TSYS posts profit of nearly $110 million in second quarter

The TSYS corporate headquarters is located along the riverfront in downtown Columbus.
The TSYS corporate headquarters is located along the riverfront in downtown Columbus.

The TSYS financial machine picked up steam in the second quarter, with the credit-card and payment processor topping $600 million in quarterly revenue for the first time in its history.

Revenue for the company, headquartered in Columbus, was $602 million to be exact, up more than 30 percent from the same April-June period a year ago.

A number that investors really want to see grow — profit or net income — came in at just under $110 million, or 58 cents per share, a 90-percent increase over the $57.7 million, or 31 cents per share, reported in the second quarter of 2013.

Phil Tomlinson, who is retiring as TSYS chief executive officer at the end of July, called it an “outstanding quarter” with free cash flow surging nearly 70 percent to $133.7 million and the company also buying back 3.7 million shares of its stock at a cost of nearly $116 million.

Fewer shares on the open market typically make remaining stock notes held by investors that much more valuable. Common shares on the market currently total an average of 187.1 million.

Taking charge of TSYS effective Aug. 1 will be longtime President and Chief Operating Officer Troy Woods, who becomes only the third CEO in the firm’s history since it became publicly traded on the New York Stock Exchange in 1983. Richard “Rick” Ussery preceded Tomlinson, who remains the company’s executive chairman of the board until the firm’s annual meeting next spring.

Tomlinson, heading his final conference call Tuesday with Wall Street analysts, said he had enjoyed every minute of his time as CEO and interacting with those following his company. He also said the leadership transition had been “carefully developed” and that the “passing of the torch” to Woods will be seamless.

“The fact that you all know and are comfortable with Troy makes that even easier for us,” he said. “I truly believe that the best of TSYS is yet to come.”

Woods noted that July 31 will be Tomlinson’s 40th anniversary with the company, which started as a credit-card processing division of Columbus Bank and Trust decades ago. He has been CEO since 2004.

“It would truly be impossible to calculate or quantify the positive impact Phil has had during his career on TSYS, our team members, and clients around the world,” Woods said on the conference call. “We are truly blessed to have had his leadership during some of our most challenging and exciting growth periods.”

Another TSYS executive retiring during the second quarter was Jim Lipham, longtime chief financial officer. He was succeeded July 1 by Paul Todd, who has been with the firm since 2008, previously serving as executive vice president for strategy, mergers and acquisitions.

Highlights of the quarter included the company’s North American segment topping 500 million accounts for the first time ever, with a record-breaking 2.7 billion transactions in the three-month period as well. Existing client transactions grew for the 19th straight quarter, the company said.

The firm’s International segment experienced double-digit transaction growth, while also seeing a spike in its accounts on file to an all-time high of 62 million.

Merchant Services — which helps businesses set up and carry out card transactions — saw a very modest 1 percent rise in revenue, while the “indirect” portion of that segment was down 10 percent. Point-of-sale transactions were up 3.5 percent, however.

The rising star at TSYS, on the other hand, is the prepaid card distributor the company bought for $1.4 billion a year ago. Austin, Texas-based NetSpend, which was the largest acquisition in TSYS history, became a subsidiary that experienced an 11 percent increase in revenue in the second quarter. It recently added Brinks, Paychex and Western Union as customers, while adding 2,000-plus retail outlets where its cards are available, and more than 80 new PayCard clients.

Through the first six months of this year, TSYS racked up $159.2 million in profit, or 84 cents per share, up nearly 39 percent from the $114.7 million, or 61 cents per share, posted in the first half of 2013. That was on revenue of nearly $1.2 billion, which is 31 percent higher than the $910.6 million the firm brought in during the January-June period a year ago.

Woods, in the earnings release, said he is “honored” to carry the TSYS torch at such an exciting and dynamic time in the firm’s history.

TSYS issued its quarterly report after the stock markets’ close Tuesday. Shares rose 34 cents, or 1 percent, to $31.92 in trading on the New York Stock Exchange. The stock’s 52-week trading range is $25.23 to $33.44 per share.