Earnings season is upon us.
And though Apple finding a way to make making $11 billion look disappointing and Amazon finding a way to drop Walmart into the #2 spot for biggest retailer in the world (as measured by market capitalization) almost certainly got your attention, they were not the only things that happened last week.
No, it in fact rained data last week — most of it rather important.
Ready to catch up? Primed to astound and amaze your coworkers at lunch later? Well then, it is time to buckle up and get ready to take your weekly data dive…
In 2007 First Data was taken private by KKR & Co. for $26 billion — an amount that at the time made it one of the biggest deals in the private equity space.
Eight years later, it appears the company is seriously considering returning to the public markets that it abandoned — this time packing an estimated value of $40 billion, according to The Wall Street Journal.
That figure would include both equity and debt and was derived with an application of enterprise value/EBITDA ratios similar to those seen in companies such as Vantiv. The EV/EBITDA multiple is used as a rough proxy to how much investors will pay for a cash flow stream. PayPal, which IPO’d a week ago today, has a valuation of roughly $50 billion.
According to First Data’s S-1, 59 percent of segment revenues came from its global business solutions unit, while the remainder came split relatively evenly between global financial solutions and network security.
The 2014 top line came in at $11.2 billion. EBITDA was about $2.7 billion with a division roughly along the same lines as revenues.
The SEC filing additionally noted that the company has scale across 6 million business locations, with 4,000 financial institutions, and clients stretch across 118 countries. The filing said that transactions processed top $1.9 trillion annually.
Citing unnamed sources, WSJ noted that an offering could top $1 billion should shares debut in an IPO.
The largest payments network in the world put up some big numbers last Thursday (July 23). Fiscal Q3 earnings were up 25 percent, buoyed by a double-digit percentage gain in payments processed across its platform.
Earnings per share, adjusted for a tax benefit, were $0.74, with revenues of $3.5 billion a convincing uptick to last year’s $3.1 billion top line. All in, total transactions processed came in at 18 billion with a value of $1.2 trillion, with volume growing across the network year to year at 11 percent. In more good news, total cards issued on the network itself stood at 2.4 billion, up 7 percent from last year’s comparable period.
So hurray for Visa. Clearly they were everywhere they wanted to be.
Well … about that…
A closer look at the figures indicate that business at home is not growing quite as fast as Visa might like.
Transactions in the States were up just under 9 percent in the period, year on year — nothing to sneeze at but slower on the whole than the network’s global expansion.
Charles Scharf, Visa’s chief executive officer, said Visa has seen what he termed “very little improvement with the U.S. consumer in our numbers thus far, if any.” “That may be a temporary lull,” said the executive, as “there are positive signs in employment and housing, lower gas prices should help, but we’ll have to wait and see.”
Scharf also had a lot to say about the digital side of the business, which he noted “continued to gain momentum.”
“We have over 270 financial institution partners globally,” he noted, with over 160,000 merchants that “currently live globally.” Scharf also noted the $50 billion in total addressable volume in 16 markets around the globe with recent markets having been established in China, Hong Kong, New Zealand, Singapore, Brazil, Colombia, the UAE and South Africa.
And across those 16 markets, Visa Checkout has over 5 million registered users.
“We continue to see great reactions from our merchant clients and have launched several new global marketing campaigns, including with Dunkin’ Donuts, Zulily, and Fandango in the U.S.; and Cineplex theaters and Indigo Books and Music in Canada,” Scharf said.
As for PayPal, Visa’s CEO noted that there’s a relationship that stretches into the past, continues and does not necessarily change whether PayPal is owned by another company or standalone. But he also noted that PayPal uses Visa transactions as a vein to “mine from” and possibly disintermediate the relationship between Visa and clients. A situation he reviewed as “not sustainable for the long term.”
If someone had handed you a list in 2005 with “Starbucks,” “Google,” “Apple” and “Walmart” on it and asked you to pick which one was going to have the most successful and widely used mobile wallet in ten years, we would bet that no one would have ever said Starbucks.
They would have been wrong. Very, very wrong.
Starbucks CEO Howard Schultz has always said that Starbucks is an “undisputed leader in mobile commerce,” and the firm’s Q3 results seem to back that claim up.
Starbucks’ mobile transactions now account for 20 percent of all in-store sales — more than 9 million mobile transactions a week — and a 4 percent increase in foot traffic.
“Our mobile commerce platform is literally stronger than ever,” Schultz said, noting that the 20 percent figure was more than double the mobile transaction sales figures seen just two years ago.
“Our plan all along has been to bring our MSR (My Starbucks Rewards) membership and our digital capabilities to scale, and we are now there,” he added.
Starbucks’ Mobile Order & Pay is also on a rapid expansion track with 4,000 company-operated stores already rocking and with plans to expand across the rest of the U.S. before the 2015 holiday season. Starbucks also has plans soon to introduce the Mobile Order & Pay app to Android customers, as well as in some of its international markets.
“Two years ago I reported on the seismic shift in consumer behavior that would significantly impact traditional bricks-and-mortar retailers. I was not clairvoyant. Since then, many traditional retailers have responded simply by substantially increasing their digital advertising budgets — significantly driving up their customer acquisition costs and producing little to show for it,” Schultz said. “We, on the other hand, took a very different approach. By further enhancing our already world-class digital technologies through the introduction of capabilities like Mobile Order & Pay — and soon to be delivery — and expanding our loyalty program, we are driving traffic as reflected in the 4 percent growth in traffic seen in Q3.”
Speaking of loyalty, he also gave some big numbers about how its MSR members were keeping up. In Q3, MSR membership hit 10.4 million active members, which was a 10 percent increase from the same quarter a year prior. Gold membership is about 60 percent of that at 6.2 million members, up 32 percent from last year.
Adding more loyalty fuel to the MSR fire, Starbucks has recently rolled out strategic partnerships with three companies to expand the Starbucks reward experience beyond just its four walls: Spotify, The New York Times and Lyft.
“We strongly believe that no other bricks-and-mortar retailer has the brand strength, digital and physical assets or connection to consumers to create, build and execute a program anything like this,” Schultz said. “We have identified perspective partners in multiple attractive business verticals, and you may expect to hear about many more carefully curated customized digital partnerships as we roll out this proprietary Starbucks star-centric digital and loyalty ecosystem.”
So now you have it. First Data’s projected market cap is $10 billion less than PayPal’s now, Starbucks offline mobile commerce success blows away everyone else (including Apple Pay) and Visa is doubling down on everything digital.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More