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Executives

Philip Tomlinson - Chairman, Chief Executive Officer and Member of Executive Committee

James Lipham - Chief Financial Officer and Senior Executive Vice President

Shawn Roberts - Director of Investor Relations

Analysts

James Friedman - Susquehanna Financial Group, LLLP

Brett Huff - Stephens Inc.

Adam Frisch - Morgan Stanley

Greg Smith - Duncan-Williams, Inc.

Thomas McCrohan - Janney Montgomery Scott LLC

Bryan Keane - Crédit Suisse AG

Lawrence Berlin - First Analysis Securities Corporation

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

Glenn Greene - Oppenheimer & Co. Inc.

Total System Services (TSS) Q1 2011 Earnings Call April 26, 2011 5:00 PM ET

Operator

Good afternoon. My name is Jeff, and I will be your conference operator today. At this time, I would like to welcome everyone to the TSYS First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, October 25(sic)[April 26], 2011. Thank you. I would now like introduce Mr. Shawn Roberts, Director of Investor Relations. Please go ahead, sir.

Shawn Roberts

Thank you, Jeff, and welcome, everyone. On the call today, our Chairman and CEO, Phil Tomlinson, will provide highlights from the first quarter of 2011, and then turn it over to Jim Lipham, our CFO, who will review our financials. After that, we'll open it up for Q&A.

I'd like to now call your attention to the fact that we'll be making forward-looking statements about the future operating results of TSYS. These forward-looking statements involve risks and uncertainties. Factors that could cause TSYS' actual results to differ materially from the forward-looking statements are set forth in TSYS' reports filed with the SEC.

At this time, I'd like to introduce TSYS CEO, Phil Tomlinson.

Philip Tomlinson

Thank you, Shawn, and good afternoon, everyone. As I'm sure you've seen by now, we feel like we're off to a good start in 2011. We reported basic EPS, or earnings per share from continuing operations of $0.25, right in line, we think, with the consensus estimates. We have also deployed $205 million of our capital in the first quarter as part of our continuing efforts to increase shareholder value and grow this company.

We completed the purchase of the remaining 49% of the First National Bank of Omaha acquiring operation, which we have now rebranded TSYS Merchant Solutions, and we continue in our stock repurchase program, and Jimmy will talk about these in detail in just a few minutes.

I think it's important to note that the key metrics that we monitor in the case that our business is improving: Organic growth -- organic revenue, merchant volume, account on file and total cardholder transaction growth, all indicate the business is getting healthier.

And I wanted to go through the 3 segments that we report. First, the North America Services segment. The strong growth in the increased market share in Canada has prompted us to open a call center operation in Sudbury, Ontario to support a lot of growing client interest in outsourcing call center and back-office functions. We'll host a ribbon cutting in early May, at our new Sudbury facility.

During the quarter, we signed BBVA Compass for a referral program for its correspondent banks, utilizing our turnkey credit card program developed by the program solutions team that we've talked about the last couple of quarters on this call.

In the International Services segment, we're in the middle of a conversion process, with BNS card services for issuing and acquiring in Germany, and for issuing for Swisscard in Switzerland.

During the quarter, U.S. Bank also launched a European Corporate Card pilot with us, and we continue to see growth in our Licensing business internationally with the PRIME software.

As you know, we have offices in Japan that service Prepaid and Credit Card Processing businesses. And the addition of 2 new issuer processing clients contributed growth to our efforts in Japan. We also operate and are a majority owner of a merchant services company, GP Net, which has about 120,000 merchants in Japan, or processes for about 120,000 merchants in Japan. Of course, when the massive earthquake and tsunami struck on March 11, our businesses remained intact and operational, and we continue to see good revenue growth in Japan from GP Net.

As usual, the TSYS family came together to support the disaster efforts there. We have regular conversations with our team in Japan, who continue to report that food supplies and power remain a concern, as they work to recover from this terrible natural disaster.

I want to talk just a second about Brazil. We are also finishing up Phase 3 of our conversion of the Carrefour accounts in Brazil. And as you probably have read in late April, Itaú Unobanco, the large Brazilian bank, purchased a 49% interest in the Carrefour Consumer Card business. And obviously, we've been in close contact with the Carrefour executives and look forward to expanding our relationship with Carrefour. And I think it also gives us an opportunity to build a relationship with the Itaú Unobanco management. We strongly believe, we still believe in the Brazilian market, and the future of this region will be very profitable for us long term.

I want to move to the Merchant segment --to the Merchant Services segment. We are growing this segment by developing some great new products and services to meet the needs of acquirers and the merchants they serve. Our growth strategy is based on organic revenue growth and a targeted M&A approach, which includes select portfolio acquisitions, joint venture opportunities, and some smaller tuck-in acquisitions that seem to make sense to us.

Today, we serve a mix of merchants well over 300,000 strong. We have an active direct sales force, agent-bank relationship management, plus relationships with many independent sales organizations, or ISOs, which are all focused on adding new merchants. We're committed to growing new and existing merchant channels, new vertical markets and further diversifying our revenue mix.

