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Blackhawk Network Holdings, Inc.
Investor Conference
February 20, 2014
Forward Looking Statements
This presentation may contain certain 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," "anticipates," "estimates," "plans," "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 complete negotiation of the contemplated credit facility, 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 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, the requirement that we comply with applicable laws
and regulations, including increasingly stringent money-laundering rules and regulations, risks
related to our ongoing relationship with Safeway and other risks and uncertainties described in our
reports and filings with the Securities and Exchange Commission, including the registration
statement filed in connection with our initial public offering and our subsequent Quarterly Reports
on Form 10-Q. 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.
2
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk Management
In attendance at conference today
3
Other Executive Officers
Bill Tauscher, Chairman
and CEO
Talbott Roche, President
Jerry Ulrich, Chief Financial
and Administrative Officer
David Durant, General
Counsel
Joan Lockie, Corporate
Controller and CAO
David Tate, Sr. VP
Products & Marketing
Patrick Cronin, VP Finance
and Investor Relations
Christopher Crum, Sr. VP
Sales & Account Management
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Capital Structure as of December 28, 2013
Shares in thousands
Shares sold at IPO on 4/18/13
Additional shares sold post IPO
# Shares
% Outstanding
11,500
638
Total float
12,138
23.1%
Safeway
37,839
72.2%
2,463
4.7%
52,440
100.0%
Other (partners, management)
Total Outstanding (1)
(1) Class A Shares = 12,138 (2.9% voting), Class B Shares = 40,302 (97.1% voting)
• On 2/19/14, Safeway announced their intention to distribute
the remainder of their Blackhawk shares to Safeway Inc.
stockholders; further information to follow re: timing, etc.
4
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk Overview - Investment Highlights
A Leading Prepaid Payment Network
Growth Track Record
Diversified Revenue Base, Good Visibility
History Of Innovation
Expanding Market Opportunities
5
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk Overview
The Gift Card Mall
• Full range of prepaid products
• Broadest gift card selection
• Distribution in 21 countries -- 400
retail partners
• Proprietary activation/ processing/
settlement platform
Adjusted
Operating Revenue¹
Adjusted
EBITDA¹
• API-based solutions for digital and
mobile channels
$114
$541
• Corporate incentives and rewards
channel
Note 1: Adjusted for non-cash and non-recurring items including
Safeway commission changes through 2013. See appendix A for
reconciliation to GAAP measures.
6
$43
$216
2009
2013
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2009
2013
Blackhawk Overview – Network Benefits
Consumers
Content Providers
Estimated 300 million
visits per week
Over 600 leading
consumer brands
Broad selection in convenient,
one-stop location
Multi-channel: in-store, online
and mobile
Drive incremental traffic and
sales
Processed 242 million load
transactions and $10 billion
load value in 2013
Expand consumer reach and
acquisition
Distribution Partners
Over 180,000 active retail distribution locations
Highly productive, growing product category
“Store-within-the-store” destinations that drive traffic and sales
7
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk Overview - Diversified Prepaid Products
Closed Loop Gift Cards (69% of 2013 Revenues)
Open Loop
Cards (16%)
Telecom (6%)
Financial (1%)
Exchange
Services (5%)
Note: Other Services accounts for 3% of 2013 Revenues.
8
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk Overview – Strong Partner Relationships
Distribution Partners
Grocery
Content Providers
Content
Drives
Distribution
Fashion
Specialty
Dining
Convenience
Home
Improvement
Other
Electronics
Online
Distribution
Drives
Content
International
9
Entertainment
Digital
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
9
Blackhawk Overview - History of Innovation
$100
Gift Card
Introduced closed loop gift
cards in third-party retail
channels
2001
GiftCardMall.com
2004
2008
Introduced prepaid Visa
gift card in third-party retail
channels
10
eGift capabilities into
online and mobile
channels
2011
2012
Acquired Cardpool, a
secondary market for
gift cards
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
GoWallet
2013
Acquired InteliSpend,
a leading provider of
unique incentives
solutions
Blackhawk Overview –
Seasonal Business with Consistent Trends
Load Value by Quarter ($M)
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
09 '10 '11 '12 '13
Q1
09 '10 '11 '12 '13
Q2
09 '10 '11 '12 '13
Q3
09 '10 '11 '12 '13
Q4
Notes: Q1 through Q3 are 12 weeks and Q4 is 16 weeks; Q4 represented 47% of total 2013 Load Value.
