SOURCE: Vantiv, Inc.

Vantiv, Inc.

July 28, 2016 06:30 ET

Vantiv Reports Second Quarter 2016 Results

Strong Second Quarter Results Leads Vantiv to Raise Its Full Year Guidance; Vantiv Renews Fifth Third Bank Relationship and Terminates Certain TRAs

CINCINNATI, OH--(Marketwired - July 28, 2016) - Vantiv, Inc. (NYSE: VNTV) ("Vantiv" or the "company") today announced financial results for the second quarter ended June 30, 2016. Total revenue increased 13% to $891 million in the second quarter as compared to $786 million in the prior year period. Net revenue increased 13% to $480 million as compared to $424 million in the prior year period, reflecting strong growth in both business segments. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. increased 58% to $0.38 as compared to $0.24 in the prior year period. Pro forma adjusted net income per share increased 25% to $0.70 as compared to $0.56 in the prior year period. (See Schedule 2 for pro forma adjusted net income per share.)

"Our performance in the first half of the year as well as the opportunities that we see before us give us confidence," said Charles Drucker, president and chief executive officer at Vantiv. "Complexity and change play to our strengths, and we continue to serve our clients well."

Merchant Services

Merchant Services net revenue increased 15% to $388 million in the second quarter as compared to $337 million in the prior year period, primarily due to a 9% increase in transactions and a 6% increase in net revenue per transaction as our high growth channels continued to grow at above market rates. Sales and marketing expenses increased 19% to $139 million in the second quarter as compared to $117 million in the prior year period, primarily due to new sales growth in partner channels.

Financial Institution Services

Financial Institution Services net revenue increased 7% to $93 million in the second quarter as compared to $87 million in the prior year period, primarily due to an 8% increase in net revenue per transaction. Net revenue per transaction growth benefited from the contribution of value added services, including the impact of EMV card reissuance and fraud related services. Sales and marketing expenses decreased 5% to $5.7 million in the second quarter as compared to $6.1 million in the prior year period.

Fifth Third Renewal and Tax Receivable Agreement Termination

Fifth Third Bank and Vantiv agreed to renew their commercial relationship and extend it through the end of 2024. This relationship includes services provided to Fifth Third Bank within Vantiv's Financial Institution Services segment, as well as ongoing merchant referrals to Vantiv from Fifth Third Bank.

Fifth Third Bank and Vantiv also agreed to terminate and settle portions of Vantiv's obligations under their tax receivable agreements ("TRAs"). This agreement includes an initial payment of approximately $116 million to Fifth Third Bank in order to terminate and settle approximately $331 million of obligations. Under the terms of the agreement, Vantiv has the option to terminate and settle additional obligations under the TRAs in 2017 and 2018. If all options are exercised, the combination of the renewal and the TRA terminations will generate the potential for approximately $0.06 in on-going annual pro forma adjusted net income per share beginning in 2017, as well as the potential for an additional $0.06 in on-going annual pro forma adjusted net income per share beginning in 2018.

Full-Year and Third Quarter Financial Outlook

Based on our strong performance in the second quarter and increased confidence in our outlook for the remainder of the year, we are increasing our full-year 2016 expectations. Net revenue for the full-year 2016 is expected to be $1,850 to $1,875 million, representing an increase of 10% to 11% above the prior year. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. is expected to be $1.39 to $1.44 for the full-year 2016. Pro forma adjusted net income per share is expected to be $2.61 to $2.66 for the full-year 2016.

For the third quarter of 2016, net revenue is expected to be $470 to $475 million, representing an increase of 9% to 10% above the prior year period. On a GAAP basis, net income per diluted share attributable to Vantiv, Inc. is expected to be $0.37 to $0.39 for the third quarter of 2016. Pro forma adjusted net income per share is expected to be $0.67 to $0.69 for the third quarter of 2016.

Earnings Conference Call and Audio Webcast

The company will host a conference call to discuss the second quarter financial results today at 7:30 a.m. ET. The conference call can be accessed live over the phone by dialing (888) 389-5997, or for international callers (719) 457-2637, and referencing conference code 6515439. 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 6515439. The replay will be available through August 11, 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.

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.

