Vantiv Reports Second Quarter 2012 Results

Vantiv, Inc. (NYSE: VNTV) (Vantiv or “the Company”) today announced financial results for the second quarter ended June 30, 2012. Revenue increased 17% to $469.6 million as compared to $402.6 million in the prior year. Net revenue increased 20% to $260.4 million as compared to $216.9 million in the prior year. Cash net income increased 48% to $68.0 million as compared to $46.0 million in the prior year. Adjusted cash net income per share was $0.32. (See Schedule 2 for cash net income and Schedules 6 and 7 for GAAP net income reconciliation to cash net income.)

On a GAAP basis, net income attributable to Vantiv, Inc. was $23.0 million, or $0.18 per diluted share, compared with net income of $5.4 million, or $0.06 per diluted share, in the prior year. GAAP net income in the prior year included $13.8 million of costs related to charges incurred in connection with refinancing of indebtedness, or $0.13 loss on a diluted per share basis.

Transactions increased 21% and net revenue increased 20% primarily driven by a 29% increase in transactions in the Merchant Services segment. Adjusted EBITDA increased 20% to $131.0 million as compared to $109.5 million in the prior year. (See Schedule 8 for reconciliation from GAAP income from operations to adjusted EBITDA.)

“Our second quarter results reflect outstanding performance across our business,” president and chief executive officer Charles Drucker said. “Vantiv employees continue to execute on our new sales and channel initiatives to drive growth in net revenue and profitability.”

Merchant Services

Net revenue increased 26% to $176.9 million as compared to $140.2 million in the prior year, primarily due to a 29% increase in transactions. Organic growth and new business contributed to strong transaction growth for the quarter. Net revenue per transaction declined by 5% as compared to the first quarter, as anticipated, primarily due to the impact of a new large national merchant processing contract. Sales and marketing expenses increased 21% to $63.6 million as compared to $52.6 million in the prior year in line with the growth in net revenue.

Financial Institution Services

Net revenue increased 9% to $83.4 million as compared to $76.7 million in the prior year driven primarily by growth in value added services revenue. Sales and marketing expenses increased by 4%.

2012 Financial Outlook

“Based on strong business results for the first half of 2012 we are raising our guidance for the year,” said Mark Heimbouch, chief financial officer. “Net revenue for 2012 is now expected to be between $1.0 billion and $1.02 billion, representing a year-over-year increase of 16% to 18% versus our previous estimate of $0.995 billion to $1.01 billion. Cash net income is now expected to be between $243.0 million and $252.0 million, representing annual growth between 32% and 37%, versus our previous estimate of $234.0 million to $242.0 million. Adjusted cash net income per share is now expected to be between $1.13 and $1.17 versus our previous estimate of $1.09 to $1.13. GAAP net income per share is expected to remain between $0.42 and $0.46 on a diluted per share basis.”

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss second quarter 2012 financial results today at 5:00 PM ET. Hosting the call will be Charles Drucker, president and chief executive officer and Mark Heimbouch, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 941-1427, or for international callers (480) 629-9664. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (877) 870-5176, or for international callers (858) 384-5517, and entering the conference ID 4551504. The replay will be available through Monday, July 30, 2012. The call will be webcast live from the Company's investor relations website at http://investors.vantiv.com.

About Vantiv, Inc.

Vantiv, Inc. (NYSE: VNTV) is a leading, integrated payment processor differentiated by a single, proprietary technology platform. Vantiv offers a comprehensive suite of traditional and innovative payment processing and technology solutions to merchants and financial institutions of all sizes in the U.S., 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 third 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 payment segments, such as ecommerce, mobile, prepaid and information solutions, and attractive industry verticals, such as business-to-business, government, healthcare and education. For more information, visit www.vantiv.com.

Non-GAAP Financial Measures

This earnings release presents non-GAAP financial information including net revenue, EBITDA, adjusted EBITDA, cash net income, and adjusted cash net income per share information. 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 or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial 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 non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the attached schedules.

Net revenue is revenue, less network fees and other costs. Cash net income includes adjustments to exclude amortization of intangible assets acquired in business combinations, primarily customer related intangible assets, share-based compensation, transition costs associated with our separation from Fifth Third Bank, integration costs incurred in connection with acquisitions and conversion of non-controlling interests into shares of Class A common stock. For purposes of providing better comparability we also made adjustments to interest expense and depreciation in 2011. (See Schedule 6 for a reconciliation from GAAP net income to cash net income.)

