TSS
$55.18
Total System Services
$.05
.09%
Earnings Details
4th Quarter December 2016
Tuesday, January 24, 2017 4:15:02 PM
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Summary

Total System Services Beats

Total System Services (TSS) reported 4th Quarter December 2016 earnings of $0.74 per share on revenue of $1.1 billion. The consensus earnings estimate was $0.70 per share on revenue of $1.2 billion. The Earnings Whisper number was $0.71 per share. Revenue grew 57.9% on a year-over-year basis.

The company said it expects 2017 non-GAAP earnings of $3.05 to $3.15 per share on revenue of $4.75 billion to $4.85 billion. The current consensus earnings estimate is $3.14 per share on revenue of $4.87 billion for the year ending December 31, 2017.

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
$0.74
Earnings Whisper
$0.71
Consensus Estimate
$0.70
Reported Revenue
$1.13 Bil
Revenue Estimate
$1.15 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

TSYS Reports Fourth Quarter and Full Year Earnings

TSYS (TSS) today reported results for the fourth quarter and full year of 2016.

"2016 was truly an exceptional year in the history of our company. We delivered record financial results, completed our largest acquisition in TransFirst that doubled the size of our Merchant business, and finished the year with results in all four segments having met or exceeded our goals," said M. Troy Woods, chairman and chief executive officer of TSYS.

Highlights for the fourth quarter of 2016 include:

Total revenues were $1.1 billion, an increase of 57.9% over last year’s $716.8 million.

Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expense, was $785.7 million, an increase of 21.8% over last year’s $645.1 million.

Income from continuing operations attributable to TSYS common shareholders was $74.0 million, a decrease of 9.2% from last year’s $81.4 million. Basic earnings per share (EPS) from continuing operations were $0.40 per share, a decrease of 9.3% from last year’s $0.44.

Adjusted earnings from continuing operations (non-GAAP) were $129.6 million, an increase of 24.7% over last year’s $103.9 million. 4th quarter ’16 adjusted EPS from continuing operations (non-GAAP) was $0.71, an increase of 24.5% over last year’s $0.57.

Adjusted EBITDA (non-GAAP) was $266.5 million, an increase of 36.7% over last year’s $195.0 million.

Highlights for the full year of 2016 include:

Total revenues were $4.2 billion, an increase of 50.0% over last year’s $2.8 billion.

Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expense, was $3.0 billion, an increase of 21.7% over last year’s $2.5 billion.

Income from continuing operations attributable to TSYS common shareholders was $319.6 million, a decrease of 11.9% from last year’s $362.6 million. Basic EPS was $1.74 per share, a decrease of 11.6% from last year’s $1.97.

Adjusted earnings from continuing operations (non-GAAP) were $516.4 million, an increase of 14.2% over last year’s $452.1 million. Adjusted EPS from continuing operations (non-GAAP) was $2.81, an increase of 14.5% over last year’s $2.46.

Adjusted EBITDA (non-GAAP) was $1.0 billion, an increase of 24.8% over last year’s $833.9 million.

"We expect the momentum of 2016 to continue in 2017. We are projecting strong organic revenue growth and double digit earnings growth as we remain laser focused on executing our strategic plans and delivering outstanding results," said Woods.

2017 Segment Changes

As a result of combining our North America and International segments, TSYS has included in the financial schedules of this release a schedule recasting its 2016 and 2015 quarterly segment results as if its Issuer Solutions Segment was combined for all of 2016 and 2015.

2017 Outlook

Beginning in 2017, TSYS will provide adjusted EPS figures based upon diluted shares to be more comparative to our industry peers. The 2017 guidance is below.

2017 Financial
Percent
Outlook Range
Change
(in millions, except per share amounts)
Revenue:
Total revenues (GAAP)
$4,750
to
$4,850
14%
to
16%
Net revenue (non-GAAP)
$3,275
to
$3,375
8%
to
11%
Earnings per share:
Diluted EPS (GAAP)
$2.14
to
$2.21
23%
to
28%
Adjusted diluted EPS attributable to TSYS common shareholders
$3.05
to
$3.15
9%
to
12%
(non-GAAP)
Average diluted weighted shares
185

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, January 24. The conference call can be accessed via simultaneous Internet broadcast 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 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(R) (TSS) unlocks opportunities in payments for payment providers, businesses and consumers. Our headquarters are in Columbus, Georgia, USA, and we operate in more than 80 countries with local offices across the Americas, EMEA and Asia-Pacific.

