Vantiv's deal to buy Element Payment Services, combined with its purchase of Litle & Co. this year, accelerate the payment processor's move toward providing e-commerce and broader merchant services.
Vantiv, formerly Fifth Third Processing Solutions, entered into an agreement to acquire Element Payment Services Inc., with the transaction expected to close in the third quarter. Element sells payments technology to Independent Software Vendors (ISVs), which offer the technology to merchants.
"Element will give Vantiv the capability to partner with ISVs and other partners and positions Vantiv to take advantage of new sales channels and accelerate into high-growth verticals," said Charles Drucker, president and CEO of Vantiv, during Vantiv's second-quarter earnings call on July 25.
Element processes about $10 billion in payments a year. The acquisition is one of several moves intended to push Vantiv into e-commerce, Drucker said.
"The next generation of point of sale [services] will include CRM, inventory, marketing and payment functions integrated into one piece of software. ISVs are developing these solutions and bundling them into one product," Drucker said.
That diversification trend will create more competition for processors, Drucker said. "ISVs will integrate with only a few processors, it will raise barriers for processors," he said.
The Element acquisition will not have a material effect on the Company's full-year 2013 financial results, Vantiv said. Vantiv did not say how much it agreed to pay for Element, though the cost should be less than one percent of Vantiv's net revenue, the company said.
Vantiv's revenue increased 11% in the second quarter, to $519.4 million, from $469.6.million in the prior year. Net revenue increased 14% to $296.9 million in the second quarter, up from $260.4 million in the prior year. The company attributed the increases primarily to 8% transaction growth and a 6% rise in new revenue per transaction. Net income in the second quarter was $0.20 per diluted share, compared to $0.18 per diluted share in the previous year.
The company lowered its revenue guidance, a move it attributes to lower consumer spending and slowness in penetrating new sales channels. Vantiv now expects to generate net revenue of $1.19 billion to $1.21 billion during 2013, representing 16% to 18% growth for the full year, as compared to its previous net revenue estimate of $1.21 billion to $1.23 billion.
Vantiv expects to generate earnings per diluted share of $0.91 to $0.96 for the full year, above its previous guidance range of $0.60 to $0.63.
Vantiv plans to adjust its sales strategy to more quickly locate and tap opportunities in new e-commerce markets, Drucker said. "Element will play an important role in that," boosted by Vantiv's scale, Drucker said.