Worldpay Reports First Quarter 2018 Results

Worldpay, Inc. First Quarter 2018 Results

(unaudited)

(in millions, except share data)

Three Months Ended

March 31, 2018 ⁽¹⁾

Net revenue

$

850.7

$

470.1

81%

Technology Solutions

336.4

162.2

107%

Merchant Solutions

432.2

223.7

93%

Issuer Solutions

82.1

84.2

(2)%

Adjusted EBITDA

374.1

210.0

78%

Adj. EBITDA Margin

44.0%

44.7%

GAAP Net (loss) income attributable to Worldpay, Inc.

$

(97.6)

$

28.9

(438)%

GAAP Net (loss) income per diluted share attributable to
Worldpay, Inc.

$

(0.36)

$

0.17

(312)%

Adjusted net income

$

236.7

$

134.7

76%

Adjusted net income per share

$

0.81

$

0.68

19%

Worldpay, Inc. Second Quarter and Full-Year Financial Outlook

(in millions, except share data)

Second Quarter Financial Outlook

Full Year Financial Outlook

Three Months Ended June 30,

Year Ended December 31,

2018 Outlook

2017 Actual ⁽²⁾

2018 Outlook ⁽¹⁾

2017 Actual ⁽²⁾

Net revenue

$960 - $980

$530

$3,810 - $3,900

$2,123

GAAP Net income per diluted share attributable to Worldpay, Inc.

$0.22 - $0.29

$0.42

$0.53 - $0.75

$0.80

Adjusted net income per share

$0.93 - $0.96

$0.83

$3.71 - $3.81

$3.37

Schedule 1

Worldpay, Inc.

Consolidated Statements of Income

(Unaudited)

(in millions, except share data)

Three Months Ended

March 31,

March 31,

2018

2017

% Change

Revenue

$

850.7

$

928.2

(8)%

Network fees and other costs

—

458.1

NM

  Net Revenue⁽¹⁾

850.7

470.1

81%

Sales and marketing

266.0

155.0

72%

Other operating costs

155.1

75.9

104%

General and administrative

250.1

89.3

180%

Depreciation and amortization

207.2

76.1

172%

(Loss) Income from operations

(27.7)

73.8

(138)%

Interest expense—net

(75.2)

(29.2)

158%

Non-operating expense⁽²⁾

(8.6)

(4.1)

110%

(Loss) income before applicable income taxes

(111.5)

40.5

(375)%

Income tax (benefit) expense⁽³⁾

(13.2)

5.2

(354)%

Net (loss) income

(98.3)

35.3

(378)%

Less: Net loss (income) attributable to non-controlling interests

0.7

(6.4)

(111)%

Net (loss) income attributable to Worldpay, Inc.

$

(97.6)

$

28.9

(438)%

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

Basic

$

(0.36)

$

0.18

(300)%

Diluted⁽⁴⁾

$

(0.36)

$

0.17

(312)%

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

Basic

274,098,480

160,876,177

Diluted

274,098,480

197,496,680

⁽¹⁾

Based on the Company's adoption of Accounting Standard Update 2014-09, Revenue From Contracts With Customers (Topic 606) ("ASC 606") effective January 1, 2018, Network fees and other costs are now netted against Revenue. For the three months ended March 31, 2018, Revenue is equivalent to Net revenue as a result of the company's adoption of ASC 606. For the three months ended March 31, 2017, Net revenue is equivalent to Revenue less Network fees and other costs.

⁽²⁾

Non-operating expense during the three months ended March 31, 2018 primarily consists of expenses relating to the Company's financing arrangements entered into in connection with the Legacy Worldpay acquisition and the change in fair value of the Mercury tax receivable agreement ("TRA"), partially offset by a gain on the settlement of a deal contingent forward entered into in connection with the Company's acquisition of Legacy Worldpay.  Non-operating expenses for the three months ended March 31, 2017 primarily relate to the change in fair value of the Mercury TRA.

⁽³⁾

Includes a credit of approximately $6.6 million and $8.6 million for three months ended March 31, 2018 and 2017 relating to excess tax benefits as a result of the Company adopting new stock compensation accounting guidance on January 1, 2017 which requires those benefits be recorded in income tax expense.

