In its first earnings release as a public company, Vantiv Inc. posted a 23% increase in first quarter net revenue, thanks mainly to merchant services.
The division posted more transactions and earned more revenue per transaction.
“We had strong transactional growth and strong revenue growth–it was a strong quarter,” Vantiv CEO Charles Drucker tells ISO&Agent Weekly.
In merchant services, net revenue grew 36% for the quarter ended March 31, to $157.5 million from $115.8 million in the same period a year earlier, the company noted April 26 in its earnings report.
The division’s transaction volume rose 16.5%, and revenue per transaction increased 17%, the report said, without providing specific data.
Drucker traces those results to having a single “nimble” processing platform that enables Vantiv to make adjustments quickly compared with the multiple platforms some processors use.
Vantiv has maintained a single platform by quickly integrating platforms gained through acquisitions, he says.
The processor also has at least two other advantages that helped propel its merchant-transaction growth beyond the industry’s typical single digits, David Koning, an analyst for Milwaukee-based Robert W. Baird & Co., tells ISO&Agent Weekly.
First, the Cincinnati-based company processes transactions for nine of the 25 biggest retailers, and the number of transactions at big-box merchants is growing more quickly than the national average, Koning says.
Vantiv also is doing a good job of expanding its stable of small merchants, which typically pay higher processing fees than do the big chains, he notes.
Many of the small and midsize merchants sign up for the company’s processing services through ISO, Drucker says. Some of the ISOs specialize in offering card-acceptance services to niche markets, such as health care, he notes.
About 40% of Vantiv’s merchant-processing revenue comes from ISOs and the rest is through the company’s direct-sales staff, says Drucker, who does not expect that balance to change with last month’s initial public offering.
Looking to the future, Drucker predicts mobile payments will continue to proliferate, and processors will provide clients with more analytics and data.
In the near term, three factors should improve the company’s already strong financial reports, according to Koning.
Discover Financial Services chose Vantiv to provide “end-to-end outsourced processing” for its large-merchant clients, and that boost should appear in the second-quarter earnings reports, Koning says.
A requirement in the so-called Durbin amendment to the Dodd-Frank law to list at least two networks on debit cards should begin to benefit Vantiv later this year, too, he notes. Vantiv owns the Jeannie electronic funds transfer network.
The loss of a major client in the third quarter of last year will have less effect on future financial comparisons with historical periods, Koning says.
In the first quarter, revenue for the company overall increased 23%, to $232.6 million from $189.2 million, the Vantiv report said.
The company reported net loss of $18.4 million; it earned net income of $3.5 million a year earlier, according to the report. The net loss included $91.8 million related to charges related to refinancing of indebtedness following the IPO, the report said.
In the Merchant Services division, transactions totaled more than 2.54 million for the quarter, up 16.5% from 2.18 million a year earlier, according to the report. Net revenue rose to $157.5 million, up 36% $115.8 million,. Revenue per transaction rose 17%, to 6.2 cents from 5.3 cents.
Financial Institution Services transaction volume totaled 823 million, up 0.6% from 818 million. Net revenue totaled $75.1 million, or 9.1 cents per transaction, up 2.2% from $73.5 million, or 9 cents per transaction.
Company net revenue for 2012 could reach $995 million to just more than $1 billion, representing an increase of 15% to 17% compared with 2011, the Vantiv report said.
That range seemed higher than one analyst expected after making preliminary estimates before the IPO.
“It’s always nice to see a company perform better than expected,” said the analyst, Gaston Ceron at Chicago-based Morningstar.