Earnings

First Data Sees Green In Clover And ISVs

First Data reported results on Monday (Feb. 12) that met Street expectations on the continued turnaround in its ISV business, and traction in payments processing solution Clover.

The company said that its fourth-quarter top line came in at $3.1 billion, up 7 percent from last year. Total segment sales were up 4 percent on an organic constant currency basis to $1.9 billion.

Adjusted net income was $0.44 and met Street estimates, gaining 13 percent year over year.

The company said that its fourth quarter Global Business Solutions (GBS) segment revenue came in at $1.1 billion, up 4 percent on an organic constant currency basis.

North American revenue within this segment was flat on similar metrics, with – as has been seen in previous quarters – growth in non-JV channels offset by softness in the JV business. CFO Himanshu Patel said on the post-earnings call that the JV channel saw a low single-digit decline in its normalized revenue growth rate in the fourth quarter. But that was an improvement from the mid-single-digit declines seen in the previous quarter. “We continue to expect this channel to gradually improve, although year-over-year growth rates may be lumpy from quarter to quarter,” Patel told analysts.

We believe an important KBI in the JV channel is lead flow, and for the first time in several quarters, JV lead flow improved year-over-year, up low single digits in the quarter. We view this as a step toward stabilization in the channel,” continued the CFO.

“We are confident that GBS North America in total will continue to gradually improve over the coming quarters, supported by continued solid performance in the enterprise business, healthy organic growth within recently acquired businesses like CardConnect and BluePay, and as I just mentioned, the gradual recovery of our JV business.”

Later, during the question-and-answer session with analysts, Patel stated that there is “an approximately six- to nine-month lag from when we see lead flow improvement to that translating into a commensurate benefit on revenue, holding all other revenue variables constant. So, I think that gives you a little bit of a sense of what we’re thinking about on timing.”

Also in GBS, EMEA revenues gained 10 percent on an organic constant currency basis, tied to strength in Germany and the U.K. Latin America showed particularly noteworthy gains – 52 percent organically – and CEO Frank Bisignano stated that Brazil and Argentina drove results here.

In remarks made to analysts on the conference call, Bisignano said that in North America, our PNC Merchant Services joint venture was recently renewed and extended to 2024 … I think this early renewal and extension with PNC is indicative of the strong relationships that we have across all of our bank partners.” Additional and continuing efforts, he said, include digital lead acquisition, and progress continues.

“The first thing that you’ll see happen will be inside the bank branch, where our JV partners are moving to largely eliminate physical sign-up forms and converting to digital sign-up within the branch,” Bisignano told analysts. “The credit decision process – which for some customers can take a few days – will be significantly accelerated, and in many cases, shortened to just seconds.”

He went on to describe the next component: “The ultimate self-service solution will be to allow merchants to log on to the bank’s website, apply for a merchant account online and receive a credit decision. I’m happy to say that each of our partners has committed to these initiatives and that they’re in various stages of implementation.”

Global Financial Solutions (GFS) saw segment revenue of $412 million, which was off 1 percent on an organic currency basis, and here in North America was off 3 percent.

Bisignano said on the call, offering a bit of color within the GFS segment, “we continue to expand our global presence. As mentioned in our joint press release on Jan. 25, we entered into a significant new processing agreement with SBI Card, a subsidiary of the State Bank of India, the largest bank in India. We also signed a processing agreement with RBL Bank, one of India’s oldest private-sector banks. These deals represent a meaningful expansion of our GFS business in India, where card usage is expanding rapidly.”

As for the ISV business, the CEO stated that “on the integration front, both CardConnect and BluePay are deep into the integration process, and both are going well. One the revenue front, I’m extremely pleased with the growth trajectory these businesses are displaying in the short time that we’ve owned them.”

The executive called out the ISV business as having shown traction in the quarter, stating that “our pipeline of ISV opportunities has tripled, and our total number of live integrations is up over 70 percent. During the fourth quarter, we had 24 new ISVs go live. Finally, merchant production across the ISV channel has more than doubled…

“While I’m on the subject of Clover,” he continued, “we have over 400,000 Clover units shipped, excluding our Clover Go. Including Clover Go, over 750,000 units have shipped. We are now processing approximately $50 billion annualized on Clover, and that’s up over 50 percent year over year.

Late in the call, the CEO said “we clearly feel Clover is a platform. It’s demonstrated that platform capability in the ecosystem. I think what we see is our next large pivot there, and we’re working diligently on supporting the ISV community with Clover, and that’s another form of the development community. When we first came out with Clover, you saw us appealing to the individual development communities and writing a series of apps, which attracted a lot of development and had very good ecosystem effect.

“What we learned through that journey was that the ISV community is probably the best software community to support, and we found that them seeing Clover as an option as opposed to a competitor became very strong, and that’s the pivot you’ll see during 2018,” added Bisignano.

Elsewhere in First Data’s results, card accounts on file grew by 6 percent year over year, the company said.

Network & Security Solutions (NSS) was up 6 percent on an organic constant currency basis to a top line of $406 million, with Stored Value revenue up 19 percent in the quarter. In the release, management stated that both open and closed loop gift cards were strong, with additional tailwinds growing from security and fraud, where revenues were up 4 percent.

Guidance for 2018 sees revenues up 5 to 7 percent, boosted in part by the net impact of acquisitions and dispositions, management said on the call.

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