11
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk Overview – Revenue Growth
Enhance Productivity at Retail
Expand Content, Products and Services
Expand Domestic Distribution
Grow International Business
Addressing New Payment Markets
12
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 REVIEW
13
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Income Statement
Pro forma
% Change % change
(amounts in millions except EPS)
2013
2012
Adjusted Operating Revenues
$
541
$
448
21%
23%
Adjusted EBITDA
$
114
$
100
15%
24%
Adjusted Net Income
$
58
$
51
14%
27%
Adjusted EPS
$
1.09
$
0.98
11%
24%
• Pro forma % change reflects Safeway commission adjustment (see S-1)
– Pro forma Adjusted EPS for 2012 was $0.88
• See Appendix for reconciliation of GAAP Adjusted and Pro forma measures
14
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Ratios
2013
Commissions and Fees as % of LV
2012
%
Change
9.1%
9.3%
-0.2%
Distribution Partner Commission Expense as % of
Commissions & Fees
66.0%
64.9%
+1.1%
Processing & Services % of Pro forma Revenues*
39.9%
40.9%
-1.0%
Sales & Marketing % of Pro forma Revenues*
25.4%
26.3%
-0.9%
General & Administrative % of Pro forma Revenues*
12.0%
11.6%
+0.4%
*Notes:
• “Pro forma Revenues” is Pro forma Adjusted Operating Revenues excluding Marketing
Revenue and Product Sales
• Expense lines above exclude stock compensation expense
• Sales and Marketing expenses exclude non-cash mark-to-market and warrant amortization
expense and is reduced by pass-through marketing revenues
15
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Load Value Growth +17%
$ Millions
$10,500
$10,000
$490
$9,500
$218
$38
-$165
$79
$9,000
$779
$9,914
$8,500
$8,000
$8,474
$7,500
2012
16
Gift Cards
Incentives
Financial
Services
Telecom
Telecom ASP
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
International
2013
2013 Review – Revenues by Product
2012
1%
1%
3%
5%
2013
3%
6%
4%
8%
16%
14%
70%
Closed Gift
Telecom
Cardpool
17
Open Gift
Financial Services
Product Sales
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
69%
2013 Review – Revenue by Region
2012
4%
6%
4%
7%
7%
85%
U.S.
18
Americas
2013
6%
EMEA
81%
Asia Pac
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Holiday Gift Card Sales
Outperform Retail
2013
Retailer holiday sales growth (National Retail Federation)
< 4%
Blackhawk U.S. gift card LV growth*
+12%
Blackhawk’s GiftCardMall.com LV growth*
+88%
Blackhawk’s total online LV growth*
+195%
* Note: Load Value (“LV”) for last 8 weeks of fiscal 2013 ended 12/28/13
19
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – U.S. Gift Card Developments
• Renewed Top 5 Distribution Partners
– All top 5 accounts contracted to September 2017 or later
• Launched The Home Depot as a Distribution Partner
• Expanded Open Loop distribution
– Added Home Depot, Macerich and Stage Stores
– Added MasterCard at Publix, Giant Eagle and Wawa
• Added over 100 new content partner brands
• 200 brands now available for electronic delivery (“e-gift”)
• Signed 16 additional digital distribution deals
20
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – U.S. Distribution Productivity
• 2M pegs added in U.S. distribution ~20% increase
• Some reduction in fuel loyalty-linked promotions in 2013
• Expect 2014 programs to be more comparable year-over-year
2011
U.S. Grocery selling store count
U.S. Grocery per store LV index adjusted (1)
Increase in per same store LV adjusted (1)
2012
18,303
18,066
19,338
100.0
122.5
134.0
+ 26.6 %
+
22.5 %
(1) Excludes LV from fuel cards used as loyalty reward in certain programs
