Vantiv Reports Third Quarter 2017 Results
CINCINNATI, Oct. 26, 2017 /PRNewswire/ -- Vantiv, Inc. (NYSE: VNTV) ("Vantiv" or the "company") today announced financial results for the third quarter ended September 30, 2017. Total revenue increased 13% to $1,033.8 million as compared to $914.0 million in the prior year period. Net revenue increased 13% to $554.2 million as compared to $490.7 million in the prior year period. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. increased 39% to $0.57 as compared to $0.41 in the prior year period. Pro forma adjusted net income per share increased 27% to $0.90 as compared to $0.71 in the prior year period. (See Schedule 1 for net income per diluted share attributable to Vantiv, Inc. and Schedule 2 for pro forma adjusted net income per share.)
"We had a great quarter, which demonstrates our people's ability to execute and to stay focused on our clients while strategically transforming the company," said Charles Drucker, president and chief executive officer at Vantiv. "We are investing in high growth segments of the market, including our combination with Worldpay, which will position us as a global acquirer with a leading position in eCommerce."
Merchant Services
Merchant Services net revenue increased 16% to $468.8 million in the third quarter as compared to $404.4 million in the prior year period, primarily due to a 9% increase in transactions and a 6% increase in net revenue per transaction. On an organic basis, Merchant Services net revenue grew high single digits in the third quarter as compared to the prior year period. Sales and marketing expenses increased 14% to $168.0 million in the third quarter as compared to $147.7 million in the prior year period, primarily due to strong new sales growth in partner channels. (See Schedule 3 for segment information.)
Financial Institution Services
Financial Institution Services net revenue decreased 1% to $85.5 million in the third quarter as compared to $86.2 million in the prior year period. The decrease in net revenue was primarily due to the de-conversion of a major client. Sales and marketing expenses increased 3% to $5.8 million in the third quarter as compared to $5.6 million in the prior year period. (See Schedule 3 for segment information.)
Operating Expenses
Other operating costs increased 10% on a GAAP basis to $79.5 million in the third quarter as compared to $72.2 million in the prior year period. When excluding transition, acquisition and integration costs of $2.6 million, Other operating costs increased 9% on a pro forma basis to $76.9 million in the third quarter as compared to $70.4 million in the prior year period. (See schedule 1 for GAAP financial measures and Schedule 2 for non-GAAP and pro forma adjustments.)
General and administrative expenses increased 22% on a GAAP basis to $49.6 million in the third quarter as compared to $40.7 million in the prior year period. When excluding transition, acquisition and integration costs of $2.5 million as well as share-based compensation of $13.6 million, General and administrative expenses increased 11% on a pro forma basis to $33.5 million in the third quarter as compared to $30.1 million in the prior year period. (See schedule 1 for GAAP financial measures and Schedule 2 for non-GAAP and pro forma adjustments.)
Adjusted EBITDA
Reflecting strong operating leverage and expense control, Adjusted EBITDA increased 14% to $270.1 million or 48.7% of net revenue in the third quarter as compared to $236.9 million or 48.3% of net revenue in the prior year period. (See Schedule 6 for a reconciliation of GAAP net income to adjusted EBITDA.)
Depreciation and Amortization
Depreciation and amortization expense increased 25% on a GAAP basis to $82.5 million in the third quarter as compared to $66.1 million in the prior year period. Excluding intangible amortization of $55.3 million, depreciation and amortization expense increased 49% on a pro forma basis to $27.2 million in the third quarter as compared to $18.3 million in the prior year period, primarily due to recent acquisitions. (See Schedule 1 for GAAP financial measures and Schedule 2 for non-GAAP and pro forma adjustments.)
Full-Year and Fourth Quarter Financial Outlook
Based on the current level of transactions and trends, for the full-year 2017, net revenue is expected to be $2,110 to $2,120 million, representing an increase of 11% above the prior year. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. is expected to be $1.42 - $1.47 for the full-year 2017. Pro forma adjusted net income per share is expected to be $3.34 - $3.36 for the full-year 2017. (See Schedule 7 for a reconciliation of the outlook for GAAP net income per share attributable to Vantiv, Inc. to pro forma adjusted net income per share.)
