Worldline falls more than 50% on guidance cut. Is FinTech Growth Story over or Xmas came early? 🤔; ChatGPT can now predict the direction of interest rates 😳
FinTech is Eating the World, 26 October
Hey Everyone,
Happy Thursday! Today we’re looking at Worldline which fell more than 50% on guidance cut (we’re going to question whether the FinTech Growth Story is over or Xmas came early + some deep dives into top FinTechs), and ChatGPT that can now predict the direction of interest rates (what this means + more reads on AI + Finance). So let’s jump straight into the cool stuff 🌶
Worldline falls more than 50% on guidance cut. Is FinTech Growth Story over or Xmas came early? 🤔
The BREAKING news 🔥 French payments giant Worldline saw its shares plunge over 50% after cutting its full-year guidance due to an economic slowdown, particularly in Germany. Ouch.
Also, the company revealed it has cut ties with some merchants to reduce risks from cybercrime. The impact of this will be in tens or hundreds of millions.
This obviously raises a lot of questions about the future of Worldline and FinTech in general.
Let’s take a look.
So what happened? 🤔 Worldline reported 3Q23 earnings, with revenue growth coming in nearly 300bps below expectations. Along with earnings, the company lowered the FY23 guidance to reflect the deteriorating macro environment, especially in Germany: FY23 organic revenue growth guidance of 6%-7% (previously 8%-10%), Operating Margin before Depreciation and Amortization (OMDA) 24% (previously >26.4%) and FCF conversion of 30%-35% (previously 46%-48%) as a % of OMDA.
Specifically, management highlighted the downward revision to 2023 topline expectations is the product of:
1) €40M linked to macro and repricing (~€30M from Germany and ~€10M from slower repricing).
2) €30M driven by new risk management decisions (where the company made decisions to tighten risk appetite policies and proactively terminate merchants that do not or will not meet criteria, amounting to €130M run-rate revenues).
3) €25M from challenges within the FS segment (failure to convert a pipeline of issuing customers), and
4) €10M from Mobility & e-Transactional Services aka MeTS contract ramp-up.
Put together, this effectively crushed Worldline's credibility and shocked investors who believed FinTech growth was resilient despite inflation.
But is it really that bad? Let’s see.