21
2013
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
+
9.4 %
2013 Review – Productivity Case Study
• 1,300+ store chain shift from Basic to Best Practices
– Added 145,000 display pegs and secondary displays
– Expanded content
– Marketing program participation increased 50%
• Results:
– 4Q13 average per store LV - up 30%
– 1st 5 weeks 2014 - up 36%
– Indexes at low end of range in Best Practices
Note: See Form S-1 for definition of Basic, Best Practices and Loyalty-based programs
22
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review - Telecom
• Exited wholesale distribution channel (-$165M LV)
• Developed telecom handset distribution program
– Wide selection of smartphones
– Direct-to-store logistics management
• Dedicated telecom displays in 3,900 locations
– Marketing funds from carriers and DP’s
• Developed online prepaid top-up application
• Introduced SIM card product
• Achieving double digit growth entering 2014
23
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Financial Services
• 73% load value growth
• Full category
– Proprietary PayPower GPR (general purpose reloadable)
– Distributed GreenDot and NetSpend brands
– Private label for some distribution partners
• Expanded distribution – now over 15,000 retail locations
• Integration with TaxAct for tax refunds
– Drives new account volume but lower margins
• Contracted with T-Mobile for private label Mobile Money
24
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Cardpool
• 38% YOY growth to $58M in revenue
– Slower rollout of new channels
– Added 1,000 ACE Cash Express locations near year-end
• Coinstar card purchase kiosk – 250 locations
– Good productivity at mature kiosks
• GAAP non-cash fair value credit adjustment for contingent
consideration liability of $15M
– based on forecast for final “earnout” period that ends 3Q14
• New GM in 4Q13
25
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – International
• Now in 20 countries either directly or through partnership
– Germany: Purchased Retailo AG in late November
– Opened South Africa in late October
– Korea and Brazil still in early stages
• YOY growth of 41% LV and 48% Adjusted Operating Revenue
• New digital content - Google Play, Sony, Microsoft, Amazon
• Implemented first two digital-only distributors
26
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2013 Review – Incentives
• Completed acquisition of InteliSpend mid - November
– Operates in U.S. and Canada
– Open Loop products with IP for restricted access cards
– $569M in LV for all 2013 (12% YOY growth rate)
• Earnings neutral in 2013
– Excluding amortization of intangibles of $2.7M pre-tax
– Including acquisition related expenses of $1.0M pre-tax
– Lower 2013 revenue recognition due to Blackhawk fiscal yearend of 12/28 versus card expiration date of 12/31
27
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 INITIATIVES –
U.S.
28
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 U.S. Load Value Growth Targets
2014
2013
2012
Gift Cards
16%
11%
24%
Telecom
16%
-25%
-22%
Financial Services
153%
72%
89%
Incentives and Rewards
480%
137%
63%
33%
13%
21%
Total U.S.
• Year-over-year “smoothing” from effect of fuel loyalty programs
• Telecom without drag from ASP exit and gaining traction from
destination displays and handset expansion
• High volume but lower margined financial services programs
• Incentives and rewards growth due to full year of InteliSpend and
growth from direct Blackhawk programs
29
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – Key Focus Areas in U.S.
