Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 26, 2016


 
Vantiv, Inc.
(Exact name of registrant as specified in its charter)
 

Delaware
(State of incorporation)
001-35462
(Commission File Number)
26-4532998
(IRS Employer Identification No.)
 
 
 
8500 Governor's Hill Drive
Symmes Township, Ohio 45249
(Address of principal executive offices, including zip code)
 
 
 
(513) 900-5250
(Registrant's telephone number, including area code)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 







Item 2.02    Results of Operations and Financial Condition.
On October 26, 2016, Vantiv, Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this current report and is incorporated herein by reference.
The information furnished on this Form 8-K, including the exhibit attached, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, regardless of any general incorporation language in such filing.

Item 9.01    Financial Statements and Exhibits.
Exhibit No.
 
Description
99.1
 
Press Release dated October 26, 2016



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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
VANTIV, INC.
 
 
 
 
Dated: October 26, 2016
By:
/s/ NELSON F. GREENE
 
 
Name:
Nelson F. Greene
 
 
Title:
Chief Legal and Corporate Services Officer and Secretary



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EXHIBIT INDEX
 
Exhibit No.
 
Description
99.1
 
Press Release dated October 26, 2016


4
Exhibit


Exhibit 99.1


Vantiv Reports Third Quarter 2016 Results

Raises Full Year Guidance Following Several Quarters of Strong Performance



CINCINNATI, October 26, 2016 - Vantiv, Inc. (NYSE: VNTV) (“Vantiv” or the “company”) today announced financial results for the third quarter ended September 30, 2016. Total revenue increased 12% to $914 million in the third quarter as compared to $816 million in the prior year period. Net revenue increased 14% to $491 million as compared to $430 million in the prior year period, reflecting strong transaction growth. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. increased 52% to $0.41 as compared to $0.27 in the prior year period. Pro forma adjusted net income per share increased 20% to $0.71 as compared to $0.59 in the prior year period. (See Schedule 2 for pro forma adjusted net income per share.)

“Our business continues to generate high rates of organic growth,” said Charles Drucker, president and chief executive officer at Vantiv. “Our ability to deliver superior financial results by consistently winning market share speaks to the strength of our people and their consistent focus on execution.”

Merchant Services
Merchant Services net revenue increased 17% to $404 million in the third quarter as compared to $345 million in the prior year period, primarily due to a 10% increase in transactions and a 6% increase in net revenue per transaction. Sales and marketing expenses increased 17% to $148 million in the third quarter as compared to $126 million in the prior year period, primarily due to new sales growth in partner channels.

Financial Institution Services
Financial Institution Services net revenue increased 1% to $86.2 million in the third quarter as compared to $85.6 million in the prior year period. Net revenue growth was impacted by compression from the Fifth Third Bank contract renewal, partially offset by contribution from EMV card reissuance and fraud related services. Sales and marketing expenses decreased 8% to $5.6 million in the third quarter as compared to $6.1 million in the prior year period.

Operating Expenses
Other operating costs increased 8% on a GAAP basis to $72 million in the third quarter as compared to $67 million in the prior year period. When excluding transition, acquisition and integration costs, Other operating costs increased 15% on a pro forma basis to $70 million as compared to $61 million in the prior year period.

General and administrative expenses decreased 2% on a GAAP basis to $40.7 million in the third quarter as compared to $41.5 million in the prior year period. When excluding transition, acquisition and integration costs as well as share-based compensation, General and administrative expenses increased 7% on a pro forma basis to $30 million as compared to $28 million in the prior year period.

Adjusted EBITDA
Adjusted EBITDA increased 14% to $237 million or 48.3% of net revenue in the third quarter as compared to $208 million or 48.4% of net revenue in the prior year period.

Depreciation and Amortization
Depreciation and amortization expense decreased on a GAAP basis to $66 million in the third quarter as compared to $71 million in the prior year period. Excluding amortization of intangible assets related to acquisitions, depreciation and amortization expense decreased on a pro forma basis to $18 million as compared to $22 million in the prior year period.

Share Repurchase Authorization Increased to $300 Million
Vantiv’s Board of Directors authorized the repurchase of additional shares of Vantiv Class A common stock  with an aggregate purchase price of up to $250 million, providing the company with a total of approximately $300 million available for share repurchases.



1
 
 
 



Debt Refinancing
Total debt was increased by $250 million in connection with the refinancing of credit facilities which resulted in a reduction of interest rates. Following the refinancing, outstanding debt consists of a $2.5 billion Term A loan, maturing in October 2021, and a $765 million Term B loan, maturing in October 2023. The financing also includes a revolving credit facility of $650 million.

