Total System Services' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Total System Services (TSS)

Q1 2012 Earnings Call

April 24, 2012 5:00 pm ET

Executives

Shawn Roberts - Director of Investor Relations

Philip W. Tomlinson - Chairman, Chief Executive Officer and Member of Executive Committee

James B. Lipham - Chief Financial Officer and Senior Executive Vice President

Analysts

Darrin D. Peller - Barclays Capital, Research Division

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

Brett Huff - Stephens Inc., Research Division

Vasundhara Govil - Morgan Stanley, Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Roman Leal - Goldman Sachs Group Inc., Research Division

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Presentation

Operator

Good afternoon. My name is Vineda, and I will be your conference operator today. At this time, I'd like to welcome everyone to the TSYS First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, April 24, 2012. Thank you. I would now like to introduce Mr. Shawn Roberts, Director of Investor Relations. Please go ahead, sir.

Shawn Roberts

Thank you, Vineda, and welcome, everyone. On the call today, our Chairman and CEO, Phil Tomlinson, will provide highlights from the first quarter of 2012, and then he'll turn it over to Jim Lipham, our CFO, who will review our financials. And after that, we're going to open up to Q&A like Vineda described.

And I'd like to now call your attention to the fact that we'll be making some forward-looking statements about the future operating results of TSYS. These forward-looking statements involve risks and uncertainties. Factors that could cause TSYS' actual results to differ materially from the forward-looking statements are set forth in TSYS' reports filed with the SEC.

At this time, I'd like to introduce TSYS' CEO, Phil Tomlinson.

Philip W. Tomlinson

Thank you, Shawn, and good evening, everybody. I'm excited to share the report of the first quarter results, which were really good, as you've seen in our press release. The key metrics that we used to measure our business exceeded our expectations, which we believe is a direct reflection of an economy that's picking up the pace of improvement, at least in our business. While one quarter doesn't make a year, we think it's a good start.

Results were positive in EPS, revenues and net income for the quarter. EPS was $0.30 for the quarter, an increase of 18.6% over 2011. Revenues were $461.2 million, up 7.4%. Revenues before reimbursables were $395.2 million, an increase of 9%. Operating income was $84.8 million, up 16.2% over the same quarter last year.

At the enterprise level, we saw healthy increases in transactions, both on the issuer processing side, as well as increases on the acquiring side, in the processing and the direct acquiring. Same client issuer transactions for North America and international combined were up 14.4%. Excluding deconverted accounts, same client point-of-sale transactions in our indirect acquiring business were up 11%.

Sales volume for our direct acquiring business was up 20.9% over the same quarter last year. And looking at the economy from a macro level, we see continued healthy decline in both credit card delinquencies and charge-offs quarter-over-quarter. Charge volumes on credit cards have trended upward over the past 3 quarters, which, again, indicate improved consumer confidence, and we see a renewed interest among our issuers, in particular, in offering new credit cards and new products.

As you know, the unemployment rate slowly continues to decline yet the job market and mortgage situation still remains pretty fragile, and consumers continued to carefully manage their finances.

I want to take just a few minutes and give you a brief update on our 3 reporting segments before Jim gets into the financial details.

First, let's take North America. We had some strong wins this quarter, and you may have seen today's announcement that we signed Huntington bank for issuer processing. And we're also happy to report that we recently entered into a long-term issuer processing agreement with Regions bank to be their payments partner as Regions reenters the credit card business or the card business in general. And we'll be converting that portfolio that they've acquired later this year.

We continue to win in the regional banks sector as more of these institutions look to credit cards as a business driver and really a necessary product for their customer base. Also, during the quarter, we successfully completed the BancorpSouth's consumer credit, commercial and debit card portfolio conversions.

On international, we're delighted, and you saw the announcement, I hope, Monday afternoon, that Royal Bank of Scotland has extended its issuer processing relationship with us. Our relationship for the U.S. business has been extended for 13 years and the U.K. business for 12.5 years, taking both of them out to the 2025 range. RBS has been a client of TSYS since 2001, and our first client in the U.K. or Europe, and is a real anchor tenant for TSYS, and we couldn't be more proud of this relationship and this extension.

Post the Carrefour conversion, the reaction in Brazil has been very positive. We've had some interesting -- we have some really interesting prospects in this market, which continues to see good economic growth. Our joint venture with CUP Data in China UnionPay had a strong finish in 2011. We expect to see an equally strong performance in '12, which is worthy of mention and is a noted addition to our net income.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says