First Data FX Headwinds Overshadow Clover Double-Digit Gains

Payments processing firm First Data had headline results that sent the stock tumbling on revised guidance tied to FX headwinds — but underlying business trends show traction across key segments such as ISV channels and through POS offering Clover, which saw processing volumes up 45 percent year on year.

At this writing, intraday, the stock was off 12 percent, and that comes as earnings came in at 35 cents a share, missing the Street by two pennies, and the aforementioned headwinds will bring earnings for the year to $1.38 to $1.40, versus the Street at $1.45 and where previous estimates from the company had been $1.42 to $1.47.

Drilling down a bit into the numbers, total segment revenues, according to supplemental materials provided alongside the Monday earnings announcement, were up 5 percent year on year on an organic constant currency basis to $2.2 billion.

Segment data show that Global Business Solutions was up 6 percent on a year-over-year organic rate, and stood at $1.4 billion for the period.  Similarly, Global Financial Solutions was up 6 percent to $407 million. Beyond that, Network Security Solutions was off 2 percent to $367 million.

CEO Frank Bisignano stated on the call that these segments grew with “notable … strong contributions in the North America region.” For GBS, growth in that region was 4 percent, driven by partner solutions and by direct sales. As a result, transactions grew by 9 percent for GBS in North America. As has been seen in past quarters, JV sales declined modestly, while international sales grew by 17 percent, and growth was seen across all regions. In international business, GBS revenues in Latin America grew by 45 percent, while Asia Pacific was up 16 percent.

GFS international sales were up 9 percent, and also saw growth in Latin America and Asia Pacific, up a respective 7 percent and 31 percent.  Accounts on file accelerated a growth rate that had been seen in recent quarters at the 6-percent to 7-percent level, to 8 percent in the third quarter.

Within NSS, revenue growth was hit by the non-renewal of what the company termed a “low margin plastics contract” while EFT network saw mid single-digit revenue growth.

Clover Gains Momentum

CEO Bisignano said that in reference to its tablet-based POS offering “we are now processing about $70 billion of annualized volume globally on Clover, up a healthy 45 percent year over year … for historical perspective, Clover was generating less than $20 billion in annualized volume in early 2016.”  He noted that expansion should come as merchants can sign up through Clover.com (he stated there are efforts with JV partners to advance enrollment of those merchants) and with increased efforts to penetrate the full-service restaurant vertical.

Later on the call, CFO Himanshu Patel stated that the company’s partner solutions business is “rapidly taking share in the ISV and agent channels” and that investment is expanding in the integrated space as digital merchant sign up initiatives are “progressing well across our JV and other bank partners.”