TSS
$128.73
Total System Services
$1.38
1.08%
Earnings Details
2nd Quarter June 2019
Wednesday, July 31, 2019 4:20:00 PM
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Summary

Total System Services Beats

Total System Services (TSS) reported 2nd Quarter June 2019 earnings of $1.29 per share on revenue of $1.0 billion. The consensus earnings estimate was $1.22 per share on revenue of $1.0 billion. The Earnings Whisper number was $1.24 per share. Revenue grew 2.8% on a year-over-year basis.

The company said it continues to expect 2019 non-GAAP earnings of $4.75 to $4.90 per share on revenue of $3.99 billion to $4.09 billion. The current consensus earnings estimate is $4.89 per share on revenue of $4.05 billion for the year ending December 31, 2019.

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
$1.29
Earnings Whisper
$1.24
Consensus Estimate
$1.22
Reported Revenue
$1.04 Bil
Revenue Estimate
$1.01 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

TSYS Reports Second Quarter Earnings

COLUMBUS, Ga.--(BUSINESS WIRE)--TSYS (NYSE: TSS) today reported results for the second quarter of 2019.

“We were pleased to deliver another quarter of solid performance with increases in net revenue and adjusted diluted EPS, and margin expansion,” said M. Troy Woods, Chairman, President and CEO of TSYS. “We also remain confident that the combined strengths of merging with Global Payments will enhance shareholder value and create opportunities for our team members and customers.”

Highlights for the second quarter of 2019 vs. 2018:

  • Total revenues were $1.04 billion, an increase of 2.8%. On a constant currency basis (non-GAAP), total revenues increased 3.4%.
  • Net revenue (non-GAAP), which excludes reimbursable items, was $979.9 million, an increase of 2.4%. On a constant currency basis (non-GAAP), net revenue increased 3.1%.
  • Net income attributable to TSYS common shareholders was $162.8 million, an increase of 14.3%. Diluted EPS was $0.91, an increase of 17.5%.
  • Adjusted earnings (non-GAAP) were $226.7 million, an increase of 11.2%. Adjusted diluted EPS (non-GAAP) was $1.27, an increase of 14.4%.
  • Adjusted EBITDA (non-GAAP) was $368.9 million, an increase of 6.9%.

2019 Full Year Guidance

TSYS reiterates its full year 2019 financial guidance which is included on page 16 in the financial schedules of this release. The guidance does not include any impact related to the previously announced merger with Global Payments.

Conference Call

Due to the pending merger with Global Payments, TSYS will not host a conference call/webcast to review the second quarter 2019 financial results.

Non-GAAP Measures

This press release contains information prepared in conformity with U.S. generally accepted accounting principles (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, revenues measured on a constant currency basis, 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 12 to 16 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 — for issuers, merchants and consumers. We succeed because we put people and their needs at the heart of every decision to help them unlock payment opportunities. It’s an approach we call People-Centered Payments®.

Our headquarters are located in Columbus, Ga., U.S.A., with approximately 13,000 team members and local offices across 13 countries. TSYS generated revenue of $4.0 billion in 2018, while processing more than 32.3 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’ expectations for its financial performance for the full year 2019, 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) and the uncertainty over the terms and timing of the expected departure; expenses incurred associated with the signing of a significant client; conversions and deconversions 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 Consumer Financial Protection Bureau’s new rule regarding prepaid financial products; 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; one or more of the assumptions upon which earnings guidance for 2019 is based is inaccurate; growth rates of TSYS’ existing clients are lower than anticipated or attrition rates of existing clients are higher than anticipated; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of TSYS and Global Payments to terminate the merger agreement; the outcome of any legal proceedings that may be instituted against TSYS, Global Payments or their respective directors; the ability to obtain regulatory approvals and meet other closing conditions to the merger on a timely basis or at all, including the risk that regulatory approvals required for the merger are not obtained on a timely basis or at all, or are obtained subject to conditions that are not anticipated or that could adversely affect the combined company or the expected benefits of the transaction; the ability to obtain approval by TSYS shareholders and Global Payments shareholders on the expected terms and schedule; difficulties and delays in integrating the TSYS and Global Payments businesses, including with respect to implementing systems to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; failing to fully realize anticipated cost savings and other anticipated benefits of the merger when expected or at all; business disruptions from the proposed merger that will harm TSYS’ or Global Payments’ business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger, including as it relates to TSYS’ or Global Payments’ ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability of TSYS or Global Payments to retain and hire key personnel; the diversion of management’s attention from ongoing business operations; uncertainty as to the long-term value of the common stock of Global Payments following the merger, including the dilution caused by Global Payments’ issuance of additional shares of its common stock in connection with the transaction; the continued availability of capital and financing following the merger; the business, economic and political conditions in the markets in which TSYS and Global Payments operate; the impact of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and cybersecurity laws and regulations; and events beyond TSYS’ or Global Payments’ control, such as acts of terrorism.

