UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-35462

~~Vantiv,~~Worldpay, Inc.

(Exact name of registrant as specified in its charter)



Delaware		26-4532998
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

8500 Governor’s Hill Drive

Symmes Township, OH 45249

(Address of principal executive offices)

~~(513) 900-5250~~

(Registrant’s telephone number, including area ~~code)~~code:

(513) 900-5250

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated ~~filer,”~~filer”, “smaller reporting ~~company,”~~company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of ~~September 30, 2017,~~March 31, 2018, there were ~~162,506,630~~297,407,507 shares of the registrant’s Class A common stock outstanding and 15,252,826 shares of the registrant’s Class B common stock outstanding.

Table of Contents

~~VANTIV,~~WORLDPAY, INC.

FORM 10-Q

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2018

TABLE OF CONTENTS



	Page
PART I-1 - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	4
Consolidated Statements of Income (Loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~	4
Consolidated Statements of Comprehensive Income (Loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~	5
Consolidated Statements of Financial Position as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017	6
Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~	7
Consolidated Statement of Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018	8
Consolidated Statement of Equity for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017	9
Notes to Unaudited Consolidated Financial Statements	10
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5145
ITEM 4. CONTROLS AND PROCEDURES	5245
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	5346
ITEM 1A. RISK FACTORS	5346
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5346
ITEM 5. OTHER INFORMATION	5346
ITEM 6. EXHIBITS	5447

Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors,” 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. All statements other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, our objectives for future operations, and any statements of a general economic or industry specific nature, are forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “continue,” “could,” “should,” “can have,” “likely,” or the negative or plural of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe, based on information currently available to our management, may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section of ~~our most recent Annual Report on Form 10-K.~~this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We undertake no obligation to publicly update any forward-looking statement after the date of this report, whether as a result of new information, future developments or otherwise, or to conform these statements to actual results or revised expectations, except as may be required by law.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

~~Vantiv,~~Worldpay, Inc.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Unaudited

(In ~~thousands,~~millions, except share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenue:

External customers $ 1,017,030
$ 897,800
$ 2,910,601
$ 2,565,529
Related party revenues 16,735
16,219
50,130
58,330
Total revenue 1,033,765
914,019
2,960,731
2,623,859
Network fees and other costs 479,533
423,361
1,406,358
1,221,510
Sales and marketing 173,779
153,248
497,082
433,730
Other operating costs 79,482
72,162
234,347
219,464
General and administrative 49,607
40,727
189,632
133,831
Depreciation and amortization 82,500
66,086
236,964
199,550
Income from operations 168,864
158,435
396,348
415,774
Interest expense—net (38,521 ) (27,474 ) (97,441 ) (81,321 )
Non-operating income (expenses) 21,207
(4,633 ) 13,672
(14,949 )
Income before applicable income taxes 151,550
126,328
312,579
319,504
Income tax expense 44,645
39,324
83,519
101,591
Net income 106,905
87,004
229,060
217,913
Less: Net income attributable to non-controlling interests (14,787 ) (20,708 ) (39,280 ) (52,552 )
Net income attributable to Vantiv, Inc. $ 92,118
$ 66,296
$ 189,780
$ 165,361
Net income per share attributable to Vantiv, Inc. Class A common stock:
Basic $ 0.57
$ 0.43
$ 1.18
$ 1.06
Diluted $ 0.57
$ 0.41
$ 1.17
$ 1.04
Shares used in computing net income per share of Class A common stock:

Basic 161,465,849
155,740,660
161,205,066
155,603,265
Diluted 162,882,396
197,342,169
162,617,782
197,126,571



	Three Months Ended March 31,
	2018			2017
Revenue	$	850.7		$	928.2
Network fees and other costs⁽¹⁾	—			458.1
Sales and marketing	266.0			155.0
Other operating costs	155.1			75.9
General and administrative	250.1			89.3
Depreciation and amortization	207.2			76.1
(Loss) Income from operations	(27.7		)	73.8
Interest expense—net	(75.2		)	(29.2		)
Non-operating expense	(8.6		)	(4.1		)
(Loss) income before applicable income taxes	(111.5		)	40.5
Income tax (benefit) expense	(13.2		)	5.2
Net (loss) income	(98.3		)	35.3
Less: Net loss (income) attributable to non-controlling interests	0.7			(6.4		)
Net (loss) income attributable to Worldpay, Inc.	$	(97.6	)	$	28.9
Net (loss) income per share attributable to Worldpay, Inc. Class A common stock:
Basic	$	(0.36	)	$	0.18
Diluted	$	(0.36	)	$	0.17
Shares used in computing net (loss) income per share of Class A common stock:
Basic	274,098,480			160,876,177
Diluted	274,098,480			197,496,680

⁽¹⁾See the Revenue Recognition section with Footnote 1 - Basis of Presentation and Summary of Significant Accounting Policies to the Notes to Unaudited Consolidated Financial Statements which addresses the change in presentation.

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited

(In ~~thousands)~~millions)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net income $ 106,905
$ 87,004
$ 229,060
$ 217,913
Other comprehensive gain (loss), net of tax:

Gain (loss) on cash flow hedges 811
3,572
5,690
(9,654 )
Comprehensive income 107,716
90,576
234,750
208,259
Less: Comprehensive income attributable to non-controlling interests (14,693 ) (21,654 ) (40,444 ) (49,992 )
Comprehensive income attributable to Vantiv, Inc. $ 93,023

$ 68,922
$ 194,306
$ 158,267



	Three Months Ended March 31,
	2018			2017
Net (loss) income	$	(98.3	)	$	35.3
Other comprehensive (loss) income, net of tax:
Gain on hedging activities and foreign currency translation	22.0			4.8
Comprehensive (loss) income	(76.3		)	40.1
Less: Comprehensive income attributable to non-controlling interests	(0.4		)	(7.6		)
Comprehensive (loss) income attributable to Worldpay, Inc.	$	(76.7	)	$	32.5

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Unaudited

(In ~~thousands,~~millions, except share data)

September 30,
2017 December 31,
2016
Assets

Current assets:

Cash and cash equivalents $ 92,638
$ 139,148
Accounts receivable—net 899,389
940,052
Related party receivable 1,639
1,751
Settlement assets 135,043
152,490
Prepaid expenses 48,073
39,229
Other 118,664
15,188
Total current assets 1,295,446
1,287,858
  Customer incentives 64,023
67,288
  Property, equipment and software—net 470,308
348,553
  Intangible assets—net 732,431
787,820
  Goodwill 4,180,307
3,738,589
  Deferred taxes 1,322,679
771,139
  Other assets 24,740
42,760
Total assets $ 8,089,934
$ 7,044,007
Liabilities and equity

Current liabilities:

Accounts payable and accrued expenses $ 528,473
$ 471,979
Related party payable 3,037
3,623
Settlement obligations 788,261
801,381
Current portion of note payable to related party 7,557
7,557
Current portion of note payable 133,097
123,562
Current portion of tax receivable agreement obligations to related parties 261,844
191,014
Current portion of tax receivable agreement obligations 54,798
60,400
Deferred income 19,349
7,907
Current maturities of capital lease obligations 8,000
7,870
Other 6,790
13,719
Total current liabilities 1,811,206
1,689,012
Long-term liabilities:

Note payable to related party 170,097
143,577
Note payable 4,421,522
2,946,026
Tax receivable agreement obligations to related parties 876,434
451,318
Tax receivable agreement obligations 42,510
86,640
Capital lease obligations 6,666
13,223
Deferred taxes 98,097
62,148
Other 46,297
44,774
Total long-term liabilities 5,661,623
3,747,706
Total liabilities 7,472,829
5,436,718
Commitments and contingencies (See Note 7 - Commitments, Contingencies and Guarantees)

Equity:

Class A common stock, $0.00001 par value; 890,000,000 shares authorized; 162,506,630 shares outstanding at September 30, 2017; 161,134,831 shares outstanding at December 31, 2016 1
1
Class B common stock, no par value; 100,000,000 shares authorized; 15,252,826 shares issued and outstanding at September 30, 2017; 35,042,826 shares issued and outstanding at December 31, 2016 —
—
Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding —
—
Paid-in capital 25,048
706,055
Retained earnings 617,683
689,512
Accumulated other comprehensive loss (1,671 ) (6,197 )
Treasury stock, at cost; 2,849,275 shares at September 30, 2017 and 2,710,195 shares at December 31, 2016 (82,893 ) (73,706 )
Total Vantiv, Inc. equity 558,168
1,315,665
Non-controlling interests 58,937
291,624
Total equity 617,105
1,607,289
Total liabilities and equity $ 8,089,934
$ 7,044,007



	March 31, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	459.4		$	126.5
Accounts receivable—net	1,491.8			986.6
Merchant float	1,894.3			—
Settlement assets	3,578.6			142.0
Prepaid expenses	77.1			33.5
Other	562.0			84.0
Total current assets	8,063.2			1,372.6
Customer incentives	68.9			68.4
Property, equipment and software—net	890.0			473.7
Intangible assets—net	3,783.9			678.5
Goodwill	15,188.9			4,173.0
Deferred taxes	764.9			739.5
Proceeds from senior unsecured notes	—			1,135.2
Other assets	190.2			26.1
Total assets	$	28,950.0		$	8,667.0
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses	$	1,329.6		$	631.9
Settlement obligations	6,181.9			816.2
Current portion of notes payable	223.7			107.9
Current portion of tax receivable agreement obligations	179.1			245.5
Deferred income	32.5			18.9
Current maturities of capital lease obligations	32.8			8.0
Other	571.0			6.0
Total current liabilities	8,550.6			1,834.4
Long-term liabilities:
Notes payable	8,051.0			5,586.4
Tax receivable agreement obligations	506.0			535.0
Capital lease obligations	33.1			4.5
Deferred taxes	716.7			65.6
Other	100.4			40.5
Total long-term liabilities	9,407.2			6,232.0
Total liabilities	17,957.8			8,066.4
Commitments and contingencies (See Note 7 - Commitments, Contingencies and Guarantees)
Equity:
Class A common stock, $0.00001 par value; 890,000,000 shares authorized; 297,407,507 shares outstanding at March 31, 2018; 162,595,981 shares outstanding at December 31, 2017	—			—
Class B common stock, no par value; 100,000,000 shares authorized; 15,252,826 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	—			—
Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding	—			—
Paid-in capital	10,030.8			55.4
Retained earnings	482.7			558.0
Accumulated other comprehensive income	23.8			2.9
Treasury stock, at cost; 3,007,183 shares at March 31, 2018 and 2,861,671 shares at December 31, 2017	(95.0		)	(83.8		)
Total Worldpay, Inc. equity	10,442.3			532.5
Non-controlling interests	549.9			68.1
Total equity	10,992.2			600.6
Total liabilities and equity	$	28,950.0		$	8,667.0

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In ~~thousands)~~millions)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Operating Activities:
Net income	$	229,060		$	217,913
Net (loss) income							$	(98.3	)	$	35.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	236,964			199,550			207.2			76.1
Amortization of customer incentives	18,648			18,508			6.2			6.7
Amortization of debt issuance costs	3,941			4,818
Unrealized gain on deal contingent forward	(24,365		)	—
Amortization and write-off of debt issuance costs							59.9			1.2
Realized gain on foreign currency forward							(35.9		)	—
Share-based compensation expense	35,068			25,892			17.2			10.6
Deferred taxes	60,000			49,900
Excess tax benefit from share-based compensation	—			(11,193		)
Deferred tax expense							(25.3		)	20.0
Tax receivable agreements non-cash items	10,708			14,880			(3.6		)	(5.1		)
Other	2,304			433			30.4			0.1
Change in operating assets and liabilities:
Accounts receivable and related party receivable	46,682			(67,938		)
Accounts receivable							14.0			56.5
Net settlement assets and obligations	4,327			(16,558		)	(12.2		)	(41.1		)
Customer incentives	(17,703		)	(30,808		)	(7.3		)	(7.2		)
Prepaid and other assets	(82,916		)	6,183			(22.9		)	(7.0		)
Accounts payable and accrued expenses	22,924			24,859			(17.1		)	(8.5		)
Payable to related party	(586		)	(1,331		)
Other liabilities	(17,390		)	(4,713		)	(28.2		)	(3.2		)
Net cash provided by operating activities	527,666			430,395			84.1			134.4
Investing Activities:
Purchases of property and equipment	(81,882		)	(93,822		)	(34.1		)	(27.9		)
Acquisition of customer portfolios and related assets and other	(38,165		)	(2,179		)	(37.1		)	(4.3		)
Purchase of derivative instruments	—			(21,523		)
Cash used in acquisitions, net of cash acquired	(531,534		)	—
Net cash used in investing activities	(651,581		)	(117,524		)
Proceeds from foreign currency forward							71.5			—
Cash acquired in acquisitions, net of cash used							1,405.8			—
Net cash provided by (used in) investing activities							1,406.1			(32.2		)
Financing Activities:
Proceeds from issuance of long-term debt	1,270,000			—			2,140.0			—
Repayment of debt and capital lease obligations							(1,662.2		)	(35.6		)
Borrowings on revolving credit facility	5,405,000			1,180,000			1,476.0			570.0
Repayment of revolving credit facility	(5,046,000		)	(1,180,000		)	(1,701.0		)	(570.0		)
Repayment of debt and capital lease obligations	(107,969		)	(98,019		)
Payment of debt issuance costs	(24,148		)	—			(86.8		)	(1.1		)
Proceeds from issuance of Class A common stock under employee stock plans	10,847			12,340			7.6			6.6
Purchase and cancellation of Class A common stock	(1,268,057		)	(25,008		)
Repurchase of Class A common stock (to satisfy tax withholding obligations)	(9,187		)	(6,036		)	(11.2		)	(5.7		)
Settlement of certain tax receivable agreements	(84,878		)	(158,115		)	(25.6		)	(15.1		)
Payments under tax receivable agreements	(55,695		)	(53,474		)	(55.3		)	(46.5		)
Excess tax benefit from share-based compensation	—			11,193
Distributions to non-controlling interests	(12,508		)	(9,018		)	(5.6		)	(5.8		)
Other	—			(12		)
Net cash provided by (used in) financing activities	77,405			(326,149		)	75.9			(103.2		)
Net decrease in cash and cash equivalents	(46,510		)	(13,278		)
Net increase (decrease) in cash and cash equivalents							1,566.1			(1.0		)
Cash and cash equivalents—Beginning of period	139,148			197,096			1,272.2			139.1
Effect of exchange rate changes on cash							31.1			—
Cash and cash equivalents—End of period	$	92,638		$	183,818		$	2,869.4		$	138.1
Cash Payments:
Interest	$	94,318		$	76,404		$	58.2		$	27.5
Taxes	31,585			35,709
Income taxes							0.6			0.3

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

CONSOLIDATED STATEMENT OF EQUITY

Unaudited

(In ~~thousands)~~millions)

Accumulated
Common Stock Other Non-
Total Class A Class B Treasury Stock Paid-in Retained Comprehensive Controlling
Equity Shares Amount Shares Amount Shares Amount Capital Earnings Income (Loss) Interests
Beginning Balance, January 1, 2017 $ 1,607,289
161,135
$ 1
35,043
$ —
2,710
$ (73,706 ) $ 706,055
$ 689,512
$ (6,197 ) $ 291,624
Cumulative effect of accounting change 491
—
—
—
—
—
—
1,299
(808 ) —
—
Net income 229,060
—
—
—
—
—
—
—
189,780
—
39,280
Issuance of Class A common stock under employee stock plans, net of forfeitures 10,847
1,511
—
—
—
—
—
10,847
—
—
—
Repurchase of Class A common stock (to satisfy tax withholding obligation) (9,187 ) (139 ) —
—
—
139
(9,187 ) —
—
—
—
Purchase and cancellation of Class A common stock (1,270,589 ) —
—
(19,790 ) —
—
—
(1,009,788 ) (260,801 ) —
—
Settlement of certain tax receivable agreements 45,347
—
—
—
—
—
—
45,347
—
—
—
Issuance of tax receivable agreements (24,403 ) —
—
—
—
—
—
(24,403 ) —
—
—
—
Unrealized gain on hedging activities, net of tax 5,690
—
—
—
—
—
—
—
—
4,526
1,164
Distribution to non-controlling interests (12,508 ) —
—
—
—
—
—
—
—
—
(12,508 )
Share-based compensation 35,068
—
—
—
—
—
—
29,619
—
—
5,449
Reallocation of non-controlling interests of Vantiv Holding due to change in ownership —
—
—
—
—
—
—
266,072
—
—
(266,072 )
Ending Balance, September 30, 2017 $ 617,105
162,507
$ 1
15,253
$ —
2,849
$ (82,893 ) $ 25,048
$ 617,683
$ (1,671 ) $ 58,937



																					Accumulated
				Common Stock																	Other		Non-
	Total			Class A				Class B			Treasury Stock				Paid-in			Retained			Comprehensive		Controlling
	Equity			Shares		Amount		Shares	Amount		Shares	Amount			Capital			Earnings			Income (Loss)		Interests
Beginning Balance, January 1, 2018	$	600.6		162.6		—		15.3	$	—	2.9	$	(83.8	)	$	55.4		$	558.0		$	2.9	$	68.1
Cumulative effect of accounting change	22.3			—		—		—	—		—	—			—			22.3			—		—
Net loss	(98.3		)	—		—		—	—		—	—			—			(97.6		)	—		(0.7		)
Issuance of Class A common stock for acquisition	10,429.4			134.4		—		—	—		—	—			10,429.4			—			—		—
Issuance of Class A common stock under employee stock plans, net of forfeitures	7.6			0.5		—		—	—		—	—			7.6			—			—		—
Repurchase of Class A common stock (to satisfy tax withheld obligation)	(11.2		)	(0.1	)	—		—	—		0.1	(11.2		)	—			—			—		—
Settlement of certain tax receivable agreements	8.2			—		—		—	—		—	—			8.2			—			—		—
Unrealized gain on hedging activities and foreign currency translation, net of tax	22.0			—		—		—	—		—	—			—			—			20.9		1.1
Distribution to non-controlling interests	(5.6		)	—		—		—	—		—	—			—			—			—		(5.6		)
Share-based compensation	17.2			—		—		—	—		—	—			16.3			—			—		0.9
Reallocation of non-controlling interests of Vantiv Holding due to change in ownership	—			—		—		—	—		—	—			(486.1		)	—			—		486.1
Ending Balance, March 31, 2018	$	10,992.2		297.4		$	—	15.3	$	—	3.0	$	(95.0	)	$	10,030.8		$	482.7		$	23.8	$	549.9

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

CONSOLIDATED STATEMENT OF EQUITY

Unaudited

(In ~~thousands)~~millions)

Accumulated
Common Stock Other Non-
Total Class A Class B Treasury Stock Paid-in Retained Comprehensive Controlling
Equity Shares Amount Shares Amount Shares Amount Capital Earnings Income (Loss) Interests
Beginning Balance, January 1, 2016 $ 1,225,066
155,488
$ 1
35,043
$ —
2,593
$ (67,458 ) $ 553,145
$ 476,304
$ (9,204 ) $ 272,278
Net income 217,913
—
—
—
—
—
—
—
165,361
—
52,552
Issuance of Class A common stock under employee stock plans, net of forfeitures 12,340
1,371
—
—
—
—
—
12,340
—
—
—
Excess tax benefit from employee share-based compensation 11,193
—
—
—
—
—
—
11,193
—
—
—
Repurchase of Class A common stock (25,008 )
(457 )
—

—

—

—

—

(25,008 )
—

—

—
Repurchase of Class A common stock (to satisfy tax withholding obligation) (6,036 ) (114 ) —
—
—
114
(6,036 ) —
—
—
—
Termination of certain tax receivable agreements 129,538

—

—

—

—

—

—

129,538

—

—

—
Unrealized loss on hedging activities, net of tax (9,654 ) —
—
—
—
—
—
—
—
(7,094 ) (2,560 )
Distribution to non-controlling interests (9,018 ) —
—
—
—
—
—
—
—
—
(9,018 )
Share-based compensation 25,892
—
—
—
—
—
—
21,150
—
—
4,742
Other (12 ) —
—
—
—
—
—
(12 ) —
—
—
Reallocation of non-controlling interests of Vantiv Holding due to change in ownership —

—

—

—

—

—

—

7,501

—

—

(7,501 )
Ending Balance, September 30, 2016 $ 1,572,214
156,288
$ 1
35,043
$ —
2,707
$ (73,494 ) $ 709,847
$ 641,665
$ (16,298 ) $ 310,493



																				Accumulated
				Common Stock																Other			Non-
	Total			Class A				Class B			Treasury Stock				Paid-in		Retained			Comprehensive			Controlling
	Equity			Shares		Amount		Shares	Amount		Shares	Amount			Capital		Earnings			Income (Loss)			Interests
Beginning Balance, January 1, 2017	$	1,607.3		161.1		$	—	35.0	$	—	2.7	$	(73.7	)	$	706.1	$	689.5		$	(6.2	)	$	291.6
Cumulative effect of accounting change	0.5			—		—		—	—		—	—			1.3		(0.8		)	—			—
Net income	35.3			—		—		—	—		—	—			—		28.9			—			6.4
Issuance of Class A common stock under employee stock plans, net of forfeitures	6.6			1.0		—		—	—		—	—			6.6		—			—			—
Repurchase of Class A common stock (to satisfy tax withholding obligation)	(5.7		)	(0.1	)	—		—	—		0.1	(5.7		)	—		—			—			—
Settlement of certain tax receivable agreements	15.1			—		—		—	—		—	—			15.1		—			—			—
Unrealized gain on hedging activities, net of tax	4.8			—		—		—	—		—	—			—		—			3.6			1.2
Distribution to non-controlling interests	(5.8		)	—		—		—	—		—	—			—		—			—			(5.8		)
Share-based compensation	10.6			—		—		—	—		—	—			8.7		—			—			1.9
Ending Balance, March 31, 2017	$	1,668.7		162.0		$	—	35.0	$	—	2.8	$	(79.4	)	$	737.8	$	717.6		$	(2.6	)	$	295.3

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Worldpay, Inc., formerly Vantiv, Inc., a Delaware corporation, is a holding company that conducts its operations through its majority-owned subsidiary, Vantiv Holding, LLC (“Vantiv Holding”). ~~Vantiv,~~Worldpay, Inc. and Vantiv Holding are referred to collectively as the “Company,” ~~“Vantiv,~~“Worldpay,” “we,” “us” or “our,” unless the context requires otherwise.

On January 16, 2018, Worldpay completed the previously announced acquisition of all of the outstanding shares of Worldpay Group Limited, formerly Worldpay Group plc, a public limited company (“Legacy Worldpay”). Following the acquisition, the Vantiv, Inc. (“Legacy Vantiv”) name was changed to Worldpay, Inc. by amending its Second Amended and Restated Certificate of Incorporation. The effective date of the name change was January 16, 2018.

On January 16, 2018, the Company’s Class A common stock began trading on the New York Stock Exchange under the new symbol “WP” and on the London Stock Exchange via a secondary standard listing under the symbol “WPY.” Legacy Worldpay shares were delisted from the London Stock Exchange on the same day.

Worldpay is a leader in global payments providing a broad range of technology-led solutions to its clients to allow them to accept payments of almost any type, across multiple payment channels nearly anywhere in the world. The Company ~~provides electronic~~serves a diverse set of merchants including mobile, online and in-store, offering over 300 payment ~~processing services to merchants~~methods in 126 transaction currencies across 146 countries, while supporting various clients including large enterprises, corporates, small and ~~financial institutions throughout the United States of America~~medium sized businesses and eCommerce businesses. The Company operates in ~~two~~three reportable ~~segments,~~segments: Technology Solutions, Merchant ~~Services~~Solutions and ~~Financial Institution Services.~~Issuer Solutions. For more information about the Company’s segments, refer to Note 11 - Segment Information. The Company markets its services through diverse distribution channels, including ~~national, regional and mid-market sales teams, third-party reseller clients and a telesales operation. The Company also has~~referral relationships with a broad range of ~~referral~~ partners that include merchant banks, independent software vendors (“ISVs”), value-added resellers (“VARs”), payment facilitators, independent sales organizations (“ISOs”) ~~and~~, trade associations, ~~as well as~~and arrangements with core processors.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include those of ~~Vantiv,~~Worldpay, Inc. and all subsidiaries thereof, including its majority-owned subsidiary, Vantiv Holding, LLC. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("(“U.S. ~~GAAP"~~GAAP”) and should be read in connection with the Company’s 2016 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The accompanying consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due to seasonal fluctuations in the Company’s revenue as a result of consumer spending patterns.. All intercompany balances and transactions have been eliminated.

As of ~~September 30, 2017, Vantiv,~~March 31, 2018, Worldpay, Inc. and Fifth Third Bank (“Fifth Third”) owned interests in Vantiv Holding of ~~91.42%~~95.12% and ~~8.58%~~4.88%, respectively (see Note 6 - Controlling and Non-controlling Interests for changes in non-controlling interests).