Now with that, I want to turn it over to Jim Lipham, our CFO, who will review the first quarter 2011 financials. Jimmy?

James Lipham

Thank you, Phil. I'll call everybody's attention to the first Slide 6, and as you can see on this slide, we put a column on the right over there for Excluding Termination Fees, so you get an idea. And then we'll talk a lot about that just to show you the numbers and the percentage growth of what our normal operations were without the deconversion fee. This is the next to the that last quarter where we have deconversion fees. We will have another one this next quarter, but it will be very small compared to what we have this quarter.

But looking to the left, just kind of straight over total revenues were up 3.9%, and revenues for reimbursables are showing a 5.8% increase.

Basically, what happened here is we had the termination fee that we had to overcome of about $23 million year-over-year, and then we had lost revenues from deconverted clients, about $9.6 million, a total of about $32 million. This lost revenue was offset by the addition of TMS, Total Merchant Services, the FNMS acquisition of $32 million in the first quarter. So both of those kind of offset. We had good organic growth of about 3.9% for the quarter. We had international operations. We had currency pickup of $3.4 million. We had some good growth from projects from existing customers. Bill mentioned growth in Japan and also revenues in Brazil. So we had a pretty good -- and I'll talk some more about that segment in a minute, but we had some good growth on the international front.

Operating income, as you can see, was down 8.4%. The big item there, as you know, the expenses went up $22 million, but FNMS represented the total increase that we had there. So that's contributed to that.

Our margin, it was 17% on total revenues, and 20.1% on revenues before reimbursables, and without the termination fee, both of these were up about 250 basis points year-over-year. So some good numbers outside of the termination fee.

Net income was down 5.7%, and then you could see it would have been up 32.7% without the termination fee.

EBITDA for the quarter was $114 million. It was up 20% over 2010 when you took out the termination fee. And our margins this quarter were 31.5% on revenues before reimbursables, so a pretty good EBITDA growth there also.

Then I'm going to split to the next slide, which gives a little more color and detail on the revenues before reimbursable growth. We mentioned internal growth of close to 4%. New clients added 3% also, and then the acquisition of FNMS brought us 9% growth in revenues quarter-over-quarter, and then currency is up 1%. So on a total, you've got about a 17% growth there, and then it was offset by the lost business and the one-time termination fee of 11% bringing that down to net growth of 6%.

It shows you again what a difference in the year makes when you could think about last year, we were a year ago, talking about a decrease in revenues for the first quarter of 2010 over '09 of .3%. So good turnaround from where we were last year at this time.

On the next Slide 8, we are looking at the account on file portfolios, some very good numbers here, and the fact that we're up, have grown 10%, on account on file year-over-year, even though it's a lot of the growth is in Stored Value, 64% of that growth, as a matter of fact, is in Stored Value, which a lot of those cards right now in the inventory stage, and they will become active, but they're not that active at this point. A year ago, there again we were showing a 17% decrease on account on file growth year-over-year, so good turnaround from year-over-year.

When you look to the right on the Sequential for the quarter from December of '10, you see a 4% growth there, and starting to see some real growth in our Consumer business, being up 3.9 million accounts, or roughly 28% growth for the quarter, from where we were at the end of December. So that's very positive, and we continue to also, see good growth on our Commercial business.

Next slide, we get into the first one of segments, which is North America, and you can see the key drivers there on deconversion fees. And my comments are going to be reflecting the current year's numbers to prior year, without the termination fee, and that's just more comparative of what's really going on in North America.

If you look at total revenues at $230 million, and revenues for reimbursables, $194 million. The revenue numbers are flat. The revenues before reimbursables are up about 1.3%. This is all because of new business and the organic revenue growth of the 4%. Had to offset the deconverted clients we have, and like I'd mentioned to you a while ago, it's about $9.6 million of revenue.

The segment operating income, $55.2 million, is up 18.4%. And our margins were $28.4 million on revenues before reimbursables and $323.9 million of revenues, and both of these are up about 400 basis points year-over-year as you restate the 2010 for the termination fee.

Then you'll see our total cardholder transactions, good growth there, totaled $1.6 billion, up 11.6%. And then our same client transactions were up 10% at $1.573 billion. So some very good numbers there as far as the metrics we look at, good growth in those accounts and transactions.

Next slide is on international. We did have a favorable currency of $3.4 million, but the revenues on international, they were up 14.3%, and then the revenues for reimbursables were up about 14.6%. The segment operating income, however, is down 2.3%, compared to 2010, and it's mainly again because of the increased costs that we've been incurring as we have expanded in the international front.

The margins compared to revenues and revenues before reimbursables were 12.2% to 12.6%, respectively. And they're basically 2 percentage points lower than what they were in January of last year, the first quarter of last year.