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 (SEC), 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.

Additional Information About the Merger and Where to Find It

In connection with the proposed merger, Global Payments filed with the SEC a registration statement on Form S-4 to register the shares of Global Payments’ common stock to be issued in connection with the merger on July 23, 2019. The registration statement includes a joint proxy statement/prospectus. Global Payments and TSYS commenced mailing the joint proxy statement/prospectus to shareholders on or about July 25, 2019. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE RELATED JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER, WHEN THEY BECOME AVAILABLE, BECAUSE THEY DO AND WILL CONTAIN IMPORTANT INFORMATION ABOUT TSYS, GLOBAL PAYMENTS AND THE PROPOSED MERGER.

Investors and security holders may obtain copies of these documents free of charge through the website maintained by the SEC at www.sec.gov or from TSYS at its website, www.tsys.com, or from Global Payments at its website, www.globalpaymentsinc.com. Documents filed with the SEC by TSYS will be available free of charge by accessing TSYS’ website at www.tsys.com under the heading Investor Relations, or, alternatively, by directing a request by telephone or mail to TSYS at One TSYS Way, Columbus, Georgia 31901, and documents filed with the SEC by Global Payments will be available free of charge by accessing Global Payments’ website at www.globalpaymentsinc.com under the heading Investor Relations or, alternatively, by directing a request by telephone or mail to Global Payments at 3550 Lenox Road, Suite 3000, Atlanta, Georgia 30326, Attention: Investor Relations.

Participants In The Solicitation

TSYS and Global Payments and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Global Payments and TSYS in respect of the proposed merger under the rules of the SEC. Information about Global Payments’ directors and executive officers is available in Global Payments’ proxy statement dated March 13, 2019 for its 2019 Annual Meeting of Shareholders. Information about TSYS’ directors and executive officers is available in TSYS’ proxy statement dated March 20, 2019 for its 2019 Annual Meeting of Shareholders. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the joint proxy statement/prospectus referenced above and other relevant materials to be filed with the SEC regarding the merger when they become available. Investors should read the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from Global Payments or TSYS using the sources indicated above.

No Offer Or Solicitation

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.

       
       

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

Six Months Ended

 

 

 

 

June 30,

 

 

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

 

 

2019

 

 

2018

 

 

Change

 

       
Total revenues 

$

 

1,035,485

 

 

1,007,580

 

 

2.8

 

%

 

$

 

2,070,016

 

 

1,994,750

 

 

3.8

 

%

       
Cost of services 

630,821

 

 

617,818

 

 

2.1

 

 

1,263,032

 

 

1,231,183

 

 

2.6

 

Selling, general and administrative expenses 

185,577

 

 

181,064

 

 

2.5

 

 

364,627

 

 

366,598

 

 

(0.5

)

Total expenses 

816,398

 

 

798,882

 

 

2.2

 

 

1,627,659

 

 

1,597,781

 

 

1.9

 

       
Operating income 

219,087

 

 

208,698

 

 

5.0

 

 

442,357

 

 

396,969

 

 

11.4

 

       
Nonoperating expenses 

(37,416

)

 

(41,170

)

 

9.1

 

 

(80,407

)

 

(78,812

)

 

(2.0

)

       
Income before income taxes and equity in income of equity investments 

181,671

 

 

 

167,528

 

 

 

8.4

 

 

 

 

 

361,950

 

 

 

318,157

 

 

 

13.8

 

Income tax expense 

31,128

 

 

37,415

 

 

(16.8

)

 

61,027

 

 

55,549

 

 

9.9

 

Income before equity in income of equity investments 

150,543

 

 

130,113

 

 

15.7

 

 

300,923

 

 

262,608

 

 

14.6

 

