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First Data’s North American Merchant Revenues Grew 7% in 2018’s Fourth Quarter

Merchant-processing revenues from North America grew 7% year-over-year in 2018’s fourth quarter to $1.1 billion on a comparable accounting basis, First Data Corp. reported Wednesday.

First Data, which has an agreement to be acquired by processor Fiserv Inc. in a $22 billion all-stock deal, reported total quarterly revenues of $1.42 billion, up 6% when adjusted for a new accounting standard, in its Global Business Solutions segment. GBS, which provides merchant-processing services, is the biggest of the company’s three segments.

North America generated 77% of GBS’s revenues. Partner Solutions, the GBS unit that includes independent software vendors and related businesses, enjoyed “strong growth,” Atlanta-based First Data said in a press release. But joint merchant-processing ventures with banks, which have been under pressure for the past couple of years, experienced “a modest decline,” the company said. GBS posted segment earnings before interest, taxes, depreciation and amortization (EBITDA) of $514 million, up 4% year-over-year.

Because of the pending Fiserv buyout, First Data said it would not have a conference call with stock analysts after releasing its earnings report. Nor did the fourth-quarter report disclose as much detail as the company usually provides, such as transaction volumes.

Revenues in the Global Financial Solutions unit, which provides processing services to payment card issuers, fell 8% from 2017’s fourth quarter under the new accounting standard to $375 million. GFS’s North American revenues declined 6% to $226 million. The release gave no reasons for the slippage.

Network & Security Solutions, the segment that includes the Star electronic funds network and debit processing, prepaid cards, and fraud-control services, posted revenues of $389 million, down 1% year-over-year. “Modest growth within the EFT business was offset by modest declines in the stored-value and security and fraud businesses,” First Data said.

Consolidated quarterly revenues totaled $2.4 billion, down 24% because of the new accounting standard that negatively affected comparability with year-earlier results, First Data said. Full-year consolidated revenues declined 21% to $9.5 billion, also because of the accounting standard. Quarter net income fell 83% to $162 million because of non-recurring tax items taken in 2017’s fourth quarter and debt-retirement expenses.

Still, Atlanta-based First Data said its financial results were in line with preliminary figures and 2019 guidance it released Jan. 16. First Data expects total segment revenue to grow in the 5% to 6% range this year on a constant-currency basis. And the highly leveraged company paid down $1.7 billion in debt during 2018, leaving $16.9 billion on its balance sheet as of Dec. 31.

“We finished the year with a strong fourth quarter across our global business lines,” First Data chairman and chief executive Frank Bisignano said in the release. “We enter 2019 with excellent momentum across our important growth initiatives and with confidence that our recently announced merger with Fiserv will position the combined company well to serve its clients through an expanded set of solutions, drive further innovation, and ultimately create significant value for shareholders.”

Brookfield, Wis.-based Fiserv is scheduled to release its fourth-quarter financial results Thursday afternoon.

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