Schedule 1
Vantiv, Inc.
Consolidated Statements of Income
(Unaudited)
(in thousands, except share data)

             
   Three Months Ended June 30,     Six Months Ended June 30,   
   2016  2015  % Change  2016  2015  % Change
Total revenue  $891,217   $785,995   13 % $1,709,840   $1,491,606   15 %
Network fees and other costs   410,736    362,349   13 %  798,149    693,495   15 %
 Net revenue(1)   480,481    423,646   13 %  911,691    798,111   14 %
Sales and marketing   144,844    122,925   18 %  280,482    238,980   17 %
Other operating costs   73,599    76,551   (4 )%  147,302    145,290   1 %
General and administrative   49,120    47,060   4 %  93,104    94,903   (2 )%
Depreciation and amortization   65,234    67,659   (4 )%  133,464    135,461   (1 )%
Income from operations   147,684    109,451   35 %  257,339    183,477   40 %
Interest expense-net   (26,118 )  (25,714 ) 2 %  (53,847 )  (51,725 ) 4 %
Non-operating expenses(2)   (4,664 )  (6,725 ) (31 )%  (10,316 )  (15,491 ) (33 )%
Income before applicable income taxes   116,902    77,012   52 %  193,176    116,261   66 %
Income tax expense   38,441    24,319   58 %  62,267    36,572   70 %
Net income   78,461    52,693   49 %  130,909    79,689   64 %
Less: Net income attributable to non-controlling interests   (19,134 )  (16,157 ) 18 %  (31,844 )  (24,164 ) 32 %
Net income attributable to Vantiv, Inc.  $59,327   $36,536   62 % $99,065   $55,525   78 %
                              
Net income per share attributable to Vantiv, Inc. Class A common stock:                             
 Basic  $0.38   $0.25   52 % $0.64   $0.38   68 %
 Diluted(3)  $0.38   $0.24   58 % $0.63   $0.37   70 %
Shares used in computing net income per share of Class A common stock:                             
 Basic   155,670,267    145,566,899        155,533,813    145,051,664      
 Diluted   197,258,209    201,831,467        197,018,018    201,276,166      
                              
Non Financial Data:                             
Transactions (in millions)   6,183    5,768   7 %  12,003    11,131   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 six months ended June 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 June 30,  Six Months Ended June 30,
   2016  2015  2016  2015
Income before applicable income taxes  $116,902  $77,012  $193,176  $116,261
Taxes   42,085   27,724   69,543   41,854
 Net income  $74,817  $49,288  $123,633  $74,407
Diluted shares   197,258,209   201,831,467   197,018,018   201,276,166
Diluted EPS  $0.38  $0.24  $0.63  $0.37
             

Schedule 2
Vantiv, Inc.
Pro Forma Adjusted Net Income
(Unaudited)
(in thousands, except share data)

             
   Three Months Ended June 30,     Six Months Ended June 30,   
   2016  2015  % Change  2016  2015  % Change
   (in thousands)     (in thousands)   
Income before applicable income taxes  $116,902   $77,012   52 % $193,176   $116,261   66 %
Non-GAAP Adjustments:                             
 Transition, acquisition and integration costs(1)   12,408    23,345   (47 )%  19,571    38,019   (49 )%
 Share-based compensation   7,940    5,097   56 %  16,292    16,720   (3 )%
 Intangible amortization(2)   47,242    47,524   (1 )%  94,907    94,749   - %
 Non-operating expenses(3)   4,664    6,725   (31 )%  10,316    15,491   (33 )%
  Non-GAAP Adjusted Income Before Applicable Taxes   189,156    159,703   18 %  334,262    281,240   19 %
Less: Pro Forma Adjustments                             
 Income tax expense(4)   68,096    57,493   18 %  120,334    101,246   19 %
 Tax adjustments(5)   (18,070 )  (11,644 ) 55 %  (36,140 )  (23,336 ) 55 %
 Other(6)   692    1,083   (36 )%  1,227    1,151   7 %
Pro Forma Adjusted Net Income  $138,438   $112,771   23 % $248,841   $202,179   23 %
                              
Pro Forma Adjusted Net Income Per Share  $0.70   $0.56   25 % $1.26   $1.00   26 %
Adjusted Shares Outstanding   197,258,209    201,831,467        197,018,018    201,276,166      
                       

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.
(2) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.
(3) Non-operating expenses for the three and six months ended June 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.
(4) 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 below. The effective tax rate is expected to remain at 36.0% for the remainder of 2016.
(5) 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 (4) above, associated with a consolidated joint venture.

