TSS Total System Services

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

July 28, 2015

Date of Report (Date of Earliest Event Reported)

 

 

Total System Services, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Georgia		1-10254		58-1493818
(State of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

One TSYS Way, Columbus, Georgia 31901

(Address of principal executive offices) (Zip Code)

(706) 649-2310

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On July 28, 2015, Total System Services, Inc. (“Registrant”) issued a press release announcing financial results for the second quarter ended June 30, 2015. The press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. The information in the press release shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934 except as shall be expressly set forth by specific reference in such filing.

 

Item 7.01

Regulation FD Disclosure.

On July 28, 2015, Registrant will hold an investor conference call and webcast to discuss its financial results for the second quarter ended June 30, 2015. A copy of the presentation to be used during the conference call is attached hereto as Exhibit 99.2 and incorporated herein by reference. The information in the presentation shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934 except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

 

2

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				TOTAL SYSTEM SERVICES, INC. (“Registrant”)
Dated: July 28, 2015				By:		/s/ Kathleen Moates
						Kathleen Moates
						Senior Deputy General Counsel

 

3

Exhibit 99.1

 

 

Total System Services, Inc. One TSYS Way P.O. Box 2567 Columbus, GA 31902-2567		+1.706.649.2307 +1.706.649.5740 www.tsys.com

For immediate release:

Contacts:

Shawn Roberts

TSYS Investor Relations

+1.706.644.6081

shawnroberts@tsys.com

TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

Raises 2015 Adjusted EPS Guidance Growth to 15-17%

COLUMBUS, Ga., July 28, 2015 — TSYS (NYSE: TSS) today reported results for the second quarter and year to date.

“For the second quarter in a row, we exceeded our expectations that resulted in another outstanding quarter and year-to-date performance. Organic revenue grew 13.7% year-to-date as we continue to deliver exceptional performance across our key metrics,” said M. Troy Woods, chairman, president and chief executive officer of TSYS.

“As a result of our great performance during the first half of the year, we are raising our revenues before reimbursables guidance range to 10-12%, up from the previous range of 8-10%, and our adjusted earnings per share (EPS) guidance range to 15-17%, up from the previous range of 12-14%,” said Woods.

Highlights for the second quarter of 2015 include:

 

•

Adjusted EPS from continuing operations were $0.58, an increase of 29.0%. On a GAAP basis, basic EPS from continuing operations were $0.45, an increase of 40.5%.

 

•

Income from continuing operations attributable to TSYS’ shareholders was $82.8 million, an increase of 38.6%.

 

•

Adjusted EBITDA was $206.5 million, an increase of 20.9%.

 

•

Total revenues for the quarter were $692.7 million, an increase of 15.1%. Revenues before reimbursable items were $622.1 million, an increase of 15.6%.

 

•

Adjusted operating margin was 26.6%. GAAP operating margin was 18.9%.

 

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TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

Highlights for the first six months of 2015 include:

 

•

Adjusted EPS from continuing operations were $1.11, an increase of 34.6%. On a GAAP basis, basic EPS from continuing operations were $0.87, an increase of 49.6%.

 

•

Income from continuing operations attributable to TSYS’ shareholders was $160.6 million, an increase of 47.2%.

 

•

Adjusted EBITDA was $400.0 million, an increase of 24.8%.

 

•

Total revenues were $1.4 billion, an increase of 13.4%. Revenues before reimbursable items were $1.2 billion, an increase of 13.7%.

 

•

Adjusted operating margin was 26.3%. GAAP operating margin was 18.7%.

“During the quarter, we purchased 700,000 shares of our stock under our share repurchase program bringing our year to date total to 2.2 million shares with a total spend of $83.5 million. Coupled with our dividends of $36.9 million, we returned $120.4 million to our shareholders, which was 74.2% of available year-to-date free cash flow,” said Woods.

 

		2015 Revised Financial Outlook
		Range (in millions, except per share amounts)		Percent Change
Total revenues		$2,667 to $2,716		9% to 11%
Revenues before reimbursable items		$2,412 to $2,456		10% to 12%
Adjusted EPS attributable to TSYS common shareholders from continuing operations*		$  2.25 to $  2.29		15% to 17%
* Average Basic Weighted Shares		184

 

*	Note: The impact of any future share repurchases is not included.

