
Noncontrolling interests |
1,445 |
|
|
1,616 |
|
||
|
Total equity |
33,028 |
|
|
34,595 |
|
||
|
Total liabilities and equity |
$ |
77,093 |
|
|
$ |
77,539 |
|
|
Selected Non-GAAP Financial Measures and Additional Information (In millions, unaudited) |
||||||||||||||||||||
|
Internal Revenue Growth 1 |
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||
|
|
2020 |
|
2019 |
|
Growth |
|
2020 |
|
2019 |
|
Growth |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted revenue |
|
$ |
3,220 |
|
|
$ |
3,643 |
|
|
|
|
$ |
6,698 |
|
|
$ |
7,116 |
|
|
|
|
Currency impact 2 |
|
48 |
|
|
— |
|
|
|
|
93 |
|
|
— |
|
|
|
||||
|
Acquisition adjustments |
|
— |
|
|
— |
|
|
|
|
(6 |
) |
|
— |
|
|
|
||||
|
Divestiture adjustments |
|
(116 |
) |
|
(243 |
) |
|
|
|
(263 |
) |
|
(462 |
) |
|
|
||||
|
Internal revenue |
|
$ |
3,152 |
|
|
$ |
3,400 |
|
|
(7)% |
|
$ |
6,522 |
|
|
$ |
6,654 |
|
|
(2)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Acceptance |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted revenue |
|
$ |
1,167 |
|
|
$ |
1,467 |
|
|
|
|
$ |
2,502 |
|
|
$ |
2,801 |
|
|
|
|
Currency impact 2 |
|
35 |
|
|
— |
|
|
|
|
69 |
|
|
— |
|
|
|
||||
|
Acquisition adjustments |
|
— |
|
|
— |
|
|
|
|
(6 |
) |
|
— |
|
|
|
||||
|
Divestiture adjustments |
|
(101 |
) |
|
(172 |
) |
|
|
|
(217 |
) |
|
(329 |
) |
|
|
||||
|
Internal revenue |
|
$ |
1,101 |
|
|
$ |
1,295 |
|
|
(15)% |
|
$ |
2,348 |
|
|
$ |
2,472 |
|
|
(5)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Fintech |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted revenue |
|
$ |
714 |
|
|
$ |
731 |
|
|
|
|
$ |
1,432 |
|
|
$ |
1,456 |
|
|
|
|
Currency impact 2 |
|
1 |
|
|
— |
|
|
|
|
3 |
|
|
— |
|
|
|
||||
|
Divestiture adjustments |
|
— |
|
|
(11 |
) |
|
|
|
— |
|
|
(20 |
) |
|
|
||||
|
Internal revenue |
|
$ |
715 |
|
|
$ |
720 |
|
|
(1)% |
|
$ |
1,435 |
|
|
$ |
1,436 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Payments |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted revenue |
|
$ |
1,329 |
|
|
$ |
1,392 |
|
|
|
|
$ |
2,725 |
|
|
$ |
2,757 |
|
|
|
|
Currency impact 2 |
|
12 |
|
|
— |
|
|
|
|
21 |
|
|
— |
|
|
|
||||
|
Divestiture adjustments |
|
(5 |
) |
|
(11 |
) |
|
|
|
(7 |
) |
|
(15 |
) |
|
|
||||
|
Internal revenue |
|
$ |
1,336 |
|
|
$ |
1,381 |
|
|
(3)% |
|
$ |
2,739 |
|
|
$ |
2,742 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Corporate and Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted revenue |
|
$ |
10 |
|
|
$ |
53 |
|
|
|
|
$ |
39 |
|
|
$ |
102 |
|
|
|
|
Divestiture adjustments |
|
(10 |
) |
|
(49 |
) |
|
|
|
(39 |
) |
|
(98 |
) |
|
|
||||
|
Internal revenue |
|
$ |
— |
|
|
$ |
4 |
|
|
|
|
$ |
— |
|
|
$ |
4 |
|
|
|
See pages 3-5 for disclosures related to the use of non-GAAP financial measures.
