Worldline - Registration Document 2016

Operation and financial review Overview

9.1.2.5

General Economic Conditions

on the number of transactions or records processed and additional system capacity. After a service has begun operations, the Group may also earn new project revenue to further expand its capabilities; fees for maintaining and running the program based on the system’s capacity. The Group also earns some fees based systems and other services to public sector entities under a range of contract types, often of significant size. Many of these services are provided on a build to run project basis where the Group earns an initial fee for the design and Collection business line offers a range of services, including large scale digitization services, road traffic enforcement, tax collection, healthcare information and reimbursement implementation of the project and thereafter earns ongoing E-Government Collection. The Group’s e-Government ● include build revenue and then an ongoing fee based on the number of connected devices managed. Revenue from these services may also include some project revenue in connection with implementing new services. Contact services are typically based on the number and duration of connections. Connected Living projects typically Mobility business line offers a large range of services. Consumer cloud services are typically priced based on the number of end users and the average usage per user. E-Consumer & Mobility. The Group’s e-Consumer & ● generally range from three to five years in length, with some private sector contracts in Latin America having a length of up to ten years. When an agreement reaches the end of its term, a client may seek to renew it or renegotiate the terms of the agreement or may decide not to renew the agreement. The The Group’s revenue and profitability can be significantly affected by contract renewal cycles. The Group’s contracts Although the Group’s business is spread across a large number terms of a contract renewal, or failure to renew a contract, can have, depending on the relative size of the agreement in question, a significant impact on the revenue and profitability of the Group or a global business line in any given period. of agreements and no single client represented more than c.5% of the Group’s revenue in 2016, the relative weighting of a particular contract can be higher within a business division or global business line. In this respect, about 50% of e-Government Collection revenue in 2015 derived from two significant contracts, the VOSA contract in the United Kingdom and the Radar Contract (Automated traffic offence management system) in France. These two contracts are terminated, at the end of the third quarter of 2015 for the VOSA contract and in the course of June 2016 for the RADAR contract. Contract Renewal Cycles 9.1.2.4

issuers often reduce credit limits and tighten their card issuance rates, which can have a negative effect on the overall value of transactions generated by consumers and number of cards The Group generates the majority of its revenue from the processing of payment transactions on either a per transaction or percentage of transaction value basis. During economic downturns, consumers typically reduce spending, and card managed. Although this effect exists, it has been far outweighed in recent years by the secular shift from cash to non-cash payments. Also, while consumers reduce spending during downturns, many consumers may make smaller but more frequent transactions. Because a majority of the Group’s revenue is generated on the basis of the number of transactions that take place, this helps reduce the effect of overall spending declines. In addition, a significant portion of the Group’s further insulates the Group from the full effect of economic downturns. groceries or fuel, the sales of which are less volatile, which Merchant Services & Terminals business is earned from retailers that are in non-discretionary spending categories such as transaction fees and the Group’s success in building scalable platforms to process these volumes profitably. significant growth in future periods, the Group’s profitability would be affected by the extent to which the new volumes generated by these payment methods outweigh the lower per margin of 13.9% in 2016). Similarly, the Group earns higher average fees on credit card transactions than it does on debit, OBeP and certain electronic wallet transactions. To the extent that these categories of non-cash payments experience Services division tends to generate a proportionately higher portion of its revenue from projects in the build and ramp phase, it achieves higher revenue growth but lower margins (OMDA higher proportion of services that have reached full scale, allowing it to generate OMDA margins of 26.1% and 22.6% respectively for these two global business lines in 2016. Conversely, because the Group’s Mobility & e-Transactional that have reached scale and others that are still in the build or ramp up phase. From a global business line profitability perspective, the Group’s Financial Services global business line and Merchant Services & Terminals global business line have a “build” phase, the most profitable stage of such contracts is The Group’s revenue and profitability are also affected by the mix and stage of maturity of the services it sells. As noted in Section 9.1.2.2 “Contract Structure,” while the highest revenue under a build to run contract is typically earned during the typically the “maturity” phase of the “run” period. Each of the Group’s three global business lines has a mix of some services Services Mix 9.1.2.6

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Worldline 2016 Registration Document