⁽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 the Company's 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 ended March 31, 2018, approximately 15.3 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. 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 ended March 31, 2018. Additionally, due to the net loss for the three months ended March 31, 2018, any remaining potentially dilutive securities were also excluded from the denominator in computing dilutive net income per share.

Three Months Ended March 31,

2018

2017

(Loss) income before applicable income taxes

$

—

$

40.5

Taxes

—

6.0

Net (loss) income

$

(97.6)

$

34.5

Diluted shares

274,098,480

197,496,680

Diluted EPS

$

(0.36)

$

0.17

Schedule 2

Worldpay, Inc.

Adjusted Net Income

(Unaudited)

(in millions, except share data)

Three Months Ended

March 31,

March 31,

2018

2017

% Change

Income before applicable income taxes

$

(111.5)

$

40.5

(375)%

Non-GAAP Adjustments:

Transition, acquisition and integration costs^{(1) (3)}

177.4

49.5

258%

Share-based compensation⁽³⁾

17.2

10.6

62%

Intangible amortization^{(2) (3)}

172.8

51.9

233%

Non-operating expense⁽⁴⁾

8.6

4.1

110%

Non-GAAP adjusted income before applicable income taxes

264.5

156.6

69%

Less: Adjustments

Adjusted tax expense⁽⁵⁾

27.5

21.7

27%

Adjusted tax rate

10%

14%

Other ⁽⁶⁾

0.3

0.2

50%

Adjusted net income

$

236.7

$

134.7

76%

Adjusted net income per share

$

0.81

$

0.68

19%

Adjusted shares outstanding⁽⁷⁾

290,880,798

197,496,680

Three Months Ended March 31, 2018

Three Months Ended March 31, 2017

Transition,
Acquisition &
Integration

Share-Based
Compensation

Amortization Of
Intangible Assets

Transition,
Acquisition &
Integration

Share-Based
Compensation

Amortization Of
Intangible Assets

Other operating costs

$

10.2

$

—

$

—

$

3.2

$

—

$

—

General and administrative

167.2

17.2

—

46.3

10.6

—

Depreciation and amortization

—

—

172.8

—

—

51.9

Total adjustments

$

177.4

$

17.2

$

172.8

$

49.5

$

10.6

$

51.9

Schedule 3

Worldpay, Inc.

Segment Information

(Unaudited)

(in millions)

Technology Solutions

Three Months Ended March 31,

2018

2017

% Change

Revenue

$

336.4

$

271.9

24%

Network fees and other costs

—

109.7

NM

  Net Revenue⁽¹⁾

336.4

162.2

107%

Sales and marketing

95.9

60.2

59%

Segment profit

$

240.5

$

102.0

136%

Merchant Solutions

Three Months Ended March 31,

2018

2017

% Change

Revenue

$

432.2

$

540.1

(20)%

Network fees and other costs

—

316.4

NM

  Net Revenue⁽¹⁾

432.2

223.7

93%

Sales and marketing

163.8

88.8

84%

Segment profit

$

268.4

$

134.9

99%

Issuer Solutions

Three Months Ended March 31,

2018

2017

% Change

Revenue

$

82.1

$

116.2

(29)%

Network fees and other costs

—

32.0

NM

  Net Revenue⁽¹⁾

82.1

84.2

Sales and marketing

6.3

6.0

5%

Segment profit

$

75.8

$

78.2

Schedule 4

Worldpay, Inc.

Condensed Consolidated Statements of Financial Position

(Unaudited)

(in millions)

March 31, 2018

December 31, 2017

Assets

Current assets:

Cash and cash equivalents

$

459.4

$

126.5

Accounts receivable—net

1,491.8

986.6

Merchant float

1,894.3

—

Settlement assets

3,578.6

142.0

Prepaid expenses

77.1

33.5

Other

562.0

84.0

Total current assets

8,063.2

1,372.6

  Customer incentives

68.9

68.4

  Property, equipment and software—net

890.0

473.7

  Intangible assets—net

3,783.9

678.5

  Goodwill

15,188.9

4,173.0

  Deferred taxes

764.9

739.5

  Proceeds from senior unsecured notes

—

1,135.2

  Other assets

190.2

26.1

Total assets

$

28,950.0

$

8,667.0

Liabilities and equity

Current liabilities:

