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November 1, 2012 at 9:49 AM EDT

Vantiv Reports Third Quarter 2012 Results

Investments in Distribution and Value Added Services Continue to Drive Superior Growth

22% Transaction Growth Led by 27% Growth in Merchant Services

19% Net Revenue Growth

$0.32 in Adjusted Cash Net Income per Share

Adjusted Cash Net Income per Share Guidance for 2012 of $1.15 to $1.17

CINCINNATI--(BUSINESS WIRE)-- Vantiv, Inc. (NYSE: VNTV) (Vantiv or “the Company”) today announced financial results for the third quarter ended September 30, 2012. Revenue increased 14% to $466.7 million as compared to $409.4 million in the prior year. Net revenue increased 19% to $258.5 million as compared to $216.9 million in the prior year. On a GAAP basis, net income attributable to Vantiv, Inc. was $24.3 million, or $0.19 per diluted share, compared with $11.6 million, or $0.13 per diluted share, in the prior year. Cash net income increased 44% to $68.1 million as compared to $47.1 million in the prior year. Adjusted cash net income per share was $0.32. (See Schedule 2 for cash net income and Schedules 6 and 7 for GAAP net income reconciliation to cash net income.)

Investments in distribution strategies and value added services continued to lead to superior transaction growth of 22%. The Merchant Services segment experienced strong double digit growth with a 27% increase in transactions, and the Financial Institutions Services segment also experienced strong growth with a 7% increase in transactions.

In connection with our growth, sales and marketing expense increased by 23% to $69.3 million as compared to $56.5 million in the prior year. The scale and efficiency of Vantiv's single processing platform continued to support superior profitability as reflected by the Company's 51% adjusted EBITDA margin for the quarter, with adjusted EBITDA increasing by 18% to $131.9 million as compared to $111.4 million in the prior year. (See Schedule 8 for reconciliation from GAAP income from operations to adjusted EBITDA.)

“Vantiv delivered another strong quarter,” said president and chief executive officer Charles Drucker. “We continue to drive growth and profitability across our business, while developing innovative new products and solutions for our customers, such as Vantiv Accept and Vantiv Mobile Wallet within our expanded suite of mobile offerings.”

Merchant Services

Net revenue increased 26% to $177.0 million in the third quarter as compared to $141.0 million in the prior year, primarily due to a 27% increase in transactions. Net revenue per transaction declined modestly as compared to the prior year due primarily to the addition of a large national processing contract in the second quarter; excluding such impact, our focus on small to mid-sized merchants contributed to growth in net revenue per transaction. Sales and marketing expenses increased 24% to $63.0 million as compared to $50.7 million in the prior year, primarily due to continued sales force and channel expansion.

Financial Institution Services

Net revenue increased 7% to $81.5 million as compared to $75.9 million in the prior year, primarily due to a 7% increase in transactions and growth in value added services revenue. Sales and marketing expenses increased by $0.9 million to $6.3 million from $5.4 million, principally due to costs associated with our annual client event.

2012 Financial Outlook

“The consistent growth and profitability that the Company generated during the third quarter increases our confidence and visibility into the rest of the year,” said chief financial officer Mark Heimbouch. “For 2012, we continue to expect to generate net revenues of $1.0 billion to $1.02 billion, and we are narrowing our adjusted cash net income per share guidance to between $1.15 and $1.17, from our previous estimate of $1.13 to $1.17”. The recently announced acquisition of Litle & Co. is expected to close late in the fourth quarter and therefore will not have a meaningful impact on our outlook for 2012 adjusted cash net income per share.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss third quarter 2012 financial results and the recently announced acquisition of Litle & Co. 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 (877) 941-1427, or for international callers (480) 629-9664. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (877) 870-5176, or for international callers (858) 384-5517, and entering the conference ID 4567381. The replay will be available through Thursday, November 8, 2012. The call will be webcast live from the Company's investor relations website at http://investors.vantiv.com.

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 ecommerce, mobile, prepaid and information solutions, and attractive industry verticals, such as business-to-business, government, healthcare and education. For more information, visit http://www.vantiv.com.

Non-GAAP Financial Measures

This earnings release presents non-GAAP financial information including net revenue, adjusted EBITDA, cash net income, and adjusted cash net income per share information. 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 or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial 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 non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the attached schedules.

Net revenue is revenue, less network fees and other costs. Cash net income includes adjustments to exclude amortization of intangible assets acquired in business combinations and customer portfolio and related asset acquisitions, share-based compensation, transition costs associated with our separation from Fifth Third Bank, integration costs incurred in connection with acquisitions and conversion of non-controlling interests into shares of Class A common stock. For purposes of providing better comparability we also made adjustments to interest expense and depreciation in 2011. (See Schedule 6 for a reconciliation from GAAP net income to cash net income.)