Full-Year and Fourth Quarter Financial Outlook
Based on continued strong performance, the company is increasing full-year 2016 expectations. Net revenue for the full-year 2016 is expected to be $1,890 to $1,900 million, representing an increase of 12% to 13% above the prior year. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. is expected to be $1.43 to $1.45 for the full-year 2016. Pro forma adjusted net income per share is expected to be $2.67 to $2.69 for the full-year 2016.

For the fourth quarter of 2016, net revenue is expected to be $488 to $498 million, representing an increase of 8% to 10% above the prior year period. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. is expected to be $0.39 to $0.41 for the fourth quarter of 2016. Pro forma adjusted net income per share is expected to be $0.70 to $0.72 for the fourth quarter of 2016.

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 (877) 852-6581, or for international callers (719) 325-4850, and referencing conference code 9805706. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (888) 203-1112, or for international callers (719) 457-0820, and entering replay passcode 9805706. The replay will be available through November 9, 2016. 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 second 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 the new www.vantiv.com, or follow us on Twitter, Facebook, LinkedIn, Google+ and YouTube.

© 2016 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.


2
 
 
 



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


3
 
 
 



Schedule 1
Vantiv, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except share data)
 
Three Months Ended September 30,
 
%  Change
 
Nine Months Ended September 30,
 
%  Change
 
2016
 
2015
 
 
2016
 
2015
 
Total revenue
$
914,019

 
$
815,998

 
12
 %
 
$
2,623,859

 
$
2,307,604

 
14
 %
Network fees and other costs
423,361

 
385,548

 
10
 %
 
1,221,510

 
1,079,043

 
13
 %
Net revenue(1)
490,658

 
430,450

 
14
 %
 
1,402,349

 
1,228,561

 
14
 %
Sales and marketing
153,248

 
132,481

 
16
 %
 
433,730

 
371,461

 
17
 %
Other operating costs
72,162

 
66,563

 
8
 %
 
219,464

 
211,853

 
4
 %
General and administrative
40,727

 
41,492

 
(2
)%
 
133,831

 
136,395

 
(2
)%
Depreciation and amortization
66,086

 
70,638

 
(6
)%
 
199,550

 
206,099

 
(3
)%
Income from operations
158,435

 
119,276

 
33
 %
 
415,774

 
302,753

 
37
 %
Interest expense—net
(27,474
)
 
(27,044
)
 
2
 %
 
(81,321
)
 
(78,769
)
 
3
 %
Non-operating expenses(2)
(4,633
)
 
(8,308
)
 
(44
)%
 
(14,949
)
 
(23,799
)
 
(37
)%
Income before applicable income taxes
126,328

 
83,924

 
51
 %
 
319,504

 
200,185

 
60
 %
Income tax expense
39,324

 
24,776

 
59
 %
 
101,591

 
61,348

 
66
 %
Net income
87,004

 
59,148

 
47
 %
 
217,913

 
138,837

 
57
 %
Less: Net income attributable to non-controlling interests
(20,708
)
 
(17,656
)
 
17
 %
 
(52,552
)
 
(41,820
)
 
26
 %
Net income attributable to Vantiv, Inc.
$
66,296

 
$
41,492

 
60
 %
 
$
165,361

 
$
97,017

 
70
 %
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Vantiv, Inc. Class A common stock:
 

 
 
 
 

 
 
 
 
 
 
Basic
$
0.43

 
$
0.29

 
48
 %
 
$
1.06

 
$
0.67

 
58
 %
Diluted(3)
$
0.41

 
$
0.27

 
52
 %
 
$
1.04

 
$
0.64

 
63
 %
Shares used in computing net income per share of Class A common stock:
 

 
 

 
 

 
 
 
 
 
 
Basic
155,740,660

 
145,015,310

 

 
155,603,265

 
145,039,413

 

Diluted
197,342,169

 
201,899,024

 

 
197,126,571

 
201,483,652

 

 
 
 
 
 
 
 
 
 
 
 
 
Non Financial Data:
 
 
 
 
 

 
 
 
 
 
 
Transactions (in millions)
6,270

 
5,776

 
9
 %
 
18,273

 
16,907

 
8
 %
 
 
(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 expenses for the three and nine months ended September 30, 2016 and 2015 primarily relate to the change in fair value of a tax receivable agreement (“TRA”) entered into as part of the acquisition of Mercury.
(3) 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. The expected effective tax rate for 2016 and 2015 was 36.0%. The components of the diluted net income per share calculation are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,