We provide seamless, secure and innovative solutions across the payments spectrum -- from issuer processing and merchant acquiring to prepaid program management -- delivered through partnership and expertise. We succeed because we put people, and their needs, at the heart of every decision. It’s an approach we call ’People-Centered Payments(R)’.

Our industry is changing every day -- and we’re leading the way toward the payments of tomorrow. We routinely post all important information on our website. For more, visit us at 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’ earnings guidance for 2017 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 TransFirst 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; TSYS does not convert clients’ portfolios 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; 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
Twelve Months Ended
December 31,
December 31,
Percent
Percent
2016
2015
Change
2016
2015
Change
Total revenues
$ 1,132,224
716,843
57.9
%
$ 4,170,077
2,779,541
50.0
%
Cost of services
826,332
489,040
69.0
2,993,062
1,855,181
61.3
Selling, general and administrative expenses
175,345
109,898
59.6
603,633
390,253
54.7
Total expenses
1,001,677
598,938
67.2
3,596,695
2,245,434
60.2
Operating income
130,547
117,905
10.7
573,382
534,107
7.4
Nonoperating expenses
(29,662 )
(9,237 )
nm
(112,168 )
(37,219 )
nm
Income before income taxes, noncontrolling interests and equity in
100,885
108,668
(7.2 )
461,214
496,888
(7.2 )
income of equity investments
Income taxes
33,209
32,160
3.3
161,175
151,364
6.5
Income before noncontrolling interests and equity in income of
67,676
76,508
(11.5 )
300,039
345,524
(13.2 )
equity investments
Equity in income of equity investments, net of tax
6,699
6,797
(1.4 )
25,933
22,106
17.3
Income from continuing operations, net of tax
74,375
83,305
(10.7 )
325,972
367,630
(11.3 )
Gain from discontinued operations, net of tax
-
1,411
nm
-
1,411
nm
Net income
74,375
84,716
(12.2 )
325,972
369,041
(11.7 )
Net income attributable to noncontrolling interests
(425 )
(1,888 )
77.5
(6,334 )
(4,997 )
(26.8 )
Net income attributable to TSYS common shareholders
$
73,950
82,828
(10.7 )
%
$
319,638
364,044
(12.2 )
%
Earnings per share (EPS):
$
0.40
0.44
(9.3 )
%
$
1.74
1.97
(11.6 )
%
Income from continuing operations to TSYS common shareholders
-
0.01
nm
-
0.01
nm
Gain from discontinued operations to TSYS common shareholders
Basic EPS
$
0.40
0.45
(10.8 )
%
$
1.74
1.98
(12.0 )
%
Diluted EPS:
$
0.40
0.44
(9.2 )
%
$
1.73
1.96
(11.5 )
%
Income from continuing operations to TSYS common shareholders
-
0.01
nm
-
0.01
nm
Gain from discontinued operations to TSYS common shareholders
Diluted EPS
$
0.40
0.45
(10.7 )
%
$
1.73
1.97
(11.8 )
%
Weighted average shares outstanding:
(includes participating securities)
Basic
183,665
183,376
183,655
184,082
Diluted
184,533
184,581
184,448
185,239
Dividends declared per share
$
0.10
0.10
$
0.40
0.40
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax
$
73,950
81,417
(9.2 )
%
$
319,638
362,633
(11.9 )
%
Gain from discontinued operations, net of tax
-
1,411
nm
-
1,411
nm
Net income
$
73,950
82,828
(10.7 )
%
$
319,638
364,044
(12.2 )
%
Non-GAAP measures:*
Net revenue
