TSS
$49.65
Total System Services
$.65
1.33%
Earnings Details
3rd Quarter September 2016
Tuesday, October 25, 2016 4:15:09 PM
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Summary

TSYS Provides Guidance

Total System Services (TSS) reported 3rd Quarter September 2016 earnings of $0.66 per share on revenue of $789.6 million. The consensus earnings estimate was $0.67 per share on revenue of $1.2 billion. Revenue grew 11.5% on a year-over-year basis.

The company said it expects 2016 non-GAAP earnings of $2.78 to $2.85 per share on revenue of $4.15 billion to $4.17 billion. The current consensus earnings estimate is $2.81 per share on revenue of $4.22 billion for the year ending December 31, 2016.

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
$0.66
Earnings Whisper
-
Consensus Estimate
$0.67
Reported Revenue
$789.6 Mil
Revenue Estimate
$1.16 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

TSYS Reports Third Quarter Earnings

TSYS (TSS) reported results for the third quarter of 2016.

"We were very pleased with this quarter’s financial performance as all four of our operating segments exceeded our expectations. We remain on track with our TransFirst integration activities and continue to be laser-focused on successfully combining our legacy merchant businesses with TransFirst," said M. Troy Woods, chairman and chief executive officer of TSYS.

Highlights for the third quarter of 2016 include:

Total revenues were $1.1 billion, an increase of 62.0% over last year’s $707.9 million.

Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expense, was $789.6 million, an increase of 24.1% over last year’s $636.4 million.

GAAP net income attributable to TSYS common shareholders was $85.4 million, a decrease of 29.2% from last year’s $120.6 million. GAAP basic earnings per share (EPS) were $0.46 per share, a decrease of 29.2% from last year’s $0.66.

Adjusted EBITDA (non-GAAP) was $269.1 million, an increase of 12.7% over last year’s $238.9 million. Q3 ’15 results included tax benefits of $15.1 million that did not recur in 2016.

Adjusted earnings (non-GAAP) were $130.7 million, a decrease of 8.8% over last year’s $143.3 million. Q3 ’15 adjusted earnings and adjusted EPS (non-GAAP) included $23.6 million and $0.13, respectively, of tax related benefits that did not recur in 2016. Q3 ’16 adjusted EPS was $0.71, which included $0.06 of headwinds for currency and severance expenses, a decrease of 8.7% over last year’s $0.78.

"Our cash flow from operating activities and free cash flow for the first nine months of the year were both records. This allowed us to reduce our debt by $175 million during the quarter, bringing the total debt reduction to $300 million year to date," said Woods.

During the third quarter, currencies, including the rapid and steep decline in the British Pound compared to the U. S. Dollar, negatively impacted total revenues and net revenue by $14 million and $13 million, respectively, on a constant currency basis compared to 2015. A similar impact is expected in Q4. This same constant currency comparison negatively impacted EPS by $0.03 in Q3 ’16 and is expected to have a similar impact in Q4.

The Consumer Financial Protection Bureau released its long-awaited rule on prepaid financial products on October 5, 2016. The new rule is not expected to have a significant financial impact on 2016 results. Additional details on the impact of the new rule will be discussed at today’s quarterly conference call.

Updated 2016 Outlook

As a result of currency headwinds, total and net revenue guidance are being adjusted. EPS guidance remains unchanged. The resulting revised guidance is below.

2016 Revised
Percent
Financial Outlook
Change
Range
(in millions, except per share amounts)
Revenue:
Total revenues (GAAP)
$4,150
to
$4,170
49%
to
50%
Net revenue (non-GAAP)
$3,030
to
$3,045
21%
to
22%
Earnings per share:
Basic EPS (GAAP)
$1.77
to
$1.83
(10%)
to
(7%)
Adjusted EPS attributable to TSYS common shareholders from
$2.78
to
$2.85
13%
to
16%
continuing operations (non-GAAP)
Average basic weighted shares
183.7