• Grow per store productivity in all categories
• Execution of incentives and rewards strategy
– Add closed loop, digital, and international capabilities
• Continue development of partners and technology to win in
digital and mobile channels
• Expand distribution
• Contract renewals – continue excellent history
30
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives - U.S. Gift Cards
• Continue migrating U.S. grocery stores into Best Practices
• One additional top 10 distribution partner with fuel loyalty
• Add local/regional content and more discount deals
• New planogramming and data analysis tools
• Expand distribution – currently four targets each with potential to be
Top 15 Partner (potential for 5%-7% incremental LV)
31
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – U.S. Telecom
• Add Telecom destination displays
• Expand channels for online top-up
• Exploit competitive advantage of handset distribution
• Leverage new SIM cards and contract buyouts offers
– Low cost way for mainstream contract users to switch
– Heavily promoted by carriers especially T-Mobile
32
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – U.S. Financial Services
• Full launch of T-Mobile’s Mobile Money solution
• Add 1,500 additional distribution locations
• New Reloadit capabilities – extend “card life” and increase
active accounts
• Introduce products with features tailored for specific retail
environments e.g. office stores
33
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – Products and Services
• Cardpool target revenue growth of 40% - 50%
– Expand partnerships with Outerwall (Coinstar), ACE Cash
Express and other assisted sale financial services businesses
– Expand digital exchange capabilities in order to integrate into
mobile and online “wallets”
34
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 INITIATIVES –
INTERNATIONAL
35
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Load Value Growth Targets - International
2014
2013
2012
Total U.S.
33%
13%
21%
International
59%
41%
33%
Worldwide
38%
17%
23%
• Full year of Retailo (Germany) acquisition
• High load value growth with lower revenue margin programs in
certain international geographies
• Assumes no sales in China in 2014
36
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – America’s
• Canada opportunities
– Sobeys adopts Safeway best practices
– Loblaws acquiring Shoppers Drug Mart
– Expand distribution of GPR and local content
– Sell digital services into additional carriers and FIs
• Mexico’s growth tied to continuing productivity gains in OXXO
• Brazil dependent on launch of Google and Microsoft
37
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – EMEA
• Retailo acquisition significant contributor to growth and profit
• Continue to drive best practices in major retailers e.g. Tesco
and Albert Heijn
• Extend Open Loop (currently limited offering in UK)
• Introduce digital product and services capabilities
• Forecast load value over $1 billion
38
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Initiatives – AsiaPac
• Australia managing uneven breakage revenue and margin
pressure due to pre-existing DP and CP relationship
• Significant LV growth opportunities in Japan but lower margin
• Korea continuing to build out distribution and global content
• Expect to launch Singapore with iTunes
• Negotiate China partnership to allow launch – still uncertain
39
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
DIGITAL AND MOBILE
UPDATE
40
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Consumers Expect Omni-Channel Experience
Digital Complements Physical
Sources: Mercator,
Consumers & Prepaid:
More Tools Please, 11/12
Source: emarketer.
Prosper Mobile insights; 2/13
online
22%
both online
& in store
68%
in store
10%
Source: MWW. National Consumer Survey
41
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Amount of time
spent with mobile
devices growing 14x
rate with desktop
Digital Service Platform Increases
Consumer Satisfaction
I delay my
purchase if I have
forgotten my card
70%
84%
I want all my cards
stored in one place
I lose track of
my balances so it’s
hard to use my card
89%
78%
I forget to take them
with me!
