Attached files
| file | filename |
|---|---|
| 8-K - 8-K - BLACKHAWK NETWORK HOLDINGS, INC | form8-kq32015.htm |
Exhibit 99.1
News Release
INVESTORS/ANALYSTS: | MEDIA: |
Patrick Cronin | Teri Llach |
(925) 226-9973 | (925) 226-9028 |
investor.relations@bhnetwork.com | teri.llach@bhnetwork.com |
Blackhawk Announces Third Quarter 2015 Financial Results
Adjusted Operating Revenues Rise 54% Versus Third Quarter 2014
Adjusted Net Income Increases 59%
Pleasanton, California, October 14, 2015— Blackhawk Network Holdings, Inc. (NASDAQ: HAWK) today announced financial results for the third quarter ended September 12, 2015.
$ in millions except per share amounts | Q3'15 | Q3'14 | % Change | |||||||
Adjusted Operating Revenues | $ | 193.4 | $ | 125.4 | 54% | |||||
Adjusted EBITDA | $ | 28.6 | $ | 14.7 | 95% | |||||
Adjusted Net Income | $ | 19.8 | $ | 12.4 | 59% | |||||
Adjusted EPS (Diluted) | $ | 0.35 | $ | 0.23 | 52% | |||||
Operating Revenues (GAAP) | $ | 352.7 | $ | 269.0 | 31% | |||||
Net Income (Loss) (GAAP) | $ | (3.6 | ) | $ | 0.6 | N/M | ||||
Earnings (Loss) Per Share (GAAP Diluted) | $ | (0.07 | ) | $ | 0.01 | N/M | ||||
"We delivered strong financial results again this quarter," commented CEO Bill Tauscher. "With the addition of Achievers in this quarter, adjusted operating revenue growth accelerated to 54%. Our U.S. retail segment grew adjusted operating revenues 21% over last year's third quarter due to strong growth in both Cardpool exchange and open loop gift cards. The International retail segment recorded adjusted operating revenues growth of 27% during the third quarter, driven by increased marketing revenue in our Asia Pacific region, partially offset by foreign exchange headwinds. Excluding marketing revenues and adjusting to a constant currency measure, international adjusted operating revenues increased 32%. In our incentives and rewards segment, adjusted operating revenues grew 392%, primarily due to the acquisition of Parago in late 2014 and the acquisition of Achievers during the third quarter of 2015."
CFO Jerry Ulrich added, "Adjusted EBITDA grew 95%, higher than adjusted operating revenue growth due to leverage in sales and marketing, and general and administrative expenses. Excluding the reduction in cash taxes payable related to our 2014 spin-off from Safeway and the realization of acquisition-related net operating losses, adjusted net income grew 107% and adjusted diluted EPS grew 89% during the third quarter. Further, excluding 2014 and 2015 acquisitions, adjusted operating revenues grew 22% and adjusted EBITDA grew 49%."
Conference Call/Webcast
On Wednesday, October 14, 2015 at 6:00 a.m. PDT / 9:00 a.m. EDT, the Company will host a conference call and live webcast presentation to discuss third quarter financial results and share financial guidance for fourth quarter 2015. A copy of the webcast presentation slides will be posted to the presentations tab of the Company's investor relations website at approximately 2 p.m. PDT on October 13, 2015. Hosting the call will be Bill Tauscher, Chief Executive Officer; Talbott Roche, President; and Jerry Ulrich, Chief Financial & Administrative Officer. Participants may access the live webcast by visiting the Company’s investor relations website at ir.blackhawknetwork.com. An audio replay of the webcast will be available on the Company's investor relations website until Friday, October 30, 2015.