Internal revenue growth is calculated using actual, unrounded amounts.
|
1 |
Internal revenue growth is measured as the change in adjusted revenue (see pages 10-12) for the current period excluding the impact of foreign currency fluctuations and revenue attributable to acquisitions (except for revenue attributable to First Data which is presented on a combined company basis) and dispositions, divided by adjusted revenue from the prior period excluding revenue attributable to dispositions. Revenue attributable to dispositions includes the revenue associated with |
|
2 |
Currency impact is measured as the increase or decrease in adjusted revenue for the current period by applying prior period foreign currency exchange rates to present a constant currency comparison to prior periods. |
|
Selected Non-GAAP Financial Measures and Additional Information (cont.) (In millions, unaudited) |
||||||||||||||||
|
Free Cash Flow |
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net cash provided by operating activities |
|
$ |
1,031 |
|
|
$ |
206 |
|
|
$ |
1,919 |
|
|
$ |
579 |
|
|
First Data net cash provided by operating activities 1 |
|
— |
|
|
713 |
|
|
— |
|
|
1,328 |
|
||||
|
First Data payments for contract assets 2 |
|
— |
|
|
(20 |
) |
|
— |
|
|
(51 |
) |
||||
|
Combined net cash provided by operating activities |
|
1,031 |
|
|
899 |
|
|
1,919 |
|
|
1,856 |
|
||||
|
Combined capital expenditures |
|
(242 |
) |
|
(310 |
) |
|
(488 |
) |
|
(543 |
) |
||||
|
Combined adjustments: |
|
|
|
|
|
|
|
|
||||||||
|
Distributions paid to noncontrolling interests and redeemable noncontrolling interests |
|
(26 |
) |
|
(81 |
) |
|
(52 |
) |
|
(133 |
) |
||||
|
Distributions from unconsolidated affiliates 3 |
|
30 |
|
|
7 |
|
|
66 |
|
|
7 |
|
||||
|
Severance, restructuring, merger and integration payments |
|
133 |
|
|
50 |
|
|
272 |
|
|
136 |
|
||||
|
Settlement of interest rate hedge contracts |
|
— |
|
|
183 |
|
|
— |
|
|
183 |
|
||||
|
Tax payments on adjustments and debt financing |
|
(31 |
) |
|
(16 |
) |
|
(62 |
) |
|
(36 |
) |
||||
|
Other |
|
— |
|
|
(4 |
) |
|
— |
|
|
(4 |
) |
||||
|
Free cash flow |
|
$ |
895 |
|
|
$ |
728 |
|
|
$ |
1,655 |
|
|
$ |
1,466 |
|
See pages 3-5 for disclosures related to the use of non-GAAP financial measures.
|
1 |
Represents the financial results of First Data prior to the date of acquisition. For the three and six months ended |
|
2 |
Represents the conformity of First Data's historical classification of payments for contract assets to be consistent with the company's classification and treatment. |
|
3 |
Distributions from unconsolidated affiliates totaled |
|
Selected Non-GAAP Financial Measures and Additional Information (cont.) (In millions, unaudited) |
||||||||||||||||
|
Total Amortization 1 |
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Acquisition-related intangible assets |
|
$ |
546 |
|
|
$ |
44 |
|
|
$ |
1,099 |
|
|
$ |
89 |
|
|
Capitalized software |
|
40 |
|
|
39 |
|
|
78 |
|
|
77 |
|
||||
|
Purchased software |
|
78 |
|
|
13 |
|
|
134 |
|
|
25 |
|
||||
|
Financing costs, debt discounts and other |
|
11 |
|
|
42 |
|
|
23 |
|
|
105 |
|
||||
|
Sales commissions |
|
22 |
|
|
21 |
|
|
44 |
|
|
41 |
|
||||
|
Deferred conversion costs |
|
7 |
|
|
5 |
|
|
14 |
|
|
10 |
|
||||
|
Total amortization |
|
$ |
704 |
|
|
$ |
164 |
|
|
$ |
1,392 |
|
|
$ |
347 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
First Data acquisition-related intangible assets |
|
$ |
— |
|
|
$ |
100 |
|
|
$ |
— |
|
|
$ |
200 |
|
|
