Revises Revenue Guidance and Reaffirms EPS Guidance
TSYS (NYSE: 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 RevisedFinancial OutlookRange
Percent
Change
(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 continuing operations (non-GAAP)
$2.78
to
$2.85
13%
to
16%
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® (NYSE: 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®’.
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 equity investments
81,075 116,715 (30.5) 232,363 269,016 (13.6) 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 portion 3,425,147 1,377,541 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)
AtSeptember 2016
AtSeptember 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 toSeptember 2016
September 2014 toSeptember 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 credits $ 141,218 119,713 18.0 % $ 399,573
324,625 23.1 %
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
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161025006732/en/
TSYS Media RelationsCyle Mims,
+1-706-644-3110cylemims@tsys.comorTSYS Investor RelationsShawn
Roberts, +1-706-644-6081shawnroberts@tsys.com
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