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Fourth Quarter and Full-Year 2017 Results
RNS Number : 2369G
Worldpay, Inc
28 February 2018
 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

 

FOR IMMEDIATE RELEASE

 

February 28, 2018

 

 

Worldpay, Inc.

 

Worldpay Reports Fourth Quarter and Full-Year 2017 Results

 

Strong Results Highlight Positive Outlook for Newly Combined Company

 

CINCINNATI and LONDON, February 28, 2018 - Worldpay, Inc. (NYSE: WP, LSE: WPY) ("Worldpay" or the "Company") today announced financial results for the fourth quarter and full-year financial results for predecessor companies Vantiv, Inc. and Worldpay Group plc for the quarterly and full-year periods ended December 31, 2017. The Company also provided guidance for the combined Company for the first quarter and full-year 2018 and furnished non-GAAP supplemental "historical as if combined" pro forma financial results for 2017 and 2016. Vantiv, Inc.'s acquisition of Worldpay Group plc closed on January 16, 2018.

 

"Both of our heritage companies performed well during 2017's fourth quarter, creating momentum for Worldpay as the leader in the rapidly expanding global payments industry," said Charles Drucker, chairman and co-chief executive officer.

 

Philip Jansen, co-chief executive officer at Worldpay, added, "Differentiated by our technological capabilities, distribution, scale, and talented colleagues, Worldpay is uniquely able to power global integrated omni-commerce, positioning us to do more for our clients together than either company could have achieved on its own."

 

Vantiv, Inc. Fourth Quarter and Full-Year 2017 Results

(unaudited)

(in millions, except share data)


Three Months Ended




Year Ended




December 31, 2017


December 31, 2016


% Change


December 31, 2017


December 31, 2016


% Change

Total revenue

$

1,066



$

955



12%


$

4,026



$

3,579



13%

Net revenue

569



502



13%


2,123



1,905



11%

Merchant Services

484



412



17%


1,787



1,546



16%

Financial Institution Services

85



90



(5)%


336



359



(6)%

Adjusted EBITDA

282



248



13%


1,018



912



12%

GAAP Net loss per diluted share attributable to Vantiv, Inc.

$

(0.37

)


$

0.29



(228)%


$

0.80



$

1.32



(39)%

Adjusted net income per share

$

0.97



$

0.75



29%


$

3.37



$

2.73



23%

 

 

Worldpay Group plc Fourth Quarter and Full-Year 2017 Results

(unaudited)

(in millions)










December 31, 2017


December 31, 2016


% Change

Foreign Currency Neutral


December 31, 2017


December 31, 2016


% Change

Foreign Currency Neutral

Total revenue

£

1,293



£

1,235



5%

8%


£

5,071



£

4,541



12%

9%

Net Revenue

317



301



5%

7%


1,221



1,124



9%

7%

Gross Profit

277



266



4%

6%


1,067



985



8%

7%

Global eCom

113



93



21%

21%


424



357



19%

19%

WPUK

104



106



(1)%

(1)%


404



397



2%

2%

WPUS

60



67



(10)%

(5)%


239



231



3%

(2)%

Underlying EBITDA

143



130



10%

11%


520



468



11%

11%

 

 

Worldpay, Inc. Combined Company First Quarter and Full-Year Financial Outlook

(in millions, except share data)


Three Months Ended March 31,


Year Ended December 31,


2018 Outlook(1)


2017 Actuals(2)


2018 Outlook(1)


2017 Actuals(2)

Net revenue

$825 - $840


$470


 $3,800 - $3,890


$2,123

GAAP Net income per diluted share attributable to Worldpay, Inc

$(0.51) - $(0.46)


$0.17


$0.56 - $0.71


$0.80

Adjusted net income per share

$0.76 - $0.79


$0.68


$3.66 - $3.76


$3.37

 

(1) Combined company guidance excludes Worldpay Group plc Net Revenue and EPS contribution for the period prior to the transaction closing from January 1, 2018 - January 15, 2018. Combined company guidance is based on an assumed exchange rate of U.S. dollar/pound sterling of $1.35.

(2)  2017 actuals include Vantiv, Inc. results only.

 

Assuming the transaction closed on January 1, 2017,  Net Revenue outlook for three months and full year ended 2018 would have been $890-$905 million and $3,865-$3,955 million, representing revenue growth of 9-11% and 7-9%, respectively.