$
785,709
645,095
21.8
%
$ 3,041,876
2,499,349
21.7
%
Adjusted EBITDA
$
266,547
195,031
36.7
%
$ 1,040,551
833,920
24.8
%
Adjusted EPS
$
0.71
0.57
24.5
%
$
2.81
2.46
14.5
%
* See reconciliation of non-GAAP measures.
nm = not meaningful
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended December 31,
Twelve Months Ended December 31,
Change
Change
2016
2015
$
%
2016
2015
$
%
Operating income (a)
$
130,547
117,905
12,642
10.7
%
$
573,382
534,107
39,275
7.4
%
Share-based compensation
9,937
10,080
(143 )
(1.4 )
43,728
41,548
2,180
5.2
TransFirst M&A expenses
2,267
-
2,267
na
28,175
-
28,175
na
Litigation, claims, judgments or settlements
21,719
-
21,719
na
21,719
-
21,719
na
Acquisition intangible amortization
55,243
22,920
32,323
nm
189,991
92,522
97,469
nm
Adjusted operating income (b)
$
219,713
150,905
68,808
45.6
%
$
856,995
668,177
188,818
28.3
%
Adjusted segment operating income:
North America Services (c)
$
117,296
104,162
13,134
12.6
%
$
468,251
429,064
39,187
9.1
%
International Services (d)
15,210
21,381
(6,171 )
(28.9 )
56,774
60,087
(3,313 )
(5.5 )
Merchant Services (e)
88,539
33,033
55,506
nm
307,595
150,225
157,370
nm
NetSpend (f)
34,834
28,614
6,220
21.7
160,371
137,837
22,534
16.3
Corporate admin and other
(36,166 )
(36,285 )
119
0.3
(135,996 )
(109,036 )
(26,960 )
(24.7 )
Adjusted segment operating income
$
219,713
150,905
68,808
45.6
%
$
856,995
668,177
188,818
28.3
%
Total revenues (g)
$ 1,132,224
716,843
415,381
57.9
%
$ 4,170,077
2,779,541
1,390,536
50.0
%
Less: reimbursable items
62,354
71,748
(9,394 )
(13.1 )
259,543
280,192
(20,649 )
(7.4 )
Revenue before reimbursable items
1,069,870
645,095
424,775
65.8
3,910,534
2,499,349
1,411,185
56.5
Less: interchange and assessments expenses
284,161
-
284,161
na
868,658
-
868,658
na
Net revenue (h)
785,709
645,095
140,614
21.8
3,041,876
2,499,349
542,527
21.7
Intersegment revenues
10,379
8,383
1,996
23.8
39,880
33,481
6,399
19.1
Segment net revenue
$
796,088
653,478
142,610
21.8
%
$ 3,081,756
2,532,830
548,926
21.7
%
Segment net revenue
North America Services (i)
$
304,450
300,265
4,185
1.4
%
$ 1,206,013
1,147,254
58,759
5.1
%
International Services (j)
77,061
87,126
(10,065 )
(11.6 )
313,631
331,159
(17,528 )
(5.3 )
Merchant Services (k)
253,960
122,053
131,907
nm
898,533
474,040
424,493
89.5
NetSpend (l)
160,617
144,034
16,583
11.5
663,579
580,377
83,202
14.3
Segment net revenue
$
796,088
653,478
142,610
21.8
%
$ 3,081,756
2,532,830
548,926
21.7
%
Segment revenue before reimbursable items
North America Services
$
304,450
300,265
4,185
1.4
%
$ 1,206,013
1,147,254
58,759
5.1
%
International Services
77,061
87,126
(10,065 )
(11.6 )
313,631
331,159
(17,528 )
(5.3 )
Merchant Services
538,121
122,053
416,068
nm
1,767,191
474,040
1,293,151
nm
NetSpend
160,617
144,034
16,583
11.5
663,579
580,377
83,202
14.3
Segment revenue before reimbursable items
$ 1,080,249
653,478
426,771
65.3
%
$ 3,950,414
2,532,830
1,417,584
56.0
%
Operating margin (GAAP) (a)/(g)
11.53 %
16.45 %
13.75 %
19.22 %
Adjusted operating margin on net revenue (b)/(h)
27.96 %
23.39 %
28.17 %
26.73 %
Adjusted segment operating margin on net revenue
North America Services(c)/(i)
38.53 %
34.69 %
38.83 %
37.40 %
International Services (d)/(j)