For the fourth quarter of 2017, net revenue is expected to be $556 to $566 million, representing an increase of 11% to 13% above the prior year period. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. is expected to be $0.24 - $0.30 for the fourth quarter of 2017. Pro forma adjusted net income per share is expected to be $0.94 - $0.96 for the fourth quarter of 2017. (See Schedule 7 for a reconciliation of the outlook for GAAP net income per share attributable to Vantiv, Inc. to pro forma adjusted net income per share.)
Earnings Conference Call and Audio Webcast
The company will host a conference call to discuss the third quarter financial results today at 8:00 a.m. ET. The conference call can be accessed live over the phone by dialing (800) 479-9001, or for international callers (719) 457-2715, and referencing code 7650623. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (866) 375-1919, or for international callers (719) 457-0820, and entering replay passcode 7650623. The call will also be webcast live from the company's investor relations website at http://investors.vantiv.com. Following completion of the call, a recorded replay of the webcast will be available on the website.
ABOUT VANTIV
Vantiv, Inc. (NYSE: VNTV) is a leading payment processor differentiated by an integrated technology platform. Vantiv offers a comprehensive suite of traditional and innovative payment processing and technology solutions to merchants and financial institutions of all sizes, enabling them to address their payment processing needs through a single provider. We build strong relationships with our customers, helping them become more efficient, more secure and more successful. Vantiv is the largest merchant acquirer and the largest PIN debit acquirer based on number of transactions in the U.S. The company's growth strategy includes expanding further into high-growth channels and verticals, including integrated payments, eCommerce, and merchant bank. Visit us at www.vantiv.com, or follow us on Twitter, Facebook, LinkedIn, Google+ and YouTube.
© 2017 Vantiv, LLC. All Rights Reserved. All trademarks, service marks and trade names referenced herein are the property of their respective owners. Vantiv and other Vantiv products and services mentioned herein as well as their respective logos are registered trademarks or trademarks of Vantiv, LLC in the U.S. and other countries.
Non-GAAP and Pro Forma Financial Measures
This earnings release presents non-GAAP and pro forma financial information including net revenue, adjusted EBITDA, pro forma adjusted net income, and pro forma 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 pro forma financial performance measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Reconciliations of these measures to the most directly comparable GAAP financial measures are presented in the attached schedules.
Forward-Looking Statements
This release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this release are forward-looking statements including any statements regarding guidance and statements of a general economic or industry specific nature. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, guidance, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "should," "can have," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements contained in this release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you review and consider information presented herein, you should understand that these statements are not guarantees of future performance or results. They depend upon future events and are subject to risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual future performance or results and cause them to differ materially from those anticipated in the forward-looking statements. Certain of these factors and other risks are discussed in the company's filings with the U.S. Securities and Exchange Commission (the "SEC") and include, but are not limited to: (i) our ability to adapt to developments and change in our industry; (ii) competition; (iii) unauthorized disclosure of data or security breaches; (iv) systems failures or interruptions; (v) our ability to expand our market share or enter new markets; (vi) our ability to identify and complete acquisitions, joint ventures and partnerships; (vii) failure to comply with applicable requirements of Visa, MasterCard or other payment networks or changes in those requirements; (viii) our ability to pass along fee increases; (ix) termination of sponsorship or clearing services; (x) loss of clients or referral partners; (xi) reductions in overall consumer, business and government spending; (xii) fraud by merchants or others; (xiii) a decline in the use of credit, debit or prepaid cards; (xiv) consolidation in the banking and retail industries; (xv) the effects of governmental regulation or changes in laws; and (xvi) outcomes of future litigation or investigations. 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
