NetSpend 2015 Annual Report Download - page 16

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internationally. The 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 based primarily in the United States. The
Company’s NetSpend segment provides GPR prepaid debit and payroll cards and alternative financial service
solutions to underbanked and other consumers in the United States.
The following table sets forth each segment’s revenues as a percentage of the Company’s total revenues:
Years Ended December 31,
2015 2014 2013
NorthAmericaServices..................................................... 47% 45% 48%
NetSpend ............................................................... 21 19 10
Merchant Services ........................................................ 20 21 26
International Services ...................................................... 12 15 16
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.
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
financial regulatory reform, may have a significant and negative impact on the Company and its clients, which
could impact TSYS’ earnings through fee reductions, higher costs (both regulatory and implementation) and new
restrictions on operations. The Financial Reform Act may also impact the competitive dynamics of the financial
services industry in the U.S. by more adversely impacting large financial institutions, some of which are TSYS
clients, and by adversely impacting the competitive position of U.S. financial institutions in comparison to foreign
competitors in certain businesses.
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