BLACKHAWK NETWORK HOLDINGS, INC.

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 28, 2015 BLACKHAWK NETWORK HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction of Incorporation or Organization) (Commission File Number) (I.R.S. Employer Identification No.) 6220 Stoneridge Mall Road Pleasanton, CA (Address of Principal Executive Offices, including Zip Code) (Registrant s Telephone Number, Including Area Code): (925) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: o Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) o o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 Item 2.02 Results of Operations and Financial Condition. On April 28, 2015, Blackhawk Network Holdings, Inc. (the Company ) issued a press release announcing its financial results for the quarter ended March 28, 2015, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference. The information in this report furnished pursuant to this Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the Exchange Act ), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing of the Company under the Exchange Act or the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. Exhibit No. Description 99.1 Press release dated April 28, Q Earnings Presentation

3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BLACKHAWK NETWORK HOLDINGS, INC. Date: April 28, 2015 By: /s/ Kirsten E. Richesson Name: Kirsten E. Richesson Title: General Counsel and Secretary

4 EXHIBIT INDEX Exhibit No. Description 99.1 Press release dated April 28, Q Earnings Presentation

5 Exhibit 99.1 News Release INVESTORS/ANALYSTS: MEDIA: Patrick Cronin Teri Llach (925) (925) Blackhawk Announces First Quarter 2015 Financial Results Adjusted Operating Revenues Up 48% Versus First Quarter 2014 Adjusted Net Income Increases 266% Pleasanton, California, April 28, 2015 Blackhawk Network Holdings, Inc. (NASDAQ: HAWK and HAWKB) today announced financial results for the first quarter ended March 28, $ in millions except per share amounts Q1'15 Q1'14 % Increase Operating Revenues $ $ % Adjusted Operating Revenues $ $ % Adjusted EBITDA $ 27.2 $ % Adjusted Net Income $ 18.9 $ % Adjusted EPS (Diluted) $ 0.34 $ % EPS (GAAP Diluted) $ 0.08 $ (0.06) N/M "Our U.S. and international retail segments began the year with good momentum, growing first quarter transaction dollar volume 26% and 29% respectively," commented CEO Bill Tauscher. "In our U.S. retail segment, which accounted for 64% of adjusted operating revenues, adjusted operating revenues grew 33% over last year's first quarter. This reflected strong sales of closed and open loop gift cards. International retail adjusted operating revenues grew 5%, or 19% on a constant currency basis, driven by sales of digital media products. In our incentives and rewards segment transaction dollar volume grew 294% primarily reflecting the acquisition of Parago, or 45% excluding 2014 acquisitions. Incentives and rewards, which generated 22% of worldwide adjusted operating revenues, grew its adjusted operating revenues 279%, or 47% excluding 2014 acquisitions. That brought Company-wide adjusted operating revenues to $164 million for the quarter, a 48% increase over the same period last year." CFO Jerry Ulrich added, "Adjusted EBITDA grew 127%, higher than adjusted operating revenue growth due to expense leverage in sales and marketing and general and administrative expenses. Excluding 2014 acquisitions, our adjusted operating revenues grew 27% and adjusted EBITDA grew 94%. First quarter adjusted net income grew 266% to $18.9 million and adjusted diluted EPS totaled $0.34, an increase of 240% over the first quarter of Excluding a reduction in cash taxes payable related to our 2014 spin-off from Safeway and the realization of acquisition-related net operating losses, adjusted net income grew 153% and adjusted diluted EPS grew 143%."

6 Conference Call/Webcast On Wednesday, April 29 at 6:00 a.m. PDT / 9:00 a.m. EDT the Company will host a conference call and live webcast to discuss first quarter financial results and provide financial guidance for the remainder of Hosting the call will be Bill Tauscher, Chief Executive Officer; Talbott Roche, President; and Jerry Ulrich, Chief Financial & Administrative Officer. Participants may access the live webcast by visiting the Company s investor relations website at ir.blackhawknetwork.com. A copy of the webcast presentation slides will be posted to the presentations tab of the Company's investor relations website by 2 p.m. PDT on April 28, A replay of the webcast will be available on the Company's investor relations website until Wednesday, May 13, GAAP financial results for the first quarter of 2015 compared to the first quarter of 2014 Operating revenues totaled $319.7 million, an increase of 37% from $233.1 million for the quarter ended March 22, This increase was due to a 24% increase in commissions and fees driven primarily by higher closed loop gift card sales; a 105% increase in program, interchange, marketing and other fees due to strong open loop gift card sales in the U.S. retail segment and growth in the incentives and rewards segment, reflecting the acquisition of Parago in late 2014; and a 36% increase in product sales primarily due to growth at Cardpool. Net income totaled $4.7 million compared to net loss of $2.8 million for the quarter ended March 22, The increase was driven primarily by a 37% increase in operating revenues and a $4.1 million non-cash contingent consideration credit related to the acquisition of CardLab, partially offset by higher operating expenses including amortization of intangibles and interest expense related to the acquisition of Parago. Earnings per diluted share was $0.08 compared to net loss per diluted share of $0.06 for the quarter ended March 22, Diluted shares outstanding increased 6% to 55.4 million due to the dilutive effect of stock options and restricted stock awards in the 2015 period as compared to the 2014 period in which diluted shares were the same as average shares outstanding because of the net loss in the 2014 period. Non-GAAP financial results for the first quarter of 2015 compared to the first quarter of 2014 (see Table 2 for Reconciliation of Non-GAAP Measures) Adjusted operating revenues totaled $164.4 million, an increase of 48% from $110.8 million for the quarter ended March 22, Excluding our 2014 acquisitions, adjusted operating revenues grew 27%, or 30% on a constant currency basis. Adjusted EBITDA totaled $27.2 million, an increase of 127% from $12.0 million for the quarter ended March 22, Excluding 2014 acquisitions, adjusted EBITDA increased 94%, or 99% on a constant currency basis. Adjusted net income totaled $18.9 million, an increase of 266% from $5.2 million for the quarter ended March 22, Excluding the impact of the reduction in cash taxes payable, adjusted net income was $9.6 million, an increase of 153% from $3.8 million for the quarter ended March 22, Adjusted net income grew faster than adjusted EBITDA primarily due to slower growth in depreciation as compared to adjusted EBITDA growth and a 210 basis point reduction in the first quarter 2015 effective tax rate on adjusted income before taxes as compared to The lower tax rate was due primarily to tax benefits from foreign rate differential resulting from jurisdictional mix of pre-tax income and lower operating losses of certain foreign subsidiaries for which we do not recognize an income tax benefit. Adjusted diluted EPS was $0.34, an increase of 240% from $0.10 for the quarter ended March 22, Excluding the impact of the reduction in cash taxes payable, adjusted diluted EPS increased 143% to $0.17.