The Company accounts for non-controlling interests in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation. Non-controlling interests primarily represent Fifth Third’s minority share of net income or loss of equity in Vantiv Holding. Net income attributable to non-controlling interests does not include expenses incurred directly by ~~Vantiv,~~Worldpay, Inc., including income tax expense attributable to ~~Vantiv,~~Worldpay, Inc. Non-controlling interests are presented as a component of equity in the accompanying ~~consolidated statements~~Consolidated Statements of ~~financial position.~~Financial Position.

Share Repurchase Program

In October 2016, our board of directors authorized a program to repurchase up to $250 million of our Class A common stock. The Company has approximately $243 million of share repurchase authority remaining as of ~~September 30, 2017~~March 31, 2018 under this authorization.

Purchases under the programs may be made from time to time in the open market, in privately negotiated transactions, or otherwise. The manner, timing and amount of any purchases will be determined by management based on an evaluation of market conditions, stock price and other factors. The Company’s share repurchase program does not obligate it to acquire any specific number or amount of shares, there is no guarantee as to the exact number or amount of shares that may be repurchased, if any, and the Company may discontinue purchases at any time that it determines additional purchases are not warranted.

~~Sponsorship~~

In order to provide electronic payment processing services, Visa, Mastercard and other payment networks require sponsorship of non-financial institutions by a member clearing bank. The Company has an agreement with Fifth Third (the “Sponsoring Member”) to provide sponsorship services to the Company through December 31, 2024. The Company also has agreements with certain other banks that provide sponsorship into the card networks.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (Topic 606) (“ASC 606”). This ASU supersedes the revenue recognition requirements in Accounting Standard Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendment allows companies to use either a full retrospective or a modified retrospective approach to adopt this ASC.

The Company adopted ASC 606 on January 1, 2018, using the modified retrospective method. The new standard requires the Company to disclose the accounting policies in effect prior to January 1, 2018, as well as the policies it has applied starting January 1, 2018. Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service or goods to a customer.

Periods prior to January 1, 2018

The Company has contractual agreements with its ~~clients~~customers that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenues are recognized as earned (i.e., for transaction based fees, when the underlying transaction is processed) in conjunction with ASC ~~605,~~ ~~Revenue Recognition~~.605. ASC 605~~Revenue Recognition~~, establishes guidance as to when revenue is realized or realizable and earned by using the following criteria: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price is fixed or determinable; and (4) collectibility is reasonably assured.

The Company ~~follows~~followed the guidance provided in ASC 605-45, Principal Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in the evaluation. The Company ~~recognizes~~recognized processing revenues net of interchange fees, which are assessed to ~~the Company’s~~its merchant customers on all processed transactions. Interchange rates are not controlled by the Company, which effectively acts as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and its processing customers. All other revenue iswas reported on a gross basis, as the Company contracts directly with the end customer, assumes the risk of loss and has pricing flexibility.

Periods commencing January 1, 2018

Revenue is recognized when a customer obtains control of promised services or goods. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.

The Company has contractual agreements with its customers that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenue is recognized when the obligation under the terms of the Company’s contract with its customer is satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company generates revenue primarily by processing electronic payment transactions. Set forth below is a description of the Company’s revenue by segment.

~~Merchant Services~~

The Company’s Merchant Services segment revenue is primarily derived from processing credit and debit card transactions. Merchant Services revenue is primarily comprised of fees charged to businesses, net of interchange fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. The fees charged consist of either a percentage of the dollar volume of the transaction or a fixed fee, or both, and are recognized at the time of the transaction. Merchant Services revenue also includes a number of revenue items that are incurred by the Company and are reimbursable as the costs are passed through to and paid by the Company’s clients. These items primarily consist of Visa, Mastercard and other payment network fees. In addition, for sales through referral partners in which the Company is the primary party to the contract with the merchant, the Company records the full amount of the fees collected from the merchant as revenue. Merchant Services segment revenue also includes revenue from ancillary services such as fraud management, equipment sales and terminal rent. Merchant Services revenue is recognized as services are performed.

~~Financial Institution Services~~

The Company’s Financial Institution Services segment revenues are primarily derived from debit, credit and automated teller machine (“ATM”) card transaction processing, ATM driving and support, and PIN debit processing services. Financial Institution Services revenue associated with processing transactions includes per transaction and account related fees, card production fees and fees generated from the Company’s Jeanie network. Financial Institution Services revenue related to card transaction processing is recognized when consumers use their client-issued cards to make purchases. Financial Institution Services also generates revenue through other services, including statement production, collections and inbound/outbound call centers for credit transactions and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. Financial Institution Services revenue is recognized as services are performed.

~~Financial Institution Services provides certain services to Fifth Third. Revenues related to these services are included in the accompanying statements of income as related party revenues.~~

Table of Contents

~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Technology Solutions

Technology Solutions provides merchant acquiring and payment processing services to a diverse set of merchants that primarily accept payments through eCommerce and integrated payment solutions.

Merchant Solutions

Merchant Solutions provides merchant acquiring and payment processing services to a diverse set of merchants that primarily accept payments through an omni-channel solution including terminal based.

Issuer Solutions

Issuer Solutions provides card issuer processing, payment network processing, fraud protection and card production to a diverse set of financial institutions, including regional banks, community banks, credit unions and regional personal identification number (“PIN”) networks.

Performance Obligations

Since the majority of the Company’s revenue relates to payment processing services for its customers, the Company’s core performance obligation is to provide continuous access to the Company’s system to process as much as its customers require. The Company’s payment processing services consist of variable consideration under a stand-ready service of distinct days of service that are substantially the same with the same pattern of transfer to the customer.

The Company’s revenue from products and services is recognized at a point in time or over time depending on the products or services, with the majority of the revenue recognized at a point in time.

Beginning in 2018, the Company records certain fees paid to third parties, including network fees and other costs, as a reduction of revenue. These fees were previously recorded on a gross basis. This change in presentation has no impact to income from operations. Under ASC 606, revenue of $850.7 million was reported for the three months ended March 31, 2018. Excluding the impact of the adoption of ASC 606, amounts recorded under ASC 605 include $1,472.4 million and $621.7 million of revenue and network fees and other costs, respectively. The adoption of ASC 606 did not have a material impact on any other line items of the Company’s Consolidated Statements of Income (Loss), Statements of Comprehensive Income (Loss), Statements of Financial Position, Statements of Equity and Statements of Cash Flows.

Disaggregation of Revenue

In the following table, revenue is disaggregated by source of revenue (in millions):



	Three Months Ended March 31, 2018
	Technology Solutions		Merchant Solutions		Issuer Solutions		Total
Major Products and Services
Processing services	$	230.1	$	340.0	$	46.8	$	616.9
Products and services	106.3		92.2		35.3		233.8
Total	$	336.4	$	432.2	$	82.1	$	850.7

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)



	Three Months Ended March 31, 2017
	Technology Solutions		Merchant Solutions		Issuer Solutions		Total
Major Products and Services ⁽¹⁾
Processing services	$	242.1	$	488.0	$	69.9	$	800.0
Products and services	29.8		52.1		46.3		128.2
Total	$	271.9	$	540.1	$	116.2	$	928.2

⁽¹⁾Revenue for the three months ended March 31, 2017 presented in the table above is prior to the Company’s adoption of ASC 606, which presents network fees and other costs net within revenue.

Processing Services

Processing services revenue is primarily derived from processing credit and debit card transactions comprised of fees charged to businesses for payment processing services. The fees charged consist of either a percentage of the dollar volume of the transaction or a fixed fee, or both.

Products and Services

Products and services revenue is primarily derived from ancillary services such as treasury management and foreign exchange, regulatory compliance, chargebacks and fraud services.

Costs to Obtain and Fulfill a Contract

ASC 606 requires capitalizing costs of obtaining a contract when those costs are incremental and expected to be recovered. Since incremental commission fees paid to sales teams as a result of obtaining contracts are recoverable, the Company recorded a $28.8 million ($22.3 million net of deferred taxes) cumulative catch-up capitalized asset on January 1, 2018. As of March 31, 2018, the amount capitalized as contract costs is $31.7 million, which is included in other non-current assets.

In order to determine the amortization period for sales commission contract costs, the Company applied the portfolio approach for “like-kind contracts” to which sales compensation earnings can be applied and allocated incentive payments to each portfolio accordingly. The Company evaluated each individual portfolio to determine the proper length of time over which the capitalized incentive should be amortized by analyzing customer attrition rates using historical data and other metrics.

The Company determined that straight-line amortization would best correspond to the transfer of services to customers since services are transferred equally over time and have limited predictable volatility. The amortization periods range from 3 to 10 years and are based on the expected life of a customer. In 2018, the amount of amortization was $2.5 million, which is included in sales and marketing expense. There was no impairment loss in relation to the costs capitalized.

The Company recognizes incremental sales commission costs of obtaining a contract as expense when the amortization period for those assets is one year or less per the practical expedient in ASC 606. These costs are included in sales and marketing expense.

Customer incentives represent signing bonuses paid to customers. Customer incentives are paid in connection with the acquisition or renewal of customer contracts, and are therefore deferred and amortized using the straight-line method based on the expected life of the customer. Related amortization is recorded as contra-revenue.

The Company capitalizes conversion costs associated with enabling customers to receive its processing services. As of March 31, 2018 and December 31, 2017, the Company had $28.1 million and $21.1 million, respectively, of capitalized conversion costs included in Intangible assets - net in the Company’s Consolidated Statement of Financial Position. For the three months ended March 31, 2018 and 2017, the Company has $0.9 million and $0.4 million, respectively, of amortization expense related to these costs, which is recorded in depreciation and amortization expense in the Company’s Consolidated Statements of Income (Loss). These costs are amortized over the average life of the customer.

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Contract Balances

Accounts Receivable-net

Accounts receivable primarily represent processing revenues earned but not collected. For a majority of its customers, the Company has the authority to debit the client’s bank accounts; as such, collectibility is reasonably assured. Aside from debiting a client’s bank account, the Company collects a majority of its revenue via net settlement with the remaining portion collected via billing the customer. The Company records a reserve for doubtful accounts when it is probable that the accounts receivable will not be collected. The Company reviews historical loss experience and the financial position of its customers when estimating the allowance. As of March 31, 2018 and December 31, 2017, the allowance for doubtful accounts was not material to the Company’s statements of financial position.

As of March 31, 2018 and December 31, 2017, accounts receivable, net of allowance for doubtful accounts on the Company’s Consolidated Statement of Financial Position was $1.5 billion and $1.0 billion, respectively. The Legacy Worldpay acquisition contributed $0.5 billion to the balance.

Contract Liabilities

Contract liabilities, which relate to advance consideration received from customers (deferred revenue) for which transfer of control occurs and therefore revenue is recognized, is not material to the Company’s consolidated financial statements.

Remaining Performance Obligations

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations; however, as permitted by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. As discussed above, the Company’s core performance obligation consists of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets the specified criteria for the disclosure exclusion; therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

Changes in Accounting Policies

As noted above, the Company adopted ASC 606, effective January 1, 2018, using the modified retrospective method, applying the standard to contracts that are not complete as of the date of initial application. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The details of the significant changes are set out below.

Under ASC 606, the Company capitalizes commission fees as costs of obtaining a contract when they are incremental and expected to be recovered. The Company amortizes these capitalized costs consistently with the pattern of transfer of the good or service to which the asset relates. If the expected amortization period is one year or less, the commission fee is expensed when incurred. The Company previously recognized sales commission fees related to contracts as sales and marketing expenses when incurred. Except for the change in revenue recognition, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

Expenses

Set forth below is a brief description of the components of the Company’s expenses:

Network fees and other costs primarily consist of pass through expenses incurred by the Company in connection with providing processing services to ~~its~~the Company’s clients, including Visa and Mastercard network association fees and payment network fees ~~third party processing~~and only relates to the three months ended March 31, 2017. Following the Company’s adoption of ASC 606 on January 1, 2018, network fees ~~telecommunication charges, postage~~ and ~~card production costs.~~other costs are presented net within revenue.

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Sales and marketing expense primarily consists of salaries and benefits paid to sales personnel, sales management and other sales and marketing personnel, amortization of capitalized commission fees, residual payments made to referral partners, and advertising and promotional costs.

Other operating costs primarily consist of salaries and benefits paid to operational and IT personnel, costs associated with operating the Company’s technology platform and data centers, information technology costs for processing transactions, product development costs, software fees and maintenance costs.

General and administrative expenses primarily consist of salaries and benefits paid to executive management and administrative employees, including finance, human resources, product, ~~development,~~ legal and risk management, share-based compensation costs, equipment and occupancy costs and consulting costs. The ~~nine~~three months ended ~~September 30,~~March 31, 2018 includes a significant amount of transition, acquisition and integration costs related to the Legacy Worldpay acquisition. The three months ended March 31, 2017 includes a charge related to a settlement agreement stemming from legacy litigation of an acquired company.

Non-operating ~~income~~ expenses~~for the~~ during three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 primarily consists of ~~an unrealized gain relating~~expenses related to the Company’s financing arrangements entered into in connection with the Legacy Worldpay acquisition and the change in ~~the~~ fair value of the Mercury tax receivable agreement (“TRA”) (see Note 8 - Fair Value Measurements), partially offset by a gain on the settlement of a deal contingent forward entered into in connection with the pending Worldpay Group plc (“Worldpay”) acquisition (see Note 12 - Pending Worldpay Transaction), partially offset by the change in fair value of a tax receivable agreement (“TRA”) entered into as part of theCompany’s acquisition of ~~Mercury Payment Systems, LLC (“Mercury”).~~Legacy Worldpay. Non-operating expenses for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2017 primarily relate to the change in fair value of athe Mercury TRA ~~entered into as part of the acquisition of Mercury.~~ (see Note 8 - Fair Value Measurements).

Share-Based Compensation

The Company expenses employee share-based payments under ASC 718, Compensation—Stock Compensation, which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model. The fair value of shares issued as restricted stock, performance awards and under the Employee Stock Purchase Plan (“ESPP”)~~, as restricted stock awards and performance awards~~ is measured based on the market price of the Company’s stock on the grant date. In 2017, the Compensation Committee of the Company’s Board of Directors approved a resolution that stock options, restricted shares and restricted stock units shall vest or become exercisable in three equal annual installments beginning on the first anniversary of the grant date.

~~In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09,~~ ~~Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~ The update simplifies several aspects of the accounting for share-based payment award transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this ASU on January 1, 2017. Under previous guidance, excess tax benefits and deficiencies from share-based compensation arrangements were recorded in equity when the awards vested or settled. ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies in the income statement, resulting in the recognition of excess tax benefits of $1.9 million and $16.0 million in income tax expense, rather than in paid-in capital, for the three and nine months ended September 30, 2017, respectively.

Additionally, under ASU 2016-09, excess income tax benefits from share-based compensation arrangements are classified as cash flow from operations, rather than as cash flow from financing activities. The Company has elected to apply the cash flow classification guidance of ASU 2016-09 prospectively, resulting in an increase to operating cash flow of $16.0 million for the nine months ended September 30, 2017, and the prior year period has not been adjusted. The presentation requirements for cash flows related to employee taxes paid for withheld shares have no impact to the periods presented in our consolidated cash flows statements since such cash flows have historically been presented as a financing activity.

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Prior to adopting ASU 2016-09 the Company estimated forfeitures as part of share-based compensation expense. Under ASU 2016-09, an entity can make an election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The Company has elected to account for forfeitures as they occur. The cumulative-effect of this change in election resulted in an increase to additional paid-in capital of $1.3 million, an increase to deferred tax assets of $0.5 million, and a decrease to retained earnings of $0.8 million at the beginning of 2017.

ASU 2016-09 requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the calculation of diluted shares, resulting in an increase in diluted weighted average shares outstanding of approximately 364,000 shares and 412,000 shares for the three and nine months ended September 30, 2017, respectively.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ total share-based compensation expense was ~~$35.1~~$17.2 million and ~~$25.9~~$10.6 million, respectively.

Earnings ~~Per~~per Share

Basic earnings per share is computed by dividing net income attributable to ~~Vantiv,~~Worldpay, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ~~Vantiv,~~Worldpay, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 9 - Net Income Per Share for further discussion.

Dividend Restrictions

The Company does not intend to pay cash dividends on its Class A common stock in the foreseeable future. ~~Vantiv,~~Worldpay, Inc. is a holding company that does not conduct any business operations of its own. As a result, ~~Vantiv,~~Worldpay, Inc.’s ability to pay cash dividends on its common stock, if any, is dependent upon cash dividends and distributions and other transfers from Vantiv Holding. The amounts available to ~~Vantiv,~~Worldpay, Inc. to pay cash dividends are subject to the covenants and distribution restrictions in its subsidiaries’ loan agreements. As a result of the restrictions on distributions from Vantiv Holding and its subsidiaries, essentially all of the Company’s consolidated net assets are held at the subsidiary level and are restricted as of ~~September 30, 2017.~~March 31, 2018.

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Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Income Taxes

~~Vantiv, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level.~~

Income taxes are computed in accordance with ASC 740, Income Taxes, and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made. ~~As of September 30, 2017 and~~ December 31, ~~2016,~~2017, the Company had recorded no valuation allowances against deferred tax assets.

The Company’s consolidated interim effective tax rate is based upon expected annual income from operations, statutory tax rates and tax laws in the various jurisdictions in which the Company operates. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs.

The Company’s effective tax rates were ~~26.7%~~11.8% and ~~31.8%~~12.8% respectively, for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016.~~2017. The effective tax rate for each period reflects the impact of the Company’s non-controlling interests not being taxed at the statutory U.S. corporate tax rates. The 2018 effective tax rate ~~for~~also reflects the ~~nine months ended September 30, 2017 includes a $16.0 million credit~~impact of tax reform and the impact related to ~~income tax expense relating to excess tax benefits~~the addition of international taxing jurisdictions as a result of the ~~Company’s adoption of ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting~~.Legacy Worldpay acquisition.

~~Table~~On December 22, 2017, the President of ~~Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

the United States signed into law the Tax Cuts and Jobs Act (“Tax Reform”). Tax Reform amended the Internal Revenue Code to reduce tax rates and modify policies, credits and deductions as well as reduce the corporate federal tax rate from a maximum of 35% to a flat 21% rate with an effective date of January 1, 2018. As of December 31, 2017, the Company preliminarily revalued its net deferred tax asset based on Tax Reform. As of March 31, 2018, the Company has not adjusted this provisional amount and is continuing to gather additional information to complete its accounting for this item and expects to complete the accounting within the prescribed measurement period.

Cash and Cash Equivalents

Cash on hand and investments with original maturities of three months or less (that are readily convertible to cash) are considered to be cash equivalents. The Company has restricted cash held in money market accounts, which approximate fair value and therefore are a level 1 input in the fair value hierarchy.

~~Accounts Receivable—net~~

~~Accounts receivable primarily represent processing revenues earned but not collected. For a majority~~Following the adoption of ~~its customers,~~ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, the Company ~~has~~includes restricted cash in the ~~authority to debit~~cash and cash equivalents balance of the ~~client’s bank accounts through~~consolidated statements of cash flows. The reconciliation between the Federal Reserve’s Automated Clearing House; as such, collectibility is reasonably assured. The Company records a reserve for doubtful accounts when it is probable that the accounts receivable will not be collected. The Company reviews historical loss experienceconsolidated statement of financial position and the ~~financial position~~consolidated statement of ~~its customers when estimating the allowance. As of September 30, 2017 and December 31, 2016, the allowance for doubtful accounts was not material to the Company’s statements of financial position.~~cash flows is as follows (in millions):



	March 31, 2018		December 31, 2017
Cash and cash equivalents on consolidated statement of financial position	$	459.4	$	126.5
Proceeds from senior unsecured notes - restricted for closing of Worldpay acquisition			1,135.2
Other restricted cash (other current assets)	515.7		10.5
Merchant Float	1,894.3		—
Total cash and cash equivalents on consolidated statement of cash flows	$	2,869.4	$	1,272.2

~~Customer Incentives~~

Customer incentives represent signing bonuses paid to customers. Customer incentives are paid in connection with the acquisition or renewal of customer contracts, and are therefore deferred and amortized using the straight-line method based on the contractual agreement. Related amortization is recorded as contra-revenue.

Property, Equipment and Software—net

Property, equipment and software consists of the Company’s facilities, furniture and equipment, software, land and leasehold improvements. ~~These facilities,~~Facilities, furniture and equipment and software are depreciated on a straight-line basis over their respective useful lives, which are 15 to 40 years for the Company’s facilities and related improvements, 2 to 10 years for furniture and equipment and 3 to 8 years for ~~software and 3 to 10 years for leasehold~~software. Leasehold improvements orare depreciated on a straight-line basis over the lesser of the estimated useful life of the improvement which is 3 to 10 years or the term of the lease. Also included in property, equipment and software is work in progress consisting of costs associated with software developed for internal use which has not yet been placed in service. Accumulated depreciation as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 was ~~$379.0~~$373.2 million and ~~$309.7~~$372.1 million, respectively.

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Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company capitalizes certain costs related to computer software developed for internal use and amortizes such costs on a straight-line basis over an estimated useful life of 5 to 8 years. Research and development costs incurred prior to establishing technological feasibility are charged to operations as such costs are incurred. Once technological feasibility has been established, costs are capitalized until the software is placed in ~~service, at which time the Company begins to amortize such costs over their estimated useful life.~~service.

Goodwill and Intangible Assets

In accordance with ASC 350, Intangibles—Goodwill and Other, the Company tests goodwill for impairment for each reporting unit on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the goodwill within the reporting unit is less than its carrying value. The Company performed its most recent annual goodwill impairment test for all reporting units as of July 31, 2017 using market data and discounted cash flow analyses. Based on this analysis, it was determined that the fair value of all reporting units ~~were~~was substantially in excess of the carrying value. There have been no other events or changes in circumstances subsequent to the testing date that would indicate impairment of these reporting units as of ~~September 30, 2017.~~March 31, 2018.

Intangible assets consist of acquired customer relationships, trade names, customer portfolios and related assets that are amortized over their estimated useful lives. The Company reviews finite lived intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. As of ~~September 30, 2017,~~March 31, 2018, there have been no such events or circumstances that would indicate potential impairment of finite lived intangible assets.

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Merchant Float and Settlement Assets and Obligations

Merchant Float represents surplus cash balances the Company holds on behalf of its merchant customers when the incoming amount from the card networks precedes when the funding to customers falls due. Such funds are held in a fiduciary capacity, and are not available for the Company to use to fund its cash requirements.

Settlement assets and obligations result ~~from Financial Institution Services~~ when funds are transferred from or received by the Company prior to receiving or paying funds to a different entity. This timing difference results in a settlement asset or obligation. The amounts are generally collected or paid the following business day.

The settlement assets and obligations recorded by Merchant Services represent intermediary balances due to differences between the amount the Sponsoring Member receives from the card associations and the amount funded to the merchants. Such differences arise from timing differences, interchange expenses, merchant reserves and exception items. In addition, certain card associations limit the Company from accessing or controlling merchant settlement funds and, instead, require that these funds be controlled by the Sponsoring Member. The Company follows a net settlement process whereby, if the settlement received from the card associations precedes the funding obligation to the merchant, the Company temporarily records a corresponding liability. Conversely, if the funding obligation to the merchant precedes the settlement from the card associations, the amount of the net receivable position is recorded by the Company, or in some cases, the Sponsoring Member may cover the position with its own funds in which case a receivable position is not recorded by the Company.

Derivatives

The Company accounts for derivatives in accordance with ASC 815, Derivatives and Hedging. This guidance establishes accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the statement of financial position at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item will be recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative will be recorded in accumulated other comprehensive income (loss) (“AOCI”) and will be recognized in the statement of income when the hedged item affects earnings. Additionally, the effective portions of the Company’s net investment hedges, which act as economic hedges of the Company’s net investments in its foreign subsidiaries, are recorded in AOCI. The Company does not enter into derivative financial instruments for speculative purposes. See Note 5 - Derivatives and Hedging for further discussion.