19.74 %
24.54 %
18.10 %
18.14 %
Merchant Services (e)/(k)
34.86 %
27.06 %
34.23 %
31.69 %
NetSpend (f)/(l)
21.69 %
19.87 %
24.17 %
23.75 %
nm = not meaningful
na = not applicable
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended December 31,
Twelve Months Ended December 31,
Change
Change
2016
2015
$
%
2016
2015
$
%
Depreciation and amortization:
North America Services
$
27,878
26,712
1,166
4.4
%
$
110,343
99,544
10,799
10.8
%
International Services
7,572
8,808
(1,236 )
(14.0 )
30,966
34,892
(3,926 )
(11.3 )
Merchant Services
6,851
4,874
1,977
40.6
25,553
18,268
7,285
39.9
NetSpend
3,667
3,139
528
16.8
13,133
10,686
2,447
22.9
Segment depreciation and amortization
45,968
43,533
2,435
5.6
179,995
163,390
16,605
10.2
Acquisition intangible amortization
55,243
22,920
32,323
nm
189,991
92,522
97,469
nm
Corporate admin and other
866
593
273
46.0
3,560
2,352
1,208
51.4
Total depreciation and amortization
$
102,077
67,046
35,031
52.2
%
$
373,546
258,264
115,282
44.6
%
Segment statistical data:
Transactions (in millions)
North America Services:
4,482.7
4,264.9
217.8
5.1
%
17,140.3
15,774.5
1,365.8
8.7
%
International Services:
742.1
661.7
80.4
12.2
2,717.8
2,473.6
244.2
9.9
Total transactions
5,224.8
4,926.6
298.2
6.1
%
19,858.1
18,248.1
1,610.0
8.8
%
Accounts on file (AOF) (in millions)
North America Services:
662.8
654.1
8.7
1.3
%
International Services:
88.7
78.5
10.2
13.0
Total AOF
751.5
732.5
19.0
2.6
%
Traditional accounts on file (AOF) (in millions)
North America Services:
454.1
415.1
39.0
9.4
%
International Services:
67.7
65.1
2.6
4.1
Total Traditional AOF
521.8
480.2
41.6
8.7
%
Merchant Services
Point-of-sale transactions (in millions)
1,120.5
1,075.2
45.3
4.2
%
4,548.1
4,266.5
281.6
6.6
%
Dollar sales volume (in millions)
$ 28,710.2
12,401.1
16,309.1
nm
%
$ 97,735.1
48,072.7
49,662.4
nm
%
NetSpend
Gross dollar volume (in millions)
$
6,579.1
5,692.0
887.1
15.6
%
$ 28,722.3
24,274.9
4,447.4
18.3
%
Direct deposit 90-day active cards (in thousands)
2,136.0
1,895.0
241.0
12.7
%
90-day active cards (in thousands)
4,295.0
3,894.1
400.9
10.3
%
% of 90-day active cards with direct deposit
49.7 %
48.7 %
nm = not meaningful
TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
December 31, 2016
December 31, 2015
Assets
Current assets:
Cash and cash equivalents
$
425,354
389,328
Accounts receivable, net
432,847
314,705
Other current assets
164,488
154,199
Total current assets
1,022,689
858,232
Goodwill
3,270,952
1,545,424
Other intangible assets, net
906,676
328,320
Property, equipment and software, net
705,533
694,968
Other long term assets
460,327
450,951
Total assets
$
6,366,177
3,877,895
Liabilities
Current liabilities:
Accounts payable
$
38,712
52,213
Notes payable and capital leases
50,727
53,546
Other current liabilities
330,914
233,173
Total current liabilities
420,353
338,932
Bonds payable, notes payable and capital leases, excluding current
3,313,276
1,377,541
portion
Deferred tax liability
419,552
192,445
Other long-term liabilities
88,983
96,885
Total liabilities
4,242,164
2,005,803
Redeemable noncontrolling interest
24,093
23,410
Equity
Shareholders’ equity
2,099,920
1,843,018
Noncontrolling interests in consolidated subsidiaries
-
5,664