Equity in income of equity investments, net of tax 

12,217

 

 

12,322

 

 

(0.9

)

 

23,444

 

 

22,929

 

 

2.2

 

Net income 

162,760

 

 

142,435

 

 

14.3

 

 

324,367

 

 

285,537

 

 

13.6

 

Net income attributable to noncontrolling interests 

-

 

 

-

 

 

na

 

-

 

 

(1,261

)

 

100.0

 

       
Net income attributable to TSYS common shareholders 

$

 

162,760

 

 

142,435

 

 

14.3

 

%

 

$

 

324,367

 

 

284,276

 

 

14.1

 

%

       
Earnings per share (EPS):      
Basic EPS 

$

 

0.92

 

 

0.78

 

 

17.7

 

%

 

$

 

1.83

 

 

1.56

 

 

16.9

 

%

       
Diluted EPS 

$

 

0.91

 

 

0.78

 

 

17.5

 

%

 

$

 

1.81

 

 

1.55

 

 

16.8

 

%

       
Weighted average shares outstanding:      
(includes participating securities)      
Basic 

176,962

 

 

182,355

 

  

177,697

 

 

181,991

 

 
Diluted 

178,514

 

 

183,575

 

  

179,198

 

 

183,456

 

 
       
Dividends declared per share 

$

 

0.13

 

 

0.13

 

  

$

 

0.26

 

 

0.26

 

 
       
Non-GAAP measures:*      
Net revenue 

$

 

979,920

 

 

956,548

 

 

2.4

 

%

 

$

 

1,960,189

 

 

1,892,045

 

 

3.6

 

%

       
Adjusted EBITDA 

$

 

368,939

 

 

345,021

 

 

6.9

 

%

 

$

 

726,226

 

 

675,943

 

 

7.4

 

%

       
Adjusted earnings 

$

 

226,686

 

 

203,796

 

 

11.2

 

%

 

$

 

442,132

 

 

411,383

 

 

7.5

 

%

       
Adjusted diluted EPS 

$

 

1.27

 

 

1.11

 

 

14.4

 

%

 

$

 

2.47

 

 

2.24

 

 

10.0

 

%

       
* See reconciliation of non-GAAP measures.      
       
na = not applicable      
 
 
 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

 

 

 

 

Change

 

 

 

 

 

 

2019

 

2018

 

$

 

%

 

 

 

2019

 

2018

 

$

 

%

 

 

Adjusted segment EBITDA:        
Issuer Solutions (a) 

 

$

209,845

 

 

195,275

 

 

 

14,570

 

 

7.5

 

%

 

$

 

414,779

 

 

391,040

 

 

 

23,739

 

 

6.1

 

%

Merchant Solutions (b) 

 

138,366

 

 

133,418

 

 

 

4,948

 

 

3.7

 

 

267,201

 

 

252,358

 

 

 

14,843

 

 

5.9

 

Consumer Solutions (c) 

 

53,595

 

 

54,545

 

 

 

(950

)

 

(1.7

)

 

117,288

 

 

108,212

 

 

 

9,076

 

 

8.4

 

Corporate admin and other 

 

(32,867

)

 

(38,217

)

 

 

5,350

 

 

14.0

 

 

(73,042

)

 

(75,667

)

 

 

2,625

 

 

3.5

 

Total (d) 

 

368,939

 

 

345,021

 

 

 

23,918

 

 

6.9

 

 

726,226

 

 

675,943

 

 

 

50,283

 

 

7.4

 

Less: 

 

       
Share-based compensation 

 

11,500

 

 

14,229

 

 

 

(2,729

)

 

(19.2

)

 

22,214

 

 

20,524

 

 

 

1,690

 

 

8.2

 

M&A and integration expenses 

 

17,150

 

 

2,581

 

 

 

14,569

 

 nm 

20,860

 

 

16,949

 

 

 

3,911

 

 

23.1

 

Depreciation and amortization 

 

104,773

 

 

104,290

 

 

 

483

 

 

0.5

 

 

208,483

 

 

208,679

 

 

 

(196

)

 

(0.1

)

Client incentive/contract cost amortization 

 

8,250

 

 

6,712

 

 

 

1,538

 

 

22.9

 

 

16,288

 

 

13,584

 

 

 

2,704

 

 

19.9

 

Contract cost asset amortization 

 

8,179

 

 

8,511

 