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 this presentation, 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 risk factors are discussed in the Company’s filings with the U.S. Securities and Exchange Commission and include, but are not limited to: (i) the ability to keep pace with rapid developments and change in our industry and provide new services to our clients; (ii) competition within our industry; (iii) disclosure of unauthorized data and security breaches that expose us to liability, litigation and reputational damage; (iv) failures of our systems or systems of our third party providers; (v) our inability to expand our market share in existing markets or expand into new markets; (vi) our ability to identify acquisition, joint venture and partnership candidates and finance or integrate businesses, services or technologies that we acquire; (vii) failure to comply with applicable requirements of Visa, MasterCard or other payment networks; (viii) changes in payment network rules or standards; (ix) our ability to pass fee increases along to merchants; (x) termination of sponsorship or clearing services provided to us; (xi) increased attrition of our merchants, independent sales organizations, or ISOs, or referral partners; (xii) inability to successfully renew or renegotiate agreements with our clients or ISOs; (xiii) reductions in overall consumer, business and government spending; (xiv) fraud by merchants or others; (xv) a decline in the use of credit, debit or prepaid cards; (xvi) consolidation in the banking and retail industries; and (xvii) the effects of governmental regulation, changes in laws and 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.

Any forward-looking statement made by us in this release speaks only as of the date on which we make it. 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
(in thousands, except share data)
(Unaudited)
 
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2012 2011 % Change 2012 2011 % Change
 
Revenue $ 469,622 $ 402,564 17 % $ 902,411 $ 774,010 17 %
Network fees and other costs   209,244     185,694   13 %   409,452     367,910   11 %
Net revenue 260,378 216,870 20 % 492,959 406,100 21 %
Sales and marketing 70,532 59,570 18 % 143,289 115,789 24 %
Other operating costs 40,417 34,980 16 % 79,426 72,720 9 %
General and administrative 29,190 28,224 3 % 57,787 49,607 16 %
Depreciation and amortization   39,667     39,001   2 %   78,562     75,701   4 %
Income from operations 80,572 55,095 46 % 133,895 92,283 45 %
Interest expense—net (10,169 ) (28,952 ) -65 % (34,619 ) (59,573 ) -42 %
Non-operating expenses (1)   (836 )   (13,799 ) -94 %   (92,672 )   (13,799 ) NM
Income before applicable income taxes 69,567 12,344 NM 6,604 18,911 -65 %
Income tax expense   21,989     683   NM   1,954     2,551   -23 %
Net income 47,578 11,661 NM 4,650 16,360 -72 %
Less: Net income attributable to noncontrolling interests   (24,622 )   (6,281 ) NM   (58 )   (7,481 ) -99 %
Net income attributable to Vantiv, Inc. $ 22,956   $ 5,380   NM $ 4,592   $ 8,879   -48 %
 
Net income per share of Class A common stock attributable to Vantiv, Inc.:
Basic $ 0.19 $ 0.06 $ 0.04 $ 0.10
Diluted $ 0.18 $ 0.06 $ 0.03 $ 0.10
Shares used in computing net income per common share:
Basic 122,777,349 89,515,617 107,897,927 89,515,617
Diluted 130,093,491 89,515,617 160,053,473 89,515,617
 
Non Financial Data:
Transactions (in millions) 3,895 3,222 21 % 7,263 6,224 17 %
 

(1) Non-operating expenses primarily consist of charges incurred with the refinancing of our debt in March 2012 and May 2011 and the termination of our interest rate swaps in March 2012.
                       
Schedule 2
Vantiv, Inc.
Cash Net Income (Non-GAAP)
(in thousands, except share data)
(Unaudited)    
 
See schedule 6 and 7 for a reconciliation of GAAP net income to cash net income.
 
