COLUMBUS, Ga.--(BUSINESS WIRE)--TSYS (NYSE: TSS) today reported results for the second quarter of 2016.
Highlights for the second quarter of 2016 include:
- Total revenues were $1.2 billion, an increase of 66.3% over last year’s $692.7 million.
- Net revenue, which excludes reimbursable items, interchange and assessment expense, was $794.9 million, an increase of 27.8% over last year’s $622.1 million.
- GAAP net income attributable to TSYS common shareholders, which includes the expenses of closing the TransFirst acquisition during the quarter, was $69.7 million, a decrease of 15.9% from last year’s $82.8 million. GAAP basic earnings per share (EPS) were $0.38 per share, a decrease of 15.8% from last year’s $0.45.
- Adjusted EBITDA was $274.0 million, an increase of 32.7% over last year’s $206.5 million. Adjusted earnings were $135.4 million, an increase of 27.8% over last year’s $106.0 million. Adjusted EPS was $0.74, an increase of 27.9% over last year’s $0.58.
- Cash of $125 million was deployed for accelerated repayments on our bank credit facility.
“We are extremely pleased with the outstanding operational and financial performance for the second quarter as we continue to deliver on our strategic plan. All four segments achieved net revenue growth on a constant currency basis and our consolidated adjusted operating margin expanded by 202 basis points,” said M. Troy Woods, chairman and chief executive officer of TSYS.
“We are also pleased to report that the integration of our TransFirst acquisition this quarter is going very well. TransFirst, along with our legacy merchant business, gives us a commanding leadership position in the merchant acquiring market on which we intend to capitalize,” said Woods.
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, July 26. 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 are included on pages 9 to 12 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 and related presentations may contain “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 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 risks described 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 disclaim 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 | Six Months Ended | ||||||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||||||
| Total revenues | $ | 1,151,587 | 692,652 | 66.3 | % | $ | 1,890,965 | 1,354,808 | 39.6 | % | |||||||||||||||||
| Cost of services | 837,660 | 459,960 | 82.1 | 1,318,216 | 909,676 | 44.9 | |||||||||||||||||||||
| Selling, general and administrative expenses | 178,106 | 102,090 | 74.5 | 285,241 | 192,034 | 48.5 | |||||||||||||||||||||
| Total expenses | 1,015,766 | 562,050 | 80.7 | 1,603,457 | 1,101,710 | 45.5 | |||||||||||||||||||||
| Operating income | 135,821 | 130,602 | 4.0 | 287,508 | 253,098 | 13.6 | |||||||||||||||||||||
| Nonoperating expenses | (30,061 | ) | (10,209 | ) | nm | (52,501 | ) | (19,418 | ) | nm | |||||||||||||||||
| Income before income taxes, noncontrolling interests and equity in income of equity investments | |||||||||||||||||||||||||||
| 105,760 | 120,393 | (12.2 | ) | 235,007 | 233,680 | 0.6 | |||||||||||||||||||||
| Income taxes | 40,290 | 41,597 | (3.1 | ) | 83,719 | 81,379 | 2.9 | ||||||||||||||||||||
| Income before noncontrolling interests and equity in income of equity investments | |||||||||||||||||||||||||||
| 65,470 | 78,796 | (16.9 | ) | 151,288 | 152,301 | (0.7 | ) | ||||||||||||||||||||