Investor Relations
(866) 254-4811
(513) 900-4811
IR@vantiv.com
Media
Andrew Ciafardini
Corporate Communications
(513) 900-5308
Andrew.Ciafardini@vantiv.com
Schedule 1 Vantiv, Inc. Consolidated Statements of Income (Unaudited) (in thousands, except share data) Three Months Ended September 30, % Nine Months Ended September 30, % Change Change ------ ------ 2017 2016 2017 2016 ---- ---- ---- ---- Total revenue $1,033,765 $914,019 13% $2,960,731 $2,623,859 13% Network fees and other costs 479,533 423,361 13% 1,406,358 1,221,510 15% ------- ------- --------- --------- Net revenue(1) 554,232 490,658 13% 1,554,373 1,402,349 11% Sales and marketing 173,779 153,248 13% 497,082 433,730 15% Other operating costs 79,482 72,162 10% 234,347 219,464 7% General and administrative 49,607 40,727 22% 189,632 133,831 42% Depreciation and amortization 82,500 66,086 25% 236,964 199,550 19% ------ ------ ------- ------- Income from operations 168,864 158,435 7% 396,348 415,774 (5)% Interest expense-net (38,521) (27,474) 40% (97,441) (81,321) 20% Non-operating income (expenses)(2) 21,207 (4,633) NM 13,672 (14,949) NM ------ ------ ------ ------- Income before applicable income taxes 151,550 126,328 20% 312,579 319,504 (2)% Income tax expense(3) 44,645 39,324 14% 83,519 101,591 (18)% ------ ------ ------ ------- Net income 106,905 87,004 23% 229,060 217,913 5% Less: Net income attributable to non- (14,787) (20,708) (29)% (39,280) (52,552) (25)% controlling interests Net income attributable to Vantiv, Inc. $92,118 $66,296 39% $189,780 $165,361 15% ======= ======= ======== ======== Net income per share attributable to Vantiv, Inc. Class A common stock: Basic $0.57 $0.43 33% $1.18 $1.06 11% Diluted(4) $0.57 $0.41 39% $1.17 $1.04 13% Shares used in computing net income per share of Class A common stock: Basic 161,465,849 155,740,660 161,205,066 155,603,265 Diluted 162,882,396 197,342,169 162,617,782 197,126,571 Non Financial Data: Transactions (in millions) 6,550 6,270 4% 19,412 18,273 6%
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(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, payment network fees, third party processing expenses, telecommunication charges, postage and card production costs. (2) Non-operating income for the three and nine months ended September 30, 2017 consists of an unrealized gain of approximately $24.4 million relating to the change in fair value of a deal contingent forward entered into in connection with the pending Worldpay Group plc ("Worldpay") acquisition, partially offset by the change in fair value of a tax receivable agreement ("TRA") entered into as part of the acquisition of Mercury. Non-operating expenses for the three and nine months ended September 30, 2016 primarily relate to the change in fair value of a TRA entered into as part of the acquisition of Mercury. (3) Includes a credit of approximately $1.9 million and $16.0 million for the three and nine months ended September 30, 2017, respectively, 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 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 nine months ended September 30, 2017, approximately 23.6 million and 31.2 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 nine months ended September 30, 2017. The components of the diluted net income per share calculation are as follows:
Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 ---- ---- ---- ---- Income before applicable income taxes $ - $126,328 $ - $319,504 Taxes - 45,478 - 115,021 --- ------ --- ------- Net income $92,118 $80,850 $189,780 $204,483 Diluted shares 162,882,396 197,342,169 162,617,782 197,126,571 Diluted EPS $0.57 $0.41 $1.17 $1.04