~~Tax Receivable Agreements~~Foreign Currencies

~~As of September 30, 2017,~~The U.S. dollar is the ~~Company is party to several TRAs in which the Company agrees to make payments to various parties of 85%~~functional currency of the federal, state, local and foreign income tax benefits realized by the Company as a result of certain tax deductions. Payments under the TRAs will be based on the tax reporting positions of the Company and, generally, are only required to the extent the Company realizes cash savings as a result of the underlying tax attributes. Under the agreement between the Company and Fifth Third dated August 7, 2017, in certain specified circumstances, the Company may be required to make payments in excess of such cash savings. The cash savings realized by the Company are computed by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been no deductions related to the tax attributes discussed below. The Company will retain the benefit of the remaining 15% of the cash savings associated with the TRAs.Company’s U.S.-based businesses. The Company has ~~entered~~operations with a local currency as their functional currency, the most significant being in the United Kingdom. Foreign currency-denominated assets and liabilities for these units and other less significant operations are translated into U.S. dollars based on exchange rates prevailing at the ~~following three TRAs:~~

~~TRAs with investors prior~~end of the period, and revenues and expenses are translated at average exchange rates during each monthly period. The effects of foreign exchange gains and losses arising from the translation of assets and liabilities of those entities where the functional currency is not the U.S. dollar are included as a component of Other Comprehensive Income (Loss). Transaction gains and losses related to operating assets and liabilities are included in various line items in the Company’s ~~initial public offering (“IPO”)~~Consolidated Statements of Income and were immaterial for ~~its use~~the three months ended March 31, 2018. Non-operating transaction gains and losses derived from non-operating assets and liabilities are included in non-operating expense in the Company’s Consolidated Statements of ~~NPC Group, Inc. net operating losses (“NOLs”) and other tax attributes existing at the IPO date (the “NPC TRA”), all of which is currently held by Fifth Third.~~Income.

A TRA with Fifth Third (the “Fifth Third TRA”) in which the Company realizes tax deductions as a result of the increases in tax basis from the purchase of Vantiv Holding units or from the exchange of Vantiv Holding units for cash or shares of Class A common stock, as well as the tax benefits attributable to payments made under such TRAs.

A TRA with Mercury shareholders (the “Mercury TRA”) as part of the acquisition of Mercury as a result of the increase in tax basis of the assets of Mercury resulting from the acquisition and the use of the net operating losses and other tax attributes of Mercury that were acquired as part of the acquisition.

Obligations recorded pursuant to the TRAs are based on estimates of future taxable income and future tax rates. On an annual basis, the Company evaluates the assumptions underlying the TRA obligations.

In connection with the Fifth Third Exchange and share purchase as discussed in Note 6 - Controlling and Non-controlling Interests, the Company recorded a liability of approximately $647.5 million during the quarter ending September 30, 2017 under the tax receivable agreements the Company entered into with Fifth Third Bank at the time of its

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~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~initial public offering. This liability is based on the closing share price of the Company’s Class A common stock on August 4, 2017.~~ Related Party Presentation

~~In 2016, the Company entered into~~As a purchase addendum in connection with the Company’s TRA with Fifth Third (the “Fifth Third TRA Addendum”) to terminate and settle a portion of the Company’s obligations owed to Fifth Third under the Fifth Third TRA and the NPC TRA. Under the terms of the Fifth Third TRA Addendum, the Company paid approximately $116.3 million to Fifth Third to settle approximately $330.7 million of obligations under the Fifth Third TRA, the difference of which was recorded as an addition to paid-in capital, net of deferred taxes.

In addition to the 2016 Fifth Third TRA settlement discussed above, as of September 30, 2017, the Fifth Third TRA Addendum provides that the Company may be obligated to pay up to a total of approximately $123.9 million to Fifth Third to terminate and settle certain remaining obligations under the Fifth Third TRA and the NPC TRA, totaling an estimated $275.8 million, the difference of which will be recorded as an addition to paid-in capital upon the exercise of the Call Options or Put Options discussed below.

In March, June and September 2017, the Company made payments of $15.1 million, $15.6 million, and $16.1 million, respectively, pursuant to the Fifth Third TRA Holders under the terms of the Fifth Third TRA Addendum. These payments resulted in a net gain recorded in equity of approximately $45.3 million after taxes.

As of September 30, 2017, the following are the remaining terms of the Fifth Third TRA Addendum. Beginning December 1, 2017, March 1, 2018, June 1, 2018, September 1, 2018 and December 1, 2018, and ending December 10, 2017, March 10, 2018, June 10, 2018, September 10, 2018 and December 10, 2018, respectively, the Company is granted call options (collectively, the “Call Options”) pursuant to which certain additional obligationsresult of the Company ~~under~~closing the Legacy Worldpay acquisition on January 16, 2018, Fifth Third’s ownership percentage in Vantiv Holding decreased below 5% and Fifth Third ~~TRA and~~no longer has board representation, therefore the ~~NPC TRA would be terminated and settled in consideration~~Company no longer considers Fifth Third a related party. Related party revenue for ~~cash payments~~the period of ~~$16.6 million, $25.6 million, $26.4 million, $27.2 million and $28.1 million, respectively.~~January 1, 2018 through January 15, 2018 was not material.

~~Under the remaining terms of the~~The Fifth Third ~~TRA Addendum, in~~related party activity within the ~~unlikely event~~Consolidated Statements of Income for the ~~Company does not exercise the relevant Call Option,~~three months ended March 31, 2017 is as follows (in millions):



Consolidated Statement of Income Location	March 31, 2017
Revenue	$	16.2

The Fifth Third ~~is granted put options beginning December 20, 2017, March 20, 2018, June 20, 2018, September 20, 2018 and December 20, 2018, and~~related party positions within the Consolidated Statements of Financial Position for the period ending December 31, 2017 March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively (collectively, the “Put Options”), pursuant to which certain additional obligations of the Company would be terminated and settled in consideration for cash payments with similar amounts to the Call Options.

~~The full carrying amount of the Fifth Third callable/puttable TRA obligations for the options exercisable within 12 months of the balance sheet date have been classified~~are as ~~current obligations in the accompanying balance sheet ($216.8 million.)~~

~~Since Fifth Third is a significant stockholder, a special committee of the Company’s board of directors comprised of independent, disinterested directors authorized the TRA Addendum.~~

During 2015, the Company entered into a Repurchase Addendum to the Mercury Tax Receivable Agreement (the “Mercury TRA Addendum”) with each of the pre-acquisition owners of Mercury ("Mercury TRA Holders"). The Mercury TRA Addendum contains the following provisions to acquire the remaining Mercury TRA:

As of September 30, 2017, the following are the remaining terms under the Mercury TRA Addendum. Beginning December 1st of each of 2017 and 2018, and ending June 30th of 2018 and 2019, respectively, the Company is granted call options (collectively, the "Call Options") pursuant to which certain additional obligations of the Company under the Mercury TRA would be terminated in consideration for cash payments of $38.0 million and $43.0 million, respectively.

In June 2017 and 2016, the Company exercised the December 2016 and December 2015 Call Options under the Mercury TRA Addendum and made the related $38.1 million and $41.4 million payments to the Mercury TRA Holders.

In the unlikely event the Company does not exercise the relevant Call Option, the Mercury TRA Holders are granted put options beginning July 10th and ending July 25th of each of 2018 and 2019, respectively (collectively, the "Put Options"), pursuant to which certain additional obligations of the Company would be terminated in consideration for cash payments with similar amounts to the Call Options.

follows (in millions):

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Except to the extent our obligations under the Mercury TRA, the Fifth Third TRA and the NPC TRA have been terminated and settled in full in accordance with the terms of the Mercury TRA and Fifth Third TRA Addendums, the Mercury TRA, Fifth Third TRA and the NPC TRA will each remain in effect, and the parties thereto will continue to have all rights and obligations thereunder.

All TRA obligations are recorded based on the full and undiscounted amount of the expected future payments, except for the Mercury TRA which represents contingent consideration relating to an acquired business, and is recorded at fair value for financial reporting purposes (see Note 8 - Fair Value Measurements).

The timing and/or amount of aggregate payments due under the TRAs outside of the call/put structures may vary based on a number of factors, including the amount and timing of the taxable income the Company generates in the future and the tax rate then applicable, the use of loss carryovers and amortizable basis. Payments under the TRAs, if necessary, are required to be made no later than January 5th of the second year immediately following the taxable year in which the obligation occurred. The Company made payments under the TRA obligations of approximately $55.7 million and $53.5 million in January 2017 and January 2016, respectively. Unless settled under the terms of the repurchase addenda, the term of the TRAs will continue until all the underlying tax benefits have been utilized or expired.



Consolidated Statement of Financial Position Location	December 31, 2017
Assets
Accounts receivable—net	$	0.7
Liabilities
Accounts payable and accrued expenses	$	9.0
Current portion of notes payable	5.4
Current portion of tax receivable agreement obligations	190.2
Notes payable	158.4
Tax receivable agreement obligations	489.8

New Accounting Pronouncements

In August 2017, the FASB issued ~~Accounting Standards Update (“ASU”)~~ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,, which amends and simplifies existing guidance to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This ASU is effective for the Company in the first quarter of fiscal 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. The update clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The update requires retrospective application to all periods presented but may be applied prospectively if retrospective application is impracticable. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU amends the existing guidance by recognizing all leases, including operating leases, with a term longer than 12 months on the balance sheet and disclosing key information about the lease arrangements. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. ~~The~~As written, the update requires modified retrospective transition, which requires application of the ASU at the beginning of the earliest comparative period presented in the year of adoption. The FASB is currently considering an option that entities may elect not to restate their comparative periods in transition. This option would allow an entity to recognize the effects of applying the standard as a cumulative-effect adjustment to retained earnings as of the adoption date and not restate prior periods. The Company ~~is forming~~has formed a project team to review contracts to determine which qualify as a lease and then evaluate the impact of the adoption of this principle on the Company’s consolidated financial statements. The Company anticipates adopting this ASU on January 1, 2019.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue From Contracts With Customers. The ASU supersedes the revenue recognition requirements in ASC 605,~~ ~~Revenue Recognition~~. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendment allows companies to use either a full retrospective or a modified retrospective approach to adopt this ASU. The Company has formed a project team and is currently assessing the impact of the adoption of this principle on the Company’s consolidated financial statements. Based on the Company’s analysis to date, the Company does not anticipate material changes to the amount and timing of its revenue recognition. The Company expects the primary impact to result from the requirement to capitalize and amortize costs to obtain and fulfill a contract, which are currently expensed as incurred. This analysis is subject to change as the Company continues to refine its assessment of the standard. The Company anticipates adopting this ASU on January 1, 2018 using the modified retrospective approach.

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~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. BUSINESS COMBINATIONS

Acquisition of Legacy Worldpay

On January 16, 2018, the Company completed the acquisition of Legacy Worldpay by acquiring 100% of the issued and outstanding shares (the “acquisition”). The approximately $11.9 billion purchase price consisted of Legacy Worldpay shareholders receiving a $1.5 billion cash payment and 134.4 million shares of the Company’s Class A common stock. The acquisition-date fair value of the 134.4 million shares of the Company’s Class A common stock issued was $10.4 billion and was determined based on the share price of $77.60 per share, the opening price of the Company’s Class A common stock on the New York Stock Exchange on January 16, 2018 since the acquisition closed before the market opened on January 16, 2018.

The acquisition creates a leading global integrated payment technology and international eCommerce payment provider and will enable the Company to take advantage of strategic and innovative opportunities to provide differentiated and diversified solutions to address clients’ needs.

The acquisition was accounted for as a business combination under ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is deductible for tax purposes. Goodwill, assigned to Technology Solutions, Merchant and Issuer Solutions, consists primarily of the acquired workforce and growth opportunities, none of which qualify as an intangible asset.

The preliminary purchase price allocation is as follows (in millions):



Cash acquired	$	584.2
Current assets ⁽¹⁾	4,138.9
Property, equipment and software	418.4
Intangible assets	3,154.0
Goodwill	11,015.4
Other non-current assets	138.6
Current liabilities ⁽²⁾	(4,522.6		)
Long-term debt ⁽³⁾	(2,300.8		)
Deferred tax liability	(656.2		)
Non-current liabilities	(21.9		)
Total purchase price	$	11,948.0


⁽¹⁾	Includes $1,947.6 million of merchant float and $511.1 million of other restricted cash.


⁽²⁾	Includes $118.6 million of dividend payable to reflect the special dividend granted to the shareholders of Legacy Worldpay.


⁽³⁾	Includes $1,649.9 million of debt which was paid off subsequent to the completion of acquisition.

The above estimated fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Intangible assets primarily consist of customer relationship assets, software and a trade name with weighted average estimated useful lives of 7 years, 6 years and 10 years, respectively.

From the acquisition date of January 16, 2018 through March 31, 2018, revenue and net loss included in the accompanying statements of income (loss) for the three months ended March 31, 2018 attributable to Legacy Worldpay was approximately $317.0 million and $2.8 million, respectively.

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Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the three months ended March 31, 2018, the Company incurred transaction expenses of approximately $120.8 million in conjunction with the acquisition of Legacy Worldpay. All transaction costs incurred for the three months ended March 31, 2018 are included in general and administrative expenses on the accompanying consolidated statement of income.

Under the terms of the Legacy Worldpay transaction agreement, the Company replaced equity awards held by certain employees of Legacy Worldpay. The weighted average fair value of the replacement awards was approximately $82.4 million. The portion of the fair value of the replacement awards related to the services provided prior to the acquisition of approximately $44.2 million was part of the consideration transferred to acquire Legacy Worldpay. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period.

Unaudited Pro Forma Results Giving Effect to the Legacy Worldpay Acquisition

The following unaudited pro forma combined financial information presents the Company’s results of operations for the three months ended March 31, 2018 and 2017, as if the acquisition had occurred on January 1, 2017 (in millions, except per share amounts).



	Three Months Ended March 31,
	2018		2017
Total revenue⁽¹⁾	$	914.5	$	1,416.9
Net income (loss) attributable to Worldpay, Inc.	33.6		(181.9		)
Net income (loss) per share attributable to Worldpay, Inc. Class A common stock:
Basic	$	0.11	$	(0.62	)
Diluted	$	0.11	$	(0.62	)
Shares used in computing net income (loss) per share of Class A common stock:
Basic	296,498,480		295,276,177
Diluted	298,027,972		295,276,177

⁽¹⁾Revenue for the three months ended March 31, 2017 presented in the table above is prior to the Company’s adoption of ASC 606, which presents network fees and other costs net within revenue.

The unaudited pro forma results include certain pro forma adjustments that were directly attributable to the acquisition as follows:

additional amortization expense that would have been recognized relating to the acquired intangible assets; and

adjustment to interest expense to reflect the additional borrowings of the Company in conjunction with the acquisition and removal of Legacy Worldpay debt.

a reduction in expenses for the three months ended March 31, 2018 and a corresponding increase in the three months ended March 31, 2017 for acquisition-related transaction costs and debt refinancing costs incurred by the Company.

Acquisition of Paymetric Holdings, Inc.

On May 25, 2017, the Company completed the acquisition of Paymetric Holdings, Inc. (“Paymetric”) by acquiring 100% of the issued and outstanding shares. Paymetric automates business-to-business payment workflows within enterprise systems and tokenizes payments data within these systems in order to enable secure storage of customer information and history. This acquisition helps to further accelerate the Company’s growth.

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Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The acquisition was accounted for as a business combination under ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, of which approximately $7.8 million is deductible for tax purposes. Goodwill, assigned to Merchant ~~Services,~~Solutions, consists primarily of the acquired workforce and growth opportunities, none of which qualify as an intangible asset. The preliminary purchase price allocation is as follows (in ~~thousands)~~millions):


Cash acquired	$	11,864		$	11.9
Current assets	7,243			7.2
Property, equipment and software, net	92,121
Property, equipment and software				92.1
Intangible assets	47,800			47.8
Goodwill	435,032			434.2
Other assets	67			0.1
Current liabilities	(17,702		)	(18.3		)
Deferred tax liability	(24,492		)	(23.1		)
Non-current liabilities	(8,535		)	(8.5		)
Total purchase price	$	543,398		$	543.4

matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

~~Intangible assets primarily consist of customer relationship assets with a weighted average estimated useful life of 10 years.~~

The Company incurred transaction expenses of approximately $7.1 million during the nine months ended September 30, 2017 in conjunction with the acquisition of Paymetric, which are included in general and administrative expenses on the accompanying consolidated statement of income. From the acquisition date of May 25, 2017 through September 30, 2017, revenue and net income included in the accompanying statement of income for the three months and nine months ended September 30, 2017 attributable to Paymetric is not material.

Under the terms of the Paymetric transaction agreement, the Company replaced employee stock options held by certain employees of Paymetric. The number of replacement awards was based on options outstanding at the acquisition date. The weighted average fair value of the replacement awards was $8.0 million and was calculated on the acquisition date using the Black-Scholes option pricing model. The portion of the fair value of the replacement awards related to the services provided prior to the acquisition of $5.9 million was part of the consideration transferred to acquire Paymetric. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period.

The pro forma results of the Company reflecting the acquisition of Paymetric were not material to ~~our~~the Company’s financial results and therefore have not been presented.

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~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~Acquisition of Moneris Solutions, Inc.~~

On December 21, 2016, the Company completed the acquisition of Moneris Solutions, Inc. (“Moneris USA”) by acquiring 100% of the issued and outstanding shares. Moneris USA is a provider of payment processing solutions offering credit, debit, wireless and online payment services for merchants in virtually every industry segment. This acquisition helps to further accelerate the Company’s growth.

The acquisition was accounted for as a business combination under ASC 805. The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, of which approximately $14.0 million is deductible for tax purposes. Goodwill, assigned to Merchant Services, consists primarily of the acquired workforce and growth opportunities, none of which qualify as an intangible asset. The preliminary purchase price allocation is as follows (in thousands):

Cash acquired $ 22,851
Current assets 44,047
Property and equipment 22
Intangible assets 72,000
Goodwill 378,747
Current liabilities (65,966 )
Deferred tax liability (19,192 )
Non-current liabilities (2,881 )
Total purchase price $ 429,628

~~matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.~~

~~Intangible assets consist of customer relationship assets of $72.0 million with a weighted average estimated useful life of 5 years.~~

~~The pro forma results of the Company reflecting the acquisition of Moneris USA were not material to our financial results and therefore have not been presented.~~

3. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill ~~by business segment,~~for the three months ended March 31, 2018 are as follows (in ~~thousands)~~millions):



	Consolidated Total
Balance as of December 31, 2017	$	4,173.0
Goodwill attributable to acquisition of Paymetric Solutions, Inc. ⁽¹⁾	0.2
Goodwill attributable to acquisition of Legacy Worldpay ⁽²⁾	11,015.7
Balance as of March 31, 2018	$	15,188.9


⁽¹⁾	Amount represents adjustments to goodwill associated with the acquisition of Paymetric as a result an update to the purchase price allocation, primarily related to revisions of certain estimates from the preliminary amount reported as of December 31, 2017.


⁽²⁾	Amount of goodwill attributable to the acquisition, including its allocation to reportable segments, is preliminary and subject to change.

As discussed in Note 11 - Segment Information, during the first quarter of 2018, the Company reorganized its reportable segments. In connection with this change, the Company is in the process of reallocating goodwill to the new reporting units using a relative fair value approach.

As of March 31, 2018 and December 31, 2017, the Company’s finite lived intangible assets consisted of the following (in millions):



	March 31, 2018		December 31, 2017
Customer relationship intangible assets	$	4,644.4	$	1,712.7
Customer portfolios and related assets	290.2		249.8
Trade name	284.1		—
Patents	1.7		1.6
	5,220.4		1,964.1
Less accumulated amortization on:
Customer relationship intangible assets	1,287.3		1,156.4
Customer portfolios and related assets	142.0		129.2
Trade name	7.2		—
	1,436.5		1,285.6
Intangible assets, net	$	3,783.9	$	678.5

Customer portfolios and related assets acquired during the three months ended March 31, 2018 have weighted-average amortization periods of 4.6 years. Amortization expense on intangible assets for the three months ended March 31, 2018 and 2017 was $149.8 million and $55.2 million, respectively.

The estimated amortization expense of intangible assets for the next five years is as follows (in millions):



Nine months ended December 31, 2018	$	501.0
2019	650.7
2020	567.2
2021	515.1
2022	492.3
2023	476.5

Merchant Services Financial Institution Services Total
Balance as of December 31, 2016 $ 3,163,739
$ 574,850
$ 3,738,589
Goodwill attributable to acquisition of Moneris USA ⁽¹⁾
6,686
—
6,686
Goodwill attributable to acquisition of Paymetric 435,032
—
435,032
Balance as of September 30, 2017 $ 3,605,457
$ 574,850
$ 4,180,307

⁽¹⁾Amount represents adjustments to goodwill associated with the acquisition of Moneris USA as a result of an update to the purchase price allocation, primarily related to revisions of certain estimates from the preliminary amounts reported as of December 31, 2016.

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~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~As of September 30, 2017 and December 31, 2016, the Company’s finite lived intangible assets consisted of the following (in thousands):~~

September 30, 2017 December 31, 2016
Customer relationship intangible assets $ 1,712,681
$ 1,671,581
Customer portfolios and related assets 247,935
178,480
Patents 1,217
955
1,961,833
1,851,016
Less accumulated amortization on:
Customer relationship intangible assets 1,112,851
980,595
Customer portfolios and related assets 116,551
82,601
1,229,402
1,063,196
Intangible assets, net $ 732,431
$ 787,820

Customer portfolios and related assets acquired during the nine months ended September 30, 2017 have weighted-average amortization periods of 4.8 years. Amortization expense on intangible assets for the three months ended September 30, 2017 and 2016 was $55.2 million and $49.7 million, respectively. Amortization expense on intangible assets for the nine months ended September 30, 2017 and 2016 was $166.5 million and $149.0 million, respectively.

~~The estimated amortization expense of intangible assets for the remainder of 2017 and the next five years is as follows (in thousands):~~

Three months ending December 31, 2017 $ 55,393
2018 208,917
2019 192,553
2020 112,134
2021 62,906
2022 41,392

4. LONG-TERM DEBT

As of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the Company’s long-term debt consisted of the following (in ~~thousands)~~millions):

September 30,
2017 December 31,
2016
Term A loan, maturing in October 2021⁽¹⁾
$ 2,376,773
$ 2,469,375
Term B loan, maturing in October 2023⁽²⁾
759,263
765,000
Incremental Term B loan, maturing in August 2024⁽³⁾
1,270,000
—
Leasehold mortgage, expiring on August 10, 2021⁽⁴⁾
10,131
10,131
Revolving credit facility, expiring in October 2021⁽⁵⁾
359,000
—
Less: Current portion of note payable and current portion of note payable to related party (140,654 ) (131,119 )
Less: Original issue discount (3,197 ) (3,631 )
Less: Debt issuance costs (39,697 ) (20,153 )
Note payable and note payable to related party $ 4,591,619
$ 3,089,603



	March 31, 2018			December 31, 2017
Term A loan, maturing in January 2023⁽¹⁾	$	3,771.7		$	2,166.7
Term A loan, maturing in October 2021⁽²⁾	176.8			179.2
Term B loan, maturing in October 2023⁽³⁾	755.4			757.4
Term B loan, maturing in August 2024⁽⁴⁾	1,805.0			1,270.0
Senior Unsecured Dollar Notes, maturing in November 2025⁽⁵⁾	500.0			500.0
Senior Unsecured Sterling Notes, maturing in November 2025⁽⁶⁾	660.2			635.2
Senior Unsecured Euro Note, expiring in November 2022⁽⁷⁾	677.7			—
Leasehold mortgage, expiring on August 10, 2021⁽⁸⁾	10.1			10.1
Revolving credit facility, expiring in January 2023	—			225.0
Less: Current portion of notes payable	(223.7		)	(107.9		)
Less: Original issue discount	(9.5		)	(3.0		)
Less: Debt issuance costs	(72.7		)	(46.3		)
Notes payable	$	8,051.0		$	5,586.4

⁽¹⁾

Interest at a variable base rate (LIBOR) plus a spread rate ~~(175~~(200 basis points) (total rate of ~~2.99%~~3.78% at ~~September 30, 2017)~~March 31, 2018) and amortizing on a basis of 1.25% per quarter during each of the first twelve quarters (June 2018 through March 2021), 1.875% per quarter during the next four quarters (June 2021 through March 2022) and 2.50% per quarter during the next three quarters (June 2022 through December 2022) with a balloon payment due at maturity.

⁽²⁾

Interest at a variable base rate (LIBOR) plus a spread rate (200 basis points) (total rate of 3.78% at March 31, 2018) and amortizing on a basis of 1.32% per quarter during each of the first eight quarters (March ~~2017~~2018 through December 2019), ~~1.875%~~1.97% per quarter during the next four quarters (March 2020 through December 2020) and ~~2.50%~~2.63% per quarter during the next three quarters (March 2021 through September 2021) with a balloon payment due at maturity.


⁽²⁾⁽³⁾	Interest at a variable base rate (LIBOR) with a floor of 75 basis points plus a spread rate (250 basis points) (total rate of 3.74% at September 30, 2017) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity.

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~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~


⁽³⁾	~~Interest~~payable at a variable base rate (LIBOR) plus a spread rate ~~(225 base~~200 basis points) (total rate of ~~3.48%~~3.78% at ~~September 30, 2017)~~March 31, 2018) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity.


⁽⁴⁾	Interest payable ~~monthly~~ at a ~~fixed~~variable base rate (LIBOR) plus a spread rate (200 basis points) (total rate of ~~6.22%.~~3.78% at March 31, 2018) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity.