| Equity in income of equity investments, net of tax | 6,278 | 4,579 | 37.1 | 12,868 | 9,973 | 29.0 | |||||||||||||||||||||
| Net income | 71,748 | 83,375 | (13.9 | ) | 164,156 | 162,274 | 1.2 | ||||||||||||||||||||
| Net income attributable to noncontrolling interests | (2,040 | ) | (536 | ) | nm | (3,820 | ) | (1,680 | ) | nm | |||||||||||||||||
| Net income attributable to TSYS common shareholders | $ | 69,708 | 82,839 | (15.9 | ) | % | $ | 160,336 | 160,594 | (0.2 | ) | % | |||||||||||||||
| Earnings per share (EPS): | |||||||||||||||||||||||||||
| Basic EPS | $ | 0.38 | 0.45 | (15.8 | ) | % | $ | 0.87 | 0.87 | 0.2 | % | ||||||||||||||||
| Diluted EPS | $ | 0.38 | 0.45 | (15.7 | ) | % | $ | 0.87 | 0.87 | 0.4 | % | ||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||
| (includes participating securities) | |||||||||||||||||||||||||||
| Basic | 183,724 | 183,829 | 183,489 | 184,153 | |||||||||||||||||||||||
| Diluted | 184,598 | 185,020 | 184,336 | 185,299 | |||||||||||||||||||||||
| Dividends declared per share | $ | 0.10 | 0.10 | $ | 0.20 | 0.20 | |||||||||||||||||||||
|
Non-GAAP measures: |
|||||||||||||||||||||||||||
| Net revenue | $ | 794,937 | 622,084 | 27.8 | % | $ | 1,466,581 | 1,217,868 | 20.4 | % | |||||||||||||||||
| Adjusted EPS from continuing operations | $ | 0.74 | 0.58 | 27.9 | % | $ | 1.40 | 1.11 | 25.5 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 274,032 | 206,537 | 32.7 | % | $ | 504,862 | 399,991 | 26.2 | % | |||||||||||||||||
| nm = not meaningful | |||||||||||||||||||||||||||
| TSYS | |||||||||||||||||||||||||||||
| Segment Breakdown | |||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| Change | Change | ||||||||||||||||||||||||||||
| 2016 | 2015 | $ | % | 2016 | 2015 | $ | % | ||||||||||||||||||||||
| Total revenues | $ | 1,151,587 | 692,652 | 458,935 | 66.3 | % | $ | 1,890,965 | 1,354,808 | 536,157 | 39.6 | % | |||||||||||||||||
| Less reimbursable items | 66,137 | 70,568 | (4,431 | ) | (6.3 | ) | 133,871 | 136,940 | (3,069 | ) | (2.2 | ) | |||||||||||||||||
| Less interchange & assessments expense | 290,513 | - | 290,513 | na | 290,513 | - | 290,513 | na | |||||||||||||||||||||
| Net revenue | $ | 794,937 | 622,084 | 172,853 | 27.8 | % | $ | 1,466,581 | 1,217,868 | 248,713 | 20.4 | % | |||||||||||||||||
| Net revenue (by segment): | |||||||||||||||||||||||||||||
| North America Services | $ | 297,168 | 287,199 | 9,969 | 3.5 | % | $ | 600,809 | 553,418 | 47,391 | 8.6 | % | |||||||||||||||||
| International Services | 81,771 | 83,857 | (2,086 | ) | (2.5 | ) | 157,125 | 157,587 | (462 | ) | (0.3 | ) | |||||||||||||||||
| Merchant Services | 261,467 | 117,868 | 143,599 | nm | 382,079 | 228,266 | 153,813 | 67.4 | |||||||||||||||||||||
| NetSpend | 162,620 | 141,621 | 20,999 | 14.8 | 347,613 | 296,695 | 50,918 | 17.2 | |||||||||||||||||||||
| Intersegment revenues | (8,089 | ) | (8,461 | ) | 372 | 4.4 | (21,045 | ) | (18,098 | ) | (2,947 | ) | (16.3 | ) | |||||||||||||||
| Net revenue from external customers | $ | 794,937 | 622,084 | 172,853 | 27.8 | % | $ | 1,466,581 | 1,217,868 | 248,713 | 20.4 | % | |||||||||||||||||
| Depreciation and amortization: | |||||||||||||||||||||||||||||
| North America Services | $ | 27,442 | 24,468 | 2,974 | 12.2 | % | $ | 54,925 | 47,532 | 7,393 | 15.6 | % | |||||||||||||||||
| International Services | 8,207 | 8,628 | (421 | ) | (4.9 | ) | 16,343 | 17,406 | (1,063 | ) | (6.1 | ) | |||||||||||||||||