7 About Blackhawk Network Blackhawk Network Holdings, Inc. is a leading prepaid and payments global company that supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels. Blackhawk s digital platform supports prepaid across a network of digital distribution partners including retailers, financial service providers, and mobile wallets. For more information, please visit and Use of Non-GAAP Financial Measures Blackhawk regards the non-gaap financial measures provided in this press release as useful measures of the operational and financial performance of its business. Reconciliations of non-gaap financial measures to Blackhawk s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. The use of non-gaap financial measures has certain limitations as they do not reflect all items of income, expense, or cash flows that affect Blackhawk s financial performance under GAAP. These non-gaap financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. In addition, these non-gaap measures may differ from the non-gaap information used by other companies, including peer companies, and therefore comparability may be limited. Blackhawk encourages investors and others to review Blackhawk s financial information in its entirety and not rely on any single financial measure. Forward Looking Statements This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements are indicated by words or phrases such as "guidance," "believes," "expects," "anticipates," "estimates," "plans," "continuing," "ongoing," and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: our ability to generate adequate taxable income to enable us to fully utilize the cash tax benefits referred to in this release, changes in applicable tax law that preclude us from fully utilizing the cash tax benefits referred to in this release, our ability to grow adjusted operating revenues and adjusted net income as anticipated, our ability to grow at historic rates or at all, the consequences should we lose one or more of our top distribution partners or fail to attract new distribution partners to our network or if the financial performance of our distribution partners' businesses decline, our reliance on our content providers, the demand for their products and our exclusivity arrangements with them, our reliance on relationships with card issuing banks, the consequences to our future growth if our distribution partners fail to actively and effectively promote our products and services, the requirement that we comply with applicable laws and regulations, including increasingly stringent money-laundering rules and regulations, and other risks and uncertainties described in our reports and filings with the Securities and Exchange Commission, including the risks and uncertainties set forth in Item 1A under the heading Risk Factors in our Annual Report on Form 10-K and other subsequent periodic reports we have filed with the Securities and Exchange Commission. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so other than as may be required by law.

8 BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) 12 weeks ended March 28, 2015 March 22, 2014 OPERATING REVENUES: Commissions and fees $ 220,402 $ 178,095 Program, interchange, marketing and other fees 73,104 35,665 Product sales 26,225 19,355 Total operating revenues 319, ,115 OPERATING EXPENSES: Partner distribution expense 155, ,307 Processing and services 64,208 41,625 Sales and marketing 43,593 33,078 Costs of products sold 24,903 19,304 General and administrative 18,748 14,603 Transition and acquisition Amortization of acquisition intangibles 5,974 4,409 Change in fair value of contingent consideration (4,139) Total operating expenses 308, ,328 OPERATING INCOME (LOSS) 10,915 (4,213) OTHER INCOME (EXPENSE): Interest income and other income (expense), net (801) (409) Interest expense (2,757) (45) INCOME (LOSS) BEFORE INCOME TAX EXPENSE 7,357 (4,667) INCOME TAX EXPENSE (BENEFIT) 2,620 (1,783) NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS 4,737 (2,884) Net (income) loss attributable to non-controlling interests, net of tax (31) 43 NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. $ 4,706 $ (2,841) EARNINGS (LOSS) PER SHARE: Basic Class A and Class B $ 0.09 $ (0.06) Diluted Class A and Class B $ 0.08 $ (0.06) Weighted average shares outstanding basic 53,323 52,095 Weighted average shares outstanding diluted 55,416 52,095

9 BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 28, 2015 January 3, 2015 March 22, 2014 ASSETS Current assets: Cash and cash equivalents $ 219,416 $ 911,615 $ 134,831 Restricted cash 3,189 5,000 Settlement receivables, net 237, , ,395 Accounts receivable, net 176, , ,614 Deferred income taxes 33,713 38,456 20,145 Other current assets 93,860 95,658 64,945 Total current assets 764,031 1,758, ,930 Property, equipment and technology, net 132, ,008 82,156 Intangible assets, net 161, ,957 93,351 Goodwill 328, , ,633 Deferred income taxes 330,686 1, Other assets 86,285 93,086 82,194 TOTAL ASSETS $ 1,802,566 $ 2,485,741 $ 913,991 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Settlement payables $ 462,346 $ 1,383,481 $ 370,757 Consumer and customer deposits 103, ,772 55,093 Accounts payable and accrued operating expenses 103, ,118 76,577 Note payable, current portion 37,384 11,211 Notes payable to Safeway 19,449 27, ,000 Bank line of credit 10,000 Other current liabilities 57, ,352 36,595 Total current liabilities 794,524 1,775, ,022 Deferred income taxes 8,101 45,375 24,501 Note payable 325, ,543 Other liabilities 10,096 14,432 7,549 Total liabilities 1,137,929 2,197, ,072 Stockholders equity: Preferred Stock Class A common stock Class B common stock Additional paid-in capital 519, , ,546 Treasury stock (305) Accumulated other comprehensive loss (29,059) (19,470) (3,397) Retained earnings 167, , ,067 Total Blackhawk Network Holdings, Inc. equity 657, , ,964 Non-controlling interests 6,893 6,840 6,955 Total stockholders equity 664, , ,919 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 1,802,566 $ 2,485,741 $ 913,991

