First Data’s Loss Shrinks As It Preps For IPO

As First Data looks to return to being a publicly traded company, its second quarter earnings show that, despite posting a loss, the company is narrowing its profit gap in the right direction.

The payments processing company filed a registration statement with the SEC on July 20 and could go public as early as this year. It’s currently privately owned by KKR & Co., a company that bought it eight years ago. While there’s no set date for First Data’s public appearance, CEO Frank Bisignano remained optimistic that the company was headed in the right direction, as company revenues trend upward.

“We are pleased with our second quarter results which showed solid constant currency revenue growth,” Bisignano said in a prepared earnings release. “During the quarter we further strengthened our capital structure, rolled out the Clover Mini integrated POS solution and acquired Transaction Wireless, a leading digital gift card distribution platform. We incurred $19 million in restructuring costs during the quarter to fund part of our recently announced strategic expense management initiative and remain focused on achieving our objective of $200 million in annualized savings by mid-2016.”

First Data saw a second quarter loss of $26 million, which was an improvement from 2014’s second quarter loss of $34 million. Revenue, however, has begun to rise and increased by 1.2 percent to $2.87 billion. Bisignano also indicated that revenue across all three of its business segments grew as the company has been able to bring in more from merchants with their payment services and help those merchants prevent fraud.

In breaking down its segments, its Global Business Solutions saw revenue of $1.1 billion, a 2 percent increase from the year prior. North America revenue of $835 million increased 3 percent versus the prior year period due to increased hardware sales and revenue from its merchant suite of solutions. This segment provides its retail point-of-sale merchant acquiring and eCommerce services, next-generation offerings such as mobile payment services, as well as the company’s cloud-based Clover and its marketplace of proprietary and third-party business apps.

It’s Global Financial Solutions, which provides credit and retail private-label card processing, output services and next-generation offerings, saw a segment revenue of $353 million (down 3 percent, YOY). North America revenue of $207 million was up 5 percent, the company said, which was due, in part, to increased card personalization volume related to EMV demand.

The third major segment — Network and Security Solutions — saw a revenue of $356 million, up 6 percent on the year. Security and Fraud Management Solutions revenue of $98 million increased 7 percent due to growth in business security solutions.

According to a Bloomberg report on the company’s earnings, Bisignano has been lauded as the leader who has helped give the company a much needed boost by securing acquisitions. This included the cloud-based payment software developer Clover Network and the digital rewards program designer Perka. It also recently acquired the mobile gift card company Gyft, along with Transaction Wireless, which is a digital gift card distribution platform.

As First Data prepares for its IPO, it seems from an organizational standpoint that the company is getting its ducks in a row. The company is now reporting its earnings by breaking them down by segments, which includes business solutions, financial solutions and network and security solutions.

Reports indicated at the time the news of the IPO broke that if the company was publicly listed the value of First Data would be roughly $40 billion (a figure that would include both equity and debt), with application of enterprise value/EBITDA ratios similar to those seen in companies such as Vantiv.

In looking at the regulatory filing for the first steps of its IPO, First Data said 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 and Security Solutions. The filing 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.