| Merchant Services | 6,806 | 4,446 | 2,360 | 53.1 | 11,856 | 8,723 | 3,133 | 35.9 | |||||||||||||||||||||
| NetSpend | 3,116 | 2,622 | 494 | 18.8 | 6,225 | 4,915 | 1,310 | 26.7 | |||||||||||||||||||||
| Segment depreciation and amortization | 45,571 | 40,164 | 5,407 | 13.5 | 89,349 | 78,576 | 10,773 | 13.7 | |||||||||||||||||||||
| Acquisition intangible amortization | 58,486 | 22,852 | 35,634 | nm | 81,407 | 46,718 | 34,689 | 74.3 | |||||||||||||||||||||
| Corporate admin and other | 912 | 889 | 23 | 2.6 | 1,796 | 1,426 | 370 | 25.9 | |||||||||||||||||||||
| Total depreciation and amortization | $ | 104,969 | 63,905 | 41,064 | 64.3 | % | $ | 172,552 | 126,720 | 45,832 | 36.2 | % | |||||||||||||||||
| Adjusted segment operating income: | |||||||||||||||||||||||||||||
| North America Services | $ | 112,737 | 108,385 | 4,352 | 4.0 | % | $ | 237,525 | 210,956 | 26,569 | 12.6 | % | |||||||||||||||||
| International Services | 15,751 | 13,353 | 2,398 | 18.0 | 26,040 | 20,336 | 5,704 | 28.0 | |||||||||||||||||||||
| Merchant Services | 89,915 | 40,690 | 49,225 | nm | 128,272 | 74,805 | 53,467 | 71.5 | |||||||||||||||||||||
| NetSpend | 42,481 | 36,442 | 6,039 | 16.6 | 84,682 | 71,909 | 12,773 | 17.8 | |||||||||||||||||||||
| Total adjusted segment operating income | 260,884 | 198,870 | 62,014 | 31.2 | 476,519 | 378,006 | 98,513 | 26.1 | |||||||||||||||||||||
| Acquisition intangible amortization | (58,486 | ) | (22,852 | ) | (35,634 | ) | nm | (81,407 | ) | (46,718 | ) | (34,689 | ) | (74.3 | ) | ||||||||||||||
| TransFirst M&A operating expenses | (20,676 | ) | - | (20,676 | ) | na | (24,078 | ) | - | (24,078 | ) | na | |||||||||||||||||
| Share-based compensation | (12,566 | ) | (12,030 | ) | (536 | ) | (4.5 | ) | (20,724 | ) | (20,173 | ) | (551 | ) | (2.7 | ) | |||||||||||||
| Corporate admin and other | (33,335 | ) | (33,386 | ) | 51 | 0.2 | (62,802 | ) | (58,017 | ) | (4,785 | ) | (8.2 | ) | |||||||||||||||
| Operating income | $ | 135,821 | 130,602 | 5,219 | 4.0 | % | $ | 287,508 | 253,098 | 34,410 | 13.6 | % | |||||||||||||||||
| nm = not meaningful | |||||||||||||||||||||||||||||
| na = not applicable | |||||||||||||||||||||||||||||
| TSYS | |||||||
| Condensed Balance Sheet | |||||||
| (unaudited) | |||||||
| (in thousands) | |||||||
| June 30, 2016 | December 31, 2015 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 465,319 | 389,328 | ||||
| Accounts receivable, net | 396,693 | 314,705 | |||||
| Other current assets | 147,419 | 154,199 | |||||
| Total current assets | 1,009,431 | 858,232 | |||||
| Goodwill | 3,252,118 | 1,545,424 | |||||
| Other intangible assets, net | 1,002,589 | 328,320 | |||||
| Property, equipment and software, net | 746,133 | 694,968 | |||||
| Other long term assets | 466,762 | 450,951 | |||||
| Total assets | $ | 6,477,033 | 3,877,895 | ||||
| Liabilities | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 34,428 | 52,213 | ||||
| Notes payable and capital leases | 49,085 | 53,546 | |||||
| Other current liabilities | 279,972 | 233,173 | |||||
| Total current liabilities | 363,485 | 338,932 | |||||
| Bonds payable, notes payable and capital leases, excluding current portion | 3,600,154 | 1,377,541 | |||||
| Deferred tax liability | 411,532 | 192,445 | |||||
| Other long-term liabilities | 93,135 | 96,885 | |||||
| Total liabilities | 4,468,306 | 2,005,803 | |||||
| Redeemable noncontrolling interest | 23,299 | 23,410 | |||||
| Equity | |||||||
