The immediate future is so bright for TSYS that the credit-card and payment processor’s top executive said Tuesday the firm is increasing its earnings and revenue estimates for the balance of 2015.
Mentioning double-digit revenue growth, improving business development pipelines and increasing consumer confidence, TSYS Chairman, President and Chief Executive Officer Troy Woods said the Columbus-based firm, which released its second-quarter financial data Tuesday, is poised to finish the year strong.
“Our leadership team continues to execute at a very high level, and they will continue to be laser-focused on our clients, the businesses that we serve, our valued shareholders and, of course, our 10,000-strong dedicated team members,” Woods said during a conference call with analysts who follow the company.
Specifically, TSYS said it expects to grow revenue before reimbursables between 10 to 12 percent in the second half of this year. That’s up from the previous range of 8 to 10 percent. It also sees adjusted earnings per share increasing 15 to 17 percent, instead of previous “guidance” of 12 to 14 percent.
“Once again, TSYS exceeded expectations, delivering an exceptionally strong performance for the second quarter,” the CEO said.
Data released Tuesday show the firm posting net income, or profit, of $82.8 million in the April-June quarter of this year, or 45 cents per share. That’s down from $109.9 million in the same quarter a year ago, a decline of nearly 25 percent.
But that year-ago figure includes one-time gains of $50.1 million classified as “discontinued operations.” Taking that number out gives TSYS “income of continuing operations” totaling $59.7 million. The current quarter’s profit of $82.8 million is nearly 39 percent higher than the latter number.
The “discontinued operations” from a year ago was the firm’s sale of its subsidiary, TSYS Japan Inc., to a group of former executives who once ran the operation. It also sold its 54-percent stake in GP Net Corp. to Visa, which was already a minority investor.
Last year, Woods and now-retired Chairman and CEO Phil Tomlinson commented that they had not been happy with the company’s progress and growth in Japan, which is crowded with processors, including a number of large banks that do their own credit-card processing. Woods said the exit from Japan was made after a strategic review of all of the firm’s international markets.
“After assessing the size of the investment required to enhance our processing platforms, and balancing that investment against the low likelihood of successful penetration of scale needed in the processing market, we decided to exit the Japanese processing segment,” he said.
The picture painted by Woods Tuesday shows a company, like the U.S. economy, steadily picking up momentum.
For TSYS in the April-June quarter, it was a portrait showing total revenue of $692.6 million, up 15 percent from $602 million in the same period a year ago. Operating income surged 32 percent from $98.7 million to $130.6 million.
“From a macro perspective, the U.S. economy experienced a nice, healthy bounce after a lackluster first quarter,” the CEO said on the analyst call. “The benefits from lower umemployment, wage increases and lower gas prices fueled spending and an improved outlook. These positives suggest the U.S. economy is returning to a slow and steady growth trajectory, and consumer fundamentals still appear favorable.”
Woods noted the momentum slowly gathering in the U.S. is countered somewhat by “headwinds” abroad due to weakening currencies where TSYS operates and the “unpredictability and volatility” of some of those nation’s markets.
Reporting on various business segments, he said North America experienced a “stellar performance” in the quarter as the Bank of America conversion to active accounts helped stoke the TSYS engine. The firm saw North America crank out the largest revenue and adjusted operating income totals in history, including the fourth straight quarter of record-setting transaction volumes.
The core business of TSYS is working with banks, retailers and card-issuing companies to handle the transaction of a consumer’s credit or debit card from the initial swipe at a checkout terminal to having the purchase amount posted to an account. In 2014 alone, the company processed about 12.2 billion card authorizations around the world, or an average of 33.6 million each day.
Overseas, Woods said, the company’s international segment was “strong” in the quarter, with several of its European clients outperforming the overall market there. He also said TSYS is seeing more activity in its business development pipeline outside of the U.S.
“We signed an LOI (letter of intent) for a well-known global brand’s UK launch for early 2016, and we are in late-stage contract negotiations with a sizeable entity, which we hope to conclude later this year,” the CEO said of the future on the international front. “Additionally, we are working on other late-stage (request for proposals), which look encouraging. Our new business pipeline is stronger than it has been in years.”
Within its newest subsidiary, NetSpend, an Austin, Texas-based prepaid card specialty outfit, revenue growth jumped more than 21 percent during the quarter compared to a year ago, Woods said. That’s the 14th quarter in a row of double-digit growth.
NetSpend ended the second quarter with more than 3.9 million active prepaid cards, the first time that total has been that high outside of tax-filing season, with 48 percent of those cards enrolled in direct deposit. Woods also said the prepaid operator has expanded its business with Walmart, with the mega-retailer now selling NetSpend cards in more than 1,100 Walmart Money Centers, which typically are just inside the stores’ front doors.
Wrapping up Tuesday’s earnings report, TSYS through the first six months of 2015 posted net income, or profit, of $160.6 million, or 87 cents per share, up 0.9 percent from $159.2 million, or 85 cents per share, in the same period a year ago.
Again, that figure is impacted by the “discontinued operations” gain from a year ago. Factoring out that one-time occurrence, the year-ago six-month net income is $109 million. That would be an increase of 47 percent to the current January-June profit of $160.6 million.
Total revenue through the first six months of this year was $1.35 billion, up 13.4 percent from $1.19 billion a year ago.
Shares of TSYS (Ticker: TSS) are traded on the New York Stock Exchange. The firm, headquartered in downtown Columbus, released its second-quarter earnings report after the market’s close Tuesday. In pre-release trading, shares closed up 84 cents, or 1.9 percent, to $44.78 apiece. That’s very close to the stock’s 52-week high of $45.47 per share. The past year’s low is $28.54 per share.