FDC 2017 Annual Report

4 3 O p er ati n g e x p e ns es o v er vi e w Ye a r e n d e d D e c e m b e r 3 1, P e r c e nt C h a n g e R e p o rt e d C o nst a nt C u r r e n c y P e rc e nt C h a n g e (i n milli o ns) 2 0 1 7 2 0 1 6 2 0 1 5 2 0 1 7 vs. 2 0 1 6 2 0 1 6 vs. 2 0 1 5 2 0 1 7 vs. 2 0 1 6 2 0 1 6 vs. 2 0 1 5 C ost of s er vi c es ( e x cl usi v e of it e ms s h o w n b el o w) $ 2, 7 6 3 $ 2, 8 5 5 $ 2, 8 7 1 ( 3) % ( 1) % ( 3) % 1 % C ost of pr o d u cts s ol d 3 5 9 3 3 7 3 5 6 7 % ( 5) % 7 % ( 3) % S elli n g, g e n er al, a n d a d mi nistr ati v e 2, 1 7 8 2, 0 3 5 2, 2 9 2 7 % ( 1 1) % 7 % ( 1 0) % D e pr e ci ati o n a n d a m orti z ati o n 9 7 2 9 4 9 1, 0 2 2 2 % ( 7) % 2 % ( 6) % Ot h er o p er ati n g e x p e ns es 1 4 3 6 1 5 3 1 3 4 % 1 5 % 1 3 4 % 1 7 % T ot al e x p e ns es ( e x cl u di n g r ei m b urs a bl e it e ms) 6, 4 1 5 6, 2 3 7 6, 5 9 4 3 % ( 5) % 3 % ( 4) % R ei m b urs a bl e d e bit n et w or k f e es, p ost a g e, a n d ot h er 3, 9 2 3 3, 7 4 5 3, 6 8 7 5 % 2 % 5 % 2 % T ot al e x p e ns es $ 1 0, 3 3 8 $ 9, 9 8 2 $ 1 0, 2 8 1 4 % ( 3) % 4 % ( 2) % C ost of s er vi c es Ye a r e n d e d D e c e m b e r 3 1, P e r c e nt C h a n g e R e p o rt e d C o nst a nt C u r r e n c y P e rc e nt C h a n g e (i n milli o ns) 2 0 1 7 2 0 1 6 2 0 1 5 2 0 1 7 vs. 2 0 1 6 2 0 1 6 vs. 2 0 1 5 2 0 1 7 vs. 2 0 1 6 2 0 1 6 vs. 2 0 1 5 S al ari es, w a g es, a n d b o n us $ 1, 4 3 7 ( a) $ 1, 4 7 4 $ 1, 4 7 8 ( 2) % — % St o c k- b as e d c o m p e ns ati o n 7 2 ( b) 1 1 2 ( d) 1 3 0 ( 3 5) % ( 1 4) % O utsi d e pr of essi o n al s er vi c es 2 5 8 ( c) 2 6 4 ( e) 2 5 0 ( 2) % 6 % S oft w ar e, t el e c o m m u ni c ati o n i nfr astr u ct ur e, a n d r e p airs 3 8 7 ( c) 3 9 6 ( e) 3 8 0 ( 2) % 4 % Ot h er 6 0 9 6 0 9 (f) 6 3 3 — % ( 4) % C ost of s er vi c es e x p e ns e $ 2, 7 6 3 $ 2, 8 5 5 $ 2, 8 7 1 ( 3) % ( 1) % ( 3) % 1 % ( a) E x p e ns e d e cr e as e d i n 2 0 1 7 c o m p ar e d t o 2 0 1 6 d u e t o a $ 3 7 milli o n d e cli n e i n s al ari es a n d w a g es r el at e d t o pr o d u cti vit y i m pr o v e m e nts a n d e n h a n c e m e nts. ( b) T h e d e cli n e i n st o c k b as e d c o m p e ns ati o n of $ 4 0 milli o n r es ult e d fr o m a $ 3 4 milli o n d e cr e as e r el ati n g t o r e all o c ati o n fr o m cost of s er vi c es t o s elli n g, g e n er al a n d a d mi nistr ati v e e x p e ns es t o b ett er ali g n wit h o ur o p er ati o ns, $ 2 2 milli o n d e cli n e i n o n e-ti m e e x p e ns e r el at e d t o o ur i niti al p u bli c off eri n g i n 2 0 1 5, offs et