TSS
$89.57
Total System Services
$.18
.20%
Earnings Details
1st Quarter March 2018
Tuesday, April 24, 2018 4:15:00 PM
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Summary

Total System Services Beats

Total System Services (TSS) reported 1st Quarter March 2018 earnings of $1.17 per share on revenue of $987.2 million. The consensus earnings estimate was $1.01 per share on revenue of $907.1 million. The Earnings Whisper number was $1.03 per share. Revenue fell 16.7% compared to the same quarter a year ago.

The company said it expects 2018 non-GAAP earnings of $4.25 to $4.35 per share on revenue of $3.70 billion to $3.80 billion. The company's previous guidance was earnings of $4.10 to $4.20 per share on revenue of $3.65 billion to $3.75 billion and the current consensus earnings estimate is $4.19 per share on revenue of $3.73 billion for the year ending December 31, 2018.

Total System Services Inc is a payment solutions provider that provides services to financial & nonfinancial institutions. It services are divided into four operating segments North America Services, Merchant Services, International Services & NetSpend.

Results
Reported Earnings
$1.17
Earnings Whisper
$1.03
Consensus Estimate
$1.01
Reported Revenue
$987.2 Mil
Revenue Estimate
$907.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

TSYS Reports First Quarter Earnings and Increases 2018 Outlook

COLUMBUS, Ga.--(BUSINESS WIRE)-- TSYS (NYSE: TSS) today reported results for the first quarter of 2018.

“We are off to an outstanding start to 2018, producing diluted earnings per share growth of over 35% for the quarter. We delivered exceptional performance across all three of our segments and were especially pleased with the completion of our Cayan acquisition during the quarter. These outstanding results and expectations for the remainder of the year provided us with great momentum and have allowed us to increase our financial outlook for 2018,” said M. Troy Woods, chairman, president and chief executive officer of TSYS.

Highlights for the first quarter of 2018 vs. 2017:

  • Total revenues were $987.2 million, a decrease of 16.7%. The decrease is the result of adopting ASC 606.(1)
  • Net revenue (non-GAAP), which excludes reimbursable items, interchange and payment network fees, was $935.5 million, an increase of 12.3%.
  • Net income attributable to TSYS common shareholders was $141.8 million, an increase of 34.0%. Diluted EPS were $0.77, an increase of 35.2%.
  • Adjusted earnings (non-GAAP) were $207.6 million, an increase of 36.3%. Adjusted diluted EPS (non-GAAP) were $1.13, an increase of 37.6%.
  • Adjusted EBITDA (non-GAAP) was $330.9 million, an increase of 15.2%.

(1)

  On January 1, 2018, TSYS adopted Accounting Standards Codification (ASC) 606 “Revenue from Contracts with Customers” using the modified retrospective transition method. The most significant impact of adopting ASC 606 in 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers are presented “net” of the amounts paid to them, as opposed to the “gross” presentation for certain of these fees in 2017.
 
 

Revised 2018 Outlook
TSYS’ revised 2018 guidance is as follows:

 

     

Revised 2018

Financial Outlook

Range(1)(2)

     

 

Percent

Change

(in millions, except per share amounts)            
Revenue:
Total revenues (GAAP) $3,900 to $4,000 (21%) to (19%)
Net revenue (non-GAAP) $3,700 to $3,800 9% to 12%
 
Earnings per share:
Diluted EPS (GAAP) $3.00

to

$3.10 (5%) to (2%)
Adjusted diluted EPS attributable to TSYS common shareholders (non-GAAP)

$4.25

to

$4.35

26%

to

29%

Weighted average diluted shares outstanding 184
 

(2) The estimated impact of the adoption of ASC 606(1) on TSYS’ revised 2018 Outlook is as follows:

 

Total revenues

($1,640)

to

($1,615)

Net revenue

($69)

to

($62)

Diluted EPS

 ($0.04)

to

($0.03)

Adjusted diluted EPS

($0.04)

to

($0.03)

 
 

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, April 24. The conference call can be accessed via live webcast on the “Investor Relations” section of TSYS’ website at investors.tsys.com where an accompanying slide presentation will also be available. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call.

Non-GAAP Measures

This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.

Additional information about non-GAAP financial measures, including, but not limited to, net revenue, adjusted earnings, adjusted EBITDA and adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 11 to 15 in the financial schedules of this release.