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2012 2011 % Change 2012 2011 % Change
 
Revenue $ 469,622 $ 402,564 17 % $ 902,411 $ 774,010 17 %
Network fees and other costs   209,244     185,694   13 %   409,452     367,910   11 %
Net revenue 260,378 216,870 20 % 492,959 406,100 21 %
Sales and marketing 70,532 59,570 18 % 143,289 115,789 24 %
Other operating costs 39,070 31,539 24 % 77,627 63,039 23 %
General and administrative   19,728     16,276   21 %   38,055     30,266   26 %
Adjusted EBITDA (1) 131,048 109,485 20 % 233,988 197,006 19 %
Depreciation and amortization   10,381     8,094   28 %   19,987     16,187   23 %
Adjusted income from operations 120,667 101,391 19 % 214,001 180,819 18 %
Interest expense—net   (10,169 )   (26,625 ) -62 %   (34,619 )   (53,250 ) -35 %
Adjusted income before applicable income taxes 110,498 74,766 48 % 179,382 127,569 41 %
Income tax expense (at an effective tax rate of 38.5%) (2)   42,542     28,784   48 %   69,062     49,114   41 %
Cash net income (3) $ 67,956   $ 45,982   48 % $ 110,320   $ 78,455   41 %
 
Adjusted cash net income per share (4) $ 0.32 $ 0.52
 
Adjusted shares outstanding (5) 214,012,627 213,158,581
 
Non Financial Data:
Transactions (in millions) 3,895 3,222 21 % 7,263 6,224 17 %
                                       

Non-GAAP Financial Measures

This schedule presents net revenue, adjusted EBITDA, cash net income, and adjusted cash net income per share information. These 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 net income, and such measures may not be comparable to those reported by other companies.

Cash net income is derived from GAAP net income, adjusting for the following items: (a) amortization of intangible assets acquired in business combinations, primarily customer related intangible assets; (b) non-operating expenses primarily associated with the refinancing of our debt and the termination of our interest rate swaps in March 2012 and May 2011; (c) adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock; (d) share-based compensation; and (e) costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions in 2010. For purposes of providing better comparability, we also make adjustments in 2011 to reflect depreciation and amortization assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011 and for interest expense assuming the Company's level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.

(1) See schedule 8 for a reconciliation of GAAP income from operations to adjusted EBITDA.

(2) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(3) Cash net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(4) Cash net income per share is calculated as cash net income divided by adjusted shares outstanding.

(5) Shares for the six months ended June 30, 2012 are pro forma and weighted assuming the equity structure in place March 31, 2012, was in place January 1, 2012. The adjusted shares outstanding include 83,919,136 Class B units that are excluded from the GAAP dilutive income per share calculation.
               
Schedule 3
Vantiv, Inc.
Segment Information
(in thousands)
(Unaudited)
   
Three months ended June 30, 2012
Financial Institution General
Merchant Services Services Corporate/Other Total
 
Total revenue $ 351,828 $ 117,794 - $ 469,622
Network fees and other costs   174,889   34,355 -     209,244
Net revenue 176,939 83,439 - 260,378
Sales and marketing   63,649   6,883 -     70,532
Segment profit $ 113,290 $ 76,556 -   $ 189,846
 
Non-financial data:
Transactions (in millions) 3,021 874 3,895
Net revenue per transaction $ 0.0586 $ 0.0955 $ 0.0668
 
Three months ended June 30, 2011
Financial Institution General
Merchant Services Services Corporate/Other Total
 
Total revenue $ 291,735 $ 110,829 - $ 402,564
Network fees and other costs   151,573   34,121 -     185,694
Net revenue 140,162 76,708 - 216,870
Sales and marketing   52,628   6,601 341     59,570
Segment profit $ 87,534 $ 70,107 ($341 ) $ 157,300
 
Non-financial data:
Transactions (in millions) 2,338 884 3,222
Net revenue per transaction $ 0.0599 $ 0.0868 $ 0.0673
                             
 
Six months ended June 30, 2012
Financial Institution General
Merchant Services Services Corporate/Other Total
 
Total revenue $ 674,806 $ 227,605 - $ 902,411
Network fees and other costs   340,415   69,037 -     409,452
Net revenue 334,391 158,568 - 492,959
Sales and marketing   130,348   12,941 -     143,289
Segment profit $ 204,043 $ 145,627 -   $ 349,670
 
Non-financial data:
Transactions (in millions) 5,566 1,697 7,263
Net revenue per transaction $ 0.0601 $ 0.0934 $ 0.0679
 
