Tsys reports Q4 income rise

Source: Tsys

Tsys today announced the results for the fourth quarter and full year of 2008. Total revenues grew 7.6% in the fourth quarter to $493 million and 7.4% for the year to $1,939 million compared to 2007.

On a generally accepted accounting principles (GAAP) basis, TSYS reported basic earnings per share (EPS) of $1.28 for the year and $0.34 for the fourth quarter. On a non-GAAP basis, excluding one-time spin costs, TSYS reported basic EPS of $1.32 for the year and $0.34 for the quarter, which exceed analysts' consensus of $1.30 for the year and $0.33 for the quarter.

The reported results include a significant shift in currency conversion rates that occurred primarily in the fourth quarter which were unfavorable to TSYS. Accordingly, the company has included a schedule with this release that provides revenues and operating results on a constant currency basis. This non-GAAP measure presents 2008 financial results using prior year foreign currency exchange rates. Most notable was the impact to TSYS' Global Services segment in the fourth quarter. On a constant currency basis, total revenues grew 41% as compared to reported growth of 14%. Management measures the performance of its global business on the basis of constant currencies.

The headwinds from the unexpected strengthening of the U.S. Dollar in the fourth quarter across most currency conversion rates resulted in a decrease related to the translation of foreign currency denominated financial statements of $0.03 for the year and $0.02 for the quarter in basic EPS on a constant currency basis. This masked TSYS' strong growth in its Global Services segment on a constant currency basis.

"The formidable challenges resulting from the current worldwide financial crisis exceed anything that we have ever seen in our history. We are extremely proud of the way our team has met these challenges. We will continue to deal with these challenges through global growth, increased value-added product sales and expense controls. We expect 2009 net income to be in the range of slightly down to flat which reflects our commitment to successfully managing our business in these difficult times. At TSYS, we believe our technological superiority enables us to add value and partner with our current and future clients to meet the challenges facing their businesses," said Philip W. Tomlinson, chairman of the board and chief executive officer of TSYS.

Key Segment Events
North America Services

For the fourth quarter, total segment revenues were $342.9 million, an increase of 6.0%, compared to $323.4 million. Total segment revenues for the year were $1.35 billion, an increase of 4.6%, compared to $1.29 billion.

Key drivers for this segment include:

  • Ended the year with 319.0 million accounts on file, a decrease of 9%, compared to 352.1 million accounts on file. The decrease is the result of portfolio deconversions and inactive account purges by our clients
  • Processed 1.7 billion transactions, a decrease of 4%, compared to 1.8 billion
  • Increased reimbursable items $18.1 million, as the result of the growth in reimbursable court costs and attorney commissions through our debt collection subsidiary

We had the following segment events:

  • Entered into an agreement with JPMorgan Chase with respect to the discontinuation of the servicing of Washington Mutual Bank's consumer card portfolio by TSYS
  • Signed an agreement with Unicard Mexico, a wholly owned subsidiary of Unibanco Brasil, one of the world's top 20 banks and the first TS2 client in Mexico

Global Services

For the fourth quarter, total segment revenues were $80.7 million, an increase of 14.4%, compared to $70.6 million. The increase was unfavorably impacted by $18.8 million as a result of currency translation with the strengthening of the U.S. Dollar against the British Pound. Year-to-date total segment revenues were $318.5 million, an increase of 25.7%, compared to $253.5 million. The increase is driven by growth in accounts and transactions processed.

Key drivers for this segment include:

  • Ended the year with 33.5 million accounts on file, an increase of 43%, compared to 23.4 million accounts on file
  • Processed 281.8 million transactions, an increase of 23.1%, compared to 229.0 million

We had the following segment events:

  • Signed a multi-year agreement to process a significant credit card portfolio for a leading German financial institution
  • Began offering merchant payment services to PaySquare in the Benelux, which is TSYS' first acquirer-processing client to go live in Europe
  • Announced the addition of a new data center in Okinawa, Japan and signed AZ Card, OCS and Nagasaki Kenmin Shinyo Kumiai to service 340,000 accounts
  • Signed a multi-year agreement with Sony Finance International, Inc. to process its newly introduced credit card program
  • Announced China UnionPay Data Services Co., Ltd. ("CUP Data"), TSYS' joint venture with China UnionPay, signed two processing agreements. One agreement was with China Postal Savings Bank, China's fifth largest lender. The other agreement was with Bank of East Asia, Hong Kong's largest local independent bank and the first foreign bank to launch a card program in China.

Merchant Services

For the fourth quarter, total revenues for the segment were $78.7 million, an increase of 7.3%, compared to $73.3 million. Year-to-date total revenues for the segment were $298.8 million, an increase of 2.3%, compared to $292.1 million.

The key driver for the segment was:

  • Processed 1.24 billion point-of-sale transactions, an increase of 1%, compared to 1.23 billion.

We had the following segment events:

  • Signed three new clients and renewed two long-term contracts in the fourth quarter
  • Acquired Infonox to provide additional new payment technology and acceptance capabilities that move any payment form through any payment device, anywhere in the world, over any network. Infonox gives us new client types in the gaming and casino business and new payment applications with self-serve kiosks, ATMs and money transfer.

Projected Outlook for 2009
TSYS' guidance for 2009 includes the following:

2009 Guidance
($in millions)
Total Revenues $1,939 to $1,978 0% to 2%
Reimbursable items $447 to $453 0% to 1%
Revenues before reimbursables $1,492 to $1,525 0% to 2%
Net income $243 to $250 (3%) to 0%


TSYS' 2009 earnings forecast is based on the following assumptions:

  1. The economy will stabilize in the second half of 2009.
  2. There will be no significant movements in LIBOR, and no significant draws on the remaining balance of TSYS' revolving credit facility.
  3. Anticipated growth levels in employment, technology and other expenses, which are included in 2009 estimates, will be accomplished.
  4. There will be no significant movement in foreign currency exchange rates related to TSYS' business subsequent to year-end December 2008.
  5. TSYS will not incur significant expenses associated with the conversion of new large clients or acquisitions, or any significant impairment of goodwill or other intangibles.
  6. There will be no deconversions of large clients during the year other than as previously announced.
  7. There will be no additional significant one-time spin costs in 2009.

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