Revises 2015 Adjusted EPS Guidance Growth to
12-14%
TSYS (NYSE: TSS) today reported results for the first
quarter.
“Through diligent planning and execution, along with the
extraordinary efforts of many to complete the largest credit card
portfolio conversion in the history of payments, we delivered
exceptional results for the first quarter,” said M. Troy Woods,
chairman, president and chief executive officer of TSYS.
Highlights for the first quarter of 2015 include:
- Adjusted earnings per share (EPS) from
continuing operations were $0.54, an increase of 41.2%. On a GAAP
basis, basic EPS from continuing operations were $0.42, an increase
of 60.4%.
- Income from continuing operations
attributable to TSYS’ shareholders was $77.8 million, an increase
of 57.7%.
- Adjusted EBITDA was $193.5 million, an
increase of 29.3%.
- Total revenues for the quarter were
$662.2 million, an increase of 11.7%. Revenues before reimbursable
items were $595.8 million, an increase of 11.8%.
- Adjusted operating margin was 25.9%.
GAAP operating margin was 18.5%.
“During the quarter, we repurchased 1.45 million shares of our
stock, and including dividends, we returned 73% of available free
cash flow to our shareholders. As a result of the great start to
the year, we are revising our adjusted EPS guidance to grow between
12-14% from the previous range of 11-13%,” said Woods.
2015 Revised Financial Outlook Range
(in millions, except pershare amounts)
Percent
Change
Total revenues $2,620 to $2,660 7%
to 9% Revenues before reimbursable
items $2,370 to $2,410 8% to 10% Adjusted EPS attributable to TSYS
common shareholders from
continuing operations* $2.19
to
$2.23 12%
to
14% * Average Basic Weighted Shares 185
TSYS Reports First Quarter Adjusted EPS Grew
41.2%
In other business, M. Troy Woods has assumed the position of
chairman, to succeed Philip W. Tomlinson, who will continue to
serve as a director.
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. ET on
Tuesday, April 28. The conference call can be accessed via
simultaneous Internet broadcast at tsys.com by clicking on the link
under "Webcasts" on the main homepage. The replay will be archived
for 12 months and will be available approximately 30 minutes after
the completion of the call. A slide presentation to accompany the
call will be available by clicking on the link under "Webcasts" on
the main homepage of tsys.com.
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, adjusted EBITDA and adjusted EPS,
and a reconciliation of those measures to the most directly
comparable GAAP measures are included on pages 8 to 11 of this
release.
About TSYS
At TSYS® (NYSE: TSS), we believe payments should revolve around
people, not the other way around. We call this belief
People-Centered Payments®. By putting people at the center of every
decision we make, TSYS supports financial institutions, businesses
and governments in more than 80 countries. Through NetSpend®, A
TSYS Company, we empower consumers with the convenience, security,
and freedom to be self-banked. TSYS offers issuer services and
merchant payment acceptance for credit, debit, prepaid, healthcare
and business solutions.
TSYS’ headquarters are located in Columbus, Ga., U.S.A., with
local offices spread across the Americas, EMEA and Asia-Pacific.
TSYS is a member of The Civic 50 and has been named one of the 2015
World's Most Ethical Companies by Ethisphere magazine. TSYS
routinely posts all important information on its website. For more,
please visit us at www.tsys.com.
TSYS Reports First Quarter Adjusted EPS Grew
41.2%
Forward-Looking Statements
This press release contains “forward-looking statements” – that
is, statements related to future, not past, events. Forward-looking
statements often address our expected future business and financial
performance and often contain words such as “expect,” “anticipate,”
“intend,” “believe,” “should,” “plan,” “potential,” “will,”
“could,” and similar expressions. These forward-looking statements
include, among others, statements regarding TSYS’ revised earnings
guidance for 2015 total revenues, revenues before reimbursable
items 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; the effect of
current domestic and worldwide economic conditions; risks
associated with foreign operations, including adverse developments
with respect to foreign currency exchange rates; 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; 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. We do not assume any obligation to update any
forward-looking statements as a result of new information, future
developments or otherwise.
