First Data Corporation (NYSE:FDC) Q3 2018 Earnings Conference Call - Final Transcript

Oct 29, 2018 • 08:00 am ET


First Data Corporation (NYSE:FDC) Q3 2018 Earnings Conference Call - Final Transcript


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Hello and welcome to the First Data Third Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. I now would like to turn the conference over to Peter Poillon. Please go ahead.

Peter R. Poillon

Thank you, operator. Good morning, and welcome, everyone, to First Data's Third Quarter 2018 Earnings Conference Call. Our call today is being hosted by Frank Bisignano, Chairman and Chief Executive Officer of First Data. Joining Frank on the call is Himanshu Patel, Chief Financial Officer. Frank and Himanshu will be referencing a slide presentation during their prepared remarks. A copy of the slide presentation as well as our earnings press release and supplemental schedules are available on our website at

Throughout this call, segment revenue and EBITDA growth rates referenced by Frank and Himanshu will be on an organic constant-currency basis and exclude the impacts from currency and acquisitions and divestitures and measure growth on a comparable accounting basis. After Frank's and Himanshu's prepared remarks, we'll open the call up to Q&A, and our standard ground rules apply. (Operator Instructions)

(Forward-Looking Cautionary Statements)

We'll also discuss items that do not conform to generally accepted accounting principles. We reconciled those measures to GAAP measures in the appendix of the slide presentation and in the supplemental schedules to the earnings release. Now I'd like to hand the call over to Frank.

Frank J. Bisignano

Thank you, Peter.

Good morning, everyone. It's a pleasure to be on the call today. We again turned in a solid quarter of performance as we continued to execute against our initiatives to drive growth, particularly in many of the high-growth areas of our business. I'll start with a review of our third quarter performance. Our segment revenue grew 5% on an organic constant-currency basis, led by strong performances in GBS and GFS, both of which grew 6%. It's notable that both segments benefited from solid growth contributions from the North American region. Segment EBITDA grew 7% on an organic constant-currency basis. Free cash flow was healthy at more than $400 million for the quarter.

During the quarter, we received proceeds of $550 million from the sales of two low-growth, non-core businesses, our check remittance processing business and GFS businesses in Greece and Central and Eastern Europe. These strategic portfolio actions allow us to concentrate management time and investment dollars in our fastest-growing and most profitable businesses.

Between the strong cash flow and the proceeds from the divestitures, this was a banner quarter for total cash generated. And that brings me to capital allocation. Our net debt declined more than $850 million in Q3 and more than $1.4 billion year-to-date. We reduced our leverage ratio to 5.3 times at the end of the quarter and are clearly on target to bring our leverage down to our stated goal of low four-times by the end of next year. Separately, we closed on a significant refinancing transaction last week that will result in an estimated $90 million interest expense reduction next year.

Let me now touch