TSYS Beats Street on Card Growth

Credit card processor Total System Services reported results Tuesday after the markets closed that topped Wall Street expectations.

Sales came in at $1.2 billion, up from $1.1 billion last year, driving earnings to an adjusted 85 cents a share compared to the 80 cents expected by the Street and up from 73 cents a share last year.

Management noted in the press release that accompanied the second-quarter earnings report that growth was organic, with the $2.4-billion TransFirst merchant processing acquisition included in both the most recent and the prior-year quarters.  Free cash flow growth, said the company, has helped to reduce debt and boost dividends, the latter by 30 percent to 13 cents a share from last year’s dime per share.

CEO Troy Woods pointed to growth in the traditional credit card and payments businesses, where 10 million new cards and payment accounts were added to the roster, bringing the total tally to 542 million, up eight percent from last year and an all-time high.  Also at an all-time high: operating income, which passed $100 million, amid greater cost control (and which also factors in the TransFirst deal).  Transactions were up 7.1 percent year over year.

TSYS boosted guidance for the current year, noting that revenue should be between $4.8 billion and $4.9 billion, up 15 percent to 17 percent from last year.

Drilling down by segments, where actual results bested internal projections, callouts included the Issuer Solutions segment, where Woods says pipeline remains “robust” both in North America and internationally, and where revenue growth is expected to be between five percent and seven percent, and with margin expansion alongside that growth.  The segment contributed $147 million in operating income out of the total $259 million recorded on that line item.

The Net spend segment showed gross-dollar volumes processed at $7.6 billion, from $6.6 billion last year, and where net revenue was up 12.6 percent year over year to $183 million.  The firm counts more than 110,000 locations and employers in its roster, according to earnings slides.

In response to questions from analysts surrounding the regulatory environment tied to PSD2 and open banking, Kelly Knutson, executive vice president and president of the company’s international issuer solutions, said firms are focusing on compliance, and TSYS sees “targeted opportunities” among existing client bases.


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