GAAP financial results for the third quarter of 2015 compared to the third quarter of 2014
• | Operating revenues totaled $352.7 million, an increase of 31% from $269.0 million for the quarter ended September 6, 2014. This increase was due to a 15% increase in commissions and fees driven primarily by higher closed loop gift card sales and the acquisition of Parago; a 77% increase in program, interchange, marketing and other fees due to strong open loop gift card sales and increased marketing revenues in our international retail segment, growth in the incentives and rewards segment, reflecting the acquisition of Parago; and an 87% increase in product sales primarily due to growth at Cardpool and the acquisition of Achievers in the third quarter of 2015. |
• | Net loss totaled $3.6 million compared to net income of $0.6 million for the quarter ended September 6, 2014. The decrease was driven primarily by higher non-cash acquisition-related expenses, higher non-cash stock compensation expense, and increased interest expense, partially offset by the related tax benefit. |
• | Net loss per diluted share was $0.07 compared to earnings per diluted share of $0.01 for the quarter ended September 6, 2014. Diluted shares outstanding increased 0.3% to 54.5 million due to the dilutive effect of stock options and restricted stock awards in the 2015 period as compared to the 2014 period. |
Non-GAAP financial results for the third quarter of 2015 compared to the third quarter of 2014 (see Table 2 for Reconciliation of Non-GAAP Measures)
• | Adjusted operating revenues totaled $193.4 million, an increase of 54% from $125.4 million for the quarter ended September 6, 2014. Excluding 2014 and 2015 acquisitions, adjusted operating revenues grew 22%. |
• | Adjusted EBITDA totaled $28.6 million, an increase of 95% from $14.7 million for the quarter ended September 6, 2014. Excluding 2014 and 2015 acquisitions, adjusted EBITDA increased 49%. |
• | Adjusted net income totaled $19.8 million, an increase of 59% from $12.4 million for the quarter ended September 6, 2014. Excluding the impact of the reduction in cash taxes payable, adjusted net income was $9.7 million, an increase of 107% from $4.7 million for the quarter ended September 6, 2014. |
• | Adjusted diluted EPS was $0.35, an increase of 52% from $0.23 for the quarter ended September 6, 2014. Excluding the impact of the reduction in cash taxes payable, adjusted diluted EPS increased 89% to $0.17. |
About Blackhawk Network
Blackhawk Network Holdings, Inc. is a leading prepaid and payments global company that supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels. Blackhawk’s digital platform supports prepaid across a network of digital distribution partners including retailers, financial service providers, and mobile wallets. For more information, please visit www.blackhawknetwork.com and www.giftcardmall.com.
Use of Non-GAAP Financial Measures
Blackhawk regards the non-GAAP financial measures provided in this press release as useful measures of the operational and financial performance of its business. Adjusted operating revenues, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted diluted earnings per share are useful to evaluating Blackhawk's operating performance for the following reasons: adjusting our operating revenues for distribution commissions paid and other compensation to our retail distribution partners and business clients is useful to understanding our operating margin; EBITDA and Adjusted EBITDA are widely used by investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company and from period to period depending upon their financing, accounting and tax methods, the book value of their assets, their capital structures and the method by which their assets were acquired; Adjusted EBITDA margin provides a measure of operating efficiency based on Adjusted operating revenues and without regard to items that can vary substantially from company to company and from period to period depending upon their financing, accounting and tax methods, the book value of their assets, their capital structures and the method by which their assets were acquired; non-cash