PLEASANTON, Calif., Oct. 11, 2017 (GLOBE NEWSWIRE) -- Blackhawk Network Holdings, Inc. (NASDAQ:HAWK) today announced financial results for the third quarter ended September 9, 2017.
$ in millions except per share amounts | Q3'17 | Q3'16 | % Change | ||||||||
(unaudited) | |||||||||||
Operating Revenues | $ | 419.3 | $ | 361.6 | 16 | % | |||||
Net Income (Loss) | $ | (7.8 | ) | $ | (5.1 | ) | (52 | )% | |||
Diluted Earnings (Loss) Per Share | $ | (0.14 | ) | $ | (0.09 | ) | (56 | )% |
Non-GAAP Measures (see Table 2)
$ in millions except per share amounts | Q3'17 | Q3'16 | % Change | ||||||||
(unaudited) | |||||||||||
Adjusted Operating Revenues | $ | 208.3 | $ | 168.9 | 23 | % | |||||
Adjusted EBITDA | $ | 31.0 | $ | 26.5 | 17 | % | |||||
Adjusted Net Income | $ | 10.2 | $ | 7.8 | 31 | % | |||||
Adjusted Diluted EPS | $ | 0.18 | $ | 0.14 | 29 | % |
CEO and president Talbott Roche commented, "The Company's third quarter 2017 earnings were in line with expectations on slightly softer revenues due to a shortfall in our Cardpool exchange business. We saw strong top line growth in our international and incentives businesses. In addition, U.S. retail transaction dollar volume (TDV) increased 13% related to the launch of Target as a distribution partner, strong growth in digital channels and the rebound from the EMV(1) impact on open loop products in 2016. Post-EMV open loop sales are on forecast and we expect to finish the year as originally planned. Volume from the Target account continues to ramp and we're currently rolling out larger, upgraded fixtures at 1,800 Target stores in time for the holiday season. We also remain focused on margin expansion initiatives and are forecasting Adjusted EBITDA margin expansion of approximately 60 to 100 basis points for full year 2017."
The Company is providing updated guidance for the fourth quarter and full year of 2017 (see "2017 Guidance" below).
Roche added, "We have recently seen increasing competitive pressures in some retail markets and believe this will result in lower growth in our U.S. retail physical channels going forward. The good news is we have continued to see excellent growth in digital channels, recently added Cashstar to expand into first party gift card markets and are increasingly diversified with solid growth in incentives and international."
Assets Held for Sale:
Today the Company announced its decision to move the Cardpool gift card exchange business into an "asset held for sale" classification. Cardpool is excluded from revised fourth quarter and full year 2017 Non-GAAP guidance and information on historical Cardpool revenues and earnings will be provided with the earnings call materials.
The Company previously announced its intention to sell the Grass Roots Meetings & Events business, which contributed $7.0 million of operating revenues, $1.0 million of pre-tax income and $1.1 million of adjusted EBITDA during the third quarter of 2017. For the first three quarters of 2017, Grass Roots Meetings & Events contributed $43.0 million of operating revenues, $1.0 million of pre-tax income and $1.5 million of adjusted EBITDA.
GAAP financial results for the third quarter of 2017 compared to the third quarter of 2016
Non-GAAP financial results for the third quarter of 2017 compared to the third quarter of 2016 (see Table 2 for Reconciliation of Non-GAAP Measures)
(1) Reference to “EMV impact” refers to our estimates of the impact on our revenues and earnings of measures taken by some U.S. retail distribution partners related to their delay in implementing the new secure payment card requirements from Europay, Mastercard and Visa (“EMV” mandate). The failure to implement EMV in their point of sale systems by October 2015 transferred the liability for fraudulent credit card payments from card issuers to the retailers. In order to limit chargebacks related to fraudulent credit cards used to purchase certain prepaid products in their stores, some of our distribution partners began taking measures in late January 2016 to limit or control the sale of high value prepaid cards and, in particular, open loop products. While the type of restrictive measures varied by distribution partner, the following types of restrictions were in place during 2016: establishment of limits on using credit cards to purchase gift cards, a move to cash or debit only for purchases of certain gift cards and removal of high denomination open loop products from store shelves.