About TSYS

TSYS® (NYSE: TSS) is a leading global payments provider, offering seamless, secure and innovative solutions across the payments spectrum — from issuer processing and merchant acquiring to prepaid program management. We succeed because we put people, and their needs, at the heart of every decision. It’s an approach we call ‘People-Centered Payments®’.

Our headquarters are located in Columbus, Ga., U.S.A., with approximately 12,000 team members and local offices across 13 countries. TSYS generated revenue of $4.9 billion in 2017, while processing more than 27.8 billion transactions. We are a member of The Civic 50 and were named one of the 2018 World's Most Ethical Companies by Ethisphere magazine. TSYS is a member of the S&P 500 and routinely posts all important information on its website. For more, visit tsys.com.

Forward-Looking Statements

This press release contains “forward-looking statements” – that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as “expect,” “anticipate,” “intend,” “believe,” “should,” “plan,” “potential,” “will,” “could,” and similar expressions. These forward-looking statements include, among others, statements regarding TSYS’ revised earnings guidance for 2018 total revenues, net revenue, diluted EPS and adjusted diluted EPS, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results or events to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to, the material breach of security of any of TSYS’ systems; TSYS’ ability to integrate acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions, particularly the recently completed Cayan acquisition; the effect of current domestic and worldwide economic conditions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates, and in particular with respect to the current environment, adverse developments with respect to foreign currency exchange rates as a result of the United Kingdom’s decision to leave the European Union (Brexit); expenses incurred associated with the signing of a significant client; conversions of clients’ portfolios do not occur as scheduled; the deconversion of a significant client; changes occur in laws, rules, regulations, credit card association rules, prepaid industry rules or other industry standards affecting TSYS and our clients that may result in costly new compliance burdens on TSYS and our clients and lead to a decrease in the volume and/or number of transactions processed or limit the types and amounts of fees that can be charged to customers, and in particular the CFPB’s new rule regarding prepaid financial products, including its effective date; the potential for our systems and software to contain undetected errors, viruses or defects; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; adverse developments with respect to the payment card industry in general, including a decline in the use of cards as a payment mechanism; and growth rates of TSYS’ existing clients are lower than anticipated or attrition rates of existing clients are higher than anticipated. Additional risks and other factors that could cause actual results or events to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. TSYS disclaims any obligation to update any forward-looking statements as a result of new information, future developments or otherwise except as required by law.

 
 
 
 
 
 
TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
             
Three Months Ended
March 31,
Percent
2018 2017 Change
 
Total revenues $ 987,170 1,184,725 (16.7 )%
 
Cost of services 613,365 861,856 (28.8 )
Selling, general and administrative expenses 185,534   155,686   19.2
Total expenses 798,899   1,017,542   (21.5 )
 
Operating income 188,271 167,183 12.6
 
Nonoperating expenses (37,642 ) (29,903 ) (25.9 )
 

Income before income taxes and equity in income of equity investments

150,629 137,280 9.7
Income tax expense 18,135   43,082   (57.9 )
Income before equity in income of equity investments 132,494 94,198 40.7
Equity in income of equity investments, net of tax 10,608   12,909   (17.8 )
Net income 143,102 107,107 33.6
Net income attributable to noncontrolling interests (1,261 ) (1,239 ) (1.8 )
 
Net income attributable to TSYS common shareholders $ 141,841   105,868   34.0 %
 
Earnings per share (EPS):
Basic EPS $ 0.78   0.58   35.7 %
 
Diluted EPS $ 0.77   0.57   35.2 %
 
Weighted average shares outstanding:
(includes participating securities)
Basic 181,612   183,880  
Diluted 183,298   184,938  
 
Dividends declared per share $ 0.13   0.10   30.0 %
 

Non-GAAP measures:*

Net revenue $ 935,497   832,892   12.3 %
 
Adjusted EBITDA $ 330,922   287,237   15.2 %
 
Adjusted earnings $ 207,586   152,265   36.3 %
 
Adjusted diluted EPS $ 1.13   0.82   37.6 %
 
* See reconciliation of non-GAAP measures.
 