And these margins are higher than what we ended the year at. And the fact, we were in the single digits at the year end numbers, and we anticipate that to continue in single digits as we go forward, as we've seen in this first quarter, a lot one-off items in both revenues and expenses that have pushed this margin up to the 12% range.

So looking -- going forward through the remainder of the year, we expect it to go back down into the high-single digits until we get further into the fourth quarter, probably in the first quarter of 2012, as we've finish out these conversions that we have underway.

Total transactions, good growth there, 15.9%, and then the same client transactions were up 7.5%. So pretty good numbers on the international front, and just caution on the margin as we go forward, continues to be depressed outside of these one-off items.

The next slide, we have the Merchant segment. Obviously, very good numbers there in light of pulling in the TMS revenues, $32.6 million, which were not there in January of last year. We see here revenues of $86.5 million, excluding reimbursables, and approximately 66% of that is transaction-driven, predominately from our TSYS Acquiring, which was our point of sale business, and 33% of that is revenue numbers from the direct merchant ownership, which we've picked up with the acquisition of TMS.

On the POS transaction, volume has declined. As you can see up here, they're down 8.3%, and this is direct result of some lost business, with the biggest 1 being a merchant processing client that we had lost a large merchant in the prior year, and had a lot of POS transactions not there. If you took the Bank of America deal out, as we have talked about them starting to deconvert and just looked at the rest of our clients, you would see an organic growth there on POS transactions of 1.3%. So small growth, but still positive growh there, and not down 8.3%. But the direct merchant ownership I mentioned that 33% of the revenue numbers are driven by dollar volume, and for TMS their dollar volumes are, for the first quarter of this year, about 4.5% higher than they were last year during the first quarter. So good metrics for that piece of the business. So operating income is increased 50.8% and margins were 23.3% and 31.1% as you look at it based on revenues, and revenues before reimbursables.

Both of these margins, again are up -- the revenue margin is up 281 basis points over 2010. And I might add that the organic growth piece of this Merchant segment is 1.6%. So some good numbers there, but we have got to see -- continue to see good improvements in the economy with the merchants and the ability to grow that small merchant portfolio.

On the next slide, is Corporate Administration, not much there, there. That's obviously, all the expenses for the Corporate Admin, and it's pretty flat year-over-year.

And the last slide I have here is on cash flow, the trailing 12 months. As you can see, we continue to generate cash with EBITDA at $468 million. Cash from operating activities ended $358 million. We mentioned last quarter about the free cash flow drop that we had and the fact that we had a $25 million payment on an incentive and roughly a $39 million software payment in the fourth quarter, which were unusual and drove the cash down. Free cash flow for the quarter, however, was $83.3 million. So we'll be picking back up that number as we go forward, and get away from the effects of the fourth quarter.

Cash at the end of the quarter, as you could see in the press release, $252 million. And Phil mentioned, the decrease was mainly due to the purchase of the remaining 49% interest on the FNMS business. We paid $169.6 million there, and we have also spent about $35.7 million in share repurchases during the quarter, which leaves us roughly about 4.9 million shares left on our plan as we go forward. But we plan, as we go forward, to continue to look at acquisitions and to pull in our capital. And outside of that, as we grow it and don't have acquisitions, we will look at share repurchases.

And with that, Phil, I'll turn it back over to you.

Philip Tomlinson

Thanks, Jimmy, and Jeff, if you're there, we'll open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Greg Smith with Duncan-Williams.

Greg Smith - Duncan-Williams, Inc.

Can you lay out what exactly is going on with Bank of America at this point? And sort of what the revenue exposure is? And what the earnings impact of that could be as it rolls off?

James Lipham

I mean I could tell you that they have decided to any type of deconversions they do, they're going to take that back-end and the front-end business at the same time, which is going to slow it down even more than we thought. And you might have a risk of about 10% drop in their revenues per year.

Greg Smith - Duncan-Williams, Inc.

Okay. 10% of the total Bank of America revenues?

Philip Tomlinson

Yes, for the remaining merchant.

James Lipham

Merchant.

Greg Smith - Duncan-Williams, Inc.

Yes. And what's the other revenues with Bank of America? You have the merchant's side, but then there's some additional revenues.

Philip Tomlinson

They're a very large commercial card client.

Greg Smith - Duncan-Williams, Inc.

Okay, and that business at this point is not at any risk?

Philip Tomlinson

No, we don't think so.

Greg Smith - Duncan-Williams, Inc.

Okay, great. And then just along those lines, you still got this sort of the JPMorgan Chase issue. I know it's a few years out, but any possibility you can size what that revenue is the amount of the license fee that they pay?

Philip Tomlinson

Greg, I don't think there is at this point, I mean it's not -- I don't think it's anything substantial enough that it would bring us to our knees or anything. I think it's something that we can handle when that time comes. So it's been slowing down year-over-year.

James Lipham

Yes.

Philip Tomlinson

Back then, it has slowed down over the years.