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

Merchant Services

          
   Three Months Ended June 30,      
   2016  2015  $ Change  % Change
Total revenue  $762,593  $661,258  $101,335  15 %
Network fees and other costs   374,820   324,166   50,654  16 %
 Net revenue   387,773   337,092   50,681  15 %
Sales and marketing   139,108   116,860   22,248  19 %
Segment profit  $248,665  $220,232  $28,433  13 %
                  
Non-financial data:                 
Transactions (in millions)   5,156   4,737      9 %
Net revenue per transaction  $0.0752  $0.0712      6 %
             
          
   Six Months Ended June 30,      
   2016  2015  $ Change  % Change
Total revenue  $1,457,173  $1,247,970  $209,203  17 %
Network fees and other costs   728,154   620,196   107,958  17 %
 Net revenue   729,019   627,774   101,245  16 %
Sales and marketing   268,444   227,035   41,409  18 %
Segment profit  $460,575  $400,739  $59,836  15 %
                  
Non-financial data:                 
Transactions (in millions)   10,003   9,144      9 %
Net revenue per transaction  $0.0729  $0.0687      6 %
             

Financial Institution Services

          
   Three Months Ended June 30,      
   2016  2015  $ Change  % Change
Total revenue  $128,624  $124,737  $3,887   3 %
Network fees and other costs   35,916   38,183   (2,267 ) (6 )%
 Net revenue   92,708   86,554   6,154   7 %
Sales and marketing   5,736   6,065   (329 ) (5 )%
Segment profit  $86,972  $80,489  $6,483   8 %
                   
Non-financial data:                  
Transactions (in millions)   1,027   1,031       - %
Net revenue per transaction  $0.0903  $0.0840       8 %
              
          
   Six Months Ended June 30,      
   2016  2015  $ Change  % Change
Total revenue  $252,667  $243,636  $9,031   4 %
Network fees and other costs   69,995   73,299   (3,304 ) (5 )%
 Net revenue   182,672   170,337   12,335   7 %
Sales and marketing   12,038   11,945   93   1 %
Segment profit  $170,634  $158,392  $12,242   8 %
                   
Non-financial data:                  
Transactions (in millions)   2,000   1,987       1 %
Net revenue per transaction  $0.0913  $0.0857       7 %
              

Schedule 4
Vantiv, Inc.
Condensed Consolidated Statements of Financial Position
(Unaudited)
(in thousands)

       
   June 30, 2016  December 31, 2015
Assets      
Current assets:      
 Cash and cash equivalents  $202,724  $197,096
 Accounts receivable-net   721,703   680,033
 Related party receivable   4,208   3,999
 Settlement assets   132,304   143,563
 Prepaid expenses   32,646   31,147
 Other   69,556   61,661
  Total current assets   1,163,141   1,117,499
          
 Customer incentives   64,043   57,984
 Property, equipment and software-net   338,755   308,009
 Intangible assets-net   764,181   863,066
 Goodwill   3,366,528   3,366,528
 Deferred taxes   715,078   731,622
 Other assets   31,602   20,718
Total assets  $6,443,328  $6,465,426
         
Liabilities and equity        
Current liabilities:        
 Accounts payable and accrued expenses  $379,118  $364,878
 Related party payable   3,394   4,698
 Settlement obligations   635,161   677,502
 Current portion of note payable   109,501   116,501
 Current portion of tax receivable agreement obligations to related parties   35,659   31,232
 Current portion of tax receivable agreement obligations   59,503   64,227
 Deferred income   14,395   14,470
 Current maturities of capital lease obligations   8,601   7,931
 Other   20,104   13,940
  Total current liabilities   1,265,436   1,295,379
Long-term liabilities:        
 Note payable   2,888,625   2,943,638
 Tax receivable agreement obligations to related parties   766,170   801,829
 Tax receivable agreement obligations   78,551   126,980
 Capital lease obligations   17,536   21,801
 Deferred taxes   26,659   15,836
 Other   34,721   34,897
  Total long-term liabilities   3,812,262   3,944,981
Total liabilities   5,077,698   5,240,360
         
Commitments and contingencies        
Equity:        
  Total equity(1)   1,365,630   1,225,066
 Total liabilities and equity  $6,443,328  $6,465,426
(1) Includes equity attributable to non-controlling interests.