 
 
 
 
   
TSYS
Segment Breakdown
(unaudited)
(in thousands)
                 
Three Months Ended March 31,
Change
2018     2017     $     %
Adjusted operating income by segment:
Issuer Solutions (a) $ 150,991 133,873 17,118 12.8 %
Merchant Solutions (b) 110,014 91,279 18,735 20.5
Netspend (c) 49,353 48,648 705 1.4
Corporate admin and other (38,401 )     (35,574 )     (2,827 ) (7.9 )
Adjusted segment operating income (d) 271,957 238,226 33,731 14.2
Less:
Share-based compensation 6,295 9,047 (2,752 ) (30.4 )
TransFirst and Cayan M&A and integration expenses 14,368 4,868 9,500 nm
Litigation, claims, judgments or settlements - 1,961 (1,961 ) (100.0 )
Acquisition intangible amortization 63,023       55,167       7,856   14.2
Operating income 188,271 167,183 21,088 12.6
Nonoperating expenses (37,642 )     (29,903 )     (7,739 ) (25.9 )

Income before income taxes and equity in income of equity investments

$ 150,629       137,280       13,349   9.7 %
 
Net revenue by segment:
Issuer Solutions (e) $ 423,574 387,255 36,319 9.4 %
Merchant Solutions (f) 317,403 260,561 56,842 21.8
Netspend (g) 210,489       197,465       13,024   6.6
Segment net revenue 951,466 845,281 106,185 12.6
Less: Intersegment revenues 15,969       12,389       3,580   28.9
Net revenue (h) 935,497 832,892 102,605 12.3

Add: reimbursable items, interchange and payment network fees

51,673       351,833       (300,160 ) (85.3 )
Total revenues $ 987,170       1,184,725       (197,555 ) (16.7 )%
 
 
Adjusted segment operating margin on segment net revenue:
Issuer Solutions (a)/(e) 35.6 %     34.6 %
Merchant Solutions (b)/(f) 34.7 %     35.0 %
Netspend (c)/(g) 23.4 %     24.6 %
 
Adjusted segment operating margin on net revenue (d)/(h) 29.1 %     28.6 %
 
nm = not meaningful
 
 
 
 
 
 
TSYS
Segment Breakdown
(unaudited)
(in thousands)
         
Three Months Ended March 31,
Change
2018   2017   $   %
Depreciation and amortization by segment:
Issuer Solutions $ 28,331 36,853 (8,522 ) (23.1 )%
Merchant Solutions 7,825 7,022 803 11.4
Netspend 4,259     4,092     167   4.1
Depreciation and amortization 40,415 47,967 (7,552 ) (15.7 )
Acquisition intangible amortization 63,023 55,167 7,856 14.2
Corporate admin and other 951     1,044     (93 ) (8.9 )
Total depreciation and amortization* $ 104,389     104,178     211   0.2 %
 
*Client incentive/contract asset amortization and contract cost asset amortization are no longer included in depreciation and amortization due to the adoption of ASC 606 on January 1, 2018
 

Segment statistical data:

 

Issuer Solutions

Total transactions (in millions) 5,547.9 4,876.6 671.3 13.8 %
Total Accounts on file (AOF) (in millions) 811.3 762.0 49.3 6.5 %
Total Traditional AOF (in millions) 578.6 532.3 46.3 8.7 %
 

Merchant Solutions

Point-of-sale transactions (in millions) 1,339.6 1,127.7 211.9 18.8 %
Dollar sales volume (in millions) $ 37,266.7 29,120.4 8,146.3 28.0 %
Segment net revenue per transaction $ 0.237 0.231 0.006 2.6 %
 

Netspend

Gross dollar volume (in millions) $ 9,690.0 9,607.2 82.8 0.9 %
Direct deposit 90-day active cards (in thousands) 2,669.9 2,854.0 (184.1 ) (6.4 )%
90-day active cards (in thousands) 5,225.5 5,147.4 78.1 1.5 %
% of 90-day active cards with direct deposit 51.1 % 55.4 %
 
 
 
 
 
 
TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
         
March 31, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 493,207 450,357
Accounts receivable, net 420,124 412,322
Contract assets 40,264 -
Other current assets 224,684 216,565
Total current assets 1,178,279 1,079,244
Goodwill 4,073,511 3,264,071
Software and other intangible assets, net 1,421,144 1,110,861
Property and equipment, net 360,111 325,218
Contract assets - long-term 40,419 -
Contract cost assets - long-term 295,859 285,235
Other long term assets 162,394 267,060
Total assets $ 7,531,717 6,331,689
 
