NetSpend 2014 Annual Report Download - page 15

Download and view the complete annual report

Please find page 15 of the 2014 NetSpend annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 95

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95

Company’s North America Services segment provides these services to clients in the United States, Canada,
Mexico and the Caribbean. The Company’s International Services segment provides services to clients in Europe,
India, Middle East, Africa, Asia Pacific and Brazil. The Company’s Merchant Services segment provides merchant
services to merchant acquirers and merchants in the United States. The Company’s NetSpend segment provides
GPR prepaid debit and payroll cards and alternative financial service solutions to the underbanked and other
consumers in the United States.
TSYS acquires other companies as part of its strategy for growth. In 2014, TSYS acquired an additional 15%
equity interest in Central Payment Co., LLC (CPAY) from CPC Holding Company, LLC, a California limited liability
company. This purchase increased TSYS’ ownership of CPAY to 75%.
The following table sets forth each segment’s revenues as a percentage of the Company’s total revenues:
Years Ended December 31,
2014 2013 2012
NorthAmericaServices..................................................... 45% 48% 53%
Merchant Services ........................................................ 21 26 28
NetSpend ............................................................... 19 10 —
International Services ...................................................... 15 16 19
Total revenues ........................................................... 100% 100% 100%
Due to the somewhat seasonal nature of the credit card industry, TSYS’ revenues and results of operations have
generally increased in the fourth quarter of each year because of increased transaction and authorization volumes
during the traditional holiday shopping season. Furthermore, growth or declines in card and merchant portfolios
of existing clients, the conversion of cardholder and merchant accounts of new clients to the Company’s
processing platforms, the receipt of fees for early contract termination and the loss of cardholder and merchant
accounts either through purges or deconversions impact the results of operations from period to period.
Another factor which may affect TSYS’ revenues and results of operations from time to time is consolidation in the
financial services or retail industries either through the sale, by a client, of its business, its card portfolio or a
segment of its accounts to a party which processes cardholder or merchant accounts internally or uses another
third-party processor. A change in the economic environment in the retail sector, or a change in the mix of
payments between cash and cards could favorably or unfavorably impact TSYS’ financial position, results of
operations and cash flows in the future.
TSYS’ reported financial results will also be impacted by significant shifts in currency conversion rates. TSYS does
not view foreign currency as an economic event for the Company but as a financial reporting issue. Because
changes in foreign currency exchange rates distort the operating growth rates, TSYS discloses the impact of
foreign currency translation on its financial performance.
A significant amount of the Company’s revenues are derived from long-term contracts with large clients.
Processing contracts with large clients, representing a significant portion of the Company’s total revenues,
generally provide for discounts on certain services based on the size and activity of clients’ portfolios. Therefore,
revenues and the related margins are influenced by the client mix relative to the size of client portfolios, as well as
the number and activity of individual cardholder or merchant accounts processed for each client. Consolidation
among financial institutions has resulted in an increasingly concentrated client base, which results in a change in
client mix toward larger clients.
Regulation
Government regulation affects key areas of TSYS’ business, in the U.S. as well as internationally. TSYS, along with
the rest of the financial services industry, continues to experience increased legislative and regulatory scrutiny,
including the enactment of additional legislative and regulatory initiatives such as the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Financial Reform Act). This legislation, which provides for sweeping
12