equity grants made to employees and distribution partners at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and the related expenses are not key measures of our core operating performance; intangible asset amortization expenses can vary substantially from company to company and from period to period depending upon the applicable financing and accounting methods, the fair value and average expected life of the acquired intangible assets, the capital structure and the method by which the intangible assets were acquired and, as such, we do not believe that these adjustments are reflective of our core operating performance; non-cash fair value adjustments to contingent business acquisition liability do not directly reflect how our business is performing at any particular time and the related expense adjustment amounts are not key measures of our core operating performance; and cash tax savings resulting from the step up in tax basis of our assets resulting from the Section 336(e) election due to our Spin-Off and the Safeway Merger and cash tax savings from amortization of goodwill and other intangibles or utilization of net operating loss carryforwards from business acquisitions represent significant cash savings that are useful for understanding our overall operating results. Reconciliations of non-GAAP financial measures to Blackhawk’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. The use of non-GAAP financial measures has certain limitations as they do not reflect all items of income, expense, or cash flows that affect Blackhawk’s financial performance under GAAP. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. In addition, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Blackhawk encourages investors and others to review Blackhawk’s financial information in its entirety and not rely on any single financial measure.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “on track” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified in the “Risk Factors” section in our filings with the Securities and Exchange Commission. Furthermore, such forward-looking statements speak only as of the date of this press release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) (Unaudited) | |||||||||||||||
12 weeks ended | 36 weeks ended | ||||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
OPERATING REVENUES: | |||||||||||||||
Commissions and fees | $ | 231,492 | $ | 201,888 | $ | 709,339 | $ | 596,324 | |||||||
Program, interchange, marketing and other fees | 77,727 | 43,895 | 231,054 | 119,981 | |||||||||||
Product sales | 43,446 | 23,244 | 104,251 | 69,781 | |||||||||||
Total operating revenues | 352,665 | 269,027 | 1,044,644 | 786,086 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Partner distribution expense | 161,852 | 142,542 | 494,193 | 415,277 | |||||||||||
Processing and services | 68,246 | 46,715 | 198,272 | 133,654 | |||||||||||
Sales and marketing | 49,954 | 36,668 | 156,653 | 111,120 | |||||||||||
Costs of products sold | 40,577 | 21,946 | 97,593 | 66,745 | |||||||||||
General and administrative | 22,136 | 16,163 | 62,186 | 41,700 | |||||||||||
Transition and acquisition | 5,275 | 326 | 6,091 | 360 | |||||||||||
Amortization of acquisition intangibles | 6,875 | 3,004 | 18,352 | 10,839 | |||||||||||
Change in fair value of contingent consideration | — | — | (7,567 | ) | — | ||||||||||
Total operating expenses | 354,915 | 267,364 | 1,025,773 | 779,695 | |||||||||||
OPERATING INCOME (LOSS) | (2,250 | ) | 1,663 | 18,871 | 6,391 | ||||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Interest income and other income (expense), net | (1,421 | ) | 182 | (1,938 | ) | 126 | |||||||||
Interest expense | (3,231 | ) | (1,080 | ) | (8,566 | ) | (2,081 | ) | |||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE | (6,902 | ) | 765 | 8,367 | 4,436 | ||||||||||
INCOME TAX EXPENSE (BENEFIT) | (3,290 | ) | 352 | 4,435 | 1,844 | ||||||||||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | (3,612 | ) | 413 | 3,932 | 2,592 | ||||||||||
Loss (income) attributable to non-controlling interests, net of tax | (3 | ) | 142 | 63 | 238 | ||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. | $ | (3,615 | ) | $ | 555 | $ | 3,995 | $ | 2,830 | ||||||
