Amid a recovering U.S. economy, credit-card processor TSYS on Tuesday reported a $47.1 million profit in the fourth quarter and a $193.9 million profit for full-year 2010.
Both of those numbers were off nearly 22 percent and 10 percent, respectively, from the same periods in 2009.
Still, those figures met the expectations of Wall Street analysts. The 19 who follow the Columbus-based company were expecting an average of 24 cents earnings per share for the quarter and $1 per share for the year, which is right where TSYS landed.
“I really believe we ended a very challenging 2010 stronger than originally expected,” TSYS Chairman and Chief Executive Officer Phil Tomlinson said during a conference call with stock analysts. “We are seeing a gradual improvement in the economy and, frankly, I’m very proud of the way our team has performed during this very difficult last two-and-half-year period.”
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For 2011, the firm is projecting earnings of $1.09 to $1.11 per share, an increase of 9 to 11 percent over 2010.That’s based on momentum the company believes it gained in the fourth quarter and will be able to carry over into this year, though it won’t necessarily be easy, Tomlinson conceded.
“Lingering economic indicators like unemployment, home foreclosures and a slipping consumer confidence index continue to cast a shadow on this economy,” he said. “Ultimately, recovery has been slow. Yet our business model is showing signs of strength that we’re very excited about.”
That optimism comes with the company working to overcome key obstacles. It lost business from Wells Fargo, Wachovia, Charming Shoppes and Nordstrom. That put the processor in a big hole heading into 2010.
“We had roughly $73 million of revenue we knew we were going to lose; this is net of termination fees and everything,” said Jim Lipham, TSYS chief financial officer. “So we went into the year looking to recover quite a bit of dollars in revenue, and finished the year with double-digit growth in cardholder transactions, which hadn’t happened in quite a while.”
Specifically, card transactions grew 10.2 percent in the fourth quarter, marking the first time since the second quarter of 2007 the firm had seen double-digit growth in that category.
Contributing to the rebound was organic growth from existing clients, the company said. But there also was cash flowing in from a merchant processing joint venture with First National Bank of Omaha. The joint venture went solo earlier this month with TSYS purchasing the second half of the operation, a $320 million acquisition altogether.
TSYS also pieced together several smaller clients through the year, adding to momentum heading into 2011. The names there include Bank of Montreal, Swisscard Permanent, Cedacri, BancVue, Simmons First National Bank and Caterpillar Financial Services.
“The new business we signed in Canada will increase our share of the market there to 64 percent when we get Bank of Montreal converted,” Tomlinson said.
Even with net income, or earnings, sliding during the fourth quarter and full year, TSYS reported a slow climb in its overall revenue. For the three-month period ended Dec. 31, the company posted revenue of $439.9 million, up 1.7 percent from $432.5 million in the quarter a year ago. For the full-year, revenue came in at $1.7 billion, up 2.4 percent from $1.6 billion in 2009.
The revenue stream was impacted by one-time items connected to lost clients in 2009, Lipham said. Without those, the picture is brighter, he said.
“If you added back the lost revenues of $12 million and the deconversion fees of $17 million that we had in 2009, revenues would be up 12.9 percent (in 2010),” he said. “That would be outstanding growth.”
Meanwhile, fourth-quarter earnings for 2010 were $47.1 million, down 21.7 percent from $60.2 million during the same period a year ago. Full-year earnings were $193.9 million, off 9.9 percent from $215.2 million in 2009.
The number of credit-card accounts processed by TSYS have remained relatively flat over the last two years. It ended 2009 at nearly 345 million accounts on its books and closed out 2010 handling nearly 343 million.
A global credit-card processor, TSYS does business in North America, Latin America, Europe and the Asia-Pacific region. The company employs just under 7,800 people, more than 4,000 of those in Columbus.