My wallet is
exploding with cards
– it’s inconvenient
67%
Source: BHN Survey
42
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Features
Consumers Want
• All cards in one place
• Online and mobile
• Automatic balance inquiry
• Card is always with you
• Personalized offers
Blackhawk Platform - Physical & Digital
in One Centralized Program
Top-Up
Spend
Wallet &
Consumer
Services
Buy
• Balance inquiry
• Exchange
• Lost/stolen replacement
• Manage balances
• Bill Pay
• P2P
Manage
Fraud/
Security
Engage
Admin
Tools
Distribution
Services
Marketing
Services
Custom
Fulfillment
Reporting
43
Custom
Templates
Offers
&
Deals
Retain
Customer
Acquisition
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Mobile Delivery
Wallet
44
eGift
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Offers
Blackhawk Digital and Online
28 Distribution Partners
Selling physical and digital (eGift) gift cards
45
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + Amazon
Blackhawk Services
• Sell eGift cards and physical gift cards
• World’s largest
e-Commerce site
• Manage digital gift cards
• 100 million unique
visitors/month
• Offer price promotions
and free shipping
46
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + Staples.com
Blackhawk Services
• Staples was the first 3rd party eTailer to launch eGift
• World’s largest office
products company and
second largest internet
retailer
• Triple digit growth rate since launch
• Successful promotional programs; selling out thousands of
units in a 24 hour period
• Staples has a broad
and loyal audience of
9.5 million unique
visitors
• Ideal small business
market for gift cards as
incentives
47
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + eBay
Blackhawk Services
• Fulfills gift cards through GiftCardMall.com
• World’s largest online
marketplace to 116M
users
• Launching eGift cards
• Our signature eBay Gift Card Deal programs have resulted
in significant sales – example $2.4M LV within 24 hours
• With 1.8M subscribers,
the Daily Deals
program promotes
3,000+ special
consumer deals every
day
48
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + United
Blackhawk Services
• Exclusive eGift card
sales opportunity
• Industry’s largest
database, most
developed loyalty
program
• 70M members
• Members earn points
for flights and other
products; now adding
gift cards to catalog
49
• Select eGifts offered,
members earn miles
• Incremental: increases
purchase frequency,
shifts share, builds
loyalty
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + PayPal
Blackhawk Services
• 60+M active accounts
in the US, 132M
globally
• 75% online shoppers
have PayPal accounts
• One third of all mobile
commerce takes place
on PayPal
• Connects effortlessly to
bank accounts,
credit/debit cards and
now… to Gift Cards as
well
50
• Variable-load and fixed
denomination digital gift
products will be
available to buy, sell,
and share
• Consumers able to buy,
store, manage, check
balance, gift and re-gift
• Immediately deliver the
Digital Gift to recipient’s
e-mail or deposit into
user’s account
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + Coinstar
Blackhawk Services
• Leader in changing
coins into cash and
eGift cards
• Leverages the BHN eGift
platform to deliver eGift codes
to Coinstar kiosks
• > 19,000 high traffic
locations reaching up
to 150M customers a
week
• Upsell and increase the
average Gift Card load—
Coinstar has an average load
value of >$55 per transaction
• Allows customers to
turn coins into an eGift
card with no service
fee
51
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk + Capital One
Proposed Blackhawk Services
• Allow customers to purchase gift cards with points
• 69M account holders
• Create innovative fraud management solutions
• $149B annual spend
• $100M gift card LV
• High level of sensitivity
towards customer
experience and fraud
management
52
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
INCENTIVES AND REWARDS
STRATEGY
53
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Rewards and Incentives: B2B Ecosystem
Solution
Providers






Incentives &
Rewards Solutions
Loyalty Solutions
Wellness Solutions
Program
Management
Training
Communications
54
Technology
Platforms





Peer-to-Peer
Sales
Tracking
Rebates
Loyalty
Payroll
Program
Managers





Solution Bundling
Product Features
Fulfillment
Client Services
Customer Service
