TSYS announced the results for the first quarter with revenues of $429.6 million, and a 13.7% increase in net income over the same period in 2006.
“We are extremely proud of our financial results for the first quarter and we are excited to announce a significant improvement in our guidance for 2007, which is a direct result of our robust core revenue growth and continued focus on streamlining costs,” said Philip W. Tomlinson, chairman and chief executive officer of TSYS.
“The results for the first quarter compared to last year are impressive, as the results for last year include revenues from two significant clients that deconverted after the first quarter of 2006. Our internal revenue growth in our core processing business was 12.3%, and new business, including acquisitions, added 20% of revenue growth, both of which helped overcome a 27% decline in revenues associated with deconverted portfolios. In addition, our international revenues for the first quarter grew 47% over last year, and we expect continued growth for the remainder of 2007,” said Tomlinson.
“Our team is committed to providing the highest quality of service faster, better, cheaper as well as smarter. The result of their efforts is clearly reflected in our expansion of operating margin, excluding reimbursable items, to 24.9% in the first quarter of 2007 over 21.8% in the same period of 2006. For the full year, we project this margin to be around 25%,” continued Tomlinson.
“Our strong operating results continue to produce internal operating funds, as demonstrated by the $66 million of cash generated from operating activities, which allows us the flexibility to pursue acquisitions and internal expansion,” said Tomlinson.
“On a non-GAAP (generally accepted accounting principles) basis, net income is now expected to increase between 20%-22% in 2007 compared to 2006. On a GAAP basis, TSYS’ 2007 net income is expected to be between 0%-2% as compared to 2006. We believe 2007 will be a year we will truly be proud of,” said Tomlinson.
pre.
Financial Highlights
(dollars in millions, except earnings per share data)
Three Months Ended March 31,
2007 2006 Percent
Change
Revenues Before
Reimbursables $343.6 329.6 4.3%
Total Revenues 429.6 412.3 4.2%
Operating Income 85.7 71.9 19.2%
Net Income 57.3 50.4 13.7%
Basic EPS 0.29 0.26 14.0%
Diluted EPS 0.29 0.26 13.9%
Recent Highlights
* TSYS completed the Capital One conversion in the first quarter of 2007.
* TSYS signed a contract extension with Spira de México, S.A. de C.V., to continue processing its consumer-credit portfolio. Under terms of the agreement, TSYS will continue to provide risk management, portfolio management and reporting tools to Spira.
* TSYS’ PRIME card and merchant management system was chosen by Norway’s largest financial-services group, DnB NOR Bank ASA, to manage the fast growing cards portfolio of its market leading credit card operator, DnB NOR Kort. DnB NOR Kort has plans to further expand its service solutions for DnB NOR Kort customers. With support from TSYS Card Tech, DnB NOR Kort is able to implement SEPA compliant technology with flexible cost effective software and leading edge customer services.
* TSYS renewed merchant-processing service agreements with Sage Payment Solutions and Moneris Solutions covering its U.S. portfolio.
* TSYS signed agreements to provide merchant-processing services for Clearent and National Processing Company, formerly Iron Triangle Payment Systems.
Projected Outlook for 2007
Excluding the one time Bank of America contract termination fee in 2006 of approximately $68.9 million and the acceleration of amortization of Bank of America contract acquisition costs of approximately $6 million, net income is now expected to increase between 20%-22% in 2007 compared to 2006, versus previous guidance of an increase between 14%-17%. Based on GAAP, TSYS’ estimated 2007 net income is now expected to be between 0%-2% as compared to 2006, versus previous guidance of a decline between 5%-3%.
TSYS’ 2007 earnings guidance is based on the following assumptions:
1. Including the Bank of America contract termination fee of approximately $68.9 million in 2006 and an acceleration of amortization of contract acquisition costs of approximately $6 million, estimated total revenues will decline 3%-2% in 2007. Excluding the termination fee and reimbursable items, revenues will increase by 3%-5% over 2006.
2. J.P. Morgan Chase & Co. will discontinue its processing agreement according to the original schedule and will license TSYS’ processing software in the third quarter of 2007.
3. Expense reductions in employment, equipment, leases and other areas that are included in 2007 estimates will be accomplished.
4. TSYS will not incur significant expenses associated with the conversion of new large clients and/or acquisitions, or any significant impairment of goodwill or other intangibles.
Presentation of revenues and net income excluding the Bank of America termination fee, acceleration of amortization of contract acquisition costs and reimbursable items are non-GAAP financial measures. The following table reconciles the range of changes from 2006 to 2007, comparing non-GAAP financial measures to GAAP financial measures.
About TSYS
TSYS is one of the world’s largest payment-services companies, offering a broad range of packaged or outsourced issuing and acquiring technologies that support consumer finance, credit, debit and prepaid services for financial institutions and retail companies worldwide. Based in Columbus, Ga., TSYS (NYSE: TSS) is 81-percent held by Synovus (NYSE: SNV), one of FORTUNE magazine’s “Most Admired Companies” and a member of its “100 Best Companies to Work For” Hall of Fame. For more information, contact [email protected]
For more information on TSYS’ first quarter performance visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