 

Supplemental Information

The company is providing non-GAAP supplemental information to illustrate what the combined Vantiv, Inc./Worldpay Group plc adjusted financial results would have been, given the assumptions outlined in the supplemental materials, had the transaction been effective at the beginning of 2016. Refer to the "Supplemental Information" section that begins on page 12.

 

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss the fourth quarter and full-year 2017 financial results today at 8:00 a.m. ET. The conference call can be accessed live over the phone in the U.S. and Canada by dialing (888) 710-4011, in the U.K. by dialing 0800 404 7655, or for international callers (719) 325-4891, and referencing code 5521502. A replay will be available approximately two hours after the call concludes and can be accessed for the U.S. and Canada by dialing (888) 203-1112, in the U.K. by dialing 0808 101 1153, or for international callers (719) 457-0820, and entering replay passcode 5521502. The call will also be webcast live from the Company's investor relations website at http://investor.worldpay.com. Following completion of the call, a recorded replay of the webcast will be available on the website.

 

About Worldpay, Inc.

Worldpay, Inc. (NYSE: WP; LSE: WPY) is a leading payments technology company with unique capability to power global integrated omni-commerce. With industry-leading scale and an unmatched integrated technology platform, Worldpay offers clients a comprehensive suite of products and services globally, delivered through a single provider.

 

Worldpay processes over 40 billion transactions annually through more than 300 payment types across 146 countries and 126 currencies. The company's growth strategy includes expanding into high-growth markets, verticals and customer segments, including global eCommerce, Integrated Payments and B2B.

 

Worldpay, Inc. was formed in 2018 through the combination of the No. 1 merchant acquirers in the U.S. and the U.K. Worldpay, Inc. trades on the New York Stock Exchange as "WP" and the London Stock Exchange as "WPY."

 

Non-GAAP and Pro Forma Financial Measures

This earnings release presents non-GAAP and pro forma financial information including net revenue, adjusted EBITDA, Underlying EBITDA, adjusted net income, and 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 adjusted 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 risks are discussed in the company's filings with the U.S. Securities and Exchange Commission (the "SEC") and include, but are not limited to: (i) our ability to adapt to developments and change in our industry; (ii) competition; (iii) unauthorized disclosure of data or security breaches; (iv) systems failures or interruptions; (v) our ability to expand our market share or enter new markets; (vi) our ability to successfully integrate the businesses of our predecessor companies; (vii) our ability to identify and complete acquisitions, joint ventures and partnerships; (viii) failure to comply with applicable requirements of Visa, MasterCard or other payment networks or changes in those requirements; (ix) our ability to pass along fee increases; (x) termination of sponsorship or clearing services; (xi) loss of clients or referral partners; (xii) reductions in overall consumer, business and government spending; (xiii) fraud by merchants or others; (xiv) a decline in the use of credit, debit or prepaid cards; (xv) consolidation in the banking and retail industries; (xvi) changes in foreign currency exchange rates; (xvii) the effects of governmental regulation or changes in laws; (xviii) geopolitical, regulatory, tax and business risks associated with our international operations; and (xix) outcomes of future litigation or investigations and our dual-listings with the NYSE and LSE. 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 most recently filed Annual Report on Form 10-K 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.

 

Pursuant to its obligations under the U.S. Securities Exchange Act of 1934, as amended, the Company will shortly file a report on Form 8-K with the SEC attaching the Company's Earnings Release in substantially the same form as set out above, as well as the Company's Fourth Quarter and Full Year 2017 Investor Presentation, as exhibits to the Form 8-K. A copy of this Form 8-K and its exhibits will be available on the SEC's website at http://www.sec.gov.

 

CONTACTS

 

Investors

Nathan Rozof, CFA or Ignatius Njoku

Investor Relations

+1 (866) 254-4811

+1 (513) 900-4811

IR@worldpay.com

 

Media

Andrew Ciafardini

Corporate Communications

+1 (513) 900-5308

Andrew.Ciafardini@worldpay.com

 

 

 

 



Schedule 1

Worldpay, Inc.