Greg Smith - Duncan-Williams, Inc.

So the actual pace, it's not just a fixed payment, every quarter same amount, it winds down?

Philip Tomlinson

No. Part of it is built on time and then built on size of the portfolio. I mean it's designed to be smaller towards the end of the contract, and we think we can handle that.

Greg Smith - Duncan-Williams, Inc.

Okay. That's helpful. And then I apologize if you talked about this, but any comments about sort of the pipeline? I know international probably very robust, but in the U.S. specifically, how does the pipeline look for any new opportunities?

Philip Tomlinson

Well, I think our -- it's pretty interesting. Our prospects have really cranked up. I think we've got 14 million accounts or so that have signed during the process of being converted. But we are, I think I said this last time, for the first time in a while, we're starting to see people in the U.S. interested -- and when I say U.S., I really mean North America, which is a very positive thing. International is very active. We have a lot going on. We feel very good about our ability to sign new business.

Greg Smith - Duncan-Williams, Inc.

Okay, great. Thanks a lot.

Philip Tomlinson

Thank you.

Operator

And our next question is from the line of Bryan Keane with Crédit Suisse.

Bryan Keane - Crédit Suisse AG

I just wanted to ask about the North American revenues. I guess if you take out the term fees, or the $23 million in term fee or so, revenue was about flat, but transaction growth still grew up pretty nicely, up 12%. Just trying to figure out that delta there, and going forward, what should we expect in kind of North America for the revenues?

James Lipham

I think going forward, you going to continue to see them flat. I think the growth in the transactions obviously comes from some transaction mix that's inactive. I mean we talked about the Stored Value business that we had there but really, what we have is a lot of transactions that pertain to bundled accounts, what we call bundled pricing. And so you'll have probably 35% to 40% of the transaction growth within that group, which don't get any extra revenues for. So it comes a little less than the mix of what's going on, and where your growth comes from.

Bryan Keane - Crédit Suisse AG

Okay. And then on the International segment, I know you talked about margins will probably drop some there, but should we still see that type of revenue growth that we saw year-over-year, or something in that level?

James Lipham

It'll start dropping a little bit as you anniversary the initial conversion dates on those customers, but...

Philip Tomlinson

We do have several clients, good-sized clients that should be converted in the second half of the year.

James Lipham

But the mechanics for the first quarter with Japan and all, those will anniversary in different times during the year, but Phil mentioned 2 customers that converted. I think one of them was in the second quarter of last year.

Bryan Keane - Crédit Suisse AG

Okay. And then just last question for me on the operating margins, the first quarter kind of came in a little bit above than we were expecting. But just going forward, how should the margins trend kind of sequentially between 2, 3 and 4 quarters? Fourth quarter?

Philip Tomlinson

I really don't give guidance there on the quarters, but we've got our guidance out there. And I see -- basically where we are. I think you for the first quarter, we had a lot of expense control from when we looked at year-over-year stuff. When you look at what created the margin in the first quarter, it's pretty much indicative of our guidance.

Bryan Keane - Crédit Suisse AG

Right. The second half of the year, again, should be stronger, I assume than the first, because you won't have to at least jump through those term fees, but maybe you spent a little more on the expense side?

Philip Tomlinson

That's right.

Bryan Keane - Crédit Suisse AG

Okay. Thanks, a lot. Congratulations.

Philip Tomlinson

Thank you, Bryan.

Operator

And our next question is from the line of Adam Frisch with Morgan Stanley.

Adam Frisch - Morgan Stanley

On the last call, I think you said you had about 14 conversions that were lined up. Just wanted to get an update there. Is this still the right number? I'm wondering if maybe the timing on some of these can offset the falloff in revs as the terminations/ deconversion fees ramp down and end after 2Q?

Philip Tomlinson

I mean, I think that you're going to have a little bit of ramp down in the second quarter because your termination fees are going to be less than half of at they were in this quarter. As we get through deconversion process, I know we have 3 or 4 still in progress in Europe and some to start. And I think all of those are going to contribute to a little more revenue growth to offset what you saw in the first quarter with the term fees. But I think as far as being in the range of our guidance on revenue growth, you shouldn't see any fluctuations quite bigger than that.

Adam Frisch - Morgan Stanley

Okay. Sounds good. And then just in terms of this quarter, excluding reimbursables, you came in at the top end of the range in the first quarter, but didn't change guidance. Do you guys not see enough yet? I know, Phil, you talked about seeing a bunch of metrics that we're starting to look a little bit healthier. Can you just...

Philip Tomlinson

We don't think 3 months makes a trend. We looked at that pretty hard, and there's still a lot of issues going on out there with consumer, when you start thinking about price of food and gasoline and so many other things. And so we're hopeful that a trend is starting. And if it is, that's really good, and we're excited about it. But I don't think we're ready to declare that we want to raise guidance right now.

Adam Frisch - Morgan Stanley

Okay. No one's going to fault you for being conservative after what you had said so...