10 OPERATING ACTIVITIES: BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) 12 weeks ended 53 weeks ended 52 weeks ended March 28, 2015 March 22, 2014 March 28, 2015 March 22, 2014 Net income (loss) before allocation to non-controlling interests $ 4,737 $ (2,884) $ 53,046 $ 50,543 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of property, equipment and technology 8,395 5,386 31,557 22,502 Amortization of intangibles 6,999 5,532 25,838 12,168 Amortization of program development costs 6,454 5,657 25,248 22,518 Employee stock-based compensation expense 4,989 2,670 17,684 9,560 Distribution partner mark-to-market expense ,103 Change in fair value of contingent consideration (4,139) (7,861) (15,318) Reversal of reserve for patent litigation (3,852) Excess tax benefit from stock-based awards (2,491) (779) (4,442) (3,190) Deferred income taxes 13,371 1,546 (1,053) Other 1, ,400 4,596 Changes in operating assets and liabilities: Settlement receivables 284, ,608 (65,095) (23,167) Settlement payables (914,632) (1,109,862) 109,225 33,792 Accounts receivable, current and long-term 4,934 15,134 (44,198) (26,830) Prepaid expenses and other current assets (4,027) 5,446 (11,753) (9,526) Other assets (529) (4,978) (23,930) (40,892) Consumer and customer deposits (30,198) 178 4, Accounts payable and accrued operating expenses (10,507) (22,249) 12,684 21,442 Other current and long-term liabilities (21,403) (24,048) 21,621 7,134 Income taxes, net (22,583) (21,475) (17,960) (22,838) INVESTING ACTIVITIES: Net cash provided by (used in) operating activities (675,222) (519,086) 130,168 50,969 Change in overnight cash advances to Safeway 40,155 Expenditures for property, equipment and technology (13,843) (8,538) (45,014) (32,456) Business acquisitions, net of cash received (1,341) (236,264) (150,711) Sale of trading securities 29,749 Change in restricted cash 1,811 (3,189) 8,968 Other (499) (650) Net cash used in investing activities (12,032) (9,879) (284,966) (104,945)

11 FINANCING ACTIVITIES: BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands) (Unaudited) 12 weeks ended 53 weeks ended 52 weeks ended March 28, 2015 March 22, 2014 March 28, 2015 March 22, 2014 Dividends paid (64) (67) (80) (129) Payments for acquisition liability (1,811) (1,811) (4,221) Proceeds from issuance of note payable 375,000 Payments of costs for issuance of note payable (3,783) Repayment of note payable (11,250) (11,250) Borrowings under revolving bank line of credit 387, ,500 Repayments on revolving bank line of credit (377,500) (592,500) Proceeds from notes payable to Safeway 27,678 Borrowings under Safeway line of credit, net 113,000 (113,000) 113,000 Repayment of debt assumed in business acquisitions (41,984) Payments for initial public offering costs (4,396) Reimbursements for initial public offering costs 5,540 Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans 1,441 1,566 8,955 5,114 Other stock-based compensation related (486) (374) (975) (854) Excess tax benefit from stock-based awards 2, ,442 3,190 Other (44) 435 Net cash provided by financing activities , , ,679 Effect of exchange rate changes on cash and cash equivalents (5,266) (1,488) (13,765) (3,899) Increase (decrease) in cash and cash equivalents (692,199) (415,549) 84,585 59,804 Cash and cash equivalents beginning of period 911, , ,831 75,027 Cash and cash equivalents end of period $ 219,416 $ 134,831 $ 219,416 $ 134,831 NONCASH FINANCING AND INVESTING ACTIVITIES Net deferred tax assets recognized for tax basis step-up with offset to Additional paidin capital $ 366,306 $ $ 366,306 $ Note payable to Safeway contributed to Additional paid-in capital $ 8,229 $ $ 8,229 $ Financing of business acquisition with contingent consideration $ $ $ 13,100 $

12 BLACKHAWK NETWORK HOLDINGS, INC. SUPPLEMENTAL INFORMATION (In thousands except percentages, average transaction value and per share amounts) (Unaudited) TABLE 1: OTHER OPERATIONAL DATA 12 weeks ended March 28, 2015 March 22, 2014 Transaction dollar volume $ 3,110,533 $ 2,187,704 Transaction count 60,280 44,638 Average transaction value $ $ Prepaid and processing revenues $ 278,775 $ 205,534 Prepaid and processing revenues as a % of transaction dollar volume 9.0% 9.4% Partner distribution expense as a % of prepaid and processing revenues 55.7% 60.5%

13 TABLE 2: RECONCILIATION OF NON-GAAP MEASURES 12 weeks ended March 28, 2015 March 22, 2014 Prepaid and processing revenues: Commissions and fees $ 220,402 $ 178,095 Program, interchange, marketing and other fees 73,104 35,665 Marketing revenues (14,731) (8,226) Total prepaid and processing revenues $ 278,775 $ 205,534 Adjusted operating revenues: Total operating revenues $ 319,731 $ 233,115 Issuing bank contract amendments 1,955 Partner distribution expense (155,354) (124,307) Adjusted operating revenues $ 164,377 $ 110,763 Adjusted EBITDA: Net income (loss) before allocation to non-controlling interests $ 4,737 $ (2,884) Interest income and other income (expense), net Interest expense 2, Income tax expense (benefit) 2,620 (1,783) Depreciation and amortization 15,394 10,918 EBITDA 26,309 6,705 Adjustments to EBITDA: Employee stock-based compensation 4,989 2,670 Distribution partner mark-to-market expense 622 Issuing bank contract amendments 1,955 Change in fair value of contingent consideration (4,139) Adjusted EBITDA $ 27,159 $ 11,952 Adjusted EBITDA margin: Total operating revenues $ 319,731 $ 233,115 Operating income (loss) $ 10,915 $ (4,213) Operating margin 3.4% (1.8)% Adjusted operating revenues $ 164,377 $ 110,763 Adjusted EBITDA $ 27,159 $ 11,952 Adjusted EBITDA margin 16.5% 10.8 %