⁽⁵⁾	$~~100~~500 million ~~revolving credit facility borrowing~~principal senior unsecured notes with interest payable semi-annually at a ~~variable base rate (LIBOR) plus a spread rate (175 basis points) (total~~fixed rate of ~~2.95% at September 30, 2017); $259~~4.375% and principal due upon maturity.

⁽⁶⁾

£470 million ~~revolving credit facility borrowing~~principal senior unsecured notes with interest payable semi-annually at a ~~variable base rate (Prime) with a spread rate (75 basis points) (total~~fixed rate of ~~5.0%~~3.875% and principal due upon maturity. The spot rate of 1.4048 U.S. dollars per Pound Sterling at ~~September 30, 2017)~~March 31, 2018 was used to translate the Note to U.S. dollars.


⁽⁷⁾	€500 million principal senior unsecured note with interest payable semi-annually at a fixed rate of 3.75% and principal due upon maturity. The spot rate of 1.2324 U.S. dollars per Euro at March 31, 2018 was used to translate the Note to U.S. dollars. Includes remaining unamortized fair value premium of $61.6 million at March 31, 2018.


⁽⁸⁾	Interest payable monthly at a fixed rate of 6.22%.

2018 Debt Activity

InThe closing of the Legacy Worldpay acquisition on January 16, 2018 resulted in the effectiveness of several debt amendments to the Existing Loan Agreement entered into prior to the closing. The resulting incremental funding and availability was as follows:

$1,605 million of additional Term A loans maturing in January 2023

$535 million of additional Term B loans maturing in August 2024

~~October, 2016, Vantiv, LLC completed~~$600 million of additional revolving credit commitments, resulting in total available revolving credit of $1,250 million

$594.5 million backstop (no outstanding balance as of March 31, 2018 and backstop expires on June 15, 2018)

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As a result of the closing of the Legacy Worldpay acquisition, the Company expensed approximately $56.6 million primarily consisting of the write-offs of unamortized deferred financing fees and original issue discount (“OID”) and fees related to previously committed unused backstop facilities associated with the component of the debt activity accounted for as a debt extinguishment and certain third party costs incurred in connection with the debt activity. Amounts expensed in connection with the refinancing ~~by entering into~~are recorded as a ~~second amended and restated loan agreement (“Second Amended Loan Agreement”). The Second Amended Loan Agreement provided for senior secured credit facilities comprised~~component of an approximately $2.5 billion term A loan, a $765.0 million term B loan and a $650 million revolving credit facility. The maturity date and debt service requirements relating to the term A and term B loans are listednon-operating expenses in the ~~table above. The revolving credit facility matures in October 2021 and includes a $100 million swing line facility and a $40 million letter~~accompanying consolidated statement of ~~credit facility. The commitment fee rate~~income for the ~~unused portion~~three months ended March 31, 2018.

Additionally, as a result of new debt being issued in connection with the ~~revolving credit facility is 0.250% (or 0.375% if~~Company’s acquisition of Legacy Worldpay, the ~~total leverage ratio is greater than 3.75 to 1.00) per year.~~Company capitalized approximately $20.9 million of deferred financing costs for the three months ended March 31, 2018.

2017 Debt Activity

On August 7, 2017, the Company funded the Fifth Third share purchase ~~discussed in Note 6 - Controlling and Non-controlling Interests,~~ by amending the Second Amended Loan Agreement to permit Vantiv ~~LLC~~Holding to obtain approximately ~~$1.27 billion~~$1,270.0 million of additional seven-year term B ~~loans (the Second Amended Loan Agreement, as so amended, the “Existing Loan Agreement”).~~loans. As a result of this borrowing, the Company capitalized approximately $23.1 million of deferred financing fees during the ~~three months~~year ended ~~September 30,~~December 31, 2017.

~~There were outstanding borrowings~~In connection with the Legacy Worldpay acquisition, on December 7, 2017, the Company priced an offering of ~~$359.0~~$500 million onaggregate principal amount of 4.375% senior unsecured notes due 2025 and £470 million aggregate principal amount of 3.875% senior unsecured notes due 2025, listed in the ~~revolving credit facility at September 30, 2017. There were no outstanding borrowings on the revolving credit facility~~table above. The spot rate of 1.3515 U.S. dollars per Pound Sterling at December 31, ~~2016.~~

As2017 was used to translate the Senior Unsecured Sterling Notes to U.S. dollars. The proceeds received in the connection with the senior unsecured notes offering were held in escrow and restricted as of ~~September 30, 2017 and~~ December 31, ~~2016, Fifth Third held $177.7 million and $151.1 million, respectively,~~2017 pending the consummation of the ~~term A loans and the revolving credit facility,~~acquisition, which ~~are presented as note payable to related party~~subsequently took place on ~~the consolidated statements of financial position.~~ January 16, 2018.

Guarantees and Security

The Company’s debt obligations at ~~September 30, 2017~~March 31, 2018 are unconditional and, with the exception of the Euro Note, are guaranteed by Vantiv Holding and certain of Vantiv Holding’s existing and subsequently acquired or organized domestic subsidiaries. The refinanced debt and related guarantees are secured on a first-priority basis (subject to liens permitted under the ~~Second~~Third Amended and Restated Loan Agreement) by a lien on substantially all the tangible and intangible assets of the Company and the aforementioned subsidiaries, including substantially all the capital stock (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries and domestic holding companies of foreign subsidiaries) and personal property of Vantiv Holding and any obligors under the Third Amended and Restated Loan Agreement as well as any real property in excess of $25 million in the aggregate held by Vantiv Holding or any obligors (other than Vantiv Holding), subject to certain exceptions. The Euro Note is guaranteed by Worldpay Group Limited.

Covenants

There are certain financial and non-financial covenants contained in the Existing Loan Agreement for the refinanced debt, which are tested on a quarterly basis. The financial covenants require maintenance of certain leverage and interest coverage ratios. At ~~September 30, 2017,~~March 31, 2018, the Company was in compliance with these financial covenants.

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

5. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company enters into derivative financial instruments to manage differences in the amount, timing and duration of its known or expected cash payments related to its variable-rate ~~debt and the pending Worldpay transaction (see Note 12 - Pending Worldpay Transaction).~~debt. As of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the Company’s interest rate derivative instruments ~~consisted~~for this purpose consist of interest rate swaps and interest rate cap agreements. ~~Additionally, during the three months ended September 30, 2017, the Company entered into a deal contingent forward, which is a foreign currency forward contract.~~ The interest rate swaps hedge the variable rate debt by effectively converting floating-rate payments to fixed-rate payments. The interest rate cap agreements cap a portion of the Company’s variable rate debt if interest rates rise above the strike rate on the contract. ~~The foreign currency forward serves as an economic hedge of the pound sterling denominated portion of the purchase price relating to the Worldpay acquisition.~~ As of ~~September 30, 2017,~~March 31, 2018 the interest rate cap agreements had a fair value of ~~$20.8~~$27.8 million, classified within other current and non-current assets on the Company’s consolidated statements of financial position. The interest rate swaps and caps (collectively “interest rate contracts”) are designated as cash flow hedges for accounting purposes. As

Table of ~~September 30,~~Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Additionally, during 2017 the Company entered into a deal contingent foreign currency forward ~~had a fair value~~contract. The foreign currency forward served as an economic hedge of ~~approximately $24.4 million, classified within other current assets on~~ the ~~Company’s consolidated statements~~pound sterling denominated portion of ~~financial position.~~the purchase price relating to the Legacy Worldpay acquisition. The foreign currency forward has not been designated as a hedge for accounting ~~purposes.~~purposes and, discussed below, was settled in connection with the closing of the Legacy Worldpay acquisition.

Accounting for Derivative Instruments

The Company recognizes derivatives in other current and non-current assets or liabilities in the accompanying consolidated statements of financial position at their fair values. Refer to Note 8 - Fair Value Measurements for a detailed discussion of the fair value of its derivatives. The Company designates its interest rate contracts as cash flow hedges of forecasted interest rate payments related to its variable-rate debt.

The Company formally documents all relationships between hedging instruments and underlying hedged transactions, as well as its risk management objective and strategy for undertaking hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. A formal assessment of hedge effectiveness is performed both at inception of the hedge and on an ongoing basis to determine whether the hedge is highly effective in offsetting changes in cash flows of the underlying hedged item. Hedge effectiveness is assessed using a regression analysis. If it is determined that a derivative ceases to be highly effective during the term of the hedge, the Company will discontinue hedge accounting for such derivative.

The Company’s interest rate contracts qualify for hedge accounting under ASC 815, Derivatives and Hedging. Therefore, the effective portion of changes in fair value were recorded in AOCI and will be reclassified into earnings in the same period during which the hedged transactions affect earnings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses a combination of interest rate swaps and caps as part of its interest rate risk management strategy. As of ~~September 30, 2017,~~March 31, 2018 the Company had a total of 42 outstanding interest rate swaps covering an exposure period from January ~~2017~~2018 through January 2019 with a combined notional balance of ~~$500.0~~$500 million. Fifth Third is the counterparty to 21 of the 42 outstanding interest rate swaps with a ~~$250 million notional balance for January 2017 to January 2018 and another~~ $250 million notional balance for January 2018 to January 2019. Additionally, as of ~~September 30, 2017,~~March 31, 2018, the Company had a total of 6 interest rate cap agreements with a combined notional balance of ~~$1.0~~$1 billion, cap strike rate of 0.75%, covering an exposure period from January 2017 to January 2020.

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

The Company does not offset derivative positions in the accompanying consolidated financial statements. The table below presents the fair value of the Company’s derivative financial instruments designated as cash flow hedges included within the accompanying consolidated statements of financial position (in ~~thousands)~~millions):


	Consolidated Statement of Financial Position Location	September 30, 2017		December 31, 2016		Consolidated Statement of Financial Position Location	March 31, 2018		December 31, 2017
Interest rate contracts	Other current assets	$	6,829	$	2,144	Other current assets	$	13.1	$	9.7
Interest rate contracts	Other long-term assets	13,934		21,085		Other long-term assets	14.7		14.7
Interest rate contracts	Other current liabilities	5,006		9,551		Other current liabilities	2.3		4.2
Interest rate contracts	Other long-term liabilities	1,479		5,507		Other long-term liabilities	—		0.2

Any ineffectiveness associated with such derivative instruments will be recorded immediately as interest expense in the accompanying consolidated statements of income. As of ~~September 30, 2017,~~March 31, 2018, the Company estimates that ~~$4.5~~$3.6 million will be reclassified from accumulated other comprehensive income as ~~an increase~~a decrease to interest expense during the next 12 months.

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The table below presents the pre-tax effect of the Company’s interest rate contracts on the accompanying consolidated statements of comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ (in ~~thousands)~~millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Derivatives in cash flow hedging relationships:
Amount of gain (loss) recognized in OCI (effective portion) ⁽¹⁾
$ 306
$ 1,247
$ 55
$ (22,964 )
Amount of (loss) reclassified from accumulated OCI into earnings (effective portion) (1,057 ) (3,923 ) (8,377 ) (9,010 )



	Three Months Ended March 31,
	2018			2017
Derivatives in cash flow hedging relationships:
Amount of gain recognized in OCI (effective portion) ⁽¹⁾	$	6.3		$	2.7
Amount of loss reclassified from accumulated OCI into earnings (effective portion)	(0.6		)	(4.2		)
Amount of gain recognized in earnings ⁽²⁾	0.1			—


⁽¹⁾	“OCI” represents other comprehensive income.


⁽²⁾	For the three months ended March 31, 2018, amount represents hedge ineffectiveness.

Credit Risk Related Contingent Features

As of ~~September 30, 2017,~~March 31, 2018, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$6.8~~$2.5 million.

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. As of ~~September 30, 2017,~~March 31, 2018, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions at ~~September 30, 2017,~~March 31, 2018, it could have been required to settle its obligations under the agreements at their termination value of ~~$6.8~~$2.5 million.

Deal Contingent Forward

On August 9, 2017, the Company entered into a ~~1.150 billion Pounds Sterling~~£1,150 million notional deal contingent forward to economically hedge a portion of the purchase price relating to the ~~pending~~Legacy Worldpay ~~acquisition (see Note 12 - Pending Worldpay Transaction).~~acquisition. The deal contingent forward ~~runs through~~settled upon the closing of the Legacy Worldpay acquisition in January 2018 and the Company recognized a related realized gain of approximately $69.0 million, of which approximately $35.9 million of the gain relates to the three months ended March 31, 2018, ~~and the change in fair value~~which is ~~reported~~recorded in non-operating ~~income (expense)~~expense.

Net Investment Hedges

To help protect the net investment in foreign operations from adverse changes in foreign currency exchange rates, the Company uses non-derivative financial instruments, such as its foreign currency-denominated debt, as economic hedges of its net investments in its Euro and GBP denominated subsidiaries (See Note 4 - Long Term Debt for more discussion on the Company’s ~~Unaudited Consolidated Statements~~foreign currency-denominated debt). The Company designated a portion of ~~Income, which is an unrealized gain~~its Euro denominated debt and 100% of ~~approximately $24.4 million for~~its GBP denominated debt as net investment hedges.

The effective portions of the net investment hedges are recorded in other comprehensive income (loss). During the three months ~~and nine~~ended March 31, 2018, the Company recognized in other comprehensive income pre-tax losses of $7.5 million relating to these net investment hedges. No ineffectiveness was recorded to earnings on the net investment hedges for three months ended ~~September 30, 2017.~~March 31, 2018.

6. CONTROLLING AND NON-CONTROLLING INTERESTS

The Company has various non-controlling interests that are accounted for in accordance with ASC 810, Consolidation (“ASC 810”). As discussed in Note 1 - Basis of Presentation and Summary of Significant Accounting Policies,~~, Vantiv,~~ Worldpay, Inc. owns a controlling interest in Vantiv Holding, and therefore consolidates the financial results of Vantiv Holding and its subsidiaries and records non-controlling interest for the economic interests in Vantiv Holding held by Fifth Third. The Exchange Agreement entered into prior to the IPO provides for a 1 to 1 ratio between the units of Vantiv Holding and the common stock of ~~Vantiv,~~Worldpay, Inc.

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Table of Contents

~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In May 2014, the Company entered into a joint venture with a bank partner which provides customers a comprehensive suite of payment solutions. Vantiv Holding owns 51% and the bank partner owns 49% of the joint venture. The joint venture is consolidated by the Company in accordance with ASC 810, with the associated non-controlling interest included in “Net income attributable to non-controlling interests” in the consolidated statements of income.

As of ~~September 30, 2017, Vantiv,~~March 31, 2018, Worldpay, Inc.’s interest in Vantiv Holding was ~~91.42%~~95.12%. Changes in units and related ownership interest in Vantiv Holding are summarized as follows:

Vantiv, Inc. Fifth Third Total
As of December 31, 2016 161,134,831
35,042,826
196,177,657
% of ownership 82.14 % 17.86 %
Fifth Third exchange of Vantiv Holding units for shares of Class A common stock 19,790,000
(19,790,000 ) —
Purchase and cancellation of Class A common stock (19,790,000 ) —
(19,790,000 )
Equity plan activity ⁽¹⁾
1,371,799
—
1,371,799
As of September 30, 2017 162,506,630
15,252,826
177,759,456
% of ownership 91.42 % 8.58 %



	Worldpay, Inc.		Fifth Third		Total
As of December 31, 2017	162,595,981		15,252,826		177,848,807
% of ownership	91.42	%	8.58	%
Shares issued for acquisition	134,400,000		—		134,400,000
Equity plan activity ⁽¹⁾	411,526		—		411,526
As of March 31, 2018	297,407,507		15,252,826		312,660,333
% of ownership	95.12	%	4.88	%


⁽¹⁾	Includes stock issued under the equity plans ~~net of~~less Class A common stock withheld to satisfy employee tax withholding obligations upon vesting or exercise of employee equity awards and forfeitures of restricted Class A common stock awards.

~~On August 7, 2017, the~~The Company entered into a transaction agreement with Fifth Third Bank pursuant to which Fifth Third Bank agreed to exercise its right to exchange 19,790,000 Class B Units in Vantiv Holding, LLC for 19,790,000 shares of the Company’s Class A common stock and immediately thereafter, the Company purchased those newly issued 134.4 million shares of Class A common stock ~~directly from Fifth Third Bank at a price~~in connection with its acquisition of ~~$64.04 per share, the closing share price~~100% of the ~~Company’s Class A common stock~~issued and outstanding shares of Legacy Worldpay on ~~the New York Stock Exchange on August 4, 2017. The purchased shares were cancelled and are no longer outstanding.~~January 16, 2018.

As a result of the changes in ownership interests in Vantiv Holding, periodic adjustments are made in order to reflect the portion of net assets of Vantiv Holding attributable to non-controlling unit holders based on changes in the proportionate ownership interests in Vantiv Holding during ~~a period.~~those periods.

The table below provides a reconciliation of net income attributable to non-controlling interests based on relative ownership interests as discussed above (in ~~thousands)~~millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 106,905
$ 87,004
$ 229,060
$ 217,913
Items not allocable to non-controlling interests:

Vantiv, Inc. expenses ⁽¹⁾
14,219
23,628
25,095
58,019
Vantiv Holding net income $ 121,124
$ 110,632
$ 254,155
$ 275,932

Net income attributable to non-controlling interests of Fifth Third ⁽²⁾
$ 14,092
$ 20,155
$ 37,549
$ 50,082
Net income attributable to joint venture non-controlling interest ⁽³⁾
695
553
1,731
2,470
Total net income attributable to non-controlling interests $ 14,787
$ 20,708
$ 39,280
$ 52,552



	Three Months Ended March 31,
	2018			2017
Net (loss) income	$	(98.3	)	$	35.3
Items not allocable to non-controlling interests:
Worldpay, Inc. (expenses) income ⁽¹⁾	30.6			(1.1		)
Vantiv Holding net (loss) income	$	(67.7	)	$	34.2

Net (loss) income attributable to non-controlling interests of Fifth Third ⁽²⁾	$	(1.0	)	$	6.0
Net income attributable to joint venture non-controlling interest ⁽³⁾	0.3			0.4
Total net (loss) income attributable to non-controlling interests	$	(0.7	)	$	6.4

⁽¹⁾ ~~Primarily represents income tax expense related to Vantiv, Inc.~~

⁽²⁾ Net income attributable to non-controlling interests of Fifth Third reflects the allocation of Vantiv Holding’s net income based on the proportionate ownership interests in Vantiv Holding held by the non-controlling unit holders. The net income attributable to non-controlling unit holders reflects the changes in ownership interests summarized in the table above.


⁽¹⁾	Primarily represents acquisition related expenses for the three months ended March 31, 2018 and primarily relates to a tax benefit for the three months ended March 31, 2017 related to Worldpay, Inc.


⁽²⁾	Net income attributable to non-controlling interests of Fifth Third reflects the allocation of Vantiv Holding’s net income based on the proportionate ownership interests in Vantiv Holding held by the non-controlling unit holders. The net income attributable to non-controlling unit holders reflects the changes in ownership interests summarized in the table above.


⁽³⁾	Reflects net income attributable to the non-controlling interest of the joint venture.

2427

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~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Legal Reserve

From time to time, the Company is involved in various litigation matters arising in the ordinary course of its business. While it is impossible to ascertain the ultimate resolution or range of financial liability with respect to these contingent matters, management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s consolidated financial statements, except as described below.

On April 17, 2017, the Company entered into a preliminary settlement agreement (the “Agreement”) to settle class action litigation filed by plaintiffs in the United States District Court for the Northern District of Georgia (the “Court”) under the caption Champs Sports Bar & Grill Co.et al. v. Mercury Payment Systems, LLC et al. regarding certain legacy business practices of the defendants, Mercury Payment Systems, LLC (“Mercury”) and Global Payments Direct, Inc., dating back to 2009. The Company acquired Mercury on June 13, 2014.

The Company has agreed to settle the lawsuit after engaging in a successful mediation session occurring on February 16, 2017, at which the parties first identified the potential for resolution, and subsequent negotiations between the parties. The parties agreed to such mediation session after a previous mediation session held in December 2016 ended without a potential path toward resolution.

Under the terms of the Agreement, in exchange for a release from all claims relating to such legacy business practices from the beginning of the applicable settlement class period through the date of preliminary approval of the settlement, the Company ~~anticipates paying $38~~incurred a charge of $38.0 million ~~based on~~for the ~~estimated number of participants who opt-in~~three months ended March 31, 2017 related to the settlement. Final claims data resulted in the Company recording an additional $3.5 million charge for the settlement in the fourth quarter of 2017.

While the agreement contains no admission of wrongdoing and the Company believes it has meritorious defenses to the claims, the Company agreed to the structure of the settlement, in order to save costs and avoid the risks of on-going litigation.

~~In connection with the settlement, the Company recorded a charge of $38 million in the first quarter of 2017. The Company will pay the settlement amount from available resources.~~

On May 16, 2017, the Court determined the proposed Agreement satisfied the criteria for preliminary approval and issued a preliminary approval order. Pursuant to the terms of the Agreement, the preliminary approval order required that the Company fund an escrow account to pay all future class action claims, legal fees and administrative fees. The Company funded such account on July 5, 2017.

~~On August 29, 2017, a final approval hearing took place and the Agreement was approved.~~

8. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the hierarchy prescribed in ASC 820, Fair Value Measurement~~(“ASC 820”)~~, based upon the available inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:

Level 1 Inputs—Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

Level 2 Inputs—Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including but not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 Inputs—Unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.

The following table summarizes assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018						December 31, 2017
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Interest rate contracts	$	—	$	27.8	$	—	$	—	$	24.4	$	—
Deal contingent foreign currency forward	—		—		—		—		33.1		—
Liabilities:
Interest rate contracts	$	—	$	2.3	$	—	$	—	$	4.4	$	—
Mercury TRA	—		85.9		—		—		100.5		—

Table of Contents

~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~The following table summarizes assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):~~

September 30, 2017 December 31, 2016
Fair Value Measurements Using
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets:
Interest rate contracts $ —
$ 20,763
$ —
$ —
$ 23,229
$ —
Deal contingent forward —
24,365
—
—
—
—
—
Liabilities:

Interest rate contracts $ —
$ 6,485
$ —
$ —
$ 15,058
$ —
Mercury TRA —
—
97,308
—
—
147,040

Interest Rate Contracts

The Company uses interest rate contracts to manage interest rate risk. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. The fair value of the interest rate caps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected future cash flows of each interest rate cap. This analysis reflects the contractual terms of the interest rate caps, including the period to maturity, and uses observable market inputs including interest rate curves and implied volatilities. In addition, to comply with the provisions of ASC 820, Fair Value Measurement, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its interest rate contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company determined that the majority of the inputs used to value its interest rate contracts fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate contracts utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate contracts and determined that the credit valuation adjustment was not significant to the overall valuation of its interest rate contracts. As a result, the Company classified its interest rate contract valuations in Level 2 of the fair value hierarchy. See Note 5 - Derivatives and Hedging Activities for further discussion of the Company’s interest rate contracts.

Deal Contingent Forward

The Company ~~uses~~used a foreign currency contract to manage its foreign currency exposure relating to the ~~pending~~ Worldpay transaction (see Note 125 - ~~Pending Worldpay Transaction)~~Derivatives and Hedging Activities). The fair value of the foreign currency forward iswas determined using the market standard methodology of discounting the projected settlement value of the instrument. The projected settlement value is based on the expectation of future foreign currency rates derived from observed market interest rate curves. In addition, to comply with the provisions of ASC 820, credit valuation adjustments are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its foreign currency forward contract for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company determined that the majority of the inputs used to value its foreign currency contract fell within Level 2 of the fair value hierarchy, certain Level 3 inputs were utilized, including the probability of successfully closing the Worldpay merger and certain other estimates required to compute the credit valuation analysis, such as the estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2017, the Company assessed the significance of the impact of the Level 3 inputs on the overall valuation of its foreign currency contract and determined that those inputs were in the aggregate not significant to the overall valuation of its foreign currency contract. As a result, the Company classified its foreign currency contract valuation in Level 2 of the fair value hierarchy. See Note 5 - Derivatives and Hedging Activities for further discussion of the Company’s foreign currency contract.

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Mercury TRA

The Mercury TRA is considered contingent consideration as it is part of the consideration payable to the former owners of Mercury. Such contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which is classified in Level 3 of the fair value hierarchy. The Mercury TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Mercury TRA Holders. ~~The~~Through 2016, the significant unobservable input used in the fair value measurement of the Mercury TRA iswas the discount ~~rate, which was approximately 14% as of September 30, 2017 and December 31, 2016.~~rate. Any significant increase (decrease) in this input ~~would~~could potentially result in a significantly lower (higher) fair value measurement. Due to the passage of time, the discount rate is no longer a significant input at March 31, 2018 and December 31, 2017. The liability recorded is re-measured at fair value at each reporting period with the change in fair value recognized in earnings as a non-operating expense. The change in value of the Mercury TRA from December 31, ~~2016~~2017 to ~~September 30, 2017~~March 31, 2018 consists of the increase in fair value of ~~$10.7~~$2.8 million and the decrease from payments of ~~$60.5~~$17.4 million related to the Mercury TRA ~~obligations and the exercised 2016 Call Option.~~obligations. The Company recorded non-operating expenses of ~~$3.1~~$2.8 million and ~~$4.6~~$4.1 million related to the change in fair value during the three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016, respectively. The Company recorded non-operating expenses of $10.7 million and $14.9 million related to the change in fair value during the nine months ended September 30, 2017 and 2016,~~ respectively.

