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April 26
Increased point of sale transactions helped boost earnings at Total System Services Inc. and could point to a rebound in consumer confidence.
TSYS said it handled 1.32 billion POS transactions in the first quarter, 7.3% more than in the same quarter last year.
"Again, a positive sign, and hopefully it's a signal that consumer confidence is starting to pick up a bit," Philip Tomlinson, the chairman and chief executive of the Columbus, Ga., processor, told analysts during a conference call Tuesday.
TSYS also reported a 4.3% increase in same-store sales volume during the quarter, to 1.7 billion transactions.
"This is a pretty good move for us, given that we've seen decreases on this metric for the fourth and third quarters of 2009," Tomlinson said.
"I'm encouraged that the bottom of the Great Recession, as we call it around here, has been reached and we've started to move forward, however small that might be."
TSYS reported that its net income rose 10.3% year over year, to $51.3 million. Revenue rose 1.59%, to $415.4 million.
TSYS also said it is encouraged by the prospects for First National Merchant Solutions LLC, a joint venture with First National Bank of Omaha that opened on April 1.
"This new venture really represents the first of what we hope to be many, many steps we'll take in the continued diversification of TSYS," Tomlinson said.
With First National Merchant Solutions, TSYS has a base in the acquiring industry that could lead to further expansion, Tomlinson said.
"We know plenty about the merchant processing side, but this Omaha transaction certainly helps our knowledge base, and we've got some great people there," he said. "We're still in the hunt for a few things."
Analysts said the First National Merchant Solutions operation will likely prove to be a good asset for TSYS.
"Through the First National Bank of Omaha deal and their own efforts, TSYS can resume some growth," said Larry Berlin, an analyst and vice president at First Analysis Securities Corp. in Chicago.
The joint venture should help TSYS by building the merchant acquiring business "into a growing and profitable entity for them," Berlin said.
Glenn Greene, an analyst at Oppenheimer & Co., said this year will be better than 2009 for the processor.
"Fiscal 2010 will be a transition year for TSYS as it absorbs client losses, diversifies its business and begins to benefit from an improving customer transaction environment," Greene wrote in a research note Wednesday.
Greene said the TSYS customer base will likely be more stable this year, after it lost some important processing clients in 2009.
The lost clients include Washington Mutual Inc., which sold its banking operations to JPMorgan Chase & Co.; Wachovia Corp., which was purchased by Wells Fargo & Co.; Charming Shoppes Inc., which sold its portfolio to Alliance Data Systems Corp.; and Bank of America Corp., which moved some of its portfolio to a joint venture it formed this year with TSYS' processing rival First Data Corp.
Accounts on file with North American clients fell 6.6% year over year in the first quarter, to 283.1 million, TSYS said.
Internationally, accounts on file rose 8.1%, to 40.2 million.
