TSS
$74.51
Total System Services
$.74
1.00%
Earnings Details
3rd Quarter September 2017
Tuesday, October 24, 2017 4:15:03 PM
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Summary

Total System Services Beats

Total System Services (TSS) reported 3rd Quarter September 2017 earnings of $0.88 per share on revenue of $1.2 billion. The consensus earnings estimate was $0.81 per share on revenue of $1.2 billion. The Earnings Whisper number was $0.83 per share. Revenue grew 58.0% on a year-over-year basis.

The company said it now expects 2017 non-GAAP earnings of $3.29 to $3.35 per share on revenue of $4.839 billion to $4.889 billion. The company's previous guidance was earnings of $3.22 to $3.38 per share on revenue of $4.809 billion to $4.889 billion and the current consensus earnings estimate is $3.28 per share on revenue of $4.84 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
$0.88
Earnings Whisper
$0.83
Consensus Estimate
$0.81
Reported Revenue
$1.25 Bil
Revenue Estimate
$1.22 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

TSYS Reports Third Quarter Earnings

TSYS (TSS) today reported results for the third quarter of 2017.

"We delivered another outstanding quarter driven by the growth in our consolidated and segment operating income margins over 2016 that exceeded our expectations. Our strong organic revenue growth reflects the exceptional execution of our strategic goals as we remain focused on delivering outstanding performance across our company," said M. Troy Woods, chairman, president and chief executive officer of TSYS.

Highlights for the third quarter of 2017 vs. 2016:

-- Total revenues were $1.2 billion, an increase of 8.8%.

Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expenses, was $852.8 million, an increase of 8.0%.

Net income attributable to TSYS common shareholders was $123.1 million, an increase of 44.2%. Diluted EPS were $0.66, an increase of 43.3%.

Adjusted earnings (non-GAAP) were $162.7 million, an increase of 24.5%. Adjusted diluted EPS (non-GAAP) were $0.88, an increase of 23.7%.

-- Adjusted EBITDA (non-GAAP) was $309.5 million, an increase of 15.0%.

Debt was reduced an additional $175 million bringing the year-to-date reduction to $400 million and bringing the total over the past six quarters to $800 million.

"During the quarter, we also completed our deleveraging commitments and resumed our share buyback activity with the purchase of 400,000 shares of our stock for $27.6 million. Our third quarter outperformance and fourth quarter outlook allow us to increase our revenue and earnings per share guidance for 2017," said Woods.

2017 Revised Outlook

The 2017 revised guidance is below.

2017 Revised
Financial Outlook
Percent
Range
Change
(in millions, except per share amounts)
Revenue:
Total revenues (GAAP)
$4,839
to
$4,889
16%
to
17%
Net revenue (non-GAAP)
$3,345
to
$3,395
10%
to
12%
Earnings per share:
Diluted EPS (GAAP)
$2.37
to
$2.43
37%
to
40%
Adjusted diluted EPS attributable to TSYS common shareholders
$3.29
to
$3.35
18%
to
20%
(non-GAAP)
Weighted average diluted shares outstanding
186

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 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 diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 11 to 14 in the financial schedules of this release.