Liabilities
Current liabilities:
Accounts payable $ 66,077 62,310

Current portion of long-term borrowings, capital leases and license agreements

815,564 565,812
Contract liabilities 56,880 52,913
Other current liabilities 279,349 308,057
Total current liabilities 1,217,870 989,092

Long-term borrowings, capital leases and license agreements, excluding current portion

3,326,536 2,628,002
Deferred income tax liabilities 370,869 238,317
Contract liabilities - long-term 21,925 48,526
Other long-term liabilities 73,943 71,070
Total liabilities 5,011,143 3,975,007
Redeemable noncontrolling interest 126,000 115,689
Equity 2,394,574 2,240,993
Total liabilities and equity $ 7,531,717 6,331,689
 
 
 
 
 
 
TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
     
Three Months Ended March 31,
2018 2017
Cash flows from operating activities:
Net income $ 143,102 107,107

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in income of equity investments, net of tax (10,608 ) (12,909 )
Depreciation and amortization 104,389 104,178
Amortization of debt issuance costs 1,035 1,079
Share-based compensation 6,295 9,047
Deferred income tax expense 15,180 891
Other noncash adjustments 19,775 16,916
Changes in operating assets and liabilities (67,275 ) 62,572  
Net cash provided by operating activities 211,893   288,881  
 
Purchases of property and equipment (22,069 ) (12,240 )
Additions to licensed computer software from vendors (13,827 ) (5,162 )
Additions to internally developed computer software (10,340 ) (7,355 )
Additions to contract acquisition costs - (7,668 )
Cash used in acquisitions, net of cash acquired (1,036,853 ) -
Other investing activities (1,550 ) (379 )
Net cash used in investing activities (1,084,639 ) (32,804 )
 

Principal payments on long-term borrowings, capital lease obligations and license agreements

(129,010 ) (104,654 )
Proceeds from long-term borrowings 1,040,000 -
Purchase of noncontrolling interests - (70,000 )
Dividends paid on common stock (23,496 ) (18,333 )
Proceeds from exercise of stock options 26,461 4,207
Repurchase of common stock (24 ) (17 )
Other financing activities (1 ) (752 )
Net cash provided by (used in) financing activities 913,930   (189,549 )
 
Cash, cash equivalents and restricted cash:
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,684   1,578  
Net increase in cash, cash equivalents and restricted cash 42,868 68,106
Cash, cash equivalents and restricted cash at beginning of period 451,370   425,810  
Cash, cash equivalents and restricted cash at end of period $ 494,238   493,916  
 
Supplemental
Capital expenditures $ 46,236   32,425  
Free cash flow (non-GAAP)* $ 165,657   256,456  
 
* See reconciliation of non-GAAP measures.
Certain prior year amounts have changed due to the adoption of ASU 2016-18 "Statement of Cash Flows (Topic 230) : Restricted Cash," which requires that a statement of cash flows explain the change in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
 
 
 
 
 
 
TSYS
Supplemental Information
(unaudited)
           
Other
AOF: Total Accounts on File
(in millions)

At

March 2018

   

At

March 2017

    %

Change

Consumer 486.5 450.0 8.1
Commercial 55.2 50.0 10.6
Other 36.9       32.3   14.0
Traditional AOF 578.6 532.3 8.7
Prepaid*/Stored Value 38.7 54.1 (28.3 )
Government Services 96.5 90.3 6.9
Commercial Card Single Use 97.5       85.3   14.2
Total AOF 811.3       762.0   6.5
* Prepaid does not include Netspend accounts.
 

Growth in Accounts on File (in millions):

March 2017 to

March 2018

   

March 2016 to

March 2017

Beginning balance 762.0 750.5
Change in accounts on file due to:
Internal growth of existing clients 53.5 51.8
New clients 31.8 23.3
Purges/Sales (34.9 ) (16.6 )
Deconversions (1.1 )     (47.0 )
Ending balance 811.3       762.0  
 
 
 
 
 
 
Reconciliation of GAAP to Non-GAAP Financial Measures
 
Non-GAAP Measures
 
The schedules below provide a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents first quarter 2018 financial results using the previous year’s foreign currency exchange rates. On a constant currency basis, TSYS’ total year-to-date revenues for the first quarter of 2018 were lower 17.6% as compared to a reported GAAP decrease of 16.7%.
 