Philip Tomlinson

Thank you. We appreciate it[indiscernible].

Adam Frisch - Morgan Stanley

And then just one last question on Merchant Acquiring, being in the Direct Acquiring business now, this is a bigger initiative for you guys. Any chance of a conflict, or any kind of discussions you've had with the acquirers you already processed for? And then 2, when you're looking at acquiring assets, are they all in the direct model? Or would you consider ISO-based, or indirect franchises, I guess, that you're looking at as well?

Philip Tomlinson

Well, I don't think that we -- we were sort of the last holdout on the -- not competing on the Direct Acquiring business. And I think that bridge has been crossed a long time ago, and we have not had any real pushback that I'm aware of from any of our clients. I think everybody understands that. So we feel good about where we're at there. No, I think and on the M&A side, I think we're going to look at most anything that we think is high quality and has some growth potential, whether it's a good-sized ISO, or a tuck-in deal. We would like to find something substantial, I will tell you that. And we're in the market for that, and we've been in the market for that. And I do think finally, as I said earlier, things appear to be improving, and so we believe something will show up here that might make sense for us, hopefully, this year.

Adam Frisch - Morgan Stanley

Sounds good. Nice job, guys. I appreciate it.

Philip Tomlinson

Thank you.

Operator

And our next question is from the line of Sanjay Sakhrani with KBW.

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

This is Steven Kwok filling in for Sanjay. Thanks for taking my question. We just had a quick question with regards to the operating margin. I know you guys don't give quarterly guidance, but I was wondering like over the longer to medium term, where you guys try to get the operating margin towards?

James Lipham

I think where we are today with the getting into the Direct Acquiring business, and where the margins are there, I'm looking at the 20% to 22% range on a consolidated basis.

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

And how long do you think it could take to get there? Is it over like 2-, 3-year period or...

James Lipham

Now we're there pretty much, I mean, on a consolidated basis, we are 20.1% marginal revenues for the quarter.

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

But to get to the higher end of the range, like you mentioned 20%...

James Lipham

We should be in the 20%, 22% range, as we get through year end.

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

Okay. And then in thinking about capital management, could you remind us how much capital you have? And are there opportunities that you see that's out there?

James Lipham

Well, the amount of capital we have, you see the cash on hand at the end of the first quarter, $252 million. We have a $250 million line of credit, so to speak out there, that we could draw down. We feel like because we have very little leverage on our balance sheet, that we could grow it a bit 2.5x our equity, and we don't see a problem with raising capital at this point. The market seemed to be very favorable.

Philip Tomlinson

We spent a lot of time here recently, talking to different bankers about how you would raise capital if you had a need to, and if we feel it's out there and we think our balance sheet is strong enough to get it fairly quickly.

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

Great. Thanks for taking my questions.

Philip Tomlinson

You bet.

Operator

Our next question comes from the line of Tom McCrohan with Janney Capital Markets.

Thomas McCrohan - Janney Montgomery Scott LLC

Just looking at Page 8 of the slide deck that details changes in accounts on file and specifically, the $21-or-so million year-over-year growth in Stored Value. Well that's really great growth. I just wanted to confirm that last year there were some prepaid car purchase, I think that have adversely impacted the March 2010 account on filed number for prepaid. So I was wondering if there's any way for -- if you guys had it available to give us kind of a normalized year-over-year number for the growth in Stored Value account on file?

James Lipham

I don't have the numbers on what was purged off during the year. But I think -- I'd say that probably contributed some to that 21% growth, but we've seen a lot of growth over the last 2 months of that quarter end, one of our large customers and new programs that they have, and that may have been a little unusual. And I don't know how much it will keep up until we get through this second quarter but...

Philip Tomlinson

I do think that we are trying to find the norm for this Prepaid business. It's a business that has not historically been large. The numbers are now starting to become meaningful, and we've got 2 to 3 really, really large prepaid clients that really drive those numbers.

Thomas McCrohan - Janney Montgomery Scott LLC

And so are you having increased dialogue with some of your bank issuers as they potentially explore issuing prepaid cards, and if you have any thoughts of them getting into that space?

James Lipham

We have had dialogue, and we do think that the banks, as time goes by, frankly, that's the reason we got into the Prepaid business several years ago, was we felt like the bank clients that we service would want to be in that business. That did not work out, particularly over the last 2 or 3 years. But we do think that they will issue more prepaid cards as time goes by. I don't think there's anything large as imminent right now, but we're having lots of conversations on prepaid.

Thomas McCrohan - Janney Montgomery Scott LLC

And I guess my last question, Phil, your thoughts on the regulatory environment, specifically?