Consolidated Statements of Income

(Unaudited)

(in thousands, except share data)

 


Three Months Ended




Year Ended




December 31,


December 31,




December 31,


December 31,




2017


2016


% Change


2017


2016


% Change

Total revenue

$

1,065,746



$

955,132



12

%


$

4,026,477



$

3,578,991



13

%

Network fees and other costs

496,807



452,720



10

%


1,903,165



1,674,230



14

%

Net revenue(1)

568,939



502,412



13

%


2,123,312



1,904,761



11

%

Sales and marketing

172,424



148,521



16

%


669,506



582,251



15

%

Other operating costs

84,318



74,771



13

%


318,665



294,235



8

%

General and administrative

105,469



55,876



89

%


295,101



189,707



56

%

Depreciation and amortization

81,529



70,504



16

%


318,493



270,054



18

%

Income from operations

125,199



152,740



(18

)%


521,547



568,514



(8

)%

Interest expense-net

(43,220

)


(28,213

)


53

%


(140,661

)


(109,534

)


28

%

Non-operating income (expense)(2)

419,154



(21,307

)


NM


432,826



(36,256

)


NM

Income before applicable income taxes

501,133



103,220



385

%


813,712



422,724



92

%

Income tax expense(3)

547,501



40,262



NM


631,020



141,853



345

%

Net (loss) income

(46,368

)


62,958



(174

)%


182,692



280,871



(35

)%

Less: Net income attributable to non-controlling interests

(13,302

)


(15,111

)


(12

)%


(52,582

)


(67,663

)


(22

)%

Net (loss) income attributable to Worldpay, Inc.

$

(59,670

)


$

47,847



(225

)%


$

130,110



$

213,208



(39

)%

Net (loss) income per share attributable to Worldpay, Inc. Class A common stock:












Basic

$

(0.37

)


$

0.30



(223

)%


$

0.81



$

1.37



(41

)%

Diluted(4)

$

(0.37

)


$

0.29



(228

)%


$

0.80



$

1.32



(39

)%

Shares used in computing net (loss) income per share of Class A common stock:












Basic

161,554,183



157,355,173





161,293,062



156,043,636




Diluted

161,554,183



162,201,382





162,807,146



162,115,549




Non Financial Data:












Transactions (in millions)

6,877



6,700



3

%


26,289



24,973



5

%


 

(1) Net revenue is revenue, less network fees and other costs which primarily consist of pass through expenses incurred by us in connection with providing processing services to our clients, including Visa and Mastercard network association fees and payment network fees.

(2) Non-operating income for the three months and year ended December 31, 2017 primarily consists of a gain of approximately $418.9 million relating to the impact to the tax receivable agreement ("TRA") liability as a result of the Tax Cuts and Jobs Act ("Tax Reform") being enacted on December 22, 2017 and an unrealized gain of approximately $8.7 million for the three months and $33.1 million for the year ended, respectively, relating to the change in fair value of a deal contingent forward entered into in connection with the Worldpay Group plc acquisition, partially offset by the change in fair value of a TRA entered into as part of the acquisition of Mercury ("Mercury TRA"). Non-operating expense for the three months and year ended December 31, 2016 relates to the change in fair value of the Mercury TRA as well as expenses relating to the refinancing of our senior secured credit facilities in October 2016.

(3) Primarily includes an adjustment of $363.6 million to deferred taxes for the change in tax rates and the impact to the TRA discussed in (2) above, both resulting from the Tax Reform enacted on December 22, 2017.

(4) 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. During the three months and year ended December 31, 2017, approximately 15.3 million and 27.2 million weighted-average dilutive Class B units of Vantiv Holding were excluded in computing diluted net income per share because including them would have an antidilutive effect. During the three months and year ended December 31, 2016, approximately 35.0 million weighted-average Class B units of Vantiv Holding were excluded in computing diluted net income per share because including them would have an antidilutive effect. As the Class B units of Vantiv Holding were not included, the numerator used in the calculation of diluted net income per share was equal to the numerator used in the calculation of basic net income per share for the three months and year ended December 31, 2017 and 2016. Additionally, due to the net loss for the three months ended December 31, 2017, any remaining potentially dilutive securities were also excluded from the denominator in computing dilutive net income per share.

 

 

 



Schedule 2

Worldpay, Inc.

