TSYS reports net income of $74 million; adjusted earnings climb

Capping what he called an “exceptional year” in the history of TSYS, the company’s Chairman and Chief Executive Officer Troy Woods on Wednesday reported net income of $74 million in the fourth quarter of 2016, or 40 cents per diluted share.

That profit was from total revenue of $1.13 billion in the October-December quarter, which was up nearly 58 percent from $716.8 million in the same period of 2015. The surge in revenue indicates the impact from the Columbus-based firm’s largest acquisition in its history, a $2.35 billion purchase of merchant specialty company TransFirst, which was announced last January and completed in April.

“We delivered record financial results, completed our largest acquisition in TransFirst that doubled the size of our merchant business, and finished the year with results in all four segments having met or exceeded our goals,” Woods said in a statement released with the earnings report.

The $74 million in net income attributable to TSYS common shareholders was down just over 9 percent from the $82.8 million posted by the global credit-card and payment processor in the fourth quarter.

Adjusted earnings from continuing operations jumped nearly 25 percent increase, rising from $103.9 million in the fourth quarter a year ago to $129.6 million in the latest October-December period. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $266.5 million, which was up nearly 37 percent from the quarter the year prior.

For all of 2016, TSYS reported total revenues of nearly $4.2 billion, a 50 percent increase from $2.8 billion in 2015, again showing the fresh cash flow contributions from TransFirst. Net income attributable to TSYS common shareholders for the year was $320 million, down just over 12 percent from $364 million in 2015.

Adjusted earnings from continuing operations came in at $516.4 million for full-year 2016, up more than 14 percent from $452.1 million the year before. Adjusted EBITDA was $1 billion, an increase of nearly 25 percent from $833.9 million the previous year.

During the fourth quarter, TSYS said it used $100 million in cash for an accelerated repayment of its debt, which cut the amount it owes by $400 million since the buyout of Hauppauge, N.Y.-based TransFirst. It also said it has combined its North American and International business segments into one, calling the segment Issuer Solutions.

TSYS also said it expects to grow net revenue in 2017 between 8 percent and 11 percent, with adjusted diluted earnings per share increasing from 9 percent to 12 percent for the year. Total revenue is pegged to rise between 14 percent and 16 percent for all of 2017, while diluted earnings per share are projected to increase 23 percent to 28 percent, which is a range of $2.14 to $2.21 per share.

“We expect the momentum of 2016 to continue in 2017,” Woods said. “We are projecting strong organic (existing client) revenue growth and double digit earnings growth as we remain laser focused on executing our strategic plans and delivering outstanding results.”

TSYS issued its earnings release after the stock markets’ close on Tuesday. Its shares rose 13 cents apiece to $53.19 Tuesday on the New York Stock Exchange. That’s not far off the stock’s 52-week trading range of $56.54 per share. The low for the past year is $37.47 per share.

During a conference call with market analysts that follow TSYS and its financial progress, Woods again applauded his global employee base for “another outstanding performance” both in the fourth quarter and 2016.

He said the credit-card processor experienced record-setting transaction, authorization and volume levels during the recent holiday shopping season. Highlights inthe quarter included repurchasing 500,000 shares of TSYS common stock and increasing the corporate adjusted operation margin for the second straight year, with it the largest margin in eight years.

Woods also said TSYS in the quarter incurred a one-time charge of $19.5 million to settle litigation related to a Telephone Consumer Protection Act case involving Central Payment Co., a merchant business acquired in recent years by the Columbus company. TSYS also was sued late last year by the Federal Trade Commission involving alleged deceptive marketing by its Austin, Texas-based prepaid specialty business NetSpend. The FTC case is now in settlement negotiations.

“While admitting no wrongdoing, we felt that these two actions were in our best interests to put (everything) behind us so we could focus on moving forward,” Woods said on the conference call.

Additional highlights, the CEO said, included the generation of more than $575 million in free cash flow by the company, which is a new record. He also noted that NetSpend signed new and renewed contracts during the fourth quarter with PayPal, 7-Eleven, Giant Eagle and Liberty Tax. NetSpend also is looking to launch a new demand deposit account product for customers who wish to have a bank account.

“We have very good momentum in our issuing business as we move into 2017,” Woods said of the firm’s core credit-card processing business. “Our customer base is strong and stable. Our customers continue to aggressively market credit and debit cards as evidenced by our customers adding over 41 million net traditional accounts to our platforms in 2016.”

The bottom line, the CEO said, is that there is plenty of growth ahead of the company headquartered in downtown Columbus, overlooking the Chattahoochee River.

“With the economy on the upswing, the health of the financial sector improving and the continued secular trend of cash payments moving to electronic payments, we see another great opportunity to deliver double-digit earnings growth in 2017,” he said.

This story was originally published January 24, 2017 at 5:01 PM with the headline "TSYS reports net income of $74 million; adjusted earnings climb."