2017 Guidance
GAAP guidance includes the Cardpool gift card exchange and Grass Roots Meetings & Events businesses. Non-GAAP guidance excludes the Cardpool gift card exchange and Grass Roots Meetings & Events businesses which are assets held for sale. Compared to the GAAP guidance provided on July 19, 2017, the range provided in the table below is lower due to slower sales trends at Cardpool, the Cardpool goodwill impairment charge recorded in the third quarter of 2017, net revenue accounting treatment at Grass Roots (which lowers reported revenues but has no earnings impact) and the mix of incentives businesses. Compared to the Non-GAAP guidance provided on July 19, 2017, the revenue range provided in the tables below is lower due to the exclusion of Cardpool and net revenue accounting treatment at Grass Roots (which lowers reported revenues but has no earnings impact). While the Adjusted EBITDA and Adjusted Net Income ranges are not changed, the Company now believes it will finish its 2017 fiscal year slightly below the midpoint of Adjusted EBITDA range and near the high end of the range for Adjusted Net Income and Adjusted EPS.
Further details regarding the Company’s guidance, including a breakdown of guidance for the fourth fiscal quarter 2017, will be provided on the October 11, 2017 earnings call.
Annual GAAP Guidance
$ in millions except per share amounts | 2017 Guidance | 2016 Actual | % Change | ||||||
Operating Revenues | $2,169 to $2,262 | $ | 1,900 | 14% to 19% | |||||
Net Income | $20 to $24 | $ | 5 | 304% to 383% | |||||
Diluted EPS | $0.35 to $0.42 | $ | 0.08 | 332% to 417% |
Annual Non-GAAP Guidance (excludes Cardpool and Grass Roots Meetings & Events)
$ in millions except per share amounts | 2017 Guidance | 2016 Actual | % Change | |||||||||
Adjusted Operating Revenues | $940 to $981 | $ | 800 | 18% to 23% | ||||||||
Adjusted EBITDA | $225 to $250 | $ | 189 | 19% to 33% | ||||||||
Adjusted Net Income | $91 to $100 | $ | 82 | 11% to 22% | ||||||||
Adjusted Diluted EPS | $1.56 to $1.70 | $ | 1.43 | 9% to 19% | ||||||||
Reduction in income taxes payable | $ | 58 | $ | 58 | — | |||||||
Reduction in income taxes payable per share (diluted) | $ | 0.98 | $ | 1.02 | (3 | )% |
The Company's revised 2017 annual free cash flow projection is in the range of $125 million to $140 million.
The guidance above does not account for the impact of any future acquisitions, dispositions, partnerships or similar transactions, any changes to the Company’s existing capital structure or business model or any adverse outcome to any litigation or government investigation, and any such developments could have an impact on the Company’s guidance. Also see “Forward-Looking Statements” below.
Conference Call/Webcast
On Wednesday, October 11, 2017 at 2:00 p.m. PDT / 5:00 p.m. EDT, the Company will host a conference call and webcast presentation to discuss third quarter 2017 financial results and fourth quarter 2017 guidance. A copy of the webcast presentation slides will be posted to the presentations tab of the Company’s investor relations website at approximately 1:30 p.m. PDT on October 11, 2017. Hosting the call will be Talbott Roche, Chief Executive Officer and president; Jerry Ulrich, Chief Financial & Administrative Officer; and Bill Tauscher, Executive Chairman. Participants may access the live webcast by visiting the Company’s investor relations website at ir.blackhawknetwork.com. An audio replay of the webcast will be available on the Company’s investor relations website until Friday, November 3, 2017.
About Blackhawk Network
Blackhawk Network Holdings, Inc. (NASDAQ:HAWK) is a global financial technology company and a leader in connecting brands and people through branded value solutions. Blackhawk platforms and solutions enable the management of stored value products, promotions and incentive programs in retail, ecommerce, financial services and mobile wallets. Blackhawk's Hawk Commerce division offers technology solutions to businesses and direct to consumers. The Hawk Incentives division offers enterprise, SMB and reseller partners an array of platforms and branded value products to incent and reward consumers, employees and sales channels. Headquartered in Pleasanton, Calif., Blackhawk operates in 26 countries. For more information, please visit blackhawknetwork.com, hawkcommerce.com, hawkincentives.com or our product websites giftcards.com, giftcardmall.com, cardpool.com, giftcardlab.com, omnicard.com and CashStar.com.
Non-GAAP Financial Measures
Blackhawk regards the non-GAAP financial measures provided in this press release as useful measures of the operational and financial performance of its business. Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share measures are prepared and presented to eliminate the effect of items from EBITDA, Net income and Diluted earnings per share that the Company does not consider indicative of its core operating performance within the period presented. Adjusted operating revenues are prepared and presented to offset the distribution commissions paid and other compensation to distribution partners and business clients. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of Adjusted operating revenues. Adjusted operating revenues, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted diluted earnings per share may not be comparable to similarly titled measures of other organizations because other organizations may not calculate these measures in the same manner as Blackhawk. Investors are encouraged to evaluate our adjustments and the reasons we consider them appropriate.
