First Data buys Size Technologies; reports Q4 earnings fall

Source: First Data

First Data Corp. (NYSE: FDC), a global leader in electronic commerce and payment services, today announced it has acquired Size Technologies, Inc., a leading provider of loyalty, stored value and transaction marketing solutions. Financial terms of the deal were not disclosed.

The acquisition of Size Technologies enables First Data to offer merchants, issuers, and coalition partners a real-time point of sale, tender-neutral loyalty solution that will help drive profitable customer behavior. Participating clients will also have access to loyalty features and functionality including couponing, consumer messaging, product-based rewards, robust customer relationship management and a campaign management tool. These capabilities can be offered at the point of sale, through printed messaging, mobile phone messaging, via the Internet and automated voice response tools.

The combination of First Data and Size Technologies' resources has already begun to be implemented through a relationship with Royal Buying Group, Inc. (RBG). RBG is a national organization that implements vendor programs for its member base of over 5,500 convenience store and petroleum locations. First Data will continue to offer similar customized loyalty programs to other clients and verticals.

"Loyalty has become an essential component of every merchant's marketing campaign," said Barry McCarthy, president of Product Innovation at First Data Commercial Services. "This acquisition clearly illustrates First Data's commitment to providing our customers with the most advanced loyalty program available in the marketplace today to help them differentiate their business. Having developed their best-in-class loyalty solution over many years, Size Technologies will bring us unparalleled speed to market."

Based in San Francisco, Size Technologies develops and licenses loyalty, stored value, transaction marketing, and open system solutions that integrate with existing payment systems. The company was founded in 1999 and has a proven track record of robust and reliable technology.

"It's an exceptional fit for Size and we're delighted to be joining the First Data organization," said James T. Ray, president, Size Technologies. "First Data is on the leading edge of developing technologies to support future trends in electronic commerce and the payments industry. As part of the First Data family, we're confident we can further enhance the services we provide to all of our clients and expand our reach to merchants of all sizes."

Separately, First Data Corp. (NYSE: FDC) today announced its financial results for the fourth quarter and full year ended December 31, 2006.

Consolidated revenue for the quarter was $1.9 billion, up 14%. Income from continuing operations for the quarter was $240 million, or $0.31 per share and $0.36 per share excluding items.

EPS for the quarter was negatively impacted by $0.05 of items:
  • Debt repayment costs ............................... $0.03
  • Restructuring costs, net ............................ $0.01
  • Impairment charges ................................. $0.01

The company also reported income from discontinued operations of $0.05 per share in the fourth quarter principally comprised of a gain on the sale of its former Taxware business.

For the full year, consolidated revenue was $7.1 billion, up 8%. Income from continuing operations was $848 million, or $1.09 per share and $1.10 per share excluding items. Net items for the full year are reconciled in a table at the end of the release. Free cash flow was a very strong $1.1 billion and operating cash flow was also strong at $1.3 billion.

"2006 was a great year for First Data and both our full-year and fourth quarter results confirm the merits of our earlier decision to spin-off Western Union and focus 100% of our efforts on our financial institution and merchant clients around the globe. We had a strong finish to 2006 with all segments performing in line with expectations, providing significant momentum and enthusiasm as we enter 2007. Our accomplishments in 2006 were the direct result of our ability to execute on First Data's four key strategies: 1) Grow our core business; 2) Expand our product offerings; 3) Improve our overall cost structure; 4) And expand the business globally," said Ric Duques, chairman and chief executive officer.

Segment Results

Commercial Services

For the quarter, Commercial Services reported revenue of $1.1 billion, up 10% or 7% excluding reimbursable debit network fees. Fourth quarter results were driven by solid transaction growth of 13%. Operating profit was $306 million, up 17%. Excluding integration expense from 2005, operating profit growth was 8%. The fourth quarter of 2005 included a reversal of incentive compensation expense that had been accrued earlier that year as bonus targets had not been achieved. Excluding this reversal, the 8% operating profit growth in the quarter would have been 12%. Margin for the quarter improved to 27.5% from 25.9% or to 34.6% from 34.5% excluding reimbursable debit network fees and 2005 integration expense.

Full-year Commercial Services revenue was $4.1 billion, up 10% or 7% excluding reimbursable debit network fees. Revenue growth was driven by intense operational focus on expanding the core business through strong sales growth, new product innovation and improvements in activation, retention and customer service. Operating profit was $1.1 billion, up 22% or 10% excluding integration expense from 2005. Full-year margin improved to 26.4% from 23.8% or to 32.9% from 32.2% excluding reimbursable debit network fees and 2005 integration expense.

Financial Institution Services

For the quarter, Financial Institution Services revenue was $484 million, up 10%, or 7% excluding reimbursables. Operating profit was $96 million, up 12%. Margin for the quarter improved to 19.8% from 19.5% or to 29.9% from 28.8% excluding reimbursables.

Full-year Financial Institution Services revenue was $1.8 billion, down 2% or down 4% excluding reimbursables. Operating profit was $371 million, down 2%. Full-year margin was relatively flat at 20.2% versus 20.3% in 2005, or improved to 30.3% from 29.5% excluding reimbursables. Financial Institution Services continued to streamline operations through an aggressive cost elimination program.

First Data International

For the quarter, First Data International generated revenue of $377 million, up 43%. Results for the quarter included a gain on the sale of a small merchant portfolio of approximately $11 million, which was included in product sales and other. Revenue growth on a constant currency basis, excluding acquisitions and divestitures, was 11%. Operating profit was $59 million, up 52%. Margin increased to 15.6% from 14.7%. Fourth quarter results were driven by strong organic transaction growth of 16%.

Full-year First Data International revenue was $1.3 billion, up 38%. Revenue growth on a constant currency basis excluding acquisitions and divestitures was a strong 11%, improving from 3% in 2005. Operating profit was $154 million, up 36%. Full-year margin was 12.1% versus 12.3% in 2005.

Outlook for 2007

For the full year 2007, First Data announced that it intends to generate earnings per share from continuing operations of $1.20-$1.26 and revenue growth in the range of 8%-10%.

Additionally, the company announced that for the first quarter of 2007 it anticipates delivering earnings per share from continuing operations in the range of $0.21-$0.23. Beyond the first quarter of 2007, First Data does not anticipate providing further quarterly earnings per share guidance.

"First Data's goal for 2007 is to deliver revenue and earnings growth that meet or exceed our stated long-term objective of 8-10%. We will accomplish this by remaining firmly focused on our four key strategies," concluded Duques.

See the full results statement here:Download the document now 61.2 kb (Adobe Acrobat Document)

Comments: (0)