Adjusted Net Income

(Unaudited)

(in thousands, except share data)

 



Three Months Ended




Year Ended





December 31,


December 31,




December 31,


December 31,





2017


2016


% Change


2017


2016


% Change

Income before applicable income taxes


$

501,133



$

103,220



385

%


$

813,712



$

422,724



92

%

Non-GAAP Adjustments:













Transition, acquisition and integration costs(1)(3)


62,260



15,226



309

%


130,146



37,558



247

%

Share-based compensation(3)


12,787



9,979



28

%


47,855



35,871



33

%

Intangible amortization(2)(3)


56,369



48,118



17

%


217,849



190,822



14

%

Non-operating (income) expenses(4)


(419,154

)


21,307



NM


(432,826

)


36,256



NM

Non-GAAP adjusted income before applicable income taxes


213,395



197,850



8

%


776,736



723,231



7

%

Less: Adjustments













Adjusted tax expense(5)


38,989



50,108



(22

)%


133,804



184,203



(27

)%

Adjusted tax rate


18

%


25

%




17

%


25

%
















Other(6)


661



(381

)


NM


1,804



1,200



50

%

Adjusted net income


$

173,745



$

148,123



17

%


$

641,128



$

537,828



19

%














Adjusted net income per share


$

0.97



$

0.75



29

%


$

3.37



$

2.73



23

%

Adjusted shares outstanding(7)


178,625,196



197,244,208





190,052,282



197,158,375




 

Non-GAAP and Adjusted Financial Measures

This schedule presents non-GAAP and adjusted 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, and such measures may not be comparable to those reported by other companies.

 


Adjusted net income is derived from GAAP income before applicable income taxes and adjusted for the following items described below:

(1) Represents acquisition and integration costs incurred in connection with our acquisitions, charges related to employee termination benefits and other transition activities. Included in Transition, acquisition and integration costs for the three months and year ended December 31, 2017 is a charge of $3.5 million and $41.5 million, respectively, to G&A related to a settlement agreement stemming from legacy litigation of an acquired company.

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

(3) Below are the adjustments to Other operating costs, General and administrative and Depreciation and amortization.



Three Months Ended December 31, 2017


Three Months Ended December 31, 2016


Transition, Acquisition & Integration

Share-Based Compensation

Amortization Of Intangible Assets


Transition, Acquisition & Integration

Share-Based Compensation

Amortization Of Intangible Assets

Other operating costs

$

4,018


$

-


$

-



$

1,133


$

-


$

-


General and administrative

58,242


12,787


-



14,093


9,979


-


Depreciation and amortization

-


-


56,369



-


-


48,118


Total adjustments

$

62,260


$

12,787


$

56,369



$

15,226


$

9,979


$

48,118


 



Year Ended December 31, 2017


Year Ended December 31, 2016


Transition, Acquisition & Integration

Share-Based Compensation

Amortization Of Intangible Assets


Transition, Acquisition & Integration

Share-Based Compensation

Amortization Of Intangible Assets

Other operating costs

$

14,864


$

-


$

-



$

8,877


$

-


$

-


General and administrative

115,282


47,855


-



28,681


35,871


-


Depreciation and amortization

-


-


217,849



-


-


190,822


Total adjustments

$

130,146


$

47,855


$

217,849



$

37,558


$

35,871


$

190,822


 

(4) Non-operating (income) expense for the three months and year ended December 31, 2017 and 2016 primarily consists of the following:



Three Months Ended December 31,


Year Ended December 31,



2017


2016


2017


2016

Impact of Tax Reform to TRA liability


$

(418,858

)


$

-



$

(418,858

)


$

-


Unrealized gain related to change in fair value of deal contingent forward


(8,743

)


-



(33,108

)


-


Change in fair value of Mercury TRA


3,263



4,594



13,971



19,474


Expenses related to refinancing of senior secured credit facilities and other


5,184



16,713



5,169



16,782


Non-operating (income) expense


$

(419,154

)


$

21,307



$

(432,826

)


$

36,256


 

(5) Represents adjusted income tax expense to reflect an effective tax rate of 34% for 2017 and 36% for 2016, 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 2017 effective tax rate includes the impact of the excess tax benefits relating to stock compensation as a result of the Company adopting new stock compensation accounting guidance on January 1, 2017 which requires those benefits to be recorded in income tax expense.  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.

(6) Represents the non-controlling interest, net of pro forma income tax expense discussed in (5) above, associated with a consolidated joint venture.