Six months ended June 30, 2011
Financial Institution General
Merchant Services Services Corporate/Other Total
 
Total revenue $ 554,421 $ 219,589 - $ 774,010
Network fees and other costs   298,484   69,426 -     367,910
Net revenue 255,937 150,163 - 406,100
Sales and marketing   101,515   13,311 963     115,789
Segment profit $ 154,422 $ 136,852 ($963 ) $ 290,311
 
Non-financial data:
Transactions (in millions) 4,522 1,702 6,224
Net revenue per transaction $ 0.0566 $ 0.0882 $ 0.0653
 
     
Schedule 4
Vantiv, Inc.
Condensed Consolidated Statements of Financial Position
(in thousands)
(Unaudited)
 
June 30, December 31,
Assets 2012 2011
Current assets:
Cash and cash equivalents $ 308,823 $ 370,549
Accounts receivable — net 359,282 368,658
Related party receivable 4,887 4,361
Settlement assets 118,300 46,840
Prepaid expenses 11,783 8,642
Other   34,319   20,947
Total current assets 837,394 819,997
 
Customer incentives 18,684 17,493
Property and equipment — net 157,704 152,310
Intangible assets — net 862,234 916,198
Goodwill 1,532,374 1,532,374
Deferred taxes 12,292 4,292
Other assets   24,950   47,046
Total assets $ 3,445,632 $ 3,489,710
 
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses $ 187,618 $ 193,706
Related party payable 760 3,814
Settlement obligations 275,078 208,669
Current portion of note payable 52,500 16,211
Deferred income 10,886 7,313
Current maturities of capital lease obligations 4,274 4,607
Other   2,087   6,400
Total current liabilities 533,203 440,720
Long-term liabilities:
Note payable 1,189,355 1,738,498
Tax receivable agreement obligations 333,000 -
Capital lease obligations 9,985 12,322
Deferred taxes 9,263 9,263
Other   891   33,187
Total long-term liabilities 1,542,494 1,793,270
Total liabilities 2,075,697 2,233,990
 
Commitments and contingencies
Equity:
Total equity (1)   1,369,935   1,255,720
Total liabilities and equity $ 3,445,632 $ 3,489,710
 
(1) Includes equity attributable to non-controlling interests.
 
       
Schedule 5
Vantiv, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
Six months ended
June 30, June 30,
2012 2011
Operating Activities:
Net income $ 4,650 $ 16,360

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 78,562 75,701
Loss on derivative assets - 100
Amortization of customer incentives 2,898 1,648
Amortization and write-off of debt issuance costs 57,406 14,726
Share-based compensation expense 17,492 1,393
Other non-cash items - 662
Change in operating assets and liabilities:
Decrease in accounts receivable and related party receivable 8,850 28,162
Decrease in net settlement assets and obligations (5,051 ) (45,720 )
Increase in customer incentives (4,089 ) (7,249 )
(Increase) decrease in prepaids and other assets (12,621 ) 809
Decrease in accounts payable and accrued expenses (15,126 ) (12,787 )
Decrease in payable to related party (3,054 ) (4,891 )

Increase in other liabilities
  2,758     1,086  
Net cash provided by operating activities   132,675     70,000  
 
Investing Activities:
Purchases of property and equipment (24,492 ) (28,568 )
Acquisition of customer portfolios and related assets (5,454 ) (736 )
Purchase of investments   -     (3,300 )
Net cash used in investing activities   (29,946 )   (32,604 )
 
Financing Activities:
Proceeds from initial public offering, net of offering costs 460,913 -
Proceeds from follow-on offering, net of offering costs 33,512 -
Proceeds from issuance of long-term debt 1,248,750 -
Repayment of debt and capital lease obligations (1,780,400 ) (9,009 )
Payment of debt issuance costs (28,949 ) (6,276 )
Purchase of Class B units in Vantiv Holding from Fifth Third (33,512 ) -
Repurchase of Class A common stock (to satisfy tax withholding obligations) (14,045 ) -
Tax benefit from employee share-based compensation 11,900 -
Distribution to funds managed by Advent International Corporation (40,086 ) -
Distribution to non-controlling interests   (22,538 )   (2,792 )
Net cash used in financing activities   (164,455 )   (18,077 )
 
