First Data again narrows Q2 net losses

Consolidated revenue for the second quarter was $2.9 billion, up 1% versus the prior year period. Segment revenue, which modifies consolidated revenue for the exclusion of various pass through items and other impacts, was $1.8 billion for the quarter, up 1% versus the prior year period, or up 5% excluding currency impacts.

For the second quarter, the net loss attributable to First Data was $26 million, a 24% improvement from the $34 million loss in the prior year period. The prior year period was positively impacted by an $80 million after-tax gain on the sale of Electronic Funds Source, LLC (EFS). Adjusted net income, which modifies net income for items such as the amortization of acquisition intangibles, stock-based compensation, restructuring costs and other impacts, was $150 million, up $63 million versus the prior year period due to improvements in interest expense and operating profit.

“We are pleased with our second quarter results which showed solid constant currency revenue growth,” said Chairman and CEO Frank Bisignano. “During the quarter we further strengthened our capital structure, rolled out the Clover® Mini integrated POS solution, and acquired Transaction Wireless, a leading digital gift card distribution platform. We incurred $19 million in restructuring costs during the quarter to fund part of our recently announced strategic expense management initiative, and remain focused on achieving our objective of $200 million in annualized savings by mid-2016.”

Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $702 million, up 3% versus the prior year period, or up 5% excluding currency impacts. EBITDA margin for the quarter was 40%, up 70 basis points versus the prior year period.

For the second quarter, the Company generated $555 million in cash flow from operations, up $128 million versus the prior year period. The Company finished the quarter with $1.1 billion in unrestricted liquidity.

Segment Results

In the second quarter of 2015, the Company realigned its operating segments. Following the realignment, the Company is now reporting results of operations in the following three reportable segments: Global Business Solutions (GBS), Global Financial Solutions (GFS), and Network & Security Solutions (NSS). All segment information has been retroactively adjusted to reflect this change.

Global Business Solutionsprovides retail point-of-sale merchant acquiring and eCommerce services, next-generation offerings such as mobile payment services, as well as the Company's cloud-based Clover® point-of-sale operating system and its marketplace of proprietary and third-party business apps. GBS segment revenue for the second quarter was $1.1 billion, up 2% versus the prior year period, or up 5% on a constant currency basis. North America revenue of $835 million increased 3% versus the prior year period due to increased hardware sales and revenue from its merchant suite of solutions. EMEA revenue was $139 million, down 6%, or up 11% on a constant currency basis due to transaction growth and yield expansion. GBS segment EBITDA was $454 million, up 1% versus the prior year period, or up 2% on a constant currency basis. GBS segment EBITDA margin for the second quarter was 43%, which was down 40 basis points versus the prior year period.

Global Financial Solutions provides credit and retail private-label card processing, output services and next-generation offerings, such as its VisionPLUS Flex software, which enables card issuers to manage all of their payments-related products and services as a single, integrated “one-stop-shop” solution. GFS segment revenue for the second quarter was $353 million, down 3% versus the prior year period, or up 3% on a constant currency basis. North America revenue of $207 million was up 5% due to internal growth and increased card personalization volume related to EMV demand. EMEA revenue was $103 million, down 16%, or down 2% on a constant currency basis due to yield pressure on renewed contracts. GFS segment EBITDA was $124 million, down 2% versus the prior year period, or up 4% on a constant currency basis. GFS Segment EBITDA margin for the second quarter was 35%, which was up 60 basis points versus the prior year period.

Network & Security Solutions provides a wide range of network services such as Electronic Funds Transfer (EFT) Network Solutions, Stored Value Network Solutions, and Security and Fraud Management Solutions. NSS segment revenue for the second quarter was $356 million, up 6% versus the prior year period. EFT Network Solutions revenue of $123 million increased 6% due to new business. Security and Fraud Management Solutions revenue of $98 million increased 7% due to growth in business security solutions. Stored Value Network Solutions revenue of $80 million declined 1% due to the EFS sale in the prior year period. Excluding the EFS sale, Stored Value Network Solutions revenue was up 10% due to increased transaction growth. NSS segment revenue in the quarter was adversely impacted by $8 million due to the sale of EFS. NSS segment EBITDA was $156 million, up 2% versus the prior year period, which was adversely impacted by $4 million due to the sale of EFS. NSS segment EBITDA margin for the second quarter was 44%, which was down 160 basis points versus the prior year period.