About TSYS

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

Our headquarters are located in Columbus, Ga., U.S.A., with approximately 11,500 team members and local offices spread across 13 countries. TSYS generated revenue of $4.2 billion in 2016, while processing more than 25.5 billion transactions. We are a member of The Civic 50 and were named one of the 2017 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’ 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
Nine Months Ended
September 30,
September 30,
Percent
Percent
2017
2016
Change
2017
2016
Change
Total revenues
$ 1,247,576
1,146,888
8.8
%
$ 3,654,676
3,037,853
20.3
%
Cost of services*
898,471
840,300
6.9
2,638,214
2,166,731
21.8
Selling, general and administrative expenses*
149,413
151,261
(1.2 )
456,339
428,287
6.5
Total expenses
1,047,884
991,561
5.7
3,094,553
2,595,018
19.2
Operating income
199,692
155,327
28.6
560,123
442,835
26.5
Nonoperating expenses*
(28,835 )
(30,368 )
5.0
(88,780 )
(82,225 )
(8.0 )
Income before income taxes and equity in income of equity
170,857
124,959
36.7
471,343
360,610
30.7
investments
Income taxes
54,628
44,247
23.5
153,917
127,966
20.3
Income before equity in income of equity investments
116,229
80,712
44.0
317,426
232,644
36.4
Equity in income of equity investments, net of tax*
8,497
6,729
26.3
30,919
18,953
63.1
Net income
124,726
87,441
42.6
348,345
251,597
38.5
Net income attributable to noncontrolling interests
(1,631 )
(2,089 )
21.9
(4,368 )
(5,909 )
26.1
Net income attributable to TSYS common shareholders
$
123,095
85,352
44.2
%
$
343,977
245,688
40.0
%
Earnings per share (EPS):
Basic EPS
$
0.67
0.46
43.9
%
$
1.87
1.34
39.6
%
Diluted EPS
$
0.66
0.46
43.3
%
$
1.85
1.33
39.2
%
Weighted average shares outstanding: (includes participating
securities)
Basic
184,272
183,830
184,107
183,601
Diluted
185,809
184,640
185,472
184,429
Dividends declared per share
$
0.13
0.10
$
0.33
0.30
Non-GAAP measures:**
Net revenue
$
852,759
789,588
8.0
%
$ 2,529,719
2,256,169
12.1
%
Adjusted EBITDA
$
309,461
269,142
15.0
%
$
904,396
774,003
16.8
%
Adjusted earnings
$
162,667
130,673
24.5
%
$
473,148
386,799
22.3
%
Adjusted diluted EPS
$
0.88
0.71
23.7
%
$
2.55
2.10
21.6
%
* Certain prior year amounts have been reclassified between
nonoperating expenses and equity in income of equity investments,
net of tax.
** See reconciliation of non-GAAP measures.
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Change
Change
2017
2016
$
%
2017
2016
$
%
Adjusted operating income by segment:
Issuer Solutions (a)
$
147,758
128,949
18,809
14.6
%
$
428,909
392,519
36,390
9.3
%
Merchant Solutions (b)
103,275
90,784
12,491
13.8
296,551
219,056
77,495
35.4
Netspend (c)
48,560
40,856
7,704
18.9
143,251
125,538
17,713
14.1
Corporate admin and other
(39,560 )
(37,022 )
(2,538 )
(6.9 )
(111,170 )
(99,830 )
(11,340 )
(11.4 )
Adjusted segment operating income (d)
260,033
223,567
36,466
16.3
757,541
637,283
120,258
18.9
Less:
Share-based compensation
8,407
13,069
(4,662 )
(35.7 )
28,462
33,792
(5,330 )
(15.8 )
TransFirst M&A and integration expenses
1,052
1,830
(778 )
(42.5 )
10,086
25,908
(15,822 )
(61.1 )
Litigation, claims, judgments or settlements
26
-
26
na
1,904
-
1,904
na
Acquisition intangible amortization
50,856
53,341
(2,485 )
(4.7 )
156,966
134,748
22,218
16.5
Operating income
199,692
155,327
44,365
28.6
560,123
442,835
117,288
26.5
Nonoperating expenses, net
(28,835 )
(30,368 )
1,533
5.0
(88,780 )
(82,225 )
(6,555 )
(8.0 )
Income before income taxes and equity in income of equity