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 25. 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 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’ expectation with respect to the impact of constant currency on revenues and EPS in the fourth quarter of 2016, the expected impact of the Consumer Financial Protection Bureau’s new rule regarding prepaid financial products on TSYS’ 2016 results, TSYS’ earnings guidance for 2016 total revenues, net revenue, basic EPS and adjusted 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 closed 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 are 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
Nine Months Ended
September 30,
September 30,
Percent
Percent
2016
2015
Change
2016
2015
Change
Total revenues
$ 1,146,888
707,890
62.0 %
$ 3,037,853
2,062,698
47.3 %
Cost of services
840,300
456,465
84.1
2,166,731
1,366,141
58.6
Selling, general and administrative expenses
151,261
88,321
71.3
428,287
280,355
52.8
Total expenses*
991,561
544,786
82.0
2,595,018
1,646,496
57.6
Operating income
155,327
163,104
(4.8)
442,835
416,202
6.4
Nonoperating expenses
(30,005)
(8,564)
nm
(82,506)
(27,982)
nm
Income before income taxes, noncontrolling interests
and equity in income of equity investments
125,322
154,540
(18.9)
360,329
388,220
(7.2)
Income taxes
44,247
37,825
17.0
127,966
119,204
7.4
Income before noncontrolling interests and equity in income of
81,075
116,715
(30.5)
232,363
269,016
(13.6)
equity investments
Equity in income of equity investments, net of tax
6,366
5,336
19.3
19,234
15,309
25.6
Net income
87,441
122,051
(28.4)
251,597
284,325
(11.5)
Net income attributable to noncontrolling interests
(2,089)
(1,429)
(46.2)
(5,909)
(3,109)
(90.1)
Net income attributable to TSYS common shareholders
$
85,352
120,622
(29.2) %
$
245,688
281,216
(12.6) %
Earnings per share (EPS):
Basic EPS
$
0.46
0.66
(29.2) %
$
1.34
1.53
(12.3) %
Diluted EPS
$
0.46
0.65
(29.0) %
$
1.33
1.52
(12.1) %
Weighted average shares outstanding:
(includes participating securities)
Basic
183,830
183,954
183,601
184,320
Diluted
184,642
185,281
184,430
185,534
Dividends declared per share
$
0.10
0.10
$
0.30
0.30
Non-GAAP measures:
Net revenue
$
789,588
636,386
24.1 %
$ 2,256,169
1,854,254
21.7 %
Adjusted EPS
$
0.71
0.78
(8.7) %
$
2.11
1.89
11.5 %
Adjusted EBITDA
$
269,142
238,898
12.7 %
$
774,003
638,889
21.1 %
* Certain amounts in prior quarters in 2016 have been reclassed
between cost of services and selling, general and administrative
expenses.
** See reconciliation of non-GAAP measures.
nm = not meaningful
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Change
Change
2016
2015
$
%
2016
2015
$
%
Operating income (a)
$
155,327
163,104
(7,777 )
(4.8 )
%
$
442,835
416,202
26,633
6.4
%
Share-based compensation
13,069
11,295
1,774
15.7
33,792
31,468
2,324
7.4
TransFirst M&A expenses
1,830
-
1,830
na
25,908
-
25,908
na
Acquisition intangible amortization
53,341
22,883
30,458
nm
134,748
69,601
65,147
93.6
Adjusted operating income (b)
$
223,567
197,282
26,285
13.3
%
$
637,283
517,271
120,012
23.2
%
Adjusted segment operating income:
North America Services (c)
$
113,425
113,946
(521 )
(0.5 )
%
$
350,955
324,902
26,053
8.0
%
International Services (d)
15,524
18,370
(2,846 )
(15.5 )
41,564
38,706
2,858
7.4
Merchant Services (e)
90,784
42,387
48,397
nm
219,056
117,192
101,864
86.9
NetSpend (f)
40,856
37,315
3,541
9.5
125,538
109,224
16,314
14.9
Corporate admin and other
(37,022 )