2016
 
2015
 
2016
 
2015
Income before applicable income taxes
$
126,328

 
$
83,924

 
$
319,504

 
$
200,185

Taxes
45,478

 
30,213

 
115,021

 
72,067

Net income
$
80,850

 
$
53,711

 
$
204,483

 
$
128,118

Diluted shares
197,342,169

 
201,899,024

 
197,126,571

 
201,483,652

Diluted EPS
$
0.41

 
$
0.27

 
$
1.04

 
$
0.64


4
 
 
 



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,
 
 
 
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Income before applicable income taxes
 
$
126,328

 
$
83,924

 
51
 %
 
$
319,504

 
$
200,185

 
60
 %
Non-GAAP Adjustments:
 
 
 
 
 

 
 
 
 
 
 
Transition, acquisition and integration costs(1)
 
2,761

 
11,359

 
(76
)%
 
22,332

 
49,378

 
(55
)%
Share-based compensation(2)
 
9,600

 
7,132

 
35
 %
 
25,892

 
23,852

 
9
 %
Intangible amortization(3)
 
47,797

 
48,682

 
(2
)%
 
142,704

 
143,431

 
(1
)%
Non-operating expenses(4)
 
4,633

 
8,308

 
(44
)%
 
14,949

 
23,799

 
(37
)%
Non-GAAP Adjusted Income Before Applicable Taxes
 
191,119

 
159,405

 
20
 %
 
525,381

 
440,645

 
19
 %
Less: Pro Forma Adjustments
 
 
 
 
 

 
 
 
 
 
 
Income tax expense(5)
 
68,803

 
57,386

 
20
 %
 
189,137

 
158,632

 
19
 %
Tax adjustments(6)
 
(18,902
)
 
(16,842
)
 
12
 %
 
(55,042
)
 
(40,178
)
 
37
 %
Other(7)
 
354

 
319

 
11
 %
 
1,581

 
1,470

 
8
 %
Pro Forma Adjusted Net Income
 
$
140,864

 
$
118,542

 
19
 %
 
$
389,705

 
$
320,721

 
22
 %
 
 
 
 
 
 

 
 
 
 
 
 
Pro Forma Adjusted Net Income Per Share
 
$
0.71

 
$
0.59

 
20
 %
 
$
1.98

 
$
1.59

 
25
 %
Adjusted Shares Outstanding
 
197,342,169

 
201,899,024

 
 
 
197,126,571

 
201,483,652

 
 

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, 2016 and September 30, 2015 includes $1,769 and $5,110 in Other Operating, respectively and $992 and $6,249 in General and Administrative (“G&A”), respectively. Transition, acquisition and integration costs for the nine months ended September 30, 2016 and September 30, 2015 includes $7,744 and $23,343 in Other Operating, respectively and $14,588 and $26,035 in G&A, respectively.
(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 expenses for the three and nine months ended September 30, 2016 and 2015 primarily relate to the change in the 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 36.0% for 2016 and 2015, 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 effective tax rate is expected to remain at 36.0% for the remainder of 2016.
(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.


5
 
 
 



Schedule 3
Vantiv, Inc.
Segment Information
(Unaudited)
(in thousands)

Merchant Services
 
Three Months Ended September 30,
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Total revenue
$
793,860

 
$
687,394

 
$
106,466

 
15
%
Network fees and other costs
389,448

 
342,518

 
46,930

 
14
%
Net revenue
404,412

 
344,876

 
59,536

 
17
%
Sales and marketing
147,663

 
126,400

 
21,263

 
17
%
Segment profit
$
256,749

 
$
218,476

 
$
38,273

 
18
%
 
 
 
 
 
 
 
 
Non-financial data:
 

 
 

 
 

 
 
Transactions (in millions)
5,241

 
4,743

 
 

 
10
%
Net revenue per transaction
$
0.0772

 
$
0.0727

 
 
 
6
%

 
Nine Months Ended September 30,
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Total revenue
$
2,251,033

 
$
1,935,364

 
$
315,669

 
16
%
Network fees and other costs
1,117,602

 
962,714

 
154,888

 
16
%
Net revenue
1,133,431

 
972,650

 
160,781

 
17
%
Sales and marketing
416,107

 
353,435

 
62,672

 
18
%
Segment profit
$
717,324

 
$
619,215

 
$
98,109

 
16
%
 
 
 
 
 
 
 
 
Non-financial data:
 

 
 

 
 

 
 
Transactions (in millions)
15,244

 
13,887

 
 

 
10
%
Net revenue per transaction
$
0.0744

 
$
0.0700

 
 
