TSYS reports $90.6 million profit in first quarter, revises 2016 revenues higher

Credit-card and payment processor TSYS on Tuesday reported a $90.6 million first-quarter profit on total revenue of $739.4 million, both double-digit increases from the same three-month period a year ago.

The global company, headquartered in downtown Columbus, also said those numbers will get much better moving forward as the cash flow from its $2.35 billion purchase of merchant specialty firm TransFirst kicks in. The acquisition, completed April 1, was the largest in TSYS history.

That prompted TSYS to revise its earnings guidance sharply higher for 2016, with the company — founded in Columbus and a major employer here — now projecting total revenues of more than $4.2 billion for this year. That will lead to adjusting earnings per share — which takes out one-time items such as investment gains and losses — growing between 13 percent and 16 percent for the year.

Total revenues at TSYS have never topped $3 billion, which would make it a milestone moment. It racked up a profit of $364 million on $2.8 billion in revenues in 2016.

TSYS Chairman, President and CEO Troy Woods, in a statement, expressed excitement that TransFirst is making such a major impact on his company out of the gate, culminating with the revised upward outlook for the balance of 2016. The first quarter numbers don’t include any revenues from TransFirst.

“As a result of this transaction, TSYS is the sixth-largest U.S. acquirer based on net revenue and supports more than 645,000 merchant outlets,” he said. “With the added strength of TransFirst, TSYS is uniquely positioned as a top tier provider in issuer processing, merchant acquiring and prepaid program management delivering on our strategic goal of being a leader in all markets we serve.”

Even without TransFirst, Woods called the performance of his firm in the first quarter “outstanding” from top to bottom as the company’s “vision” of being the best in the world at processing for a variety of clients in a variety of business areas materializes. He said that will benefit the company’s shareholders greatly.

In a conference call with market analysts who follow TSYS, Woods said the company’s “immediate priority” over the next two years is to use the firm’s strong free cash flow to “de-lever” its balance sheet, or pay down debt, to get back to long-term ratios that management prefers.

Woods also said TSYS is keeping an eye on possible federal overdraft rules on prepaid cards that could hurt those consumers who might use the services of its subsidiary NetSpend, which markets and distributes those products to people who might not have or want a bank account.

Breaking down the basic numbers for the January-March period, the $90.6 million profit, or net income, was up from $77.7 million, or 16.6 percent from a year ago. That translates to basic and diluted earnings per share of 49 cents. That’s up more than 17 percent from 42 cents per share in the quarter a year ago.

Adjusted earnings per share came in at 66 cents, which was up nearly 23 percent from 54 cents per share a year ago. That easily beat the 61 cents per share anticipated by nearly two dozen Wall Street analysts who follow TSYS, according to a survey by research firm Thomson Financial.

The quarterly total revenues of $739.4 million were nearly 12 percent higher than the $662.1 million it posted in the first three months of 2015. Total expenses rose nearly 9 percent from $539.6 million to $587.6 million year over year.

The full-year 2016 revised guidance of $4.2 billion in total revenues, with $3.1 billion in net revenues, would amount to adjusted earnings per share of $2.85, a 16 percent increase year over year. Again, the net revenue and adjusted earnings figures are from continuing operations and subtract one-time items experienced by the company.

Looking at the various segments at TSYS during the first quarter, North America Services net revenue jumped 14.1 percent, International Services rose 2.2 percent, Merchant Services climbed 9.3 percent and NetSpend leaped 19.3 percent. TSYS purchased Austin, Texas-based for $1.4 billion in 2013. Before the purchase of Hauppauge, N.Y.-based TransFirst, NetSpend was the largest acquisition in TSYS history.

TSYS has said John Shlonsky, former president and chief executive officer of TransFirst, will continue to lead the operation as a senior executive vice president with TSYS. He will report to Pam Joseph, who becomes TSYS president and chief operating officer starting Monday.

Aside from its New York presence, TransFirst also has facilities in Broomfield, Colo., Aurora, Colo., Franklin, Tenn., and Cypress, Calif. Heading into the acquisition by TSYS, its workforce was about 1,000. TSYS has about 10,500 employees worldwide, with about 4,800 of those in Columbus.

Of note for TSYS in the first quarter, the North America segment saw record revenues, operating income and accounts on file, the company said. Woods, on the conference call, noted that its clients in the North American region are benefiting from an improved employee market, consumer confidence, relatively strong auto sales and the lowest gas prices in years.

“When they grow, we grow with them,” he said of those clients.

NetSpend also experienced record gross dollar volume and operating income in the quarter, the company said. In the process, the subsidiary topped 100,000 employers and distribution locations for the first time.

The core business for TSYS is processing credit-card transactions and payments for retailers, banks and other financial-oriented companies. Card accounts on file now at TSYS, one indication of its processing growth, stood at 750 million at the end of March. That’s up 3.7 percent from more than 723 million accounts at the end of March 2015.

This story was originally published April 26, 2016 at 4:56 PM with the headline "TSYS reports $90.6 million profit in first quarter, revises 2016 revenues higher."