Data Dive

Data Dive, Earnings Edition: Green Dot Hits, OnDeck Misses, And First Data Looks Ahead

Americans were projected to spend a record-setting $23.4 billion yesterday celebrating their moms, buying flowers and cards and taking them out to brunch.

Not that love for our mothers can be quantified with dollars.

But for publicly-traded corporations, on the other hand, love is easily measured in dollars. And as Q2 got up and spinning, lots of figures from all sorts of firms rained down.

So what happened?

First Data’s New Friends

First Data CEO, Frank Bisignano, noted in the wake of First Data’s earnings release this week that the company remains on track to meet its guidance for 2017 and that he is “confident that the current weakness is transitory.”

Q1 for First Data was marked by a flurry of deals and joint ventures — and as earnings hit this week, the firm added another big one to the list.

First Data will be instrumental in helping drive Alipay expansion into the U.S. market, focusing on firms that use First Data’s Clover platform.

Welcome to the U.S., Chinese consumers.

By the numbers, First Data reported adjusted earnings per share of $0.28 and revenue of $1.7 billion. That essentially met expectations on earnings, though revenues were a bit higher than projections by about $10 million.

Bisignano’s statement that the firm will meet expectations for the remainder of the year draws from improvements observable across segments.

The CEO called out “better salesforce and merchant retention” tied to its North American Global Business Solutions segment, which saw revenues of $971 million, a 3 percent increase on an adjusted basis. North America contributed $751 million to the total take — Latin America had revenues of $59 million, up 52 percent in constant currency. Much of that growth was driven by developing strength in Brazil and Argentina.

Transaction growth was steady, with 7 percent growth in North America, consistent with the last four quarters.

Credit and retail processing in North America were up 1 percent, and the business, globally, gained 2 percent. Accounts on file, again for North America, grew by 7 percent.

Clover, the firm reported — despite being “still in early days” — has had First Data log “solid interest from developers,” with ISVs signed up, including Breadcrumb and Flywire.

As First Data and Alipay — a deal released as the market closed — the partnership will let the latter’s consumers shop at several million merchants in the U.S. The initial rollout will start with firms deploying the aforementioned Clover. Alipay has been seeking a greater presence in the U.S. as part of a movement on a global scale, with a focus on mobile wallet usage.

The deal will give Alipay scale roughly equivalent to Apple Pay’s in terms of presence, at around 4.5 million U.S. sites.

OnDeck’s Falling Figures

Things continue to look rough over at marketplace lender OnDeck, as it reported quarterly earnings that included a slightly bigger-than-expected quarterly loss.

That news was paired with words from Chief Financial Officer Howard Katzenberg on a conference call with investors that OnDeck’s newly stricter credit requirements would lead to a 20 percent drop in originations in the second quarter from the previous three months.

Lower origination volumes were something of a theme of the call.

“We have strategic decision to shift the company’s near-term focus from growing loans under management to achieving profitability,” Chief Executive Officer Noah Breslow said on the call.

Reflecting the changes, the company lowered its full-year net revenue outlook to a range of $342 million to $352 million. It previously had forecast $377 million to $387 million.

Annual costs are also slated for a big cut — by around $25 million. Those cuts will be achieved by lowering headcount. About 27 percent of the staff will be cut back from levels at the end of 2016.

And OnDeck, it seems, is thinking about seriously hitting reset on its entire business model — as it announced this week that it will shift further toward funding more loans itself. That means OnDeck is also putting more money away for loss, with provisions for losses soaring 82 percent to $46.18 million, while funding costs nearly doubled to $11.28 million.

It expects loans funded by outside entities to account for only 5 percent of its originations this year, a change that means the company will have to set more money aside for potential losses, Katzenberg said.

By the numbers, losses clocked in at $0.11 per share, slightly more than the $0.10 loss analysts were looking for. Gross revenue rose 48.4 percent to $92.89 million on higher net interest income, beating analysts’ estimates of $90.38 million.

On Deck’s investors were less than thrilled by the outcomes, and the pivot on underwriting direction- shares fell 8 percent in after-hours trading.

And finally ...

Green Dot Beats the Streets (In a Big Way)

Green Dot Corp. made some investors very happy, as it trounced the Street’s estimates. The company posted adjusted earnings per share of $1, which was $0.16 better than analysts were forecasting. Revenue clocked in at $253 million, was up 11 percent year over year and was higher than the roughly $234 million that had been forecasted.

Guidance for the full year was also ticking up — just about in line with the magnitude of the beat, with revenue to range from $830 million to $845 million (both ends of the range were taken up by $15 million). Earnings per share are slated to come in between $1.89 and $1.94, which compares with the consensus of $1.92 as of Wednesday morning.

CEO Steven Streit told analysts that the quarter benefited from the inclusion of UniRush, which closed in February of this year. The TPG tax prep business was also a major source of growth, since it offered a variety of touchpoints with potential customers due to its “synergistic approach to its business.”

Streit noted that “tax prep partners [were] taking out and repaying Green Dot Bank small business loans, then selling Green Dot brand prepaid cards to customers” as they set up accounts in which to deposit their tax refunds. Those tax refund recipients, in turn, were able to get cash advances.

In its active base of account holders, said management, double-digit growth has been seen in accounts sold through Walmart and small business use through GoBank, consistent with the least few quarters’ activity.

Streit also highlighted the direct-to-consumer business, which offers bank accounts and prepaid cards, driven in part by online activity. Green Dot reports that mobile app users across the company’s brand portfolio have tripled from a year ago, all of which has helped take gross dollar value per active card up 11 percent over the same timeframe. Spend per card is also up — by about 9 percent.

That comes even as the active card count, excluding the recent acquisitions, declined by 8 percent to 4.4 million cards, a trend CFO Mark Shifke has said reflects some stabilization after the discontinuance of MoneyPak in 2015. Counting in cards gained through the UniRush acquisition, active card count grew by 6 percent to more than five million.

So what did we learn this week?

Green Dot is making pre-paid cards look easy, OnDeck is demonstrating how marketplace lending (or marketplace anything) is really, really hard — and First Data is greatly looking forward to next quarter, when it can report smoother sailing.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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