The Company believes Adjusted operating revenues, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted diluted earnings per share, Reduction in income taxes payable and Adjusted free cash flow are useful to evaluate the Company's operating performance for the following reasons:
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are indicated by words or phrases such as “guidance,” “believes,” “expects,” “intends,” “forecasts,” “can,” “could,” “may,” “anticipates,” “estimates,” “plans,” “projects,” “seeks,” “should,” “targets,” “will,” “would,” “outlook,” “continuing,” “ongoing,” and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: our ability to grow adjusted operating revenues and adjusted net income as anticipated; our ability to grow at historic rates or at all; the consequences should we lose one or more of our top distribution partners, fail to maintain or renew existing relationships with our distribution partners on the same or similar economic terms or fail to attract new distribution partners to our network or if the financial performance of our distribution partners’ businesses decline; our reliance on our content providers; the demand for their products and our exclusivity arrangements with them; our reliance on relationships with card issuing banks; the consequences to our future growth if our distribution partners fail to actively and effectively promote our products and services; changes in consumer behavior away from our distribution partners or our products resulting from limits or controls implemented by our distribution partners during their transition to EMV compliance; our ability to successfully integrate our acquisitions; our ability to generate adequate taxable income to enable us to fully utilize the tax benefits referred to in this release; changes in applicable tax law that preclude us from fully utilizing the tax benefits referred to in this release; the requirement that we comply with applicable laws and regulations, including increasingly stringent anti-money laundering rules and regulations; and other risks and uncertainties described in our reports and filings with the Securities and Exchange Commission (the “SEC”), including the risks and uncertainties set forth in Item 1A under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016, our Quarterly Report on Form 10-Q for the fiscal quarter ended on September 9, 2017 which is expected to be filed prior to or on October 19, 2017 and other subsequent periodic reports we file with the SEC. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so other than as may be required by law.
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) (Unaudited) | ||||||||||||||||
12 weeks ended | 36 weeks ended | |||||||||||||||
September 9, 2017 | September 10, 2016 | September 9, 2017 | September 10, 2016 | |||||||||||||
OPERATING REVENUES: | ||||||||||||||||
Commissions and fees | $ | 269,737 | $ | 248,138 | $ | 807,576 | $ | 750,693 | ||||||||
Program and other fees | 95,592 | 64,857 | 304,416 | 207,718 | ||||||||||||
Marketing | 14,348 | 17,943 | 53,454 | 52,098 | ||||||||||||
Product sales | 39,582 | 30,622 | 124,195 | 108,719 | ||||||||||||
Total operating revenues | 419,259 | 361,560 | 1,289,641 | 1,119,228 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Partner distribution expense | 196,633 | 178,363 | 577,634 | 541,749 | ||||||||||||
Processing and services | 93,877 | 75,818 | 303,829 | 226,634 | ||||||||||||
Sales and marketing | 58,711 | 52,327 | 199,218 | 166,176 | ||||||||||||
Costs of products sold | 37,148 | 29,122 | 117,882 | 103,163 | ||||||||||||
General and administrative | 24,122 | 21,773 | 78,710 | 67,827 | ||||||||||||
Transition and acquisition | 665 | 2,574 | 2,021 | 4,160 | ||||||||||||
Amortization of acquisition intangibles | 13,904 | 10,376 | 40,577 | 35,533 | ||||||||||||
Change in fair value of contingent consideration | (2,100 | ) | 1,300 | (5,097 | ) | 2,100 | ||||||||||
