Company Reports

Worldline reported first-quarter revenue of EUR 1,097 million, up 2.5% on an organic basis versus the same period a year prior and well ahead of flat consensus expectations collected by the group prior to the release. Moreover, merchant terminations in the merchant services business have been completed, allowing Worldline to reset its focus on stronger organic growth figures in its largest segment toward the end of the year. Merchant services expanded 3.9%, or 6.5% if we exclude merchant terminations, highlighting the potential for greater top-line results once the initial merchant termination impact during the third quarter last year is in the base. We maintain our EUR 28.90 per share fair value estimate and narrow economic moat rating.

Worldline reported a EUR 817 million loss for 2023 after taking a EUR 1.147 billion goodwill impairment related predominantly to lower valuations in the merchant acquiring segment. Excluding the noncash impairment, performance was within expectations. Revenue for the full year grew 6% and adjusted EBITDA remained virtually flat. The second half of the year saw a material slowdown in growth with the merchant services segment standing out negatively. Worldline pointed toward the discontinuation of merchant relationships related to its revised risk policy, macroeconomic weakness expressed in lower consumption hitting volume growth, and disadvantageous pricing actions driving merely 2.7% organic growth in merchant services in the fourth quarter. These dynamics are likely to continue into first-half 2024. Given the operational weakness and its depressed valuation, we expect that Worldline will likely remain the target of interested parties over the coming months. We maintain our EUR 28.90 per-share fair value estimate and narrow moat rating.

We are relaunching coverage of European payment services provider Worldline with a fair value estimate of EUR 28.9 per share. The fintech has seen its valuation more than halved since it announced an unexpectedly sharp deceleration of growth in Germany in the third quarter. Moreover, the German regulator, BaFin, is investigating Worldline for insufficient risk and anti-money-laundering processes at its German subsidiary, Payone, although we believe this is largely unrelated to the growth performance in Germany to date. After taking a close look at the potential implications, we reiterate our narrow economic moat rating. However, we do increase our Uncertainty Rating to Very High from High, reflecting the greater volatility and risks investors may face going forward.

Worldline has turned itself into a Europe payment services provider to be reckoned with after a string of acquisitions that added both depth and breadth. The group covers the full range of the payment value chain outside card networks, from the processing to the acquiring of payments and issuing of cards. Notably, it monetizes its infrastructure via multiple business streams. Through its merchant acquiring model, it targets merchants directly offering payment acceptance services, while its financial services business leverages its back-end infrastructure to support banks in their endeavor of providing customized payment solutions to clients.

We are placing Worldline under review after the payment provider lowered revenue guidance for 2023 and announced the termination of merchant contracts in Germany. Worldline posted 4.8% organic revenue growth in the third quarter, a material slowdown from the 9.3% growth posted over the first half of 2023. The culprits were weak financial services performance (down 2.9%) as well as a relatively poor showing from merchant services (up 7.6%). Merchant services is Worldline’s largest segment and has been its core growth driver (up 13.1% in the first half of 2023). The financial technology firm cited a sudden change in consumer behavior in Germany as the core driver behind its disappointing merchant services segment performance. The dramatic share price reaction is partially explained by this unexpected and sharp trend change revealed on Oct. 25. However, we believe that the termination of some online merchants that Worldline undertook since the second quarter of 2023, but only made public on Oct. 25, is of greater concern to investors. We plan to update our model and fair value estimate shortly. We see heightened risk around the merchant relationship terminations and also believe management lost credibility on Oct. 25 by not giving any form of reliable guidance and outlook. None of this bodes well for a quick reversal of the poor Worldline share price performance recently.

Worldline reported first-half adjusted operating profit of EUR 519 million, up 13.4% versus the same period last year, as the group continues to enjoy good traction in its largest segment merchant services. We maintain our EUR 91 per-share fair value estimate and narrow moat rating.

Narrow-moat Worldline posted a good first-quarter revenue release. On an organic basis, revenue grew 9.2% to EUR 1,070 million. The growth driver remained merchant services (up 12.6%), Worldline’s largest segment (71% of first-quarter revenue). Commercial acquiring stood out in the quarter with 13% volume growth, split into 11% growth in in-store and 19% in e-commerce.

Narrow-moat Worldline closed an overall good 2022. Organic revenue growth of 10.7% beat the company’s 8%-10% guidance on a strong showing in merchant services. This segment remains the core focus for Worldline, driving the majority of organic and inorganic revenue growth. Management highlighted a further appetite for transactions in Europe, which we believe is the right strategy in the still highly fragmented European payment space. Lower equity valuations in the payment space as well as a derisked balance sheet after the terminal business disposal should position Worldline well to create shareholder value. We maintain our EUR 91 fair value estimate and view the shares as cheap.

Narrow-moat Worldline reported third-quarter revenue figures, posting a solid organic growth of 10% to EUR 1,158 million compared with the year-ago period. Guidance of 8% to 10% organic revenue growth for the full year was unchanged, suggesting a slowdown in the fourth quarter this year. Year to date, Worldline has delivered a strong 11.6% organic growth. Pressed on this implied negative signal, management highlighted the uncertainty many merchants and consumers in Worldline’s end markets are facing. However, the group still expects to close the year toward the top end of its guided range, and we believe that risks lie to the upside. We maintain our fair value estimate of EUR 91 per share.