TSYS Financial Highlights (unaudited) (in thousands, except
per share data) Three Months Ended
March 31, Percent 2015 2014 Change Total revenues $ 662,156
592,848 11.7 % Cost of services 449,705 422,883 6.3 Selling,
general and administrative expenses 89,955 89,268 0.8
Total expenses 539,660 512,151 5.4 Operating
income 122,496 80,697 51.8 Nonoperating expenses (9,209 )
(9,813 ) 6.2 Income before income taxes, noncontrolling
interests and equity in income of equity investments 113,287 70,884
59.8 Income taxes 39,782 24,335 63.5 Income before
noncontrolling interests and equity in income of equity investments
73,505 46,549 57.9 Equity in income of equity investments, net of
tax 5,394 4,096 31.7 Income from continuing
operations, net of tax 78,899 50,645 55.8 Gain (Loss) from
discontinued operations, net of tax - 980 nm Net
income 78,899 51,625 52.8 Net income attributable to noncontrolling
interests (1,144 ) (2,322 ) 50.7 Net income attributable to
TSYS common shareholders $ 77,755 49,303 57.7 %
Basic earnings per share(EPS): Income from continuing
operations to TSYS common shareholders* $ 0.42 0.26 60.4 % Gain
(Loss) from discontinued operations to TSYS common shareholders* -
(0.00 ) nm Basic EPS $ 0.42 0.26 60.5 %
Diluted EPS: Income from continuing operations to TSYS common
shareholders* $ 0.42 0.26 61.8 % Gain (Loss) from discontinued
operations to TSYS common shareholders* - (0.00 ) nm Diluted
EPS $ 0.42 0.26 61.8 % Weighted average shares
outstanding: Basic 184,481 187,752 Diluted 185,563
190,384 Dividends declared per share $ 0.10
0.10 Amounts attributable to TSYS common
shareholders: Income from continuing operations, net of tax $
77,755 49,321 57.7 % Gain (Loss) from discontinued operations, net
of tax - (18 ) nm Net income $ 77,755 49,303
57.7 %
Non-GAAP measures: Adjusted EPS from
continuing operations $ 0.54 0.38 41.2 %
Adjusted EBITDA $ 193,454 149,596 29.3 % nm =
not meaningful * EPS amounts may not total due to rounding.
TSYS Segment Breakdown (unaudited) (in
thousands) Three Months Ended
March 31, Change 2015 2014 $ % Revenues before
reimbursable items: North America Services $ 266,219 224,368 41,851
18.7 % International Services 73,730 76,773 (3,043 ) (4.0 )
Merchant Services 110,398 104,625 5,773 5.5 NetSpend 155,074
132,640 22,434 16.9 Intersegment revenues (9,637
)
(5,656 ) (3,981 ) (70.4 ) Revenues before
reimbursable items from external customers $ 595,784
532,750 63,034 11.8 % Total
revenues: North America Services $ 309,233 262,178 47,055 17.9 %
International Services 79,802 82,378 (2,576 ) (3.1 ) Merchant
Services 129,104 122,690 6,414 5.2 NetSpend 155,074 132,640 22,434
16.9 Intersegment revenues (11,057
)
(7,038 ) (4,019 ) (57.1 ) Revenues from external
customers $ 662,156 592,848
69,308 11.7 %
Depreciation and amortization: North America Services $ 23,064
20,276 2,788 13.8 % International Services 8,778 9,805 (1,027 )
(10.5 ) Merchant Services 4,277 3,400 877 25.8 NetSpend 2,293
1,735 558 32.2 Segment
depreciation and amortization 38,412 35,216 3,196 9.1 Acquisition
intangible amortization 23,867 24,313 (446 ) (1.8 ) Corporate admin
and other 536 506 30 5.9
Total depreciation and amortization $ 62,815
60,035 2,780 4.6 % Adjusted segment
operating income: North America Services $ 102,570 74,578 27,992
37.5 % International Services 6,983 4,555 2,428 53.3 Merchant
Services 34,115 30,168 3,947 13.1 NetSpend 35,467
28,717 6,750 23.5 Total adjusted
