First Data 2009 Annual Report Download - page 56

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Transaction and processing service fees revenue
(in millions)
Historical Pro Forma Historical
Percent ChangeSuccessor Successor Predecessor
Year ended
December 31,
2009
Year ended
December 31,
2008
Year ended
December 31,
2007
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
2009
vs.
2008
Historical
2008
vs.
Pro Forma
2007
Acquiring revenue ....... $2,078.3 $2,160.7 $2,099.2 $571.9 $1,527.3 (4)% 3%
Check processing
revenue ............. 357.2 380.2 411.9 112.0 299.9 (6)% (8)%
Prepaid revenue ......... 212.4 228.6 214.8 76.8 138.0 (7)% 6%
Processing fees and other
revenue from alliance
partners ............. 72.2 124.7 145.2 40.5 104.7 (42)% (14)%
Total transaction and
processing service fees
revenue ............. $2,720.1 $2,894.2 $2,871.1 $801.2 $2,069.9 (6)% 1%
Acquiring revenue
Acquiring revenue decreased in 2009 compared to 2008 due to economic weakness and resulting changes in
consumer spending patterns, merchant attrition, and price compression. The changes in spending patterns
resulted in a decrease to the average ticket size of signature based transactions and a shift from smaller, more
profitable merchants to national discounters and wholesalers. Price compression was within the Company’s
historical three to five percentage range. Also, the Company experienced a shift from credit card usage to the use
of PIN debit cards resulting in less revenue per transaction. These effects were partly offset by increased
transaction volume, new sales and higher fee-related income.
Transactions are not comparable year over year due to the items noted in (a) above. BAMS transactions earn
a lower revenue amount per transaction than the Company has historically experienced due to its business mix.
Also, differences in transaction growth and revenue growth occur due to debit transactions having lower revenue
per transaction, the impact of adverse economic conditions including lower average ticket size and business mix
whereby national merchants and ISO growth are outpacing other higher margin transactions.
The Company anticipates that acquiring revenue trends could continue to be negatively impacted by
transaction volume shifting from smaller merchants to discounters and wholesalers, PIN-debit growth outpacing
credit, and lower average ticket size. These trends are all impacted by consumer spending patterns.
Revenue in 2008 compared to 2007 was positively impacted by annual fees recognized in the fourth quarter
of 2008 that were not included in 2007 results due to purchase accounting related to the merger as well as
changes in pricing. Acquiring revenue was negatively impacted due to lower average ticket size for acquired
credit card transactions, to shifts in transaction volumes from smaller, more profitable merchants to several
nationwide discounters and wholesalers and other impacts of the economy.
Revenue growth for 2008 compared to pro forma 2007 was most significantly impacted by annual fees. This
increase was partially offset by the factors noted above.
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