14 TABLE 2: RECONCILIATION OF NON-GAAP MEASURES (continued) 12 weeks ended March 28, 2015 March 22, 2014 Adjusted net income: Income (loss) before income tax expense $ 7,357 $ (4,667) Employee stock-based compensation 4,989 2,670 Distribution partner mark-to-market expense 622 Issuing bank contract amendments 1,955 Change in fair value of contingent consideration (4,139) Amortization of intangibles 6,999 5,532 Adjusted income before income tax expense 15,206 6,112 Income tax expense (benefit) 2,620 (1,783) Tax expense on adjustments 2,921 4,134 Adjusted income tax expense before cash tax benefits 5,541 2,351 Reduction in cash taxes payable resulting from amortization of spin-off tax basis step-up (6,618) Reduction in cash taxes payable from amortization of acquisition intangibles and utilization of acquired NOLs (2,690) (1,372) Adjusted income tax expense (benefit) (3,767) 979 Adjusted net income before allocation to non-controlling interests 18,973 5,133 Net (income) loss attributable to non-controlling interests, net of tax (31) 43 Adjusted net income attributable to Blackhawk Network Holdings, Inc. $ 18,942 $ 5,176 Adjusted diluted earnings per share: Net income (loss) attributable to Blackhawk Network Holdings, Inc. $ 4,706 $ (2,841) Distributed and undistributed earnings allocated to participating securities (51) (38) Net income (loss) attributable to common shareholders $ 4,655 $ (2,879) Diluted weighted-average shares outstanding 55,416 52,095 Diluted earnings (loss) per share $ 0.08 $ (0.06) Adjusted net income attributable to Blackhawk Network Holdings, Inc. $ 18,942 $ 5,176 Adjusted distributed and undistributed earnings allocated to participating securities (97) (59) Adjusted net income available for common shareholders $ 18,845 $ 5,117 Diluted weighted-average shares outstanding 55,416 52,095 Increase in common share equivalents 1,597 Adjusted diluted weighted-average shares outstanding 55,416 53,692 Adjusted diluted earnings per share $ 0.34 $ 0.10 TABLE 3: RECONCILIATION OF GAAP CASH FLOW TO FREE CASH FLOW 12 weeks ended 53 weeks ended 52 weeks ended March 28, 2015 March 22, 2014 March 28, 2015 March 22, 2014 Net cash flow provided by (used in) operating activities $ (675,222) $ (519,086) $ 130,168 $ 50,969 Changes in settlement payables and consumer and customer deposits, net of settlement receivables 660, ,076 (48,850) (11,050) Adjusted net cash provided by (used in) operating activities (14,492) (35,010) 81,318 39,919 Expenditures for property, equipment and technology (13,843) (8,538) (45,014) (32,456) Free cash flow (28,335) (43,548) 36,304 7,463

15 1 Q 1 E a rn in g s R e p o rta p ril 2 9, :0 0 a m P a c ific B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.

16 F o rw a rd L o o k in g S ta te m e n ts T h is p re s e n ta tio n m a y c o n ta in c e rta in fo rw a rd -lo o k in g s ta te m e n ts w ith in th e m e a n in g o fs e c tio n 2 7 A o fth e S e c u ritie s A c to f a n d S e c tio n 2 1 E o fth e S e c u ritie s E x c h a n g e A c to f F o rw a rd -lo o k in g s ta te m e n ts a re in d ic a te d b y w o rd s o rp h ra s e s s u c h a s "g u id a n c e,"b e lie v e s,"e x p e c ts,"a n tic ip a te s,"e s tim a te s,"p la n s,"c o n tin u in g,"o n g o in g,"a n d s im ila rw o rd s o rp h ra s e s a n d th e n e g a tiv e o fs u c h w o rd s a n d p h ra s e s.f o rw a rd -lo o k in g s ta te m e n ts a re b a s e d o n o u rc u re n tp la n s a n d e x p e c ta tio n s a n d in v o lv e ris k s a n d u n c e rta in tie s w h ic h a re,in m a n y in s ta n c e s,b e y o n d o u rc o n tro l,a n d w h ic h c o u ld c a u s e a c tu a l re s u lts to d ife rm a te ria ly fro m th o s e in c lu d e d in o rc o n te m p la te d o rim p lie d b y th e fo rw a rd -lo o k in g s ta te m e n ts.s u c h ris k s a n d u n c e rta in tie s in c lu d e th e fo lo w in g :o u ra b ility to m e e to u rfin a n c ia l fo re c a s ts fo rth e c u re n ty e a r;o u ra b ility to a c h ie v e a n tic ip a te d c o s ts a v in g s ;o u ra b ility to g e n e ra te a d e q u a te ta x a b le in c o m e to e n a b le u s to fu ly u tiliz e th e c a s h ta x b e n e fits re fe re d to in th is p re s e n ta tio n ;c h a n g e s in a p p lic a b le ta x la w th a tp re c lu d e u s fro m fu ly u tiliz in g th e c a s h ta x b e n e fits re fe re d to in th is p re s e n ta tio n ;o u ra b ility to s u c c e s s fu ly in te g ra te o u re c e n ta c q u is itio n s in to o u rc o m p a n y a n d to re a liz e th e fo re c a s te d s y n e rg ie s o fo u rin c e n tiv e s a n d re w a rd s b u s in e s s ;o u ra b ility to g ro w a d ju s te d o p e ra tin g re v e n u e s a n d a d ju s te d n e tin c o m e a s a n tic ip a te d,o u ra b ility to g ro w a th is to ric ra te s o ra ta l,th e c o n s e q u e n c e s s h o u ld w e lo s e o n e o rm o re o fo u rto p d is trib u tio n p a rtn e rs o rfa il to a tra c tn e w d is trib u tio n p a rtn e rs to o u rn e tw o rk o rifth e fin a n c ia l p e rfo rm a n c e o fo u rd is trib u tio n p a rtn e rs ' b u s in e s s e s d e c lin e,o u re lia n c e o n o u rc o n te n tp ro v id e rs,th e d e m a n d fo rth e irp ro d u c ts a n d o u re x c lu s iv ity a ra n g e m e n ts w ith th e m,o u re lia n c e o n re la tio n s h ip s w ith c a rd is s u in g b a n k s,th e c o n s e q u e n c e s to o u rfu tu re g ro w th ifo u rd is trib u tio n p a rtn e rs fa il to a c tiv e ly a n d e fe c tiv e ly p ro m o te o u rp ro d u c ts a n d s e rv ic e s,th e re q u ire m e n th a tw e c o m p ly w ith a p p lic a b le la w s a n d re g u la tio n s,in c lu d in g in c re a s in g ly s trin g e n tm o n e y -la u n d e rin g ru le s a n d re g u la tio n s a n d o th e ris k s a n d u n c e rta in tie s d e s c rib e d in o u re p o rts a n d filin g s w ith th e S e c u ritie s a n d E x c h a n g e C o m m is s io n,in c lu d in g th e ris k s a n d u n c e rta in tie s s e tfo rth in Ite m 1 A u n d e rth e h e a d in g R is k F a c to rs in o u ra n n u a l R e p o rto n F o rm 1 0 -K,a n d o th e rs u b s e q u e n tp e rio d ic re p o rts w e h a v e file d w ith th e S E C.We u n d e rta k e n o o b lig a tio n to u p d a te fo rw a rd -lo o k in g s ta te m e n ts to re fle c td e v e lo p m e n ts o rin fo rm a tio n o b ta in e d a fte rth e d a te h e re o fa n d d is c la im a n y o b lig a tio n to d o s o o th e rth a n a s m a y b e re q u ire d b y la w B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.2