Goodwill impairment | 9,000 | — | 9,000 | — | ||||||||||||
Total operating expenses | 431,960 | 371,653 | 1,323,774 | 1,147,342 | ||||||||||||
OPERATING INCOME (LOSS) | (12,701 | ) | (10,093 | ) | (34,133 | ) | (28,114 | ) | ||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest income and other income (expense), net | 631 | 2,360 | 2,134 | 3,258 | ||||||||||||
Interest expense | (7,374 | ) | (5,684 | ) | (21,368 | ) | (13,868 | ) | ||||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) | (19,444 | ) | (13,417 | ) | (53,367 | ) | (38,724 | ) | ||||||||
INCOME TAX EXPENSE (BENEFIT) | (11,858 | ) | (8,357 | ) | (26,224 | ) | (18,884 | ) | ||||||||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | (7,586 | ) | (5,060 | ) | (27,143 | ) | (19,840 | ) | ||||||||
Loss (income) attributable to non-controlling interests, net of tax | (180 | ) | (42 | ) | (460 | ) | (152 | ) | ||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. | $ | (7,766 | ) | $ | (5,102 | ) | $ | (27,603 | ) | $ | (19,992 | ) | ||||
EARNINGS (LOSS) PER SHARE: | ||||||||||||||||
Basic | $ | (0.14 | ) | $ | (0.09 | ) | $ | (0.49 | ) | $ | (0.36 | ) | ||||
Diluted | $ | (0.14 | ) | $ | (0.09 | ) | $ | (0.49 | ) | $ | (0.36 | ) | ||||
Weighted average shares outstanding—basic | 56,709 | 55,668 | 56,355 | 55,851 | ||||||||||||
Weighted average shares outstanding—diluted | 56,709 | 55,668 | 56,355 | 55,851 |
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | ||||||||||||
September 9, 2017 | December 31, 2016 | September 10, 2016 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 304,904 | $ | 1,008,125 | $ | 300,349 | ||||||
Restricted cash | 66,509 | 10,793 | 2,500 | |||||||||
Settlement receivables, net | 429,494 | 641,691 | 275,471 | |||||||||
Accounts receivable, net | 226,126 | 262,672 | 199,552 | |||||||||
Other current assets | 191,691 | 131,375 | 123,919 | |||||||||
Total current assets | 1,218,724 | 2,054,656 | 901,791 | |||||||||
Property, equipment and technology, net | 180,554 | 172,381 | 168,865 | |||||||||
Intangible assets, net | 418,046 | 350,185 | 293,034 | |||||||||
Goodwill | 656,266 | 570,398 | 508,607 | |||||||||
Deferred income taxes | 351,760 | 362,302 | 352,683 | |||||||||
Other assets | 86,610 | 85,856 | 69,039 | |||||||||
TOTAL ASSETS | $ | 2,911,960 | $ | 3,595,778 | $ | 2,294,019 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Settlement payables | $ | 646,160 | $ | 1,626,827 | $ | 522,133 | ||||||
Consumer and customer deposits | 267,642 | 173,344 | 115,085 | |||||||||
Accounts payable and accrued operating expenses | 142,029 | 153,885 | 103,920 | |||||||||
Deferred revenue | 151,425 | 150,582 | 113,867 | |||||||||
Note payable, current portion | 9,890 | 9,856 | 9,846 | |||||||||
Notes payable to Safeway | 4,201 | 3,163 | 3,239 | |||||||||
Bank line of credit | 115,000 | — | — | |||||||||
Other current liabilities | 74,804 | 51,176 | 48,630 | |||||||||
Total current liabilities | 1,411,151 | 2,168,833 | 916,720 | |||||||||
Deferred income taxes | 30,516 | 27,887 | 19,930 | |||||||||
Note payable | 178,048 | 137,984 | 137,848 | |||||||||
Convertible notes payable | 437,769 | 429,026 | 425,833 | |||||||||
Other liabilities | 26,644 | 39,653 | 25,429 | |||||||||
Total liabilities | 2,084,128 | 2,803,383 | 1,525,760 | |||||||||
Stockholders’ equity: | ||||||||||||
Preferred stock | — | — | — | |||||||||
Common stock | 57 | 56 | 55 | |||||||||
Additional paid-in capital | 638,008 | 608,568 | 594,739 | |||||||||
Accumulated other comprehensive loss | (14,934 | ) | (48,877 | ) | (34,398 | ) | ||||||
Retained earnings | 200,484 | 228,451 | 203,791 | |||||||||
Total Blackhawk Network Holdings, Inc. equity | 823,615 | 788,198 | 764,187 | |||||||||
Non-controlling interests | 4,217 | 4,197 | 4,072 | |||||||||
Total stockholders’ equity | 827,832 | 792,395 | 768,259 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,911,960 | $ | 3,595,778 | $ | 2,294,019 |
BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | ||||||||||||||||
36 weeks ended | 52 weeks ended | |||||||||||||||
September 9, 2017 | September 10, 2016 | September 9, 2017 | September 10, 2016 | |||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) before allocation to non-controlling interests | $ | (27,143 | ) | $ | (19,840 | ) | $ | (2,265 | ) | $ | 22,037 | |||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization of property, equipment and technology | 37,518 | 33,096 | 52,801 | 46,314 | ||||||||||||
Goodwill impairment | 9,000 | — | 9,000 | — | ||||||||||||
Amortization of intangibles | 44,416 | 38,988 | 67,473 | 49,720 | ||||||||||||
Amortization of deferred program and contract costs | 21,706 | 18,805 | 31,916 | 27,764 | ||||||||||||
Amortization of deferred financing costs and debt discount | 9,546 | 2,984 | 13,068 | 3,420 | ||||||||||||
Loss on property, equipment and technology disposal/write-down | 660 | 2,758 | 7,740 | 3,758 | ||||||||||||
Employee stock-based compensation expense | 24,560 | 24,865 | 32,287 | 35,139 | ||||||||||||
Change in fair value of contingent consideration | (5,097 | ) | 2,100 | (5,097 | ) | 2,100 | ||||||||||
Deferred income taxes | — | — | (8,899 | ) | 16,439 | |||||||||||
Other | (3,388 | ) | 38 | 1,667 | 854 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Settlement receivables | 233,441 | 359,398 | (119,881 | ) | (27,221 | ) | ||||||||||
Settlement payables | (1,003,220 | ) | (1,091,151 | ) | 107,838 | 46,692 | ||||||||||
Accounts receivable, current and long-term | 35,179 | 44,585 | (22,418 | ) | (9,013 | ) | ||||||||||
Other current assets | 16,807 | 3,940 | (1,024 | ) | 7,292 | |||||||||||
Other assets | (12,172 | ) | (9,299 | ) | (27,563 | ) | (19,737 | ) | ||||||||
Consumer and customer deposits | 12,330 | 13,963 | 12,139 | (9,299 | ) | |||||||||||
Accounts payable and accrued operating expenses | (17,426 | ) | (28,775 | ) | (3,486 | ) | (22,068 | ) | ||||||||
Deferred revenue | 4,948 | 2,703 | 35,607 | 25,171 | ||||||||||||
Other current and long-term liabilities | 5,334 | (24,912 | ) | 8,539 | (12,420 | ) | ||||||||||
Income taxes, net | (28,276 | ) | (13,883 | ) | (5,851 | ) | (1,000 | ) | ||||||||
Net cash (used in) provided by operating activities | (641,277 | ) | (639,637 | ) | 183,591 | 185,942 | ||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Expenditures for property, equipment and technology | (43,484 | ) | (33,522 | ) | (62,294 | ) | (48,950 | ) | ||||||||
Business acquisitions, net of cash acquired | (170,773 | ) | (144,284 | ) | (247,094 | ) | (181,371 | ) | ||||||||
Investments in unconsolidated entities | (5,801 | ) | (3,901 | ) | (12,441 | ) | (9,778 | ) | ||||||||
Change in restricted cash | 2,500 | 689 | (5,880 | ) | 40,543 | |||||||||||
Other | (3,245 | ) | 4,000 | (5,837 | ) | 4,463 | ||||||||||
Net cash (used in) provided by investing activities | (220,803 | ) | (177,018 | ) | (333,546 | ) | (195,093 | ) | ||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Payments for acquisition liability | (5,503 | ) | — | (5,503 | ) | — | ||||||||||
Repayment of debt assumed in business acquisitions | (8,585 | ) | (8,964 | ) | (8,585 | ) | (8,964 | ) | ||||||||
Proceeds from issuance of note payable | 50,000 | 250,000 | 50,000 | 250,000 | ||||||||||||
Repayment of note payable | (10,000 | ) | (463,750 | ) | (10,000 | ) | (463,750 | ) | ||||||||
Payments of financing costs | (1,025 | ) | (15,926 | ) | (1,643 | ) | (17,265 | ) | ||||||||
Borrowings under revolving bank line of credit | 1,771,381 | 1,959,749 | 2,797,122 | 2,897,195 | ||||||||||||
Repayments on revolving bank line of credit | (1,656,381 | ) | (1,959,749 | ) | (2,682,122 | ) | (2,997,195 | ) | ||||||||
Repayment on notes payable to Safeway | (254 | ) | (890 | ) | (254 | ) | (8,855 | ) | ||||||||
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans | 13,286 | 4,491 | 19,097 | 10,253 | ||||||||||||
Other stock-based compensation related | (10,157 | ) | (2,135 | ) | (10,306 | ) | (3,189 | ) | ||||||||
