Total System Services Inc.
) reported first-quarter 2013 operating earnings of 30 cents per
share, which lagged the Zacks Consensus Estimate of 34 cents but
were in line with the year-ago quarter figure.
The company's earnings per share climbed 1.7%, while net
income attributable to shareholders edged up 1.1% to $57.0
million from $56.4 million in the prior-year period. Net income
in the reported quarter included an expense of $6.2 million
related to the pending acquisition of NetSpend Holdings, slated
to close by mid-2013.
Results reflect consistent revenue growth in the merchant
segment and increase in overall transaction volume and new
accounts. Lower tax expense and almost flat cost of services also
boosted the results. However, lower revenue from North America
and international segments, higher-than-expected SG&A and
merger expenses deteriorated the operating cash flow and cash
Behind the Headlines
Total revenue for the reported quarter was $465.0 million, up
0.8% year over year, although it missed the Zacks Consensus
Estimate of $477 million. Reimbursable items declined 7.9% year
over year to $60.8 million.
Total System's top line also benefited from point-of-sale
(POS) transactions, excluding de-converted clients in indirect
business, which increased 6.6% on a year-over-year basis, while
sales volume from direct merchant business jumped 15.5%. Same
client transactions grew 8.7% year over year, although a decrease
of $5.2 million in reimbursable items impacted the top line
On a geographical basis, quarterly revenues from North America
dipped 0.3% year over year to $239.8 million, while revenues from
international services witnessed a 3.3% year-over-year fall to
$97.1 million. However, revenue from merchant acquiring services
grew 5.9% year over year to $132.9 million, whereas inter-segment
revenues improved 9.9% year over year to a negative $4.8
Additionally, as of Mar 31, 2013, total number of accounts on
file was 478.6 million, up 15.1% from 415.9 million at end of the
year-ago quarter. This upside was primarily driven by new client
growth, partially offset by a decline in internal growth of
Total System also reported 13.7% year-over-year growth in
SG&A expenses, which stood at $66.1 million. Cost of services
edged up marginally 0.7% year over year to $320.6 million.
Alongside, non-operating income stood at $1.0 million against an
expense of $0.4 million. The company also incurred merger and
acquisition expenses related to a bridge loan facility of $2.7
million during the reported quarter.
Subsequently, operating income declined 11.7% year over year
to $74.9 million in the reported quarter. Operating margin dipped
to 16.1% from 18.4% in the year-ago quarter.
At the end of the reported quarter, operating cash flow
plunged 46.5% year over year to $52.4 million. Consequently, cash
and equivalents fell to $223.1 million from $247.6 million at the
end of 2012. However, total assets increased to $2.04 billion and
total shareholder equity climbed to $1.45 billion, from
On Apr 1, 2013, Total System paid a regular quarterly dividend
of 10 cents per share to the shareholders of record as on Mar 21,
Along with Total System, other strong performers in the
financial sector include
Alliance Data Systems Corp.
), all carrying a Zacks Rank #2 (Buy). Another outperformer,
) carries a Zacks Rank #1 (Strong Buy).
ALLIANCE DATA (ADS): Free Stock Analysis
FISERV INC (FISV): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
TOTAL SYS SVC (TSS): Free Stock Analysis
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