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EX-99.2 - EX-99.2 - Worldpay, Inc.d662978dex992.htm

Exhibit 99.1

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)

 

     Three Months Ended                  Year Ended               
     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

 

1


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.

 

2


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.

CONTACTS

Investors

Nathan Rozof, CFA or Ignatius Njoku

Investor Relations

(866) 254-4811

(513) 900-4811

IR@worldpay.com

Media

Andrew Ciafardini

Corporate Communications

(513) 900-5308

Andrew.Ciafardini@worldpay.com

 

3


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.

 

4


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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

5


     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.

 

6


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

 

7


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.

 

8


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  

 

9


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.

 

10


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.

 

11


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.

 

12


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.

 

13


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.

 

14