Total equity
2,099,920
1,848,682
Total liabilities and equity
$
6,366,177
3,877,895
Note: TSYS adopted Accounting Standards Update (ASU) 2015-03
"Interest - Imputation of Interest (Subtopic 835-30), Simplifying
the Presentation of Debt Issuance Cost" on January 1, 2016. This ASU
requires TSYS to present debt issuance costs in the balance sheet as
a direct deduction from the carrying amount of the corresponding
debt liability, consistent with debt discounts. All prior periods
presented have been restated for this ASU.
TSYS also adopted ASU 2015-17 "Income Taxes (Topic 740), Balance
Sheet Classification of Deferred Taxes" on January 1, 2016. This ASU
requires the classification of all deferred tax assets and
liabilities as noncurrent on the balance sheet instead of separating
deferred taxes into current and noncurrent amounts. All prior
periods presented have been restated for this ASU.
TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
Twelve Months Ended December 31,
2016
2015
Cash flows from operating activities:
Net income
$
325,972
369,041
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on disposal of subsidiaries
-
(3,568 )
Equity in income of equity investments
(25,933 )
(22,106 )
Dividends received from equity investments
15,246
12,097
Depreciation and amortization
373,546
258,264
Amortization of debt issuance costs
13,570
1,841
Share-based compensation
43,728
41,548
Deferred income tax expense (benefit)
7,435
(4,083 )
Other noncash adjustments
51,357
24,728
Changes in operating assets and liabilities
(87,012 )
(77,568 )
Net cash provided by operating activities
717,909
600,194
Net cash used in investing activities
(2,492,876 )
(202,184 )
Net cash provided by (used in) financing activities
1,822,190
(290,754 )
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents
(11,197 )
(7,111 )
Net increase in cash and cash equivalents
36,026
100,145
Cash and cash equivalents at beginning of period
389,328
289,183
Cash and cash equivalents at end of period
$
425,354
389,328
TSYS
Supplemental Information
(unaudited)
Other
AOF:
Total Accounts on File
(in millions)
At
At
%
December 2016
December 2015
Change
Consumer
442.9
408.2
8.5
Commercial
47.9
45.4
5.4
Other
31.0
26.6
16.8
Traditional AOF
521.8
480.2
8.7
Prepaid*/Stored Value
57.8
97.2
(40.5 )
Government Services
88.7
79.3
11.7
Commercial Card Single Use
83.2
75.8
9.8
Total AOF
751.5
732.5
2.6
* Prepaid does not include NetSpend accounts
Growth in Accounts on File (in millions):
December 2015 to
December 2014 to
December 2016
December 2015
Beginning balance
732.5
616.7
Change in accounts on file due to:
Internal growth of existing clients
53.1
42.2
New clients
27.8
145.6
Purges/Sales
(12.9 )
(29.0 )
Deconversions
(49.0 )
(43.0 )
Ending balance
751.5
732.5
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 fourth quarter
2016 financial results using the previous year’s foreign currency
exchange rates. On a constant currency basis, TSYS’ total revenues
for 2016 grew 51.6% as compared to a reported GAAP increase of 50.0%.
The schedules below also provide a reconciliation of EPS to adjusted
EPS.
The schedules below also provide a reconciliation of net income to