Accounts payable and accrued expenses

$

1,329.6

$

631.9

Settlement obligations

6,181.9

816.2

Current portion of note payable

223.7

107.9

Current portion of tax receivable agreement obligations

179.1

245.5

Deferred income

32.5

18.9

Current maturities of capital lease obligations

32.8

8.0

Other

571.0

6.0

Total current liabilities

8,550.6

1,834.4

Long-term liabilities:

Note payable

8,051.0

5,586.4

Tax receivable agreement obligations

506.0

535.0

Capital lease obligations

33.1

4.5

Deferred taxes

716.7

65.6

Other

100.4

40.5

Total long-term liabilities

9,407.2

6,232.0

Total liabilities

17,957.8

8,066.4

Commitments and contingencies

Equity:

Total equity ⁽¹⁾

10,992.2

600.6

Total liabilities and equity

$

28,950.0

$

8,667.0

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

Schedule 5

Worldpay, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in millions)

Three Months Ended

March 31, 2018

March 31, 2017

Operating Activities:

Net (loss) income

$

(98.3)

$

35.3

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

Depreciation and amortization expense

207.2

76.1

Amortization of customer incentives

6.2

6.7

Amortization and write-off of debt issuance costs

59.9

1.2

Realized gain on foreign currency forward

(35.9)

—

Share-based compensation expense

17.2

10.6

Deferred tax expense

(25.3)

20.0

Tax receivable agreements non-cash items

(3.6)

(5.1)

Other

30.4

0.1

Change in operating assets and liabilities:

Accounts receivable

14.0

56.5

Net settlement assets and obligations

(12.2)

(41.1)

Customer incentives

(7.3)

(7.2)

Prepaid and other assets

(22.9)

(7.0)

Accounts payable and accrued expenses

(17.1)

(8.5)

Other liabilities

(28.2)

(3.2)

Net cash provided by operating activities

84.1

134.4

Investing Activities:

Purchases of property and equipment

(34.1)

(27.9)

Acquisition of customer portfolios and related assets and other

(37.1)

(4.3)

Proceeds from foreign currency forward

71.5

—

Cash acquired in acquisitions, net of cash used

1,405.8

—

Net cash provided by (used in) investing activities

1,406.1

(32.2)

Financing Activities:

Proceeds from issuance of long-term debt

2,140.0

—

Repayment of debt and capital lease obligations

(1,662.2)

(35.6)

Borrowings on revolving credit facility

1,476.0

570.0

Repayment of revolving credit facility

(1,701.0)

(570.0)

Payment of debt issuance costs

(86.8)

(1.1)

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

7.6

6.6

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

(11.2)

(5.7)

Settlement of certain tax receivable agreements

(25.6)

(15.1)

Payments under tax receivable agreements

(55.3)

(46.5)

Distributions to non-controlling interests

(5.6)

(5.8)

Net cash provided by (used in) financing activities

75.9

Net increase (decrease) in cash and cash equivalents

1,566.1

(1.0)

Cash and cash equivalents—Beginning of period

1,272.2

139.1

Effect of exchange rate changes on cash

31.1

—

Cash and cash equivalents—End of period

$

2,869.4

$

138.1

Cash Payments:

Interest

$

58.2

$

27.5

Income taxes

0.6

0.3

Schedule 6

Worldpay, Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(Unaudited)

(in millions)

Three Months Ended

March 31,

March 31,

2018

2017

% Change

Net (loss) income

$

(98.3)

$

35.3

(379)%

Income tax expense⁽¹⁾

(13.2)

5.2

(354)%

Non-operating expenses⁽²⁾

8.6

4.1

109%

Interest expense—net

75.2

29.2

158%

Share-based compensation

17.2

10.6

62%

Transition, acquisition and integration costs⁽³⁾

177.4

49.5

258%

Depreciation and amortization

207.2

76.1

172%

Adjusted EBITDA

$

374.1

$

210.0

78%

⁽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)

Second Quarter Financial Outlook

Full Year Financial Outlook

Three Months Ended June 30,

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.

$0.22 - $0.29

$

0.42

$0.53 - $0.75

$

0.80

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

$0.71 - $0.67

$

0.41

$3.18 - $3.06

$

2.57

Adjusted net income per share

$0.93 - $0.96

$

0.83

$3.71 - $3.81

$

3.37