First Data Beats Street, Eyes US Merchant Acquirer Business Gains

In a sign that payments processor First Data may be turning a corner as it trims back expenses and continues investment in new business areas, which weighed on margins, the firm, which went public last year, put up numbers for the March quarter that beat expectations.

The headline numbers were these: Adjusted net income came in at $0.24 per share, better than The Street by one penny, and revenues were up 3 percent to $2.8 billion, in line with projections.

The firm does not provide forecasts, but management did provide some qualitative thoughts on where the business might be headed, with revenues to grow by more than the current rate at the mid-single digits. One driving force, according to the conference call, would be a pickup in the North American merchant acquirer business (down a bit in previous quarters on a reported basis), as part of the Global Business Solutions (GBS) segment, which is slated for the second half, picking up from flat levels (with transactions up but yields down).

GBS North America, said Himanshu Patel, First Data’s chief financial officer, is comprised of a $3 billion business, speaking on an annualized basis, and includes three partnerships with Bank of America, Wells Fargo and PNC, which accounts for a third of that $3 billion tally, with the remainder tied to national merchants, smaller merchants and eCommerce.  Outside of the U.S., according to management commentary, Brazil remained strong, ramping up its own merchant acquiring business, up 44 percent year over year.

Elsewhere, in other business segments, North America showed strength in the Global Financial Solutions unit, leading to 12 percent growth, as measured in constant currency across the unit as a whole, to $386 million.

Turning to digital efforts, Frank Bisignano, chairman and chief executive officer, said: “We are investing in our digital strategy to acquire merchants directly online across all of our distribution channels,” citing the recent launch of the firm’s Clover.com site. Elsewhere during the call, the CEO said: “In addition, we have been making good progress on loan processing, which has been a new growth area for us. Citizens Bank is processing their consumer smartphone loans for a major handset manufacturer with First Data, and Bank of Ireland is processing consumer installment loans in the U.K. with us as well.”