After spinning off Western Union Financial Services Inc. next week, First Data Corp. expects to generate revenue of $7 billion this year, and long-term gains of 8% to 10% per year in both revenue and earnings, executives said Wednesday.
In a meeting with investors and analysts in New York, the Denver company detailed its post-breakup organization and financial structure. It plans to spin off the money transfer company Sept. 29.
First Data also unveiled a major customer win Wednesday. Pam Patsley, the president of First Data International, announced a long-term agreement to process credit cards and loans for Barclays Bank PLC.
The British banking giant will shift its U.K. Barclaycard co-branded portfolio to First Data’s VisionPlus processing platform, and the deal could eventually expand to include Barclays’ accounts in other European countries, Asia, and South Africa, Ms. Patsley said in an interview. All those places “match up with our footprint,” she said.
The processor had already discussed much of its new structure since announcing the breakup plan in January, but it disclosed several key financial details at Wednesday’s meeting. After Western Union becomes independent, First Data will have three divisions. The international unit is the smallest, and is expected to post revenue of $1.2 billion this year. The commercial services division will bring in about $4 billion, and the financial institution services division will generate $1.8 billion. The international division is the fastest-growing, as evidenced by the Barclays deal, and its top line is expected to have 24%-27% growth this year.
First Data reported total revenue of $2.9 billion in the second quarter.
“I think we’re very much headed in the right direction, and would not change much,” said Henry C. Duques, First Data’s chairman and chief executive.
In July, First Data said it planned to shift much of its debt to Western Union, a move analysts said would give First Data more financial freedom to pursue growth after losing a significant revenue source.
After the spinoff, First Data will be left with $4.6 billion in debt, but Kim Patmore, its chief financial officer, said Wednesday that Western Union will give First Data $2.5 billion in cash to “take down” that debt to $2.1 billion. Western Union, post-breakup, will have $3.5 billion in debt.
First Data spokesman Colin L. Wheeler said the debt distribution was “largely driven by having quality debt ratings.” Western Union was given the bulk of the debt because it “generates so much cash and it’s easier to service the debt.”
First Data wanted to ensure its high debt rating because its bank clientele “like to do business with companies with higher ratings,” Mr. Wheeler said.
Lawrence S. Berlin, an analyst for First Analysis Securities, said First Data is “working to address clarity issues” at its business segments, for analysts, investors, and customers.
“If you clarify your services, your products, to your customers, eventually it will show up, and the investors will be happy,” Mr. Berlin said.
Some analysts seemed disappointed during the meeting that First Data does not expect higher revenue growth. Mr. Berlin, however, said he was not surprised by the anticipated gains of 8% to 10%.
“It’s a good company growing nicely, but it’s not a rapidly growing company,” he said, though if its international business takes off, overall growth could also pick up by the end of the decade, he said.