Schedule 2 Vantiv, Inc. Pro Forma Adjusted Net Income (Unaudited) (in thousands, except share data Three Months Ended September 30, % Nine Months Ended September 30, % Change Change ------ ------ 2017 2016 2017 2016 ---- ---- ---- ---- (in thousands) (in thousands) Income before applicable income taxes $151,550 $126,328 20% $312,579 $319,504 (2)% Non-GAAP Adjustments: Transition, acquisition and integration costs(1) 5,116 2,761 85% 67,886 22,332 204% Share-based compensation(2) 13,607 9,600 42% 35,068 25,892 35% Intangible amortization(3) 55,280 47,797 16% 161,480 142,704 13% Non-operating (income) expenses(4) (21,207) 4,633 NM (13,672) 14,949 NM ------- ----- ------- ------ Non-GAAP Adjusted Income 204,346 191,119 7% 563,341 525,381 7% Before Applicable Taxes Less: Pro Forma Adjustments Income tax expense(5) 69,478 68,803 1% 191,536 189,137 1% Tax adjustments(6) (33,564) (18,902) 78% (96,721) (55,042) 76% ------- ------- ------- ------- Total pro forma tax expense 35,914 49,901 (28)% 94,815 134,095 (29)% Pro forma tax rate 18% 26% 17% 26% Other(7) 459 354 30% 1,143 1,581 (28)% --- --- ----- ----- Pro forma adjusted net income $167,973 $140,864 19% $467,383 $389,705 20% ======== ======== ======== ======== Pro forma adjusted net income per share $0.90 $0.71 27% $2.41 $1.98 22% djusted shares outstanding 186,524,461 197,342,169 193,860,354 197,126,571
Non-GAAP and Pro Forma Financial Measures This schedule presents non-GAAP and pro forma 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. --------------------------------------------- _______________ Pro forma 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. Transition, acquisition and integration costs for the three months ended September 30, 2017 and 2016 include $2,609 and $1,769 in Other operating costs, respectively and $2,507 and $992 in General and administrative ("G&A"), respectively. Transition, acquisition and integration costs for the nine months ended September 30, 2017 and 2016 include $10,846 and $7,744 in Other operating costs, respectively and $57,040 and $14,588 in G&A, respectively. Included in Transition, acquisition and integration costs in the nine months ended September 30, 2017 is a $38 million charge to G&A related to a settlement agreement stemming from legacy litigation of an acquired company. (2) Share-based compensation is recorded in G&A. (3) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions. (4) Non-operating income for the three and nine months ended September 30, 2017 consists of an unrealized gain of approximately $24.4 million relating to the change in fair value of a deal contingent forward entered into in connection with the pending Worldpay acquisition, partially offset by the change in fair value of a TRA entered into as part of the acquisition of Mercury. Non-operating expenses for the three and nine months ended September 30, 2016 primarily relate to the change in fair value of a TRA entered into as part of the acquisition of Mercury. (5) Represents adjusted income tax expense to reflect an effective tax rate of 34.0% for 2017 and 36.0% for 2016, respectively, 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. The effective tax rate is expected to remain at 34.0% for the remainder of 2017. (6) 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. (7) Represents the non-controlling interest, net of pro forma income tax expense discussed in (5) above, associated with a consolidated joint venture.
Schedule 3 Vantiv, Inc. Segment Information (Unaudited) (in thousands) Merchant Services ----------------- Three Months Ended September 30, 2017 2016 % Change ---- ---- -------- Total revenue $916,630 $793,860 15% Network fees and other costs 447,863 389,448 15% ------- ------- --- Net revenue 468,767 404,412 16% Sales and marketing 168,022 147,663 14% Segment profit $300,745 $256,749 17% ======== ======== === Non-financial data: Transactions (in millions) 5,702 5,241 9% Net revenue per transaction $0.0822 $0.0772 6% Nine Months Ended September 30, 2017 2016 % Change ---- ---- -------- Total revenue $2,615,341 $2,251,033 16% Network fees and other costs 1,311,539 1,117,602 17% --------- --------- --- Net revenue 1,303,802 1,133,431 15% Sales and marketing 479,628 416,107 15% ------- ------- --- Segment profit $824,174 $717,324 15% ======== ======== === Non-financial data: Transactions (in millions) 16,716 15,244 10% Net revenue per transaction $0.0780 $0.0744 5% Financial Institution Services ------------------------------ Three Months Ended September 30, 2017 2016 % Change ---- ---- -------- Total revenue $117,135 $120,159 (3)% Network fees and other costs 31,670 33,913 (7)% ------ ------ --- Net revenue 85,465 86,246 (1)% Sales and marketing 5,757 5,585 3% ----- ----- --- Segment profit $79,708 $80,661 (1)% ======= ======= === Non-financial data: Transactions (in millions) 848 1,029 (18)% Net revenue per transaction $0.1008 $0.0838 20% Nine Months Ended September 30, 2017 2016 % Change ---- ---- -------- Total revenue $345,390 $372,826 (7)% Network fees and other costs 94,819 103,908 (9)% ------ ------- --- Net revenue 250,571 268,918 (7)% Sales and marketing 17,454 17,623 (1)% ------ ------ --- Segment profit $233,117 $251,295 (7)% ======== ======== === Non-financial data: Transactions (in millions) 2,696 3,029 (11)% Net revenue per transaction $0.0929 $0.0888 5%