| Shareholders' equity | 1,985,428 | 1,843,018 | |||||
| Noncontrolling interests in consolidated subsidiaries | - | 5,664 | |||||
| Total equity | 1,985,428 | 1,848,682 | |||||
| Total liabilities and equity | $ | 6,477,033 | 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) | |||||||||
| Six Months Ended June 30, | |||||||||
| 2016 | 2015 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 164,156 | 162,274 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Equity in income of equity investments | (12,868 | ) | (9,973 | ) | |||||
| Dividends received from equity investments | 808 | 984 | |||||||
| Depreciation and amortization | 172,552 | 126,720 | |||||||
| Amortization of debt issuance costs | 11,451 | 917 | |||||||
| Share-based compensation | 20,724 | 20,173 | |||||||
| Deferred income tax expense(benefit) | 18,520 | (12,954 | ) | ||||||
| Other noncash adjustments | 21,764 | 21,401 | |||||||
| Changes in operating assets and liabilities | (56,227 | ) | (24,249 | ) | |||||
| Net cash provided by operating activities | 340,880 | 285,293 | |||||||
| Net cash used in investing activities | (2,428,856 | ) | (97,512 | ) | |||||
| Net cash provided by (used in) financing activities | 2,169,545 | (126,244 | ) | ||||||
| Cash and cash equivalents: | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (5,578 | ) | (1,342 | ) | |||||
| Net increase in cash and cash equivalents | 75,991 | 60,195 | |||||||
| Cash and cash equivalents at beginning of period | 389,328 | 289,183 | |||||||
| Cash and cash equivalents at end of period | $ | 465,319 | 349,378 | ||||||
| Supplemental - Non-GAAP: | |||||||||
| Net cash provided by operating activities | $ | 340,880 | 285,293 | ||||||
| Capital expenditures | (81,807 | ) | (96,552 | ) | |||||
| Free cash flow | $ | 259,073 | 188,741 | ||||||
| TSYS | ||||||||||
| Supplemental Information | ||||||||||
| (unaudited) | ||||||||||
| Other | ||||||||||
| Accounts on File (AOF): | Total Accounts on File | |||||||||
| (in millions) |
At |
At |
% |
|||||||
| Consumer | 425.3 | 400.5 | 6.2 | |||||||
| Commercial | 47.0 | 44.0 | 7.1 | |||||||
| Other | 28.8 | 24.0 | 19.6 | |||||||
| Traditional AOF | 501.1 | 468.5 | 7.0 | |||||||
| Prepaid*/Stored Value | 79.5 | 133.1 | (40.3 | ) | ||||||
| Government Services | 84.6 | 77.1 | 9.8 | |||||||
| Commercial Card Single Use | 76.9 | 72.7 | 5.8 | |||||||
| Total AOF | 742.1 | 751.4 | (1.2 | ) | ||||||
| * Prepaid does not include NetSpend accounts | ||||||||||
|
Growth in Accounts on File (in millions): |
||||||||
|
June 2015 to |
June 2014 to |
|||||||
| Beginning balance | 751.4 | 572.7 | ||||||
| Change in accounts on file due to: | ||||||||
| Internal growth of existing clients | 51.8 | 42.4 | ||||||
| New clients | 32.9 | 166.1 | ||||||
| Purges/Sales | (24.0 | ) | (29.3 | ) | ||||
| Deconversions | (70.0 | ) | (0.5 | ) | ||||
| Ending balance | 742.1 | 751.4 | ||||||
| Segment data: | |||||||||||||||||
| Three Months Ended June 30, | |||||||||||||||||
| Change | |||||||||||||||||
| 2016 | 2015 | Inc/(Dec) | % | ||||||||||||||
| North America Segment: | |||||||||||||||||
| Transactions (in millions) | 4,326.6 | 4,042.2 | 284.4 | 7.0 | % | ||||||||||||
| International Segment: | |||||||||||||||||
| Transactions (in millions) | 658.5 | 613.9 | 44.6 | 7.3 | % | ||||||||||||
| Merchant Segment: | |||||||||||||||||
| Point-of-sale transactions (in millions) | 1,159.5 | 1,089.4 | 70.1 | 6.4 | % | ||||||||||||