EARNINGS (LOSS) PER SHARE: | |||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.01 | $ | 0.07 | $ | 0.05 | ||||||
Diluted | $ | (0.07 | ) | $ | 0.01 | $ | 0.07 | $ | 0.05 | ||||||
Weighted average shares outstanding—basic | 54,467 | 52,609 | 53,941 | 52,450 | |||||||||||
Weighted average shares outstanding—diluted | 54,467 | 54,304 | 55,994 | 54,035 | |||||||||||
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | |||||||||||
September 12, 2015 | January 3, 2015 | September 6, 2014 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 214,722 | $ | 911,615 | $ | 219,851 | |||||
Restricted cash | 43,043 | 5,000 | 5,000 | ||||||||
Settlement receivables, net | 240,273 | 526,587 | 272,912 | ||||||||
Accounts receivable, net | 188,912 | 181,431 | 125,976 | ||||||||
Deferred income taxes | 33,722 | 38,456 | 20,145 | ||||||||
Other current assets | 107,950 | 95,658 | 71,802 | ||||||||
Total current assets | 828,622 | 1,758,747 | 715,686 | ||||||||
Property, equipment and technology, net | 154,085 | 130,008 | 94,971 | ||||||||
Intangible assets, net | 230,213 | 170,957 | 84,973 | ||||||||
Goodwill | 382,803 | 331,265 | 162,373 | ||||||||
Deferred income taxes | 328,417 | 1,678 | 727 | ||||||||
Other assets | 78,294 | 93,086 | 86,590 | ||||||||
TOTAL ASSETS | $ | 2,002,434 | $ | 2,485,741 | $ | 1,145,320 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Settlement payables | $ | 469,590 | $ | 1,383,481 | $ | 472,629 | |||||
Consumer and customer deposits | 102,633 | 133,772 | 65,607 | ||||||||
Accounts payable and accrued operating expenses | 112,753 | 117,118 | 89,633 | ||||||||
Deferred revenue | 91,474 | 48,114 | 23,934 | ||||||||
Note payable, current portion | 37,378 | 11,211 | 8,708 | ||||||||
Notes payable to Safeway | 13,129 | 27,678 | 8,473 | ||||||||
Bank line of credit | 100,000 | — | — | ||||||||
Other current liabilities | 43,320 | 54,238 | 23,551 | ||||||||
Total current liabilities | 970,277 | 1,775,612 | 692,535 | ||||||||
Deferred income taxes | 15,590 | 45,375 | 23,312 | ||||||||
Note payable | 325,151 | 362,543 | 165,446 | ||||||||
Other liabilities | 4,867 | 14,432 | 20,325 | ||||||||
Total liabilities | 1,315,885 | 2,197,962 | 901,618 | ||||||||
Stockholders’ equity: | |||||||||||
Preferred stock | — | — | — | ||||||||
Common stock | 55 | 54 | 54 | ||||||||
Additional paid-in capital | 547,230 | 137,916 | 124,759 | ||||||||
Accumulated other comprehensive loss | (31,535 | ) | (19,470 | ) | (7,556 | ) | |||||
Retained earnings | 166,370 | 162,439 | 119,730 | ||||||||
Total Blackhawk Network Holdings, Inc. equity | 682,120 | 280,939 | 236,987 | ||||||||
Non-controlling interests | 4,429 | 6,840 | 6,715 | ||||||||
Total stockholders’ equity | 686,549 | 287,779 | 243,702 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,002,434 | $ | 2,485,741 | $ | 1,145,320 | |||||
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||||||||||
36 weeks ended | 53 weeks ended | 52 weeks ended | |||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
OPERATING ACTIVITIES: | |||||||||||||||
Net income before allocation to non-controlling interests | $ | 3,932 | $ | 2,592 | $ | 46,765 | $ | 51,765 | |||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization of property, equipment and technology | 27,765 | 17,951 | 38,362 | 24,934 | |||||||||||
Amortization of intangibles | 21,634 | 14,202 | 31,803 | 18,735 | |||||||||||
Amortization of program development costs | 20,032 | 17,779 | 26,704 | 25,559 | |||||||||||
Employee stock-based compensation expense | 19,856 | 9,769 | 25,452 | 13,014 | |||||||||||
Distribution partner mark-to-market expense | — | (88 | ) | 1,400 | 1,549 | ||||||||||
Change in fair value of contingent consideration | (7,567 | ) | — | (11,289 | ) | (13,485 | ) | ||||||||
Reversal of reserve for patent litigation | — | (3,852 | ) | — | (3,852 | ) | |||||||||
Excess tax benefit from stock-based awards | (5,018 | ) | (1,364 | ) | (6,384 | ) | (3,187 | ) | |||||||
Deferred income taxes | 13,371 | — | 1,546 | (1,053 | ) | ||||||||||