Repurchase of common stock | — | (34,845 | ) | 2 | (34,845 | ) | ||||||||||
Proceeds from convertible debt | — | 500,000 | — | 500,000 | ||||||||||||
Payments for note hedges | — | (75,750 | ) | — | (75,750 | ) | ||||||||||
Proceeds from warrants | — | 47,000 | — | 47,000 | ||||||||||||
Other | — | (155 | ) | (1 | ) | (155 | ) | |||||||||
Net cash (used in) provided by financing activities | 142,762 | 199,076 | 147,807 | 94,480 | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 16,097 | 3,352 | 6,703 | 298 | ||||||||||||
Increase (decrease) in cash and cash equivalents | (703,221 | ) | (614,227 | ) | 4,555 | 85,627 | ||||||||||
Cash and cash equivalents—beginning of period | 1,008,125 | 914,576 | 300,349 | 214,722 | ||||||||||||
Cash and cash equivalents—end of period | $ | 304,904 | $ | 300,349 | $ | 304,904 | $ | 300,349 | ||||||||
NONCASH FINANCING AND INVESTING ACTIVITIES: | ||||||||||||||||
Forgiveness of notes receivable and accrued interest as part of business acquisition | $ | — | $ | — | $ | 5,445 | $ | — | ||||||||
Financing of business acquisition with contingent consideration | $ | 1,640 | $ | 20,100 | $ | 3,192 | $ | 20,100 |
BLACKHAWK NETWORK HOLDINGS, INC. SUPPLEMENTAL INFORMATION (Tables 1, 2 & 3 in thousands except percentages and per share amounts) (Unaudited) | ||||||||||||||||
TABLE 1: OTHER OPERATIONAL DATA | ||||||||||||||||
12 weeks ended | 36 weeks ended | |||||||||||||||
September 9, 2017 | September 10, 2016 | September 9, 2017 | September 10, 2016 | |||||||||||||
Prepaid and processing revenues | $ | 365,329 | $ | 312,995 | $ | 1,111,992 | $ | 958,411 | ||||||||
Partner distribution expense as a % of prepaid and processing revenues | 53.8 | % | 57.0 | % | 51.9 | % | 56.5 | % |
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
12 weeks ended | 36 weeks ended | |||||||||||||||
September 9, 2017 | September 10, 2016 | September 9, 2017 | September 10, 2016 | |||||||||||||
Prepaid and processing revenues: | ||||||||||||||||
Commissions and fees | $ | 269,737 | $ | 248,138 | $ | 807,576 | $ | 750,693 | ||||||||
Program and other fees | 95,592 | 64,857 | 304,416 | 207,718 | ||||||||||||
Total prepaid and processing revenues | $ | 365,329 | $ | 312,995 | $ | 1,111,992 | $ | 958,411 | ||||||||
Adjusted operating revenues: | ||||||||||||||||
Total operating revenues | $ | 419,259 | $ | 361,560 | $ | 1,289,641 | $ | 1,119,228 | ||||||||
Revenue adjustment from purchase accounting | 965 | 3,666 | 4,454 | 11,875 | ||||||||||||
Marketing and other pass-through revenues | (15,336 | ) | (17,943 | ) | (59,969 | ) | (52,098 | ) | ||||||||
Partner distribution expense | (196,633 | ) | (178,363 | ) | (577,634 | ) | (541,749 | ) | ||||||||
Adjusted operating revenues | $ | 208,255 | $ | 168,920 | $ | 656,492 | $ | 537,256 | ||||||||
Adjusted EBITDA: | ||||||||||||||||
Net income (loss) before allocation to non-controlling interests | $ | (7,586 | ) | $ | (5,060 | ) | $ | (27,143 | ) | $ | (19,840 | ) | ||||
Interest and other (income) expense, net | (631 | ) | (2,360 | ) | (2,134 | ) | (3,258 | ) | ||||||||
Interest expense | 7,374 | 5,684 | 21,368 | 13,868 | ||||||||||||
Income tax expense (benefit) | (11,858 | ) | (8,357 | ) | (26,224 | ) | (18,884 | ) | ||||||||
Depreciation and amortization | 27,754 | 22,941 | 81,934 | 72,084 | ||||||||||||
EBITDA | 15,053 | 12,848 | 47,801 | 43,970 | ||||||||||||
Adjustments to EBITDA: | ||||||||||||||||
Employee stock-based compensation | 8,109 | 8,293 | 24,560 | 24,865 | ||||||||||||
Acquisition-related employee compensation expense | (14 | ) | 420 | 548 | 620 | |||||||||||
Revenue adjustment from purchase accounting, net | 905 | 3,665 | 4,209 | 11,114 | ||||||||||||
Other (gains)/losses, net | — | — | — | (754 | ) | |||||||||||
Change in fair value of contingent consideration | (2,100 | ) | 1,300 | (5,097 | ) | 2,100 | ||||||||||
Goodwill impairment | 9,000 | — | 9,000 | — | ||||||||||||