First Data capitalized software |
|
— |
|
|
27 |
|
|
— |
|
|
52 |
|
||||
|
First Data purchased software |
|
— |
|
|
32 |
|
|
— |
|
|
61 |
|
||||
|
First Data financing costs, debt discounts and other |
|
— |
|
|
4 |
|
|
— |
|
|
7 |
|
||||
|
First Data sales commissions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
|
First Data deferred conversion costs |
|
— |
|
|
9 |
|
|
— |
|
|
18 |
|
||||
|
Total First Data amortization 2 |
|
$ |
— |
|
|
$ |
172 |
|
|
$ |
— |
|
|
$ |
338 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Combined acquisition-related intangible assets |
|
$ |
546 |
|
|
$ |
144 |
|
|
$ |
1,099 |
|
|
$ |
289 |
|
|
Combined capitalized software |
|
40 |
|
|
66 |
|
|
78 |
|
|
129 |
|
||||
|
Combined purchased software |
|
78 |
|
|
45 |
|
|
134 |
|
|
86 |
|
||||
|
Combined financing costs, debt discounts and other |
|
11 |
|
|
46 |
|
|
23 |
|
|
112 |
|
||||
|
Combined sales commissions |
|
22 |
|
|
21 |
|
|
44 |
|
|
41 |
|
||||
|
Combined deferred conversion costs |
|
7 |
|
|
14 |
|
|
14 |
|
|
28 |
|
||||
|
Total combined amortization |
|
$ |
704 |
|
|
$ |
336 |
|
|
$ |
1,392 |
|
|
$ |
685 |
|
|
1 |
The company adjusts its non-GAAP results to exclude amortization of acquisition-related intangible assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions (see corresponding adjustment on page 8). The adjustment for acquired First Data software/technology excludes only the incremental amortization related to the fair value purchase accounting allocation. Management believes that the adjustment of acquisition-related intangible asset amortization supplements the GAAP information with a measure that can be used to assess the comparability of operating performance. Although the company excludes amortization from acquisition-related intangible assets from its non-GAAP expenses, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. |
|
2 |
Represents the financial results of First Data prior to the date of acquisition. For the three and six months ended |
Full Year Forward-Looking Non-GAAP Financial Measures
Adjusted Earnings Per Share - The company's adjusted earnings per share outlook for 2020 excludes certain non-cash or other items which should enhance shareholders' ability to evaluate the company's performance, as such measures provide additional insights into the factors and trends affecting its business. Non-cash or other items may be significant and include, but are not limited to, non-cash deferred revenue adjustments arising from acquisitions; non-cash intangible asset amortization expense associated with acquisitions; non-cash impairment charges; severance and restructuring costs; net charges associated with debt financing activities including foreign currency transaction gains, early debt extinguishment and bridge financing costs; merger and integration costs; gains or losses from the sale of businesses; and certain discrete tax benefits and expenses. Adjustments to earnings per share that have been incurred in 2019 are presented on page 8 but are not necessarily indicative of adjustments that may be incurred in 2020. Estimates of these adjustments on a forward-looking basis are not available due to the variability, complexity and limited visibility of these items.
The company's adjusted earnings per share growth outlook for 2020 is based on 2019 adjusted earnings per share performance, including the historical results of First Data on an adjusted combined company basis, as adjusted for the Investment Services Transaction and other divestitures.