 

 

(332

)

 

(3.9

)

 

16,024

 

 

19,238

 

 

 

(3,214

)

 

(16.7

)

Operating income 

 

219,087

 

 

208,698

 

 

 

10,389

 

 

5.0

 

 

442,357

 

 

396,969

 

 

 

45,388

 

 

11.4

 

Nonoperating expenses 

 

(37,416

)

 

(41,170

)

 

 

3,754

 

 

9.1

 

 

(80,407

)

 

(78,812

)

 

 

(1,595

)

 

(2.0

)

Income before income taxes and equity in income of equity investments 

 

$

181,671

 

 

167,528

 

 

 

14,143

 

 

8.4

 

%

 

$

 

361,950

 

 

318,157

 

 

 

43,793

 

 

13.8

 

%

 

 

        
Net revenue by segment: 

 

       
Issuer Solutions (e) 

 

$

432,445

 

 

421,015

 

 

 

11,430

 

 

2.7

 

%

 

$

 

865,919

 

 

844,589

 

 

 

21,330

 

 

2.5

 

%

Merchant Solutions (f) 

 

364,210

 

 

346,389

 

 

 

17,821

 

 

5.1

 

 

707,166

 

 

663,792

 

 

 

43,374

 

 

6.5

 

Consumer Solutions (g) 

 

196,143

 

 

200,293

 

 

 

(4,150

)

 

(2.1

)

 

415,321

 

 

410,781

 

 

 

4,540

 

 

1.1

 

Segment net revenue 

 

992,798

 

 

967,697

 

 

 

25,101

 

 

2.6

 

 

1,988,406

 

 

1,919,162

 

 

 

69,244

 

 

3.6

 

Less: Intersegment revenues 

 

12,878

 

 

11,149

 

 

 

1,729

 

 

15.5

 

 

28,217

 

 

27,117

 

 

 

1,100

 

 

4.1

 

Net revenue (h) 

 

979,920

 

 

956,548

 

 

 

23,372

 

 

2.4

 

 

1,960,189

 

 

1,892,045

 

 

 

68,144

 

 

3.6

 

Add: reimbursable items 

 

55,565

 

 

51,032

 

 

 

4,533

 

 

8.9

 

 

109,827

 

 

102,705

 

 

 

7,122

 

 

6.9

 

Total revenues 

 

$

1,035,485

 

 

1,007,580

 

 

 

27,905

 

 

2.8

 

%

 

$

 

2,070,016

 

 

1,994,750

 

 

 

75,266

 

 

3.8

 

%

         
         
Adjusted segment EBITDA margin on segment net revenue:        
Issuer Solutions (a)/(e) 

48.5

%

 

46.4

%

   

47.9

%

 

46.3

%

  
Merchant Solutions (b)/(f) 

38.0

%

 

38.5

%

   

37.8

%

 

38.0

%

  
Consumer Solutions (c)/(g) 

27.3

%

 

27.2

%

   

28.2

%

 

26.3

%

  
         
Adjusted EBITDA margin on net revenue (d)/(h) 

37.6

%

 

36.1

%

   

37.0

%

 

35.7

%

  
         
nm = not meaningful
 
 
 
TSYS
Segment Breakdown
(unaudited)
(in thousands)
         
 Three Months Ended June 30, Six Months Ended June 30,
   Change   Change
 

2019

 

2018

 

$

 

 

%

 

2019

 

 

2018

 

 

$

 

 

%

Depreciation and amortization by segment:        
Issuer Solutions

 

 

$

 

36,129

 

29,640

 

 

6,489

 

 

21.9

 

%

 

$

 

71,296

 

 

57,971

 

 

 

13,325

 

 

23.0

 

%

Merchant Solutions 

 

8,257

 

7,523

 

 

734

 

 

9.8

 

 

15,940

 

 

15,348

 

 

 

592

 

 

3.9

 

Consumer Solutions 

 

5,202

 

4,313

 

 

889

 

 

20.6

 

 

9,618

 

 

8,573

 

 

 

1,045

 

 

12.2

 

Depreciation and amortization 

 

49,588

 

41,476

 

 

8,112

 

 

19.6

 

 

96,854

 

 

81,892

 

 

 

14,962

 

 

18.3

 

Acquisition intangible amortization 

 

53,706

 

61,865

 

 

(8,159

)

