Morningstar | Worldpay Sees Solid Growth in 3Q; Integration on Track
Worldpay’s third-quarter results displayed the company's solid long-term growth prospects, and the integration process appears to be on track. We will maintain our $83 fair value estimate and narrow moat rating.Worldpay’s results show the ongoing shift in the acquiring market and the ability of the company to maintain solid growth during this process. On a pro forma basis, net revenue was up 9% year over year. The technology solutions segment (which contains the company’s integrated and omnichannel offerings) was up 17%, while merchant solutions was up only 4%. In our view, these results support our view that Worldpay has the assets and relationships it needs to maintain its market position as the industry evolves.
On a pro forma basis, management estimates that adjusted EBITDA margins improved 150 basis points year over year. Worldpay remains on track to achieve the cost synergies management laid out for the merger and expects to achieve $50 million of its ultimate target of $200 million this year.
We are pleased to see that the company is actively deleveraging following the merger, reducing debt by $125 million this year. However, while Worldpay is likely to take a pause as it digests this year’s merger, we believe it will, in long run, remain aggressive in terms of M&A, and leverage could remain somewhat elevated as a result.
Worldpay is a holding company. Through its subsidiaries, the company provides electronic payment processing services to merchants and financial institutions. The company operates two segments: Merchant Services, which provides merchant acquiring and payment processing services to national merchants, regional and small-to-mid sized businesses; and Financial Institution Services, which provides card issuer processing, payment network processing, fraud protection, card production, prepaid program management, automated teller machine driving and network gateway and switching services that utilize the company's proprietary Jeanie debit payment network to a set of financial institutions.
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