Other | 5,496 | 3,852 | 6,692 | 5,325 | |||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Settlement receivables | 274,941 | 535,183 | 16,171 | (93,359 | ) | ||||||||||
Settlement payables | (906,181 | ) | (1,006,128 | ) | 13,942 | 110,826 | |||||||||
Accounts receivable, current and long-term | (3,573 | ) | 8,721 | (46,292 | ) | (27,738 | ) | ||||||||
Other current assets | (20,562 | ) | 1,450 | (24,292 | ) | 1,247 | |||||||||
Other assets | (9,996 | ) | (21,466 | ) | (16,909 | ) | (38,732 | ) | |||||||
Consumer and customer deposits | (31,140 | ) | 6,542 | (2,586 | ) | 7,550 | |||||||||
Accounts payable and accrued operating expenses | (9,695 | ) | (13,345 | ) | 4,592 | 18,657 | |||||||||
Deferred revenue | (8,105 | ) | (6,606 | ) | 16,075 | 8,671 | |||||||||
Other current and long-term liabilities | 4,385 | (6,127 | ) | 11,914 | 6,547 | ||||||||||
Income taxes, net | (15,492 | ) | (22,474 | ) | (9,870 | ) | (10,543 | ) | |||||||
Net cash provided by (used in) operating activities | (625,917 | ) | (463,409 | ) | 123,796 | 102,430 | |||||||||
INVESTING ACTIVITIES: | |||||||||||||||
Change in overnight cash advances to Safeway | — | — | — | 9,000 | |||||||||||
Expenditures for property, equipment and technology | (37,310 | ) | (25,960 | ) | (51,059 | ) | (34,621 | ) | |||||||
Business acquisitions, net of cash acquired | (78,394 | ) | (14,159 | ) | (301,840 | ) | (163,529 | ) | |||||||
Sale of trading securities | — | — | — | 29,749 | |||||||||||
Change in restricted cash | (38,043 | ) | (5,000 | ) | (38,043 | ) | (5,000 | ) | |||||||
Other | (561 | ) | — | (1,060 | ) | (400 | ) | ||||||||
Net cash used in investing activities | (154,308 | ) | (45,119 | ) | (392,002 | ) | (164,801 | ) | |||||||
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands) (Unaudited) | |||||||||||||||
36 weeks ended | 53 weeks ended | 52 weeks ended | |||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
FINANCING ACTIVITIES: | |||||||||||||||
Dividends paid | (65 | ) | (75 | ) | (73 | ) | (85 | ) | |||||||
Payments for acquisition liability | (1,811 | ) | — | (1,811 | ) | (3,334 | ) | ||||||||
Proceeds from issuance of note payable | — | 175,000 | 200,000 | 175,000 | |||||||||||
Payments of financing costs | (724 | ) | (2,451 | ) | (2,056 | ) | (2,451 | ) | |||||||
Repayment of note payable | (11,250 | ) | — | (11,250 | ) | — | |||||||||
Borrowings under revolving bank line of credit | 1,536,083 | — | 1,751,083 | — | |||||||||||
Repayments on revolving bank line of credit | (1,436,083 | ) | — | (1,651,083 | ) | — | |||||||||
Proceeds from notes payable to Safeway | — | 8,473 | 19,205 | 8,473 | |||||||||||
Repayment on notes payable to Safeway | (6,320 | ) | — | (6,320 | ) | — | |||||||||
Repayment of debt assumed in business acquisitions | — | (7,474 | ) | (34,510 | ) | (7,474 | ) | ||||||||
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans | 8,055 | 5,895 | 11,240 | 9,084 | |||||||||||
Other stock-based compensation related | (610 | ) | (659 | ) | (814 | ) | (621 | ) | |||||||
Excess tax benefit from stock-based awards | 5,018 | 1,364 | 6,384 | 3,187 | |||||||||||
Other | (1,494 | ) | (44 | ) | (1,494 | ) | 67 | ||||||||
Net cash provided by financing activities | 90,799 | 180,029 | 278,501 | 181,846 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | (7,467 | ) | (2,030 | ) | (15,424 | ) | (3,077 | ) | |||||||
Increase (decrease) in cash and cash equivalents | (696,893 | ) | (330,529 | ) | (5,129 | ) | 116,398 | ||||||||
Cash and cash equivalents—beginning of period | 911,615 | 550,380 | 219,851 | 103,453 | |||||||||||
Cash and cash equivalents—end of period | $ | 214,722 | $ | 219,851 | $ | 214,722 | $ | 219,851 | |||||||
NONCASH FINANCING AND INVESTING ACTIVITIES | |||||||||||||||
Net deferred tax assets recognized for tax basis step-up with offset to Additional paid-in capital | $ | 366,306 | $ | — | $ | 366,306 | $ | — | |||||||
Note payable to Safeway contributed to Additional paid-in capital | $ | 8,229 | $ | — | $ | 8,229 | $ | — | |||||||
Financing of business acquisition with contingent consideration | $ | — | $ | 13,100 | $ | — | $ | 13,100 | |||||||
Intangible assets recognized for warrants issued | $ | 3,147 | $ | — | $ | 3,147 | $ | — | |||||||
BLACKHAWK NETWORK HOLDINGS, INC.
