Thanks for the thorough write up! We’ve been doing some work on WLN. Overall we like the business and industry and the valuation is very attractive.
A huge reservation we have is capital allocation which as you’ve detailed has been atrocious. From experience we’ve been burned from otherwise slam dunk investments by terrible capital allocation decisions. We are hopeful the new board and management are better or at least neutral capital allocators.
Thank you! Agreed regarding capital allocation, definitely a big risk given track record. I feel better with the old CEO gone, but could still play a role.
Stock down on results which missed slightly. New CEO in. Why is Merchant services not growing/projected to grow much ? What are the headwinds? Doesn't make sense.
Seems like a lot of the report today a wash to give the new CEO a fresh start
They claim that the real reason for POWER24 is to make up for increased scheme fees to Visa/Mastercard, allegedly soon to be €1bn, on €4.6bn revenue. That is about 21% of revenue. These were at €724.1mn in 2023 (15.7% of revenue).
I've followed the commentary/articles form CFTC and they're part of the problem at WLN (like employee unions at all French organization). WLN doesn't control scheme fees - those are determined by the card used by consumers at merchants. If consumers use international cards (e.g., Mastercard & Visa), the scheme fee is higher than for domestic cards. These are essentially just pass through fees, similar to interchange (which is netted from reported revenue). This is not the reason for the Power24 restructuring; too many inefficient employees after years of acquisitions is the reason for Power24.
Managment seems to have a history of diluting shareholders (10% per year). That is really weighting down on per share metrics. If they are not stopping this we are looking at negative free cash flow growth per share. Thoughts?
Essentially all the issued shares over the last decade were for two large acquisitions SPS and Ingenico - I discuss these and the use of equity to fund the purchases in the report and the footnotes.
That management team is gone (CEO left last month, who was also the Chairman for all of WLN's major acquisitions) and a new Chairman and several new directors were appointed this year. I'm cautiously optimistic that M&A is behind the company with all these changes. It helps that there aren't any large businesses left for WLN to acquire in Europe other than Nexi, which should be well outside of their budget.
Why does WLN have so many employees? It seems Power24 is not really going to put much of a dent in this. This company seems to have a lot of efficiency potential, but I understand it is hard to cut workforce in EU
I discuss this toward the end of the post under the MS Margin section. It is largely a function of operating with a physical footprint across so many different countries, which is necessary in Europe given the the local dynamics of payments. The other reason is that they are not efficiently managed (a result of rolling up a bunch of other roll-ups and operating in Europe). Improving employee efficiency is not necessary for the company to be worth 3-4x the €6 per share. For the shares to be worth 5-6x the current price, there definitely needs to be continued improvement in efficiency.
I think that getting the right CEO will be very important in this regard. It looks like the new board should be capable of recruiting someone like that.
Also, if you need a physical footprint, that should serve as a moat against lighter competitors such as Adyen
Just wanted to say, great job on this analysis of Worldline. It’s clear you put a lot of effort into breaking down the key points and staying focused on the fundamentals. I’m also interested in the company and plan to dive deeper into it soon. Really appreciate the insights—you’ve won yourself a subscriber!
Thanks for the thorough write up! We’ve been doing some work on WLN. Overall we like the business and industry and the valuation is very attractive.
A huge reservation we have is capital allocation which as you’ve detailed has been atrocious. From experience we’ve been burned from otherwise slam dunk investments by terrible capital allocation decisions. We are hopeful the new board and management are better or at least neutral capital allocators.
Thank you! Agreed regarding capital allocation, definitely a big risk given track record. I feel better with the old CEO gone, but could still play a role.
Stock down on results which missed slightly. New CEO in. Why is Merchant services not growing/projected to grow much ? What are the headwinds? Doesn't make sense.
Seems like a lot of the report today a wash to give the new CEO a fresh start
I found some news from worldline's union https://cftc-atosworldline.fr/wp/blog/2025/01/28/nao-2025-lettre-ouverte-a-florence-gallois-drh-worldline-monde/
They claim that the real reason for POWER24 is to make up for increased scheme fees to Visa/Mastercard, allegedly soon to be €1bn, on €4.6bn revenue. That is about 21% of revenue. These were at €724.1mn in 2023 (15.7% of revenue).
I've followed the commentary/articles form CFTC and they're part of the problem at WLN (like employee unions at all French organization). WLN doesn't control scheme fees - those are determined by the card used by consumers at merchants. If consumers use international cards (e.g., Mastercard & Visa), the scheme fee is higher than for domestic cards. These are essentially just pass through fees, similar to interchange (which is netted from reported revenue). This is not the reason for the Power24 restructuring; too many inefficient employees after years of acquisitions is the reason for Power24.
https://www.reuters.com/business/finance/worldline-attracts-early-stage-interest-private-equity-firms-sources-say-2024-12-02/
What are the chances the big holders like Six Group allow this ? Or are they going to be part of the PE consortium
No idea. We'll have to wait and see.
Managment seems to have a history of diluting shareholders (10% per year). That is really weighting down on per share metrics. If they are not stopping this we are looking at negative free cash flow growth per share. Thoughts?
Essentially all the issued shares over the last decade were for two large acquisitions SPS and Ingenico - I discuss these and the use of equity to fund the purchases in the report and the footnotes.
That management team is gone (CEO left last month, who was also the Chairman for all of WLN's major acquisitions) and a new Chairman and several new directors were appointed this year. I'm cautiously optimistic that M&A is behind the company with all these changes. It helps that there aren't any large businesses left for WLN to acquire in Europe other than Nexi, which should be well outside of their budget.
Estimated employee count end 2023:
WLN: 18k
Nexi: 10k
Adyen: 2k
Stripe: 7k
Worldpay: 8.5k
Why does WLN have so many employees? It seems Power24 is not really going to put much of a dent in this. This company seems to have a lot of efficiency potential, but I understand it is hard to cut workforce in EU
I discuss this toward the end of the post under the MS Margin section. It is largely a function of operating with a physical footprint across so many different countries, which is necessary in Europe given the the local dynamics of payments. The other reason is that they are not efficiently managed (a result of rolling up a bunch of other roll-ups and operating in Europe). Improving employee efficiency is not necessary for the company to be worth 3-4x the €6 per share. For the shares to be worth 5-6x the current price, there definitely needs to be continued improvement in efficiency.
I think that getting the right CEO will be very important in this regard. It looks like the new board should be capable of recruiting someone like that.
Also, if you need a physical footprint, that should serve as a moat against lighter competitors such as Adyen
Thank you so much for your work. We published its french translation on our website, as agreed :
https://cftc-atosworldline.fr/wp/blog/2024/10/15/worldline-sa-ignorez-les-recits-et-regardez-les-fondamentaux-cest-a-dire-les-donnees/
Just wanted to say, great job on this analysis of Worldline. It’s clear you put a lot of effort into breaking down the key points and staying focused on the fundamentals. I’m also interested in the company and plan to dive deeper into it soon. Really appreciate the insights—you’ve won yourself a subscriber!
Thanks! I appreciate the feedback and kind words. Let me know if you come to a different conclusion following your research.
That was a very thorough write-up. Thanks a lot!
Thanks! I appreciate the feedback.