Total System Services, Inc. (TSS)

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Total System Services (TSS)

Q3 2010 Earnings Call

October 20, 2010 5:00 p.m. ET

Executives

Philip Tomlinson – Chairman of the Board and Chief Executive Officer

James Lipham – Senior Executive Vice President and Chief Financial Officer

Shawn Roberts – Director of Investor Relations

Analysts

Jason Kupferberg - UBS

Bryan Keene – Credit Suisse

Greg Smith – Duncan Williams

Glenn Fodor – Morgan Stanley

Craig Maurer – CLSA

Tom McCrohan - Janney Montgomery Scott

John Williams – Goldman Sachs

Presentation

Good afternoon. At this time I would like to welcome everyone to the TSYS third quarter 2010 earnings conference call. [Operator Instructions.] I would now like to introduce Mr. Shawn Roberts, director of investor relations. Please go ahead sir.

Shawn Roberts

Thanks operator, and welcome everyone. On the call today Chairman and CEO Phil Tomlinson will provide highlights on the third quarter events, and then he's turn it over to Jim Lipham, our CFO, who will review the third quarter financials. After that, of course, as you already heard, we’re going to open it up for Q&A.

I’d like to remind everyone of our Safe Harbor, the fact that we’ll be making 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 Tomlinson

Thank you Shawn and welcome everyone. Good evening. We're delighted to be reporting to you today and think we have a good report. We believe we're seeing improving trends and we have some really positive news to share with you.

First, I want to talk about the third quarter of 2010 versus the same quarter of 2009. Same-client account on file growth increased 7.3%. That's a real high quality number for us. Same-client transactions increased 5.1%. On a year-to-date basis, same-client revenue growth increased 3%.

Now I want to take a few minutes and talk about some new wins and some successes in each of our reporting sectors for the quarter. In our international sector, we announced earlier today that we've signed a contract to process the credit card portfolio for SwissCard, in Switzerland. We expect to convert these accounts from their in-house systems in mid-year 2011.

SwissCard, if you're not fully aware of it, is a joint venture between Credit Suisse and American Express, and is the only company in Switzerland to offer its cardholders American Express, MasterCard, and Visa credit cards.

I want to bring you up to date on Brazil. The second state of the three-stage conversion for Carrefour was completed August 15, with the last stage scheduled for mid-year 2011. The conversion was very successful, and the subsequent daily processing is going very well.

I think it's important to understand that we've delivered to Carrefour, and to the whole Brazilian market, a completely new server-based outsourced card system. We're confident that this strong relationship that we have built and continue to build with Carrefour will open additional opportunities and help us introduce new products and services, not only to our client there but other regional prospects as well.

As you know, Brazil is the fourth largest card market and is enjoying really strong growth. Also, we believe that pre-paid is a huge opportunity for us to expand beyond credit. Brazil is predicted to be the second largest pre-paid market in the world, growing at a 20% rate over the next 10 years.

Additionally, on the international front we previously announced we had won the Tesco retail business in the U.K. and Tesco Bank is the U.K.'s most successful supermarket bank, with more than 6 million customers. And they're the sixth largest credit card provider in the U.K., with over 2 million accounts in circulation.

Even though it was already on TS2 with another client, their decision reaffirmed the value that we think we bring to our clients over a competitor, and of course that decision as they went on their own was to stay with TS2 or TSYS.

We also just announced a contract renewal with the Bank of Ireland for its consumer and commercial card portfolios, and we'll continue to focus on Italy, which is the seventh largest card market in Europe with about 70 million credit and debit cards and over 8 million pre-paid cards. We think that is going to be a good market for us.

One I meant to tell you about when we were talking about Ireland was I'm also happy to report - and it hasn't been released yet, but they've agreed to let us talk about it - that we've just signed an agreement with Permanent TSB, which is a bank located in Dublin, Ireland. Our first European debit client, and we'll process both their credit and debit business and believe this will prove to be a watershed event for us that hopefully will lead to even more debit processing in Europe and the U.K.

Now back to Italy, you'll remember that earlier this year we announced the signing of Cedacri. You might think of Cedacri as an aggregator model providing a host of payment related services to Italian banks and retailers and we're leveraging our newly formed relationship to provide a full end-to-end solution in this market and that should ramp up in about mid-2011.

In the North America sector, we're seeing traction in our end-to-end card offer of community banks and credit unions through the TSYS program solutions, or TPS is what we call it, which we formed this time about a year ago and we talked about it on this call about a year ago. We have just recently signed a partnership agreement with BancVue in Austin, Texas, to provide credit card products and related services to its nearly 700 community bank and credit union clients.

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