First Data Rallies On N. America SMB Efforts

Win a battleground, investors cheer.

First Data saw a turnaround in its North American global business solutions (GBS) operations in the third quarter of 2016, notching the first positive results in several quarters, and that was fuel for a rally of as much as 12 percent intraday in the company’s stock price.

The company said Monday (Nov. 7) that the unit saw 1 percent year-over-year top-line growth to $819 million, coming after two straight quarters of declines north of 2 percent.

The area has been challenging enough for CEO Frank Bisignano in the past to have called it a “battleground,” which could be considered the key in its continued turnaround in the wake of having been spun out of KKR last year.

This time around, it was the continued traction in small and mid-sized business transactions that garnered a spotlight in management commentary. CFO Himanshu Patel said on the call that SMBs, which drive 20 percent of the unit’s sales, are showing lower attrition rates than had been seen in the past and, in fact, saw sequential and year-over-year growth in revenues, contributing positively to the top line of GBS overall. Transaction growth came in at 7 percent, with a dilutive impact of lower blended yield.

“I’ve always said this is a ground game,” said Bisignano of the North American operations. “No silver bullet … It’s not a quarter-to-quarter item; it’s a long-term trajectory item. We’d talked about that we see improvement in the second half.”

Speaking to analysts on the conference call, CFO Patel said that, within the GBS segment, activations of new merchants were gaining ground. Drilling down to sales force efforts, 10 percent of leads were via digital sources, which helps First Data’s productivity. Better merchant SMB performance this quarter, said the CEO, has been tied in part to Clover (which helps businesses with processing and other functions and which the CEO pointed out in a recent interview with PYMNTS’ Karen Webster has been designed to be “a business in a box”), which the firm has seen “perform better” as “an individual item.”

Outside the U.S., growth rates also were positive in the all-important GBS segment, at 2 percent in Europe, though were up 12 percent in Latin America, buoyed by growth in Argentina and the Brazilian acquiring business.

Taken on a consolidated basis, revenues budged up only slightly for First Data, as sales were $2 billion, up 1 percent year over year, though, as measured in constant currency growth, that figure was 3 percent year over year. Earnings met The Street at $0.34 a share.

The GBS segment, which carries sales at $1 billion, grew by 3 percent year over year.