Schedule 5
Vantiv, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

    
   Six Months Ended June 30,
   2016  2015
Operating Activities:      
Net income  $130,909   $79,689  
Adjustments to reconcile net income to net cash provided by operating activities:           
 Depreciation and amortization expense   133,464    135,461  
 Amortization of customer incentives   12,581    8,183  
 Amortization and write-off of debt issuance costs   3,237    5,196  
 Share-based compensation expense   16,292    16,720  
 Deferred taxes   32,400    22,705  
 Excess tax benefit from share-based compensation   (8,067 )  (13,753 )
 Tax receivable agreements non-cash items   10,252    13,733  
 Other   382    -  
 Change in operating assets and liabilities:           
  Accounts receivable and related party receivable   (41,879 )  30,348  
  Net settlement assets and obligations   (31,082 )  41,380  
  Customer incentives   (23,343 )  (13,342 )
  Prepaid and other assets   (1,695 )  (2,163 )
  Accounts payable and accrued expenses   17,867    24,043  
  Payable to related party   (1,304 )  595  
  Other liabilities   (1,528 )  3,582  
   Net cash provided by operating activities   248,486    352,377  
Investing Activities:           
 Purchases of property and equipment   (62,883 )  (42,013 )
 Acquisition of customer portfolios and related assets and other   (883 )  (37,154 )
 Purchase of derivative instruments   (21,523 )  -  
   Net cash used in investing activities   (85,289 )  (79,167 )
Financing Activities:           
 Borrowings on revolving credit facility   855,000    -  
 Repayment of revolving credit facility   (855,000 )  -  
 Repayment of debt and capital lease obligations   (69,521 )  (262,946 )
 Proceeds from issuance of Class A common stock under employee stock plans   8,538    9,628  
 Repurchase of Class A common stock (to satisfy tax withholding obligations)   (5,784 )  (15,867 )
 Settlement of certain tax receivable agreements   (41,163 )  -  
 Payments under tax receivable agreements   (53,474 )  (22,805 )
 Excess tax benefit from share-based compensation   8,067    13,753  
 Distributions to non-controlling interests   (4,220 )  (3,132 )
 Other   (12 )  -  
 Decrease in cash overdraft   -    (2,627 )
   Net cash used in financing activities   (157,569 )  (283,996 )
Net increase (decrease) in cash and cash equivalents   5,628    (10,786 )
Cash and cash equivalents-Beginning of period   197,096    411,568  
Cash and cash equivalents-End of period  $202,724   $400,782  
Cash Payments:           
 Interest  $50,814   $48,502  
 Taxes   13,443    5,054  
         

Schedule 6
Vantiv, Inc.
Non-GAAP Adjusted Income Before Applicable Income Taxes
(Unaudited)
(in thousands, except share data)

See schedule 7 and 8 for a reconciliation of GAAP income before applicable income taxes to non-GAAP adjusted income before applicable income taxes.

             
   Three Months Ended June 30,     Six Months Ended June 30,   
   2016  2015  % Change  2016  2015  % Change
Total revenue  $891,217   $785,995   13 % $1,709,840   $1,491,606   15 %
Network fees and other costs   410,736    362,349   13 %  798,149    693,495   15 %
 Net revenue(1)   480,481    423,646   13 %  911,691    798,111   14 %
Sales and marketing   144,844    122,925   18 %  280,482    238,980   17 %
Other operating costs   70,112    64,643   8 %  141,327    127,057   11 %
General and administrative   32,259    30,526   6 %  63,216    58,397   8 %
 Adjusted EBITDA(2)   233,266    205,552   13 %  426,666    373,677   14 %
Depreciation and amortization   17,992    20,135   (11 )%  38,557    40,712   (5 )%
Adjusted income from operations   215,274    185,417   16 %  388,109    332,965   17 %
Interest expense-net   (26,118 )  (25,714 ) 2 %  (53,847 )  (51,725 ) 4 %
Non-GAAP adjusted income before applicable income taxes  $189,156   $159,703   18 % $334,262   $281,240   19 %
                       

Non-GAAP Financial Measures
This schedule presents non-GAAP 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, payment network fees, third party processing expenses, telecommunication charges, postage and card production costs.
(2) See schedule 9 for a reconciliation of GAAP net income to adjusted EBITDA.
 