Schedule 4 Vantiv, Inc. Condensed Consolidated Statements of Financial Position (Unaudited) (in thousands) September 30, 2017 December 31, 2016 ------------------ ----------------- Assets Current assets: Cash and cash equivalents $92,638 $139,148 Accounts receivable-net 899,389 940,052 Related party receivable 1,639 1,751 Settlement assets 135,043 152,490 Prepaid expenses 48,073 39,229 Other 118,664 15,188 ------- ------ Total current assets 1,295,446 1,287,858 Customer incentives 64,023 67,288 Property, equipment and software-net 470,308 348,553 Intangible assets-net 732,431 787,820 Goodwill 4,180,307 3,738,589 Deferred taxes 1,322,679 771,139 Other assets 24,740 42,760 ------ Total assets $8,089,934 $7,044,007 ========== ========== Liabilities and equity Current liabilities: Accounts payable and accrued expenses $528,473 $471,979 Related party payable 3,037 3,623 Settlement obligations 788,261 801,381 Current portion of note payable 140,654 131,119 Current portion of tax receivable agreement obligations to related parties 261,844 191,014 Current portion of tax receivable agreement obligations 54,798 60,400 Deferred income 19,349 7,907 Current maturities of capital lease obligations 8,000 7,870 Other 6,790 13,719 ----- ------ Total current liabilities 1,811,206 1,689,012 Long-term liabilities: Note payable 4,591,619 3,089,603 Tax receivable agreement obligations to related parties 876,434 451,318 Tax receivable agreement obligations 42,510 86,640 Capital lease obligations 6,666 13,223 Deferred taxes 98,097 62,148 Other 46,297 44,774 ------ ------ Total long-term liabilities 5,661,623 3,747,706 Total liabilities 7,472,829 5,436,718 Commitments and contingencies Equity: Total equity(1) 617,105 1,607,289 Total liabilities and equity $8,089,934 $7,044,007 ========== ==========
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(1) Includes equity attributable to non- controlling interests.
Schedule 5 Vantiv, Inc. Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended September 30, 2017 2016 ---- ---- Operating Activities: Net income $229,060 $217,913 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 236,964 199,550 Amortization of customer incentives 18,648 18,508 Amortization of debt issuance costs 3,941 4,818 Unrealized gain on deal contingent forward (24,365) - Share-based compensation expense 35,068 25,892 Deferred taxes 60,000 49,900 Excess tax benefit from share-based compensation - (11,193) Tax receivable agreements non-cash items 10,708 14,880 Other 2,304 433 Change in operating assets and liabilities: Accounts receivable and related party receivable 46,682 (67,938) Net settlement assets and obligations 4,327 (16,558) Customer incentives (17,703) (30,808) Prepaid and other assets (82,916) 6,183 Accounts payable and accrued expenses 22,924 24,859 Payable to related party (586) (1,331) Other liabilities (17,390) (4,713) Net cash provided by operating activities 527,666 430,395 ------- ------- Investing Activities: Purchases of property and equipment (81,882) (93,822) Acquisition of customer portfolios and related assets and other (38,165) (2,179) Purchase of derivative instruments - (21,523) Cash used in acquisitions, net of cash acquired (531,534) - -------- --- Net cash used in investing activities (651,581) (117,524) -------- -------- Financing Activities: Proceeds from issuance of long-term debt 1,270,000 - Borrowings on revolving credit facility 5,405,000 1,180,000 Repayment of revolving credit facility (5,046,000) (1,180,000) Repayment of debt and capital lease obligations (107,969) (98,019) Payment of debt issuance costs (24,148) - Proceeds from issuance of Class A common stock under employee stock plans 10,847 12,340 Purchase and cancellation of Class A common stock (1,268,057) (25,008) Repurchase of Class A common stock (to satisfy tax withholding obligations) (9,187) (6,036) Settlement of certain tax receivable agreements (84,878) (158,115) Payments under tax receivable agreements (55,695) (53,474) Excess tax benefit from share-based compensation - 11,193 Distributions to non-controlling interests (12,508) (9,018) Other - (12) Net cash provided by (used in) financing activities 77,405 (326,149) ------ -------- Net decrease in cash and cash equivalents (46,510) (13,278) Cash and cash equivalents-Beginning of period 139,148 197,096 Cash and cash equivalents-End of period $92,638 $183,818 ======= ======== Cash Payments: Interest $94,318 $76,404 Taxes 31,585 35,709