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes carrying amounts and estimated fair values for the Company’s financial instrument liabilities that are not reported at fair value in our consolidated statements of financial position as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 (in ~~thousands)~~millions):


	September 30, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Liabilities:
Note payable	$	4,732,273	$	4,785,387	$	3,220,722	$	3,250,025
Notes payable									$	8,274.7	$	8,377.9	$	5,694.3	$	5,772.1

We consider that the carrying value of cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value (level 1) given the short-term nature of these items. The fair value of the Company’s ~~note~~notes payable was estimated based on rates currently available to the Company for bank loans with similar terms and maturities and is classified in Level 2 of the fair value hierarchy.

9. NET INCOME PER SHARE

Basic net income per share is calculated by dividing net income attributable to ~~Vantiv,~~Worldpay, Inc. by the weighted-average shares of Class A common stock outstanding during the period.

Diluted net income per share is calculated assuming that Vantiv Holding is a wholly-owned subsidiary of ~~Vantiv,~~Worldpay, Inc., therefore eliminating the impact of Fifth Third’s non-controlling interest. Pursuant to the Exchange Agreement, the Class B units of Vantiv Holding (“Class B units”), which are held by Fifth Third and represent the non-controlling interest in Vantiv Holding, are convertible into shares of Class A common stock on a one-for-one basis. Based on this conversion feature, diluted net income per share is calculated assuming the conversion of the Class B units on an “if-converted” basis. Due to the Company’s structure as a C corporation and Vantiv Holding’s structure as a pass-through entity for tax purposes, the numerator in the calculation of diluted net income per share is adjusted accordingly to reflect the Company’s income tax expense assuming the conversion of the Fifth Third non-controlling interest into Class A common stock.

During the three months ~~and nine months~~ ended ~~September 30, 2017,~~March 31, 2018 approximately ~~23.6 million and 31.2~~15.3 million weighted-average Class B units of Vantiv Holding were excluded in computing diluted net income per share because including them would have had an antidilutive effect. As the Class B units of Vantiv Holding were not included, the numerator used in the calculation of diluted net income per share was equal to the numerator used in the calculation of basic net income per share for the three months ~~and nine months~~ ended ~~September 30, 2017.~~March 31, 2018. As of ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ there were approximately 15.3 million and 35.0 million Class B units outstanding, respectively.

In addition to the Class B units discussed above, potentially dilutive securities during ~~the~~ three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 included restricted stock awards, restricted stock units, stock options, performance share awards and ESPP purchase rights. ~~Potentially~~Due to the net loss for the three months ended March 31, 2018, any potentially dilutive securities ~~during~~were also excluded from the three and nine months ended September 30, 2016 included restricted stock awards, restricted stock units, the warrant held by Fifth Third which allows for the purchase of Class C units of Vantiv Holding, stock options and ESPP purchase rights.

~~Table of Contents~~

~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

denominator in computing dilutive net income per share.

The shares of Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. Accordingly, basic and diluted net income per share of Class B common stock have not been presented.

Table of Contents

Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table sets forth the computation of basic and diluted net (loss) income per share (in ~~thousands,~~millions, except share data):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018			2017
Basic:
Net income attributable to Vantiv, Inc.	$	92,118	$	66,296	$	189,780	$	165,361
Net (loss) income attributable to Worldpay, Inc.									$	(97.6	)	$	28.9
Shares used in computing basic net income per share:					0
Weighted-average Class A common shares	161,465,849		155,740,660		161,205,066		155,603,265		274,098,480			160,876,177
Basic net income per share	$	0.57	$	0.43	$	1.18	$	1.06
Basic net (loss) income per share									$	(0.36	)	$	0.18
Diluted:
Consolidated income before applicable income taxes	$	—	$	126,328	$	—	$	319,504	$	—		$	40.5
Income tax expense excluding impact of non-controlling interest	—		45,478		—		115,021		—			6.0
Net income attributable to Vantiv, Inc.	$	92,118	$	80,850	$	189,780	$	204,483
Net (loss) income attributable to Worldpay, Inc.									$	(97.6	)	$	34.5
Shares used in computing diluted net income per share:
Weighted-average Class A common shares	161,465,849		155,740,660		161,205,066		155,603,265		274,098,480			160,876,177
Weighted-average Class B units of Vantiv Holding	—		35,042,826		—		35,042,826		—			35,042,826
Warrant	—		5,550,050		—		5,428,637
Stock options	739,835		506,635		706,632		547,640		—			731,907
Restricted stock awards, restricted stock units and employee stock purchase plan	645,508		501,998		664,275		504,203		—			800,438
Performance awards	31,204		—		41,809		—		—			45,332
Diluted weighted-average shares outstanding	162,882,396		197,342,169		162,617,782		197,126,571		274,098,480			197,496,680
Diluted net income per share	$	0.57	$	0.41	$	1.17	$	1.04
Diluted net (loss) income per share									$	(0.36	)	$	0.17

2831

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~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The activity of the components of accumulated other comprehensive income (loss) (“AOCI”) related to ~~cash flow~~ hedging and other activities for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018, and 2017 ~~and 2016~~ is presented below (in ~~thousands)~~millions):


				Total Other Comprehensive Income (Loss)																					Total Other Comprehensive Income (Loss)
	AOCI Beginning Balance			Pretax Activity			Tax Effect			Net Activity			Attributable to non-controlling interests			Attributable to Vantiv, Inc.			AOCI Ending Balance			AOCI Beginning Balance			Pretax Activity			Tax Effect			Net Activity			Attributable to non-controlling interests			Attributable to Worldpay, Inc.			AOCI Ending Balance
Three Months Ended September 30, 2017
Three Months Ended March 31, 2018
Net change in fair value of cash flow hedge recorded in AOCI																						$	(13.8	)	$	6.3		$	(1.5	)	$	4.8		$	(0.4	)	$	4.4		$	(9.4	)
Net realized loss on cash flow hedge reclassified into earnings ^(a)																						16.7			0.6			(0.1		)	0.5			—			0.5			17.2
Translation adjustments on net investment hedge recorded in AOCI^(b)																						—			(7.5		)	2.0			(5.5		)	0.4			(5.1		)	(5.1		)
Foreign currency translation adjustments^(c)																						—			22.2			—			22.2			(1.1		)	21.1			21.1
Net change																						$	2.9		$	21.6		$	0.4		$	22.0		$	(1.1	)	$	20.9		$	23.8

Three Months Ended March 31, 2017
Net change in fair value recorded in accumulated OCI	$	(17,942	)	$	306		$	(186	)	$	120		$	184		$	304		$	(17,638	)	$	(17.8	)	$	2.7		$	(0.8	)	$	1.9		$	(0.5	)	$	1.4		$	(16.4	)
Net realized loss reclassified into earnings ^(a)	15,366			1,057			(366		)	691			(90		)	601			15,967			11.6			4.2			(1.3		)	2.9			(0.7		)	2.2			13.8
Net change	$	(2,576	)	$	1,363		$	(552	)	$	811		$	94		$	905		$	(1,671	)	$	(6.2	)	$	6.9		$	(2.1	)	$	4.8		$	(1.2	)	$	3.6		$	(2.6	)

Three Months Ended September 30, 2016
Net change in fair value recorded in accumulated OCI	$	(26,644	)	$	1,247		$	(386	)	$	861		$	(227	)	$	634		$	(26,010	)
Net realized loss reclassified into earnings ^(a)	7,720			3,923			(1,212		)	2,711			(719		)	1,992			9,712
Net change	$	(18,924	)	$	5,170		$	(1,598	)	$	3,572		$	(946	)	$	2,626		$	(16,298	)

Nine Months Ended September 30, 2017
Net change in fair value recorded in accumulated OCI	$	(17,819	)	$	55		$	(101	)	$	(46	)	$	227		$	181		$	(17,638	)
Net realized loss reclassified into earnings ^(a)	11,622			8,377			(2,641		)	5,736			(1,391		)	4,345			15,967
Net change	$	(6,197	)	$	8,432		$	(2,742	)	$	5,690		$	(1,164	)	$	4,526		$	(1,671	)

Nine Months Ended September 30, 2016
Net change in fair value recorded in accumulated OCI	$	(14,336	)	$	(22,964	)	$	7,080		$	(15,884	)	$	4,210		$	(11,674	)	$	(26,010	)
Net realized loss reclassified into earnings ^(a)	5,132			9,010			(2,780		)	6,230			(1,650		)	4,580			9,712
Net change	$	(9,204	)	$	(13,954	)	$	4,300		$	(9,654	)	$	2,560		$	(7,094	)	$	(16,298	)

^(a) The reclassification adjustment on cash flow hedge derivatives affected the following lines in the accompanying consolidated statements of income:



OCI Component		Affected line in the accompanying consolidated statements of income
Pretax activity⁽¹⁾		Interest expense-net
Tax effect		Income tax expense
OCI attributable to non-controlling interests		Net income attributable to non-controlling interests


⁽¹⁾	The three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ reflect amounts of ~~gain (loss)~~losses reclassified from AOCI into earnings, representing the effective portion of the hedging relationships, and are recorded in interest expense-net.


^(b)	See Note 5 - Derivatives and Hedging Activities for more information on net investment hedge activity.


^(c)	There is no tax impact on the foreign translation adjustments due to the Tax Reform impact on distributions, enacted in 2017.

11. SEGMENT INFORMATION

~~The Company’s segments consist~~As a result of the Company’s acquisition of Legacy Worldpay, the Company has reorganized its reportable segments and recast March 31, 2017 segment information to align with the new reportable segments. The new segments are Technology Solutions, Merchant ~~Services segment~~Solutions and ~~the Financial Institution Services segment,~~Issuer Solutions, which are organized bybased on the ~~products~~Company’s solution offerings. The reorganization consisted of separating the Company’s former Merchant segment into two separate segments, Technology Solutions and ~~services~~Merchant Solutions, with the ~~Company provides.~~Company’s Financial Institutions segment renamed Issuer Solutions. The Company’s ~~Chief~~Chairman of the Board and Co-Chief Executive Officer ~~(“CEO”), who~~ is the chief operating decision maker (“CODM”), who evaluates the performance and allocates resources based on the operating results of each segment. The Company’s reportable segments are the same as the Company’s operating segments and there is no aggregation of the Company’s operating segments. Below is a summary of each segment:

29Technology Solutions - Technology Solutions provides merchant acquiring and payment processing services to a diverse set of merchants that primarily accept payments through eCommerce and integrated payment solutions.

Table of Contents

~~Vantiv,~~Worldpay, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Merchant ~~Services~~Solutions ~~—Provides~~- Merchant Solutions provides merchant acquiring and payment processing services to ~~large national~~a diverse set of merchants ~~regional and small-to-mid sized businesses. Merchant services are sold to small to large businesses~~that primarily accept payments through ~~diverse distribution channels. Merchant Services includes all aspects of card processing~~an omni-channel solution including ~~authorization and settlement, customer service, chargeback and retrieval processing and interchange management.~~terminal based.

~~Financial Institution Services~~Issuer Solutions~~—Provides~~ - Issuer Solutions provides card issuer processing, payment network processing, fraud protection and card production ~~prepaid program management, ATM driving and network gateway and switching services that utilize the Company’s proprietary Jeanie debit payment network~~ to a diverse set of financial institutions, including regional banks, community banks, credit unions and regional ~~personal identification number (“PIN”)~~PIN networks. Financial Institution Services also provides statement production, collections and inbound/outbound call centers for credit transactions, and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services.

Segment operating results are presented below (in ~~thousands)~~millions). The results reflect revenues and expenses directly related to each segment. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented.

Segment profit reflects ~~total~~ revenue less ~~network fees and other costs and~~ sales and marketing costs of the segment. The Company’s CODM evaluates this metric in analyzing the results of operations for each segment.


	Three Months Ended September 30, 2017						Three Months Ended March 31, 2018
	Merchant Services		Financial Institution Services		Total		Technology Solutions		Merchant Solutions		Issuer Solutions		Total
Total revenue	$	916,630	$	117,135	$	1,033,765
Revenue							$	336.4	$	432.2	$	82.1	$	850.7
Network fees and other costs(1)	447,863		31,670		479,533		—		—		—		—
Sales and marketing	168,022		5,757		173,779		95.9		163.8		6.3		266.0
Segment profit	$	300,745	$	79,708	$	380,453	$	240.5	$	268.4	$	75.8	$	584.7

⁽¹⁾For the three months ended March 31, 2018 network fees and other costs are netted within revenue as the result of the Company’s adoption of ASC 606 on January 1, 2018.


	Three Months Ended September 30, 2016						Three Months Ended March 31, 2017
	Merchant Services		Financial Institution Services		Total		Technology Solutions		Merchant Solutions		Issuer Solutions		Total
Total revenue	$	793,860	$	120,159	$	914,019
Revenue							$	271.9	$	540.1	$	116.2	$	928.2
Network fees and other costs	389,448		33,913		423,361		109.7		316.4		32.0		458.1
Sales and marketing	147,663		5,585		153,248		60.2		88.8		6.0		155.0
Segment profit	$	256,749	$	80,661	$	337,410	$	102.0	$	134.9	$	78.2	$	315.1

Nine Months Ended September 30, 2017
Merchant Services Financial Institution Services Total
Total revenue $ 2,615,341
$ 345,390
$ 2,960,731
Network fees and other costs 1,311,539
94,819
1,406,358
Sales and marketing 479,628
17,454
497,082
Segment profit $ 824,174
$ 233,117
$ 1,057,291

Nine Months Ended September 30, 2016
Merchant Services Financial Institution Services Total
Total revenue $ 2,251,033
$ 372,826
$ 2,623,859
Network fees and other costs 1,117,602
103,908
1,221,510
Sales and marketing 416,107
17,623
433,730
Segment profit $ 717,324
$ 251,295
$ 968,619

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~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

A reconciliation of total segment profit to the Company’s income before applicable income taxes is as follows (in ~~thousands)~~millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Total segment profit $ 380,453
$ 337,410
$ 1,057,291
$ 968,619
Less: Other operating costs (79,482 ) (72,162 ) (234,347 ) (219,464 )
Less: General and administrative (49,607 ) (40,727 ) (189,632 ) (133,831 )
Less: Depreciation and amortization (82,500 ) (66,086 ) (236,964 ) (199,550 )
Less: Interest expense—net (38,521 ) (27,474 ) (97,441 ) (81,321 )
Less: Non-operating expenses 21,207
(4,633 ) 13,672
(14,949 )
Income before applicable income taxes $ 151,550
$ 126,328
$ 312,579
$ 319,504

~~12. PENDING WORLDPAY TRANSACTION~~

~~Firm Offer for Worldpay Group PLC~~

On August 9, 2017, the Company issued an announcement pursuant to Rule 2.7 of the U.K. City Code on Takeovers and Mergers disclosing the terms of a recommended offer (the “Offer”) by the Company to acquire the entire issued and to be issued ordinary share capital of Worldpay, a public limited company registered in England and Wales, in a cash and stock transaction (the “Business Combination”).

Under the terms of the Offer, Worldpay shareholders will be entitled to receive, for each Worldpay ordinary share held by such shareholders, 55 pence in cash and 0.0672 new shares of the Company’s Class A common stock. As of September 30, 2017, Worldpay has approximately 2.003 billion shares outstanding. The Business Combination is to be effected by means of a court-sanctioned scheme of arrangement between Worldpay and Worldpay shareholders under the UK Companies Act 2006, as amended. In addition to the consideration payable in connection with the Offer, Worldpay shareholders are also entitled to receive an interim dividend of 0.8 pence per Worldpay ordinary share that was paid on October 23, 2017.

In addition, Worldpay shareholders will be entitled to receive a special dividend of 4.2 pence per Worldpay ordinary share, which would be conditional on completion of the Business Combination and would be paid to Worldpay shareholders on the register of members of Worldpay at the scheme record time. Effective upon completion of the Business Combination, the combined company will amend its governance documents to adopt the “Worldpay” name. The Company will also seek a secondary standard listing on the Main Market of the London Stock Exchange in relation to the new shares of Company Stock following completion of the Business Combination.

The Business Combination is subject to conditions and certain further terms, including, among other things: (i) the approval of the Scheme by a majority in number of Worldpay shareholders representing not less than 75% in value of the Worldpay shareholders, in each case present and voting at the Worldpay shareholders’ meeting; (ii) the sanction of the Scheme by the High Court of Justice in England and Wales; (iii) the Scheme becoming effective no later than March 31, 2018; (iv) the issuance of the new shares of Company Stock to Worldpay shareholders in connection with the Business Combination being duly approved by the affirmative vote of the majority of the votes cast at the Company’s stockholder’s meeting; and (v) the receipt of certain required antitrust, regulatory and other approvals. It is expected that, subject to the satisfaction or waiver of all relevant conditions, the Business Combination will be completed in early 2018.

~~Financing Arrangements~~

~~In connection with the Worldpay transaction, the Company entered into several amendments to its Existing Loan Agreement set forth below.~~

~~Incremental Amendment to Existing Loan Agreement and Bridge and Backstop Commitments~~

On August 9, 2017, Vantiv, LLC executed an amendment (the “Incremental Amendment”), to the Existing Loan Agreement (as amended by the Incremental Amendment, the “Loan Agreement”) with various financial institutions and their affiliates. The Incremental Amendment provides Vantiv, LLC with committed funding as follows:

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~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~$1.605 billion of additional five-year term Tranche A-4 loans~~

~~$1.129 billion of additional seven-year term B loans, which consists of approximately $535 million of outstanding term loans (Tranche B-1) and a $594 million backstop (Tranche B-2)~~

~~$350.0 million of additional revolving credit commitments~~

The proceeds of the commitments provided under the Incremental Amendment will be used to, among other things, provide the cash consideration for the Worldpay acquisition, to refinance existing debt of Worldpay including a $594 million backstop for the Worldpay Euro bond, to pay fees and expenses in connection with the foregoing and for working capital and general corporate purposes. The obligations of the lenders party to the Incremental Amendment to provide the increased debt financing contemplated thereunder are subject to the consummation of the Worldpay acquisition.

In addition, on August 9, 2017, Vantiv, LLC and various financial institutions and their affiliates entered into a Bridge Commitment Letter, pursuant to which, subject to the satisfaction of the conditions set forth therein, the lenders thereunder agreed to provide an up to a $1.13 billion bridge term loan facility for the benefit of Vantiv, LLC and certain of its subsidiaries. This bridge term loan facility will only be used in the event the Company is not able to raise funds via an anticipated bond offering.

Further, on August 9, 2017, Vantiv, LLC, and various financial institutions, collectively, the “Backstop Lenders” entered into the Backstop Commitment Letter (the “Backstop Commitment”), pursuant to which, subject to the conditions set forth therein, the Backstop Lenders agreed to provide the following:

~~Up to a $1.0 billion revolving credit facility~~

~~Up to an approximately $4.01 billion term A loan facility~~

~~Up to an approximately $3.2 billion term B loan facility for the benefit of Vantiv, LLC and certain of its subsidiaries~~

~~Subsequently, the Backstop Commitment has been terminated as a result of the effectiveness of the third amendment and restatement agreement described below.~~

~~Third Amendment and Restatement Agreement~~

On September 8, 2017, Vantiv, LLC entered into a third amendment and restatement loan agreement (the “Third Amendment and Restatement Agreement”) pursuant to which the Existing Loan Agreement will be amended and restated as follows:

~~Amended the existing term A loans ($2.4 billion)~~


◦	~~$181.5 million (Tranche A-3) amended, but did not extend the current maturity date of October 2021~~


◦	~~$2.2 billion (Tranche A-5) amended and extended the maturity date to the fifth anniversary following the funding of the Business Combination~~

~~Amended and extended the maturity of, provide for borrowing under additional currencies, and increased by an additional $250.0 million the existing revolving credit facility~~

~~The effectiveness of the Third Amendment and Restatement Agreement is subject to, among other things, the consummation of the Worldpay acquisition.~~

The Third Amendment and Restatement Agreement requires Vantiv, LLC to maintain a maximum leverage ratio and a minimum interest coverage ratio, each of which will be tested quarterly based on the last four fiscal quarters, commencing on the first full fiscal quarter following the funding of the Worldpay acquisition. The maximum leverage ratio starts at 6.50:1.00 and becomes more restrictive over time. The minimum interest coverage ratio is 4.00:1.00 and is constant throughout the term of the agreement.

~~Fourth Amendment to Existing Credit Agreement~~

~~On October 3, 2017, Vantiv, LLC entered into a Fourth Amendment, which amends the Loan Agreement as follows:~~

~~The existing initial term B loan tranche was replaced with a $759.3 million new term Tranche B-3 loan maturing in October 2023~~

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~~Vantiv, Inc.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~The existing incremental term B loan tranche was replaced with a $1.27 billion term Tranche B-4 loan maturing August 2024~~

The $535 million incremental term Tranche B-1 to be funded in connection with the closing of the Worldpay acquisition will, upon the funding thereof, be modified to have the same economic terms as the new term Tranche B-4 loan and become part of the same class of term Tranche B-4 loans

The term B loan tranches amortize in equal quarterly installments of 0.25% per quarter, with balloon payments at maturity. The amortization for the new term Tranche B-3 ($759.3 million) will commence on March 31, 2018 and for the new term Tranche B-4 ($1.27 billion) on June 30, 2018.

Interest on all loans under the senior secured credit facilities is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. Borrowings under the Credit Agreement accrue interest at a rate equal to, at Vantiv, LLC’s option, a base rate or LIBOR rate plus an applicable margin. The applicable margin for each of the new term Tranche B-3 loan ($759.3 million) and new term Tranche B-4 loan ($1.27 billion) is 100 basis points in the case of base rate loans (subject to a 0.0% floor) and 200 basis points in the case of LIBOR loans (subject to a 0.0% floor). The applicable margin for the incremental term B-2 loan tranche ($594 million) remains 125 basis points in the case of base rate loans (subject to a 0.0% floor) and 225 basis points in the case of LIBOR loans (subject to a 0.0% floor).

~~******~~



	Three Months Ended March 31,
	2018			2017
Total segment profit	$	584.7		$	315.1
Less: Other operating costs	(155.1		)	(75.9		)
Less: General and administrative	(250.1		)	(89.3		)
Less: Depreciation and amortization	(207.2		)	(76.1		)
Less: Interest expense—net	(75.2		)	(29.2		)
Less: Non-operating expense	(8.6		)	(4.1		)
(Loss) income before applicable income taxes	$	(111.5	)	$	40.5

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~~Vantiv,~~Worldpay, Inc.

~~MANAGEMENT’S~~MANAGEMENT'S DISCUSSION AND ANALYSIS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis provides a review of the results of operations, financial condition and

liquidity and capital resources of Worldpay, Inc., formerly Vantiv, Inc. (“~~Vantiv”~~Worldpay”, “we”, “us”, “our”, or the “company” refer to ~~Vantiv,~~Worldpay, Inc. and its consolidated subsidiaries) and outlines the factors that affected recent results, as well as factors that may affect future results. Our actual results in the future may differ materially from those anticipated in these forward looking statements as a result of many factors, including those set forth under “Risk ~~Factors,~~Factors”,” ~~“Forward~~Forward Looking Statements” and elsewhere in this ~~report, as well as in our 10-K filed with the SEC on February 8, 2017.~~report. The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this report, as well as management’s discussion and analysis and consolidated financial statements for the year ended December 31, ~~2016~~2017 included in our most recent Annual Report on Form 10-K.

~~General~~Overview

Worldpay, Inc. is a leading global payments technology company providing a broad range of technology-led solutions to its merchant clients to allow them to accept payments of almost any type, across multiple payment channels, nearly anywhere in the world. We serve a diverse set of merchants across a variety of end-markets, sizes and geographies. We are the largest merchant acquirer and PIN debit acquirer by number of transactions, according to the Nilson Report, and a leading payment processor in the United States and the United Kingdom differentiated by our ~~integrated~~ technology, ~~platform,~~ breadth of distribution and superior cost structure. Our ~~integrated~~ technology ~~platform~~ enables us to efficiently provide a comprehensive suite of services to both merchants and financial institutions of all sizes as well as to innovate, develop and deploy new services, while providing us with significant economies of scale. Our broad and varied distribution provides us with a growing and diverse client base of merchants and financial institutions. Our merchant client base includes merchant locations across the globe. Our financial institution client base includes regional banks, community banks, credit unions and regional PIN debit networks.

