Blackhawk Network Holdings Inc.

Overview Key strengths Key risks Sizable footprint of partner distribution locations and proprietary technology platform support a defensible market position. High leverage above 5x. Long-standing relationships with distribution partners. Significant price competition against large and well-capitalized players. Expanding incentives business reduces effect of gift card seasonality. Highly seasonal cash flow and a reliance on consumer holiday spending for a significant share of revenue. The company's adjusted operating revenue (a non-GAAP measure of revenue that excludes pass-through costs and purchase accounting adjustments) declined 0.7% and its transaction dollar volume (the total value loaded onto any of its prepaid products) fell about 5% through the first half of 2023. The declines were primarily due to unfavorable foreign-exchange rates and a tough comparison

...Blackhawk's leverage continues to improve despite revenue headwinds. The company's adjusted operating revenue (a non- GAAP measure of revenue that excludes pass-through costs and purchase accounting adjustments) declined 0.7% and its transaction dollar volume (the total value loaded onto any of its prepaid products) fell about 5% through the first half of 2023. The declines were primarily due to unfavorable foreign-exchange rates and a tough comparison with the same period last year, when many retail distribution partners offered significant fuel-related incentives to increase traffic to their stores amid spiking fuel prices. Nevertheless, Blackhawk is controlling its costs well, enabling it to sustain leverage of 5.8x as of the end of its second quarter (ended June 17, 2023). We forecast the company will improve its leverage to about 5.25x as of the end of 2023 on...

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