segment operating income 179,135 138,018 41,117 29.8 Acquisition
intangible amortization (23,867
)
(24,313 ) 446 1.8 NetSpend M&A operating expenses - (1,253 )
1,253 nm Share-based compensation (8,143
)
(7,611 ) (532 ) (7.0 ) Corporate admin and other (24,629
)
(24,144 ) (485 ) (2.0 ) Operating income $ 122,496
80,697 41,799 51.8 %
Other: Reimbursable items: North America Services $ 43,014
37,810 5,204 13.8 % International Services 6,072 5,605 467 8.3
Merchant Services 18,706 18,065 641 3.5 NetSpend - - - na
Intersegment revenues (1,420
)
(1,382 ) (38 ) (2.7 ) Reimbursable items $ 66,372
60,098 6,274 10.4 %
TSYS
Condensed Balance Sheet (unaudited) (in thousands)
Mar 31, 2015 Dec 31, 2014
Assets Current assets: Cash
and cash equivalents $ 328,112 289,183 Accounts receivable, net
315,524 283,203 Other current assets 117,004 118,167
Total current assets 760,640 690,553 Goodwill 1,546,185 1,547,397
Other intangible assets, net 385,161 404,107 Property, equipment
and software, net 650,795 656,733 Other long term assets 434,657
434,791 Total assets $ 3,777,438 3,733,581
Liabilities Current liabilities: Accounts
payable $ 58,473 48,793 Bonds, notes and capital leases 45,526
50,911 Other current liabilities 240,494 196,809
Total current liabilities 344,493 296,513 Bonds, notes and capital
leases, excluding current portion 1,396,044 1,405,106 Other
long-term liabilities 299,480 309,826 Total
liabilities 2,040,017 2,011,445
Redeemable
noncontrolling interest 23,397 22,492
Equity Shareholders' equity 1,707,677 1,692,762
Noncontrolling interests in consolidated subsidiaries 6,347
6,882 Total equity 1,714,024 1,699,644
Total liabilities and equity $ 3,777,438 3,733,581
TSYS Selected Cash
Flow Highlights (unaudited) (in thousands) Three Months Ended March
31, 2015 2014
Cash flows from operating activities: Net
income $ 78,899 51,625 Adjustments to reconcile net income to net
cash provided by operating activities: Equity in income of equity
investments (5,394 ) (4,096 ) Depreciation and amortization 62,815
61,432 Other non cash adjustments 16,836 20,350 Changes in
operating assets and liabilities: 5,336 19,395
Net
cash provided by operating activities 158,492 148,706
Net cash used in investing activities (41,714 ) (48,064 )
Net cash used in financing activities (73,756 )
(72,474 )
Cash and cash equivalents: Effect of
exchange rate changes on cash and cash equivalents (4,093 ) 1,015
Net increase in cash and cash equivalents 38,929 29,183 Cash
and cash equivalents at beginning of period 289,183 278,230
Cash and cash equivalents at end of period 328,112 307,413
Less cash and cash equivalents of discontinued operations at end of
period - 33,252 Cash and cash equivalents of
continuing operations at end of period $ 328,112 274,161
Free cash flow $ 114,938 101,464
TSYS Supplemental Information
(unaudited)
Other:
Supplemental Information: Total Accounts on
File (in millions) March 2015 March 2014 %
Change
Consumer Credit 364.5 234.8 55.3 Retail 28.3
27.5 2.6 Total Consumer 392.8 262.3 49.8 Commercial 42.3
40.4 4.8 Other 22.7 19.7 15.2 Subtotal
457.8 322.4 42.0 Prepaid/Stored Value 126.6 120.0 5.5 Government
Services 74.5 63.0 18.3 Commercial Card Single Use 64.8
50.8 27.5 Total AOF 723.7
556.2 30.1
Growth in Accounts on
File (in millions): March 2014 to
March 2015
March 2013 to
March 2014
Beginning balance 556.2 478.5 Change in accounts on file due to:
Internal growth of existing clients 39.8 38.6 New clients 172.5
