US EFT vendor TSYS is reaping the benefits of its recent takeover of Vital Processing Services (VPS) which has helped raise first quarter profit at the firm by nearly 42%.
For the three months ending 31 March 2005, Georgia-based TSYS is reporting net income of $46.1m, a 41.7% increase on $32.6m a year ago. Revenue was up 22.7% to $350m, from $285.2m in Q1 2004.
TSYS said in January it was acquiring the remaining 50% equity stake it didn't already own in VPS from Visa USA for $95 million. Formed in 1996 as a joint venture between Visa USA and TSYS, Vital is now the second largest processor of merchant accounts in the US, serving more than one million merchant locations.
TSYS began consolidating Vital's results with its own on 1 March and the acquisition has clearly paid off as the company is now reporting its largest quarterly increase in earnings for the last five years.
Philip Tomlinson, TSYS CEO, says the purchase of the remaining share of Vital is a significant strategic move for TSYS and is expected to add $225-235 million in annual revenue in 2005.
"Our conversion pipeline has approximately 34 million accounts, which are expected to be converted by the end of the third quarter. We believe we have built great momentum that will lead to a break-out year in 2005," says Tomlinson.
The vendor also secured a five year contract extension with Bank of America in the quarter. The contract covers all of the bank's consumer and commercial credit Visa and MasterCard accounts.
On the back of its Q1 results, TSYS is increasing its earnings guidance from 19-22% to 22-25% for the year. Revenue growth is expected to be in the 30-33% range for 2005.
TSYS shares fell 1.46% on the Nyse yesterday in advance of the update to close at $24.16.