 

(13.2

)

 

108,663

 

 

124,888

 

 

 

(16,225

)

 

(13.0

)

Corporate admin and other 

 

1,479

 

949

 

 

530

 

 

55.8

 

 

2,966

 

 

1,899

 

 

 

1,067

 

 

56.2

 

Total depreciation and amortization

 

 

$

 

104,773

 

104,290

 

 

483

 

 

0.5

 

%

 

$

 

208,483

 

 

208,679

 

 

 

(196

)

 

(0.1

)

%

 

 

        
 

 

        
Segment statistical data: 

 

       
 

 

        
Issuer Solutions 

 

       
Total transactions (in millions) 

 

6,645.4

 

6,050.0

 

 

595.4

 

 

9.8

 

%

 

12,594.2

 

 

11,598.0

 

 

 

996.2

 

 

8.6

 

%

Total Accounts on File (AOF) (in millions) 

 

    

769.0

 

 

829.3

 

 

 

(60.3

)

 

(7.3

)

%

Total Traditional AOF (in millions) 

 

    

638.9

 

 

588.9

 

 

 

50.0

 

 

8.5

 

%

 

 

        
Merchant Solutions 

 

       
Point-of-sale transactions (in millions) 

 

1,700.3

 

1,498.5

 

 

201.8

 

 

13.5

 

%

 

3,224.7

 

 

2,838.0

 

 

 

386.7

 

 

13.6

 

%

Dollar sales volume (in millions)

 

 

$

 

43,890.0

 

40,362.1

 

 

3,527.9

 

 

8.7

 

%

 

$

 

84,131.6

 

 

77,628.8

 

 

 

6,502.8

 

 

8.4

 

%

Segment net revenue per transaction

 

 

$

 

0.214

 

0.231

 

 

(0.017

)

 

(7.3

)

%

 

$

 

0.219

 

 

0.234

 

 

 

(0.015

)

 

(6.2

)

%

 

 

        
Consumer Solutions 

 

       
Gross dollar volume (in millions)

 

 

$

 

8,659.8

 

8,336.2

 

 

323.6

 

 

3.9

 

%

 

$

 

18,713.3

 

 

18,030.5

 

 

 

682.8

 

 

3.8

 

%

Direct deposit 90-day active cards (in thousands)     

2,453.3

 

 

2,518.7

 

 

 

(65.4

)

 

(2.6

)

%

90-day active cards (in thousands)     

4,973.6

 

 

5,078.5

 

 

 

(104.9

)

 

(2.1

)

%

% of 90-day active cards with direct deposit     

49.3

%

 

49.6

%

  
         
 
 

TSYS

Condensed Balance Sheet

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

Assets  
Current assets:  
Cash and cash equivalents 

$

 

458,220

 

471,156

Accounts receivable, net 

513,712

 

450,322

Contract assets 

43,847

 

30,950

Other current assets 

224,048

 

188,355

Total current assets 

1,239,827

 

1,140,783

Goodwill 

4,114,851

 

4,114,838

Software and other intangible assets, net 

1,224,111

 

1,331,238

Property and equipment, net 

373,868

 

383,074

Operating lease right-of-use assets, net 

198,539

 

-

Contract assets - long-term 

56,925

 

47,839

Contract cost assets - long-term 

148,938

 

145,598

Other long term assets 

349,747

 

305,339

Total assets 

$

 

7,706,806

 

7,468,709

   
Liabilities   
Current liabilities:  
Accounts payable 

$

 

57,911

 

97,956

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

35,523

29,125

Current portion of operating lease liabilities 

43,346

 

-

Contract liabilities 

51,553

 

47,227

Other current liabilities 

312,994

 

341,293

Total current liabilities 

501,327

 

515,601

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

4,042,738

 

 

3,889,541

Long-term operating lease liabilities, excluding current portion 

167,102

 

-

Deferred income tax liabilities 

401,486

 

380,278

Contract liabilities - long-term 

25,281

 

21,489

Other long-term liabilities 

74,278

 

75,894

Total liabilities 

5,212,212

 

4,882,803

Equity  

2,494,594

 

2,585,906

Total liabilities and equity 

$

 

7,706,806

 

7,468,709

   
 
 
 

TSYS

Selected Cash Flow Highlights

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

Cash flows from operating activities:  
Net income 

$

 

324,367

 

