First Data 2007 Annual Report Download - page 55

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Transaction and processing service fee revenue
Components of transaction and processing service fee revenue
Pro Forma Historical
Successor Predecessor Percent Change
Historical
Percent Change
Year ended
December 31,
2007
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year ended December 31,
(in millions) 2006 2005
Pro Forma
2007
vs. Historical
2006
2006
vs. 2005
Credit and retail card processing $ 398.8 $ 110.3 $ 288.5 $ 406.2 $ 429.7 (2)% (5)%
Debit processing 487.1 132.7 354.4 436.6 427.4 12% 2%
Output services 255.5 65.1 190.4 254.5 247.0 0% 3%
Remittance and other processing services 83.5 22.3 61.2 90.5 96.7 (8)% (6)%
Total $ 1,224.9 $ 330.4 $ 894.5 $ 1,187.8 $ 1,200.8 3% (1)%
Credit and retail card processing revenue
Growth of existing clients positively impacted revenue while price compression negatively impacted revenue in the 2007 predecessor and successor
periods.
Credit and retail card processing revenue decreased for the 2007 pro forma results compared to historical 2006 due to price compression partially offset
by growth of existing clients. Contract pricing at the customer level is dependent upon the volume of accounts, mix of account types (e.g. retail, credit, co-
branded credit and debit) and product usage. Although active accounts on file increased, revenue did not proportionately increase due most significantly to
price compression.
Credit and retail card processing revenue decreased in 2006 compared to 2005 largely due to the deconversion of credit card accounts in 2005 and price
compression, partially offset by growth from existing clients and new business.
Debit processing revenue
Debit processing revenue in the 2007 predecessor and successor periods was positively impacted by growth in domestic debit issuer transactions and by
acquisitions noted above. Negatively impacting revenue in the 2007 predecessor and successor periods were price compression and lost business.
On a pro forma basis, the 2007 growth of existing clients and acquisitions noted above added approximately 9 and 9 percentage points, respectively, to
the debit processing revenue growth rate. The majority of domestic debit issuer transaction growth was driven by the shift to the use of debit cards from
checks and cash, and such trend is expected to continue. Transaction growth and revenue growth for the pro forma 2007 results were relatively consistent.
This growth was partially offset on a pro forma basis by 5 and 5 percentage points, respectively, due to pricing and lost business.
Revenue increased in 2006 compared to 2005 due to growth of existing clients partially offset by deconversions and price compression. The majority of
domestic debit issuer transaction growth was driven by the shift to the use of debit cards from credit cards, checks and cash. Additional transaction growth
was driven by the conversion of a major issuer. Price compression upon renewal of contracts and the change in client mix drove the spread between revenue
growth and transaction growth.
Output services revenue
Output services revenue for the 2007 predecessor and successor periods was not significantly impacted by any unique events or trends. Output services
revenue remained relatively flat for the 2007 pro forma period compared to historical 2006.
Output services revenue increased for 2006 compared to 2005 due to new business partially offset by deconversions.
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