(7) The adjusted shares outstanding include 17.1 million and 27.2 million weighted average Class B units of Vantiv Holding and other potentially dilutive securities that are excluded from the GAAP dilutive net income per share calculation for the three months and year ended December 31, 2017, respectively, because including them would have an antidilutive effect. The adjusted shares outstanding include 35.0 million weighted-average Class B units that are excluded from the GAAP dilutive net income per share calculation for the three months and year ended December 31, 2016 because including them would have an antidilutive effect.



Schedule 3

Worldpay, Inc.

Segment Information

(Unaudited)

(in thousands)

 

Merchant Services

 


Three Months Ended December 31,




2017


2016


% Change

Total revenue

$

952,192



$

831,918



14

%

Network fees and other costs

468,640



419,470



12

%

Net revenue

483,552



412,448



17

%

Sales and marketing

166,851



141,835



18

%

Segment profit

$

316,701



$

270,613



17

%







Non-financial data:






Transactions (in millions)

6,031



5,711



6

%

Net revenue per transaction

$

0.0802



$

0.0722



11

%

 


Year Ended December 31,




2017


2016


% Change

Total revenue

$

3,567,533



$

3,082,951



16

%

Network fees and other costs

1,780,179



1,537,072



16

%

Net revenue

1,787,354



1,545,879



16

%

Sales and marketing

646,479



557,942



16

%

Segment profit

$

1,140,875



$

987,937



15

%







Non-financial data:






Transactions (in millions)

22,747



20,955



9

%

Net revenue per transaction

$

0.0786



$

0.0738



7

%

 

 

Financial Institution Services

 


Three Months Ended December 31,




2017


2016


% Change

Total revenue

$

113,554



$

123,214



(8

)%

Network fees and other costs

28,167



33,250



(15

)%

Net revenue

85,387



89,964



(5

)%

Sales and marketing

5,573



6,686



(17

)%

Segment profit

$

79,814



$

83,278



(4

)%







Non-financial data:






Transactions (in millions)

846



989



(14

)%

Net revenue per transaction

$

0.1009



$

0.091



11

%

 


Year Ended December 31,




2017


2016


% Change

Total revenue

$

458,944



$

496,040



(7

)%

Network fees and other costs

122,986



137,158



(10

)%

Net revenue

335,958



358,882



(6

)%

Sales and marketing

23,027



24,309



(5

)%

Segment profit

$

312,931



$

334,573



(6

)%







Non-financial data:






Transactions (in millions)

3,542



4,018



(12

)%

Net revenue per transaction

$

0.0948



$

0.0893



6

%



Schedule 4

Worldpay, Inc.

Condensed Consolidated Statements of Financial Position

(Unaudited) (in thousands)



December 31, 2017


December 31, 2016

Assets





Current assets:





Cash and cash equivalents


$

126,503



$

139,148


Accounts receivable-net


985,888



940,052


Related party receivable


736



1,751


Settlement assets


142,010



152,490


Prepaid expenses


33,524



39,229


Other


83,951



15,188


Total current assets


1,372,612



1,287,858







  Customer incentives


68,365



67,288


  Property, equipment and software-net


473,723



348,553


  Intangible assets-net


678,532



787,820


  Goodwill


4,172,964



3,738,589


  Deferred taxes


739,524



771,139


  Proceeds from senior unsecured notes


1,135,205



-


  Other assets


26,048



42,760


Total assets


$

8,666,973



$

7,044,007







Liabilities and equity





Current liabilities:





Accounts payable and accrued expenses


$

622,871



$

471,979


Related party payable


9,013



3,623


Settlement obligations


816,235



801,381


Current portion of note payable


107,897



131,119


Current portion of tax receivable agreement obligations to related parties


190,220



191,014


Current portion of tax receivable agreement obligations


55,324



60,400


Deferred income


18,879



7,907


Current maturities of capital lease obligations


8,044



7,870


Other


5,975



13,719


Total current liabilities


1,834,458



1,689,012


Long-term liabilities:





Note payable


5,586,348



3,089,603


Tax receivable agreement obligations to related parties


489,780



451,318


Tax receivable agreement obligations


45,247



86,640


Capital lease obligations


4,456



13,223


Deferred taxes


65,617



62,148


Other


40,413



44,774


Total long-term liabilities


6,231,861



3,747,706


Total liabilities


8,066,319



5,436,718







Commitments and contingencies





Equity:





Total equity (1)


600,654



1,607,289


Total liabilities and equity


$

8,666,973



$

7,044,007


 


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



Schedule 5

Worldpay, Inc.