 

285,537

 

Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of equity investments, net of tax 

(23,444

)

 

(22,929

)

Dividends received from equity investments 

-

 

 

892

 

Depreciation and amortization 

208,483

 

 

208,679

 

Amortization of debt issuance costs 

2,652

 

 

2,362

 

Amortization of operating lease right-of-use assets 

25,555

 

 

-

 

Share-based compensation 

22,214

 

 

20,524

 

Deferred income tax expense 

21,258

 

 

18,657

 

Other noncash adjustments 

27,293

 

 

43,187

 

Changes in operating assets and liabilities 

(212,948

)

 

(86,316

)

Net cash provided by operating activities  

395,430

 

 

470,593

 

   
Purchases of property and equipment 

(30,844

)

 

(48,608

)

Additions to licensed computer software from vendors 

(61,209

)

 

(19,216

)

Additions to internally developed computer software 

(24,817

)

 

(19,934

)

Cash used in acquisitions, net of cash acquired 

-

 

 

(1,051,629

)

Other investing activities 

(2,700

)

 

(4,119

)

Net cash used in investing activities  

(119,570

)

 

(1,143,506

)

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

(299,499

)

 

(2,626,534

)

Proceeds from long-term borrowings 

450,000

 

 

3,477,000

 

Debt issuance costs 

-

 

 

(15,979

)

Purchase of noncontrolling interests 

-

 

 

(126,000

)

Dividends paid on common stock 

(46,534

)

 

(47,189

)

Proceeds from exercise of stock options 

6,911

 

 

29,289

 

Repurchase of common stock 

(400,023

)

 

(82

)

Other financing activities 

-

 

 

(3,779

)

Net cash (used in) provided by financing activities  

(289,145

)

 

686,726

 

   
Cash, cash equivalents and restricted cash:  
Effect of exchange rate changes on cash, cash equivalents and restricted cash 

(332

)

 

(4,143

)

Net (decrease) increase in cash, cash equivalents and restricted cash 

(13,617

)

 

9,670

 

Cash, cash equivalents and restricted cash at beginning of period 

474,279

 

 

451,370

 

Cash, cash equivalents and restricted cash at end of period 

$

 

460,662

 

 

461,040

 

   
Supplemental  
Capital expenditures 

$

 

116,870

 

 

87,758

 

Free cash flow (non-GAAP)* 

$

 

278,560

 

 

382,835

 

   
* See reconciliation of non-GAAP measures.  
 
 
 

TSYS

Supplemental Information

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Other

 

 

 

 

 

 

 

 

 

 

 

Accounts on File (AOF):

 

 

 

Total Accounts on File

 

 

 

(in millions)

 

 

 

At June 2019

 

At June 2018

 

Percent
Change

 

 

 

Consumer 

532.2

 

 

493.8

 

 

7.8

 

%

Commercial 

61.6

 

 

56.8

 

 

8.4

 

Other 

45.1

 

 

38.3

 

 

18.0

 

Traditional AOF 

638.9

 

 

588.9

 

 

8.5

 

Prepaid*/Stored Value 

8.4

 

 

37.0

 

 

(77.2

)

Commercial Card Single Use 

121.7

 

 

106.0

 

 

14.8

 

Government Services 

-

 

 

97.4

 

 

(100.0

)

Total AOF 

769.0

 

 

829.3

 

 

(7.3

)

%

* Prepaid does not include Consumer Solutions accounts.  
    
Growth in AOF:   
(in millions) 

June 2018 to
June 2019

 

June 2017 to
June 2018

 
Beginning balance 

829.3

 

 

773.6

 

 
Change in accounts on file due to:   
Internal growth of existing clients 

56.7

 

 

53.7

 

 
New clients 

23.8

 

 

37.3

 

 
Purges/Sales 

(22.3

)

 

(34.4

)

 
Deconversions 

(118.5

)

 

(0.9

)

 
Ending balance 

769.0

 

 

829.3

 

 
 
 
 
 

 

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 second quarter 2019 financial results using the previous year’s foreign currency exchange rates. On a constant currency basis, TSYS’ total revenues for the second quarter of 2019 were higher 3.4% as compared to a reported GAAP increase of 2.8%. On a constant currency basis, TSYS’ total revenues for the first six months of 2019 were higher 4.5% as compared to a reported GAAP increase of 3.8%.
 