~~We offer~~On January 16, 2018, our Class A common stock began trading on the New York Stock Exchange under the new symbol “WP” and on the London Stock Exchange via a broad suite of payment processing services that enable our clients to meet their payment processing needs through a single provider, including in omni-channel environments that span point-of-sale, ecommerce and mobile devices. We enable merchants of all sizes to accept and process credit, debit and prepaid payments and provide them supporting value-added services, such as security solutions and fraud management, information solutions, and interchange management. We also provide mission critical payment services to financial institutions, such as card issuer processing, payment network processing, fraud protection, card production, prepaid program management, ATM driving and network gateway and switching services that utilize our proprietary Jeanie PIN debit payment network.

Our integrated technology platform provides our merchant and financial institution clients with differentiated payment processing solutions and provides us with significant strategic and operational benefits. Small and mid-sized merchants are able to easily connect to our integrated technology platform using our application process interfaces, or APIs, software development kits, or SDKs, and other tools we make available to technology partners, which we believe enhances our capacity to sell to such merchants. Our integrated technology platform allows us to collect, manage and analyze data across both our Merchant Services and our Financial Institution Services segments that we can then package into information solutions for our clients. It provides insight into market trends and opportunities as they emerge, which enhances our ability to innovate and develop new value-added services, including security solutions and fraud management, and it allows us to easily deploy new solutions that spansecondary standard listing under the payment processing value chain, such as ecommerce and mobile services, which are high growth market opportunities. It is highly scalable, which enables us to efficiently manage, update and maintain our technology, increase capacity and speed, and realize significant operating leverage. We believe our integrated technology platform is a key differentiatorsymbol “WPY.” Legacy Worldpay shares were delisted from ~~payment processors that operate~~the London Stock Exchange on ~~multiple technology platforms and provides us with a significant competitive advantage.~~

We distribute our services through multiple sales channels that enable us to efficiently and effectively target a broad range of merchants and financial institutions. Our sales channels include direct and indirect sales forces, which include our referral partner relationships, which provide us with a growing and diverse client base of merchants and financial institutions. We have a national sales force that targets financial institutions and large national merchants, a regional and mid-market sales team that sells solutions to merchants and third-party reseller clients and a telesales operation that targets small and mid-sized merchants. Our indirect sales force includes Independent Sales Organizations, or ISOs, that target small and mid-sized merchants. We have referral partner relationships with merchant banks, independent software vendors, or ISVs, value-added resellers, or VARs, payment facilitators, and trade associations that target a broad range of merchants, including difficult to reach small and mid-sized merchants. We also have relationships with third-party reseller partners and arrangements with core processors that target small and mid-sized financial institutions.

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the same day.

Executive Overview

Revenue for the three months ended ~~September 30, 2017 increased 13%~~March 31, 2018 decreased 8% to ~~$1,033.8~~$850.7 million from ~~$914.0~~$928.2 million in ~~2016. Revenue for the nine months ended September 30, 2017 increased 13% to $2,960.7 million from $2,623.9 million in 2016.~~ 2017.

Income (loss) from operations for the three months ended ~~September 30, 2017 increased~~March 31, 2018 decreased 138% to ~~$168.9~~a loss of $27.7 million from ~~$158.4~~income of $73.8 million in ~~2016. Income from operations for~~2017 as a result of expenses associated with the ~~nine months ended September 30, 2017 decreased to $396.3 million from $415.8 million in 2016.~~Legacy Worldpay acquisition.

Net income (loss) for the three months ended ~~September 30, 2017 increased~~March 31, 2018 decreased to ~~$106.9~~a loss of $98.3 million from ~~$87.0~~income of $35.3 million in ~~2016.~~2017. Net income (loss) attributable to ~~Vantiv,~~Worldpay, Inc. for the three months ended ~~September 30, 2017 increased~~March 31, 2018 decreased to ~~$92.1~~a loss of $97.6 million from ~~$66.3~~income of $28.9 million in 2016. Net income for the nine months ended September 30, 2017 increased to $229.1 million from $217.9 million in 2016. Net income attributable to Vantiv, Inc. for the nine months ended September 30, 2017 increased to $189.8 million from $165.4 million in 2016.2017. See the “Results of Operations” section of this Management’s Discussion and Analysis for a discussion of our financial results.

In October 2016, our board of directors authorized a program to repurchase up to $250 million of our Class A common stock. We currently have approximately $243 million of share repurchase authority remaining as of September 30, 2017 under this authorization.Recent Acquisitions

~~See Note 12 - Pending~~On January 16, 2018, we completed the acquisition of Worldpay ~~Transaction in the Notes to Unaudited Consolidated Financial Statements for details on the pending~~Group Limited, formerly Worldpay Group plc, a public limited company (“Legacy Worldpay”) ~~acquisition.~~by acquiring 100% of the issued and outstanding shares. The acquisition creates a leading global integrated payment technology and international eCommerce payment provider and will enable us to take advantage of strategic and innovative opportunities to provide differentiated and diversified solutions to address clients’ needs.

~~Paymetric Acquisition~~

On May 25, 2017, ~~we acquired~~the Company completed the acquisition of Paymetric Holdings, Inc. (“Paymetric”) ~~for $532 million in cash, which is net~~by acquiring 100% of ~~cash acquired. We funded~~ the ~~acquisition with cash on hand~~issued and ~~borrowings under our revolving credit facility.~~outstanding shares. Paymetric automates business-to-business payment workflows within enterprise systems and tokenizes payments data within these systems in order to enable secure storage of customer information and history. This acquisition helps to further accelerate ~~our~~the Company’s growth. ~~The operations of Paymetric are included in our Merchant Services segment operating results.~~

~~Fifth Third Share Purchase~~

~~On August 9, 2017, pursuant~~Please see Note 2 - Business Combinations in “Item 1 - Notes to a transaction agreement with Fifth Third Bank, we purchased 19,790,000 shares of our Class A common stock directly from Fifth Third Bank at a price of $64.04 per share. The total purchase price of approximately $1.27 billion was funded with an additional Term B Loan. In connection with the purchase, we recorded a liability of approximately $647.5 million during the quarter ended September 30, 2017 under the tax receivable agreement the we entered into with Fifth Third Bank at the time of our initial public offering.

~~Our Segments, Revenue and Expenses~~

~~Segments~~

~~We report our results of operations in two segments, Merchant Services and~~Unaudited Consolidated Financial Institution Services. We evaluate segment performance based upon segment profit, which is defined as net revenue and represents total revenue less network fees and other costs, less sales and marketing expense attributable to that segment.

~~Merchant Services~~

We have a broad and diversified merchant client base. Our merchant client base has low client concentration and is heavily weighted in non-discretionary everyday spend categories, such as grocery and pharmacy, and includes large national retailers. We provide a comprehensive suite of payment processing services to our merchant services clients. We authorize, clear, settle and provide reportingStatements” for ~~electronic payment transactions, as further discussed below.~~

~~Acquiring and Processing.~~ We provide merchants with a broad range of credit, debit and prepaid payment processing services. We give them the ability to accept and process Visa, Mastercard, American Express, Discover and PIN debit network card transactions originated at the point of sale as well as for ecommerce and mobile transactions. This service includes allmore information about these acquisitions.

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~~aspects of card processing, including authorization and settlement, customer service, chargeback and retrieval processing and network fee and interchange management.~~

~~Value-added Services.~~ We offer value-added services that help our clients operate and manage their businesses including omni-channel acceptance, prepaid services and gift card solutions. We also provide security solutions such as point-to-point encryption and tokenization both at the point of sale and for ecommerce transactions.

We provide our services to merchants of varying sizes, which provides us with a number of key benefits. Due to the large transaction volume that they generate, large national merchants provide us with significant operating scale efficiencies and recurring revenues. Small and mid-sized merchants generally generate higher per transaction fees.

~~We distribute our comprehensive suite of services to a broad range of merchants, including large, mid-sized and small merchants, through multiple sales channels as further discussed below.~~

Direct: Includes a national sales force that targets large national merchants, a regional and mid-market sales team that sells solutions to merchants and third party reseller clients, and a telesales operation that targets small and mid-sized merchants.

~~Indirect: Includes Independent Sales Organizations (ISOs) that target small and mid-sized merchants.~~

~~Merchant Bank: Includes referral partner relationships with financial institutions that target their financial services customers as merchant referrals to us.~~

Integrated Payments (IP): Includes referral partner relationships with independent software vendors (ISVs), value-added resellers (VARs), and payment facilitators that target their technology customers as merchant referrals to us.

~~eCommerce: Includes a sales force that targets internet retail, online services and direct marketing merchants.~~

These sales channels utilize multiple strategies and leverage relationships with referral partners that sell our solutions to small and mid-sized merchants. We offer certain services on a white-label basis which enables them to be marketed under our partners’ brand. We select referral partners that enhance our distribution and augment our services with complimentary offerings. We believe our sales structure provides us with broad geographic coverage and access to various industries and verticals.

~~Financial Institution Services~~

Our financial institution client base is also generally well diversified and includes regional banks, community banks, credit unions and regional PIN debit networks. We generally focus on small to mid-sized institutions with less than $15 billion in assets. Smaller financial institutions generally do not have the scale or infrastructure typical of large institutions and are more likely to outsource their payment processing needs. We provide integrated card issuer processing, payment network processing and value-added services to our financial institutions clients. These services are discussed further below.

~~Integrated Card Issuer and Processing.~~ We process and service credit, debit, ATM and prepaid transactions. We process and provide statement production, collections and inbound/outbound call centers. Our card processing solution includes processing and other services such as card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. We provide authorization support in the form of online or batch settlement, as well as real-time transaction research capability and archiving and daily and monthly cardholder reports for statistical analysis.

~~Value-added Services.~~ We provide additional services to our financial institution clients that complement our issuing and processing services. These services include fraud protection, card production, prepaid cards, ATM driving, portfolio optimization, data analytics and card program marketing. We also provide network gateway and switching services that utilize our Jeanie PIN network. Our Jeanie network offers real-time electronic payment, network bill payment, single point settlement, shared deposit taking and customer select PINs.

We distribute our services to financial institutions by utilizing direct sales forces as well as a diverse group of referral partner relationships. These sales channels utilize multiple strategies and leverage relationships with core processors that sell our solutions to small and mid-sized financial institutions. We offer certain of our services on a white-label basis which enables them to be marketed under our client’s brand. We select resellers that enhance our distribution and augment our services with complementary offerings. Our relationships with core processors are necessary for developing the processing environments required by our financial institution clients. Many of our core processing relationships are non-contractual and continue for so long as an interface between us and the core processor is needed to accommodate one or more common financial institution customers.

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Our Segments, Revenue and Expenses

Technology Solutions

Technology Solutions provides merchant acquiring and payment processing services to a diverse set of merchants that primarily accept payments through eCommerce and integrated payment solutions.

Merchant Solutions

Merchant Solutions provides merchant acquiring and payment processing services to a diverse set of merchants that primarily accept payments through an omni-channel solution including terminal based.

Issuer Solutions

Revenue

We provide a wide range of electronic payment and related products and services, both online and by mobile, to accept, validate and settle payments in 126 currencies across 146 countries, using any one of over 300 payment methods. Our customers also use our payments technology to maximize the rate at which payments are approved, manage the risk of fraud, and optimize their costs of operating globally.

We generate revenue primarily by providing payment processing ~~electronic payment transactions.~~as well as related products and services. Set forth below is a description of our revenues by segment and factors impacting segment revenues.

~~Our Merchant Services segment revenues are primarily derived from processing credit~~Technology Solutions provides merchant acquiring and ~~debit card transactions. Merchant Services revenue is primarily comprised of fees charged to businesses, net of interchange fees, for~~ payment processing services to a diverse set of merchants that primarily accept payments through eCommerce and integrated payment solutions.

Merchant Solutions provides merchant acquiring and payment processing services to a diverse set of merchants that primarily accept payments through an omni-channel solution including authorization, capture, clearing, settlement and information reporting of electronic transactions. The fees charged consist of either a percentage of the dollar volume of the transaction or a fixed fee, or both, and are recognized at the time of the transaction. Merchant Services revenue also includes a number of revenue items that are incurred by us and are reimbursable as the costs are passed through to and paid by our clients. These items primarily consist of Visa, Mastercard and otherterminal based.

Issuer Solutions provides card issuer processing, payment network fees. In addition, for sales through referral partners in which we are the primary party to the contract with the merchant, we record the full amount of the fees collected from the merchant as revenue. Associated residual payments made to referral partners are included in salesprocessing, fraud protection and marketing expenses. Merchant Services revenue also includes revenue from ancillary services such as fraud management, equipment sales and terminal rent. Revenue in our Merchant Services segment is impacted primarily by transaction volume, average transaction size, the mix of merchant types in our client portfolio, the performance of our merchant clients and the effectiveness of our distribution channels.

Our Financial Institution Services revenues are primarily derived from debit, credit and ATM card transaction processing, ATM driving and support, and PIN debit processing services. Financial Institution Services revenue associated with processing transactions includes per transaction and account related fees, card production ~~fees and fees generated from our Jeanie network. Financial Institution Services revenue is impacted by the number~~to a diverse set of financial institutions, ~~using our services as well as their transaction volume. The number of financial institutions in the United States has declined as a result of prevailing economic conditions~~including regional banks, community banks, credit unions and consolidation, as well as other market and regulatory pressures. These factors have contributed to industry-wide pricing compression of the fees that financial institutions are willing to pay for payment processing.regional PIN networks.

Network Fees and Other Costs

Network fees and other costs primarily consist of pass through expenses incurred by us in connection with providing processing services to our clients, including Visa and Mastercard network association fees, payment network fees, third party processing expenses, telecommunication charges, postage and card production costs.

Net Revenue

Net revenue is revenue, less network fees and other costs and reflects revenue generated from the services we provide to our clients. Management uses net revenue to assess our operating performance. We believe that net revenue, when reviewed together with revenue, is meaningful to our investors in order to understand our performance.

Expenses

Set forth below is a brief description of the components of our expenses:

Network fees and other costs primarily consist of pass through expenses ~~aside from~~incurred by us in connection with providing processing services to our clients, including Visa and Mastercard network association fees and payment network fees and only relates to the three months ended March 31, 2017. Following our adoption of ASC 606 on January 1, 2018, network fees and other costs ~~discussed above:~~are presented net within revenue.

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Sales and marketing expense primarily ~~consists~~consist of salaries and benefits paid to sales personnel, sales management and other sales and marketing personnel, amortization of capitalized commission fees, residual payments made to referral partners and advertising and promotional costs.

Other operating costs primarily consist of salaries and benefits paid to operational and IT personnel, costs associated with operating our technology platform and data centers, information technology costs for processing transactions, product development costs, software fees and maintenance costs.

Depreciation and amortization expense consists of our depreciation expense related to investments in property, equipment and software as well as our amortization of intangible assets.

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Interest expense—net consists primarily of interest on borrowings under our senior secured credit facilities less interest income earned on our cash and cash equivalents.

Income tax expense represents foreign, federal, state and local taxes based on income in multiple jurisdictions.

Non-operating ~~income~~expenses ~~for the~~during three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 primarily consists of ~~an unrealized gain relating~~expenses related to financing arrangements entered into in connection with the Legacy Worldpay acquisition and the change in ~~the~~ fair value of the Mercury tax receivable agreement (“TRA”), partially offset by a gain on the settlement of a deal contingent forward entered into in connection with ~~the pending Worldpay acquisition, partially offset by the change in fair value of a tax receivable agreement (“TRA”) entered into as part of the~~our acquisition of ~~Mercury Payment Systems, LLC (“Mercury”).~~Legacy Worldpay. Non-operating expenses for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2017 primarily relate to the change in fair value of ~~a TRA entered into as part of~~ the ~~acquisition of Mercury.~~Mercury TRA.

Non-Controlling Interest

As a result of the non-controlling ownership interests in Vantiv Holding held by Fifth Third, our results of operations include net income attributable to non-controlling interests. Future sales or redemptions of ownership interests in Vantiv Holding by Fifth Third will continue to reduce the amount recorded as non-controlling interest and increase net earnings attributable to our Class A stockholders. In addition, net income attributable to non-controlling interests includes the non-controlling interest related to a joint venture with a bank partner. See Note 6 - Controlling and Non-Controlling Interests in “Item 1 - Unaudited Consolidated Financial Statements” for more information.

Factors and Trends Impacting Our Business and Results of Operations

The majority of our revenues is generated by services priced as a percentage of transaction value or a specified fee per transaction, depending on card type or the vertical. We ~~expect~~also earn fees based on specific value-added services that may be unrelated to the number or value of transactions. These revenues depend upon a number of factors, ~~will impact~~such as demand for and price of our ~~business, results~~services, the technological competitiveness of ~~operations~~our offerings, our reputation for providing timely and ~~financial condition. In general,~~reliable service, competition within our ~~revenue is impacted by the number~~industry and ~~dollar volume of card based transactions which in turn are impacted by~~ general economic conditions, consumer spending and the emergence of new technologies and payment types, such as ecommerce, mobile payments, and prepaid cards. In our Merchant Services segment, our net revenues are impacted by the mix of the size of merchants that we provide services to as well as the mix of transaction volume by merchant category. In our Financial Institution Services segment, our net revenues are also impacted by the mix of the size of financial institutions to which we provide services as well as consolidation and market and industry pressures, which have contributed and are expected to continue to contribute to pricing compression of payment processing fees in this segment. We also expect our results of operations to be impacted by the factors discussed below.conditions.

~~Pro Forma~~ Adjusted Net Income

We use ~~pro forma~~ adjusted net income for financial and operational decision making as a means to evaluate period-to-period comparisons of our performance and results of operations. ~~Pro forma~~The adjusted net income is also incorporated into performance metrics underlying certain share-based payments ~~issued under the 2012 Vantiv, Inc. Equity Incentive Plan~~ and our annual incentive plan. We believe ~~pro forma~~the adjusted net income provides useful information about our performance and operating results, enhances the overall understanding of past financial performance and future prospects and allows for greater transparency with respect to key metrics used by management in its financial and operational decision making.

In calculating ~~pro forma~~the adjusted net income, we make certain non-GAAP adjustments, as well as ~~pro forma~~certain tax adjustments, to adjust our GAAP operating results for the items discussed below. This non-GAAP measure should be considered together with GAAP operating results.

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Non-GAAP Adjustments

Transition, Acquisition and Integration Costs

In connection with our acquisitions, we incur costs associated with the acquisitions and related integration activities, consisting primarily of consulting fees for advisory, conversion and integration services and related personnel costs. Also included in these expenses are costs related to employee termination benefits and other transition activities. These transition, acquisition and integration costs are included in other operating costs and general and administrative expenses. Included in transition, acquisition and integration costs in ~~the nine~~three months ended ~~September 30,~~March 31, 2017 is a ~~$38~~$38.0 million charge ~~to general and administrative expense~~ related to a settlement agreement stemming from legacy litigation of an acquired company.

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Share-Based Compensation

We have granted share-based awards to certain employees and members of our board of directors and intend to continue to grant additional share-based awards in the future. Share-based compensation is included in general and administrative expense.

Intangible Amortization Expense

These expenses represent amortization of intangible assets acquired through business combinations and customer portfolio and related asset acquisitions.

Non-operating ~~(Income)~~ Expense

Non-operating ~~income for the~~expenses during three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 primarily consists of ~~an unrealized gain~~expenses relating to the financing arrangements we entered into in connection with the Legacy Worldpay acquisition and the change in ~~the~~ fair value of the Mercury TRA, partially offset by a gain on the settlement of a deal contingent forward entered into in connection with ~~the pending Worldpay acquisition, partially offset by the change in fair value of a TRA entered into as part of the~~our acquisition of ~~Mercury.~~ Legacy Worldpay.

Non-operating expenses for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2017 primarily ~~relate~~related to the change in fair value of ~~a TRA entered into as part of~~ the ~~acquisition of Mercury.~~

Mercury TRA.

~~Pro Forma~~Tax Adjustments

Income Tax Expense Adjustments

Our effective tax rate reported in our results of operations reflects the impact of our non-controlling interest not being taxed at the statutory corporate tax rate. For purposes of calculating ~~pro forma~~the adjusted net income, income tax expense is adjusted accordingly to reflect an effective tax rate assuming conversion of Fifth Third’s non-controlling interests into shares of Class A common stock, including the income tax effect of the non-GAAP adjustments described above. The adjusted effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 is ~~34.0%~~approximately 19.7% and includes the impact of tax reform on U.S. federal taxes as well as the inclusion of international jurisdictions due to the acquisition of Legacy Worldpay. Also included in the adjusted effective tax rate for the three months ended March 31, 2018 and 2017 is the impact of the excess tax benefits relating to ~~the Company’s~~our adoption of ASU 2016-09,Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment ~~Accounting.~~ Accounting. The adjusted effective tax rate is expected to remain at ~~34.0%~~approximately 19.7% for the remainder of ~~2017. This~~2018. The adjusted effective tax rate was ~~36%~~34% for the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2017.

Other Tax Adjustments

In addition to the adjustment described above, income tax expense is also adjusted for the cash tax benefits resulting from certain tax attributes, primarily the amortization of tax intangible assets resulting from or acquired with our acquisitions, the tax basis step up associated with our separation from Fifth Third and the purchase or exchange of units of Vantiv Holding, net of payment obligations under TRAs established at the time of our initial public offering (“IPO”) and in connection with our acquisition of Mercury. The estimate of the cash tax benefits is based on the consistent and highly predictable realization of the underlying tax attributes.

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The following table provides a schedule of the tax adjustments discussed above which are reflected in the ~~pro forma~~ adjusted net income table ~~below:~~below (in millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Fifth Third Tax Benefit ^(a)
$ 6,382
$ 11,927
$ 10,918
$ 35,781
Mercury Tax Benefit ^(b)
3,168
4,665
9,506
13,995
Total Tax Benefits 9,550
16,592
20,424
49,776
Less: TRA payments ^(c)
(7,662 ) (14,103 ) (16,904 ) (42,309 )
TRA Tax Benefits ^(d)
1,888
2,489
3,520
7,467
Acquired Tax Benefits ^(e)
31,676
16,413
93,201
47,575
Pro Forma Tax Benefits ^(f)
$ 33,564
$ 18,902
$ 96,721
$ 55,042



	Three Months Ended March 31,
	2018		2	2017
TRA Tax Benefits ^(a)	$	2.2		$	0.8
Acquired Tax Benefits ^(b)	22.4			30.8
Adjusted Tax Benefits ^(c)	$	24.6		$	31.6


^(a)	Represents the 15% benefit that we retain for the shared tax benefits related to the TRAs.


^(b)	Represents the tax benefits wholly owned by us, acquired through acquisition or termination of TRAs in which we retain 100% of the benefit.


^(c)	Represents the net cash tax benefit retained by us from the use of the tax attributes, as reflected in the Tax Adjustments.

The table below provides a reconciliation of GAAP income before applicable income taxes to the adjusted net income for the three months ended March 31, 2018 and 2017 (in millions):



	Three Months Ended March 31,
	2018			2017
(Loss) income before applicable income taxes	$	(111.5	)	$	40.5
Non-GAAP Adjustments:
Transition, acquisition and integration costs	177.4			49.5
Share-based compensation	17.2			10.6
Intangible amortization	172.8			51.9
Non-operating expenses	8.6			4.1
Non-GAAP adjusted income before applicable taxes	264.5			156.6
Less: Adjustments
Adjusted tax expense	27.5			21.7
JV non-controlling interest	0.3			0.2
Adjusted Net Income	$	236.7		$	134.7

Results of Operations

The following tables set forth our statements of income in dollars and as a percentage of revenue for the periods presented (in millions).



	Three Months Ended March 31,
	2018			2017		$ Change			% Change
Revenue	$	850.7		$	928.2	(77.5		)	(8	)%
Network fees and other costs	—			458.1		(458.1		)	NM
Net Revenue⁽¹⁾	850.7			470.1		380.6			81	%
Sales and marketing	266.0			155.0		111.0			72
Other operating costs	155.1			75.9		79.2			104
General and administrative	250.1			89.3		160.8			180
Depreciation and amortization	207.2			76.1		131.1			172
(Loss) Income from operations	$	(27.7	)	$	73.8	$	(101.5	)	(138	)%

^(a)(1) ~~Represents~~For the ~~cash tax benefits which~~three months ended March 31, 2018 net revenue is equivalent to gross revenue since network fees and other costs are ~~shared~~netted against gross revenue as the result of the Company’s adoption of Accounting Standard Update 2014-09, Revenue From Contracts With Customers (Topic 606) (“ASC 606”) on January 1, 2018.