| Dollar sales volume (in millions) | $ | 28,560.8 | $ | 12,314.8 | $ | 16,246.0 | 131.9 | % | |||||||||
| NetSpend Segment: | |||||||||||||||||
| Gross dollar volume (in millions) | $ | 6,614.7 | $ | 5,531.0 | $ | 1,083.7 | 19.6 | % | |||||||||
| Six Months Ended June 30, | |||||||||||||||||
| Change | |||||||||||||||||
| 2016 | 2015 | Inc/(Dec) | % | ||||||||||||||
| North America Segment: | |||||||||||||||||
| AOF (in millions) | 660.9 | 677.5 | (16.6 | ) | (2.5 | ) | % | ||||||||||
| Traditional AOF (in millions) | 435.1 | 405.4 | 29.7 | 7.3 | % | ||||||||||||
| Transactions (in millions) | 8,296.2 | 7,353.0 | 943.2 | 12.8 | % | ||||||||||||
| International Segment: | |||||||||||||||||
| AOF (in millions) | 81.3 | 73.9 | 7.4 | 10.0 | % | ||||||||||||
| Traditional AOF (in millions) | 66.0 | 63.1 | 3.0 | 4.7 | % | ||||||||||||
| Transactions (in millions) | 1,276.9 | 1,185.9 | 91.0 | 7.7 | % | ||||||||||||
| Merchant Segment: | |||||||||||||||||
| Point-of-sale transactions (in millions) | 2,250.4 | 2,074.0 | 176.4 | 8.5 | % | ||||||||||||
| Dollar sales volume (in millions) | $ | 40,344.2 | $ | 23,616.4 | $ | 16,727.8 | 70.8 | % | |||||||||
| NetSpend Segment: | |||||||||||||||||
| Gross dollar volume (in millions) | $ | 15,776.2 | $ | 13,191.7 | $ | 2,584.5 | 19.6 | % | |||||||||
| Direct deposit 90-day active cards (in thousands) | 2,192.5 | 1,879.8 | 312.7 | 16.6 | % | ||||||||||||
| 90-day active cards (in thousands) | 4,448.8 | 3,885.1 | 563.7 | 14.5 | % | ||||||||||||
| % of 90-day active cards with direct deposit | 49.3 | % | 48.4 | % | |||||||||||||
| 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 second quarter 2016 financial results using the previous year’s foreign currency exchange rates. On a constant currency basis, TSYS’ total revenues grew 40.4% as compared to a reported GAAP increase of 39.6%. | |
| The schedules below also provide 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 schedules below provide a reconciliation of total revenues to net revenue. Net revenue is defined as total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and assessment fees charged by the card associations or payment networks that are recorded by TSYS as expense. | |
| 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 schedules also provide 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. | |
| 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 use 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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
| Consolidated | |||||||||||||||||||||||
| Constant currency (1) | $ | 1,157,633 | 692,652 | 67.1 | % | $ | 1,902,607 | 1,354,808 | 40.4 | % | |||||||||||||
| Foreign currency impact (2) | (6,046 | ) | - | (11,642 | ) | - | |||||||||||||||||
| Total revenues | $ | 1,151,587 | 692,652 | 66.3 | % | $ | 1,890,965 | 1,354,808 | 39.6 | % | |||||||||||||
| Constant currency (1) | $ | 800,586 | 622,084 | 28.7 | % | $ | 1,477,432 | 1,217,868 | 21.3 | % | |||||||||||||
| Foreign currency impact (2) | (5,649 | ) | - | (10,851 | ) | - | |||||||||||||||||
| Net revenue | $ | 794,937 | 622,084 | 27.8 | % | $ | 1,466,581 | 1,217,868 | 20.4 | % | |||||||||||||
| Constant currency (1) | $ | 137,848 | 130,602 | 5.5 | % | $ | 290,629 | 253,098 | 14.8 | % | |||||||||||||
| Foreign currency impact (2) | (2,027 | ) | - | (3,121 | ) | - | |||||||||||||||||
| Operating income | $ | 135,821 | 130,602 | 4.0 | % | $ | 287,508 | 253,098 | 13.6 | % | |||||||||||||
