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 July 21 to discuss second-quarter earnings,
a refreshing reprieve from recent earnings calls in which TSYS executives were
relatively gloomy in their forecasts, one analyst 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.
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.
Tomlinson also speculates that some merchant acquirers may have to re-price their debit card-processing services in light of passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which enables the Federal Reserve to set debit interchange rates.
Smaller merchant acquirers with just a flat discount rate, which includes interchange and other processing fees, may have to reset their rates, Tomlinson says. “It’s going to cost them money to do that,” he says.
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.