Net (decrease) increase in cash and cash equivalents (61,726 ) 19,319
Cash and cash equivalents — Beginning of period   370,549     236,512  
Cash and cash equivalents —End of period $ 308,823   $ 255,831  
 
Cash Payments:
Interest $ 41,981 $ 55,830
Taxes 4,800 5,718
Noncash Items:
Issuance of tax receivable agreements $ 333,000 $ -
Assets acquired under capital lease obligations - 12,234
Accrual of secondary offering costs 3,000 -
 
                       
Schedule 6
Vantiv, Inc.
Reconciliation of GAAP Net Income to Cash Net Income
(in thousands)
(Unaudited)                                          
 
Three months ended June 30, 2012
 
Transition, Acquisition Share-Based Comparability Other

GAAP

and Integration (1)

Compensation

Adjustments

Adjustments

Cash Net Income
 
Revenue $ 469,622 $ - $ - $ - $ - $ 469,622
Network fees and other costs   209,244     -     -     -     -     209,244  
Net revenue 260,378 - - - - 260,378
Sales and marketing 70,532 - - - - 70,532
Other operating costs 40,417 (1,347 ) - - - 39,070
General and administrative 29,190 (633 ) (8,829 ) - - 19,728
Depreciation and amortization   39,667     -     -     -     (29,286 ) (2 )   10,381  
Income from operations 80,572 1,980 8,829 - 29,286 120,667
Interest expense—net (10,169 ) - - - - (10,169 )
Non-operating expenses   (836 )   -     -     -     836   (3 )   -  
Income before applicable income taxes 69,567 1,980 8,829 - 30,122 110,498
Income tax expense   21,989     762     3,399     -     16,392   (4 )   42,542  
Net income (5) $ 47,578   $ 1,218   $ 5,430   $ -   $ 13,730   $ 67,956  
                                             
 
Three months ended June 30, 2011
 
Transition, Acquisition Share-Based Comparability Other

GAAP

and Integration (1)

Compensation

Adjustments

Adjustments

Cash Net Income
 
Revenue $ 402,564 $ - $ - $ - $ - $ 402,564
Network fees and other costs   185,694     -     -     -     -     185,694  
Net revenue 216,870 - - - - 216,870
Sales and marketing 59,570 - - - - 59,570
Other operating costs 34,980 (3,441 ) - - - 31,539
General and administrative 28,224 (11,207 ) (741 ) - - 16,276
Depreciation and amortization   39,001     -     -     68   (6 )   (30,975 ) (2 )   8,094  
Income from operations 55,095 14,648 741 (68 ) 30,975 101,391
Interest expense—net (28,952 ) - - 2,327 (7 ) - (26,625 )
Non-operating expenses   (13,799 )   -     -     -     13,799   (3 )   -  
Income before applicable income taxes 12,344 14,648 741 2,259 44,774 74,766
Income tax expense   683     5,640     285     870     21,306   (4 )   28,784  
Net income (5) $ 11,661   $ 9,008   $ 456   $ 1,389   $ 23,468   $ 45,982  
                                                                     

Non-GAAP Financial Measures

This schedule presents net revenue and cash net income. These 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 net income, and such measures may not be comparable to those reported by other companies.

(1) Represents costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions in 2010.

(2) Represents amortization of intangible assets acquired in business combinations, primarily customer related intangible assets.

(3) Represents non-operating expenses primarily associated with the refinancing of our debt in 2012 and 2011.

(4) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(5) Net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(6) Depreciation and amortization represents expense associated with our property and equipment, assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011.

(7) Represents adjustment to reflect what our 2011 interest expense would have been if the Company's level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.
                       