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, July 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.

 

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TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

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 9 to 12 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.

 

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TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

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.

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TSYS Announces Second Quarter 2015 Earnings

Page 5 of 12

 

 

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

 

		Three Months Ended June 30,												Six Months Ended June 30,
		2015				2014				Percent Change				2015				2014				Percent Change
Total revenues		$	692,652				602,036				15.1	%		$	1,354,808				1,194,883				13.4	%
Cost of services			459,941				416,489				10.4				909,646				839,372				8.4
Selling, general and administrative expenses			102,109				86,784				17.7				192,064				176,051				9.1
Total expenses			562,050				503,273				11.7				1,101,710				1,015,423				8.5
Operating income			130,602				98,763				32.2				253,098				179,460				41.0
Nonoperating expenses			(10,209	)			(10,385	)			1.7				(19,418	)			(20,198	)			3.9
Income before income taxes, noncontrolling interests and equity in income of equity investments			120,393				88,378				36.2				233,680				159,262				46.7
Income taxes			41,597				30,771				35.2				81,379				55,106				47.7
Income before noncontrolling interests and equity in income of equity investments			78,796				57,607				36.8				152,301				104,156				46.2
Equity in income of equity investments, net of tax			4,579				3,600				27.2				9,973				7,696				29.6
Income from continuing operations, net of tax			83,375				61,207				36.2				162,274				111,852				45.1
Gain from discontinued operations, net of tax			—				50,133				nm				—				51,113				nm
Net income			83,375				111,340				(25.1	)			162,274				162,965				(0.4	)
Net income attributable to noncontrolling interests			(536	)			(1,436	)			62.7				(1,680	)			(3,759	)			55.3
Net income attributable to TSYS common shareholders		$	82,839				109,904				(24.6	)%		$	160,594				159,206				0.9	%
Basic earnings per share (EPS):
Income from continuing operations to TSYS common shareholders*		$	0.45				0.32				40.5	%		$	0.87				0.58				49.6	%
Gain from discontinued operations to TSYS common shareholders*			—				0.27				nm				—				0.27				nm
Basic EPS		$	0.45				0.59				(23.6	)%		$	0.87				0.85				2.5	%
Diluted EPS:
Income from continuing operations to TSYS common shareholders*		$	0.45				0.32				41.1	%		$	0.87				0.58				50.5	%
Gain from discontinued operations to TSYS common shareholders*			—				0.27				nm				—				0.26				nm
Diluted EPS		$	0.45				0.58				(23.3	)%		$	0.87				0.84				3.1	%
Weighted average shares outstanding:
(includes participating securities)
Basic			183,829				186,373								184,153				187,058
Diluted			185,020				188,367								185,299				189,437
Dividends declared per share		$	0.10				0.10							$	0.20				0.20
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax		$	82,839				59,771				38.6	%		$	160,594				109,092				47.2	%
Gain from discontinued operations, net of tax			—				50,133				nm				—				50,114				nm
Net income		$	82,839				109,904				(24.6	)%		$	160,594				159,206				0.9	%
Non-GAAP measures:
Adjusted EPS from continuing operations		$	0.58				0.45				29.0	%		$	1.11				0.83				34.6	%
Adjusted EBITDA		$	206,537				170,894				20.9	%		$	399,991				320,489				24.8	%

nm = not meaningful

*	EPS amounts may not total due to rounding.

 

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TSYS Announces Second Quarter 2015 Earnings