$
170,857
124,959
45,898
36.7
%
$
471,343
360,610
110,733
30.7
%
investments
Net revenue by segment:
Issuer Solutions (e)
$
401,074
379,145
21,929
5.8
%
$ 1,181,090
1,135,016
46,074
4.1
%
Merchant Solutions (f)
281,819
262,494
19,325
7.4
820,968
644,573
176,395
27.4
Netspend (g)
179,918
155,349
24,569
15.8
560,448
502,961
57,487
11.4
Segment net revenue
862,811
796,988
65,823
8.3
2,562,506
2,282,550
279,956
12.3
Less: Intersegment revenues
10,052
7,400
2,652
35.8
32,787
26,381
6,406
24.3
Net revenue (h)
852,759
789,588
63,171
8.0
2,529,719
2,256,169
273,550
12.1
Add: reimbursable items, interchange and assessments expenses
394,817
357,300
37,517
10.5
1,124,957
781,684
343,273
43.9
Total revenues
$ 1,247,576
1,146,888
100,688
8.8
%
$ 3,654,676
3,037,853
616,823
20.3
%
Adjusted segment operating margin on segment net revenue:
Issuer Solutions (a)/(e)
36.8 %
34.0 %
36.3 %
34.6 %
Merchant Solutions (b)/(f)
36.6 %
34.6 %
36.1 %
34.0 %
Netspend (c)/(g)
27.0 %
26.3 %
25.6 %
25.0 %
Adjusted segment operating margin on net revenue: (d)/(h)
30.5 %
28.3 %
29.9 %
28.2 %
na = not applicable
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Change
Change
2017
2016
$
%
2017
2016
$
%
Depreciation and amortization by segment:
Issuer Solutions
$
36,699
34,590
2,109
6.1
%
$
109,287
105,858
3,429
3.2 %
Merchant Solutions
7,588
6,846
742
10.8
21,990
18,702
3,288
17.6
Netspend
3,785
3,241
544
16.8
12,057
9,466
2,591
27.4
Depreciation and amortization
48,072
44,677
3,395
7.6
143,334
134,026
9,308
6.9
Acquisition intangible amortization
50,856
53,341
(2,485 )
(4.7 )
156,966
134,748
22,218
16.5
Corporate admin and other
1,356
898
458
51.0
3,521
2,694
827
30.7
Total depreciation and amortization
$
100,284
98,916
1,368
1.4
%
$
303,821
271,468
32,353
11.9 %
Segment statistical data:
Issuer Solutions
Total transactions (in millions)
5,494.9
5,060.3
434.6
8.6
%
15,712.1
14,633.4
1,078.7
7.4 %
Total Accounts on file (AOF) (in millions)
797.3
738.8
58.5
7.9 %
Total Traditional AOF (in millions)
562.1
511.2
50.9
10.0 %
Merchant Solutions
Point-of-sale transactions (in millions)
1,260.9
1,177.1
83.8
7.1
%
3,622.2
3,427.6
194.6
5.7 %
Dollar sales volume (in millions)
$ 31,478.2
28,680.7
2,797.5
9.8
%
$ 91,726.1
69,024.9
22,701.2
32.9 %
Segment net revenue per transaction
$
0.223
0.223
0.001
0.2
%
$
0.227
0.188
0.039
20.5 %
Netspend
Gross dollar volume (in millions)
$
7,242.3
6,367.0
875.3
13.7
%
$ 24,455.1
22,143.3
2,311.8
10.4 %
Direct deposit 90-day active cards (in thousands)
2,315.3
2,079.8
235.5
11.3 %
90-day active cards (in thousands)
4,697.2
4,162.7
534.5
12.8 %
% of 90-day active cards with direct deposit
49.3 %
50.0 %
TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
September 30, 2017
December 31, 2016
Assets
Current assets:
Cash and cash equivalents
$
413,622
425,354
Accounts receivable, net
409,167
432,847
Other current assets
176,049
164,488
Total current assets
998,838
1,022,689
Goodwill
3,272,792
3,270,952
Software and other intangible assets, net
1,166,098
1,329,864
Property and equipment, net
282,490
282,345
Other long term assets
498,672
460,327
Total assets
$
6,218,890
6,366,177
Liabilities
Current liabilities:
Accounts payable
$
53,460
38,712
565,660
50,727
Current portion of long-term borrowings, capital leases and
license agreements
Other current liabilities
352,560
330,914
Total current liabilities
971,680
420,353
Long-term borrowings, capital leases and license agreements,
2,394,283
3,313,276
excluding current portion
Deferred income tax liabilities