Schedule 7
Vantiv, Inc.
Reconciliation of GAAP Income Before Applicable Income Taxes to Non-GAAP Adjusted Income Before Applicable
Income Taxes

(Unaudited)
(in thousands)

    
   Three Months Ended June 30, 2016
      Non-GAAP Adjustments   
   GAAP  Transition, Acquisition and Integration(2)  Share-Based
Compensation
 Amortization of Intangible Assets(3)  Non Operating Income (Expense)(4)  Non-GAAP Adjusted Income Before Applicable Income Taxes
Total revenue  $891,217   $-   $-   $-   $-  $891,217  
Network fees and other costs   410,736    -    -    -    -   410,736  
 Net revenue(1)   480,481    -    -    -    -   480,481  
Sales and marketing   144,844    -    -    -    -   144,844  
Other operating costs   73,599    (3,487 )  -    -    -   70,112  
General and administrative   49,120    (8,921 )  (7,940 )  -    -   32,259  
Depreciation and amortization   65,234    -    -    (47,242 )  -   17,992  
Income from operations   147,684    12,408    7,940    47,242    -   215,274  
Interest expense-net   (26,118 )  -    -    -    -   (26,118 )
Non-operating income (expense)   (4,664 )  -    -    -    4,664   -  
Income before applicable income taxes  $116,902   $12,408   $7,940   $47,242   $4,664  $189,156  
                        
    
   Three Months Ended June 30, 2015
      Non-GAAP Adjustments   
   GAAP  Transition, Acquisition
and Integration
(2)
 Share-Based
Compensation
 Amortization of Intangible Assets(3)  Non Operating Income (Expense)(4)  Non-GAAP Adjusted Income Before Applicable  Income Taxes
Total revenue  $785,995   $-   $-   $-   $-  $785,995  
Network fees and other costs   362,349    -    -    -    -   362,349  
 Net revenue(1)   423,646    -    -    -    -   423,646  
Sales and marketing   122,925    -    -    -    -   122,925  
Other operating costs   76,551    (11,908 )  -    -    -   64,643  
General and administrative   47,060    (11,437 )  (5,097 )  -    -   30,526  
Depreciation and amortization   67,659    -    -    (47,524 )  -   20,135  
Income from operations   109,451    23,345    5,097    47,524    -   185,417  
Interest expense-net   (25,714 )  -    -    -    -   (25,714 )
Non-operating income (expense)   (6,725 )  -    -    -    6,725   -  
Income before applicable income taxes  $77,012   $23,345   $5,097   $47,524   $6,725  $159,703  
                        

Non-GAAP Financial Measures
This schedule presents non-GAAP 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, payment network fees, third party processing expenses, telecommunication charges, postage and card production costs.
(2) Represents acquisition and integration costs incurred in connection with our acquisitions, charges related to employee termination benefits and other transition activities.
(3) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.
(4) Non-operating income (expense) during 2016 and 2015 primarily relates to the change in the fair value of a TRA entered into as part of the acquisition of Mercury.
 

Schedule 8
Vantiv, Inc.
Reconciliation of GAAP Income Before Applicable Income Taxes to Non-GAAP Adjusted Income Before Applicable Income Taxes
(Unaudited)
(in thousands)