(14,736 )
(22,286 )
nm
(99,830 )
(72,753 )
(27,077 )
(37.2 )
Adjusted segment operating income
$
223,567
197,282
26,285
13.3
%
$
637,283
517,271
120,012
23.2
%
Total revenues (g)
$ 1,146,888
707,890
438,998
62.0
%
$ 3,037,853
2,062,698
975,155
47.3
%
Less: reimbursable items, interchange and assessments expenses
357,300
71,504
285,796
nm
781,684
208,444
573,240
nm
Net revenue (h)
789,588
636,386
153,202
24.1
2,256,169
1,854,254
401,915
21.7
Intersegment revenues
8,454
7,000
1,454
20.8
29,498
25,098
4,400
17.5
Segment net revenue
$
798,042
643,386
154,656
24.0
%
$ 2,285,667
1,879,352
406,315
21.6
%
Segment net revenue
North America Services (i)
$
300,754
293,571
7,183
2.4
%
$
901,563
846,989
54,574
6.4
%
International Services (j)
79,445
86,446
(7,001 )
(8.1 )
236,570
244,033
(7,463 )
(3.1 )
Merchant Services (k)
262,494
123,721
138,773
nm
644,573
351,987
292,586
83.1
NetSpend (l)
155,349
139,648
15,701
11.2
502,961
436,343
66,618
15.3
Segment net revenue
$
798,042
643,386
154,656
24.0
%
$ 2,285,667
1,879,352
406,315
21.6
%
Operating margin (GAAP) (a)/(g)
13.5 %
23.0 %
14.6 %
20.2 %
Adjusted operating margin on net revenue (b)/(h)
28.3 %
31.0 %
28.3 %
27.9 %
Adjusted segment operating margin on net revenue
North America Services(c)/(i)
37.7 %
38.8 %
38.9 %
38.4 %
International Services (d)/(j)
19.5 %
21.3 %
17.6 %
15.9 %
Merchant Services (e)/(k)
34.6 %
34.3 %
34.0 %
33.3 %
NetSpend (f)/(l)
26.3 %
26.7 %
25.0 %
25.0 %
nm = not meaningful
na = not applicable
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Change
Change
2016
2015
$
%
2016
2015
$
%
Depreciation and amortization:
North America Services
$
27,540
25,300
2,240
8.9
%
$
82,464
72,831
9,633
13.2
%
International Services
7,050
8,678
(1,628 )
(18.8 )
23,394
26,084
(2,690 )
(10.3 )
Merchant Services
6,846
4,670
2,176
46.6
18,702
13,394
5,308
39.6
NetSpend
3,241
2,632
609
23.1
9,466
7,547
1,919
25.4
Segment depreciation and amortization
44,677
41,280
3,397
8.2
134,026
119,856
14,170
11.8
Acquisition intangible amortization
53,341
22,883
30,458
nm
134,748
69,601
65,147
93.6
Corporate admin and other
898
336
562
nm
2,694
1,762
932
52.9
Total depreciation and amortization
$
98,916
64,499
34,417
53.4
%
$
271,468
191,219
80,249
42.0
%
Segment statistical data:
Transactions (in millions)
North America Services:
4,361.5
4,156.7
204.8
4.9
%
12,657.7
11,509.6
1,148.1
10.0
%
International Services:
698.8
626.1
72.7
11.6
1,975.7
1,812.0
163.7
9.0
Total transactions
5,060.3
4,782.8
277.5
5.8
%
14,633.4
13,321.6
1,311.8
9.8
%
Accounts on file (AOF) (in millions)
North America Services:
652.5
685.5
(33.0 )
(4.8 )
%
International Services:
86.3
74.9
11.4
15.2
Total AOF
738.8
760.4
(21.6 )
(2.8 )
%
Traditional accounts on file (AOF) (in millions)
North America Services:
444.6
404.6
40.0
9.9
%
International Services:
66.6
63.3
3.3
5.2
Total Traditional AOF
511.2
467.9
43.3
9.2
%
Merchant Services
Point-of-sale transactions (in millions)
1,177.1
1,117.3
59.8
5.4
%
3,427.6
3,191.3
236.3
7.4
%
Dollar sales volume (in millions)
$ 28,680.7
12,055.7
16,625.0
nm
%
$ 69,024.9
35,671.5
33,353.4
93.5
%
NetSpend
Gross dollar volume (in millions)
$
6,367.0
5,391.2
975.8
18.1
%
$ 22,143.3
18,582.8
3,560.5
19.2
%
Direct deposit 90-day active cards (in thousands)
2,079.8
1,796.0
283.8
15.8
%
90-day active cards (in thousands)
4,162.7
3,643.4
519.3
14.3
%
% of 90-day active cards with direct deposit
50.0 %
49.3 %
TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
September 30, 2016