Consolidated Statements of Cash Flows

(Unaudited) (in thousands)

Year Ended


December 31, 2017


December 31, 2016

Operating Activities:




Net income

$

182,692



$

280,871


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization expense

318,493



270,054


Amortization of customer incentives

24,347



25,818


Amortization and write-off of debt issuance costs

5,989



22,584


Unrealized gain on foreign currency forward

(33,108

)


-


Share-based compensation expense

47,855



35,871


Deferred tax expense

596,802



79,668


Excess tax benefit from share-based compensation

-



(12,167

)

Tax receivable agreements non-cash items

(421,663

)


(3,928

)

Other

3,966



467


Change in operating assets and liabilities:




Accounts receivable and related party receivable

(38,914

)


(212,862

)

Net settlement assets and obligations

25,334



79,719


Customer incentives

(24,502

)


(42,548

)

Prepaid and other assets

(1,214

)


39,636


Accounts payable and accrued expenses

125,103



92,749


Payable to related party

5,390



(1,075

)

Other liabilities

(31,759

)


(9,722

)

Net cash provided by operating activities

784,811



645,135


Investing Activities:




Purchases of property and equipment

(110,805

)


(118,194

)

Acquisition of customer portfolios and related assets and other

(41,784

)


(23,627

)

Purchase of derivative instruments

-



(21,523

)

Cash used in acquisitions, net of cash acquired

(531,534

)


(406,777

)

Net cash used in investing activities

(684,123

)


(570,121

)

Financing Activities:




Proceeds from issuance of long-term debt

1,270,000



3,234,375


Proceeds from issuance of senior unsecured notes

1,135,205



-


Repayment of debt and capital lease obligations

(143,708

)


(3,084,922

)

Borrowings on revolving credit facility

8,442,000



1,250,000


Repayment of revolving credit facility

(8,217,000

)


(1,250,000

)

Payment of debt issuance costs

(27,621

)


(20,115

)

Proceeds from issuance of Class A common stock under employee stock plans

14,566



15,389


Purchase and cancellation of Class A common stock

(1,268,057

)


-


Repurchase of Class A common stock

-



(81,369

)

Repurchase of Class A common stock (to satisfy tax withholding obligations)

(10,092

)


(6,248

)

Settlement of certain tax receivable agreements

(93,902

)


(149,022

)

Payments under tax receivable agreements

(46,472

)


(40,271

)

Excess tax benefit from share-based compensation

-



12,167


Distribution to non-controlling interests

(22,552

)


(12,934

)

Other

-



(12

)

Net cash used in financing activities

1,032,367



(132,962

)

Net decrease in cash and cash equivalents

1,133,055



(57,948

)

Cash and cash equivalents-Beginning of period

139,148



197,096


Cash and cash equivalents-End of period

$

1,272,203



$

139,148


Cash Payments:




Interest

$

123,056



$

102,695


Income taxes

45,801



51,140


Non-cash Items:




Issuance of tax receivable agreements to related parties

$

647,507



$

171,162


Schedule 6

Worldpay, Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(Unaudited)

(in thousands)

 



Three Months Ended




Year Ended





December 31,


December 31,




December 31,


December 31,





2017


2016


% Change


2017


2016


% Change

Net (loss) income


$

(46,368

)


$

62,958



(174

)%


$

182,692



$

280,871



(35

)%

Income tax expense(1)


547,501



40,262



NM


631,020



141,853



345

%

Non-operating (income) expenses(2)


(419,154

)


21,307



NM


(432,826

)


36,256



NM

Interest expense-net


43,220



28,213



53

%


140,661



109,534



28

%

Share-based compensation


12,787



9,979



28

%


47,855



35,871



33

%

Transition, acquisition and integration costs(3)


62,260



15,226



309

%


130,146



37,558



247

%

Depreciation and amortization


81,529



70,504



16

%


318,493



270,054



18

%

Adjusted EBITDA


$

281,775



$

248,449



13

%


$

1,018,041



$

911,997



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) See note (3) in Schedule 1.

(2) See note (4) in Schedule 2.

(3) See note (3) in Schedule 2.

