eFunds Corp.’s revenue rose only modestly in the second quarter, but its profit almost doubled, because of cost-cutting and good results in three of its divisions.
Net income grew 84% over the same period last year, to $9.4 million, while revenue inched up 6%, to $140.7 million, the Scottsdale, Ariz., electronic transaction processor and automated teller machine deployer said Wednesday. Earnings per share of 19 cents topped the average analyst estimate by a penny.
eFunds has four primary divisions: electronic payments, which processes electronic funds transfers; risk management, which sells data and analytics to financial institutions; automated teller machine deployment in nonbank locations; and global outsourcing. The ATM division was the only one that had a bad quarter, eFunds said.
Revenue in the largest division, electronic payments, grew 14%, to $51.7 million, because of higher volumes. But its operating income fell 20%, to $7.4 million.
Late last year eFunds acquired Oasis Technology Ltd., a Canadian payment software vendor that was expected to spur growth in the e-payments division.
“Our pipeline wasn’t as full as we anticipated it to be,” but “Oasis provided us with a rich source of new customers” for other products and services, said Paul F. Walsh, eFunds’ chairman and chief executive officer.
The risk management division’s revenue grew 9% over the second quarter of last year, to $35 million, but its operating income grew 90%, to $12.4 million. The division provides a range of check guarantee and identity verification services.
eFunds’ smallest division, global outsourcing, produced $19.4 million of revenue, as it did a year earlier, but its operating income quadrupled, to $3 million. The division recently opened its sixth processing center in India.
“We are actively exploring opportunities for expansion outside the U.S.” by several of its divisions, Mr. Walsh said.
The weakest spot was the ATM deployment division, whose operating profit declined 32%, to $446,000, as revenue fell 5%, to $34.6 million. Mr. Walsh said eFunds is studying options for improving its margins, though he would not discuss details.
“We are continuing to pursue those options until we have clarity on which one will be best for the company,” he said in response to an analyst’s question. Later, he said, “You should not anticipate us putting more capital into this segment of the business.”
eFunds operates the nation’s second-largest ATM network, with 17,200 units.
Mr. Walsh called the second quarter “another quarter of solid financial results.” He cited a cost-control effort that began late in 2002 and led to $30 million of savings last year. The ongoing effort could generate just as much savings this year, he said.
eFunds affirmed its full-year forecast for earnings per share growth of 25% to 30% on a revenue increase of 5% to 10%. For last year it posted earnings of 61 cents a share and revenue of $532.1 million.
