Worldline - 2019 Universal Registration Document

FINANCIALS Main factors affecting the Group’s revenue and profitability

E.1.2

Contract Structure

Although each contract is tailored to the circumstances and the specific terms vary from client to client, the Group’s contracts typically have one of two main structures: Build to run contracts. The Group provides most of its services under mid- to long-term “build to run” contracts. These arrangements typically include fixed fees paid to the Group upon completion of specified milestones during the “build” phase of the service, as well as ongoing “run” fees paid once the service has become operational. “Run” fees for operating and maintaining the system typically include a fixed component, typically with a pre-agreed capacity or assumed minimum number of transactions, and a variable component based on the number of transactions beyond a pre-agreed threshold; Transaction value based contracts . The Group provides some services under contracts that are primarily based on the value of transactions processed, with minimal fees for initial set up of the service. These arrangements include the processing of credit (or debit) card transactions in the Group’s commercial acquiring business and some of the Group’s e-Ticketing contracts in Latin America. The Group recognizes revenue from transaction based contracts at the time of the transaction. The Group’s revenue and profitability recorded during any given period is affected by the mix of types of contracts and the development stage of those contracts.

From a revenue perspective, the Group generally records a significant amount of revenue from a build to run contract during the “build” phase. Once the “run” phase of a project begins, the Group typically earns lower transaction based revenue during the “ramp” phase of the project and higher transaction based revenue once the project reaches the “maturity” stage. In terms of profitability, the most profitable stage of a contract is typically the “maturity” stage, where the Group earns increasing transaction based revenue (or they remain high) with relatively small additional cost. The “build” stage is typically less profitable because the costs of building a service are usually higher than the fixed costs of running a service once it is in place. During the “ramp” phase, a contract with “run” revenue priced on a per transaction or value basis may or may not be profitable, depending on the terms of the agreement and whether the minimum fees charged without reference to the number or value of transactions are high enough to offset the associated costs. Given the front-end nature of build revenue and the lower associated profitability of the build and early ramp phases of a project, differences in the mix of development stages of the Group’s projects from period to period may cause significant period to period fluctuations in revenue and profitability at the consolidated level, and the effect may be even more pronounced at the level of a particular Global Business Line or business division. ancillary value added services such as fraud detection, customer feedback surveys, loyalty and gift card solutions, DDC (dynamic currency conversion) services. Revenue from the Group’s commercial acquiring business is affected primarily by average transaction values, the mix of merchant types in its client portfolio and the commercial performance of the Group’s merchant clients; Revenue from Omni-channel payment acceptance is generated primarily from activation fees, monthly subscription fees and per transaction processing fees that incorporate volume discounts for higher numbers of transactions. The Group also includes in this Business Line revenue from other acceptance-related processing services. Revenue from its online services business is impacted primarily by the number of omni-commerce projects in the build phase during the relevant period, the number of omni-commerce transactions processed for projects in the run phase and the number of Sips and other acceptance transactions processed;

E

E.1.3

Composition of Global Business Line Revenue

The Group’s consolidated revenue is generated by sales of services and products by its three Global Business Lines.

Revenue of the Merchant Services E.1.3.1 Global Business Line The Group’s Merchant Services Global Business Line generates revenue from four Business Lines: Commercial Acquiring. The Group’s Commercial Acquiring revenue is primarily derived from the processing of credit and debit card transactions. The fees the Group charges generally consist of either a percentage of the value of the transaction (in the case of credit card transactions) or a fixed fee per transaction (in the case of debit cards), or both (in the case of low-value debit transactions), and are recognized at the time of the transaction. The Group also generates revenue from

211 Universal Registration Document 2019