TSYS reports 2013 profit of $244.7 million

NetSpend contributions, rising transactions highlight ‘transformational year,’ CEO says

tadams@ledger-enquirer.comJanuary 28, 2014 

TSYS Riverfront Campus

JOE PAULL — jpaull@ledger-enquirer.com

Calling 2013 "truly a transformational year" for TSYS, Chairman and Chief Executive Officer Phil Tomlinson reported Tuesday a profit of $244.7 million on total revenue of $2.1 billion.

It’s the first time in the Columbus-based credit-card processor's history that it has topped $2 billion in revenue, with the profit translating to $1.72 per share. That met the expectations of Wall Street analysts surveyed by research firm Thomson Financial.

For the fourth quarter of the year, the company's profit, or net income, was $65.6 million, or 48 cents per share, on revenue of $600.8 million. The analysts were anticipating 47 cents per share.

"During the fourth quarter, we reduced our debt by $62.5 million, bringing our total reductions since the NetSpend acquisition to $124.9 million," Tomlinson said in a statement. "... We purchased 3.1 million shares of our stock for $97.6 million. We are pleased to announce our board of directors has approved increasing the number of shares that may be repurchased under our current share repurchase plan from up to 20 million shares to up to 28 million shares and extended the expiration date of the plan to April 30, 2015. With the increase, we have approximately 12 million shares available to be repurchased under the plan."

On a percentage basis, revenue for the quarter shot up more than 25 percent from the October-December period in 2012, while full-year 2013 revenue was 14 percent higher than the prior year. Quarterly net income was up nearly 27 percent from the same period a year ago, while it was nearly 18 percent higher from year to year.

There doesn't appear much of a drop-off is expected by TSYS in 2014, either, with Tomlinson's executive team projecting total revenue growth between 17 and 19 percent, and an increase in adjusted cash earnings per share between 11 and 13 percent.

"The results for 2013 and our guidance for 2014 reflect our focus on diversification, growth and the exceptional performance of our TSYS team," the CEO said.

A major piece of diversification came in the firm's $1.4 billion acquisition last July of Austin, Texas-based NetSpend Holdings, which it turned into a sole division. NetSpend, which specializes in marketing and distributing prepaid cards, grew its own slice of revenue pie by 16 percent in the quarter.

NetSpend added to its direct-deposit customer base, TSYS said, while also adding 4,000-plus retail outlets for people to pick them up. It also gained more than 80 payroll card clients.

Other factors in the fourth quarter, the company said, included an increase of nearly 11 percent in existing client card-processing transactions in North America, the 17th quarter in a row it has seen growth from the previous year's same quarter. The firm also processed just under 2.5 million transactions in the quarter, its third-largest quarterly volume ever. Its international segment posted a 17-percent jump in transactions.

The global payment processor does business in the U.S. and Canada, in Europe, Latin America and the Asia-Pacific region. Overall, its employee base grew by 14 percent over the past year, with its workforce rising from 8,406 at the end of 2012 to 9,595 at the conclusion of 2013.

More than 4,500 of those employees earn a paycheck in Columbus. The newly acquired NetSpend added 553 staffers to the mix.

In terms of consumer credit and other card accounts the company now has "on file" and processes for retailers, banks, governments and other clients, the total now stands at 541 million. That's up nearly 13 percent from just under 480 million at the end of 2012.

Heading into Tuesday's earnings report, Sterne Agee brokerage analyst Greg Smith expected the data to "indicate steady credit card volumes and ... solid results from NetSpend." He noted the company at the end of the third quarter of 2013 had 89 million card accounts in the pipeline for conversion to the TSYS processing system, with about 75 million of those with Bank of America. Those are expected to go active in the third quarter of 2014, which should fuel more revenue.

Smith termed TSYS a "top sector pick," with a "buy" rating on its stock and a price target of $36 per share within the next year. TSYS shares closed up 28 cents, or 0.9 percent, to $30.58 in trading Tuesday on the New York Stock Exchange. The stock's 52-week trading range is $21.53 to $33.44.

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