First Data 2012 Annual Report Download - page 35

Prepaid revenue increased in 2011 compared to 2010 due mostly to higher transaction volumes within the open loop payroll
distribution program related to new and existing customers. In addition, sales of gift cards increased in 2011 compared to the prior
year related to a large sale to a national retailer associated with an incentive program as well as volume growth from existing clients
and new clients. These increases were partially offset by sales of promotional gift cards in 2010 driven by a specific direct marketing
campaign. Additionally, 2011 was impacted by a change in merchant mix resulting from increased card shipments to merchants that
generate less revenue per card.
Processing fees and other revenue from alliance partners. The increases in processing fees and other revenue from
alliance partners in 2012 compared to 2011 and in 2011 compared to 2010 resulted from increased fees from the BAMS alliance due
to a shift of processing from the alliance partner to the Company beginning in October 2011, as well as increased transaction and
dollar volumes within the Company’s merchant alliances. The impact of the shift in processing benefited the 2012 and 2011 revenue
and growth rates by approximately $55 million or 37 percentage points and approximately $18 million or 15 percentage points,
respectively.
Product sales and other revenue. Product sales and other revenue decreased in 2012 compared to 2011 primarily due to a
decline in equipment sales including lower bulk sales and a gain on the sale of a portfolio in 2011 partially offset by growth in leasing
revenue resulting from increased lease originations and lease renewals.
Product sales and other revenue increased in 2011 compared to 2010 primarily due to increases in the leasing business resulting
from new clients as well as increased fees from lease renewals. Equipment sales decreased slightly in 2011 compared to 2010
resulting from higher terminal demand in the prior year due to new regulations and a shift in the mix of terminals in 2011 to lower
cost, proprietary models.
Segment EBITDA. The impact of the revenue items noted above primarily contributed to the increase in Retail and Alliance
Services segment EBITDA in 2012 compared 2011. The Dodd-Frank Act benefited the segment EBITDA growth rate in 2012
compared to the prior year by an estimated $70 million or 5 percentage points. The impact from the shift in processing related to the
BAMS alliance positively impacted the segment EBITDA growth rate for 2012 compared to 2011 by approximately $44 million or 3
percentage points.
Retail and Alliance Services segment EBITDA in 2011 compared to 2010 was positively impacted by the revenue items noted
above in the revenue discussion. The decrease in debit interchange rates positively impacted the segment EBITDA growth rate in
2011 compared to 2010 by approximately $24 million or 2 percentage points. Expense reductions also benefited Retail and Alliance
Services segment EBITDA in 2011 compared to the prior year. Also contributing to the increase in segment EBITDA for 2011
compared to 2010 was decreased credit losses due to a lower level of merchant delinquencies which benefited the segment EBITDA
growth rate by 1 percentage point. The card association fee noted above negatively impacted the segment EBITDA growth rate in
2011 compared to 2010 by 2 percentage points.
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