Adjusted EBITDA | $ | 30,953 | $ | 26,526 | $ | 81,021 | $ | 81,915 | ||||||||
Adjusted EBITDA margin: | ||||||||||||||||
Total operating revenues | 419,259 | 361,560 | 1,289,641 | 1,119,228 | ||||||||||||
Operating income (loss) | (12,701 | ) | (10,093 | ) | (34,133 | ) | (28,114 | ) | ||||||||
Operating margin | (3.0 | )% | (2.8 | )% | (2.6 | )% | (2.5 | )% | ||||||||
Adjusted operating revenues | $ | 208,255 | $ | 168,920 | $ | 656,492 | $ | 537,256 | ||||||||
Adjusted EBITDA | $ | 30,953 | $ | 26,526 | $ | 81,021 | $ | 81,915 | ||||||||
Adjusted EBITDA margin | 14.9 | % | 15.7 | % | 12.3 | % | 15.2 | % |
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES (continued) | ||||||||||||||||
12 weeks ended | 36 weeks ended | |||||||||||||||
September 9, 2017 | September 10, 2016 | September 9, 2017 | September 10, 2016 | |||||||||||||
Adjusted net income: | ||||||||||||||||
Income (loss) before income tax expense | $ | (19,444 | ) | $ | (13,417 | ) | $ | (53,367 | ) | $ | (38,724 | ) | ||||
Employee stock-based compensation | 8,109 | 8,293 | 24,560 | 24,865 | ||||||||||||
Acquisition-related employee compensation expense | (14 | ) | 420 | 548 | 620 | |||||||||||
Revenue adjustment from purchase accounting, net | 905 | 3,665 | 4,209 | 11,114 | ||||||||||||
Other (gains)/losses, net | — | (1,944 | ) | — | (2,698 | ) | ||||||||||
Change in fair value of contingent consideration | (2,100 | ) | 1,300 | (5,097 | ) | 2,100 | ||||||||||
Amortization of intangibles | 15,256 | 11,529 | 44,416 | 38,988 | ||||||||||||
Goodwill impairment | 9,000 | — | 9,000 | — | ||||||||||||
Adjusted income before income tax expense | $ | 11,712 | $ | 9,846 | $ | 24,269 | $ | 36,265 | ||||||||
Income tax expense (benefit) | (11,858 | ) | (8,357 | ) | (26,224 | ) | (18,884 | ) | ||||||||
Tax expense on adjustments | 13,162 | 10,336 | 31,698 | 30,105 | ||||||||||||
Adjusted income tax expense | 1,304 | 1,979 | 5,474 | 11,221 | ||||||||||||
Adjusted net income before allocation to non-controlling interests | 10,408 | 7,867 | 18,795 | 25,044 | ||||||||||||
Net loss (income) attributable to non-controlling interests, net of tax | (180 | ) | (42 | ) | (460 | ) | (152 | ) | ||||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 10,228 | $ | 7,825 | $ | 18,335 | $ | 24,892 | ||||||||
Adjusted diluted earnings per share: | ||||||||||||||||
Net income (loss) attributable to Blackhawk Network Holdings, Inc. | $ | (7,766 | ) | $ | (5,102 | ) | $ | (27,603 | ) | $ | (19,992 | ) | ||||
Distributed and undistributed earnings allocated to participating securities | — | — | — | (15 | ) | |||||||||||
Net income (loss) available for common shareholders | $ | (7,766 | ) | $ | (5,102 | ) | $ | (27,603 | ) | $ | (20,007 | ) | ||||
Diluted weighted average shares outstanding | 56,709 | 55,668 | 56,355 | 55,851 | ||||||||||||
Diluted earnings (loss) per share | $ | (0.14 | ) | $ | (0.09 | ) | $ | (0.49 | ) | $ | (0.36 | ) | ||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 10,228 | $ | 7,825 | $ | 18,335 | $ | 24,892 | ||||||||
Adjusted distributed and undistributed earnings allocated to participating securities | — | (7 | ) | — | (44 | ) | ||||||||||
Adjusted net income available for common shareholders | $ | 10,228 | $ | 7,818 | $ | 18,335 | $ | 24,848 | ||||||||
Diluted weighted-average shares outstanding | 56,709 | 55,668 | 56,355 | 55,851 | ||||||||||||
Increase in common share equivalents | 1,590 | 1,304 | 1,665 | 1,496 | ||||||||||||
Adjusted diluted weighted-average shares outstanding | 58,299 | 56,972 | 58,020 | 57,347 | ||||||||||||
Adjusted diluted earnings per share | $ | 0.18 | $ | 0.14 | $ | 0.32 | $ | 0.43 | ||||||||
Reduction in income taxes payable: | ||||||||||||||||
Reduction in income taxes payable resulting from amortization of spin-off tax basis step-up | $ | 6,597 | $ | 6,580 | $ | 19,791 | $ | 19,767 | ||||||||
Reduction in cash taxes payable from amortization of acquisition intangibles and utilization of acquired NOLs | 1,667 | 4,428 | 6,405 | 12,606 | ||||||||||||