374,778
419,552
Other long-term liabilities
107,987
88,983
Total liabilities
3,848,728
4,242,164
Redeemable noncontrolling interest
13,402
24,093
Equity
2,356,760
2,099,920
Total liabilities and equity
$
6,218,890
6,366,177
TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
Nine Months Ended September 30,
2017
2016
Cash flows from operating activities:
Net income
$
348,345
251,597
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in income of equity investments, net of tax
(30,919 )
(18,953 )
Dividends received from equity investments
20,589
15,246
Depreciation and amortization
303,821
271,468
Amortization of debt issuance costs
3,247
12,499
Share-based compensation
28,462
33,792
Deferred income tax (benefit) expense
(46,435 )
4,110
Other noncash adjustments
55,764
35,689
Changes in operating assets and liabilities
(30,849 )
(54,368 )
Net cash provided by operating activities
652,025
551,080
Purchases of property and equipment
(42,572 )
(32,134 )
Additions to licensed computer software from vendors
(23,114 )
(11,112 )
Additions to internally developed computer software
(22,011 )
(25,705 )
Additions to contract acquisition costs
(21,662 )
(38,384 )
Cash used in acquisitions, net of cash acquired
-
(2,345,493 )
Other investing activities
(1,436 )
(4,430 )
Net cash used in investing activities
(110,795 )
(2,457,258 )
(415,788 )
(618,598 )
Principal payments on long-term borrowings, capital lease
obligations and license agreements
Proceeds from long-term borrowings
-
2,666,295
Debt issuance costs
-
(26,563 )
Purchase of noncontrolling interests
(70,000 )
(5,878 )
Dividends paid on common stock
(55,151 )
(55,000 )
Proceeds from exercise of stock options
15,499
9,980
Other financing activities
(33,111 )
(608 )
Net cash (used in) provided by financing activities
(558,551 )
1,969,628
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents
5,589
(5,895 )
Net (decrease) increase in cash and cash equivalents
(11,732 )
57,555
Cash and cash equivalents at beginning of period
425,354
389,328
Cash and cash equivalents at end of period
$
413,622
446,883
Supplemental
Capital expenditures
$
109,359
107,335
Free cash flow (non-GAAP)*
$
542,666
443,745
* See reconciliation of non-GAAP measures.
TSYS
Supplemental Information
(unaudited)
Other
AOF:
Total Accounts on File
(in millions)
At
At
%
September 2017
September 2016
Change
Consumer
474.7
433.5
9.5
Commercial
52.8
48.0
9.9
Other
34.6
29.7
16.5
Traditional AOF
562.1
511.2
10.0
Prepaid*/Stored Value
50.6
58.9
(14.0 )
Government Services
92.1
85.7
7.5
Commercial Card Single Use
92.5
83.0
11.4
Total AOF
797.3
738.8
7.9
* Prepaid does not include Netspend accounts
Growth in Accounts on File (in millions):
September 2016 to
September 2015 to
September 2017
September 2016
Beginning balance
738.8
760.4
Change in accounts on file due to:
Internal growth of existing clients
53.2
53.8
New clients
29.5
31.6
Purges/Sales
(23.6 )
(16.7 )
Deconversions
(0.6 )
(90.3 )
Ending balance
797.3
738.8
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
and year-to-date 2017 financial results using the previous year’s
foreign currency exchange rates. On a constant currency basis, TSYS’
total year-to-date revenues for the third quarter of 2017 grew 21.0%
as compared to a reported GAAP increase of 20.3%.
The schedules below also provide a reconciliation of diluted EPS to
adjusted diluted EPS.
The schedules below also provide a reconciliation of net income to
adjusted EBITDA.
The schedules below also provide a reconciliation of cash flows from