Philip Tomlinson

I think it's awful. I mean, if we weren't on a public telephone system here, I'd give you my real thoughts on it. But I mean, it's like it's trying to put us all out of business. This Durbin Amendment is a disaster. There's a lot of issues with Dodd-Frank. We just came off this CARD Act last year, which cost lots of money, not only for us to do it, but it cost our clients millions and millions in revenues. And I was telling our Board the last time we met, I just don't know where this is going to end. I mean, we just need some more relief from all these regulations. Our General Counsel is sitting over here looking at me funny, but I think it's a problem for business, period. And I'm sure it's a problem for you guys in the investment community.

Thomas McCrohan - Janney Montgomery Scott LLC

Do you have any thoughts on the Fed opining and finalizing Durbin on July, and do you think they're going to delay it further?

Philip Tomlinson

I wish I knew. I'm hoping that we can get -- or we can help get 3 or 4 more senators to come up, to get up for a vote against -- to delay this thing for a year or 2 to where people can really understand it. That thing is, in my opinion, was sort of past in the midnight hour, and I don't think anybody really understood what all was included in that Durbin Amendment. And I think as people have finally started to understand it, it's a pretty interesting coalition, that when you read all of the groups, and special interest groups that have out against the Durbin Amendment since people are really starting to understand what's in that bill. And we've said from day 1, it's a problem. It's bad for business. And I think we talked a lot about the law of unintended consequences, and this is a great example of it.

Thomas McCrohan - Janney Montgomery Scott LLC

Thank you.

Operator

And our next question is from the line of Glenn Greene with Oppenheimer.

Glenn Greene - Oppenheimer & Co. Inc.

A few questions. I guess the first 1 is just sort of an update on where we stand with Carrefour, and I know that's been sort of a big issue in terms of the international margins, but when we may get some relief in terms of the margins and really, more importantly, when is the conversion going to be complete?

Philip Tomlinson

I was getting the latest date on that. That will be complete sometime between November and February. And honestly, I can spend an hour telling you the details of it. It's not an issue here. It's not an issue with Carrefour. We're in good shape there. It's an issue with the processor that had that business, and they've just been a little bit slow coming to the table, in my opinion. We think that will happen. It's just been a little longer than we had anticipated, and it represents a good amount of revenue for us. I mean we'd like to do it next week. But it's just something we're both having to work our way through. And there's no easy way to deal with it, other than just to grind it out, and that's exactly what we're doing. Jimmy, you want to talk about those margins again? I mean, we don't expect a miracle in the margins, but certainly, that would help.

James Lipham

It would obviously improve the margins quite a bit. But we're out into future years here for the real margin growth out of Brazil, as we -- as you know, got to get some scale out of that data center with some new business in addition to Carrefour and so...

Glenn Greene - Oppenheimer & Co. Inc.

And my follow-up to that was that the pipeline in Brazil that sort of bring on that second client and get some scale, what are the prospects?

Philip Tomlinson

Well, we've got some prospects, we don't have anybody signed. And I can't wait to announce whenever we do get someone signed. But I think the truth is, you've got a lot of people in Brazil sitting on the sidelines, watching this deal, see if we can perform. I believe that we will. I think Carrefour wanted to be as good a sales group as we've ever had. And a lot of our sales over our history has certainly been done through our clients. There's a lot of activity in Brazil. There's a lot of opportunities in Brazil. But again, this is a -- as I've talked about before, the sales cycle in this business is fairly long.

Glenn Greene - Oppenheimer & Co. Inc.

And then Jim, you had mentioned in the quarter, there were some one-off items in International that helped the margins to get to sort of double digits that weren't necessarily sustainable. What were the sort of the order of magnitude of those one-off items?

James Lipham

Well, I don't have the actual dollar amount of all of them, but it's things like project revenues, it's things like processing charges or [indiscernible] adjustments and this type of thing that came into the quarter.

Glenn Greene - Oppenheimer & Co. Inc.

Okay. And then another question, just for Jim, and it relates to a prior question. Someone had asked about the long-term operating margins, and I guess I was surprised at your answer of 20% to 22%. I sort of look at North America in the high 20s already, and Merchant Services are reading in the 30s, and International, we know is depressed for some of the reasons we just talked about. But I think longer-term, you'd certainly talk about high-teens, if not higher. And you're already obviously in that 20% to 22% range so...

James Lipham

Yes. We are in the 20% to 22% range, but you've got to be -- watch when you're talking about revenues, operating margins. Our revenue before reimbursable operating margins in that 20% that with the revenue margins.

Glenn Greene - Oppenheimer & Co. Inc.

Okay. So what would it be if we could talk revenue before reimbursables?

James Lipham

It would be roughly 24%, 25%.

Glenn Greene - Oppenheimer & Co. Inc.

Okay, a big difference. All right. Thanks for clarifying that. I'm good.

James Lipham

Thank you for clarifying.

Operator

And our next question comes from Brett Huff with Stephens.

Brett Huff - Stephens Inc.

First question is I'm glad you're buying stock back. It sounds like you got more aggressive on that. It sounds like maybe $1 million a month for the last couple of months of that quarter. What's the plan going forward?