17 O v e rv ie w S e g m e n tr e p o rtin g U.S.R e ta il In te rn a tio n a l R e ta il In c e n tiv e s & R e w a rd s B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.3 F ro m tim e to tim e w e m a y p ro v id e d a ta fo r o n lin e a n d d ig ita l p ro d u c ts a le s w h ic h in c lu d e s a l o n lin e s a le s a n d c e rta in w e b -b a s e d B 2 B fu lfilm e n to fo u rc o n te n tin p h y s ic a l o rd ig ita l fo rm a ts a n d w h ic h a re in c lu d e d in th e re s p e c tiv e re p o rtin g s e g m e n ts a b o v e.in c lu d e s g iftc a rd s,re lo a d a b le d e b ita n d p re p a id te le c o m c a rd s s o ld a tre ta il a n d d ig ita l d is trib u tio n p a rtn e rs,a n d a l p ro d u c ts a le s in th e U.S.In c lu d e s s a le s o fs o ftw a re s o lu tio n s,p re p a id c a rd s a n d o th e rs e rv ic e s to b u s in e s s e s fo ru s e a s e m p lo y e e,c h a n n e l a n d c o n s u m e rin c e n tiv e s In c lu d e s g iftc a rd s a n d re lo a d a b le d e b itc a rd s s o ld a tre ta il a n d d ig ita l d is trib u tio n p a rtn e rs a n d p ro d u c ts a le s o u ts id e th e U.S.

18 C o n tin u e d G ro w th in T ra n s a c tio n D o la rv o lu m e (T D V )a n d A d ju s te d O p e ra tin g R e v e n u e s (A O R ) B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.q 1 Y O Y T D V g ro w th % % % $ -$ 1.0 $ 2.0 $ 3.0 $ 4.0 $ 5.0 $ 6.0 $ Q Q Q Q Q Q Q Q Q 1 5 T D V (in b ilio n s )$ -$ $ $ $ $ $ $ Q Q Q Q Q Q Q Q Q 1 5 A O R (in m ilio n s )Q 1 Y O Y A O R g ro w th % % %

19 A d ju s te d E B IT D A a n d A d ju s te d E P S Q u a rte rly T re n d B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.q 1 Y O Y A d ju s te d E B IT D A g ro w th % % % Q 1 Y O Y A d ju s te d E P S g ro w th % % % $ -$ $ $ $ $ $ Q Q Q Q Q Q Q Q Q 1 5 A d ju s te d E B IT D A (in m ilio n s )$ -$ $ $ $ $ $ $ Q Q Q Q Q Q Q Q Q 1 5 A d ju s te d E P S

20 K e y F in a n c ia l M e tric s (n o n -G A A P )Q v s Q B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s e x c e p te P S )Q Q % C h a n g e A d ju s te d O p e ra tin g R e v e n u e s (A O R )$ $ % A d ju s te d E B IT D A $ 2 7 $ % A d ju s te d E B IT D A M a rg in 1 7 % 1 1 % A d ju s te d N e tin c o m e $ 1 9 $ % A d ju s te d D ilu te d E P S $ $ % L e v e ra g e a te B IT D A lin e d u e to in c re a s e in p ro fita b ility a c ro s s a l s e g m e n ts A d ju s te d n e tin c o m e in c lu d e s re d u c tio n in c a s h ta x e s p a y a b le re la te d to s p in -o fro m S a fe w a y a n d a c q u is itio n re la te d N O L s $ 9.3 M o r$ p e rd ilu te d s h a re fo r1 Q 1 5 (v s $ 1.4 M o r$ p e rd ilu te d s h a re fo r1 Q 1 4 )

21 S e g m e n tf in a n c ia l M e tric s (n o n -G A A P )Q v s.q B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )U S R e ta il In t l R e ta il B E S U n a lo c a te d T o ta l T D V $ 1,9 6 4 $ $ $ 3,1 1 1 T D V $ 1,5 6 0 $ $ $ 2,1 8 8 % In c re a s e 2 6 % 2 9 % % 4 2 % A O R $ $ 2 3 $ 3 6 $ A O R $ 8 0 $ 2 2 $ 9 $ % In c re a s e 3 3 % 5 % % 4 8 % A d ju s te d E B IT D A $ 4 4 $ 3 $ 7 $ (2 7 )$ 2 7 A d ju s te d E B IT D A $ 3 3 $ 2 $ 1 $ (2 4 )$ 1 2 % In c re a s e 3 7 % 5 1 % % 1 4 % % N o te :U n a lo c a te d is p rim a rily s h a re d s e rv ic e s e x p e n s e s