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As a Percentage of Net Revenue	Three Months Ended March 31,
	2018		2017
Net Revenue	100.0	%	100.0	%
Sales and marketing	31.3	%	33.0	%
Other operating costs	18.2	%	16.1	%
General and administrative	29.4	%	19.0	%
Depreciation and amortization	24.4	%	16.2	%
(Loss) Income from operations	(3.3	)%	15.7	%

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Net Revenue

Net revenue increased 81% to $850.7 million for the three months ended March 31, 2018 from $470.1 million for the three months ended March 31, 2017. The prior year period excludes $344.7 million of Legacy Worldpay generated net revenue prior to our acquisition. Additionally, continued strong growth in our Technology Solutions segment also contributed to the increase. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the three months ended March 31, 2018 and includes Legacy Worldpay results for the three months ended March 31, 2017.

Sales and Marketing

Sales and marketing expense increased 72% to $266.0 million for the three months ended March 31, 2018 from $155.0 million for the three months ended March 31, 2017. The prior year period excludes $96.4 million of Legacy Worldpay sales and marketing expense prior to our acquisition. Additionally, higher residual payments to referral partners as a result of increased revenue in our Technology Solutions segment also contributed to the increase. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the three months ended March 31, 2018 and includes Legacy Worldpay results for the three months ended March 31, 2017.

Other Operating Costs

Other operating costs increased to $155.1 million for the three months ended March 31, 2018 from $75.9 million for the three months ended March 31, 2017. When excluding transition, acquisition and integration costs, other operating costs increased to $144.9 million for the three months ended March 31, 2018 from $72.7 million for the three months ended March 31, 2017. The prior year period excludes $61.2 million of Legacy Worldpay other operating costs when excluding transition, acquisition and integration costs prior to our acquisition. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the three months ended March 31, 2018 and includes Legacy Worldpay results for the three months ended March 31, 2017.

General and Administrative

General and administrative expenses increased to $250.1 million for the three months ended March 31, 2018 from $89.3 million for the three months ended March 31, 2017. When excluding transition, acquisition and integration costs and share-based compensation, general and administrative costs increased to $65.6 million for the three months ended March 31, 2018 from $32.4 million for the three months ended March 31, 2017. The prior period excludes $47.2 million of Legacy Worldpay general and administrative expenses when excluding transition, acquisition and integration costs prior to our acquisition. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the three months ended March 31, 2018 and includes Legacy Worldpay results for the three months ended March 31, 2017.

Depreciation and Amortization

Depreciation expense associated with ~~Fifth Third Bank pursuant~~our property, equipment and software increased to ~~a TRA.~~$57.4 million for the three months ended March 31, 2018 from $20.9 million for the three months ended March 31, 2017. The increase is primarily attributable to our recent acquisitions.

^(b) ~~Represents the cash tax benefits shared with Mercury former shareholders pursuant to a TRA.~~

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^(c) ~~Represents the amount of the TRA payment to be made to Fifth Third Bank and Mercury shareholders (85% payment).~~

^(d) ~~Represents the 15% benefit that we retain for the shared tax benefits related to the TRAs.~~

^(e) ~~Represents the tax benefits wholly owned by us, acquired through acquisition or termination of TRAs in which we retain 100% of the benefit.~~

^(f) ~~Represents the net cash tax benefit retained by us from the use of the tax attributes, as reflected in the Pro Forma Tax Adjustments.~~

~~The table below provides a reconciliation of GAAP income before applicable income taxes to pro forma adjusted net income for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands)
Income before applicable income taxes $ 151,550
$ 126,328
$ 312,579
$ 319,504
Non-GAAP Adjustments:
Transition, acquisition and integration costs 5,116
2,761
67,886
22,332
Share-based compensation 13,607
9,600
35,068
25,892
Intangible amortization 55,280
47,797
161,480
142,704
Non-operating (income) expenses (21,207 ) 4,633
(13,672 ) 14,949
Non-GAAP Adjusted Income Before Applicable Taxes 204,346
191,119
563,341
525,381
Less: Pro Forma Adjustments
Income tax expense 69,478
68,803
191,536
189,137
Tax adjustments (33,564 ) (18,902 ) (96,721 ) (55,042 )
Total pro forma tax expense 35,914
49,901
94,815
134,095
Pro forma tax rate 18 % 26 % 17 % 26 %

JV non-controlling interest 459
354
1,143
1,581
Pro Forma Adjusted Net Income $ 167,973
$ 140,864
$ 467,383
$ 389,705

~~Results of Operations~~

~~The following tables set forth our statements of income in dollars and as a percentage of net revenue for the periods presented.~~

Three Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Revenue $ 1,033,765
$ 914,019
$ 119,746
13 %
Network fees and other costs 479,533
423,361
56,172
13 %
Net revenue 554,232
490,658
63,574
13 %
Sales and marketing 173,779
153,248
20,531
13 %
Other operating costs 79,482
72,162
7,320
10 %
General and administrative 49,607
40,727
8,880
22 %
Depreciation and amortization 82,500
66,086
16,414
25 %
Income from operations $ 168,864
$ 158,435
$ 10,429
7 %
Non-financial data:

Transactions (in millions) 6,550
6,270

4 %

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As a Percentage of Net Revenue Three Months Ended September 30,
2017 2016
Net revenue 100.0 % 100.0 %
Sales and marketing 31.4 % 31.2 %
Other operating costs 14.3 % 14.7 %
General and administrative 9.0 % 8.3 %
Depreciation and amortization 14.9 % 13.5 %
Income from operations 30.4 % 32.3 %

Nine Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Revenue $ 2,960,731
$ 2,623,859
$ 336,872
13 %
Network fees and other costs 1,406,358
1,221,510
184,848
15 %
Net revenue 1,554,373
1,402,349
152,024
11 %
Sales and marketing 497,082
433,730
63,352
15 %
Other operating costs 234,347
219,464
14,883
7 %
General and administrative 189,632
133,831
55,801
42 %
Depreciation and amortization 236,964
199,550
37,414
19 %
Income from operations $ 396,348
$ 415,774
$ (19,426 ) (5 )%
Non-financial data:
Transactions (in millions) 19,412
18,273
6 %

As a Percentage of Net Revenue Nine Months Ended September 30,
2017 2016
Net revenue 100.0 % 100.0 %
Sales and marketing 32.0 % 30.9 %
Other operating costs 15.1 % 15.7 %
General and administrative 12.2 % 9.5 %
Depreciation and amortization 15.2 % 14.2 %
Income from operations 25.5 % 29.7 %

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016 and Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016~~

~~Revenue~~

Revenue increased 13% to $1,033.8 million for the three months ended September 30, 2017 from $914.0 million for the three months ended September 30, 2016. The increase during the three months ended September 30, 2017 was due primarily to transaction growth of 4%. Additionally, growth in our Merchant Services segment as a result of our continued penetration of small and mid-sized merchants contributed to higher net revenue per transaction.

Revenue increased 13% to $2,960.7 million for the nine months ended September 30, 2017 from $2,623.9 million for the nine months ended September 30, 2016. The increase during the nine months ended September 30, 2017 was due primarily to transaction growth of 6%. Additionally, growth in our Merchant Services segment as a result of our continued penetration of small and mid-sized merchants contributed to higher net revenue per transaction.

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~~Network Fees and Other Costs~~

Network fees and other costs increased 13% to $479.5 million for the three months ended September 30, 2017 from $423.4 million for the three months ended September 30, 2016. The increase was due primarily to transaction growth of 4% and an increase in third party processing costs.

Network fees and other costs increased 15% to $1,406.4 million for the nine months ended September 30, 2017 from $1,221.5 million for the nine months ended September 30, 2016. The increase was due primarily to transaction growth of 6% and an increase in third party processing costs.

~~Net Revenue~~

Net revenue, which is revenue less network fees and other costs, increased 13% to $554.2 million for the three months ended September 30, 2017 from $490.7 million for the three months ended September 30, 2016 due to the factors discussed above.

Net revenue, which is revenue less network fees and other costs, increased 11% to $1,554.4 million for the nine months ended September 30, 2017 from $1,402.3 million for the nine months ended September 30, 2016 due to the factors discussed above.

~~Sales and Marketing~~

Sales and marketing expense increased 13% to $173.8 million for the three months ended September 30, 2017 from $153.2 million for the three months ended September 30, 2016. The increase was primarily attributable to higher residual payments to referral partners as a result of increased revenue in our Merchant Services segment in connection with the continued penetration of small and mid-sized merchants.

Sales and marketing expense increased 15% to $497.1 million for the nine months ended September 30, 2017 from $433.7 million for the nine months ended September 30, 2016. The increase was primarily attributable to higher residual payments to referral partners as a result of increased revenue in our Merchant Services segment in connection with the continued penetration of small and mid-sized merchants.

~~Other Operating Costs~~

Other operating costs increased 10% to $79.5 million for the three months ended September 30, 2017 from $72.2 million for the three months ended September 30, 2016. When excluding transition, acquisition and integration costs, other operating costs increased 9% to $76.9 million for the three months ended September 30, 2017 from $70.4 million for the three months ended September 30, 2016. The increase is primarily attributable to an increase in information technology and operation costs, in support of our revenue growth and the acquisition of Paymetric.

Other operating costs increased 7% to $234.3 million for the nine months ended September 30, 2017 from $219.5 million for the nine months ended September 30, 2016. When excluding transition, acquisition and integration costs, other operating costs increased 6% to $223.5 million for the nine months ended September 30, 2017 from $211.7 million for the nine months ended September 30, 2016. The increase is primarily attributable to an increase in information technology and operation costs, in support of our revenue growth and the acquisition of Paymetric.

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~~General and Administrative~~

General and administrative expenses increased 22% to $49.6 million for the three months ended September 30, 2017 from $40.7 million for the three months ended September 30, 2016. When excluding transition, acquisition and integration costs and share-based compensation costs, general and administrative expenses increased 11% to $33.5 million for the three months ended September 30, 2017 from $30.1 million for the three months ended September 30, 2016. The increase is primarily attributable to the acquisition of Paymetric.

General and administrative expenses increased 42% to $189.6 million for the nine months ended September 30, 2017 from $133.8 million for the nine months ended September 30, 2016. When excluding transition, acquisition and integration costs, which include a $38 million charge related to a settlement agreement stemming from legacy litigation of an acquired company, as well as share-based compensation costs, general and administrative expenses increased 4% to $97.5 million for the nine months ended September 30, 2017 from $93.4 million for the nine months ended September 30, 2016. The increase is primarily attributable to the acquisition of Paymetric.

~~Depreciation and Amortization~~

Depreciation expense associated with our property, equipment and software increased to $27.3 million for the three months ended September 30, 2017 from $16.4 million for the three months ended September 30, 2016. The increase is primarily attributable to our recent acquisitions.

Depreciation expense associated with our property, equipment and software increased to $70.5 million for nine months ended September 30, 2017 from $50.5 million for the nine months ended September 30, 2016. The increase is primarily attributable to our recent acquisitions.

Amortization expense associated with intangible assets, which consist primarily of customer relationship intangible assets, increased to $149.8 million for the three months ended March 31, 2018 from $55.2 million for the three months ended ~~September 30, 2017 from $49.7 million for the three months ended September 30, 2016.~~March 31, 2017. The increase is primarily attributable to an increase in amortization of customer relationship intangible assets as a result of recent acquisitions.

Amortization expense associated with intangible assets, which consist primarily of customer relationship intangible assets, increased to $166.5 million for the nine months ended September 30, 2017 from $149.0 million for the nine months ended September 30, 2016. The increase is primarily attributable to an increase in amortization of customer relationship intangible assets as a result of recent acquisitions.

Income (Loss) from Operations

Income (loss) from operations ~~increased 7%~~decreased to ~~$168.9~~a loss of $27.7 million for the three months ended ~~September 30, 2017~~March 31, 2018 from ~~$158.4~~income of $73.8 million for the three months ended ~~September 30, 2016.~~

~~Income from operations decreased 5% to $396.3 million for the nine months ended September 30, 2017 from $415.8 million for the nine months ended September 30, 2016.~~March 31, 2017.

Interest Expense—Net

Interest expense—net increased to ~~$38.5~~$75.2 million for the three months ended ~~September 30, 2017~~March 31, 2018 from ~~$27.5~~$29.2 million for the three months ended ~~September 30, 2016.~~March 31, 2017. The increase in interest expense—net is primarily attributable to ~~our October 2016~~ debt ~~refinancing, which resulted in an increase in~~issued to fund the ~~amount~~acquisition of ~~outstanding debt, our recent incremental Term B loan and our interest rate swaps.~~

Interest expense—net increased to $97.4 million for the nine months ended September 30, 2017 from $81.3 million for the nine months ended September 30, 2016. This increase in interest expense—net is primarily attributable to our October 2016 debt refinancing, which resulted in an increase in the amount of outstanding debt, our recent incremental Term B loan and our interest rate swaps.

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Legacy Worldpay.

Non-Operating ~~Income (Expense)~~Expense

Non-operating ~~income~~expense was ~~$21.2 million and $13.7~~$8.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2018, primarily consisting of ~~an unrealized gain~~expenses relating to the Company’s financing arrangements entered into in connection with the Legacy Worldpay acquisition and the change in ~~the~~ fair value of the Mercury TRA, partially offset by a gain on the settlement of a deal contingent forward entered into in connection with the ~~pending Worldpay acquisition, partially offset by the change in fair value of a TRA entered into as part of the~~Company’s acquisition of ~~Mercury.~~

Legacy Worldpay.Non-operating expense was ~~$4.6 million and $14.9~~$4.1 million for the three ~~and nine~~ months ended ~~September 30, 2016, respectively,~~March 31, 2017, primarily ~~relating~~related to the change in fair value of the ~~TRA entered into as part of the acquisition of Mercury.~~Mercury TRA.

Income Tax Expense (Benefit)

Income tax benefit for the three months ended March 31, 2018 was $13.2 million compared to $5.2 million of expense for the three months ended ~~September 30,~~March 31, 2017, ~~was $44.6 million compared to $39.3 million for the three months ended September 30, 2016,~~ reflecting effective rates of ~~29.5%~~11.8% and 31.1%, respectively. Income tax expense for the nine months ended September 30, 2017 was $83.5 million compared to $101.6 million for the nine months ended September 30, 2016, reflecting effective rates of 26.7% and 31.8%12.8%, respectively. Our effective rate reflects the impact of our non-controlling interests not being taxed at the statutory U.S. corporate tax rates. The 2018 effective tax rate also reflects the impact of tax reform and the impact related to the addition of international taxing jurisdictions as a result of the Legacy Worldpay acquisition. The effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, includes a ~~$1.9 million and a $16.0 million~~ credit ~~respectively,~~ to income tax expense as a result of our adoption of ASU 2016-09,Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting.

Segment Results

The following tables provide a summary of the components of segment profit for our ~~two~~three segments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016.~~(in millions):

~~Merchant Services~~

Three Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Total revenue $ 916,630
$ 793,860
$ 122,770
15 %
Network fees and other costs 447,863
389,448
58,415
15 %
Net revenue 468,767
404,412
64,355
16 %
Sales and marketing 168,022
147,663
20,359
14 %
Segment profit $ 300,745
$ 256,749
$ 43,996
17 %
Non-financial data:

Transactions (in millions) 5,702
5,241

9 %

Technology Solutions

Nine Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Total revenue $ 2,615,341
$ 2,251,033
$ 364,308
16 %
Network fees and other costs 1,311,539
1,117,602
193,937
17 %
Net revenue 1,303,802
1,133,431
170,371
15 %
Sales and marketing 479,628
416,107
63,521
15 %
Segment profit $ 824,174
$ 717,324
$ 106,850
15 %
Non-financial data:
Transactions (in millions) 16,716
15,244
10 %



	Three Months Ended March 31,
	2018		2017		$ Change			% Change
Revenue	$	336.4	$	271.9	64.5			24	%
Network fees and other costs	—		109.7		(109.7		)	NM
Net Revenue⁽¹⁾	336.4		162.2		174.2			107	%
Sales and marketing	95.9		60.2		35.7			59	%
Segment profit	$	240.5	$	102.0	$	138.5		136	%

⁽¹⁾For the three months ended March 31, 2018 net revenue is equivalent to gross revenue since network fees and other costs are netted against gross revenue as the result of the Company’s adoption of ASC 606 on January 1, 2018.

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Net Revenue

Net revenue in this segment increased ~~16%~~107% to ~~$468.8~~$336.4 million for the three months ended ~~September 30, 2017~~March 31, 2018 from ~~$404.4~~$162.2 million for the three months ended ~~September 30, 2016.~~March 31, 2017. The ~~increase during~~prior year period excludes $121.0 million of Legacy Worldpay generated net revenue prior to our acquisition. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the three months ended ~~September 30, 2017 was due primarily~~March 31, 2018 and includes Legacy Worldpay results for the three months ended March 31, 2017.

Sales and Marketing

Sales and marketing expense increased 59% to ~~transaction growth~~$95.9 million for the three months ended March 31, 2018 from $60.2 million for the three months ended March 31, 2017. The prior year period excludes $17.6 million of 9%Legacy Worldpay sales and marketing expense prior to our acquisition. Additionally, higher residual payments to referral partners as a ~~6% increase in~~result of increased revenue also contributed to the increase. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the three months ended March 31, 2018 and includes Legacy Worldpay results for the three months ended March 31, 2017.

Merchant Solutions



	Three Months Ended March 31,
	2018		2017		$ Change			% Change
Revenue	$	432.2	$	540.1	(107.9		)	(20	)%
Network fees and other costs	—		316.4		(316.4		)	NM
Net Revenue⁽¹⁾	432.2		223.7		208.5			93	%
Sales and marketing	163.8		88.8		75.0			84	%
Segment profit	$	268.4	$	134.9	$	133.5		99	%

⁽¹⁾For the three months ended March 31, 2018 net revenue ~~per transaction associated with our continued penetration~~is equivalent to gross revenue since network fees and other costs are netted against gross revenue as the result of ~~small and mid-sized merchants.~~the Company’s adoption of ASC 606 on January 1, 2018.

Net Revenue

Net revenue in this segment increased ~~15%~~93% to ~~$1,303.8~~$432.2 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 from ~~$1,133.4~~$223.7 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. The ~~increase during~~prior period excludes $221.8 million of Legacy Worldpay generated net revenue prior to our acquisition. The explanation above excludes Legacy Worldpay results from January 1, 2018 through January 15, 2018 for the ~~nine~~three months ended ~~September 30, 2017 was primarily due to transaction growth of 10%~~March 31, 2018 and ~~a 5% increase in net revenue per transaction associated with our continued penetration of small and mid-sized merchants.~~includes Legacy Worldpay results for the three months ended March 31, 2017.

Sales and Marketing

Sales and marketing expense increased ~~14%~~84% to ~~$168.0~~163.8 million for the three months ended ~~September 30, 2017~~March 31, 2018 from ~~$147.7~~$88.8 million for the three months ended ~~September 30, 2016.~~March 31, 2017. The ~~increase was primarily attributable to higher residual payments to referral partners as a result~~prior year period excludes $77.8 million of ~~increased revenue in connection with the continued penetration of small and mid-sized merchants.~~

~~Sales~~Legacy Worldpay sales and marketing expense ~~increased 15%~~prior to ~~$479.6 million for the nine months ended September 30, 2017~~our acquisition. The explanation above excludes Legacy Worldpay results from $416.1 million for the nine months ended September 30, 2016. The increase was primarily attributable to higher residual payments to referral partners as a result of increased revenue in connection with the continued penetration of small and mid-sized merchants.

~~Financial Institution Services~~

Three Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Total revenue $ 117,135
$ 120,159
$ (3,024 ) (3 )%
Network fees and other costs 31,670
33,913
(2,243 ) (7 )%
Net revenue 85,465
86,246
(781 ) (1 )%
Sales and marketing 5,757
5,585
172
3 %
Segment profit $ 79,708
$ 80,661
$ (953 ) (1 )%
Non-financial data:

Transactions (in millions) 848
1,029

(18 )%

Nine Months Ended September 30,
2017 2016 $ Change % Change
(dollars in thousands)
Total revenue $ 345,390
$ 372,826
$ (27,436 ) (7 )%
Network fees and other costs 94,819
103,908
(9,089 ) (9 )%
Net revenue 250,571
268,918
(18,347 ) (7 )%
Sales and marketing 17,454
17,623
(169 ) (1 )%
Segment profit $ 233,117
$ 251,295
$ (18,178 ) (7 )%
Non-financial data:
Transactions (in millions) 2,696
3,029
(11 )%

~~Net Revenue~~

~~Net revenue in this segment decreased slightly~~January 1, 2018 through January 15, 2018 for the three months ended ~~September 30, 2017 when compared to~~March 31, 2018 and includes Legacy Worldpay results for the three months ended ~~September 30, 2016. The decrease during~~March 31, 2017.

Issuer Solutions



	Three Months Ended March 31,
	2018		2017		$ Change			% Change
Revenue	$	82.1	$	116.2	(34.1		)	(29	)%
Network fees and other costs	—		32.0		(32.0		)	NM
Net Revenue⁽¹⁾	82.1		84.2		(2.1		)	(2	)%
Sales and marketing	6.3		6.0		0.3			5	%
Segment profit	$	75.8	$	78.2	$	(2.4	)	(3	)%

⁽¹⁾ For the three months ended ~~September 30, 2017 was due~~March 31, 2018 net revenue is equivalent to ~~an 18% decrease in transactions resulting from~~gross revenue since network fees and other costs are netted against gross revenue as the ~~de-conversion~~result of ~~a major client.~~the Company’s adoption of ASC 606 on January 1, 2018.

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Net Revenue

Net revenue in this segment decreased 7%2% to ~~$250.6~~$82.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 from ~~$268.9~~$84.2 million for the ~~nine~~three months ended September 30, 2016. The decrease during the nine months ended September 30, 2017 was due to an 11% decrease in transactions impacted by the de-conversion of a major client and compression from the Fifth Third contract renewal.March 31, 2017.

Sales and Marketing

Sales and marketing expense increased ~~$0.2 million~~5% to ~~$5.8~~$6.3 million for the three months ended ~~September 30, 2017~~March 31, 2018 from ~~$5.6~~$6.0 million for the three months ended ~~September 30, 2016.~~

~~Sales and marketing expense decreased $0.2 million to $17.5 million for the nine months ended September 30, 2017 from $17.6 million for the nine months ended September 30, 2016.~~March 31, 2017.

Liquidity and Capital Resources

Our liquidity is funded primarily through cash provided by operations, debt and a line of credit, which is generally sufficient to fund our operations, planned capital expenditures, tax distributions made to our non-controlling interest holders, required payments under ~~TRAs,~~our TRA agreements, debt service and acquisitions. As of ~~September 30, 2017,~~March 31, 2018, our principal sources of liquidity consisted of ~~$92.6~~$459.4 million of cash and cash equivalents and ~~$291.0 million~~$1.25 billion of availability under the revolving portion of our senior secured credit facilities. Our total indebtedness, including capital leases, was ~~$4.7~~$8.3 billion as of ~~September 30, 2017.~~March 31, 2018.

We have approximately $243 million of share repurchase authority remaining as of ~~September 30, 2017~~March 31, 2018 under a program authorized by the board of directors in October 2016 to repurchase up to an additional $250 million of our Class A common stock.

Purchases under the share repurchase programs are allowed from time to time in the open market, in privately negotiated transactions, or otherwise. The manner, timing, and amount of any purchases are determined by management based on an evaluation of market conditions, stock price, and other factors. The share repurchase programs have no expiration date and we may discontinue purchases at any time that management determines additional purchases are not warranted.

In connection with our IPO, we entered into the Exchange Agreement with Fifth Third, under which Fifth Third has the right, from time to time, to exchange their units in Vantiv Holding for shares of our Class A common stock or, at our option, cash. If we choose to satisfy the exchange in cash, we anticipate that we will fund such exchange through cash from operations, funds available under the revolving portion of our senior secured credit facilities, equity financings or a combination thereof.

We do not intend to pay cash dividends on our Class A common stock in the foreseeable future. ~~Vantiv,~~Worldpay, Inc. is a holding company that does not conduct any business operations of its own. As a result, ~~Vantiv,~~Worldpay, Inc.’s ability to pay cash dividends on its common stock, if any, is dependent upon cash dividends and distributions and other transfers from Vantiv Holding. The amounts available to ~~Vantiv,~~Worldpay, Inc. to pay cash dividends are subject to the covenants and distribution restrictions in its subsidiaries’ loan agreements.

In addition to principal needs for liquidity discussed above, our strategy includes investing in and leveraging our ~~integrated~~ business model and technology ~~platform,~~platforms, broadening and deepening our distribution channels, entry into new geographic markets and development of additional payment processing services. Our near-term priorities for capital allocation include debt reduction, investing in our operations to support organic growth, and share repurchases. Long-term priorities remain unchanged and include investing for growth through strategic acquisitions and returning excess capital to shareholders.

We anticipate that to the extent that we require additional liquidity, it will be funded through the incurrence of other indebtedness, equity financings or a combination thereof. We cannot assure you that we will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available under our credit facilities or otherwise to meet our liquidity needs. If we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions.