operating activities and capital expenditures to free cash flow.
The schedules below also provide a reconciliation of 2017 guidance
of total revenues to net revenue and diluted EPS to adjusted diluted
EPS.
The tax rate used in the calculation of adjusted diluted EPS for the
quarter and year is equal to an estimate of our annual effective tax
rate on GAAP income. This effective rate is estimated annually and
may be adjusted during the year to take into account events or
trends that materially impact the effective tax rate including, but
not limited to, significant changes resulting from tax legislation,
material changes in the mix of revenues and expenses by entity and
other significant events.
TSYS believes that non-GAAP financial measures are important to
enable investors to understand and evaluate its ongoing operating
results. Accordingly, TSYS includes non-GAAP financial measures when
reporting its financial results to shareholders and potential
investors in order to provide them with an additional tool to
evaluate TSYS’ ongoing business operations. TSYS believes that the
non-GAAP financial measures are representative of comparative
financial performance that reflects the economic substance of TSYS’
current and ongoing business operations.
Although non-GAAP financial measures are often used to measure TSYS’
operating results and assess its financial performance, they are not
necessarily comparable to similarly titled measures of other
companies due to potential inconsistencies in the method of
calculation.
TSYS believes that its provision of non-GAAP financial measures
provides investors with important key financial performance
indicators that are utilized by management to assess TSYS’ operating
results, evaluate the business and make operational decisions on a
prospective, going-forward basis. Hence, management provides
disclosure of non-GAAP financial measures to give shareholders and
potential investors an opportunity to see TSYS as viewed by
management, to assess TSYS with some of the same tools that
management utilizes internally and to be able to compare such
information with prior periods. TSYS believes that inclusion of
non-GAAP financial measures provides investors with additional
information to help them better understand its financial statements
just as management utilizes these non-GAAP financial measures to
better understand the business, manage budgets and allocate
resources.
Reconciliation of GAAP to Non-GAAP
Constant Currency Comparison
(unaudited)
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Percent
Percent
2017
2016
Change
2017
2016
Change
Consolidated
Constant currency (1)
$ 1,247,808
1,146,888
8.8 %
$ 3,676,013
3,037,853
21.0 %
Foreign currency impact (2)
(232 )
-
(21,337 )
-
Total revenues
$ 1,247,576
1,146,888
8.8 %
$ 3,654,676
3,037,853
20.3 %
Constant currency (1)
$
852,975
789,588
8.0 %
$ 2,549,574
2,256,169
13.0 %
Foreign currency impact (2)
(216 )
-
(19,855 )
-
Net revenue
$
852,759
789,588
8.0 %
$ 2,529,719
2,256,169
12.1 %
Constant currency (1)
$
200,574
155,327
29.1 %
$
570,467
442,835
28.8 %
Foreign currency impact (2)
(882 )
-
(10,344 )
-
Operating income
$
199,692
155,327
28.6 %
$
560,123
442,835
26.5 %
Issuer Solutions
Constant currency (1)
$
453,665
429,078
5.7 %
$ 1,354,497
1,288,656
5.1 %
Foreign currency impact (2)
(202 )
-
(21,281 )
-
Total revenues
$
453,463
429,078
5.7 %
$ 1,333,216
1,288,656
3.5 %
Constant currency (1)
$
401,261
379,145
5.8 %
$ 1,200,889
1,135,016
5.8 %
