Efforts to grow internationally appear to be paying off for Total System Services Inc., as are indications the economy is improving.
Indeed, executives at the Columbus, Ga.-based processor expressed optimism during a conference call with analysts Wednesday to discuss second-quarter earnings, a refreshing reprieve from recent earnings calls in which TSYS executives were relatively gloomy in their forecasts, one analysts notes.
“Domestic indications are starting to show a rebound. But combine that with international (growth), and they’re looking pretty good, and that’s the source of their increased optimism,” notes Robert Dodd, an analyst with Morgan Keegan & Co.
Wall Street also noted the increased optimism. TSYS stock was selling at about $15 per share in midday trading Thursday, up 6% from Wednesday’s closing price of $14.16.
During the quarter, TSYS began servicing two large retail brands in Canada, President’s Choice and Wal-Mart Canada, in previously undisclosed deals company CEO Philip Tomlinson revealed during Wednesday’s call. In addition, TSYS signed a contract with Tesco Personal Finance PLC in the United Kingdom, once processing with TSYS through Royal Bank of Scotland but now independently with the processor, he said. Tesco has a portfolio of 2.4 million credit cards in the UK (
TSYS also expects to complete its card-processing conversion with retailer Carrefour in Brazil, part of France-based retailer Carrefour Group. “We believe we’ll have the conversion completed very quickly,” Tomlinson said. “This success will give us the opportunity to add additional clients in the Brazilian market as we go forward, which is one of the world’s top five markets for cards.”
Such a strategy, which TSYS calls “clustering,” is proving to be successful in other markets where the processor has quickly added customers after showing success with one in a new market, Tomlinson said. “As the latest example, we’ve now signed our fifth client in Germany over about the last year and a half,” he said.
Tomlinson also noted the significance of its joint venture with First National Bank of Omaha, called First National Merchant Solutions. That deal closed April 1 (
“I’m sure we’ll look back at this transaction in a few years and think of it as a watershed event, as it gets us closer to the merchant and, ultimately, the end user,” Tomlinson said. “The great thing now is we’re able to refer merchant leads and will ultimately create efficiencies and synergies between” TSYS Acquiring Solutions and First National Merchant Solutions, he said.
Talks also continue regarding TSYS’s relationship with Bank of America Merchant Services to extend its relationship with that organization, Tomlinson said. However, no definitive agreement has yet been reached, he said. BofA last year announced it was shifting that merchant-services business to First Data Corp.
Dodd believes TSYS still likely will lose that relationship, though it will last longer than originally planned.
TSYS reported net income of $52.5 million for the quarter ended June 30, down 2.8% from $54 million during the same period last year. Revenues were up 5.3%, to $433.8 million from $412 million.
In North America, revenues totaled $236.8 million, down 10.6% from $265 million. Transaction volume in the region totaled 1.56 billion, up 2.6% from 1.52 billion. Accounts on file in the region were down 6.7%, to 290.7 million from 311.7 million.
The international segment generated revenues of $78 million, up 2.1% from $76.4 million. Transaction volume in the region was up 9.9%, to 297.9 million from 271.1 million. Accounts on file were up 11.4%, to 42.1 million from 37.8 million.
The merchant segment generated revenues of $126.8 million, up 57.9% from $80.3 million. Transactions processed rose 8.3%, to 1.42 billion from 1.31 billion.
What do you think about this? Send us your feedback.