The schedules below also provide a reconciliation of total revenues to net revenue.
 
The schedules below also provide a reconciliation of net income attributable to TSYS common shareholders to adjusted earnings, and diluted EPS to adjusted diluted EPS.
 
Although the Company excludes the amortization of purchased intangibles from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
 
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 2019 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 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 June 30,

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

Percent

 

 

 

 

 

2019

 

2018

Change

 

 

2019

 

2018

Change

 

Consolidated
Total revenues (GAAP)

$

1,035,485

1,007,580

2.8

%

$

2,070,016

1,994,750

3.8

%

Foreign currency impact (1)

6,839

-

15,107

-

Constant currency (2) (non-GAAP)

$

1,042,324

1,007,580

3.4

%

$

2,085,123

1,994,750

4.5

%

 
Net revenue (non-GAAP)

$

979,920

956,548

2.4

%

$

1,960,189

1,892,045

3.6

%

Foreign currency impact (1)

6,354

-

14,060

-

Constant currency (2) (non-GAAP)

$

986,274

956,548

3.1

%

$

1,974,249

1,892,045

4.3

%

 
Operating income (GAAP)

$

219,087

208,698

5.0

%

$

442,357

396,969

11.4

%

Foreign currency impact (1)

1,989

-

3,886

-

Constant currency (2) (non-GAAP)

$

221,076

208,698

5.9

%

$

446,243

396,969

12.4

%

 
Issuer Solutions
Segment net revenue (GAAP)

$

432,445

421,015

2.7

%

$

865,919

844,589

2.5

%

Foreign currency impact (1)

6,415

-

14,261

-

Constant currency (2) (non-GAAP)

$

438,860

421,015

4.2

%

$

880,180

844,589

4.2

%

 
(1) Reflects the impact of calculated changes in foreign currency rates from the comparable period.
(2) Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.
 

Net Revenue

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

Percent

 

 

 

 

 

2019

 

2018

Change

 

 

2019

 

2018

Change

 

Total revenues

$

1,035,485

1,007,580

2.8

%

$

2,070,016

1,994,750

3.8

%

Less: reimbursable items

55,565

51,032

8.9

109,827

102,705

6.9

Net revenue

$

979,920

956,548

2.4

%

$

1,960,189

1,892,045

3.6

%

 
 
 
 

Reconciliation of GAAP to Non-GAAP

 

Adjusted Diluted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

2019

 

2018

 

Change

 

 

 

2019

 

 

2018

 

Change

 

Net income attributable to TSYS common shareholders (GAAP) 

$

162,760

 

142,435

 

14.3

%

 

$

324,367

  

284,276

 

14.1

%

Adjust for amounts attributable to TSYS common shareholders:       
Add: Acquisition intangible amortization* 

53,707

 

61,830

 

(13.1

)

 

$

108,663

  

124,818

 

(12.9

)

Add: Share-based compensation  

11,500

 

14,228

 

(19.2

)

 

22,214

  

20,522

 

8.2

Add: M&A and integration expenses** 

17,150

 

2,581

 nm 

20,860

  

16,949

 

23.1

Less: Tax impact of adjustments*** 

(18,431

)

(17,278

 )

(6.7

)

 

(33,972

)

 

(35,182

)

3.4

Adjusted earnings (non-GAAP)  

$

226,686

 

203,796

 

11.2

%

 

$

442,132

  

411,383

 

7.5

%

         
Diluted EPS - Net income attributable to TSYS common shareholders        
As reported (GAAP)  

$

0.91

 

0.78

 

17.5

%

 

$

1.81

  

1.55

 

16.8

%

         
Adjusted diluted EPS (non-GAAP)  

$

1.27

 

1.11

 

14.4

%

 

$

2.47

  

2.24

 

10.0

%

         
Weighted average diluted shares outstanding 

178,514

 

183,575

  

179,198

  

183,456

 
         
* The Company’s amortization of acquisition intangible assets is disclosed in its 2018 Form 10-K filing in the applicable footnotes to the consolidated financial statements (Note 7 Other Intangible Assets, Net and the amortization expense associated with acquisition technology intangibles in Note 8 Intangible Assets – Computer Software, Net).
** Costs associated with the merger & acquisitions and integrations are included in selling, general and administrative expenses and nonoperating expenses.
*** Certain of these merger and acquisition costs are nondeductible for income tax purposes.
         