December 31, 2015
Assets
Current assets:
Cash and cash equivalents
$
446,883
389,328
Accounts receivable, net
413,867
314,705
Other current assets
124,118
154,199
Total current assets
984,868
858,232
Goodwill
3,254,422
1,545,424
Other intangible assets, net
954,821
328,320
Property, equipment and software, net
722,749
694,968
Other long term assets
458,318
450,951
Total assets
$
6,375,178
3,877,895
Liabilities
Current liabilities:
Accounts payable
$
36,659
52,213
Notes payable and capital leases
43,244
53,546
Other current liabilities
289,572
233,173
Total current liabilities
369,475
338,932
Bonds payable, notes payable and capital leases, excluding current
3,425,147
1,377,541
portion
Deferred tax liability
398,083
192,445
Other long-term liabilities
91,751
96,885
Total liabilities
4,284,456
2,005,803
Redeemable noncontrolling interest
25,053
23,410
Equity
Shareholders’ equity
2,065,669
1,843,018
Noncontrolling interests in consolidated subsidiaries
-
5,664
Total equity
2,065,669
1,848,682
Total liabilities and equity
$
6,375,178
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)
Nine Months Ended September 30,
2016
2015
Cash flows from operating activities:
Net income
$
251,597
284,325
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in income of equity investments
(19,234 )
(15,309 )
Dividends received from equity investments
15,246
12,092
Depreciation and amortization
271,468
191,219
Amortization of debt issuance costs
12,499
1,378
Share-based compensation
33,792
31,468
Deferred income tax expense(benefit)
4,110
(25,960 )
Other noncash adjustments
35,508
29,039
Changes in operating assets and liabilities
(54,026 )
(47,698 )
Net cash provided by operating activities
550,960
460,554
Net cash used in investing activities
(2,457,138 )
(138,618 )
Net cash provided by (used in) financing activities
1,969,628
(158,429 )
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents
(5,895 )
(4,840 )
Net increase in cash and cash equivalents
57,555
158,667
Cash and cash equivalents at beginning of period
389,328
289,183
Cash and cash equivalents at end of period
$
446,883
447,850
TSYS
Supplemental Information
(unaudited)
Other
AOF:
Total Accounts on File
(in millions)
At
At
%
September 2016
September 2015
Change
Consumer
433.5
399.0
8.6
Commercial
48.0
44.1
8.9
Other
29.7
24.8
19.5
Traditional AOF
511.2
467.9
9.2
Prepaid*/Stored Value
58.9
133.8
(56.0 )
Government Services
85.7
78.7
9.0
Commercial Card Single Use
83.0
80.0
3.8
Total AOF
738.8
760.4
(2.8 )
* Prepaid does not include NetSpend accounts
Growth in Accounts on File (in millions):
September 2015 to
September 2014 to
September 2016
September 2015
Beginning balance
760.4
605.5
Change in accounts on file due to:
Internal growth of existing clients
53.8
41.0
New clients
31.6
153.7
Purges/Sales
(16.7 )
(38.3 )
Deconversions
(90.3 )
(1.5 )
Ending balance
738.8
760.4
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 third quarter
2016 financial results using the previous year’s foreign currency
exchange rates. On a constant currency basis, TSYS’ total revenues
grew 48.5% as compared to a reported GAAP increase of 47.3%.
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 operating
margin to adjusted operating margin excluding severance.
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 2016 guidance
of total revenues to net revenue and EPS to adjusted 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 September 30,