Philip Tomlinson

Well, I think you'll see us continue to be active in that. This is 1 of the few times we have an earnings call before our Board Meeting. We've got a Board Meeting next week. We've got our Annual Shareholders' Meeting. But I think you'll see us continue to be in that market. We still have some room in the current stock repurchase program, so we're okay there. But I would hope that long term, you'll see us increase that number.

Brett Huff - Stephens Inc.

Okay. And will that be taken up at the Board Meeting, expanding that authorization?

Philip Tomlinson

I couldn't tell you today.

Brett Huff - Stephens Inc.

Okay. And second question is, I think, Jim, you were talking last quarter about $20 million of free cash a month, is what I recall. First of all, am I remembering that right? And second of all, is that still about right?

James Lipham

That's still about right.

Brett Huff - Stephens Inc.

And then in the down arrow, in whatever the slide is, it's a very helpful slide, that includes price compression. Could you call out price compression a little bit for us? What specifically it was in the quarter, and is that deviating from history?

James Lipham

It is deviating from history because it's smaller. It is about 1% of that number.

Brett Huff - Stephens Inc.

And I know sort of in the darkest days, it was 2-plus, correct?

James Lipham

Correct.

Philip Tomlinson

Right.

Brett Huff - Stephens Inc.

And that's just a function of big deals already being renewed, I'm assuming. Or is there other stuff that's going on there that we should know about?

Philip Tomlinson

It's just basically renewals, and we've got a couple of competitors that I think are a little irrational with the pricing, but that's just part of this business.

Brett Huff - Stephens Inc.

And can you just go through the merchant transactions down again? Jim, I think the way you explained it is there's sort of 2 parts, there's the BAMS part, which we kind of knew about, and then there's another client from whom you processed that loss to large client, is that the right way to think about it?

James Lipham

Well, I think the large merchant we lost was with BAMS.

Brett Huff - Stephens Inc.

Okay, so...

James Lipham

We have had others, I don't if we've ever talked about, which ones they were but they are with TAS and they were sort of direct merchant point-of-sale process indirectly with TAS, and we did lose some point-of-sale traffic there. But the majority of that decrease was with that large merchant.

Brett Huff - Stephens Inc.

And so going forward, on kind of a same store sales, it seems like that should be growing, or I guess if you take away sort of the noise, should it be growing similar to the other transaction growth you guys are seeing in different parts of your business, I mean high single-digits?

Philip Tomlinson

It should be, I think. It will get there.

Brett Huff - Stephens Inc.

And then when did we see that sort of cleaner number, I guess? Or could you opine on that a little bit when we start to see the same-store, if you will, and the actual trends and the total trends, sort of converged?

Philip Tomlinson

You kind of wonder about the amount of growth that was really been attributed to BAMS, and I haven't really looked at that as far as year-over-year in the past, or quarter-over-quarter. And I think as we go forward, the remainder of the merchants that we have in that Point-of-Sale business will have a little tougher time, maybe of growing its rate of a larger organization with a good sales channel to it. So I'd rather not just put some number out there at this point and let's go through another quarter and see if we can really pinpoint what's going on with BAMS.

Brett Huff - Stephens Inc.

Okay. And then last question is, the purges and the sales of some of the portfolio, the cards, that still seems high to me relative to where we are in the cycle. And again, if I recall correctly, there's lots of purges back in the day when the crisis was happening as a way to sort of reduce the payments people were having to make to you, I assume that would taper more quickly. What's the outlook for that?

Philip Tomlinson

I think we had about, I don't know, $16 million or so accounts during the quarter that purged -- since last year in that quarter, but that's just year-over-year. And that's in the consumer space. I don't -- we had the retails that hit us last year pretty much, and I don't see much going forward, maybe about $2 million more as we go out through the year.

Brett Huff - Stephens Inc.

So the next number we should see should be more on the $2 million side, rather than the $18 million side?

Philip Tomlinson

Correct.

Brett Huff - Stephens Inc.

Okay. And then last question, as you're looking at the same store sales, the new account growth, the accounts on file, are the percentages that we're seeing, the 7% and 10% respectively, the right way to think about that going forward for the rest of the year, or will that be a little lumpier?

James Lipham

You'll see -- we have 4% for the whole quarter. So I would think that you're going to see pretty much that same -- it's not going to be much different than that as we go forward.

Brett Huff - Stephens Inc.

Okay. That's what I needed. Thanks for your time.

Philip Tomlinson

Thanks, Brett.

Operator

And our next question is from the line of James Friedman with AIG(sic)[SIG].

James Friedman - Susquehanna Financial Group, LLLP

Just to clarify, I didn't change firms. I'm still at SIG. So I wanted to ask Jimmy that -- could you give us a little bit more detail on the accounts on file, because my recollection is and my memory maybe fading, but this Other category used to be composed into Retail, Debit, Healthcare. So if you could kind of reconstitute that and share what was the strength in the accounts on file in the Other category?