22 T ra n s a c tio n D o la rv o lu m e % o ft o ta l b y S e g m e n t B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.u S R e ta il -s tro n g s a le s a to p p a rtn e rs in c lu d in g K ro g e r,s a fe w a y,a h o ld & S im o n M a ls In te rn a tio n a l R e ta il -s tro n g s a le s in A s ia -P a c,p rim a rily d ig ita l m e d ia c o n te n tin c e n tiv e s & R e w a rd s -in c lu d e s P a ra g o a c q u is itio n ;> 4 0 % o rg a n ic g ro w th 6 3 % 2 1 % 1 6 % Q % 2 3 % 6 % Q 1 1 4

23 A d ju s te d O p e ra tin g R e v e n u e s % o ft o ta l b y S e g m e n t B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.6 4 % 1 4 % 2 2 % Q % 2 0 % 8 % Q U S R e ta il -s tro n g s a le s o fc lo s e d & o p e n g iftc a rd s a n d C a rd p o o l e x c h a n g e In te rn a tio n a l R e ta il -c o n s ta n tc u re n c y g ro w th 1 9 %;lo w e ra O R g ro w th v s.t D V d u e to h ig h e rm ix o fj a p a n (lo w e re v e n u e,m in im a l e x p e n s e s )In c e n tiv e s & R e w a rd s -e x c lu d in g a c q u is itio n s g ro w th > 4 0 %

24 U.S.R e ta il % P ro d u c tiv ity im p ro v e m e n ts a te x is tin g d is trib u tio n p a rtn e rs d ro v e ~ 8 0 % o fy O Y T D V g ro w th fo rq A O R g re w 3 3 % a n d w a s 5.4 % o ft D V,+ 3 0 b p s v s d u e to g ro w th in m a rk e tin g re v e n u e s a n d p ro d u c ts a le s.p ro fo rm a A O R u p 2 2 % Y O Y e x c lu d in g m a rk e tin g a n d p ro d u c te x p e c to m ig ra te a d d itio n a l 1,0 0 0 g ro c e ry lo c a tio n s fro m b a s ic to b e s tp ra c tic e s d u rin g F Y M a rg in le v e ra g e b a s e d o n g iftc a rd g ro w th a n d im p ro v e d c o n trib u tio n fro m F in a n c ia l S e rv ic e s,c a rd p o o l a n d O n lin e c h a n n e l B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.1 0

25 O n lin e a n d D ig ita l J u s tu n d e r4 0 0 e g iftb ra n d s in U.S. 3 5 o fo u rto p 5 0 c o n te n tp ro v id e rs a re liv e w ith e g iftc o n te n tp ro v id e rs d o u b lin g m a rk e tin g s p e n d a n d e v e n ts in F Y n e w d ig ita l d is trib u tio n p a rtn e rs la u n c h e d in D ig ita l tra n s a c tio n d o la rv o lu m e g ro w in g o v e r2 0 0 % B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.1 1

26 In te rn a tio n a l R e ta il P ro d u c tiv ity im p ro v e m e n ta te x is tin g d is trib u tio n p a rtn e rs re p re s e n te d ~ 8 5 % o fy O Y T D V g ro w th fo rq A O R g ro w th 5 % (1 9 % in c o n s ta n tc u re n c y )-d ig ita l m e d ia c o n te n t(it u n e s,g o o g le P la y,x b o x )d riv in g g ro w th in re g io n s w ith lo w e re v e n u e y ie ld E x p e c to la u n c h P o la n d,in d o n e s ia,a n d In d ia o v e rth e n e x ts e v e ra l q u a rte rs B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.1 2 F X im p a c te x p e c te d to w o rs e n F Y 1 5 a d ju s te d E B IT D A im p a c to f$ 3.8 M v s.$ 2.5 M im p a c tp e rg u id a n c e ($ 0.6 M im p a c tin Q )

27 In c e n tiv e s & R e w a rd s o u tlo o k fo r p ro fo rm a o rg a n ic T ra n s a c tio n D o la rv o lu m e g ro w th o f1 5 % to 2 0 % (a s ifw e o w n e d P a ra g o fo ra l o f )Q 1 A O R g ro w th > 4 0 % e x c lu d in g a c q u is itio n s ;c ro s s s e lin g o p p o rtu n itie s in to B la c k h a w k re ta il d e v e lo p in g S y n e rg ie s o n tra c k to y ie ld c o s ts a v in g s o f$ 8 M fo rfis c a l F u l y e a rp ro je c te d A d ju s te d E B IT D A m a rg in s 2 2 %-2 4 % B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.1 3 %

28 F in a n c ia l D e ta ils

29 R e v e n u e R a tio s -Q v s Q B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.q Q C h a n g e F Y E s t*p re p a id a n d P ro c e s s in g R e v e n u e s (P P R )% o ft D V 9.0 % 9.4 % -0.4 % 9.1 % P a rtn e rd is trib u tio n E x p e n s e (P D E )% o fp P R % % -4.8 % % A d ju s te d O p e ra tin g R e v e n u e s (A O R )% o ft D V 5.3 % 5.1 % % 5.2 % P ro F o rm a A d ju s te d O p e ra tin g R e v e n u e s % o ft D V 4.0 % 3.9 % 0.1 % 3.9 % P P R a s % o ft D V lo w e rd u e to h ig h e rm ix o fo p e n lo o p v s c lo s e d lo o p P D E a s a % o fp P R lo w e rd u e to a d d itio n o fp a ra g o a n d h ig h e rm ix o fu S o p e n lo o p A O R in c re a s e d u e to fa s te rg ro w th in m a rk e tin g re v e n u e s a n d p ro d u c ts a le s N o te :P P R is to ta l re v e n u e s e x c lu d in g m a rk e tin g re v e n u e s a n d p ro d u c ts a le s.s e e re c o n c ilia tio n to P ro fo rm a A O R in A p p e n d ix *C u re n tp o in te s tim a te o fu l y e a ra tio s