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 increases along to merchants; (x) termination of sponsorship or clearing services provided to us; (xi) increased attrition of our merchants, independent sales organizations, or ISOs, or referral partners; (xii) inability to successfully renew or renegotiate agreements with our clients or ISOs; (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.

Any forward-looking statement made by us in this release speaks only as of the date on which we make it. 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.

       
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,
2012 2011 % Change 2012 2011 % Change
 
Revenue $ 466,736 $ 409,364 14 % $ 1,369,147 $ 1,183,374 16 %
Network fees and other costs 208,239   192,466   8 % 617,691   560,376   10 %
Net revenue 258,497 216,898 19 % 751,456 622,998 21 %
Sales and marketing 69,313 56,495 23 % 212,602 172,284 23 %
Other operating costs 40,376 35,028 15 % 119,802 107,748 11 %
General and administrative 28,600 18,896 51 % 86,387 68,503 26 %
Depreciation and amortization 40,618   40,066   1 % 119,181   115,767   3 %
Income from operations 79,590 66,413 20 % 213,484 158,696 35 %
Interest expense—net (10,056 ) (26,198 ) (62 )% (44,675 ) (85,771 ) (48 )%
Non-operating expenses(1)     NM (92,672 ) (13,799 ) NM
Income before applicable income taxes 69,534 40,215 73 % 76,137 59,126 29 %
Income tax expense 20,895   11,532   81 % 22,848   14,083   62 %
Net income 48,639 28,683 70 % 53,289 45,043 18 %
Less: Net income attributable to non-controlling interests (24,375 ) (17,035 ) 43 % (24,433 ) (24,516 ) %
Net income attributable to Vantiv, Inc. $ 24,264   $ 11,648   108 % $ 28,856   $ 20,527   41 %
 
Net income per share of Class A common stock attributable to Vantiv, Inc.:
Basic $ 0.20 $ 0.13 $ 0.26 $ 0.23
Diluted $ 0.19 $ 0.13 $ 0.24 $ 0.23
Shares used in computing net income per share of Class A common stock:
Basic 122,959,429 89,515,617 112,953,425 89,515,617
Diluted 131,127,197 89,515,617 119,600,082 89,515,617
 
Non Financial Data:
Transactions (in millions) 3,928 3,221 22 % 11,191 9,445 18 %
 

(1) Non-operating expenses primarily consist of charges incurred with the refinancing of our debt in March 2012 and May 2011 and the termination of our interest rate swaps in March 2012.

       
Schedule 2
Vantiv, Inc.
Cash Net Income (Non-GAAP)

(Unaudited)

(in thousands, except share data)

 

See schedule 6 and 7 for a reconciliation of GAAP net income to cash net income.

 
Three Months Ended Nine Months Ended
September 30,   September 30, September 30,   September 30,
2012 2011 % Change 2012 2011 % Change
 
Revenue $ 466,736 $ 409,364 14 % $ 1,369,147 $ 1,183,374 16 %
Network fees and other costs 208,239   192,466   8 % 617,691   560,376   10 %
Net revenue 258,497 216,898 19 % 751,456 622,998 21 %
Sales and marketing 69,313 56,204 23 % 212,602 171,993 24 %
Other operating costs 39,823 32,296 23 % 117,451 95,335 23 %
General and administrative 17,503   17,015   3 % 55,558   47,280   18 %
Adjusted EBITDA(1) 131,858 111,383 18 % 365,845 308,390 19 %
Depreciation and amortization 11,039   8,093   36 % 31,026   24,280   28 %
Adjusted income from operations 120,819 103,290 17 % 334,819 284,110 18 %
Interest expense—net (10,056 ) (26,624 ) (62 )% (44,675 ) (79,874 ) (44 )%
Adjusted income before applicable income taxes 110,763 76,666 44 % 290,144 204,236 42 %
Income tax expense (at an effective tax rate of 38.5%)(2) 42,644   29,517   44 % 111,705   78,632   42 %
Cash net income(3) $ 68,119   $ 47,149   44 % $ 178,439   $ 125,604   42 %
 
Adjusted cash net income per share(4) $ 0.32 $ 0.83
 
Adjusted shares outstanding(5) 215,046,333 213,787,832
 
Non Financial Data:
Transactions (in millions) 3,928 3,221 22 % 11,191 9,445 18 %
 

Non-GAAP Financial Measures

This schedule presents net revenue, adjusted EBITDA, cash net income, and adjusted cash net income per share information. These 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.