    
   Six Months Ended June 30, 2016
      Non-GAAP Adjustments   
   GAAP  Transition, Acquisition and Integration(2)  Share-Based
Compensation
 Amortization of Intangible Assets(3)  Non Operating Income (Expense)(4)  Non-GAAP Adjusted Income Before Applicable Income Taxes
Total revenue  $1,709,840   $-   $-   $-   $-  $1,709,840  
Network fees and other costs   798,149    -    -    -    -   798,149  
 Net revenue(1)   911,691    -    -    -    -   911,691  
Sales and marketing   280,482    -    -    -    -   280,482  
Other operating costs   147,302    (5,975 )  -    -    -   141,327  
General and administrative   93,104    (13,596 )  (16,292 )  -    -   63,216  
Depreciation and amortization   133,464    -    -    (94,907 )  -   38,557  
Income from operations   257,339    19,571    16,292    94,907    -   388,109  
Interest expense-net   (53,847 )  -    -    -    -   (53,847 )
Non-operating income (expense)   (10,316 )  -    -    -    10,316   -  
Income before applicable income taxes  $193,176   $19,571   $16,292   $94,907   $10,316  $334,262  
                        
    
   Six Months Ended June 30, 2015
      Non-GAAP Adjustments   
   GAAP  Transition, Acquisition and Integration(2)  Share-Based
Compensation
 Amortization of Intangible Assets(3)  Non Operating Income (Expense)(4)  Non-GAAP Adjusted Income Before Applicable Income Taxes
Total revenue  $1,491,606   $-   $-   $-   $-  $1,491,606  
Network fees and other costs   693,495    -    -    -    -   693,495  
 Net revenue(1)   798,111    -    -    -    -   798,111  
Sales and marketing   238,980    -    -    -    -   238,980  
Other operating costs   145,290    (18,233 )  -    -    -   127,057  
General and administrative   94,903    (19,786 )  (16,720 )  -    -   58,397  
Depreciation and amortization   135,461    -    -    (94,749 )  -   40,712  
Income from operations   183,477    38,019    16,720    94,749    -   332,965  
Interest expense-net   (51,725 )  -    -    -    -   (51,725 )
Non-operating income (expense)   (15,491 )  -    -    -    15,491   -  
Income before applicable income taxes  $116,261   $38,019   $16,720   $94,749   $15,491  $281,240  
                        

Non-GAAP Financial Measures
This schedule presents non-GAAP 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, payment network fees, third party processing expenses, telecommunication charges, postage and card production costs.
(2) Represents acquisition and integration costs incurred in connection with our acquisitions, charges related to employee termination benefits and other transition activities.
(3) Represents amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.
(4) Non-operating income (expense) during 2016 and 2015 primarily relates to the change in the fair value of a TRA entered into as part of the acquisition of Mercury.
 

Schedule 9
Vantiv, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(Unaudited)
(in thousands)

             
   Three Months Ended
June 30,
    Six Months Ended
June 30,
  
   2016  2015  % Change  2016  2015  % Change
Net income  $78,461  $52,693  49 % $130,909  $79,689  64 %
Income tax expense   38,441   24,319  58 %  62,267   36,572  70 %
Non-operating expenses(1)   4,664   6,725  (31 )%  10,316   15,491  (33 )%
Interest expense-net   26,118   25,714  2 %  53,847   51,725  4 %
Share-based compensation   7,940   5,097  56 %  16,292   16,720  (3 )%
Transition, acquisition and integration costs(2)   12,408   23,345  (47 )%  19,571   38,019  (49 )%
Depreciation and amortization   65,234   67,659  (4 )%  133,464   135,461  (1 )%
Adjusted EBITDA  $233,266  $205,552  13 % $426,666  $373,677  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 six months ended June 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.
 

Schedule 10
Vantiv, Inc.
Outlook Summary
(Unaudited)
(in millions, except share data)

   Third Quarter Financial Outlook  Full Year Financial Outlook
   Three Months Ended  
September 30,
    Year Ended  
December 31,
  
   2016 Outlook  2015 Actual  % Change  2016 Outlook  2015 Actual  % Change
GAAP net income per share attributable to Vantiv, Inc.  $0.37 - $0.39  $0.27  37% - 44 % $1.39 - $1.44  $0.95  46% - 52 %
Adjustments to reconcile GAAP to non-GAAP pro forma adjusted net income per share(1)  $0.30  $0.32  (6 )% $1.22  $1.29  (5 )%
Pro forma adjusted net income per share  $0.67 - $0.69  $0.59  14% - 17 % $2.61 - $2.66  $2.24  17% - 19 %
                      

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%, 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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