Reduction in cash taxes payable from deductible stock-based compensation and convertible debt | 3,294 | 2,491 | 16,936 | 11,403 | ||||||||||||
Reduction in income taxes payable | $ | 11,558 | $ | 13,499 | $ | 43,132 | $ | 43,776 | ||||||||
Adjusted diluted weighted average shares outstanding | 58,299 | 56,972 | 58,020 | 57,347 | ||||||||||||
Reduction in income taxes payable per share | $ | 0.20 | $ | 0.24 | $ | 0.74 | $ | 0.76 |
TABLE 3: RECONCILIATION OF GAAP CASH FLOW TO ADJUSTED FREE CASH FLOW | ||||||||
52 weeks ended | ||||||||
September 9, 2017 | September 10, 2016 | |||||||
Net cash flow provided by operating activities | $ | 183,591 | $ | 185,942 | ||||
Changes in settlement payables and consumer and customer deposits, net of settlement receivables | (96 | ) | (10,172 | ) | ||||
Benefit from settlement timing | 18,863 | 18,859 | ||||||
Adjust for: Safeway cash tax payment reimbursed (refunded) | (254 | ) | (8,855 | ) | ||||
Adjusted net cash flow provided by operating activities | 202,104 | 185,774 | ||||||
Expenditures for property, equipment and technology | (62,294 | ) | (48,950 | ) | ||||
Adjusted free cash flow | $ | 139,810 | $ | 136,824 | ||||
Reconciliation of Adjusted EBITDA to Adjusted free cash flow | ||||||||
Adjusted EBITDA | $ | 188,306 | $ | 189,481 | ||||
Less: Expenditures for property, equipment and technology | (62,294 | ) | (48,950 | ) | ||||
Less: Interest paid | (18,077 | ) | (13,881 | ) | ||||
Less: Cash taxes (paid) refunded | (3,563 | ) | 2,958 | |||||
Less: Revenue adjustment from purchase price accounting, net | (8,719 | ) | (15,581 | ) | ||||
Change in working capital and other | 25,294 | 3,938 | ||||||
Benefit from settlement timing | 18,863 | 18,859 | ||||||
Adjusted free cash flow | $ | 139,810 | $ | 136,824 |
TABLE 4: FULL YEAR 2017 GUIDANCE - RECONCILIATION OF NON-GAAP MEASURES | ||||||||
(In millions except per share amounts) | ||||||||
Adjusted operating revenues: | Low | High | ||||||
Total operating revenues | $ | 2,169 | $ | 2,262 | ||||
Partner distribution expense | (1,023 | ) | (1,059 | ) | ||||
Marketing and other pass-through revenues | (90 | ) | (106 | ) | ||||
Cardpool, Grass Roots M&E Revenues | (116 | ) | (116 | ) | ||||
Adjusted operating revenues | $ | 940 | $ | 981 | ||||
Adjusted EBITDA: | ||||||||
Net income before allocation to non-controlling interests | $ | 20 | $ | 24 | ||||
Add back: Net loss from Cardpool and Grass Roots M&E | 9 | 9 | ||||||
Interest (income) expense and other (income) expense, net | 30 | 35 | ||||||
Income tax expense | 9 | 14 | ||||||
Depreciation and amortization | 119 | 124 | ||||||
EBITDA | 187 | 206 | ||||||
Adjustments to EBITDA: | ||||||||
Employee stock-based compensation | 33 | 39 | ||||||
Other adjustments | 5 | 5 | ||||||
Adjusted EBITDA | $ | 225 | $ | 250 | ||||
Adjusted net income: | ||||||||
Income before income tax expense | $ | 27 | $ | 37 | ||||
Add back: Cardpool, Grass Roots M&E adjusted loss before income tax expense | 5 | 5 | ||||||
Employee stock-based compensation | 33 | 39 | ||||||
Amortization of intangibles | 62 | 62 | ||||||
Other | - | - | ||||||
Adjusted income before income tax expense | 127 | 143 | ||||||
Income tax expense | 9 | 14 | ||||||
Tax expense on adjustments | 27 | 29 | ||||||
Adjusted income tax expense | 36 | 43 | ||||||
Adjusted net income | $ | 91 | $ | 100 | ||||
Adjusted diluted earnings per share: | ||||||||
Diluted earnings per share | $ | 0.35 | $ | 0.42 | ||||
Add back: Cardpool, Grass Roots M&E loss per diluted share | 0.06 | 0.06 | ||||||
Employee stock-based compensation | 0.39 | 0.41 | ||||||
Amortization of intangibles | 0.74 | 0.76 | ||||||
Other | 0.02 | 0.05 | ||||||
Adjusted diluted earnings per share | $ | 1.56 | $ | 1.70 |
INVESTORS/ANALYSTS:
Patrick Cronin
(925) 226-9973
investor.relations@bhnetwork.com
MEDIA:
Teri Llach
(925) 226-9028
teri.llach@bhnetwork.com