64.6 Purges/Sales (44.2 ) (24.7 ) Deconversions (0.6 )
(0.8 ) Ending balance 723.7
556.2
Three Months Ended March 31, Change 2015 2014 Inc(Dec)
% North America Segment: Accounts on file
(AOF) (in millions) 653.2 495.5 157.7 31.8 % Transactions (in
millions) 3,310.7 2,327.6 983.1 42.2 % International
Segment: AOF (in millions) 70.5 60.7 9.8 16.1 % Transactions (in
millions) 572.0 517.9 54.1 10.5 % Merchant Segment:
Point-of-sale transactions (in millions) 984.6 982.2 2.4 0.2 %
Dollar sales volume (in millions) $ 11,301.6 $ 10,779.7 $ 521.9 4.8
% NetSpend Segment: Gross dollar volume (in millions) $
7,660.7 $ 6,567.2 $ 1,093.5 16.7 % Direct deposit 90-day
active cards (in thousands) 2,403.5 2,070.3 333.2 16.1 % 90-day
active cards (in thousands) 4,193.0 3,654.9 538.1 14.7 % % of
90-day active cards with direct deposit 57.3 % 56.6 %
Reconciliation of GAAP to Non-GAAP Financial Measures
Non-GAAP Measures The schedule below provides
a reconciliation of revenues and operating results on a constant
currency basis to reported revenues and operating income. This
non-GAAP measure presents first quarter 2015 financial results
using the previous year’s foreign currency exchange rates. On a
full year constant currency basis, TSYS’ total revenues grew 13.0%
as compared to a reported GAAP increase of 11.7%. The
schedule below also provides a reconciliation of basic EPS,
adjusted for the after-tax impact of acquisition intangible
amortization, share-based compensation and merger and acquisition
costs, 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.
The schedule also provides a reconciliation of net income,
adjusted for income from discontinued operations, equity in income
of equity investments, income taxes, nonoperating expense,
depreciation and amortization, share-based compensation, and merger
and acquisition expenses, to adjusted EBITDA. 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 captions of other
companies due to potential inconsistencies in the method of
calculation. TSYS believes that its use of non-GAAP
financial measures provides investors with the same 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 the presentation
of GAAP financial measures alone would not provide its shareholders
and potential investors with the ability to appropriately analyze
its ongoing operational results, and therefore expected future
results. TSYS therefore believes that inclusion of non-GAAP
financial measures provides investors with additional information
to help them better understand its financial statements just as
management utilizes these non-GAAP financial measures to better
understand the business, manage budgets and allocate resources.
Reconciliation of GAAP to
Non-GAAP
Constant Currency Comparison (unaudited) (in
thousands) Three Months Ended March 31, Percent 2015
2014 Change
Consolidated Constant currency (1) $
669,863 592,848 13.0 % Foreign currency (2) (7,707 ) - Total
revenues $ 662,156 592,848 11.7 % Constant currency
(1) $ 602,902 532,750 13.2 % Foreign currency (2) (7,118 ) - Total
revenues before reimbursable items $ 595,784 532,750 11.8 %
Constant currency (1) $ 122,337 80,697 51.6 % Foreign
currency (2) 159 - Operating income $ 122,496 80,697
51.8 %
International Services Constant currency (1) $
87,381 82,378 6.1 % Foreign currency (2) (7,579 ) - Total revenues
$ 79,802 82,378 (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.
