Report

TransFirst Acquisition Boosts TSYS’ 2016 Guidance

TSYS said Tuesday (April 26) night that it had adjusted profit of $0.66 a share, up 22 percent year over year, which was $0.04 better than The Street. The latest bottom line beat came even as the firm missed top line estimates, coming in at about $671 million, and below projections of roughly $691 million.

Still, investors seemed cheered by the news, as they sent the stock up 4 percent after the bell and after the earnings announcement. The likely impetus to the forward momentum came as the payments company boosted its guidance to net revenues of $3 billion to $3.1 billion, with the bottom line at $2.78 to $2.85.

By contrast, The Street, for this year, has earnings estimates of $2.61 and $2.9 billion, respectively.

Management said at the time of the release that the revised guidance includes the operations of TransFirst and that the transaction now makes the combined entity the sixth-largest U.S. acquirer, spanning 645,000 merchant outlets.

As has been reported, the firm agreed to buy TransFirst late last year for $2.4 billion from Vista Equity Partners, and M. Troy Woods, CEO of TSYS, said that the deal provides “additional scale and reach in merchant acquiring,” while also remarking that “our financial performance for the first quarter was outstanding across all four of our segments.”

Drilling down into the numbers a bit, the two largest segments of the company had the fastest growth, with North America services up 14 percent and NetSpend up 19 percent year over year. Operating income in the former grew faster than sales at 21 percent, while keeping pace with the NetSpend top line segment growth. The commercial accounts on file grew by 9 percent year over year to 46.3 million at the end of the latest quarter. Commercial card single use also grew by 17.1 percent to nearly 76 million in the latest quarter. The merchant segment grew by 10.8 percent, with dollar sales volume also growing by 4.3 percent.

Organic growth, said Woods, has been strong but now should be bolstered by the onboarding of TransFirst, for acquisition-related growth.

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