Page 6 of 12

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

		Three Months Ended June 30,																Six Months Ended June 30,
										Change																Change
		2015				2014				$				%				2015				2014				$				%
Revenues before reimbursable items:
North America Services		$	287,199				233,217				53,982				23.1	%		$	553,418				457,585				95,833				20.9	%
International Services			83,857				84,732				(875	)			(1.0	)			157,587				161,505				(3,918	)			(2.4	)
Merchant Services			117,868				108,335				9,533				8.8				228,266				212,960				15,306				7.2
NetSpend			141,621				116,833				24,788				21.2				296,695				249,473				47,222				18.9
Intersegment revenues			(8,461	)			(5,050	)			(3,411	)			(67.5	)			(18,098	)			(10,705	)			(7,393	)			(69.1	)
Revenues before reimbursable items from external customers		$	622,084				538,067				84,017				15.6	%		$	1,217,868				1,070,818				147,050				13.7	%
Total revenues:
North America Services		$	333,844				273,324				60,520				22.1	%		$	643,077				535,502				107,575				20.1	%
International Services			89,618				90,466				(848	)			(0.9	)			169,420				172,844				(3,424	)			(2.0	)
Merchant Services			137,472				128,017				9,455				7.4				266,576				250,707				15,869				6.3
NetSpend			141,621				116,833				24,788				21.2				296,695				249,473				47,222				18.9
Intersegment revenues			(9,903	)			(6,604	)			(3,299	)			(50.0	)			(20,960	)			(13,643	)			(7,317	)			(53.6	)
Revenues from external customers		$	692,652				602,036				90,616				15.1	%		$	1,354,808				1,194,883				159,925				13.4	%
Depreciation and amortization:
North America Services		$	24,468				20,928				3,540				16.9	%		$	47,532				41,204				6,328				15.4	%
International Services			8,628				9,761				(1,133	)			(11.6	)			17,406				19,566				(2,160	)			(11.0	)
Merchant Services			4,446				3,567				879				24.6				8,723				6,967				1,756				25.2
NetSpend			2,622				1,890				732				38.7				4,915				3,625				1,290				35.6
Segment depreciation and amortization			40,164				36,146				4,018				11.1				78,576				71,362				7,214				10.1
Acquisition intangible amortization			22,852				24,282				(1,430	)			(5.9	)			46,718				48,595				(1,877	)			(3.9	)
Corporate admin and other			889				533				356				66.8				1,426				1,038				388				37.4
Total depreciation and amortization		$	63,905				60,961				2,944				4.8	%		$	126,720				120,995				5,725				4.7	%
Adjusted segment operating income:
North America Services		$	108,385				84,578				23,807				28.1	%		$	210,956				159,155				51,801				32.5	%
International Services			13,353				11,743				1,610				13.7				20,336				16,298				4,038				24.8
Merchant Services			40,690				32,896				7,794				23.7				74,805				63,064				11,741				18.6
NetSpend			36,442				30,703				5,739				18.7				71,909				59,421				12,488				21.0
Total adjusted segment operating income			198,870				159,920				38,950				24.4				378,006				297,938				80,068				26.9
Acquisition intangible amortization			(22,852	)			(24,282	)			1,430				5.9				(46,718	)			(48,595	)			1,877				3.9
NetSpend M&A operating expenses			—				(1,182	)			1,182				nm				—				(2,435	)			2,435				nm
Share-based compensation			(12,030	)			(9,988	)			(2,042	)			(20.4	)			(20,173	)			(17,599	)			(2,574	)			(14.6	)
Corporate admin and other			(33,386	)			(25,705	)			(7,681	)			(29.9	)			(58,017	)			(49,849	)			(8,168	)			(16.4	)
Operating income		$	130,602				98,763				31,839				32.2	%		$	253,098				179,460				73,638				41.0	%
Other:
Reimbursable items:
North America Services		$	46,645				40,107				6,538				16.3	%		$	89,659				77,917				11,742				15.1	%
International Services			5,761				5,734				27				0.5				11,833				11,339				494				4.4
Merchant Services			19,604				19,682				(78	)			(0.4	)			38,310				37,747				563				1.5
NetSpend			—				—				—				na				—				—				—				na
Intersegment revenues			(1,442	)			(1,554	)			112				7.2				(2,862	)			(2,938	)			76				2.6
Reimbursable items		$	70,568				63,969				6,599				10.3	%		$	136,940				124,065				12,875				10.4	%

 

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TSYS Announces Second Quarter 2015 Earnings

Page 7 of 12

 

 

TSYS

Condensed Balance Sheet

(unaudited)

(in thousands)

 

 