EBITDA and 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 2017 guidance
of total revenues to net revenue and diluted EPS to adjusted diluted
EPS. TSYS has also provided historical diluted EPS and adjusted
diluted EPS
The tax rate used in the calculation of adjusted 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 December 31,
Twelve Months Ended December 31,
Percent
Percent
2016
2015
Change
2016
2015
Change
Consolidated
Constant currency (1)
$ 1,148,810
716,843
60.3
%
$ 4,212,598
2,779,541
51.6
%
Foreign currency impact (2)
(16,586 )
-
(42,521 )
-
Total revenues
$ 1,132,224
716,843
57.9
%
$ 4,170,077
2,779,541
50.0
%
Constant currency (1)
$
801,145
645,095
24.2
%
$ 3,081,534
2,499,349
23.3
%
Foreign currency impact (2)
(15,436 )
-
(39,658 )
-
Net revenue
$
785,709
645,095
21.8
%
$ 3,041,876
2,499,349
21.7
%
Constant currency (1)
$
137,738
117,905
16.8
%
$
589,934
534,107
10.5
%
Foreign currency impact (2)
(7,191 )
-
(16,552 )
-
Operating income
$
130,547
117,905
10.7
%
$
573,382
534,107
7.4
%
International Services
Constant currency (1)
$
99,180
93,128
6.5
%
$
378,512
354,725
6.7
%
Foreign currency impact (2)
(16,618 )
-
(42,535 )
-
Total revenues
$
82,562
93,128
(11.3 )
%
$
335,977
354,725
(5.3 )
%
Constant currency (1)
$
92,531
87,126
6.2
%
$
353,303
331,159
6.7
%
Foreign currency impact (2)
(15,470 )
-
(39,672 )
-
Net revenue
$
77,061
87,126
(11.6 )
%
$
313,631
331,159
(5.3 )
%
(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 December 31,
Twelve Months Ended December 31,
Percent
Percent
2016
2015
Change
2016
2015
Change
Total revenues
$ 1,132,224
716,843
57.9
%
$ 4,170,077
2,779,541
50.0
%
Less: reimbursable items
62,354
71,748
(13.1 )
259,543
280,192
(7.4 )
Revenue before reimbursable items
1,069,870
645,095
65.8
3,910,534
2,499,349
56.5
Less: interchange and assessments expenses
284,161
-
na
868,658
-
na
Net revenue
$
785,709
645,095
21.8
%
$ 3,041,876
2,499,349
21.7
%
na = not applicable
Reconciliation of GAAP to Non-GAAP
Adjusted Earnings per Share
(unaudited)
(in thousands, except per share data)
Three Months Ended December 31,
Twelve Months Ended December 31,
Percent
Percent
2016
2015
Change
2016
2015
Change
Income from continuing operations attributable to TSYS common
$
73,950
81,417
(9.2 )
%
$
319,638
362,633
(11.9 )
%
shareholders
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization
$
54,967
22,645
nm
$
188,887
91,418
nm
Add: Share-based compensation
9,925
10,076
(1.5 )
43,691
41,535
5.2
Add: TransFirst M&A expenses*
2,268
-
na
37,957
-
na
Add: Litigation, claims, judgments or settlements**
19,913
-
na
19,913
-
na
Less: Tax impact of adjustments***
(31,403 )
(10,208 )
nm
(93,667 )
(43,474 )
nm
Adjusted earnings
$ 129,620
103,930
24.7
%
$
516,419
452,112
14.2
%
Basic EPS - Income from continuing operations attributable to
TSYS common shareholders
As reported (GAAP)
$
0.40
0.44
(9.3 )
%
$
1.74
1.97
(11.6 )
%
Adjusted EPS
$
0.71
0.57
24.5
%
$
2.81
2.46
14.5
%
Weighted average shares outstanding
183,665
183,376
183,655
184,082
* Costs associated with the TransFirst acquisition and integration
that are included in selling, general and administrative expenses
and nonoperating expenses.
** Litigation settlement or settlement discussions and related legal
expenses in the 4th quarter.