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Cash Flows

The following table presents a summary of cash flows from operating, investing and financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ (in ~~thousands)~~millions).


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2018		2017
Net cash provided by operating activities	$	527,666		$	430,395		$	84.1	$	134.4
Net cash used in investing activities	(651,581		)	(117,524		)
Net cash provided by (used in) investing activities							1,406.1		(32.2		)
Net cash provided by (used in) financing activities	77,405			(326,149		)	75.9		(103.2		)

Cash Flow from Operating Activities

Net cash provided by operating activities was $~~527.7~~84.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to ~~$430.4~~$134.4 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. The ~~increase is due primarily to~~decrease reflects a decrease in ~~the accounts receivable balance~~earnings and net cash outflow due to changes in ~~net settlement asset and obligations. Settlement assets and obligations can fluctuate due to seasonality as well as day of the month end.~~working capital.

Cash Flow from Investing Activities

Net cash provided by investing activities was $1,406.1 million for the three months ended March 31, 2018 as compared to $32.2 million of cash used in investing activities ~~was $651.6 million~~ for the ~~nine~~three months ended ~~September 30, 2017 as compared to $117.5 million for~~March 31, 2017. The change is the ~~nine months ended September 30, 2016. The increase was primarily due~~result of cash acquired relating to the acquisition of ~~Paymetric.~~Legacy Worldpay.

Cash Flow from Financing Activities

Net cash provided by financing activities was ~~$77.4~~$75.9 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to net cash used of ~~$326.1~~$103.2 million for ~~the nine~~three months ended ~~September 30, 2016.~~March 31, 2017. Cash provided by financing activities ~~for~~during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 consisted primarily of proceeds from issuance of additional ~~seven-year term B loans and borrowings under our revolving credit facility~~debt, partially offset by the ~~repurchase~~repayment of ~~Class A common stock,~~debt and capital leases, payments under tax receivable agreements and addendums, and distributions to non-controlling interests. Cash used in financing activities for the three months ended March 31, 2017 consisted primarily of the repayment of debt and capital leases, payments under the tax receivable agreements and addendums and distributions to non-controlling interests. Cash used in financing activities for the nine months ended September 30, 2016 consisted primarily of the repayment of debt and capital leases, repurchases of Class A common stock, and payments under the tax receivable agreements and addendums an distributions to non-controlling interests.

Credit Facilities

In October 2016, Vantiv, LLC completed a debt refinancing by entering into a second amended and restated loan agreement (“Second Amended Loan Agreement”). The Second Amended Loan Agreement provides for senior secured credit facilities comprised of a $2.5 billion tranche A loan maturing in October 2021, a $765.0 million tranche B loan maturing in October 2023 and a $650.0 million revolving credit facility maturing in October 2021.

~~On August 7, 2017,~~At March 31, 2018, we funded the Fifth Third share purchase discussed in Note 6 - Controlling and Non-controlling Interests in “Item 1 - Unaudited Consolidated Financial Statements”, by amending the Second Amended Loan Agreement to permit Vantiv LLC to obtain approximately $1.27have $8.3 billion of ~~additional seven-year~~ term B loans ~~(the Second Amended Loan Agreement, as so amended, the “Existing Loan Agreement”).~~

~~At September 30, 2017, we have $2.4 billion~~ and ~~$2.0 billion outstanding under the term A and term B loans, respectively,~~bonds and there ~~was approximately $359.0 million~~were no outstanding borrowings on ~~the~~our revolving credit facility. See additional discussion in Note 4 ~~– Long-term~~- Long-Term Debt in “Item 1 - Notes to Unaudited Consolidated Financial ~~Statements”.~~Statements.”

~~See Note 12 - Pending~~As a result of the Legacy Worldpay ~~Transaction in “Item 1 - Unaudited Consolidated Financial Statements” for details on~~acquisition, the ~~financing relating~~amendments to the ~~transaction.~~

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~~The~~ Existing Loan Agreement, requires us to maintain a leverage ratio no greater than established thresholds (based upon the ratio of total funded debt to consolidated EBITDA, as defined in the loan agreement) and a minimum interest coverage ratio (based upon the ratio of consolidated EBITDA to interest expense), which are tested quarterly based on the last four fiscal ~~quarters, commencing on September 30, 2016.~~quarters. The required financial ratios become more restrictive over time, with the specific ratios required by period set forth in the below table.



Period	Leverage Ratio (must not exceed)	Interest Coverage Ratio (must exceed)
~~July 1, 2016~~January 16, 2018 to September 30, ~~2016~~2018	~~6.25~~6.50 to 1.00	4.00 to 1.00
December 31, ~~2016~~2018 to September 30, ~~2017~~2019	~~5.50~~5.75 to 1.00	4.00 to 1.00
December 31, ~~2017~~2019 to September 30, ~~2018~~2020	~~4.75~~5.00 to 1.00	4.00 to 1.00
December 31, ~~2018~~2020 and thereafter	4.25 to 1.00	4.00 to 1.00

As of ~~September 30, 2017,~~March 31, 2018, we were in compliance with these covenants with a leverage ratio of ~~4.75~~4.38 to 1.00 and an interest coverage ratio of ~~8.50.~~10.70 to 1.00

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Interest Rate Swaps, Caps and ~~Caps~~Net Investment Hedges

As of ~~September 30, 2017,~~March 31, 2018, we have a total of 42 outstanding interest rate swaps and 6 interest rate cap agreements that were designated as cash flow hedges of interest rate risk. Additionally, the Company has designated a portion of its Euro denominated debt and 100% of its GBP denominated debt as net investment hedges. See Note 5 - Derivatives and Hedging Activities in “Item 1 - Notes to Unaudited Consolidated Financial Statements” for more information about the interest rate swaps, caps and ~~caps.~~net investment hedges.

Tax Receivable Agreements

As of ~~September 30, 2017,~~March 31, 2018, we are party to several TRAs in which we ~~agree~~have agreed to make payments to various parties of 85% of the federal, state, local and foreign income tax benefits realized by us as a result of certain tax deductions. ~~Payments under the TRAs will be based on our tax reporting positions and are only required to the extent we realize cash savings as a result~~

As of the underlying tax attributes. The cash savings realized by us are computed by comparing our actual income tax liability to the amount of such taxes we would have been required to pay had there been no deductions related to the tax attributes discussed below. We will retain the benefit ofMarch 31, 2018, the remaining ~~15% of the cash savings associated with the TRAs. We currently have the following three TRAs:~~

~~TRAs with investors prior to our IPO for its use of NPC Group, Inc. net operating losses (“NOLs”) and other tax attributes existing at the IPO date~~call/put options under ~~the NPC TRA, all of which is currently held by Fifth Third.~~

The Fifth Third TRA in which we realize tax deductions as a result of the increases in tax basis from the purchase of Vantiv Holding units or from the exchange of Vantiv Holding units for cash or shares of Class A common stock, as well as the tax benefits attributable to payments made under such TRAs.

~~Obligations recorded pursuant to the TRAs are based on estimates of future taxable income and future tax rates. On an annual basis, we evaluate the assumptions underlying the TRA obligations.~~

In connection with the Fifth Third share purchase discussed in Note 6 - Controlling and Non-controlling Interests in “Item 1 - Unaudited Consolidated Financial Statements”, we recorded a liability of approximately $647.5 million during the quarter ending September 30, 2017 under the tax receivable agreements we entered into with Fifth Third Bank at the time of its initial public offering. This liability is based on the closing share price of our Class A common stock on August 4, 2017.

~~During 2016, we terminated a portion of the obligations under the Fifth Third TRA. In addition to the Fifth Third TRA settlement,~~ the Fifth Third TRA Addendum, ~~contains the following provisions to acquire a significant portion of the remaining Fifth Third TRA:~~

~~As of September 30, 2017, the Fifth Third TRA Addendum provides that we may be obligated to pay up to a total of~~

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approximately $123.9 million to Fifth Third to terminate and settle certain remaining obligations under the Fifth Third TRA and the NPC TRA, totaling an estimated $275.8 million, the difference of which will be recorded as an addition to paid-in capital upon the exercise of the Call Options or Put Options (as defined below).

As of September 30, 2017, the following are the remaining terms under the Fifth Third TRA Addendum. Beginning December 1, 2017, March 1, 2018, June 1, 2018, September 1, 2018 and December 1, 2018, and ending December 10, 2017, March 10, 2018, June 10, 2018, September 10, 2018 and December 10, 2018, respectively, we are granted call options (collectively, the “Call Options”) pursuant to which certain of our additional obligations under the Fifth Third TRA and the NPC TRA would be terminated and settled in consideration for cashif exercised require payments of ~~$16.6 million, $25.6 million,~~ $26.4 million, $27.2 million and $28.1 million, ~~respectively.~~

Under the remaining terms of the Fifth Third TRA Addendum, in the unlikely event we do not exercise the relevant Call Option, Fifth Third is granted put options beginning December 20, 2017, March 20, 2018, June 20, 2018, September 20, 2018 and December 20, 2018, and ending December 31, 2017, March 31, 2018,effectively due on June 30, 2018, September 30, 2018 and December 31, 2018, respectively (collectively, the “Put Options”), pursuant to which certain of our additional obligations would be terminated and settled in consideration for cash payments with similar amounts to the Call Options.

In March, June and September 2017, we made payments of $15.1 million, $15.6 million and $16.1, respectively, pursuant to the Fifth Third TRA Holders under the terms of the Fifth Third TRA Addendum. These payments resulted in a net gain recorded in equity of approximately $45.3 million after taxes.

~~Since Fifth Third is a significant stockholder, a special committee of our board of directors comprised of independent, disinterested directors authorized the TRA Addendum.~~

During 2015, we entered into the Mercury TRA Addendum with each of the pre-acquisition owners of Mercury ("Mercury TRA Holders"). The Mercury TRA Addendum contains the following provisions to acquire the remaining Mercury TRA:respectively.

As of ~~September 30, 2017,~~March 31, 2018, the following are the remaining terms under the Mercury TRA Addendum. Beginning December 1st of each of 2017 and 2018, and ending June 30th of 2018 and 2019, respectively, we are granted call options (collectively, the "Call Options") pursuant to which certain of our additional obligations under the Mercury TRA would be terminated in consideration for cash payments of $38.0 million and $43.0 million, respectively.

In the unlikely event we do not exercise the relevant Call Option, the Mercury TRA Holders are granted put options beginning July 10th and ending July 25th of each of 2018 and 2019, respectively (collectively, the "Put Options"), pursuant to which certain of our additional obligations would be terminated in consideration for cash payments with similar amounts to the Call Options.

~~In June 2017 and 2016, we exercised the December 2016 and 2015 Call Options under the Mercury TRA Addendum and we made the related $38.1 million and $41.4 million payments to the Mercury TRA Holders.~~

The timing and/or amount of aggregate payments due under the TRAs outside of the call/put structures may vary based on a number of factors, including the amount and timing of the taxable income we generate in the future and the tax rate then applicable, the use of loss carryovers and amortizable basis. Payments under the TRAs, if necessary, are required to be made no later than January 5th of the second year immediately following the taxable year in which the obligation occurred. We made payments under the TRA obligations of approximately $55.7 million and $53.5 million in January 2017 and January 2016, respectively. Unless settled under the terms of the repurchase addenda, the terms of the TRAs will continue until all underlying tax benefits have been utilized or expired.

~~Table of Contents~~

If Fifth Third had exchanged its remaining Class B units of Vantiv Holding all for shares of Class A common stock on ~~September 30, 2017,~~March 31, 2018, we would have recorded an additional full and undiscounted TRA obligation of approximately ~~$0.6~~$0.4 billion.

This estimate is subject to material change based on changes in Fifth Third’s tax basis in the partnership interest, changes in tax rates, or significant changes in our stock price.

For more information on the TRAs, see Note 7 - Tax Receivable Agreements in the Notes to Consolidated Financial Statements of the Company’s 2017 Form 10-K filed on February 28, 2018.

Contractual Obligations

~~Except for the August 2017 $1.27 billion incremental Term B loan borrowing presented in Note 4 - Long-Term Debt in “Item 1 - Unaudited Consolidated Financial Statements”, there~~There have been no significant changes to contractual obligations and commitments compared to those disclosed in

our Annual Report on Form 10-K as of December 31, ~~2016~~2017 filed with the SEC on February ~~8, 2017.~~28, 2018.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our ~~unaudited~~audited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our critical estimates giving consideration to a combination of factors, including historical experience, current conditions and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

~~During~~Except for the ~~nine months ended September 30, 2017,~~adoption of Accounting Standards Update 2014-09, Revenue From Contracts With Customers (Topic 606) on January 1, 2018 as discussed in Note 1- Basis of Presentation and Summary of Significant Accounting Policies, we have not adopted any new critical accounting policies, have not changed any critical accounting policies and have not changed the application of any critical accounting policies from the year ended December 31, ~~2016.~~2017. Our critical accounting policies and estimates are described fully within Management’s Discussion and Analysis of Financial Condition and Results of Operations included within our Annual Report on Form 10-K filed with the SEC on February ~~8, 2017.~~28, 2018.

Off-Balance Sheet Arrangements

We have no off-balance sheet financing arrangements.

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Item 3. Quantitative and Qualitative Disclosure ~~About~~about Market Risk

We are exposed to interest rate risk in connection with our senior secured credit facilities, which are subject to variable interest rates. We hedge a portion of our exposure to interest rate fluctuations through the utilization of interest rate swaps and caps in order to mitigate the risk of this exposure.

As of ~~September 30, 2017~~March 31, 2018 we had a total of 42 outstanding interest rate swaps covering an exposure period from January ~~2017~~2018 through January 2019 and have a combined notional balance of $500 million. In addition, we have 6 interest rate cap agreements with a combined $1.0 billion notional balance and a cap strike rate of 0.75% covering an exposure period from January 2017 to January 2020.

Based on the amount outstanding under our senior secured credit facilities at ~~September 30, 2017,~~March 31, 2018, a change in one percentage point in variable interest rates, after the effect of our interest rate swaps and caps effective at ~~September 30, 2017,~~March 31, 2018, would cause an increase or decrease in interest expense of ~~$32.7~~$50.1 million on an annual basis.

~~Table of Contents~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our ~~Chief~~Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. As a result of the closing of the Legacy Worldpay acquisition in the first quarter of 2018, the scope of management’s assessment of the effectiveness of the Company’s disclosure controls and procedures did not include the internal controls over financial reporting of Legacy Worldpay. This exclusion is in accordance with the SEC Staff’s general guidance that an assessment of a recently acquired business may be omitted from the scope of management’s assessment for one year following the acquisition. Based on the evaluation of our disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2018, our ~~Chief~~Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

~~There~~Changes in Internal Control over Financial Reporting

As a result of the closing of the Legacy Worldpay acquisition, the Company has incorporated internal controls over significant processes specific to the acquisition that the Company believes are appropriate and necessary in consideration of the level of related integration. As the post-closing integration continues, the Company will continue to review the internal controls and processes of Legacy Worldpay and may take further steps to integrate such controls and processes with those of the Company. Except as noted above, there were no changes in our internal control over financial reporting that occurred during the three months ended ~~September 30, 2017~~March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various litigation matters arising in the ordinary course of our business. While it is impossible to ascertain the ultimate resolution or range of financial liability with respect to these contingent matters, management believes none of these matters, either individually or in the aggregate, would have a material adverse effect on us, except as discussed in Note 7 - Commitments, Contingencies and Guarantees in Part I, ~~Item 1.~~“Item 1 - Notes to Unaudited Consolidated Financial Statements”. See the information under Legal Reserve in Note 7 - Commitments, Contingencies and Guarantees, which we incorporate herein by reference.

Item 1A. Risk Factors

You should carefully consider the risks described under “Risk Factors” in our Annual Report on Form 10-K for the

year ended December 31, ~~2016. Additionally, our Preliminary Proxy Statement filed September 22, 2017, includes “Risk Factors” related to the pending Worldpay transaction.~~2017. These risks could materially affect our business, results of operations or financial condition, cause the trading price of our common stock to decline materially or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of Vantiv. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the risks of our businesses described elsewhere in this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016 or in our Preliminary Proxy Statement.~~2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information regarding shares of Class A common stock repurchased by us during the three months ended ~~September 30, 2017:~~March 31, 2018:

Period
Total Number
of Shares
Purchased ⁽¹⁾⁽²⁾
Average Price
Paid per
Share
Total Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs ⁽²⁾

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) ⁽²⁾
July 1, 2017 to July 31, 2017 6,254
$ 64.18
—
$ 243.2
August 1, 2017 to August 31, 2017 43,336
$ 70.69
—
$ 243.2
September 1, 2017 to September 30, 2017 —
$ —
—
$ 243.2



Period	Total Number of Shares Purchased ⁽¹⁾⁽²⁾	Average Price Paid per Share		Total Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) ⁽²⁾
January 1, 2018 to January 31, 2018	106	$	80.59	—	$	243.2
February 1, 2018 to February 28, 2018	145,406	$	77.48	—	$	243.2
March 1, 2018 to March 31, 2018	—	$	—	—	$	243.2


⁽¹⁾	Includes shares of Class A common stock surrendered to us to satisfy tax withholding obligations in connection with the vesting of restricted stock awards.

⁽²⁾

In October 2016, our board of directors authorized a program to repurchase up to $250 million of our Class A common stock. Purchases under the repurchase program are allowed from time to time in the open market, in privately negotiated transactions, or otherwise. The manner, timing, and amount of any purchases are determined by management based on an evaluation of market conditions, stock price, and other factors. The share repurchase program has no expiration date and we may discontinue purchases at any time that management determines additional purchases are not warranted.

Item 5. Other Information

None.

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Item 6. Exhibits

See the Exhibit Index ~~immediately following the signature page~~ of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		~~VANTIV, INC.~~

~~Dated:~~	~~October 26, 2017~~	~~By:~~	~~/s/ STEPHANIE L. FERRIS~~
			~~Name: Stephanie L. Ferris~~
			~~Title: Chief Financial Officer~~


~~Dated:~~	~~October 26, 2017~~	~~By:~~	~~/s/ CHRISTOPHER THOMPSON~~
			~~Name: Christopher Thompson~~
			~~Title: SVP, Controller and Chief Accounting Officer~~

~~Table of Contents~~

EXHIBIT INDEX



Exhibit		Incorporated by Reference
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
~~31.1~~31.1.1	Certification of ~~Chief~~Co-Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.1.2	Certification of Co-Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~32.1~~32	Certifications of ~~Chief~~Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive Data Files.

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Table of Contents

SIGNATURES



		WORLDPAY, INC.

Dated:	May 10, 2018	By:	/s/ CHARLES D. DRUCKER
			Name: Charles D. Drucker
			Title: Executive Chairman and Co-Chief Executive Officer


Dated:	May 10, 2018	By:	/s/ PHILIP JANSEN
			Name: Philip Jansen
			Title: Co-Chief Executive Officer


Dated:	May 10, 2018	By:	/s/ STEPHANIE L. FERRIS
			Name: Stephanie L. Ferris
			Title: Chief Financial Officer


Dated:	May 10, 2018	By:	/s/ CHRISTOPHER THOMPSON
			Name: Christopher Thompson
			Title: SVP, Controller and Chief Accounting Officer



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Revenue:
External customers	$	1,017,030		$	897,800		$	2,910,601		$	2,565,529
Related party revenues	16,735			16,219			50,130			58,330
Total revenue	1,033,765			914,019			2,960,731			2,623,859
Network fees and other costs	479,533			423,361			1,406,358			1,221,510
Sales and marketing	173,779			153,248			497,082			433,730
Other operating costs	79,482			72,162			234,347			219,464
General and administrative	49,607			40,727			189,632			133,831
Depreciation and amortization	82,500			66,086			236,964			199,550
Income from operations	168,864			158,435			396,348			415,774
Interest expense—net	(38,521		)	(27,474		)	(97,441		)	(81,321		)
Non-operating income (expenses)	21,207			(4,633		)	13,672			(14,949		)
Income before applicable income taxes	151,550			126,328			312,579			319,504
Income tax expense	44,645			39,324			83,519			101,591
Net income	106,905			87,004			229,060			217,913
Less: Net income attributable to non-controlling interests	(14,787		)	(20,708		)	(39,280		)	(52,552		)
Net income attributable to Vantiv, Inc.	$	92,118		$	66,296		$	189,780		$	165,361
Net income per share attributable to Vantiv, Inc. Class A common stock:
Basic	$	0.57		$	0.43		$	1.18		$	1.06
Diluted	$	0.57		$	0.41		$	1.17		$	1.04
Shares used in computing net income per share of Class A common stock:
Basic	161,465,849			155,740,660			161,205,066			155,603,265
Diluted	162,882,396			197,342,169			162,617,782			197,126,571



	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	92,638		$	139,148
Accounts receivable—net	899,389			940,052
Related party receivable	1,639			1,751
Settlement assets	135,043			152,490
Prepaid expenses	48,073			39,229
Other	118,664			15,188
Total current assets	1,295,446			1,287,858
Customer incentives	64,023			67,288
Property, equipment and software—net	470,308			348,553
Intangible assets—net	732,431			787,820
Goodwill	4,180,307			3,738,589
Deferred taxes	1,322,679			771,139
Other assets	24,740			42,760
Total assets	$	8,089,934		$	7,044,007
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses	$	528,473		$	471,979
Related party payable	3,037			3,623
Settlement obligations	788,261			801,381
Current portion of note payable to related party	7,557			7,557
Current portion of note payable	133,097			123,562
Current portion of tax receivable agreement obligations to related parties	261,844			191,014
Current portion of tax receivable agreement obligations	54,798			60,400
Deferred income	19,349			7,907
Current maturities of capital lease obligations	8,000			7,870
Other	6,790			13,719
Total current liabilities	1,811,206			1,689,012
Long-term liabilities:
Note payable to related party	170,097			143,577
Note payable	4,421,522			2,946,026
Tax receivable agreement obligations to related parties	876,434			451,318
Tax receivable agreement obligations	42,510			86,640
Capital lease obligations	6,666			13,223
Deferred taxes	98,097			62,148
Other	46,297			44,774
Total long-term liabilities	5,661,623			3,747,706
Total liabilities	7,472,829			5,436,718
Commitments and contingencies (See Note 7 - Commitments, Contingencies and Guarantees)
Equity:
Class A common stock, $0.00001 par value; 890,000,000 shares authorized; 162,506,630 shares outstanding at September 30, 2017; 161,134,831 shares outstanding at December 31, 2016	1			1
Class B common stock, no par value; 100,000,000 shares authorized; 15,252,826 shares issued and outstanding at September 30, 2017; 35,042,826 shares issued and outstanding at December 31, 2016	—			—
Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding	—			—
Paid-in capital	25,048			706,055
Retained earnings	617,683			689,512
Accumulated other comprehensive loss	(1,671		)	(6,197		)
Treasury stock, at cost; 2,849,275 shares at September 30, 2017 and 2,710,195 shares at December 31, 2016	(82,893		)	(73,706		)
Total Vantiv, Inc. equity	558,168			1,315,665
Non-controlling interests	58,937			291,624
Total equity	617,105			1,607,289
Total liabilities and equity	$	8,089,934		$	7,044,007



Cash acquired	$	22,851
Current assets	44,047
Property and equipment	22
Intangible assets	72,000
Goodwill	378,747
Current liabilities	(65,966		)
Deferred tax liability	(19,192		)
Non-current liabilities	(2,881		)
Total purchase price	$	429,628



Three months ending December 31, 2017	$	55,393
2018	208,917
2019	192,553
2020	112,134
2021	62,906
2022	41,392



	September 30, 2017			December 31, 2016
Term A loan, maturing in October 2021⁽¹⁾	$	2,376,773		$	2,469,375
Term B loan, maturing in October 2023⁽²⁾	759,263			765,000
Incremental Term B loan, maturing in August 2024⁽³⁾	1,270,000			—
Leasehold mortgage, expiring on August 10, 2021⁽⁴⁾	10,131			10,131
Revolving credit facility, expiring in October 2021⁽⁵⁾	359,000			—
Less: Current portion of note payable and current portion of note payable to related party	(140,654		)	(131,119		)
Less: Original issue discount	(3,197		)	(3,631		)
Less: Debt issuance costs	(39,697		)	(20,153		)
Note payable and note payable to related party	$	4,591,619		$	3,089,603



	Vantiv, Inc.		Fifth Third		Total
As of December 31, 2016	161,134,831		35,042,826		196,177,657
% of ownership	82.14	%	17.86	%
Fifth Third exchange of Vantiv Holding units for shares of Class A common stock	19,790,000		(19,790,000	)	—
Purchase and cancellation of Class A common stock	(19,790,000	)	—		(19,790,000	)
Equity plan activity ⁽¹⁾	1,371,799		—		1,371,799
As of September 30, 2017	162,506,630		15,252,826		177,759,456
% of ownership	91.42	%	8.58	%