b y a n i n cr e as e of $ 1 6 milli o n i n r e c urri n g st o c k- b as e d c o m p e ns ati o n i n c urr e d o v er t h e v esti n g lif e of n or m al s er vi c e- b as e d st o c k a w ar ds. ( c) O utsi d e pr of essi o n al s er vi c es a n d S oft w ar e, t el e c o m m u ni c ati o n, i nfr astr u ct ur e a n d r e p airs e x p e ns e d e cr e as e d b y $ 1 5 milli o n d u e t o b e n efits a c hi e v e d t hr o u g h o ur c ost i niti ati v es. ( d) St o c k c o m p e ns ati o n e x p e ns e d e cr e as e d i n 2 0 1 6 c o m p ar e d t o 2 0 1 5 b y $ 1 8 milli o n as a r es ult of a $ 7 8 milli o n o n e-ti m e e x p e ns e i n 2 0 1 5 r el at e d t o o ur i niti al p u bli c off eri n g, p arti all y offs et b y a n i n cr e as e of $ 6 0 milli o n i n r e c urri n g st o c k- b as e d c o m p e ns ati o n i n c urr e d o v er t h e v esti n g lif e of n or m al s er vi c e- b as e d st o c k a w ar ds. ( e) O utsi d e pr of essi o n al s er vi c es a n d S oft w ar e, t el e c o m m u ni c ati o n, i nfr astr u ct ur e a n d r e p airs e x p e ns e i n cr e as e d b y $ 3 0 milli o n as w e c o nti n u e t o i n v est i n o ur c or e o p er ati n g b usi n ess es. (f) Ot h er e x p e ns es d e cli n e d as 2 0 1 5 w as n e g ati v el y i m p a ct e d b y t w o cli e nt-r el at e d m att ers t ot ali n g $ 2 4 milli o n. I n a d diti o n, i ncl u d e d wit hi n ot h er e x p e ns es is a n i n cr e as e of a p pr o xi m at el y $ 2 5 milli o n i n m er c h a nt cr e dit l oss es, p arti all y offs et b y a d e cli n e of w arr a nt y e x p e ns e wit hi n N S S of $ 1 0 milli o n. M er c h a nt cr e dits l oss es i n cr e as e d d u e t o hi g h er fr a u d r at es a n d c h ar g e- b a c ks r es ulti n g fr o m a li a bilit y s hift p ost E M V. Warr a nt y e x p e ns e d e cli n e d dri v e n b y l o w er v ol u m es wit hi n o ur Tel e C h e c k b usi n ess. T h e r e m ai ni n g d e cli n e i n ot h er e x p e ns e w as dri v e n b y e x p e ns e r ati o n ali z ati o n fr o m o ur pr e vi o usl y a n n o u n c e d c ost m a n a g e m e nt i niti ati v es. C ost of pr o d u cts s ol d C ost of pr o d u cts s ol d e x p e ns e i n cr e as e d i n 2 0 1 7 c o m p ar e d t o 2 0 1 6 d u e t o h ar d w ar e e x p e ns es, i m p a ct e d b y a $ 4 7 milli o n c h a n g e i n a c c o u nti n g r el ati n g t o o ur Cl o v er t er mi n als eff e cti v e as of J a n u ar y 1, 2 0 1 7. C ost of pr o d u cts s ol d d e cr e as e d i n 2 0 1 6 c o m p are d t o 2 0 1 5 d u e t o d e cli n e i n h ar d w ar e s al es.