*** Certain of these merger and acquisition costs are nondeductible
for income tax purposes. Income tax impact includes a discrete item
as a result of the acquisition.
Adjusted EBITDA
(unaudited)
(in thousands)
Three Months Ended December 31,
Twelve Months Ended December 31,
Percent
Percent
2016
2015
Change
2016
2015
Change
Net income
$
74,375
84,716
(12.2 )
%
$
325,972
369,041
(11.7 )
%
Adjust for:
Less: Income from discontinued operations
-
(1,411 )
nm
-
(1,411 )
nm
Less: Equity in income of equity investments
(6,699 )
(6,797 )
1.4
(25,933 )
(22,106 )
(17.3 )
Add: Income taxes
33,209
32,160
3.3
161,175
151,364
6.5
Add: Nonoperating expense
29,662
9,237
nm
112,168
37,219
nm
Add: Depreciation and amortization
102,077
67,046
52.2
373,546
258,264
44.6
EBITDA
$ 232,624
184,951
25.8
%
$
946,928
792,371
19.5
%
Adjust for:
Add: Share-based compensation
9,937
10,080
(1.4 )
43,728
41,549
5.2
Add: TransFirst M&A expenses*
2,267
-
na
28,176
-
na
Add: Litigation, claims, judgments or settlements
21,719
-
na
21,719
-
na
Adjusted EBITDA
$ 266,547
195,031
36.7
%
$ 1,040,551
833,920
24.8
%
* Costs associated with the TransFirst acquisition and integration
that 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)
Twelve Months Ended
Free cash flow:
December 31,
2016
2015
Net cash provided by operating activities (GAAP)
$
717,909
600,194
Capital expenditures
(142,573 )
(203,315 )
Free cash flow (non-GAAP)
$
575,336
396,879
Guidance Summary
(unaudited)
(in millions, except per share data)
Revenue:
2017
% Change
Total revenues (GAAP)
$
4,750
to
$
4,850
14 %
to
16 %
Less: reimbursable items, interchange and assessments expenses
1,475
to
1,475
Net revenue (non-GAAP)
$
3,275
to
$
3,375
8 %
to
11 %
Earnings per share (EPS):
Diluted EPS (GAAP)
$
2.14
to
$
2.21
23 %
to
28 %
Acquisition intangible amortization, share-based compensation,
0.91
to
0.94
litigation, claims, judgments or settlements and TransFirst M&A
expenses, less the tax impact of adjustments
Adjusted diluted EPS attributable to TSYS common shareholders*
$
3.05
to
$
3.15
9 %
to
12 %
(non-GAAP)
* Average diluted weighted shares
185
Reconciliation of GAAP to Non-GAAP
Adjusted Diluted Earnings per Share
(unaudited)
(in thousands, except per share data)
2015
2016
Q1
Q2
Q3
Q4
YTD
Q1
Q2
Q3
Q4
YTD
Income from continuing operations attributable to TSYS common
$
77,755
82,839
120,622
81,417
362,633
$
90,628
69,708
85,352
73,950
319,638
shareholders
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization
$
23,590
22,576
22,607
22,645
91,418
$
22,645
58,210
53,065
54,967
188,887
Add: Share-based compensation
8,144
12,024
11,291
10,076
41,535
8,150
12,557
13,059
9,925
43,691
Add: TransFirst M&A expenses
-
-
-
-
-
13,183
20,676
1,830
2,268
37,957
Add: Litigation, claims, judgments or settlements
-
-
-
-
-
-
-
-
19,913
19,913
Less: Tax impact of adjustments
(10,532 )
(11,484 )
(11,250 )
(10,208 )
(43,474 )
(13,896 )
(25,735 )
(22,633 )
(31,403 )
(93,667 )
Adjusted earnings
$
98,957
105,955
143,270
103,930
452,112
$ 120,710
135,416
130,673
129,620
516,419
Diluted EPS - Income from continuing operations attributable to
TSYS common shareholders
As reported (GAAP)
$
0.42
0.45
0.65
0.44
1.96
$
0.49
0.38
0.46
0.40
