TSYS posts third-quarter profit of $64.3 million as NetSpend kicks into its revenue stream

Credit-card processor’s total revenue up more than 25 percent to $588 million

tadams@ledger-enquirer.comOctober 22, 2013 

Strong business in North America and internationally, combined with solid results from prepaid card subsidiary NetSpend, propelled TSYS to a profit of $64.3 million in the third quarter. That’s 6.7 percent higher than the same period a year ago.

The company, a global credit card and payment processor headquartered in downtown Columbus, reported earnings of 34 cents per share Tuesday on total revenue of $588 million, the latter of which is more than 25 percent higher than the same July-September period a year ago.

The earnings per share, up 5.5 percent over the same quarter last year, met the expectations of Wall Street analysts surveyed by Thomson Financial.

“This is the first quarter that NetSpend has been included in our consolidated financial statements and as our fourth operating segment,” TSYS Chairman and Chief Executive Officer Phil Tomlinson said in a statement. “Their results were outstanding as revenues grew 22.2 percent over last year, making a significant contribution to our overall results this quarter.”

TSYS finalized its $1.4 billion purchase of Austin, Texas-based NetSpend Holdings in July, making it the largest acquisition ever by the Columbus firm and the first time it has gobbled up a publicly traded company. NetSpend shares were bought out, with its sales folded into the TSYS numbers, taking it off the Nasdaq exchange. At the time the deal was finalized, NetSpend estimated its 2013 revenue would amount to about $420 million. On Tuesday, Jim Lipham, TSYS chief financial officer, said the six-month revenue impact of NetSpend will be in the range of $210 million to $214 million.

Much of the prepaid card specialist’s business is aimed at those consumers who either don’t qualify for a bank account because of financial issues or have decided to forgo the traditional banking avenue.

Tomlinson said his company will remain aggressive toward paying down the debt incurred to buy out NetSpend in anticipation that more opportunities lie ahead. He said the firm’s balance sheet is healthy at $3.8 billion.

“Our free cash flow continues to be very strong,” he said. “We applied over $60 million to reduce our debt as we move toward our goal of reducing our debt to (earnings before interest, taxes, depreciation and amortization) ratio. We will continue using cash to reduce debt over the next several quarters in anticipation of future acquisitions and share buybacks.”

Through the first nine months of this year, TSYS posted net earnings, or a profit, of $179 million, or 95 cents per basic share, both of those numbers more than 2 percent lower than the same January-September stretch in 2012. That was on total revenue of just over $1.5 billion, up 10 percent from about $1.4 billion a year ago.

The company said its same-client card-processing growth in North America jumped 15.2 percent, the 16th quarter in a row growth that has occurred. It also has 89 million card accounts in the pipeline to be converted to its processing system in 2014.

Internationally, the firm processed a record 59 million accounts, with transaction growth of nearly 27 percent.

Its merchant services business saw a 5.4 percent increase in revenue, with point-of-sale transactions up nearly 4 percent. Its small business sector sales also was in record territory with volume of $5.3 billion, which is 22 percent higher than the third quarter a year ago.

The employee count at TSYS also jumped as the company took on the 462 staffers from NetSpend. The card processor employed 9,429 people (full-time equivalents) as of Sept. 30, with just under half of those earning a paycheck in Columbus. The remainder are scattered throughout Europe, Latin America and the Asia-Pacific region.

That’s an overall employment increase of 14.4 percent from the 8,245 on the payroll at the end of 2012. There are now 544 positions classified as “corporate admin and other.”

TSYS released its third-quarter earnings report after the stock market’s close Tuesday. Shares reached a 52-week high of $30.79 during the day, but settled to a close of $30.65 per share, 16 cents higher, in trading on the New York Stock Exchange. The 52-week low for the stock is $21.10 per share.

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