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Payment
Networks




Card Networks
ATM Networks
Processors
Issuing Banks
Incentives and Rewards Market Characteristics
Incentives Used For….*
70%
60%
50%
40%
30%
20%
10%
0%
• Mercator estimated ~10%
growth for 2013
– Would result in market size
of approximately $40B
• Estimates vary on Open
Loop vs. Closed Loop
breakdown
– Open Loop use between
40% and 60% and
growing faster
* Aspect Market Intelligence October 2012 Survey
55
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Incentives and Rewards Market Characteristics
Increasing Budgets for Prepaid Cards
• 74% of surveyed
companies* have multiple
award types
• Only 52% of companies*
currently use gift cards for
incentives
• Nearly half of companies
source prepaid cards
direct from merchant
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012
2013
* Aspect Market Intelligence October 2012 Survey
Stay Same
56
Increase
Decrease
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
InteliSpend Acquisition
• Good potential for revenue growth and expanding EBITDA margins
• Corporate customers complementary to Blackhawk’s consumer
focused retail gift card market
• Opportunity to leverage Blackhawk’s investments in digital product
solutions and international markets
• Eventual infrastructure and back office synergies
• Less seasonal business and good revenue visibility
57
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
InteliSpend Industry Recognition
TharpeRobbins Award 2013
Vendor
of the Year
2013 Paybefore Awards
Best Business-toBusiness Prepaid Card
Program
•
Expense Visa Prepaid Card
2012 Prepaid Awards Canada
Best Prepaid B2B
Service
2012 Paybefore Awards
Most Effective Prepaid
Marketing Program
• Firestone
Most Effective Prepaid
Solution
• MasterCard® Wellness
Prepaid Card
• Monsanto Rapid
Recognition
Breakout Prepaid
Company of the Year
58
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
InteliSpend Customers and Partners
• 1,500 Direct Customers
• Broad variety of
programs and solutions
• High retention rate
• 300 Channel Partners
• Open Loop Prepaid
solution provider
• Program integration and
compliance
59
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
InteliSpend Solutions
Corporate Incentives
Dealer and Sales Incentives
Holiday & Year-End Gifting
Wellness Incentives
Service Anniversaries
Consumer Promotions
Rebates
Consumer Loyalty
Referrals, Research & Other
Event Marketing
Tailored and integrated services to meet needs of wide variety
of customers and channel partners
60
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
InteliSpend Merchant Network
• Strong participation in patented restricted authorization network (“RAN”)
card programs
• Delivers extra value to customers, their employees and awards recipients
• Good synergies with Blackhawk’s broad content provider network
61
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Blackhawk’s Incentives and Rewards Vision
• Comprehensive portfolio of prepaid solutions
– Integrated closed and open loop gift and eGift catalog
– Integrated mobile app for enhanced recipient experience
– Prepaid provider of choice for channel partners with complete
program management toolset
• Execute international solution for large global accounts
• Fully leverage Blackhawk cross marketing opportunities
62
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
ACQUISITION PURCHASE
PRICE ACCOUNTING
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Purchase Price Accounting (“PPA”)
(amounts in millions)
Net tangible assets
$
Intangible assets and technology
Customer and partner relationships
Backlog and other intangibles
7
85
$
68
17
Goodwill
90
Deferred taxes (NOL $7M less DTL $14M)
(7)
Non-controlling interest
(7)
Total purchase price
$
168
• Step up in basis for InteliSpend results in future tax benefit not
reflected in purchase price allocation (NPV ~$18 million)
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Purchase Price Accounting (“PPA)
• Revenue and expense accounting for expired cards - change
from previous InteliSpend accounting to deferred
methodology (-$4M impact in 2014)
• Intangible amortization of $13.9M (2014) and $8.7M (2015)
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 FINANCIAL
GUIDANCE
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Outlook - Summary
• Continuing growth in core prepaid products in U.S.