James Lipham

Basically, in the Other category, we had Debit. It's about 5 million accounts. That's what it was last year, that's what it was this year. So it only grew about 300,000 accounts. Healthcare did have a little growth there. They went from about 200,000 accounts, up to 900,000 at the end of March. The Other category, I forget what else what's in there, let's see, I guess...

James Friedman - Susquehanna Financial Group, LLLP

I think Retail?

James Lipham

Yes, the Retail, which is I got it grouped in here with Consumer. But it's not on the schedule, but it is down there, but it was pretty flat after we went through year-over-year with the growth, I mean the deconversions, the purges that we put in there...

James Friedman - Susquehanna Financial Group, LLLP

So the Stored Value increased about $7 million, is that primarily prepaid?

James Lipham

Yes, it is.

James Friedman - Susquehanna Financial Group, LLLP

Okay, so that continues to be a good category for you?

James Lipham

Good category.

James Friedman - Susquehanna Financial Group, LLLP

Okay. And then last thing is, I just want to get your perspective on mobile. Is that a good or bad thing for TSYS? And if so, why? Do you have an opportunity to be a processor on the mobile side, when and if it comes about?

Philip Tomlinson

I think we do have an opportunity to be a processor of some sort here with mobile. I think it's going to take some time to sort all this out as you have seen 10 announcements a day probably, of different things going on in the mobile business. But I think long term, as your mobile phone is able to affect a transaction, that's got to be good for us because I think it will just create more transactions, and more transactions equals more activity, which equals more statements and authorizations, and all the things that go along with that. So I think long term, it's going to be positive for us. We are working very hard to be a player in that business. It would be a good way for us to be able to clear a lot of transactions. And I think it's like a lot of new products. It's going to have to sort itself out, and there'll be some winners and some losers. And we think that we manage enough transactions to be a net winner in it.

James Friedman - Susquehanna Financial Group, LLLP

Phil, thanks for the clarification. I appreciate it.

Philip Tomlinson

Okay, thanks you.

Operator

And our final question today comes from the line of Larry Berlin with First Analysis.

Lawrence Berlin - First Analysis Securities Corporation

Quick question going back ways, when you're -- I think in Bryan's question, you were talking about Stored Value, and then you went to other transactions, I think you said bubble transactions, or are my ears just getting really bad as I get old?

Philip Tomlinson

I think you're starting to get old, buddy.

Lawrence Berlin - First Analysis Securities Corporation

I think I am, too, but it's the weather here in Chicago. But you talked about other transactions, some of which you said you get paid for -- extra revenue for I thought I heard and some of which you'd don't. And that was in talking about the mixed transactions in North America?

Philip Tomlinson

What Jimmy was talking about is, we have a couple of issuers that we -- it was more than a couple, I think he said 30% of our Authorization business, instead of charging by the transaction, it's more of a bundled price. In other words, you pay x and you get an authorization, and you get your transaction posted. And it's more of something that we did to be able to compete with some of our competitors around the world. So there's not an absolute direct correlation with transaction growth, equals x pennies of revenue growth. So there is -- part of that business is bundled, and you did say 30%, 35%, right?

James Lipham

Yes.

Philip Tomlinson

And so does that cleared up any for you?

Lawrence Berlin - First Analysis Securities Corporation

Yes, it does. Bundled, as it bubbles. I was at least close.

Philip Tomlinson

Well, it started with the b, so you've got part of it right.

Lawrence Berlin - First Analysis Securities Corporation

Yes, exactly. But that does cleared it up a little bit, and that does explain to me why there isn't a correlation. I appreciate it, gentlemen.

Philip Tomlinson

Thank you.

Lawrence Berlin - First Analysis Securities Corporation

Thank you.

Operator

And we have no further questions at this time, sir. Do you have any closing remarks?

Philip Tomlinson

I do. One is, I want to thank you for being on the phone with us today. And I'm sitting here thinking what a difference a year makes. Accounts on file growth is up 10% this quarter versus down 17% in the first quarter of 2010. Transactions are growing again. We have become a pretty good-sized acquirer, as we've been telling you we wanted to do. We think we'll be a lot larger as time goes by.

I think it's encouraging that our clients are engaging in new products and projects, and beginning to focus on growing portfolios again. I hope all of you are receiving credit card solicitations in the mail. I am. I think that's all good news, long term for TSYS.

Now I don't think anything's a slam dunk any more. I mean no doubt, our economy and the government have serious challenges and issues to work through, but we do believe that better things are ahead for our industry in TSYS. So we're feeling better. The numbers are starting to bear it out, and so stay tuned. And we think we have more good news to come as time goes by.

We appreciate your continued interest in TSYS, and if you have any additional questions, feel free to call Shawn in Investor Relations. I think all of you have got his number. And he is available 24 by 7.

Thank you for being with us today, and we hope to talk to you soon. Good night.

Operator

And this does conclude today's conference call. Thank you for your participation. At this time, you may now disconnect.

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