		Jun 30, 2015				Dec 31, 2014
Assets
Current assets:
Cash and cash equivalents		$	349,378				289,183
Accounts receivable, net			314,678				283,203
Other current assets			123,689				118,167
Total current assets			787,745				690,553
Goodwill			1,547,089				1,547,397
Other intangible assets, net			366,215				404,107
Property, equipment and software, net			647,115				656,733
Other long term assets			464,360				434,791
Total assets		$	3,812,524				3,733,581
Liabilities
Current liabilities:
Accounts payable		$	57,358				48,793
Bonds, notes and capital leases			43,791				50,911
Other current liabilities			230,075				196,809
Total current liabilities			331,224				296,513
Bonds, notes and capital leases, excluding current portion			1,387,514				1,405,106
Other long-term liabilities			291,249				309,826
Total liabilities			2,009,987				2,011,445
Redeemable noncontrolling interest			22,370				22,492
Equity
Shareholders’ equity			1,774,224				1,692,762
Noncontrolling interests in consolidated subsidiaries			5,943				6,882
Total equity			1,780,167				1,699,644
Total liabilities and equity		$	3,812,524				3,733,581

 

 

TSYS

Selected Cash Flow Highlights

(unaudited)

(in thousands)

 

 

		Six Months Ended June 30,
		2015				2014
Cash flows from operating activities:
Net income		$	162,274				162,965
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposal of subsidiaries			—				(85,310	)
Equity in income of equity investments			(9,973	)			(7,696	)
Dividends received from equity investments			984				—
Depreciation and amortization			126,720				122,393
Other non cash adjustments			29,537				31,996
Changes in operating assets and liabilities:			(24,249	)			15,094
Net cash provided by operating activities			285,293				239,442
Net cash used in investing activities			(97,512	)			(61,539	)
Net cash used in financing activities			(126,244	)			(207,575	)
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents			(1,342	)			2,399
Net increase in cash and cash equivalents			60,195				(27,273	)
Cash and cash equivalents at beginning of period			289,183				278,230
Cash and cash equivalents at end of period		$	349,378				250,957
Supplemental - Non GAAP:
Net cash provided by operating activities		$	285,293				239,442
Capital expenditures			(96,552	)			(105,776	)
Free cash flow			188,741				133,666
Principal payments on debt and capital leases			(26,393	)			(34,467	)
Available free cash flow		$	162,348				99,199

 

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TSYS Announces Second Quarter 2015 Earnings

Page 8 of 12

 

 

TSYS

Supplemental Information

(unaudited)

 

Other

Accounts on File:

 

		Total Accounts on File
(in millions)		June 2015				June 2014				% Change
Consumer Credit			374.1				246.5				51.8
Retail			26.4				27.9				(5.6	)
Total Consumer			400.5				274.4				45.9
Commercial			44.0				40.4				8.7
Other			24.0				20.4				18.4
Subtotal			468.5				335.2				39.8
Prepaid/Stored Value			133.1				117.7				13.2
Government Services			77.1				65.6				17.4
Commercial Card Single Use			72.7				54.2				34.2
Total AOF			751.4				572.7				31.2

Growth in Accounts on File (in millions):

 

		June 2014 to June 2015				June 2013 to June 2014
Beginning balance			572.7				488.7
Change in accounts on file due to:
Internal growth of existing clients			42.4				38.4
New clients			166.1				71.9
Purges/Sales			(29.3	)			(25.4	)
Deconversions			(0.5	)			(0.9	)
Ending balance			751.4				572.7

Segment data:

 