• Strong growth outlook for International
• Execute on key initiatives in incentive and rewards
– B2B channel significantly increases addressable market
– Leverage InteliSpend acquisition
• Well positioned for digital and mobile evolution
– Gaining new partners, content and services
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Outlook – Profitability Comments
• Adjusted Operating Revenue growth mid-point 26%
– InteliSpend, International and T-Mobile
• Adjusted EBITDA growth mid-point 22%
– T-Mobile launch investment, deferred revenue accounting on
InteliSpend and higher display and program development exp
• Adjusted Net Income growth mid-point 13%
– Interest expense (separation from Safeway)
– Higher depreciation on technology investments
– Tax rate increase of ~2% due to higher state taxes
• 2015 would not expect these YOY negative impacts
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
2014 Financial Guidance
2014
2013
% increase
Adjusted Operating Revenue
$ 670M - $ 690M
$ 541M
24% - 28%
Adjusted EBITDA
$ 137M - $ 142M
$ 114M
20% - 24%
Adjusted Net Income
$ 64M - $ 67M
$ 58M
11% - 16%
$ 1.19 - $ 1.24
$ 1.09
9% - 14%
Adjusted Net Income per Share
• Adjusted Net Income growth impacted by
– Depreciation increase of $5.7M or 26%
– Interest expense of $5.0M-$5.2M (nil previously)
– Higher tax rate to 40.2% versus 38.2% due to increased state taxes and
limitations on stock compensation expense deduction
• Forecast 54.0 million weighted average shares (diluted) +3%
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
APPENDIX
Reconciliation of GAAP to Non-GAAP
and Pro-forma Results
Prior Quarter Changes
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Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Adjusted Operating Revenues Reconciliation
(including Pro forma)
2013
(amounts in millions)
Total Operating Revenues
$
Less: Distribution Partner Commissions
Adjusted Operating Revenues
2012
1,138
(597)
$
541
Adjust for Safeway commission change
Pro forma Adjusted Operating Revenues
71
$
(511)
$
$
541
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
959
448
(8)
$
440
Adjusted EBITDA Reconciliation
(including Pro forma)
(amounts in millions)
2013
Net income before allocation to NCI
$
2012
54
$
48
Interest income and other income, net
-
(1)
Interest expense
-
-
Income tax expense
30
30
Depreciation and amortization
28
18
EBITDA
$
112
$
95
Adjustments to EBITDA:
Employee stock-based compensation
8
5
Distribution partner mark-to-market expense
9
3
(15)
(3)
Change in fair value of contingent consideration
Adjusted EBITDA
$
Adjust for Safeway commission change
Pro forma adjusted EBITDA
72
114
$
$
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
114
100
(8)
$
92
Adjusted Net Income Reconciliation
(including Pro forma)
2013
(amounts in millions)
Net income before allocation to NCI
$
54
$
48
Employee stock-based compensation
8
5
Distribution partner mark-to-market expense
9
3
(15)
(3)
7
1
9
6
Tax expense on adjustments
(6)
(3)
Adjusted net income before allocation to Non-controlling Interest
57
51
1
-
Change in fair value of contingent consideration
Amortization of intangibles
Total pre-tax adjustments
NCI (net of tax)
Adjusted net income
$
Safeway commission adjustment (net of tax)
Pro forma adjusted net income
73
2012
58
$
$
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
58
51
(6)
$
45
Adjusted EPS Reconciliation
(amounts in millions except EPS)
Net income before allocation to NCI
2013
$
Income allocated to participating securities
Net income attributable to common shareholders
$
Diluted weighted-average shares outstanding
2012
54 $
48
(1)
(1)
53 $
47
52.4
50.0
Diluted EPS
$
1.02 $
0.93
Adjusted net income
$
58 $
51
Adjusted income allocated to participating securities
(1)
(2)
Adjusted net income attributable to common shareholders $
Diluted weighted-average shares outstanding
57 $
49
52.4
50.0
Adjusted diluted EPS
1.09 $
0.98
74
$
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Pro forma Adjusted EPS Reconciliation
(amounts in millions except EPS)
Pro forma adjusted net income
2013
58 $
45
Adjusted income allocated to participating securities
(1)
(1)
Adjusted net income attributable to common shareholders $
Diluted weighted-average shares outstanding
57 $
44
52.4
50.0
Pro forma adjusted diluted EPS
1.09 $
0.88
75
$
2012
$
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Prior Quarter Adjustments
• Reclass Q4 tax expense item to Q2 ($1.36 million)
• Reclass acquisition related expenses to separate line item
• Below are the adjusted amounts only for Q1 through Q3
Amounts in 000s
1Q13
2Q13
3Q13
$28,325
$39,932
$30,486
Cost of products sold
15,850
18,509
21,423
General & administrative
11,780
11,015
10,320
677
(1,384)
(255)
Sales & marketing
Acquisition related expenses
76
Income tax expense
3,470
Net income before NCI
2,005
Net income attributable to Blackhawk
2,131
EPS Basic
$0.04
EPS Diluted
$0.04
Blackhawk Network Confidential – Reproduction or Redistribution Prohibited
Thank You
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