 



Schedule 7

Worldpay, Inc.

Outlook Summary

(Unaudited)

 


First Quarter Financial Outlook


Full Year Financial Outlook


Three Months Ended March 31,


Year Ended December 31,


2018 Outlook(1)


2017 Actual(2)


2018 Outlook(1)


2017 Actual(2)

GAAP net income per share attributable to Worldpay, Inc.

($0.51) - ($0.46)


$0.17



$0.56 - $0.71


$0.80


Adjustments to reconcile GAAP to non-GAAP adjusted net income per share(3)

$1.27 - $1.25


$0.51



$3.10 - $3.05


$2.57


Adjusted net income per share

$0.76 - $0.79


$0.68



$3.66 - $3.76


$3.37


 

Non-GAAP and Adjusted Financial Measures

This schedule presents non-GAAP and adjusted 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, and such measures may not be comparable to those reported by other companies.

 


(1) Combined company guidance excludes Worldpay Group plc EPS contribution for the period prior to the transaction closing from January 1, 2018 to January 15, 2018. Combined company guidance is based on an assumed exchange rate of U.S. dollar/pound sterling of $1.35.

(2) 2017 actuals include Vantiv, Inc. results only.

(3) Represents estimated ranges of adjustments for the following items: (a) acquisition and integration costs incurred in connection with our acquisitions, charges related to employee termination benefits and other transition activities; (b) share-based compensation; (c) amortization of intangible assets acquired in business combinations and customer portfolio and related asset acquisitions; (d) non-operating expense is primarily associated with the change in the fair value of a TRA entered into as part of the acquisition of Mercury and a realized gain of approximately $56 million relating to the settlement of a deal contingent forward entered into in connection with the acquisition of Worldpay Group plc, (e) adjustments to income tax expense to reflect an effective tax rate for the three months ended March 31, 2018 and the full year 2018 based on Tax Reform and a new tax structure, assuming conversion of the Fifth Third Bank non-controlling interests into shares of Class A common stock, including the tax effect of adjustments described above; 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.

 

 



PRELIMINARY ADJUSTED COMBINED SUPPLEMENTAL INFORMATION

 

We are providing this preliminary supplemental non-GAAP (Generally Accepted Accounting Principles) information to illustrate what the combined Vantiv, Inc./Worldpay Group plc (Company renamed Worldpay, Inc.) would have been had the transactions been effective at the beginning of 2016 with the new segment reporting structure, given the assumptions contained therein.

 

Management uses the preliminary adjusted combined non-GAAP supplemental information for purposes of evaluating business unit and consolidated company performance. The company therefore believes that the non-GAAP measures presented provide useful information to investors by allowing them to view the company's businesses through the eyes of management, facilitating comparison of results across historical periods and providing a focus on the underlying ongoing operating performance of its businesses.

 

The company uses the preliminary adjusted combined non-GAAP supplemental information to supplement the financial information presented for Vantiv, Inc. on a GAAP historical basis. This non-GAAP supplemental information is not to be considered in isolation from or as a substitute for the related GAAP measures and should be read only in conjunction with financial information presented on a GAAP basis.

 

The preliminary historical adjusted combined financial information contained in the following supplemental information is for informational purposes only. These results do not necessarily reflect what the historical results of Worldpay, Inc. would have been if the acquisition of Worldpay Group plc had occurred on January 1, 2016. Nor is this information necessarily indicative of the future results of operations of Worldpay, Inc. The preparation of the preliminary adjusted combined financial information includes the use of estimates that may not have been accurate and assumptions that may not have been valid had the transactions occurred on January 1, 2016. However management believes them to be reasonable.

 

The preliminary historical adjusted combined financial information is not pro forma information prepared in accordance with Article 11 of SEC regulation S-X, and the preparation of information in accordance with Article 11 would result in a significantly different presentation.

 

The preliminary historical adjusted combined financial information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual amounts to differ materially from those anticipated. See "Risk Factors" and "Cautionary Statements Regarding Forward Looking Information" included in our 2017 Annual Report on Form 10-K or as amended in subsequent filings.

 

The preliminary historical adjusted combined amounts reflect the historical combined results of Vantiv, Inc. and Worldpay Group plc., including information for the following combined company segments.