Cash 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; (b) non-operating expenses primarily associated with the refinancing of our debt and the termination of our interest rate swaps in March 2012 and May 2011; (c) adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock; (d) share-based compensation; and (e) costs associated with our separation from Fifth Third Bank and acquisition and integration costs incurred in connection with our acquisitions. For purposes of providing better comparability, we also make adjustments in 2011 to reflect depreciation and amortization assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011 and for interest expense assuming the Company’s level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.

(1) See schedule 8 for a reconciliation of GAAP income from operations to adjusted EBITDA.

(2) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(3) Cash net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(4) Adjusted cash net income per share is calculated as cash net income divided by adjusted shares outstanding.

(5) Shares for the nine months ended September 30, 2012 are pro forma and weighted assuming the equity structure in place March 31, 2012, was in place January 1, 2012. The quarter to date and year to date adjusted shares outstanding include 83,919,136 Class B units that are excluded from the GAAP dilutive income per share calculation.

 
Schedule 3
Vantiv, Inc.
Segment Information

(Unaudited)

(in thousands)

 
Three Months Ended September 30, 2012
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 354,120 $ 112,616 $ $ 466,736
Network fees and other costs 177,084   31,155     208,239
Net revenue 177,036 81,461 258,497
Sales and marketing 63,046   6,267     69,313
Segment profit $ 113,990   $ 75,194   $   $ 189,184
 
Non-financial data:
Transactions (in millions) 3,047 881 3,928
Net revenue per transaction $ 0.0581 $ 0.0925 $ 0.0658
 
Three Months Ended September 30, 2011
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 299,318 $ 110,046 $ $ 409,364
Network fees and other costs 158,315   34,151     192,466
Net revenue 141,003 75,895 216,898
Sales and marketing 50,748   5,400   347   56,495
Segment profit $ 90,255   $ 70,495   $ (347 ) $ 160,403
 
Non-financial data:
Transactions (in millions) 2,396 825 3,221
Net revenue per transaction $ 0.0588 $ 0.0920 $ 0.0673
 
Nine Months Ended September 30, 2012
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 1,028,926 $ 340,221 $ $ 1,369,147
Network fees and other costs 517,499   100,192     617,691
Net revenue 511,427 240,029 751,456
Sales and marketing 193,394   19,208     212,602
Segment profit $ 318,033   $ 220,821   $   $ 538,854
 
Non-financial data:
Transactions (in millions) 8,613 2,578 11,191
Net revenue per transaction $ 0.0594 $ 0.0931 $ 0.0671
 
Nine Months Ended September 30, 2011
  Financial Institution   General  
Merchant Services Services Corporate/Other Total
Total revenue $ 853,739 $ 329,635 $ $ 1,183,374
Network fees and other costs 456,799   103,577     560,376
Net revenue 396,940 226,058 622,998
Sales and marketing 152,263   18,711   1,310   172,284
Segment profit $ 244,677   $ 207,347   $ (1,310 ) $ 450,714
 
Non-financial data:
Transactions (in millions) 6,918 2,527 9,445
Net revenue per transaction $ 0.0574 $ 0.0895 $ 0.0660
   
Schedule 4
Vantiv, Inc.
Condensed Consolidated Statements of Financial Position

(Unaudited)

(in thousands)

 

September 30,
2012

December 31,
2011
Assets
Current assets:
Cash and cash equivalents $ 380,757 $ 370,549
Accounts receivable—net 367,047 368,658
Related party receivable 4,394 4,361
Settlement assets 110,946 46,840
Prepaid expenses 11,512 8,642
Other 17,765   20,947
Total current assets 892,421 819,997
 
Customer incentives 19,709 17,493
Property and equipment—net 161,219 152,310
Intangible assets—net 837,001 916,198
Goodwill 1,532,374 1,532,374
Deferred taxes 12,292 4,292
Other assets 24,281   47,046
Total assets $ 3,479,297   $ 3,489,710
 
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses $ 213,017 $ 193,706
Related party payable 752 3,814
Settlement obligations 248,752 208,669
Current portion of note payable 52,500 16,211
Deferred income 9,830 7,313
Current maturities of capital lease obligations 5,068 4,607
Other 2,477   6,400
Total current liabilities 532,396 440,720
Long-term liabilities:
Note payable 1,176,480 1,738,498
Tax receivable agreement obligations 333,000
Capital lease obligations 9,552 12,322
Deferred taxes 9,263 9,263
Other 1,423   33,187
Total long-term liabilities 1,529,718 1,793,270
Total liabilities 2,062,114 2,233,990
 
Commitments and contingencies
Equity:
Total equity (1) 1,417,183   1,255,720
Total liabilities and equity $ 3,479,297   $ 3,489,710

 

(1) Includes equity attributable to non-controlling interests.