The schedules below also provide a reconciliation of diluted EPS to adjusted diluted EPS.
 
The schedules below also provide a reconciliation of net income to adjusted EBITDA.
 
The schedules below also provide a reconciliation of cash flows from operating activities and capital expenditures to free cash flow.
 
The schedules below also provide a reconciliation of 2018 revised guidance of total revenues to net revenue and diluted EPS to adjusted diluted EPS.
 
The tax rate used in the calculation of adjusted diluted EPS for the quarter and year is equal to an estimate of our annual effective tax rate on GAAP income. This effective rate is estimated annually and may be adjusted during the year to take into account events or trends that materially impact the effective tax rate including, but not limited to, significant changes resulting from tax legislation, material changes in the mix of revenues and expenses by entity and other significant events.
 
TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS’ current and ongoing business operations.
 
Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation.
 
TSYS believes that its provision of non-GAAP financial measures provides investors with important key financial performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.
 
 
 
 
 
 
Reconciliation of GAAP to Non-GAAP
 
Constant Currency Comparison
(unaudited)
(in thousands)
       
Three Months Ended March 31,
Percent
2018   2017   Change

Consolidated

Constant currency (1)

$ 975,982 1,184,725 (17.6 )%
Foreign currency impact (2) 11,188   -
Total revenues $ 987,170   1,184,725 (16.7 )%
 
Constant currency (1) $ 925,030 832,892 11.1 %
Foreign currency impact (2) 10,467   -
Net revenue $ 935,497   832,892 12.3 %
 
Constant currency (1) $ 184,885 167,183 10.6 %
Foreign currency impact (2) 3,386   -
Operating income $ 188,271   167,183 12.6 %
 

Issuer Solutions

Constant currency (1) $ 463,570 437,117 6.1 %
Foreign currency impact (2) 11,225   -
Total revenues $ 474,795   437,117 8.6 %
 
Constant currency (1) $ 413,070 387,255 6.7 %
Foreign currency impact (2) 10,504   -
Segment net revenue $ 423,574   387,255 9.4 %
 
(1) Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.
(2) Reflects the impact of calculated changes in foreign currency rates from the comparable period.
 
 
Net Revenue
(unaudited)
(in thousands)
 
Three Months Ended March 31,
Percent
2018   2017   Change
Total revenues $ 987,170 1,184,725 (16.7 )%
Less: reimbursable items, interchange and payment network fees 51,673   351,833 (85.3 )
Net revenue $ 935,497   832,892 12.3 %
 
 
 
 
 
 
Reconciliation of GAAP to Non-GAAP
 
Adjusted Diluted Earnings per Share
(unaudited)
(in thousands, except per share data)
       
Three Months Ended March 31,
Percent
2018   2017   Change

Net income attributable to TSYS common shareholders (GAAP)

$ 141,841 105,868 34.0 %

Adjust for amounts attributable to TSYS common shareholders:

Add: Acquisition intangible amortization $ 62,988 55,002 14.5
Add: Share-based compensation 6,294 9,041 (30.4 )
Add: TransFirst and Cayan M&A expenses* 14,368 4,825 nm
Add: Litigation, claims, judgments or settlements** - 1,961 (100.0 )
Less: Tax impact of adjustments*** (17,905 )   (24,432 ) 26.7
Adjusted earnings (non-GAAP) $ 207,586     152,265   36.3 %
 

Diluted EPS - Net income attributable to TSYS common shareholders

As reported (GAAP) $ 0.77     0.57   35.2 %
 
Adjusted diluted EPS (non-GAAP) $ 1.13     0.82   37.6 %
 
Weighted average diluted shares outstanding 183,298     184,938  
 

* Costs associated with the TransFirst and Cayan acquisitions and integrations are included in selling, general and administrative expenses and nonoperating expenses.

 
** Litigation settlement or settlement discussions and related legal expenses.

*** Certain of these merger and acquisition costs are nondeductible for income tax purposes. Income tax impact includes discrete items as a result of the acquisitions.