 

Merchant Solutions

 

Merchant Solutions primarily consists of Vantiv, Inc.'s Direct, Independent Sales Organizations (ISOs), Merchant Bank sales channels and Worldpay Group plc's U.S. and U.K segments.

 

Technology Solutions

 

Technology Solutions primarily consists of Vantiv, Inc.'s eCommerce, Paymetric, Integrated Payments sales channels and Worldpay Group plc's Global eCommerce segments.

 

Issuer Solutions

 

Issuer Solutions primarily consists of Vantiv, Inc.'s Financial Institutions Services segment.

 



Supplemental Schedule 1

Worldpay, Inc.

Combined Consolidated Statements of Income

(Unaudited)

(in thousands)

 



2017


2016



Q1


Q2


Q3


Q4


YTD


YTD

Total revenue


$

1,417,254



$

1,535,796



$

1,575,587



$

1,634,324



$

6,162,961



$

5,565,711


Network fees and other costs


602,123



627,102



640,888



670,901



2,541,014



2,193,627


Net revenue(1)


815,131



908,694



934,699



963,423



3,621,947



3,372,084


Sales and marketing


251,479



263,350



267,866



261,404



1,044,099



988,555


Other operating costs(2)


134,030



144,498



148,113



149,961



576,602



528,789


General and administrative(3)


79,660



70,071



76,706



79,720



306,157



310,730


Depreciation and amortization(4)


35,246



37,191



41,771



39,342



153,550



126,744


Income from operations


314,716



393,584



400,243



432,996



1,541,539



1,417,266


Interest expense-net


75,628



78,524



83,700



88,844



326,696



310,892


Income before applicable income taxes


239,088



315,060



316,543



344,152



1,214,843



1,106,374


Income tax expense(5)


37,440



59,602



58,713



66,046



221,801



267,176


Tax rate(5)


16

%


19

%


19

%


19

%


18

%


24

%

Other(6)


(256

)


(428

)


(459

)


(661

)


(1,804

)


(1,200

)

Adjusted net income


$

201,392



$

255,030



$

257,371



$

277,445



$

991,238



$

837,998


 

Non-GAAP and Adjusted Financial Measures

This schedule presents non-GAAP and adjusted 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, and such measures may not be comparable to those reported by other companies.

 


(1) Net revenue is revenue, less network fees and other costs which primarily consist of pass through expenses incurred by us in connection with providing processing services to our clients, including Visa and MasterCard network association fees and payment network fees.

(2) Excludes transition, acquisition, and integration costs and Worldpay Group plc separately disclosed items ("SDIs").

(3) Excludes transition, acquisition, and integration costs, share-based compensation and Worldpay Group plc SDIs.

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

(5) Represents adjusted income tax expense 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 2017 effective tax rate includes the impact of the excess tax benefits relating to stock compensation as a result of the Company adopting new stock compensation accounting guidance on January 1, 2017 which requires those benefits to be recorded in income tax expense.  Also includes 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.

(6) Represents the non-controlling interest, net of pro forma income tax expense discussed in (2) above, associated with a consolidated joint venture.

 



Supplemental Schedule 2

Worldpay, Inc.

Combined Segment Information

(Unaudited)

(in thousands)

 


2017


2016


Q1


Q2


Q3


Q4


YTD


YTD

Net revenue:












Merchant Solutions(1)

$

445,720



$

494,142



$

487,252



$

507,204



$

1,934,318



$

1,896,274


Technology Solutions(2)

283,283



331,722



360,163



369,270



1,344,438



1,107,786


Issuer Solutions(3)

86,128



82,830



87,284



86,949



343,191



368,024


Total net revenue

815,131



908,694



934,699



963,423



3,621,947



3,372,084


Sales and marketing

251,479



263,350



267,866



261,404



1,044,099



988,555


Segment profit

$

563,652



$

645,344



$

666,833



$

702,019



$

2,577,848



$

2,383,529


 

(1) Merchant Solutions primarily consists of Vantiv, Inc.'s Direct, ISOs, Merchant Bank sales channels and Worldpay Group plc's U.S. and U.K segments.

(2) Technology Solutions primarily consists of Vantiv, Inc.'s eCommerce, Paymetric, Integrated Payments sales channels and Worldpay Group plc's Global eCommerce segments.

(3) Issuer Solutions primarily consists of Vantiv, Inc.'s Financial Institutions Services segment.

 

 

 

 

 

 

 


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