 
Schedule 5
Vantiv, Inc.
Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 
Nine Months Ended
September 30,   September 30,
2012 2011
Operating Activities:
Net income $ 53,289 $ 45,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 119,181 115,767
Loss on derivative assets 100
Amortization of customer incentives 4,567 2,574
Amortization and write-off of debt issuance costs 58,407 17,346
Share-based compensation expense 26,889 2,202
Deferred taxes (2,255 )
Other non-cash items 711
Change in operating assets and liabilities:
Decrease in accounts receivable and related party receivable 1,578 19,403
Decrease in net settlement assets and obligations (24,023 ) (31,380 )
Increase in customer incentives (6,783 ) (8,243 )
Decrease (increase) in prepaid and other assets 4,192 (708 )
Increase (decrease) in accounts payable and accrued expenses 11,333 (8,234 )
Decrease in payable to related party (3,062 ) (1,932 )
Increase (decrease) in other liabilities 1,332   (694 )
Net cash provided by operating activities 246,900   149,700  
 
Investing Activities:
Purchases of property and equipment (38,245 ) (46,232 )
Acquisition of customer portfolios and related assets (10,530 ) (1,226 )
Purchase of investments   (3,300 )
Net cash used in investing activities (48,775 ) (50,758 )
 
Financing Activities:
Proceeds from initial public offering, net of offering costs 460,913
Proceeds from follow-on offering, net of offering costs 33,512
Proceeds from issuance of long-term debt 1,248,750
Repayment of debt and capital lease obligations (1,793,074 ) (15,443 )
Payment of debt issuance costs (28,949 ) (6,276 )
Purchase of Class B units in Vantiv Holding from Fifth Third (33,512 )
Repurchase of Class A common stock (to satisfy tax withholding obligations) (16,126 )
Tax benefit from employee share-based compensation 13,436
Distribution to funds managed by Advent International Corporation (40,086 )
Distribution to non-controlling interests (32,781 ) (2,792 )
Net cash used in financing activities (187,917 ) (24,511 )
 
Net increase in cash and cash equivalents 10,208 74,431
Cash and cash equivalents—Beginning of period 370,549   236,512  
Cash and cash equivalents—End of period $ 380,757   $ 310,943  
 
Cash Payments:
Interest $ 50,720 $ 82,267
Taxes 12,247 5,950
Non-cash Items:
Issuance of tax receivable agreements $ 333,000 $
Assets acquired under capital lease obligations 1,202 18,702
Assets acquired under debt obligations 19,227
Accrual of secondary offering costs 3,000
 
Schedule 6
Vantiv, Inc.
Reconciliation of GAAP Net Income to Cash Net Income

(Unaudited)

(in thousands)

 
Three Months Ended September 30, 2012
GAAP   Transition, Acquisition
and Integration(1)
  Share-Based
Compensation
  Comparability
Adjustments
  Other
Adjustments
Cash Net Income
 
Revenue $ 466,736 $ $ $ $ $ 466,736
Network fees and other costs 208,239           208,239  
Net revenue 258,497 258,497
Sales and marketing 69,313 69,313
Other operating costs 40,376 (553 ) 39,823
General and administrative 28,600 (1,701 ) (9,396 ) 17,503
Depreciation and amortization 40,618         (29,579 ) (2) 11,039  
Income from operations 79,590 2,254 9,396 29,579 120,819
Interest expense—net (10,056 ) (10,056 )
Non-operating expenses            
Income before applicable income taxes 69,534 2,254 9,396 29,579 110,763
Income tax expense 20,895   868   3,617     17,264   (3) 42,644  
Net income(4) $ 48,639   $ 1,386   $ 5,779   $   $ 12,315   $ 68,119  
 
Three Months Ended September 30, 2011
GAAP   Transition, Acquisition
and Integration(1)
  Share-Based
Compensation
  Comparability
Adjustments
Other
Adjustments
Cash Net Income
 
Revenue $ 409,364 $ $ $ $ $ 409,364
Network fees and other costs 192,466           192,466  
Net revenue 216,898 216,898
Sales and marketing 56,495 (291 ) 56,204
Other operating costs 35,028 (2,732 ) 32,296
General and administrative 18,896 (1,072 ) (809 ) 17,015
Depreciation and amortization 40,066       (931 ) (5) (31,042 ) (2) 8,093  
Income from operations 66,413 4,095 809 931 31,042 103,290
Interest expense—net (26,198 ) (426 ) (6) (26,624 )
Non-operating expenses            
Income before applicable income taxes 40,215 4,095 809 505 31,042 76,666
Income tax expense 11,532   1,576   311   195   15,903   (3) 29,517  
Net income(4) $ 28,683   $ 2,519   $ 498   $ 310   $ 15,139   $ 47,149  
 

Non-GAAP Financial Measures

This schedule presents net revenue and cash net income. These 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 costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions.