 
 
nm = not meaningful
 
 
 
 
 
 
Reconciliation of GAAP to Non-GAAP
 
Adjusted EBITDA
(unaudited)
(in thousands)
       
Three Months Ended March 31,
Percent
2018   2017   Change
Net income (GAAP) (a) $ 143,102 107,107 33.6 %
Adjust for:
Less: Equity in income of equity investments (10,608 ) (12,909 ) 17.8
Less: Income tax expense 18,135 43,082 (57.9 )
Add: Interest expense, net 36,652 29,773 23.1
Add: Depreciation and amortization* 104,389 104,178 0.2
Add: Client incentive/contract asset amortization* 6,874 - na
Add: Contract cost asset amortization* 10,726 - na
Less: Loss on foreign currency translations 427 311 37.3
Less: Other nonoperating (income)/expenses 562 (181 ) nm
Add: Share-based compensation 6,295 9,047 (30.4 )
Add: TransFirst and Cayan M&A expenses** 14,368 4,868 nm
Add: Litigation, claims, judgments or settlements -     1,961   (100.0 )
Adjusted EBITDA (non-GAAP) (b) $ 330,922     287,237   15.2 %
 
Total revenues (c) $ 987,170     1,184,725  
Net income margin on total revenues (GAAP) (a)/(c) 14.5 %   9.0 %
 
Net revenue (d) $ 935,497     832,892  
Adjusted EBITDA margin on net revenue (non-GAAP) (b)/(d) 35.4 %   34.5 %
 
* Client incentive/contract asset amortization and contract cost asset amortization are no longer included in depreciation and amortization due to the adoption of ASC 606 on January 1, 2018.
 
** Costs associated with the TransFirst and Cayan acquisitions and integrations are included in selling, general and administrative expenses.
 
 
nm = not meaningful
na = not applicable
 
 
 
 
 
 
Reconciliation of GAAP to Non-GAAP
 
Free Cash Flow
(unaudited)
(in thousands)
 
  Three Months Ended        
Free cash flow: March 31,
2018         2017
   
Net cash provided by operating activities (GAAP) $ 211,893 288,881
Capital expenditures (46,236 ) (32,425 )
Free cash flow (non-GAAP) $ 165,657   256,456  
 
   
Revised Guidance Summary
(unaudited)
(in millions, except per share data)
 
 
Revenue:

2018(1)

% Change
 
Total revenues (GAAP) $ 3,900 to $ 4,000 (21.0 %) to (19.0 %)

Less: reimbursable items, interchange and payment network fees

200   to 200  
Net revenue (non-GAAP) $ 3,700 to $ 3,800 9.0 % to 12.0 %
 
 
Earnings per share (EPS):
 
Diluted EPS (GAAP) $ 3.00 to $ 3.10 (5.0 %) to (2.0 %)

Acquisition intangible amortization, share-based compensation, litigation, claims, judgments or settlements and for TransFirst and Cayan M&A expenses, less the tax impact of adjustments

1.25   to   1.25  

Adjusted diluted EPS attributable to TSYS common shareholders* (non-GAAP)

$ 4.25 to $ 4.35 26.0 % to 29.0 %
 
* Weighted average diluted shares outstanding 184
 

(1)

The estimated impact of the adoption of ASC 606 on TSYS' 2018 Outlook is as follows: Total revenues ($1,640) to ($1,615), Net revenue ($69) to ($62), Diluted EPS and Adjusted diluted EPS of ($0.04) to ($0.03). The most significant impact of adopting ASC 606 in 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers will be presented "net" of the amounts paid to them, as opposed to the "gross" presentation for certain of these fees in 2017.

 
 
 
 
 
 
TSYS
Impact of New Revenue Guidance on Financial Statement Line items
(unaudited)
(in thousands, except per share data)
             
Three Months Ended
March 31, 2018
Balances Effect of
As Without Adoption Change
Reported of Topic 606 Higher/(Lower)
 
Total revenues $ 987,170 1,363,046 (375,876 )
Total operating expenses 798,899 1,173,741 (374,842 )
Operating income $ 188,271 189,305 (1,034 )
Income taxes $ 18,135 18,371 (236 )
Net income $ 143,102 143,900 (798 )
Net income attributable to TSYS common shareholders $ 141,841 142,639 (798 )
Earnings per share (EPS):
Basic EPS* $ 0.78 0.79 (0.00 )
Diluted EPS* $ 0.77 0.78 (0.00 )
 
* EPS amounts may not total due to rounding.
 
 
 
 

TSYS
Media Relations:
Cyle Mims, 706-644-3110
cylemims@tsys.com
or
Investor Relations:
Shawn Roberts, 706-644-6081
shawnroberts@tsys.com

Source: TSYS