In reaction to its mixed Q3 and worse than expected FY17 revenue guidance, shares of Blackhawk Network (HAWK 36.30, -7.90 -17.87%) are making multi-month lows as results out of the company’s Cardpool exchange business fell short.
In short, the company sees lower US retail growth going forward. However, growth in digital channels and the recently added Cashstar should provide ample opportunity to make up the shortcoming in the future. Additionally, HAWK management announced the decision to move the Cardpool gift card exchange business into an “asset held for sale” classification.
Despite the commentary about lower US retail growth, HAWK reported a Q3 earnings beat of $0.18 per share. Revenues came in modestly under market expectations, growing 16% versus last year to about $419.3 million.
The revenue increase was due to a 9% increase in commissions and fees driven primarily by international growth, including the addition of Grass Roots which was acquired during Q4 of 2016, and growth in U.S. retail physical and digital gift card TDV.
Results were also aided by a 47% increase in program and other fees mostly due to international growth including the acquisition of Grass Roots, higher U.S. retail physical and digital TDV and growth in the incentives segment.
Also, a 29.3% increase in product sales was due to higher incentives and rewards sales, but partially offset by a 20.0% decrease in marketing revenues across both the U.S. retail and international segments and a revenue decline at Cardpool.
As previously mentioned, HAWK also announced its decision to move the Cardpool gift card exchange business into an "asset held for sale" classification. Cardpool is excluded from revised Q4 and full year 2017 Non-GAAP guidance. The company previously announced its intention to sell the Grass Roots Meetings & Events business, which contributed $7.0 million of operating revenues, $1.0 million of pre-tax income and $1.1 million of adjusted EBITDA during Q3.
As for guidance, HAWK still sees in-line FY17 EPS of $1.56-1.70. The company now sees FY17 GAAP operating revenues between $2.169-2.262 billion (from $2.148-2.312 billion). As mentioned FY17 non-GAAP guidance excludes the Cardpool gift card exchange and Grass Roots Meetings & Events businesses which are assets held for sale.