| International Services | |||||||||||||||||||||||
| Constant currency (1) | $ | 93,549 | 89,618 | 4.4 | % | $ | 180,160 | 169,420 | 6.3 | % | |||||||||||||
| Foreign currency impact (2) | (6,040 | ) | - | (11,578 | ) | - | |||||||||||||||||
| Total revenues | $ | 87,509 | 89,618 | (2.4 | ) | % | $ | 168,582 | 169,420 | (0.5 | ) | % | |||||||||||
| Constant currency (1) | $ | 87,413 | 83,857 | 4.2 | % | $ | 167,911 | 157,587 | 6.6 | % | |||||||||||||
| Foreign currency impact (2) | (5,642 | ) | - | (10,786 | ) | - | |||||||||||||||||
| Net revenue | $ | 81,771 | 83,857 | (2.5 | ) | % | $ | 157,125 | 157,587 | (0.3 | ) | % | |||||||||||
| (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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
| Total revenues | $ | 1,151,587 | 692,652 | 66.3 | % | $ | 1,890,965 | 1,354,808 | 39.6 | % | |||||||||||||
| Less reimbursable items | 66,137 | 70,568 | (6.3 | ) | 133,871 | 136,940 | (2.2 | ) | |||||||||||||||
| Less interchange & assessments expense | 290,513 | - | na | 290,513 | - | na | |||||||||||||||||
| Net revenue | $ | 794,937 | 622,084 | 27.8 | % | $ | 1,466,581 | 1,217,868 | 20.4 | % | |||||||||||||
| na = not applicable | |||||||||||||||||||||||
| 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, | ||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||
|
|
2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
|
Income from continuing operations attributable to TSYS common shareholders |
$ | 69,708 | 82,839 | (15.9 | ) | % | $ | 160,336 | 160,594 | (0.2 | ) | % | |||||||||||
| Adjust for amounts attributable to TSYS common shareholders: | |||||||||||||||||||||||
| Add: Acquisition intangible amortization | $ | 58,210 | 22,576 | nm | 80,855 | 46,167 | 75.1 | ||||||||||||||||
| Add: Share-based compensation | 12,557 | 12,024 | 4.4 | 20,707 | 20,167 | 2.7 | |||||||||||||||||
| Add: TransFirst M&A expenses* | 20,676 | - | na | 33,859 | - | na | |||||||||||||||||
| Less: Tax impact of adjustments** | (25,735 | ) | (11,484 | ) | nm | (39,631 | ) | (22,016 | ) | (80.0 | ) | ||||||||||||
| Adjusted earnings | $ | 135,416 | 105,955 | 27.8 | % | $ | 256,126 | 204,912 | 25.0 | % | |||||||||||||
| Basic EPS - Income from continuing operations attributable to TSYS common shareholders | |||||||||||||||||||||||
| As reported (GAAP) | $ | 0.38 | 0.45 | (15.8 | ) | % | $ | 0.87 | 0.87 | 0.2 | % | ||||||||||||
| Adjusted EPS | $ | 0.74 | 0.58 | 27.9 | % | $ | 1.40 | 1.11 | 25.5 | % | |||||||||||||
| Weighted average shares outstanding | 183,724 | 183,829 | 183,489 | 184,153 | |||||||||||||||||||
|
* Costs associated with the TransFirst acquisition and integration which 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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
| Net income | $ | 71,748 | 83,375 | (13.9 | ) | % | $ | 164,156 | 162,274 | 1.2 | % | ||||||||||||
| Adjust for: | |||||||||||||||||||||||
| Deduct: Equity in income of equity investments | (6,278 | ) | (4,579 | ) | (37.1 | ) | (12,868 | ) | (9,973 | ) | (29.0 | ) | |||||||||||
| Add: Income taxes | 40,290 | 41,597 | (3.1 | ) | 83,719 | 81,379 | 2.9 | ||||||||||||||||
| Add: Nonoperating expense | 30,061 | 10,209 | nm | 52,501 | 19,418 | nm | |||||||||||||||||
| Add: Depreciation and amortization | 104,969 | 63,905 | 64.3 | 172,552 | 126,720 | 36.2 | |||||||||||||||||
| EBITDA | $ | 240,790 | 194,507 | 23.8 | % | $ | 460,060 | 379,818 | 21.1 | % | |||||||||||||
