NetSpend 2012 Annual Report Download - page 5

250,000 merchants to instantly self-enroll online, and offer
simplified pricing and the ability to accept a payment from their
mobile or smart devices with secure processing and encryption.
In July 2012, we announced a new long-term agreement with
Bank of America
®
Corp. to begin processing for its U.S. consumer
credit card portfolio and continue providing processing for its
commercial card portfolio. This type of event debunks the theory
that I’ve heard over the years, which is that the largest issuers feel
they must process in-house. Personally, I believe that TSYS clients
find themselves in an advantageous position, not only technically,
but also in terms of customer service, product development and
compliance when compared with their in-house competitors.
Additionally, in August, we announced the formation of a
60-percent-owned joint venture with Central Payment
®
Co., LLC,
one of the fastest-growing private companies in the United States.*
Central Payment, based in San Rafael, Calif., has more than 800
independent sales agents, supporting some 45,000 merchants in
the restaurant, personal services and retail sectors. This joint venture
will help move us closer to our goal of becoming a top-10 global
acquirer in terms of revenues and profits.
2012 PERFORMANCE
We feel that it’s important to have clear performance standards.
Without them, goals become moving targets and bull’s-eyes
can be painted wherever the arrow lands. The Board of Directors
and I measure our financial performance by looking at revenue
growth and operational performance of our businesses and the
individuals that run them.
Overall, our company’s progress in 2012 was very good, as we
met revenue and earnings-per-share (EPS) expectations, and had
exceptionally strong performance for the year. We had double-
digit operating income growth of 10.9 percent year over year. Our
basic earnings per share was $1.30, an increase of 13.1 percent
year over year. Total revenues were $1.9 billion, up 3.4 percent.
Once we convert Bank of America, which we expect to occur
in 2014, and continue our worldwide growth, we’ll be close to
our goal of being the largest third-party processor of Visa and
MasterCard credit cards. We as a leadership team are confident
that we’re headed in the right direction.
We also saw good increases in transactions in 2012. Transactions
from our issuer-processing business were up 13.1 percent over
last year, and point-of-sale (POS) transactions from our merchant-
processing business were up 10.7 percent, excluding Bank of
America Merchant Services. Same-client transactions were up 12.2
percent in our North America segment and 11.0 percent for Interna-
tional. In our direct merchant business, our sales volume increased
15.6 percent year over year. Part of that increase can be attributed
to our new Central Payment joint venture and a full year of reporting
from our 2011 acquisition of TermNet Merchant Services.
A REVIEW OF OUR SEGMENTS
Let’s examine the performance of our three reporting segments:
North America, International and Merchant Services. I’d like to take a
moment to share the segments’ highlights, along with the strengths
and challenges unique to each.
NORTH AMERICA SERVICES: In this segment, we were
buoyed by our long-term contracts and the recurring revenue they
provide. Our revenue from this segment was $965.4 million, an
increase of 1.1 percent year over year. The North America seg-
ment represents approximately 51 percent of TSYS’ consolidated
revenue. We gained traction with community banks, regional banks
and credit unions by packaging TS2
®
— one of our core processing
platforms
— with risk, marketing and consulting services, tuning into
the individual needs for this market sector. This package of services
harnesses the powerful financial technology used by many of the
largest banks, giving smaller institutions the power to compete
successfully. Regional banks are re-entering the business in an
aggressive way, buying back portfolios and re-establishing them-
selves in the credit card market. We think this bodes well for TSYS.
As growth in mobile wallets becomes more mainstream, we will
continue pursuing opportunities with mobile wallet providers to
deliver our clients’ customers a safe, secure payment experience.
To further enhance the customers’ experience, we began offering
transaction-based marketing funded by participating merchants that
target the individual’s spend behavior. Traditionally, our business
was all about completing the transaction, but these days, real value
also lies in all that happens before, during and after it.
INTERNATIONAL SERVICES: Those of you who follow
our International segment know that we’ve taken a close look at
our margins. It is our goal to increase our international margins
300 to 400 basis points per year (beginning in 2013) until we reach
a margin goal of 18 to 20 percent. Our plan includes expense
reductions, cross-selling opportunities and top-line growth.
During the past year, we made the decision to segregate
supporting services
— such as technology, client support and
operations
— domestically and internationally. We’ve also been
realigning resources to encourage accountability, eliminate
non-performing assets and increase scale where we do business.
* Inc. Magazine’s Top 500 fastest-growing companies
2
TSYS accelerated its growth of processing of accounts, establishing valuable
relationships and becoming a bigger player in the field. (s)
The development and launch of TS takes the company to
new heights and furthered its reputation throughout the
industry as the “gold standard” of processing platforms. ()