1.73
Adjusted diluted EPS
$
0.53
0.57
0.77
0.56
2.44
$
0.66
0.73
0.71
0.70
2.80
Average diluted weighted shares
185,563
185,020
185,281
184,581
185,239
183,886
184,598
184,640
184,533
184,448
TSYS
Segment Breakdown Recast for New Segment Structure
(unaudited)
(in thousands)
2015
2016
Q1
Q2
Q3
Q4
YTD
Q1
Q2
Q3
Q4
YTD
Operating income (a)
$ 122,496
130,602
163,104
117,905
534,107
$ 151,687
135,821
155,327
130,547
573,382
Share-based compensation
8,143
12,030
11,295
10,080
41,548
8,158
12,566
13,069
9,937
43,730
TransFirst M&A expenses
-
-
-
-
-
3,401
20,676
1,830
2,267
28,174
Litigation, claims, judgments or settlements
-
-
-
-
-
-
-
-
21,719
21,719
Acquisition intangible amortization
23,867
22,852
22,883
22,920
92,522
22,921
58,486
53,341
55,243
189,991
Adjusted operating income (b)
$ 154,506
165,484
197,282
150,905
668,177
$ 186,167
227,549
223,567
219,713
856,996
Adjusted segment operating income:
Issuer Solutions (c)
$ 109,553
121,738
132,316
125,543
489,151
$ 135,077
128,493
128,949
132,506
525,025
Merchant Services (d)
34,115
40,690
42,387
33,033
150,225
38,357
89,915
90,784
88,539
307,595
NetSpend (e)
35,467
36,442
37,315
28,614
137,837
42,201
42,481
40,856
34,834
160,372
Corporate admin and other
(24,629 )
(33,386 )
(14,736 )
(36,285 )
(109,036 )
(29,468 )
(33,340 )
(37,022 )
(36,166 )
(135,996 )
Adjusted segment operating income
$ 154,506
165,484
197,282
150,905
668,177
$ 186,167
227,549
223,567
219,713
856,996
Total revenues (f)
$ 662,156
692,652
707,890
716,843
2,779,541
$ 739,378
1,151,587
1,146,889
1,132,224
4,170,078
Less: reimbursable items, interchange and assessments expenses
66,372
70,568
71,504
71,748
280,192
67,734
356,649
357,302
346,517
1,128,202
Net revenue (g)
595,784
622,084
636,386
645,095
2,499,349
671,644
794,938
789,587
785,707
3,041,876
Intersegment revenues
8,569
7,256
5,950
7,207
28,982
11,969
7,011
7,401
9,316
35,697
Segment net revenue
$ 604,353
629,340
642,336
652,302
2,528,331
$ 683,613
801,949
796,988
795,023
3,077,573
Segment net revenue
Issuer Solutions (h)
$ 338,881
369,851
378,967
386,215
1,473,914
$ 378,009
377,862
379,145
380,446
1,515,462
Merchant Services (i)
110,398
117,868
123,721
122,053
474,040
120,612
261,467
262,494
253,960
898,533
NetSpend (j)
155,074
141,621
139,648
144,034
580,377
184,992
162,620
155,349
160,617
663,578
Segment net revenue
$ 604,353
629,340
642,336
652,302
2,528,331
$ 683,613
801,949
796,988
795,023
3,077,573
Operating margin (GAAP) (a)/(g)
18.50 %
18.86 %
23.04 %
16.45 %
19.22 %
20.52 %
11.79 %
13.54 %
11.53 %
13.75 %
Adjusted operating margin on net revenue (b)/(h)
25.93 %
26.60 %
31.00 %
23.39 %
26.73 %
27.72 %
28.62 %
28.31 %
27.96 %
28.17 %
Adjusted segment operating margin on net revenue
Issuer Solutions(c)/(h)
32.33 %
32.92 %
34.91 %
32.51 %
33.19 %
35.73 %
34.01 %
34.01 %
34.83 %
34.64 %
Merchant Services (d)/(i)
30.90 %
34.52 %
34.26 %
27.06 %
31.69 %
31.80 %
34.39 %
34.59 %
34.86 %
34.23 %
NetSpend (e)/(j)
22.87 %
25.73 %
26.72 %
19.87 %
23.75 %
22.81 %
26.12 %
26.30 %
21.69 %
24.17 %

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TSYS Media Relations
Cyle Mims, +1-706-644-3110
cylemims@tsys.com
or
TSYS Investor Relations
Shawn Roberts, +1-706-644-6081
shawnroberts@tsys.com