SUPPLEMENTAL INFORMATION
(In thousands except percentages and per share amounts)
(Unaudited)
TABLE 1: OTHER OPERATIONAL DATA | |||||||||||||||
12 weeks ended | 36 weeks ended | ||||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
Transaction dollar volume | $ | 3,167,719 | $ | 2,514,561 | $ | 9,660,243 | $ | 7,321,923 | |||||||
Prepaid and processing revenues | $ | 292,908 | $ | 234,135 | $ | 881,281 | $ | 683,501 | |||||||
Prepaid and processing revenues as a % of transaction dollar volume | 9.2 | % | 9.3 | % | 9.1 | % | 9.3 | % | |||||||
Partner distribution expense as a % of prepaid and processing revenues | 55.3 | % | 60.9 | % | 56.1 | % | 60.8 | % | |||||||
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||
12 weeks ended | 36 weeks ended | ||||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
Prepaid and processing revenues: | |||||||||||||||
Commissions and fees | $ | 231,492 | $ | 201,888 | $ | 709,339 | $ | 596,324 | |||||||
Program, interchange, marketing and other fees | 77,727 | 43,895 | 231,054 | 119,981 | |||||||||||
Marketing revenues | (16,311 | ) | (11,648 | ) | (59,112 | ) | (32,804 | ) | |||||||
Total prepaid and processing revenues | $ | 292,908 | $ | 234,135 | $ | 881,281 | $ | 683,501 | |||||||
Adjusted operating revenues: | |||||||||||||||
Total operating revenues | $ | 352,665 | $ | 269,027 | $ | 1,044,644 | $ | 786,086 | |||||||
Issuing bank contract amendments | — | (1,093 | ) | — | — | ||||||||||
Revenue adjustment from purchase accounting | 2,606 | — | 2,606 | — | |||||||||||
Partner distribution expense | (161,852 | ) | (142,542 | ) | (494,193 | ) | (415,277 | ) | |||||||
Adjusted operating revenues | $ | 193,419 | $ | 125,392 | $ | 553,057 | $ | 370,809 | |||||||
Adjusted EBITDA: | |||||||||||||||
Net income (loss) before allocation to non-controlling interests | $ | (3,612 | ) | $ | 413 | $ | 3,932 | $ | 2,592 | ||||||
Interest and other (income) expense, net | 1,421 | (182 | ) | 1,938 | (126 | ) | |||||||||
Interest expense | 3,231 | 1,080 | 8,566 | 2,081 | |||||||||||
Income tax expense (benefit) | (3,290 | ) | 352 | 4,435 | 1,844 | ||||||||||
Depreciation and amortization | 17,927 | 10,465 | 49,399 | 32,153 | |||||||||||
EBITDA | 15,677 | 12,128 | 68,270 | 38,544 | |||||||||||
Adjustments to EBITDA: | |||||||||||||||
Employee stock-based compensation | 7,117 | 3,679 | 19,856 | 9,769 | |||||||||||
Distribution partner mark-to-market expense | — | — | — | (88 | ) | ||||||||||
Acquisition-related employee compensation expense | 3,218 | — | 3,218 | — | |||||||||||
Issuing bank contract amendments | — | (1,093 | ) | — | — | ||||||||||
Revenue adjustment from purchase accounting | 2,606 | — | 2,606 | — | |||||||||||
Change in fair value of contingent consideration | — | — | (7,567 | ) | — | ||||||||||
Adjusted EBITDA | $ | 28,618 | $ | 14,714 | $ | 86,383 | $ | 48,225 | |||||||
Adjusted EBITDA margin: | |||||||||||||||
Total operating revenues | $ | 352,665 | $ | 269,027 | $ | 1,044,644 | $ | 786,086 | |||||||
Operating income (loss) | $ | (2,250 | ) | $ | 1,663 | $ | 18,871 | $ | 6,391 | ||||||
Operating margin | (0.6 | )% | 0.6 | % | 1.8 | % | 0.8 | % | |||||||
Adjusted operating revenues | $ | 193,419 | $ | 125,392 | $ | 553,057 | $ | 370,809 | |||||||
Adjusted EBITDA | $ | 28,618 | $ | 14,714 | $ | 86,383 | $ | 48,225 | |||||||
Adjusted EBITDA margin | 14.8 | % | 11.7 | % | 15.6 | % | 13.0 | % | |||||||
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES (continued) | |||||||||||||||
12 weeks ended | 36 weeks ended | ||||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
Adjusted net income: | |||||||||||||||
Income (loss) before income tax expense | $ | (6,902 | ) | $ | 765 | $ | 8,367 | $ | 4,436 | ||||||