Revenues Before Reimbursable Items (unaudited)
(in thousands) Three Months Ended March 31, Percent 2015
2014 Change Total revenues $ 662,156 592,848 11.7 %
Reimbursable items 66,372 60,098 10.4 Revenues before
reimbursable items $ 595,784 532,750 11.8 %
Reconciliation of Cash Provided by Operating Activities to
Available Free Cash Flow (unaudited) (in thousands) Three
Months Ended March 31, 2015 2014 Net cash provided by operating
activities $ 158,492 148,706 Capital expenditures (43,554 ) (47,242
) Free cash flow 114,938 101,464 Principal payments on debt and
capital leases (15,085 ) (22,277 ) Available free cash flow $
99,853 79,187
Reconciliation of GAAP
to Non-GAAP
Adjusted Earnings per Share (unaudited) (in
thousands, except per share data) Three Months Ended
March 31, Percent
Income from continuing operations
attributable to 2015 2014 Change
TSYS common
shareholders $ 77,755 49,321 57.7 % Adjust for amounts
attributable to TSYS common shareholders: Add: Acquisition
intangible amortization, net of taxes 15,761 15,813 (0.3 ) Add:
Share-based compensation, net of taxes 5,441 5,017 8.4 Add:
NetSpend M&A expenses, net of taxes* - 1,204 nm
Adjusted earnings $ 98,957 71,355 38.7 %
Basic EPS - Income from continuing operations attributable
to TSYS common shareholders As reported (GAAP) $ 0.42
0.26 60.4 % Adjust for amounts attributable to
TSYS common shareholders: Add: Acquisition intangible amortization,
net of taxes 0.09 0.08 1.4 Add: Share-based compensation, net of
taxes 0.03 0.03 10.5 Add: NetSpend M&A expenses, net of taxes*
- 0.01 nm Adjusted EPS ** $ 0.54 0.38
41.2 % Average common shares and participating securities
184,481 187,752 * Certain merger and
acquisition costs are nondeductible for income tax purposes **
Adjusted EPS amounts may not total due to rounding.
Adjusted
EBITDA (unaudited) (in thousands) Three Months Ended March
31, Percent 2015 2014 Change
Net income $
78,899 51,625 52.8 % Adjust for: Deduct: Loss (Income) from
discontinued operations - (980 ) nm Deduct: Equity in income of
equity investments (5,394 ) (4,096 ) (31.7 ) Add: Income taxes
39,782 24,335 63.5 Add: Nonoperating expense 9,209 9,813 (6.2 )
Add: Depreciation and amortization 62,815 60,035 4.6
EBITDA $ 185,311 140,732 31.7 % Adjust for: Add: Share-based
compensation 8,143 7,611 7.0 Add: NetSpend M&A operating
expenses - 1,253 nm
Adjusted EBITDA $ 193,454
149,596 29.3 %
nm = not meaningful
Reconciliation of GAAP to Non-GAAP
Segment
Operating Margin and Consolidated Adjusted Operating Margin
(unaudited) (in thousands) Three Months Ended March
31, 2015 Three Months Ended March 31, 2014 Adjusted Segment
Revenues before Adjusted Adjusted Segment Revenues before Adjusted
Operating Income Reimbursable Items Operating Margin
Operating Income Reimbursable Items Operating Margin
North America Services $ 102,570 266,219 38.53 % $ 74,578 224,368
33.24 % International Services 6,983 73,730 9.47 4,555 76,773 5.93
Merchant Services 34,115 110,398 30.90 30,168 104,625 28.83
NetSpend 35,467 155,074 22.87 28,717 132,640 21.65 Intersegment -
(9,637 ) - (5,656 ) Corporate admin and other (24,629 ) -
(24,144 ) - Adjusted operating margin $
154,506 595,784 25.93 % $ 113,874 532,750 21.37 % Acquisition
intangible amortization (23,867 ) (24,313 ) NetSpend M&A
operating expenses - (1,253 ) Share-based compensation (8,143 )
(7,611 ) Operating income and margin* $
122,496 595,784 20.56 % $ 80,697 532,750 15.15 % Reimbursable items
66,372 60,098 Operating
margin (US GAAP) $ 122,496 662,156 18.50 % $
80,697 592,848 13.61 % * Operating
margin on revenue before reimbursable items
TSYS Investor RelationsShawn Roberts,
+1-706-644-6081shawnroberts@tsys.com
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