Schedule 6 Vantiv, Inc. Reconciliation of GAAP Net Income to Adjusted EBITDA (Unaudited) (in thousands) Three Months Ended September 30, % Nine Months Ended September 30, % Change Change ------ ------ 2017 2016 2017 2016 ---- ---- ---- ---- Net income $106,905 $87,004 23% $229,060 $217,913 5% Income tax expense 44,645 39,324 14% 83,519 101,591 (18)% Non-operating (income) expenses(1) (21,207) 4,633 NM (13,672) 14,949 NM Interest expense-net 38,521 27,474 40% 97,441 81,321 20% Share-based compensation 13,607 9,600 42% 35,068 25,892 35% Transition, acquisition and integration costs(2) 5,116 2,761 85% 67,886 22,332 204% Depreciation and amortization 82,500 66,086 25% 236,964 199,550 19% ------ ------ ------- ------- Adjusted EBITDA $270,087 $236,882 14% $736,266 $663,548 11% ======== ======== ======== ========
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) Non-operating income for the three and nine months ended September 30, 2017 consists of an unrealized gain of approximately $24.4 million relating to the change in fair value of a deal contingent forward entered into in connection with the pending Worldpay acquisition, partially offset by the change in fair value of a TRA entered into as part of the acquisition of Mercury. Non-operating expenses for the three and nine months ended September 30, 2016 primarily relate to the change in fair value of a TRA entered into as part of the acquisition of Mercury. (2) 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 in the nine months ended September 30, 2017 is a $38 million charge related to a settlement agreement stemming from legacy litigation of an acquired company.
Schedule 7 Vantiv, Inc. Outlook Summary (Unaudited) Fourth Quarter Financial Outlook Full Year Financial Outlook Three Months Ended December 31, Year Ended December 31, 2017 Outlook 2016 Actual % Change 2017 Outlook 2016 Actual % Change ------------ ----------- -------- ------------ ----------- -------- GAAP net income per share $0.24 - $0.30 $0.29 (17%) - 3% $1.42 - $1.47 $1.32 8% - 11% attributable to Vantiv, Inc. Adjustments to reconcile GAAP $0.70 - $0.66 $0.46 52% - 43% $1.92 - $1.89 $1.41 36% - 34% to non-GAAP pro forma adjusted net income per share(1) Pro forma adjusted net income $0.94 - $0.96 $0.75 25% - 28% $3.34 - $3.36 $2.73 22% - 23% per share
Non-GAAP and Pro Forma Financial Measures This schedule presents non-GAAP and pro forma 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) 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, the full year 2017 financial outlook includes a $38 million charge recorded in March 2017 related to a settlement agreement stemming from legacy litigation of an acquired company; (b) share-based compensation; (c) amortization of intangible assets acquired in business combinations and customer portfolio and related asset acquisitions; (d) non-operating income (expense) is primarily associated with the change in the fair value of a TRA entered into as part of the acquisition of Mercury and an unrealized gain of approximately $24.4 million through the nine months ended September 30, 2017 relating to the change in fair value of a deal contingent forward entered into in connection with the pending Worldpay transaction, but excludes any estimate of unrealized gains or losses on the deal contingent forward for the period of October 1 - December 31, 2017; (e) non-controlling interest; (f) adjustments to income tax expense to reflect an effective tax rate of 34.0% for the three months and year ended December 31, 2017, which includes the impact of 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 be recorded in income tax expense and 36.0% for the three months and year ended December 31, 2016, 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 (g) 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.
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SOURCE Vantiv, Inc.