Though First Data Corp.’s second-quarter earnings show losses tied to debt service from a 2007 takeover by private equity firm Kohlberg Kravis Roberts & Co., company executives pointed to positive revenue numbers and strong liquidity during an Aug. 3 conference call with analysts.
The Atlanta-based card processor reported a second-quarter 5.4% increase in revenue for the quarter ended June 30 but also reported a net loss. (
“The economic recovery in the U.S. remains weak, with the second quarter being particularly soft,” Ray Winborne, First Data chief financial officer, told industry analysts during the call. “Our business is closely tied to consumer spending and consumer pullback in the quarter.”
High unemployment, gasoline prices at $4 a gallon, inflation and rising food prices all factored into consumer spending patterns in the U.S. the past three months, Winborne said.
Winborne cited increases in debit-network fees and favorable changes in foreign currency exchange rates as key reasons for the revenue increase.
Winborne pointed to the company’s new mobile and fraud-security products an the company’s role in the Google Wallet launch as factors in its strong liquidity at $1.8 billion, which includes $287 million in cash available for corporate use and $1.5 billion under the revolving credit facility.
Jon Judge, First Data chief executive officer, during cited the company’s diversity in helping get through difficult economic times. “When one area of our business may be weak, another may be strong,” he said. “This was the case in the second quarter, where the U.S. acquiring market was impacted by the economy while our international segment was enjoying another healthy quarter.”
Company executives expressed mostly positive speculation about the potential effect the Durbin amendment may have on First Data.
Ed Labry, First Data president-North America, said Durbin’s effect on debit versus credit cards will be noticeable because of the extreme growth already seen in debit card use. Financial institutions will see revenue possibilities in credit cards, sparking a growth in credit card products along with a recommitment by major retail card issuers to strengthen business after coming out of the lows of the 2009, he said.
International revenue for the second quarter increased 6.6%, to $412.5 million from $387.1 million in the second quarter of 2010. The international credit card issuing segment reported a 0.7% revenue increase, to $221.5 million from $220 million.
Merchant-services revenue was up 6.3%, to $939.5 million from $883.8 million. Card Services revenue totaled $439.2 million, up 1.9% from $431.1 million.
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