Schedule 7
Vantiv, Inc.
Reconciliation of GAAP Net Income to Cash Net Income
(in thousands)
(Unaudited)                                          
 
Six months ended June 30, 2012
 
Transition, Acquisition Share-Based Comparability Other

GAAP

and Integration (1)

Compensation

Adjustments

Adjustments

Cash Net Income
 
Revenue $ 902,411 $ - $ - $ - $ - $ 902,411
Network fees and other costs   409,452     -     -     -     -     409,452  
Net revenue 492,959 - - - - 492,959
Sales and marketing 143,289 - - - - 143,289
Other operating costs 79,426 (1,799 ) - - - 77,627
General and administrative 57,787 (2,240 ) (17,492 ) - - 38,055
Depreciation and amortization   78,562     -     -     -     (58,575 ) (2 )   19,987  
Income from operations 133,895 4,039 17,492 - 58,575 214,001
Interest expense—net (34,619 ) - - - - (34,619 )
Non-operating expenses   (92,672 )   -     -     -     92,672   (3 )   -  
Income before applicable income taxes 6,604 4,039 17,492 - 151,247 179,382
Income tax expense   1,954     1,555     6,734     -     58,819   (4 )   69,062  
Net income (5) $ 4,650   $ 2,484   $ 10,758   $ -   $ 92,428   $ 110,320  
                                               
 
Six months ended June 30, 2011
 
Transition, Acquisition Share-Based Comparability Other

GAAP

and Integration (1)

Compensation

Adjustments

Adjustments

Cash Net Income
 
Revenue $ 774,010 $ - $ - $ - $ - $ 774,010
Network fees and other costs   367,910     -     -     -     -     367,910  
Net revenue 406,100 - - - - 406,100
Sales and marketing 115,789 - - - - 115,789
Other operating costs 72,720 (9,681 ) - - - 63,039
General and administrative 49,607 (17,948 ) (1,393 ) - - 30,266
Depreciation and amortization   75,701     -     -     2,665   (6 )   (62,179 ) (2 )   16,187  
Income from operations 92,283 27,629 1,393 (2,665 ) 62,179 180,819
Interest expense—net (59,573 ) - - 6,323 (7 ) - (53,250 )
Non-operating expenses   (13,799 )   -     -     -     13,799   (3 )   -  
Income before applicable income taxes 18,911 27,629 1,393 3,658 75,978 127,569
Income tax expense   2,551     10,638     536     1,409     33,980   (4 )   49,114  
Net income (5) $ 16,360   $ 16,991   $ 857   $ 2,249   $ 41,998   $ 78,455  
                                             

Non-GAAP Financial Measures

This schedule presents net revenue and cash net income. These 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 net income, and such measures may not be comparable to those reported by other companies.

(1) Represents costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions in 2010.

(2) Represents amortization of intangible assets acquired in business combinations, primarily customer related intangible assets.

(3) Represents non-operating expenses primarily associated with the refinancing of our debt in 2012 and 2011 and the termination of our interest rate swaps in 2012.

(4) Represents adjustments to income tax expense assuming conversion of non-controlling interests into shares of Class A common stock.

(5) Net income assumes the conversion of non-controlling interests into shares of Class A common stock.

(6) Depreciation and amortization represents expense associated with our property and equipment, assuming that our property and equipment at December 31, 2011 was in place on January 1, 2011.

(7) Represents adjustment to reflect what our 2011 interest expense would have been if the Company's level of debt and applicable terms as of December 31, 2011 was outstanding on January 1, 2011.
                       
Schedule 8
Vantiv, Inc.
Reconciliation of GAAP Income from Operations to Adjusted EBITDA
(in thousands)
(Unaudited)
 
 
 
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2012 2011 % Change 2012 2011 % Change
 
Income from operations $ 80,572 $ 55,095 46 % $ 133,895 $ 92,283 45 %
Depreciation and amortization   39,667   39,001 2 %   78,562   75,701 4 %
EBITDA 120,239 94,096 28 % 212,457 167,984 26 %
Transition, acquisition and integration costs (1) 1,980 14,648 -86 % 4,039 27,629 -85 %
Share-based compensation   8,829   741

NM
  17,492   1,393

NM
Adjusted EBITDA $ 131,048 $ 109,485 20 % $ 233,988 $ 197,006 19 %
                                                 

Non-GAAP Financial Measures

This schedule presents EBITDA and adjusted EBITDA. These are important financial performance measures for the company, but are not financial measures as defined by GAAP.

These financial measures should not be considered as an alternative to GAAP income from operations, and may not be comparable to those reported by other companies.

(1) Represents costs associated with our separation from Fifth Third Bank and acquisition and integration costs in connection with our acquisitions in 2010.

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