First Data 3Q Shows Slip In N. America Biz Solutions Turnaround

First Data reported earnings that were largely in line with expectations, but showed softness within some of its North American operations.

Revenues were $1.9 billion for the third quarter, excluding reimbursable items, up 4.4 percent year over year, and earnings were $0.40 a share, matching consensus.

First Data investors have been focused on the North American region tied to First Data’s Global Business Solutions (GBS) unit, which in total was $1 billion, up 2 percent on an organic constant currency basis.

Delving a bit deeper, North America was roughly 44 percent of that tally, and that region saw sales slip 3 percent year over year. Joint ventures with banks have been in turnaround mode within North America, and the decline of 3 percent year over year may have concerned investors, who sent shares in the company down as much as 5 percent in intraday trading.

That softness was offset by strength in other operations, namely the Global Financial Solutions and Network and Security Solutions units.

In Monday’s (Oct. 30) conference call discussing results with analysts after First Data’s earnings release, CEO Frank Bisignano and CFO Himanshu Patel said that the joint ventures (JVs) had seen, as the CEO termed it, “weak lead flow” as compared to last year, a trend that has been in place since the end of 2016.

Bisignano told analysts that the firm has been holding “deep dialogue” with bank executives, and talks, said the CEO, “have taken on a greater sense of urgency” within the banks. Bisignano said a full recovery in the business is expected. The discussions have involved, in part, digital lead acquisitions and streamlining sign-up activities.

Later in the call, Bisignano said, when referring to the GBS business, that initiatives include digital, where instantaneous onboarding will be “implemented in the first half of next year,” with the firm getting the benefit of that implementation in 2018.

Bisignano also said that since finalizing its acquisition of CardConnect earlier this year, the company closed 30 deals with independent software vendors (ISVs) in the past quarter, with solid pipelines in place; and, he added, “we will further accelerate our presence in the ISV space with the planned acquisition of BluePay, another tech-oriented independent sales organization (ISO) that largely processes through First Data today. The acquisition is highly complementary to First Data and CardConnect on several fronts, primarily because BluePay is highly focused on the card-not-present ISV space.”

CFO Patel told analysts that CardConnect contributed 25 basis points of organic constant currency growth seen in consolidated results of 3 percent, while revenues grew by a mid-teens percentage rate.

Growth outside the United States, said Patel, is up mid-single digit percentages in the EMEA (Europe, the Middle East and Africa) region; GBS Latin America grew by 61 percent year over year and Asia-Pacific (APAC) was up 18 percent year over year.

Within the Global Financial Services segment, top line grew by 5 percent to $416 million on both a reported and organic basis. Within that headline result, North American sales were up 1 percent, with U.S. card processing revenue hit by a decline in the card personalization business, which the firm said had been anticipated, lapping a surge in EMV-related business last year. EMEA within this segment was up 7 percent on a constant currency basis.

The network and security segment was $395 million, gathering 5 percent growth year over year. Security and fraud solutions saw similar growth.

Patel told analysts that Clover Go’s installed base is at 700,000 units, and the firm estimates that payment volume is approaching $50 billion annualized by the end of 2017.

First Data reiterated its 2017 guidance to investors, with 3 to 5 percent revenue growth seen for the year and 15 percent earnings growth for the period.