Nine Months Ended September 30,
Percent
Percent
2016
2015
Change
2016
2015
Change
Consolidated
Constant currency (1)
$ 1,161,181
707,890
64.0
%
$ 3,063,788
2,062,698
48.5
%
Foreign currency impact (2)
(14,293 )
-
(25,935 )
-
Total revenues
$ 1,146,888
707,890
62.0
%
$ 3,037,853
2,062,698
47.3
%
Constant currency (1)
$
802,958
636,386
26.2
%
$ 2,280,389
1,854,254
23.0
%
Foreign currency impact (2)
(13,370 )
-
(24,220 )
-
Net revenue
$
789,588
636,386
24.1
%
$ 2,256,169
1,854,254
21.7
%
Constant currency (1)
$
161,567
163,104
(0.9 )
%
$
452,196
416,202
8.6
%
Foreign currency impact (2)
(6,240 )
-
(9,361 )
-
Operating income
$
155,327
163,104
(4.8 )
%
$
442,835
416,202
6.4
%
International Services
Constant currency (1)
$
99,171
92,177
7.6
%
$
279,332
261,597
6.8
%
Foreign currency impact (2)
(14,338 )
-
(25,917 )
-
Total revenues
$
84,833
92,177
(8.0 )
%
$
253,415
261,597
(3.1 )
%
Constant currency (1)
$
92,861
86,446
7.4
%
$
260,772
244,033
6.9
%
Foreign currency impact (2)
(13,416 )
-
(24,202 )
-
Net revenue
$
79,445
86,446
(8.1 )
%
$
236,570
244,033
(3.1 )
%
(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 September 30,
Nine Months Ended September 30,
Percent
Percent
2016
2015
Change
2016
2015
Change
Total revenues
$ 1,146,888
707,890
62.0
%
$ 3,037,853
2,062,698
47.3
%
Less: reimbursable items, interchange and assessments expenses
357,300
71,504
nm
781,684
208,444
nm
Net revenue
$
789,588
636,386
24.1
%
$ 2,256,169
1,854,254
21.7
%
nm = not meaningful
Reconciliation of GAAP to Non-GAAP
Adjusted Earnings per Share
(unaudited)
(in thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
Percent
Percent
2016
2015
Change
2016
2015
Change
Income attributable to TSYS common shareholders
$
85,352
120,622
(29.2 )
%
$ 245,688
281,216
(12.6 )
%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization
$
53,065
22,607
nm
$ 133,920
68,774
94.7
Add: Share-based compensation
13,059
11,291
15.7
33,766
31,459
7.3
Add: TransFirst M&A expenses*
1,830
-
na
35,689
-
na
Less: Tax impact of adjustments**
(22,633 )
(11,250 )
nm
(62,264 )
(33,267 )
(87.2 )
Adjusted earnings
$ 130,673
143,270
(8.8 )
%
$ 386,799
348,182
11.1
%
Add: Severance impact
8,749
-
na
8,749
-
na
Add: Severance impact - Share-based compensation
147
-
na
147
-
na
Add: Currency impact
6,320
-
na
9,564
-
na
Less: Federal & state R&D tax credits and related expenses
-
(15,084 )
nm
-
(15,084 )
nm
Less: Tax impact of adjustments
(4,671 )
(8,473 )
nm
(5,686 )
(8,473 )
nm
Adjusted earnings excluding impact of severance, currency and tax
$ 141,218
119,713
18.0
%
$ 399,573
324,625
23.1
%
credits
Basic EPS - Income attributable to TSYS common shareholders
As reported (GAAP)
$
0.46
0.66
(29.2 )
%
$
1.34
1.53
(12.3 )
%
Adjusted EPS
$
0.71
0.78
(8.7 )
%
$
2.11
1.89
11.5
%
Add/Less: Impact of severance, currency and tax credits
0.06
(0.13 )
nm
0.07
(0.13 )
nm
Adjusted EPS without impact of severance, currency and tax credits $
0.77
0.65
18.1
%
$
2.18
1.76
23.6
%
Weighted average shares outstanding
183,830
183,954
183,601
184,320
* Costs associated with the TransFirst acquisition and integration
that are included in selling, general and administrative expenses
and nonoperating expenses.
** 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 September 30,
Nine Months Ended September 30,
Percent
Percent
2016
2015
Change
2016
2015
Change
Net income
$
87,441
122,051
(28.4 )
%
$ 251,597
284,325
(11.5 )
%
Adjust for:
Less: Equity in income of equity investments
(6,366 )
(5,336 )
