Eye on Earnings: First Data, Green Dot, Heartland, Cardtronics

Payments companies ranging from leading merchant processors to prepaid card and ATM managers reported transaction growth in the third quarter, but some also faced pricing pressures and other drags on the bottom line.

–No. 1 payment processor First Data Corp. said transactions in its merchant-processing unit called Retail and Alliance Services, the company’s biggest business, grew 9%. Credit and signature debit card transactions grew, though slightly, more than PIN-debit transactions for the first time in at least seven quarters. The average card ticket declined 3% to $69 from $71 a year prior. The unit added 10 referral agreements, one new revenue-sharing pact and 20 new independent sales organizations. Retail and Alliance segment revenues grew 7% to $851 million. Prepaid card revenues were up 16%.

Atlanta-based First Data’s cardholder processing unit, dubbed Financial Services, faced pricing pressures and saw accounts on file slip 4%. Debit card issuer transactions, however, grew 7% excluding the deconversion of the former Washington Mutual portfolio now owned by JPMorgan Chase & Co. Total company revenues grew 8% to $2.63 million but First Data nonetheless reported a net loss of $431.3 million. Part of the loss came from a $178 million charge associated with a new federal law that affects the company’s ability to use foreign tax credits to offset future U.S. taxes.

–Prepaid card program manager Green Dot Corp. reported that its active card base increased 50% to 3.3 million in the third quarter over 2.2 million a year earlier. Monrovia, Calif.-based Green Dot, which completed an IPO in July, also reported that gross dollar volume on its cards jumped 69% to $2.52 billion from $1.49 billion in 2009’s third quarter. Green Dot remains heavily dependent on its largest customer, Wal-Mart Stores Inc. The company generated 63% of its revenues through sales at Wal-Mart, unchanged from a year earlier, according to Green Dot’s latest quarterly report to the Securities and Exchange Commission. Green Dot posted revenues of $88.9 million, an increase of 36% from $65.3 million. Net income, however, fell 14% to $8.97 million from $10.5 million because of stock-based incentives for retailers and higher commissions to Wal-Mart.

–Leading non-bank ATM network operator Cardtronics Inc. reported transactions increased 9.5% to 111.9 million from 102.2 million in 2009’s third quarter. The 68.2 million cash withdrawals amounted to 61% of all transactions. The average ATM generated $1,326 in revenues per month offset by $880 in expenses for a gross profit of $446, up 7.5% from $415 a year earlier. Cardtronics had an average of 35,846 owned and managed ATMs in its network in the U.S., United Kingdom, and Mexico during the third quarter, up from 34,616 a year earlier. Total ATM operating revenues of $134.1 million, up 6.3% from a year earlier, included $67.9 million from surcharges, $41.1 million from interchange, and $20.8 million from bank-branding and surcharge-free network agreements.

Cardtronics this week also announced it had hired Tom Pierce as chief marketing officer. Pierce comes to Cardtronics from Fidelity National Information Services Inc. (FIS) where he was vice president of marketing strategy. Before that he worked in marketing at Metavante Corp., now part of FIS, and Wausau Financial Systems.

–Merchant processor Heartland Payment Systems Inc. reported that same-store sales rose 2% in the third quarter for the second quarter in a row and were up 90 basis points (0.9 percentage points) from the preceding quarter. Princeton, N.J.-based Heartland said small and mid-sized merchants set a record of $16.6 billion in charge volume, up 5.9% from 2009’s third quarter. The 825 million transactions from Heartland’s Network Services unit, mostly petroleum and other national retailers, set another record, as did the company’s $115.4 million in net revenues, up 4.9%. Heartland reported net income of $7.53 million compared with a loss of $37.1 million in 2009’s third quarter when it set aside an after-tax provision of $45.8 million to cover expenses related to the big data breach it announced in January 2009.

–Point-of-sale terminal maker Hypercom Corp. had a good quarter: Revenues set a record at $125.1 million, up 23.7% from $101.2 million in 2009’s third quarter. Net income more than tripled to $4.48 million from $1.18 million. At a Tuesday conference call with analysts, however, Hypercom’s top brass refused to discuss the question on everyone’s mind: What is the company’s next move after rejecting the hostile takeover bid from rival VeriFone Systems Inc. (Digital Transactions News, Sept. 29)?