 
6
%

Financial Institution Services
 
Three Months Ended September 30,
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Total revenue
$
120,159

 
$
128,604

 
$
(8,445
)
 
(7
)%
Network fees and other costs
33,913

 
43,030

 
(9,117
)
 
(21
)%
Net revenue
86,246

 
85,574

 
672

 
1
 %
Sales and marketing
5,585

 
6,081

 
(496
)
 
(8
)%
Segment profit
$
80,661

 
$
79,493

 
$
1,168

 
1
 %

 
 
 
 
 
 
 
Non-financial data:
 

 
 

 
 

 
 
Transactions (in millions)
1,029

 
1,033

 
 

 
 %
Net revenue per transaction
$
0.0838

 
$
0.0828

 
 
 
1
 %

 
Nine Months Ended September 30,
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Total revenue
$
372,826

 
$
372,240

 
$
586

 
 %
Network fees and other costs
103,908

 
116,329

 
(12,421
)
 
(11
)%
Net revenue
268,918

 
255,911

 
13,007

 
5
 %
Sales and marketing
17,623

 
18,026

 
(403
)
 
(2
)%
Segment profit
$
251,295

 
$
237,885

 
$
13,410

 
6
 %
 
 
 
 
 
 
 
 
Non-financial data:
 

 
 

 
 

 
 
Transactions (in millions)
3,029

 
3,020

 
 

 
 %
Net revenue per transaction
$
0.0888

 
$
0.0847

 
 
 
5
 %



6
 
 
 



Schedule 4
Vantiv, Inc.
Condensed Consolidated Statements of Financial Position
(Unaudited)
(in thousands)
 
 
September 30, 2016
 
December 31, 2015
Assets
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
183,818

 
$
197,096

Accounts receivable—net
 
750,449

 
680,033

Related party receivable
 
1,521

 
3,999

Settlement assets
 
150,901

 
143,563

Prepaid expenses
 
42,796

 
31,147

Other
 
55,118

 
61,661

Total current assets
 
1,184,603

 
1,117,499

 
 
 
 
 
  Customer incentives
 
65,855

 
57,984

  Property, equipment and software—net
 
344,424

 
308,009

  Intangible assets—net
 
734,250

 
863,066

  Goodwill
 
3,366,528

 
3,366,528

  Deferred taxes
 
622,175

 
731,622

  Other assets
 
31,350

 
20,718

Total assets
 
$
6,349,185

 
$
6,465,426

 
 
 
 
 
Liabilities and equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and accrued expenses
 
$
390,470

 
$
364,878

Related party payable
 
3,367

 
4,698

Settlement obligations
 
668,282

 
677,502

Current portion of note payable
 
98,339

 
116,501

Current portion of tax receivable agreement obligations to related parties
 
153,903

 
31,232

Current portion of tax receivable agreement obligations
 
59,978

 
64,227

Deferred income
 
12,255

 
14,470

Current maturities of capital lease obligations
 
7,887

 
7,931

Other
 
16,796

 
13,940

Total current liabilities
 
1,411,277

 
1,295,379

Long-term liabilities:
 
 
 
 
Note payable
 
2,875,743

 
2,943,638

Tax receivable agreement obligations to related parties
 
317,215

 
801,829

Tax receivable agreement obligations
 
82,468

 
126,980

Capital lease obligations
 
15,385

 
21,801

Deferred taxes
 
33,845

 
15,836

Other
 
41,038

 
34,897

Total long-term liabilities
 
3,365,694

 
3,944,981

Total liabilities
 
4,776,971

 
5,240,360

 
 
 
 
 
Commitments and contingencies
 
 
 
 
Equity:
 
 
 
 
Total equity(1)
 
1,572,214

 
1,225,066

Total liabilities and equity
 
$
6,349,185

 
$
6,465,426

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

7
 
 
 



Schedule 5
Vantiv, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
Nine Months Ended September 30,
 
2016
 
2015
Operating Activities:
 

 
 

Net income
$
217,913

 
$
138,837

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

 
 

Depreciation and amortization expense
199,550

 
206,099

Amortization of customer incentives
18,508

 
12,535

Amortization and write-off of debt issuance costs
4,818

 
6,784

Share-based compensation expense
25,892

 
23,852

Deferred taxes
49,900

 
35,527

Excess tax benefit from share-based compensation
(11,193
)
 
(15,797
)
Tax receivable agreements non-cash items
14,880

 
21,196

Other
433

 

Change in operating assets and liabilities:
 

 
 

