Most financial technology, payment processors and specialty finance companies that have reported second-quarter earnings saw quarter-over-quarter declines in their EPS, according to S&P Global Market Intelligence data.
The list compiled by Market Intelligence shows that 13 out of 21 institutions that posted results as of June 30 had lower EPS sequentially compared to the first quarter. However, the majority of these institutions' earnings increased year over year.
Foreign exchange headwinds pose EPS challenge
Eight out of 13 fintechs posted a sequential decline in their EPS during the quarter, with headwinds from the volatility in the foreign exchange rates and the current macro environment hurting companies' revenue growth.
Atlanta-based NCR Corp. posted a positive EPS as it rose to 26 cents in the second quarter compared to a net loss of 28 cents in the first quarter. Strong customer demand for solutions across various business segments was a key driver in the revenue growth of the company during the second quarter as supply chain bottlenecks eased, NCR's CEO and director Michael Hayford said during an earnings call.
However, volatility in foreign exchange rates resulted in an impact of $50 million on NCR's revenue and 7 cents on its EPS during the quarter. NCR CFO Timothy Oliver highlighted during the call that if the "forward curve is correct," it could potentially impact the revenue by another $170 million, which translates to roughly $50 million of pressure on EBITDA or 20 cents of EPS during the second half.
NCR's peer, Windsor, Conn.-based SS&C Technologies Holdings Inc., posted an EPS of 42 cents in the second quarter, down 22 cents from 64 cents per share in the previous quarter.
* Downland a model to help produce a CECL analysis.
* Download a list of financial technology transactions.
* Download a model to generate an implied IPO valuation for a private firm.
Similar to NCR, SS&C Technologies also faced headwinds from foreign exchange volatility during the quarter, which dented the EPS by about $0.01 to $0.015, CFO Patrick Pedonti said during the latest earnings call.
Pedonti added that the company's EPS could continue to face pressure from the volatility in the foreign exchange rates.
Columbus, Ohio-based Bread Financial Holdings Inc. saw a significant drop in EPS during the quarter as it recorded per-share net income of 25 cents, down from $4.20 per-share net income in the first quarter.
The company's EPS was impacted by the reserve build due to loan growth in the second quarter, the combined Loyalty Ventures write-down of $21 million and the purchase of written-off accounts worth $13 million.
"These items, combined with the reserve build, reduced diluted EPS by $3.10 in total for the quarter," Bread Financial's Executive Vice President and CFO Perry Beberman said during the earnings call.
Payment processors
Payment processing companies' EPS during the second quarter was mixed. All but one payment processor saw a sequential decline in per-share net income; however, all four witnessed a net income growth compared to the corresponding quarter of 2021.
Leawood, Kan.-based Euronet Worldwide Inc. was an outlier among its peers with a substantial increase in the per-share net income to $1.08 compared to 16 cents in the previous quarter and in the same quarter of 2021.
San Francisco-based Visa Inc. posted an EPS of $1.60 in the fiscal third quarter, down from $1.70 in the previous quarter but up from $1.18 a year ago. The company's vice chairman and CFO, Vasant Prabhu, pointed out during their recent earnings call that the strengthening of the dollar "dragged down reported net revenue growth by almost 3 points and non-GAAP EPS growth by nearly 3.5 points."
Specialty finance
All but one specialty finance company posted year-over-year growth in EPS, while two of four witnessed a sequential growth in their per-share net income.
Greenville, S.C.-based World Acceptance Corp. posted a net loss of $1.53 per share in the first quarter of fiscal 2023, compared to $2.44 in the year-ago period. An increase in the day one provision for credit losses and the impact of seasonality on the expected loss rates weighed significantly on the company's net income, the earnings release said.
Newark, Del.-based Sallie Mae witnessed quarter-over-quarter and year-over-year growth in EPS during the second quarter. The specialty lender posted a net income of $1.29 per share, compared to EPS of 45 cents in the previous quarter and 44 cents in the same quarter of 2021.
The increase in GAAP net income of $342 million, up 144%, was driven by a $240 million gain on the sale of $2.1 billion private education loans during the quarter. Sallie Mae's EPS could come under pressure as a result of lower loan sale premiums due to higher rates and wider spreads and the impact of certain credit pressures that will be largely isolated to 2022, the company's CEO and director Jonathan Witter said during an earnings call.