30 E x p e n s e R a tio s -Q v s Q B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.q Q C h a n g e F Y E s t*p ro c e s s in g & S e rv ic e s % o fp ro F o rm a A O R % % 2.1 % % S a le s & M a rk e tin g,n e t% o fp ro F o rm a A O R % % -6.1 % % G & A % o fp ro F o rm a A O R % % -2.5 % % P ro c e s s in g & S e rv ic e s in c re a s e d u e to h ig h e rm ix o fo p e n lo o p p ro d u c ts a n d re b a te p ro c e s s in g e x p e n s e s a s a re s u lto fp a ra g o a c q u is itio n S a le s & M a rk e tin g (n e to fm a rk e tin g re v e n u e s )lo w e rd u e to P a ra g o s s m a le ra tio o fm a rk e tin g s p e n d a n d d u e to A O R g ro w th ra te in R e ta il G & A le v e ra g e d u e to s tro n g re ta il s a le s g ro w th N o te :E x p e n s e s e x c lu d e n o n -c a s h ite m s *C u re n tp o in te s tim a te o fu l y e a ra tio s

31 P ro d u c ts a le s a n d M a rg in B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )Q Q % C h a n g e F Y E s t*p ro d u c ts a le s $ $ % 3 3 % C o s to fp ro d u c ts S o ld % 3 2 % P ro d u c tg ro s s P ro fit$ 1.3 $ 0.1 > % % P ro d u c tg ro s s M a rg in 5.0 % 0.3 % 6.0 % Q 1 P ro d u c ts a le s :c o m p ris e d o fc a rd p o o l (8 5 % o fto ta l,u p 5 1 % Y O Y ),te le c o m h a n d s e ts a n d c a rd s e rv ic e s & p ro c e s s in g *C u re n tp o in te s tim a te o fu l y e a rg ro w th ra te a n d m a rg in

32 A d ju s te d E B IT D A B rid g e Q v s Q B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )E x is tin g A c q u is itio n s T o ta l Q A d ju s te d E B IT D A $ 1 2 $ 0 $ 1 2 A O R O P E X (1 8 )(2 0 )(3 8 )F X ra te im p a c t(1 )0 (1 )Q A d ju s te d E B IT D A $ 2 3 $ 4 $ 2 7 % in c re a s e Y O Y 9 0 % N A %

33 Q A d ju s te d E B IT D A -> A d ju s te d N e tin c o m e B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )E x is tin g A c q u is itio n s T o ta l Q A d ju s te d E B IT D A $ 2 3 $ 4 $ 2 7 D e p re c ia tio n (6 )(2 )(8 )In te re s t,n e t(2 )(2 )(4 )A d ju s te d in c o m e b e fo re ta x e s In c o m e ta x e s (6 )-(6 )A d ju s te d n e tin c o m e b e fo re re d u c tio n in c a s h ta x e s p a y a b le A d d :R e d u c tio n in c a s h ta x e s p a y a b le Q A d ju s te d N e tin c o m e $ 1 6 $ 3 $ 1 9

34 A d ju s te d E P S B rid g e Q v s.q B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.t o ta l T a x B e n e fits T o ta l E x c l T a x Q A d ju s te d E P S $ $ $ G ro w th fro m e x is tin g b u s in e s s e s G ro w th fro m a c q u is itio n s L e s s :D e p re c ia tio n in c re a s e 1 s ty e a r(0.0 2 )(0.0 2 )L e s s :In te re s tin c re a s e 1 s ty e a r(0.0 2 )(0.0 2 )N e tin c re a s e fro m a c q u is itio n s C a s h ta x b e n e fit s p in -o f F X ra te im p a c t(0.0 1 )(0.0 1 )In c re a s e d in te re s t s p in -o f(0.0 1 )(0.0 1 )T a x ra te B e n e fit Q A d ju s te d E P S $ $ $ 0.1 7

35 Q F in a n c ia l G u id a n c e B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s e x c e p te P S )Q G u id a n c e Q A c tu a l % C h a n g e A d ju s te d O p e ra tin g R e v e n u e s $ $ $ % -3 4 % A d ju s te d E B IT D A $ 2 5 -$ 2 7 $ % -2 5 % A d ju s te d N e tin c o m e b e fo re R e d u c tio n in C a s h T a x e s P a y a b le $ 8.2 -$ 8.9 $ % to -3 % A d ju s te d D ilu te d E P S b e fo re R e d u c tio n in C a s h T a x e s P a y a b le $ $ $ % to -6 % A d ju s te d N e tin c o m e $ $ $ % to 2 3 % A d ju s te d D ilu te d E P S $ $ $ % to 1 8 % Q in c lu d e d a litig a tio n s e tle m e n tp re -ta x g a in o f$ 3.9 m ilio n ($ d ilu te d E P S ) R e d u c tio n in c a s h ta x e s p a y a b le e x p e c te d to b e $ 9.3 m ilio n,$ 3.7 m ilio n m o re th a n P Y P ro je c te d s h a re c o u n t5 6.0 m ilio n v s m ilio n