Accounts receivable and related party receivable
(67,938
)
 
28,743

Net settlement assets and obligations
(16,558
)
 
23,876

Customer incentives
(30,808
)
 
(22,716
)
Prepaid and other assets
6,183

 
2,016

Accounts payable and accrued expenses
24,859

 
40,051

Payable to related party
(1,331
)
 
1,869

Other liabilities
(4,713
)
 
3,685

Net cash provided by operating activities
430,395

 
506,557

Investing Activities:
 

 
 

Purchases of property and equipment
(93,822
)
 
(64,344
)
Acquisition of customer portfolios and related assets and other
(2,179
)
 
(39,312
)
Purchase of derivative instruments
(21,523
)
 

Net cash used in investing activities
(117,524
)
 
(103,656
)
Financing Activities:
 

 
 

Borrowings on revolving credit facility
1,180,000

 

Repayment of revolving credit facility
(1,180,000
)
 

Repayment of debt and capital lease obligations
(98,019
)
 
(295,208
)
Proceeds from issuance of Class A common stock under employee stock plans
12,340

 
12,739

Repurchase of Class A common stock
(25,008
)
 
(161,156
)
Repurchase of Class A common stock (to satisfy tax withholding obligations)
(6,036
)
 
(16,119
)
Settlement of certain tax receivable agreements
(158,115
)
 
(44,800
)
Payments under tax receivable agreements
(53,474
)
 
(22,805
)
Excess tax benefit from share-based compensation
11,193

 
15,797

Distributions to non-controlling interests
(9,018
)
 
(12,732
)
Other
(12
)
 

Decrease in cash overdraft

 
(2,627
)
Net cash used in financing activities
(326,149
)
 
(526,911
)
Net increase (decrease) in cash and cash equivalents
(13,278
)
 
(124,010
)
Cash and cash equivalents—Beginning of period
197,096

 
411,568

Cash and cash equivalents—End of period
$
183,818

 
$
287,558

Cash Payments:
 

 
 

Interest
$
76,404

 
$
73,965

Taxes
35,709

 
6,484


8
 
 
 



Schedule 6
Vantiv, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(Unaudited)
(in thousands)

 
Three Months Ended September 30,
 
%  Change
 
Nine Months Ended September 30,
 
%  Change
 
2016
 
2015
 
 
2016
 
2015
 
Net income
$
87,004

 
$
59,148

 
47
 %
 
$
217,913

 
$
138,837

 
57
 %
Income tax expense
39,324

 
24,776

 
59
 %
 
101,591

 
61,348

 
66
 %
Non-operating expenses(1)
4,633

 
8,308

 
(44
)%
 
14,949

 
23,799

 
(37
)%
Interest expense—net
27,474

 
27,044

 
2
 %
 
81,321

 
78,769

 
3
 %
Share-based compensation
9,600

 
7,132

 
35
 %
 
25,892

 
23,852

 
9
 %
Transition, acquisition and integration costs(2)
2,761

 
11,359

 
(76
)%
 
22,332

 
49,378

 
(55
)%
Depreciation and amortization
66,086

 
70,638

 
(6
)%
 
199,550

 
206,099

 
(3
)%
Adjusted EBITDA
$
236,882

 
$
208,405

 
14
 %
 
$
663,548

 
$
582,082

 
14
 %
 
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 expenses for the three and nine months ended September 30, 2016 and 2015 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.





9
 
 
 



Schedule 7
Vantiv, Inc.
Outlook Summary
(Unaudited)


 
Fourth Quarter Financial Outlook
 
Full Year Financial Outlook
 
Three Months Ended December 31,
 
 
 
Year Ended December 31,
 
 
 
2016 Outlook
 
2015 Actual
 
% Change
 
2016 Outlook
 
2015 Actual
 
% Change
GAAP net income per share attributable to Vantiv, Inc.
$0.39 - $0.41

 

$0.31

 
26% - 32%

 
$1.43 - $1.45

 

$0.95

 
51% - 53%

Adjustments to reconcile GAAP to non-GAAP pro forma adjusted net income per share(1)

$0.31

 

$0.34

 
(9
)%
 

$1.24

 

$1.29

 
(4
)%
Pro forma adjusted net income per share
$0.70 - $0.72

 

$0.65

 
8% - 11%

 
$2.67 - $2.69

 

$2.24

 
19% - 20%


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 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 primarily associated with the change in fair value of a TRA entered into as part of the acquisition of Mercury; (e) non-controlling interest; (f) adjustments to income tax expense to reflect an effective rate of 36.0%, 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.



10