Though Total System Services Inc. is still feeling the effects of the recession, it said it thinks the worst may be in the past.
The Columbus, Ga., processor has been hit hard by consolidation, losing several key contracts from big bank clients that were acquired.
However, the company said that it is making up for those losses with new business and that much of its growth is coming from outside the troubled U.S. market.
"We're feeling good about where we are at, and we do think we're starting to see maybe — maybe — just a little light at the end of the tunnel," Philip W. Tomlinson, TSYS' chairman and chief executive, said in a conference call Tuesday to discuss the company's second-quarter results.
Last month, shortly after Bank of America Corp. announced a joint venture with a rival processor, First Data Corp., the Charlotte banking company told TSYS that it would take at least part of its card portfolio off TSYS' systems. Tomlinson said he did not have any new details about this deconversion.
TSYS also lost the business of Washington Mutual Inc. this year after JPMorgan Chase & Co. bought the Seattle thrift's banking operations last September. Soon after, TSYS also lost business from Wells Fargo & Co., which moved the Wachovia Corp. portfolio to First Data, a unit of Kohlberg Kravis Roberts & Co. Wells bought Wachovia in December.
James B. Lipham, TSYS' chief financial officer, said that it has reversed this trend. "We are able to grow our sales past what we lost in customers," he said. TSYS spotlighted recent deals with Deutsche Bank AG in Germany and Banco Carrefour SA in Brazil. Lipham suggested that the effects of these deals would be more apparent in TSYS' financial results after the anniversaries of its client losses had passed.
TSYS' revenue dropped 4.1%, to $412 million, in the second quarter from a year earlier. Its net income dropped 15%, to $53.4 million. The company noted that these were rough comparison quarters and that both revenue and net income were up compared with the first quarter of this year, when conditions were more comparable to what it faced in the second quarter.
The company is aggressively seeking business, and Tomlinson said most of its opportunities are abroad. "It's almost like the U.S. business … is so beat up right now that nobody is really making any serious decisions" in financial services, he said.
TSYS has already made its name known in other industries, such as health care, Tomlinson said. In a recent television appearance, Newt Gingrich mentioned TSYS by name as a company capable of monitoring health-care transactions for signs of Medicare and Medicaid fraud. Though Tomlinson stressed that TSYS has not been working with the government to do this, "I'm glad to hear that Newt is thinking about us," he said.
Analysts said that, though challenges remain for TSYS, it is in good shape.
John Williams, an analyst at Macquarie Group, wrote in a note published Wednesday that TSYS "is on the right track, though it will likely take time for its international issuer processing and merchant acquiring strategy to pan out."
Some of TSYS' best opportunities are in China and Brazil, he said, where it is already active but needs to improve its infrastructure.
Timothy Willi, a senior analyst at Wells Fargo Securities LLC, wrote in a research note published Tuesday that TSYS' sales pipeline is "robust … particularly outside the U.S."