36 A n n u a l F in a n c ia l G u id a n c e U p d a te B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s e x c e p te P S )F Y G u id a n c e F Y A c tu a l % C h a n g e A d ju s te d O p e ra tin g R e v e n u e s $ M -$ M $ M 2 3 %-2 8 % A d ju s te d E B IT D A $ M -$ M $ M 2 4 %-3 1 % A d ju s te d N e tin c o m e b e fo re R e d u c tio n in C a s h T a x e s P a y a b le $ 8 0 M -$ 8 6 M $ 6 9 M 1 6 %-2 5 % A d ju s te d D ilu te d E P S b e fo re R e d u c tio n in C a s h T a x e s P a y a b le $ $ $ %-2 0 % A d ju s te d N e tin c o m e $ M -$ M $ 9 7 M 2 3 %-2 9 % A d ju s te d D ilu te d E P S $ $ $ %-2 6 % R a is in g F Y 1 5 g u id a n c e u p p e ra n g e b y $ to $ c o m p a re d to o rig in a l g u id a n c e p ro v id e d o n F e b ru a ry 2 6

37 T ra ilin g 4 Q u a rte rs C a s h F lo w B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.2 3 ($ in m ilio n s )5 3 We e k s E n d e d Q We e k s E n d e d Q C h a n g e C a s h flo w s fro m o p e ra tin g a c tiv itie s :N e tin c o m e $ 5 3 $ 5 1 $ 2 N o n c a s h re c o n c ilin g ite m s In c o m e ta x re la te d,n e t(2 1 )(2 7 )6 C h a n g e s in s e tle m e n ta c c o u n ts C h a n g e s in o th e ro p e ra tin g a c c o u n ts (4 6 )(4 9 )3 N e tc a s h p ro v id e d b y o p e ra tin g a c tiv itie s C a s h flo w s fro m in v e s tin g a c tiv itie s (2 8 5 )(1 0 5 )(1 8 0 )C a s h flo w s fro m fin a n c in g a c tiv itie s Im p a c to ff X (1 4 )(4 )(1 0 )N e tin c re a s e in c a s h $ 8 4 $ 6 0 $ 2 4

38 G A A P C a s h F lo w s to F re e C a s h F lo w s R e c o n c ilia tio n B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )5 3 We e k s E n d e d Q We e k s E n d e d Q C h a n g e N e tc a s h p ro v id e d b y o p e ra tin g a c tiv itie s $ $ 5 1 $ 7 9 C h a n g e in s e tle m e n ta c c o u n ts (4 9 )(1 1 )(3 8 )A d ju s te d n e tc a s h p ro v id e d b y o p e ra tin g a c tiv itie s C a p ita l e x p e n d itu re s (4 5 )(3 3 )(1 2 )F re e c a s h flo w $ 3 6 $ 7 $ 2 9

39 A p p e n d ix

40 G A A P R e v e n u e s,a d ju s te d O p e ra tin g R e v e n u e s (A O R )a n d P ro F o rm a A O R R e c o n c ilia tio n B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )Q Q % C h a n g e T o ta l O p e ra tin g R e v e n u e s $ $ % L e s s :P a rtn e rd is trib u tio n E x p e n s e (1 5 5 )(1 2 4 )2 5 % A d d :B a n k A m e n d m e n ts -2 A d ju s te d O p e ra tin g R e v e n u e s % L e s s :M a rk e tin g R e v e n u e s (1 5 )(8 )7 9 % L e s s :P ro d u c ts a le s (2 6 )(1 9 )3 6 % A d d :M a rk -to -M a rk e ta n d In ta n g ib le % P ro F o rm a A d ju s te d O p e ra tin g R e v e n u e s $ $ % P ro fo rm a A d ju s te d O p e ra tin g R e v e n u e s m e a s u re e x p e n s e le v e ra g e M a rk e tin g re v e n u e s a re a p a s s th ro u g h w ith o fs e tin s a le s a n d m a rk e tin g e x p e n s e P ro d u c ts a le s a n d c o s to fp ro d u c ts a le s a re s e p a ra te lin e ite m s o n th e in c o m e s ta te m e n ta n d p ro d u c ts a le s d o n td riv e m a te ria l o th e ro p e ra tin g e x p e n s e s M a rk -to -m a rk e ta n d in ta n g ib le e x p e n s e a d ju s tm e n ts re p re s e n te q u ity -re la te d ite m s

41 G A A P N e tin c o m e to A d ju s te d E B IT D A R e c o n c ilia tio n B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )Q Q % C h a n g e N e tin c o m e $ 5 $ (3 )N /M In te re s ta n d o th e rin c o m e % In te re s te x p e n s e 3 -N /M In c o m e ta x e x p e n s e 2 (2 )N /M D e p re c ia tio n a n d a m o rtiz a tio n % E B IT D A % E m p lo y e e s to c k -b a s e d c o m p e n s a tio n % D is trib u tio n p a rtn e rm a rk -to -m a rk e t-1 N /M Is s u in g b a n k c o n tra c ta m e n d m e n ts -2 N /M C h a n g e in v a lu e o fc o n tin g e n tc o n s id e ra tio n (4 )-N /M A d ju s te d E B IT D A $ 2 7 $ %

42 G A A P N e tin c o m e to A d ju s te d N e tin c o m e R e c o n c ilia tio n B la c k h a w k N e tw o rk.c o n fid e n tia l a n d n o tfo re p lic a tio n o rd is trib u tio n.($ in m ilio n s )Q Q % C h a n g e In c o m e b e fo re in c o m e ta x e x p e n s e $ 7 $ (5 )N /M E m p lo y e e s to c k -b a s e d c o m p e n s a tio n % D is trib u tio n p a rtn e rm a rk -to -m a rk e t0 1 N /M Is s u in g b a n k c o n tra c ta m e n d m e n ts 0 2 N /M C h a n g e in v a lu e o fc o n tin g e n tc o n s id e ra tio n (4 )0 N /M A m o rtiz a tio n o fin ta n g ib le s % A d ju s te d in c o m e b e fo re in c o m e ta x e x p e n s e % In c o m e ta x e x p e n s e (b e n e fit)2 (2 )N /M In c o m e ta x e x p e n s e o n a d ju s tm e n ts 3 4 (2 9 %)S p in -O fa n d N O L b e n e fits (9 )(1 )N /M A d ju s te d in c o m e ta x e x p e n s e (b e n e fit)(4 )1 N /M A d ju s te d n e tin c o m e $ 1 9 $ %

43 Q & A

44