Boosted by its $1.05 billion acquisition of the big independent sales organization and merchant processor Cayan LLC in January, payment processor Total System Services Inc. (TSYS) saw its merchant revenues rise nearly 22% in the first quarter.
TSYS’s Merchant Solutions segment posted net revenues of $317.4 million, a 21.8% increase from $260.6 million in 2017’s first quarter, according to financial results issued by Columbus, Ga.-based TSYS Tuesday. About 10% of the increase came from organic growth in TSYS’s non-Cayan merchant portfolio, according to chief financial officer Paul M. Todd.
What’s more, integrated services drove much of the non-Cayan growth, Todd told stock analysts on a conference call. Integrated services include payment processing sold to merchants along with various business-management software applications and currently are one of the fastest-growing segments in merchant acquiring.
“So the growth there, primarily driven by integrated growth, in that kind of pre-Cayan business was extremely impressive, growing faster than the industry, and it’s both kind of same-client growth as well as overall share gain because we’re growing at faster than the industry,” Todd said, according to a Thomson Reuters StreetEvents call transcript. “So that’s obviously a high point. And then Cayan grew right in line with our expectations, at much faster than industry growth rates.”
Merchant Solutions processed 1.34 billion point-of-sale transactions in the quarter, up 18.8% from a year earlier. Sales volume jumped 28% to $37.3 billion. Net revenue per transaction grew 2.6% to 23.7 cents from last year’s 23.1 cents.
TSYS chief executive M. Troy Woods said on the call that Henry Helgeson, Cayan’s co-founder and chief executive “will take on an expanded role for the merchant business to help bring more innovative products to our broad customer base and accelerate our integrated-solutions growth.” Helgeson also is in charge of national accounts.
TSYS indicated Helgeson would stay on after the acquisition, though it didn’t publicly delineate his duties when it announced the pending deal in December. His title became president of Cayan, reporting to Merchant Solutions segment president Philip C. McHugh, when the acquisition closed. His new title is president, Integrated Solutions, for TSYS, a spokesperson says. He continues to report to McHugh.
Issuer Solutions, which provides card-processing services to issuers in the U.S. and other countries, saw its revenues grow 9.4% (6.7% on a constant-currency basis), to $423.6 million. Total accounts on filed increased 6.5% to 811.3 million.
Prepaid card services provider Netspend, TSYS’s third major segment, posted revenues of $210.5 million, up 6.6%. TSYS said Netspend’s revenues exceeded its expectations in light of Netspend’s loss of its distribution relationship with Intuit Inc.’s TurboTax tax-return software unit.
Gross dollar volume on NetSpend cards grew only 0.9% year-over-year to $9.7 billion, although volume jumped $2.1 billion from $7.6 billion in 2017’s fourth quarter. NetSpend recently struck deals with Major League Baseball and renewed its distribution agreement with PayPal Holdings Inc.
In all, TSYS posted total revenues of $987.2 million, down 16.7% from a year earlier, primarily because of an accounting change for how companies report interchange. Net revenues rose 12.3% to $935.5 million, and net income jumped 34% to $141.8 million.