|
Full Year Forward-Looking Non-GAAP Financial Measures (cont.) |
|||
|
2019 GAAP net income |
$ |
893 |
|
|
2019 GAAP net income attributable to First Data 1 |
303 |
|
|
|
2019 combined net income attributable to |
1,196 |
|
|
|
Combined adjustments: |
|
||
|
Merger and integration costs 2 |
467 |
|
|
|
Severance and restructuring costs 3 |
150 |
|
|
|
Amortization of acquisition-related intangible assets 4 |
1,222 |
|
|
|
Debt financing activities 5 |
287 |
|
|
|
Non wholly-owned entity activities 6 |
(53 |
) |
|
|
Tax impact of adjustments 7 |
(480 |
) |
|
|
Gain on sale of businesses 8 |
(12 |
) |
|
|
Tax impact of gain on sale of businesses 7 |
3 |
|
|
|
Discrete tax items 9 |
(5 |
) |
|
|
2019 adjusted net income |
2,775 |
|
|
|
Impact of divestitures 8 |
(46 |
) |
|
|
Taxes on Impact of divestitures 7 |
10 |
|
|
|
2019 adjusted net income, as adjusted for divestitures |
$ |
2,739 |
|
|
|
|
||
|
Weighted average common shares outstanding - diluted |
522.6 |
|
|
|
Issuance of shares for combination |
167.0 |
|
|
|
Dilutive impact of exchanged equity awards |
4.5 |
|
|
|
Combined weighted average common shares outstanding - diluted 10 |
694.1 |
|
|
|
|
|
||
|
2019 GAAP earnings per share 10 |
$ |
1.71 |
|
|
|
|
||
|
Combined earnings per share 10 |
$ |
1.72 |
|
|
Combined adjustments - net of income taxes: |
|
||
|
Merger and integration costs 2 |
0.52 |
|
|
|
Severance and restructuring costs 3 |
0.17 |
|
|
|
Amortization of acquisition-related intangible assets 4 |
1.36 |
|
|
|
Debt financing activities 5 |
0.32 |
|
|
|
Non wholly-owned entity activities 6 |
(0.06 |
) |
|
|
Gain on sale of businesses 8 |
(0.01 |
) |
|
|
Discrete tax items 9 |
(0.01 |
) |
|
|
|
|
||
|
2019 adjusted earnings per share |
4.00 |
|
|
|
Impact of divestitures 8 |
(0.05 |
) |
|
|
2019 adjusted earnings per share, as adjusted for divestitures |
$ |
3.95 |
|
|
|
|
||
|
2020 adjusted earnings per share outlook |
≥ |
||
|
2020 adjusted earnings per share growth outlook |
≥ 10% |
||
|
|
|
||
In millions, except per share amounts, unaudited. Earnings per share is calculated using actual, unrounded amounts.
See pages 3-5 for disclosures related to the use of non-GAAP financial measures.
|
Full Year Forward-Looking Non-GAAP Financial Measures (cont.) |
|
|
1 |
Represents the financial results of First Data prior to the date of acquisition. For the year ended |
|
2 |
Represents acquisition and related integration costs incurred as a result of the company's various acquisitions. Merger and integration costs include |
|
3 |
Represents severance and other costs associated with the achievement of ongoing expense management initiatives, including real estate and data center consolidation activities. Severance and restructuring costs includes a non-cash impairment charge of |
|
4 |
Represents amortization of intangible assets acquired through various acquisitions, including customer relationships, software/technology, and trade names. This adjustment does not exclude the amortization of other intangible assets such as contract assets (sales commissions and deferred conversion costs), capitalized and purchased software, and financing costs and debt discounts. See additional information on page 17 for an analysis of the company's amortization expense. |
|
5 |
Represents losses on early debt extinguishments and other costs associated with the refinancing of certain indebtedness, including that of First Data. Debt financing activities include |
|
6 |
Represents the company’s share of amortization of acquisition-related intangible assets at its unconsolidated affiliates, as well as the minority interest share of amortization of acquisition-related intangible assets at its subsidiaries in which it holds a controlling financial interest. This adjustment also includes a |
|
7 |
The tax impact of adjustments is calculated using a tax rate of 23%, which approximates the combined company's annual effective tax rate, exclusive of the actual tax impacts associated with the net gain on sale of businesses. |
|
8 |
Represents the earnings attributable to divested businesses and the gain on the associated divestiture transactions, including two businesses acquired as part of the First Data acquisition that were sold in |
|
9 |
Represents certain discrete tax items, such as tax effects associated with |
|
10 |
GAAP earnings per share is computed by dividing GAAP net income by the weighted-average number of common shares outstanding - diluted during the period. Combined earnings per share is computed by dividing combined net income attributable to |
FISV-E
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