A significant increase in purchase transactions Total System Services Inc. processed during the first three months of the year may be an indication consumer confidence in the economy is rising, the Columbus, Ga.-based payment processor suggested in its first-quarter earnings results yesterday afternoon.
During the quarter ended March 31, TSYS processed 1.32 billion transactions initiated at the point of sale, up 7.3% from the 1.23 billion during the same period last year. Same-store sales volume increased 4.3% to 1.7 billion transactions from 1.63 billion transactions a year earlier.
“Again, a positive sign, and hopefully it’s a signal that consumer confidence is starting to pick up a bit,” Philip Tomlinson, TSYS chairman and CEO, told analysts during a conference call yesterday. “This is a pretty good move for us, given that we’ve seen decreases on [same-store sales] for the fourth and third quarters on 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,” he added.
TSYS reported net income of $51.3 million for the quarter, up 10.3% from $46.5 million for the same period last year. Revenue totaled $415.4 million, up 1.6% from the $408.9 million.
TSYS also is encouraged by its merchant acquiring joint venture in First National Merchant Solutions LLC with First National Bank of Omaha, a deal that closed 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.
Asked about other potential deals, Tomlinson told analysts the First National joint venture gives TSYS a base in the acquiring industry. “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 and only [time] will tell what we’ll be successful with.”
The creation of the First National Merchant Solutions joint venture was a positive move for TSYS, analysts agree.
“Through the First National Bank of Omaha deal and their own efforts, TSYS can resume some growth,” Larry Berlin, an analyst and vice president at First Analysis Securities Corp., a Chicago-based firm, tells PaymentsSource.
The joint venture should help TSYS build the merchant-acquiring business “into a growing and profitable entity for them,” Berlin says.
Similarly, analyst Glenn Greene with New York-based Oppenheimer & Co. Inc. is hopeful TSYS’s growth will improve. “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 writes in a research note. Hopefully, Greene notes, TSYS’s customer base stabilizes.
TSYS has lost some processing client accounts, including Charming Shoppes Inc. and Bank of America Corp. (
Debit and credit card accounts on file with North America clients totaled 283.1 million at the end of March, down 6.6% from 303.2 million a year ago, according to TSYS. Activity on these accounts totaled nearly 1.46 billion in the quarter, down 1.35% from 1.48 billion a year ago.
Internationally, accounts on file totaled 40.2 million, up 8.1% from 37.2 million. TSYS processed 281.3 million transactions on these accounts, a 13.5% increase from the 247.9 million transactions a year earlier.
TSYS also announced layoffs earlier this year. As of March 31, the processor says it employed 7,433 workers, down 7.9% from 8,068 a year earlier.