Worldline has turned itself into a Europe payment services provider to be reckoned with after a string of acquisitions that added both depth and breadth. The group covers the full range of the payment value chain outside card networks, from the processing to the acquiring of payments and issuing of cards. Notably, it monetizes its infrastructure via multiple business streams. Through its merchant acquiring model, it targets merchants directly offering payment acceptance services, while its financial services business leverages its back-end infrastructure to support banks in their endeavor of providing customized payment solutions to clients.

Narrow-moat Worldline reported a strong first half of 2022 with revenue growing 12.6% on an organic basis to EUR 2,020 million. This is in line with our estimates for the group excluding the terminal business for this year. We maintain our fair value estimate of EUR 91 per share. The payment services acquirer offers material upside, despite its shares reacting favorably on the back of the earnings release July 27.

Narrow-moat Worldline reported a strong set of revenue figures for the first quarter of 2022. On an organic basis, revenue grew 11.6% to EUR 939 million carried by its merchant services segment. Transaction volumes in the first quarter were 36% ahead of last year and 27% ahead of 2019. In-store and online volumes grew 37% and 32%, respectively. Both figures are strong and in direct conflict with the idea that Worldline is losing market share to e-commerce-focused payment services providers. Management also reiterated its full-year guidance of 8% to 10% organic revenue growth despite international travel still lagging 2019 levels.

Worldline closed the year with a strong performance in the last quarter of 2021, as we had anticipated. Revenue grew 12% to EUR 1,035 million on an organic basis versus the same quarter a year ago, with merchant services, its largest segment, delivering a respectable 15% organic growth. Its EBITDA margin for the full year came in at 25.3%, up 220 basis points. Worldline’s share price has shown a complete opposite trend since the summer of 2021, however, halving from its peak at EUR 85 per share.

After market close on Oct. 26, narrow-moat Worldline reported third-quarter revenue of EUR 960 million, up 8.3% on an organic basis compared with the year-ago period. The payment-services provider also finally revealed what it plans to do with its terminals business, opting for disposal. We had previously voiced our preference for a sale of this asset. We are maintaining our fair value estimate of EUR 91 per share as we await greater information of the group’s new strategy during its investor day on Oct. 27. Moreover, details around the technicalities of the planned disposal are sparse. As such, we are likely to continue our modeling of the group as if it were retaining the terminals business until we have enough data points to segregate the asset properly. We don’t anticipate a change to our narrow moat rating.

Narrow-moat Worldline reported first-half revenue of EUR 2.3 billion, flat on an organic basis. On these results, the shares have dropped around 8% as of this writing. We think the market had expected a faster revenue recovery from the lows of 2020, and we believe that commentary around the potential retention or divestment of Worldline’s hardware business was not well received. We are less worried about either of these two concerns. Indeed, we increase our fair value estimate to EUR 91 per share from EUR 84, albeit primarily to adjust for the time value of money since our last model update. Overall, the quarterly and first-half performance was well in line with our expectations. Additionally, our thesis resolves around long-term growth drivers in the European payment space, such as the shift from cash to card payments and banks increasingly outsourcing and divesting payment activities. While the recovery from the pandemic does introduce near-term uncertainties, we think the long-term trajectory of Worldline is unchanged. The shares look undervalued.

Worldline has turned itself into a Europe payment services provider to be reckoned with after a string of acquisitions that added both depth and breadth. The group covers the full range of the payment value chain outside card networks, from the processing to the acquiring of payments and issuing of cards. Notably, it monetizes its infrastructure via multiple business streams. Through its merchant acquiring model, it targets merchants directly offering payment acceptance services, while its financial services business leverages its back-end infrastructure to support banks in their endeavor of providing customized payment solutions to clients.

We maintain our EUR 84 per-share fair value estimate for Worldline after the payment services provider published first-quarter revenue figures. The top line declined 9% on an organic basis, driven primarily by its merchant services and terminals business, although all segments were down this quarter. While this performance is not pretty, it was well within our expectations. Given the continued, and in some of Worldline’s operating regions intensifying, coronavirus lockdowns; a revenue decline versus the largely unaffected first-quarter 2020 was to be expected. On the flip side of the coin, the combination of vaccine rollouts and a much lower comparable base for the second quarter should result in significantly stronger growth figures in future. Looking past these multiple moving parts, we think mid-single-digit revenue growth and a 2% operating margin improvement are achievable for the full year. We maintain our narrow moat and stable trend ratings.

We are launching coverage of Worldline with a fair value estimate of EUR 84 per share, corresponding to a 29 forward P/E ratio and implying a 16 times 2021 EV/EBITDA multiple. Trading between 3- and 4-star territory, we think there is some upside for investors looking to gain exposure to the Europe payments space. We think Worldline has carved out a narrow moat based on cost advantage and switching costs stemming from its merchant acquiring and financial services businesses.

Worldline has turned itself into a Europe payment services provider to be reckoned with after a string of acquisitions that added both depth and breadth. The group covers the full range of the payment value chain outside card networks, from the processing to the acquiring of payments and issuing of cards. Notably, it monetizes its infrastructure via multiple business streams. Through its merchant acquiring model, it targets merchants directly offering payment acceptance services, while its financial services business leverages its back-end infrastructure to support banks in their endeavor of providing customized payment solutions to clients.