Total System Services, Inc. (TSS)

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Total System Services (TSS)

Q1 2011 Earnings Call

April 26, 2011 5:00 pm ET


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

James Lipham - Chief Financial Officer and Senior Executive Vice President

Shawn Roberts - Director of Investor Relations


James Friedman - Susquehanna Financial Group, LLLP

Brett Huff - Stephens Inc.

Adam Frisch - Morgan Stanley

Greg Smith - Duncan-Williams, Inc.

Thomas McCrohan - Janney Montgomery Scott LLC

Bryan Keane - Crédit Suisse AG

Lawrence Berlin - First Analysis Securities Corporation

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

Glenn Greene - Oppenheimer & Co. Inc.



Good afternoon. My name is Jeff, and I will be your conference operator today. At this time, I would like to welcome everyone to the TSYS First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, October 25(sic)[April 26], 2011. Thank you. I would now like introduce Mr. Shawn Roberts, Director of Investor Relations. Please go ahead, sir.

Shawn Roberts

Thank you, Jeff, and welcome, everyone. On the call today, our Chairman and CEO, Phil Tomlinson, will provide highlights from the first quarter of 2011, and then turn it over to Jim Lipham, our CFO, who will review our financials. After that, we'll open it up for Q&A.

I'd like to now call your attention to 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 good afternoon, everyone. As I'm sure you've seen by now, we feel like we're off to a good start in 2011. We reported basic EPS, or earnings per share from continuing operations of $0.25, right in line, we think, with the consensus estimates. We have also deployed $205 million of our capital in the first quarter as part of our continuing efforts to increase shareholder value and grow this company.

We completed the purchase of the remaining 49% of the First National Bank of Omaha acquiring operation, which we have now rebranded TSYS Merchant Solutions, and we continue in our stock repurchase program, and Jimmy will talk about these in detail in just a few minutes.

I think it's important to note that the key metrics that we monitor in the case that our business is improving: Organic growth, organic revenue, merchant volume, account on file and total cardholder transaction growth, all indicate the business is getting healthier.

And now I want to go through the 3 segments that we report. First, the North America Services segment. The strong growth in the increased market share in Canada has prompted us to open our call center operation in Sudbury, Ontario to support a lot of growing client interest in outsourcing call center and back-office functions. We'll host a ribbon cutting in early May, at our new Sudbury facility.

During the quarter, we signed BBVA Compass for a referral program for its corresponded banks, utilizing our turnkey credit card program developed by the program solutions team that we've talked about the last couple of quarters on this call.

In the International Services segment, we're in the middle of the conversion process, with BNS card services we're issuing and acquiring in Germany, and we're issuing our Swisscard in Switzerland.

During the quarter, U.S. Bank also launched a European Corporate Card pilot with us, and we continue to see growth in our Licensing business internationally with the PRIME software.

As you know, we have offices in Japan that service Prepaid and Credit Card Processing businesses. And the addition of 2 new issuer processing clients contributed growth to our efforts in Japan. We also operate in majority owner of a merchant services company, GP Net, which has about 120,000 merchants in Japan, or processes for about 120,000 merchants in Japan. Of course, when the massive earthquake and tsunami struck on March 11, our businesses remained intact and operational, and we continue to see good revenue growth in Japan from GP Net.

As usual, the TSYS family came together to support the disaster efforts there. We have regular conversations with our team in Japan, who continued to report that food supplies and power remain a concern, as they work to recover from this terrible natural disaster.

I want to talk just a second about Brazil. We are also finishing up Phase 3 of our conversion of the Carrefour accounts in Brazil. And as you probably have read in late April, Itaú Unobanco, the large Brazilian bank, purchased a 49% interest in the Carrefour Consumer Card business. And obviously, we've been in close contact with the Carrefour executives and look forward to expanding our relationship with Carrefour. And I think it also gives us an opportunity to build a relationship with the Itaú Unobanco management. We strongly believe, we still believe in the Brazilian market, and the future of this region will be very profitable for us long term.

I want to move to the Merchant Services segment. We are growing this segment by developing some great new products and services to meet the needs of acquirers and the merchants they serve. Our growth strategy is based on organic revenue growth and a targeted M&A approach, which includes select portfolio acquisitions, joint venture opportunities, and some smaller tuck-in acquisitions that seem to make sense to us.

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