(2) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.

(3) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(4) Net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(5) Depreciation and amortization represents expense associated with our property and equipment, assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011.

(6) Represents adjustment to reflect what our 2011 interest expense would have been if the Company’s level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.

 
Schedule 7
Vantiv, Inc.
Reconciliation of GAAP Net Income to Cash Net Income

(Unaudited)

(in thousands)

 
Nine Months Ended September 30, 2012
GAAP   Transition, Acquisition
and Integration(1)
  Share-Based
Compensation
  Comparability
Adjustments
  Other
Adjustments
Cash Net Income
 
Revenue $ 1,369,147 $ $ $ $ $ 1,369,147
Network fees and other costs 617,691           617,691  
Net revenue 751,456 751,456
Sales and marketing 212,602 212,602
Other operating costs 119,802 (2,351 ) 117,451
General and administrative 86,387 (3,940 ) (26,889 ) 55,558
Depreciation and amortization 119,181         (88,155 ) (2) 31,026  
Income from operations 213,484 6,291 26,889 88,155 334,819
Interest expense—net (44,675 ) (44,675 )
Non-operating expenses (92,672 )       92,672   (3)  
Income before applicable income taxes 76,137 6,291 26,889 180,827 290,144
Income tax expense 22,848   2,422   10,352     76,083   (4) 111,705  
Net income(5) $ 53,289   $ 3,869   $ 16,537   $   $ 104,744   $ 178,439  
 
Nine Months Ended September 30, 2011
GAAP   Transition, Acquisition
and Integration(1)
  Share-Based
Compensation
  Comparability
Adjustments
Other
Adjustments
Cash Net Income
 
Revenue $ 1,183,374 $ $ $ $ $ 1,183,374
Network fees and other costs 560,376           560,376  
Net revenue 622,998 622,998
Sales and marketing 172,284 (291 ) 171,993
Other operating costs 107,748 (12,413 ) 95,335
General and administrative 68,503 (19,021 ) (2,202 ) 47,280
Depreciation and amortization 115,767       1,734   (6) (93,221 ) (2) 24,280  
Income from operations 158,696 31,725 2,202 (1,734 ) 93,221 284,110
Interest expense—net (85,771 ) 5,897 (7) (79,874 )
Non-operating expenses (13,799 )       13,799   (3)  
Income before applicable income taxes 59,126 31,725 2,202 4,163 107,020 204,236
Income tax expense 14,083   12,215   848   1,603   49,883   (4) 78,632  
Net income(5) $ 45,043   $ 19,510   $ 1,354   $ 2,560   $ 57,137   $ 125,604  
 

Non-GAAP Financial Measures

This schedule presents net revenue and cash net income. These 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 costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions.

(2) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.

(3) Represents non-operating expenses primarily associated with the refinancing of our debt in 2012 and 2011 and the termination of our interest rate swaps in 2012.

(4) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(5) Net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(6) Depreciation and amortization represents expense associated with our property and equipment, assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011.

(7) Represents adjustment to reflect what our 2011 interest expense would have been if the Company’s level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.

       
Schedule 8
Vantiv, Inc.
Reconciliation of GAAP Income from Operations to Adjusted EBITDA

(Unaudited)

(in thousands)

 
Three Months Ended Nine Months Ended
September 30,   September 30, September 30,   September 30,
2012 2011 % Change 2012 2011 % Change
 
Income from operations $ 79,590 $ 66,413 20 % $ 213,484 $ 158,696 35 %
Depreciation and amortization 40,618 40,066 1 % 119,181 115,767 3 %
Transition, acquisition and integration costs(1) 2,254 4,095 (45 )% 6,291 31,725 (80 )%
Share-based compensation 9,396   809   NM 26,889   2,202   NM
Adjusted EBITDA $ 131,858   $ 111,383   18 % $ 365,845   $ 308,390   19 %

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 income from operations, and such measure may not be comparable to those reported by other companies.

(1) Represents costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions.

Source: Vantiv, Inc.

Nathan Rozof, CFA

Senior Vice President, Investor Relations

(866) 254-4811

(513)-900-4811

IR@vantiv.com