		Three Months Ended June 30,
										Change
		2015				2014				Inc (Dec)				%
North America Segment:
Transactions (in millions)			4,042.2				2,696.7				1,345.5				49.9	%
International Segment:
Transactions (in millions)			613.9				558.1				55.8				10.0	%
Merchant Segment:
Point-of-sale transactions (in millions)			1,089.4				1,045.1				44.3				4.2	%
Dollar sales volume (in millions)		$	12,314.8			$	11,796.5			$	518.3				4.4	%
NetSpend Segment:
Gross dollar volume (in millions)		$	5,531.0			$	4,628.0			$	903.0				19.5	%
		Six Months Ended June 30,
										Change
		2015				2014				Inc (Dec)				%
North America Segment:
Accounts on file (AOF) (in millions)			677.5				510.3				167.2				32.8	%
Transactions (in millions)			7,353.0				5,024.3				2,328.7				46.3	%
International Segment:
AOF (in millions)			73.9				62.3				11.6				18.5	%
Transactions (in millions)			1,185.9				1,076.0				109.9				10.2	%
Merchant Segment:
Point-of-sale transactions (in millions)			2,074.0				2,027.3				46.7				2.3	%
Dollar sales volume (in millions)		$	23,616.4			$	22,576.3			$	1,040.1				4.6	%
NetSpend Segment:
Gross dollar volume (in millions)		$	13,191.7			$	11,195.2			$	1,996.5				17.8	%
Direct deposit 90-day active cards (in thousands)			1,879.8				1,600.7				279.1				17.4	%
90-day active cards (in thousands)			3,885.1				3,388.0				497.1				14.7	%
% of 90-day active cards with direct deposit			48.4	%			47.2	%

 

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TSYS Announces Second Quarter 2015 Earnings

Page 9 of 12

 

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 second quarter 2015 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 14.8% as compared to a reported GAAP increase of 13.4%.

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.

 

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TSYS Announces Second Quarter 2015 Earnings

Page 10 of 12

 

Reconciliation of GAAP to Non-GAAP

 

 

Constant Currency Comparison

(unaudited)

(in thousands)

 

 

		Three Months Ended June 30,												Six Months Ended June 30,
		2015				2014				Percent Change				2015				2014				Percent Change
Consolidated
Constant currency (1)		$	702,191				602,036				16.6	%		$	1,372,054				1,194,883				14.8	%
Foreign currency (2)			(9,539	)			—								(17,246	)			—
Total revenues		$	692,652				602,036				15.1	%		$	1,354,808				1,194,883				13.4	%
Constant currency (1)		$	631,025				538,067				17.3	%		$	1,233,927				1,070,818				15.2	%
Foreign currency (2)			(8,941	)			—								(16,059	)			—
Total revenues before reimbursable items		$	622,084				538,067				15.6	%		$	1,217,868				1,070,818				13.7	%
Constant currency (1)		$	131,105				98,763				32.7	%		$	253,443				179,460				41.2	%
Foreign currency (2)			(503	)			—								(345	)			—
Operating income		$	130,602				98,763				32.2	%		$	253,098				179,460				41.0	%
International Services
Constant currency (1)		$	99,076				90,466				9.5	%		$	186,456				172,844				7.9	%
Foreign currency (2)			(9,458	)			—								(17,036	)			—
Total revenues		$	89,618				90,466				(0.9	)%		$	169,420				172,844				(2.0	)%

 

(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 June 30,												Six Months Ended June 30,
		2015				2014				Percent Change				2015				2014				Percent Change
Total revenues		$	692,652				602,036				15.1	%		$	1,354,808				1,194,883				13.4	%
Reimbursable items			70,568				63,969				10.3				136,940				124,065				10.4
Revenues before reimbursable items		$	622,084				538,067				15.6	%		$	1,217,868				1,070,818				13.7	%

 

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TSYS Announces Second Quarter 2015 Earnings

Page 11 of 12

 

Reconciliation of GAAP to Non-GAAP

 

Adjusted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

 

		Three Months Ended June 30,												Six Months Ended June 30,
		2015				2014				Percent Change				2015				2014				Percent Change
Income from continuing operations attributable to TSYS common shareholders		$	82,839				59,771				38.6	%		$	160,594				109,092				47.2	%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes		$	15,083				15,799				(4.5	)%			30,844				31,612				(2.4	)
Add: Share-based compensation, net of taxes			8,033				6,584				22.0				13,474				11,601				16.1
Add: NetSpend M&A expenses, net of taxes*			—				1,122				nm				—				2,326				nm
Adjusted earnings		$	105,955				83,276				27.2	%		$	204,912				154,631				32.5	%
Basic EPS - Income from continuing operations attributable to TSYS common shareholders
As reported (GAAP)		$	0.45				0.32				40.5	%		$	0.87				0.58				49.6	%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes			0.08				0.08				(3.3	)			0.17				0.17				(0.9	)
Add: Share-based compensation, net of taxes			0.04				0.04				23.7				0.07				0.06				18.0
Add: NetSpend M&A expenses, net of taxes*			—				0.01				nm				—				0.01				nm
Adjusted EPS **		$	0.58				0.45				29.0	%		$	1.11				0.83				34.6	%
Weighted average shares outstanding			183,829				186,373								184,153				187,058

