Worldline - Registration Document 2016

Operation and financial review Overview

competitive, and the ability to deliver reliable, high quality processing services at competitive prices for high processing volumes is an important differentiator. The Group seeks to leverage its scale and global factory Pricing dynamics. The payment services industry is highly ● approach to achieve low costs and enhance its ability to provide highly competitive pricing without sacrificing services and Connected Living services that leverage the “internet of things” are each creating new service E-Ticketing and automated fare collection, new government ecosystems with new non-cash payment needs. is creating new digital businesses that are expected to drive additional payment transaction growth in the coming years. Emergence of new digital businesses. The digital revolution ● reliability or profitability; 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 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 time of the transaction. Group’s e-Ticketing contracts in Latin America. The Group recognizes revenue from transaction based contracts at the development stage of those contracts. period is affected by the mix of types of contracts and the The Group’s revenue and profitability recorded during any given 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 Contract Structure 9.1.2.2

transaction based revenue once the project reaches the “maturity” stage; high) with relatively small additional cost. The “build” stage is typically less profitable because the costs of building a contract is typically the “maturity” stage, where the Group earns increasing transaction based revenue (or they remain service are usually higher than the fixed costs of running a service once it is in place. During the “ramp” phase, a In terms of profitability, the most profitable stage of 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. Revenue of theMerchant Services &Terminals Global Business Line The Group’s Merchant Services & Terminals 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 generally consist of either a percentage of the value of the transaction (in the case of credit card transactions) or a fixed and debit card transactions. The fees the Group charges 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 ancillary value added services such as fraud performance of the Group’s merchant clients; is affected primarily by average transaction values, the mix of merchant types in its client portfolio and the commercial Revenue from the Group’s Commercial Acquiring business detection, customer feedback surveys, loyalty and gift card solutions, DDC (dynamic currency conversion) services. Revenue Composition of Global Business Line 9.1.2.3 The Group’s consolidated revenue is generated by sales of services and products by its three global business lines.

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Worldline 2016 Registration Document