Employee stock-based compensation | 7,117 | 3,679 | 19,856 | 9,769 | |||||||||||
Distribution partner mark-to-market expense | — | — | — | (88 | ) | ||||||||||
Acquisition-related employee compensation expense | 3,218 | — | 3,218 | — | |||||||||||
Issuing bank contract amendments | — | (1,093 | ) | — | — | ||||||||||
Revenue adjustment from purchase accounting | 2,606 | — | 2,606 | — | |||||||||||
Change in fair value of contingent consideration | — | — | (7,567 | ) | — | ||||||||||
Amortization of intangibles | 8,106 | 4,085 | 21,634 | 14,202 | |||||||||||
Adjusted income before income tax expense | 14,145 | 7,436 | 48,114 | 28,319 | |||||||||||
Income tax expense (benefit) | (3,290 | ) | 352 | 4,435 | 1,844 | ||||||||||
Tax expense on adjustments | 7,743 | 2,538 | 12,625 | 9,020 | |||||||||||
Adjusted income tax expense before cash tax benefits | 4,453 | 2,890 | 17,060 | 10,864 | |||||||||||
Reduction in cash taxes payable resulting from amortization of spin-off tax basis step-up | (6,903 | ) | (7,504 | ) | (20,139 | ) | (12,506 | ) | |||||||
Reduction in cash taxes payable from amortization of acquisition intangibles and utilization of acquired NOLs | (3,188 | ) | (241 | ) | (8,568 | ) | (2,231 | ) | |||||||
Adjusted income tax benefit | (5,638 | ) | (4,855 | ) | (11,647 | ) | (3,873 | ) | |||||||
Adjusted net income before allocation to non-controlling interests | 19,783 | 12,291 | 59,761 | 32,192 | |||||||||||
Net loss (income) attributable to non-controlling interests, net of tax | (3 | ) | 142 | 63 | 238 | ||||||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 19,780 | $ | 12,433 | $ | 59,824 | $ | 32,430 | |||||||
Adjusted diluted earnings per share: | |||||||||||||||
Net income (loss) attributable to Blackhawk Network Holdings, Inc. | $ | (3,615 | ) | $ | 555 | $ | 3,995 | $ | 2,830 | ||||||
Distributed and undistributed earnings allocated to participating securities | — | (1 | ) | (46 | ) | (47 | ) | ||||||||
Net income (loss) attributable to common shareholders | $ | (3,615 | ) | $ | 554 | $ | 3,949 | $ | 2,783 | ||||||
Diluted weighted-average shares outstanding | 54,467 | 54,304 | 55,994 | 54,035 | |||||||||||
Diluted earnings (loss) per share | $ | (0.07 | ) | $ | 0.01 | $ | 0.07 | $ | 0.05 | ||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 19,780 | $ | 12,433 | $ | 59,824 | $ | 32,430 | |||||||
Adjusted distributed and undistributed earnings allocated to participating securities | (40 | ) | (31 | ) | (182 | ) | (47 | ) | |||||||
Adjusted net income available for common shareholders | $ | 19,740 | $ | 12,402 | $ | 59,642 | $ | 32,383 | |||||||
Diluted weighted-average shares outstanding | 54,467 | 54,304 | 55,994 | 54,035 | |||||||||||
Increase in common share equivalents | 2,006 | $ | — | $ | — | $ | — | ||||||||
Adjusted diluted weighted-average shares outstanding | 56,473 | 54,304 | 55,994 | 54,035 | |||||||||||
Adjusted diluted earnings per share | $ | 0.35 | $ | 0.23 | $ | 1.07 | $ | 0.60 | |||||||
TABLE 3: RECONCILIATION OF GAAP CASH FLOW TO FREE CASH FLOW
36 weeks ended | 53 weeks ended | 52 weeks ended | |||||||||||||
September 12, 2015 | September 6, 2014 | September 12, 2015 | September 6, 2014 | ||||||||||||
Net cash flow provided by (used in) operating activities | $ | (625,917 | ) | $ | (463,409 | ) | $ | 123,796 | $ | 102,430 | |||||
Changes in settlement payables and consumer and customer deposits, net of settlement receivables | 662,380 | 464,403 | (27,527 | ) | (25,017 | ) | |||||||||
Adjusted net cash provided by operating activities | 36,463 | 994 | 96,269 | 77,413 | |||||||||||
Expenditures for property, equipment and technology | (37,310 | ) | (25,960 | ) | (51,059 | ) | (34,621 | ) | |||||||
Free cash flow | $ | (847 | ) | $ | (24,966 | ) | $ | 45,210 | $ | 42,792 | |||||