nm = not meaningful
 
 
 
 

Reconciliation of GAAP to Non-GAAP

 

Adjusted EBITDA

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

 

Percent

 

 

 

 

 

 

2019

 

2018

 

Change

 

 

 

2019

 

2018

 

Change

 

Net income (GAAP) (a) 

$

 

162,760

 

142,435

 

14.3

%

 

 

$

 

324,367

 

285,537

 

13.6

%

 

Adjust for:      
Less: Equity in income of equity investments 

(12,217)

 

(12,322)

 

0.9

 

 

(23,444)

 

(22,929)

 

(2.2

)

Add: Income tax expense 

31,128

 

37,415

 

(16.8

)

 

61,027

 

55,549

 

9.9

 

Add: Interest expense, net 

43,014

 

41,119

 

4.6

 

 

85,783

 

77,772

 

10.3

 

Add: Depreciation and amortization 

104,773

 

104,290

 

0.5

 

 

208,483

 

208,679

 

(0.1

)

Add: Client incentive/contract asset amortization 

8,250

 

6,712

 

22.9

 

 

16,288

 

13,584

 

19.9

 

Add: Contract cost asset amortization 

8,179

 

8,511

 

(3.9

)

 

16,024

 

19,238

 

(16.7

)

Less/Add: (Gain)/ Loss on foreign currency translations 

(850)

 

(535)

 

(58.9

)

 

287

 

(107)

 

nm

Less/Add: Other nonoperating (income)/expenses 

(4,748)

 

586

 

nm

 

(5,663)

 

1,147

 

nm

Add: Share-based compensation 

11,500

 

14,229

 

(19.2

)

 

22,214

 

20,524

 

8.2

 

Add: M&A and integration expenses* 

17,150

 

2,581

 

nm

 

20,860

 

16,949

 

23.1

 

Adjusted EBITDA (non-GAAP) (b)  

$

 

368,939

 

345,021

 

6.9

%

 

 

$

 

726,226

 

675,943

 

7.4

%

 

       
Total revenues (c)  

$

 

1,035,485

 

1,007,580

 

2.8

%

 

 

$

 

2,070,016

 

1,994,750

 
Net income margin on total revenues (GAAP) (a)/(c) 

15.7%

 

14.1%

  

15.7%

 

14.3%

 
       
Net revenue (d)  

$

 

979,920

 

956,548

 

2.4

%

 

 

$

 

1,960,189

 

1,892,045

 
Adjusted EBITDA margin on net revenue (non-GAAP) (b)/(d) 

37.6%

 

36.1%

  

37.0%

 

35.7%

 
       
* Costs associated with the mergers & acquisitions and integrations are included in selling, general and administrative expenses.
       
nm = not meaningful
 
 
 
 

Reconciliation of GAAP to Non-GAAP

 

Free Cash Flow

(unaudited)

(in thousands)

 

 

 

 

Six Months Ended

 

 

 

 

 

 

Free cash flow:

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

2018

 

 

 

 

 

 

     
Net cash provided by operating activities (GAAP)

$

 

395,430

 

  

470,593

 

  
Capital expenditures

(116,870

)

  

(87,758

)

  
Free cash flow (non-GAAP)

$

 

278,560

 

  

382,835

 

  
     

Guidance Summary

(unaudited)

(in millions, except per share data)

     
     
Revenue:

2019

% Change

     
Total revenues (GAAP)

$

 

4,190

 

 

to

 

$

 

4,290

 

4

%

 

to

 

6

%

Less: reimbursable items

200

 

 

to

 

200

 

  
Net revenue (non-GAAP)

$

 

3,990

 

 

to

 

$

 

4,090

 

5

%

 

to

 

7

%

     
     
Earnings per share (EPS):    
     
Diluted EPS (GAAP)

$

 

3.48

 

 

to

 

$

 

3.63

 

11

%

 

to

 

16

%

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

1.27

 

 

to

 

1.27

 

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

$

 

4.75

 

 

to

 

$

 

4.90

 

6

%

 

to

 

10

%

 
 

 

Cyle Mims
TSYS Media Relations
+1.706.644.3110
cylemims@tsys.com

Shawn Roberts
TSYS Investor Relations
+1.706.644.6081
shawnroberts@tsys.com

Source: TSYS