Foreign currency impact (2)
(187 )
-
(19,799 )
-
Segment net revenue
$
401,074
379,145
5.8 %
$ 1,181,090
1,135,016
4.1 %
(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
2017
2016
Change
2017
2016
Change
Total revenues
$ 1,247,576
1,146,888
8.8 %
$ 3,654,676
3,037,853
20.3 %
Less: reimbursable items, interchange and assessments expenses
394,817
357,300
10.5
1,124,957
781,684
43.9
Net revenue
$
852,759
789,588
8.0 %
$ 2,529,719
2,256,169
12.1 %
Reconciliation of GAAP to Non-GAAP
Adjusted Diluted Earnings per Share
(unaudited)
(in thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
Percent
Percent
2017
2016
Change
2017
2016
Change
Net income attributable to TSYS common shareholders
$ 123,095
85,352
44.2
%
$ 343,977
245,688
40.0
%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization
$
50,704
53,065
(4.4 )
$ 156,489
133,920
16.9
Add: Share-based compensation
8,404
13,059
(35.6 )
28,455
33,766
(15.7 )
Add: TransFirst M&A expenses*
1,052
1,830
(42.5 )
10,025
35,689
(71.9 )
Add: Litigation, claims, judgments or settlements**
26
-
na
1,904
-
na
Less: Tax impact of adjustments***
(20,614 )
(22,633 )
8.9
(67,702 )
(62,264 )
(8.7 )
Adjusted earnings
$ 162,667
130,673
24.5
%
$ 473,148
386,799
22.3
%
Diluted EPS - Net income attributable to TSYS common
shareholders
As reported (GAAP)
$
0.66
0.46
43.3
%
$
1.85
1.33
39.2
%
Adjusted diluted EPS
$
0.88
0.71
23.7
%
$
2.55
2.10
21.6
%
Weighted average diluted shares outstanding
185,809
184,640
185,472
184,429
* 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.
*** 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
2017
2016
Change
2017
2016
Change
Net income
$ 124,726
87,441
42.6
%
$ 348,345
251,597
38.5
%
Adjust for:
Less: Equity in income of equity investments
(8,497 )
(6,729 )
(26.3 )
(30,919 )
(18,953 )
(63.1 )
Add: Income taxes
54,628
44,247
23.5
153,917
127,966
20.3
Add: Interest expense, net
28,501
30,634
(7.0 )
87,811
83,700
4.9
Add: Depreciation and amortization
100,284
98,916
1.4
303,821
271,468
11.9
Less: (Gain)/loss on foreign currency translations
427
(194 )
nm
1,250
(1,664 )
nm
Less: Other nonoperating (income)/expenses
(93 )
(72 )
(29.2 )
(281 )
189
nm
Add: Share-based compensation
8,407
13,069
(35.7 )
28,462
33,792
(15.8 )
Add: TransFirst M&A expenses*
1,052
1,830
(42.5 )
10,086
25,908
(61.1 )
Add: Litigation, claims, judgments or settlements
26
-
na
1,904
-
na
Adjusted EBITDA
$ 309,461
269,142
15.0
%
$ 904,396
774,003
16.8
%
* 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)
Nine Months Ended
Free cash flow:
September 30,
2017
2016
Net cash provided by operating activities (GAAP)
$
652,025
551,080
Capital expenditures
(109,359 )
(107,335 )
Free cash flow (non-GAAP)
$
542,666
443,745
Revised Guidance Summary
(unaudited)
(in millions, except per share data)
Revenue:
2017
% Change
Total revenues (GAAP)
$
4,839
to
$
4,889
16 %
to
17 %
1,494
to
1,494
Less: reimbursable items, interchange and assessments expenses
Net revenue (non-GAAP)
$
3,345
to
$
3,395
10 %
to
12 %
Earnings per share (EPS):
Diluted EPS (GAAP)
$
2.37
to
$
2.43
37 %
to
40 %
Acquisition intangible amortization, share-based
compensation, litigation, claims, judgments or
settlements and TransFirst M&A expenses, less
0.92
to
0.92
the tax impact of adjustments
Adjusted diluted EPS attributable to TSYS common
shareholders* (non-GAAP)
$
3.29
to
$
3.35
18 %
to
20 %
* Weighted average diluted shares outstanding
186

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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