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First Data’s Q1 Segment Performance A Mixed Bag

Transaction processor First Data Corp.’s first-quarter performance was a mixed bag, as its Financial Services and International segments showed year-over-year revenue gains, while Merchant Solutions (formerly called Retail and Alliance Services) saw revenues drop slightly.

Merchant Solutions revenue for the period ended March 31 was $856 million, down 0.1 percent from $861 million during the same period ended March 31 last year. Merchant-acquiring revenue was flat on higher volumes offset by lower yield, First Data said in its earnings release. First Data is private company and is not required to provide full details of its quarterly earnings and segment performance.

The segment’s transaction growth was 5 percent, and its credit mix was 71 percent , the company said. Average ticket was $78, up 1 percent from a year earlier. Product revenue was down 2 percent because of a continued decline in check processing, offset by growth in equipment revenue. During the quarter, Merchant Solutions added 22 new independent sales organizations, 19 bank-referral agreements and one revenue sharing alliance.

Segment earnings before interest, tax, depreciation and amortization (EBITDA) was $370 million, up 4 percent from $354 million.

Financial Services revenue rose 5 percent, to $349 million, on new business and volume growth, First Data said, noting last year’s first quarter was negatively impacted by 1 percent for a price concession to resolve a customer dispute. Average active card accounts on file were up 15 percent, primarily driven by new card portfolios and organic growth.

Debit card issuer transactions were up 1 percent year over year. Segment EBITDA was $173 million, up 30 percent from $133 million as a result of cost reductions and revenue growth. During the quarter Financial Services renewed more than 250 contracts with financial institutions.

International revenue was $421 million, up 3 percent from $409 million. On a constant-currency basis, segment revenue was up $29 million, or 7 percent. Merchant-acquiring revenue grew 5 percent on higher volumes, while issuing revenue grew 9 percent on organic growth and new card portfolios. Segment EBITDA was $128 million, up 28 percent from $100 million. On a constant currency basis, segment EBITDA was up $39 million.

As a company, First Data reported consolidated revenue of $2.6 billion, up $49 million, or 2%, primarily driven by a $30 million increase in reimbursable debit network fees, postage and other, and an increase in card-services revenue. Adjusted revenue, which excludes certain items including debit network fees, was up 2% year over year at $1.6 billion.

The company reported a net loss attributable to First Data of $201 million, which compared with $337 million loss a year earlier on a $93 million improvement in operating income.

“First Data delivered a very good quarter, generating double-digit EBITDA growth with solid top-line growth in International and steadily improving results in Financial Services,” First Data Chairman and CEO Frank Bisignano said in the release. “We are winning in the marketplace, and we are running the company better – increasing operating effectiveness and efficiency, resulting in better client delivery and margin expansion across the business.”

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