(19.3 )
(19,234 )
(15,309 )
(25.6 )
Add: Income taxes
44,247
37,825
17.0
127,966
119,204
7.4
Add: Nonoperating expense
30,005
8,564
nm
82,506
27,982
nm
Add: Depreciation and amortization
98,916
64,499
53.4
271,468
191,219
42.0
EBITDA
$ 254,243
227,603
11.7
%
$ 714,303
607,421
17.6
%
Adjust for:
Add: Share-based compensation
13,069
11,295
15.7
33,792
31,468
7.4
Add: TransFirst M&A expenses*
1,830
-
na
25,908
-
na
Adjusted EBITDA
$ 269,142
238,898
12.7
%
$ 774,003
638,889
21.1
%
* 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
TSYS
Operating Margins Excluding the Impact of Severance
(unaudited)
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
As reported
Severance
Adjusted
As reported
Severance
Adjusted
2016
2016
2016
2016
Operating income (a)
$
155,327
8,749
164,076
$
442,835
8,749
451,584
Share-based compensation
13,069
147
13,216
33,792
147
33,939
TransFirst M&A expenses
1,830
-
1,830
25,908
-
25,908
Acquisition intangible amortization
53,341
-
53,341
134,748
-
134,748
Adjusted segment operating income (b)
$
223,567
8,896
232,463
$
637,283
8,896
646,179
Adjusted segment operating income:
North America Services (c)
$
113,425
6,103
119,528
$
350,955
6,103
357,058
International Services (d)
15,524
1,882
17,406
41,564
1,882
43,446
Merchant Services (e)
90,784
81
90,865
219,056
81
219,137
NetSpend (f)
40,856
182
41,038
125,538
182
125,720
Corporate admin and other
(37,022 )
648
(36,374 )
(99,830 )
648
(99,182 )
Adjusted segment operating income (b)
$
223,567
8,896
232,463
$
637,283
8,896
646,179
Total revenues (g)
$ 1,146,888
1,146,888
$ 3,037,853
3,037,853
Less: reimbursable items, interchange and
assessments expenses
357,300
357,300
781,684
781,684
Net revenue (h)
$
789,588
789,588
$ 2,256,169
2,256,169
Segment net revenue
North America Services (i)
$
300,754
300,754
$
901,563
901,563
International Services (j)
79,445
79,445
236,570
236,570
Merchant Services (k)
262,494
262,494
644,573
644,573
NetSpend (l)
155,349
155,349
502,961
502,961
Intersegment revenues
(8,454 )
(8,454 )
(29,498 )
(29,498 )
Net revenue (h)
$
789,588
789,588
$ 2,256,169
2,256,169
Operating margin (GAAP) (a)/(g)
13.5 %
14.3 %
14.6 %
14.9 %
Adjusted operating margin on net revenue (b)/(h)
28.3 %
29.4 %
28.3 %
28.6 %
Adjusted segment operating margin on net revenue
North America Services(c)/(i)
37.7 %
39.7 %
38.9 %
39.6 %
International Services (d)/(j)
19.5 %
21.9 %
17.6 %
18.4 %
Merchant Services (e)/(k)
34.6 %
34.6 %
34.0 %
34.0 %
NetSpend (f)/(l)
26.3 %
26.4 %
25.0 %
25.0 %
Reconciliation of GAAP to Non-GAAP
Free Cash Flow
(unaudited)
(in thousands)
Nine Months Ended
Free cash flow:
September 30,
2016
2015
Net cash provided by operating activities
$
550,960
460,554
Capital expenditures
(107,335)
(136,183)
Free cash flow
$
443,625
324,371
Guidance Summary
(unaudited)
(in thousands, except per share data)
Revenue:
2016
% Change
Total revenues (GAAP)
$
4,150
to
$
4,170
49%
to
50%
Less: reimbursable items, interchange and
assessments expenses
1,120
to
1,125
Net revenue (non-GAAP)
$
3,030
to
$
3,045
21%
to
22%
Earnings per share (EPS)
Basic EPS (GAAP)
$
1.77
to
$
1.83
(10%)
to
(7%)
Acquisition intangible amortization, share-based
compensation and TransFirst M&A expenses, less
the tax impact of adjustments
1.01
to
1.02
Adjusted EPS attributable to TSYS common
$
2.78
to
$
2.85
13%
to
16%
shareholders from continuing operations* (non-GAAP)
* Average basic weighted shares
183.7

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