 

*	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 June 30,												Six Months Ended June 30,
		2015				2014				Percent Change				2015				2014				Percent Change
Net income		$	83,375				111,340				(25.1	)%		$	162,274				162,965				(0.4	)%
Adjust for:
Deduct: Income from discontinued operations			—				(50,133	)			nm				—				(51,113	)			nm
Deduct: Equity in income of equity investments			(4,579	)			(3,600	)			(27.2	)			(9,973	)			(7,696	)			(29.6	)
Add: Income taxes			41,597				30,771				35.2				81,379				55,106				47.7
Add: Nonoperating expense			10,209				10,385				(1.7	)			19,418				20,198				(3.9	)
Add: Depreciation and amortization			63,905				60,961				4.8				126,720				120,995				4.7
EBITDA		$	194,507				159,724				21.8	%		$	379,818				300,455				26.4	%
Adjust for:
Add: Share-based compensation			12,030				9,988				20.4				20,173				17,599				14.6
Add: NetSpend M&A operating expenses			—				1,182				nm				—				2,435				nm
Adjusted EBITDA		$	206,537				170,894				20.9	%		$	399,991				320,489				24.8	%

nm = not meaningful

 

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TSYS Announces Second Quarter 2015 Earnings

Page 12 of 12

 

Reconciliation of GAAP to Non-GAAP

 

 

Segment Operating Margin and Consolidated Adjusted Operating Margin

(unaudited)

(in thousands)

 

 

		Three Months Ended June 30, 2015												Three Months Ended June 30, 2014
		Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin				Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin
North America Services		$	108,385				287,199				37.74	%		$	84,578				233,217				36.27	%
International Services			13,353				83,857				15.92				11,743				84,732				13.86
Merchant Services			40,690				117,868				34.52				32,896				108,335				30.37
NetSpend			36,442				141,621				25.73				30,703				116,833				26.28
Intersegment			—				(8,461	)							—				(5,050	)
Corporate admin and other			(33,386	)											(25,705	)
Adjusted operating margin		$	165,484				622,084				26.60	%		$	134,215				538,067				24.94	%
Acquisition intangible amortization			(22,852	)											(24,282	)
NetSpend M&A operating expenses			—												(1,182	)
Share-based compensation			(12,030	)											(9,988	)
Operating income and margin*		$	130,602				622,084				20.99	%		$	98,763				538,067				18.36	%
Reimbursable items							70,568												63,969
Operating margin (US GAAP)		$	130,602				692,652				18.86	%		$	98,763				602,036				16.40	%
		Six Months Ended June 30, 2015												Six Months Ended June 30, 2014
		Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin				Adjusted Segment Operating Income				Revenues before Reimbursable Items				Adjusted Operating Margin
North America Services		$	210,956				553,418				38.12	%		$	159,155				457,585				34.78	%
International Services			20,336				157,587				12.90				16,298				161,505				10.09
Merchant Services			74,805				228,266				32.77				63,064				212,960				29.61
NetSpend			71,909				296,695				24.24				59,421				249,473				23.82
Intersegment			—				(18,098	)							—				(10,705	)
Corporate admin and other			(58,017	)											(49,849	)
Adjusted operating margin		$	319,989				1,217,868				26.27	%		$	248,089				1,070,818				23.17	%
Acquisition intangible amortization			(46,718	)											(48,595	)
NetSpend M&A operating expenses			—												(2,435	)
Share-based compensation			(20,173	)											(17,599	)
Operating income and margin*		$	253,098				1,217,868				20.78	%		$	179,460				1,070,818				16.76	%
Reimbursable items							136,940												124,065
Operating margin (US GAAP)		$	253,098				1,354,808				18.68	%		$	179,460				1,194,883				15.02	%

 

*	Operating margin on revenue before reimbursable items

 

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