| Adjust for: | |||||||||||||||||||||||
| Add: Share-based compensation | 12,566 | 12,030 | 4.5 | 20,724 | 20,173 | 2.7 | |||||||||||||||||
| Add: TransFirst M&A expenses* | 20,676 | - | na | 24,078 | - | na | |||||||||||||||||
| Adjusted EBITDA | $ | 274,032 | 206,537 | 32.7 | % | $ | 504,862 | 399,991 | 26.2 | % | |||||||||||||
|
* Costs associated with the TransFirst acquisition and integration which are included in selling, general and administrative expenses. |
|||||||||||||||||||||||
| nm = not meaningful | |||||||||||||||||||||||
| na = not applicable | |||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP | ||||||||||||||||||||||
| Segment Operating Margin and Consolidated Adjusted Operating Margin | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||
| Three Months Ended June 30, 2016 | Three Months Ended June 30, 2015 | |||||||||||||||||||||
| Adjusted Segment | Adjusted | Adjusted Segment | Adjusted | |||||||||||||||||||
| Operating Income | Net Revenue | Operating Margin | Operating Income | Net Revenue | Operating Margin | |||||||||||||||||
| North America Services | $ | 112,737 | 297,168 | 37.94 | % | $ | 108,385 | 287,199 | 37.74 | % | ||||||||||||
| International Services | 15,751 | 81,771 | 19.26 | 13,353 | 83,857 | 15.92 | ||||||||||||||||
| Merchant Services | 89,915 | 261,467 | 34.39 | 40,690 | 117,868 | 34.52 | ||||||||||||||||
| NetSpend | 42,481 | 162,620 | 26.12 | 36,442 | 141,621 | 25.73 | ||||||||||||||||
| Intersegment | - | (8,089 | ) | - | (8,461 | ) | ||||||||||||||||
| Corporate admin and other | (33,335 | ) | (33,386 | ) | ||||||||||||||||||
| Subtotal | $ | 227,549 | 794,937 | 28.62 | % | $ | 165,484 | 622,084 | 26.60 | % | ||||||||||||
| Acquisition intangible amortization | (58,486 | ) | (22,852 | ) | ||||||||||||||||||
| TransFirst M&A expenses* | (20,676 | ) | - | |||||||||||||||||||
| Share-based compensation | (12,566 | ) | (12,030 | ) | ||||||||||||||||||
| Operating income and margin** | $ | 135,821 | 794,937 | 17.09 | % | $ | 130,602 | 622,084 | 20.99 | % | ||||||||||||
| Reimbursable items | 66,137 | 70,568 | ||||||||||||||||||||
| Interchange and assessments | 290,513 | - | ||||||||||||||||||||
| Operating income and margin (US GAAP) | ||||||||||||||||||||||
| $ | 135,821 | 1,151,587 | 11.79 | % | $ | 130,602 | 692,652 | 18.86 | % | |||||||||||||
| Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | |||||||||||||||||||||
| Adjusted Segment | Adjusted | Adjusted Segment | Adjusted | |||||||||||||||||||
| Operating Income | Net Revenue | Operating Margin | Operating Income | Net Revenue | Operating Margin | |||||||||||||||||
| North America Services | $ | 237,525 | 600,809 | 39.53 | % | $ | 210,956 | 553,418 | 38.12 | % | ||||||||||||
| International Services | 26,040 | 157,125 | 16.57 | 20,336 | 157,587 | 12.90 | ||||||||||||||||
| Merchant Services | 128,272 | 382,079 | 33.57 | 74,805 | 228,266 | 32.77 | ||||||||||||||||
| NetSpend | 84,682 | 347,613 | 24.36 | 71,909 | 296,695 | 24.24 | ||||||||||||||||
| Intersegment | - | (21,045 | ) | - | (18,098 | ) | ||||||||||||||||
| Corporate admin and other | (62,802 | ) | (58,017 | ) | ||||||||||||||||||
| Subtotal | $ | 413,717 | 1,466,581 | 28.21 | % | $ | 319,989 | 1,217,868 | 26.27 | % | ||||||||||||
| Acquisition intangible amortization | (81,407 | ) | (46,718 | ) | ||||||||||||||||||
| TransFirst M&A expenses* | (24,078 | ) | - | |||||||||||||||||||
| Share-based compensation | (20,724 | ) | (20,173 | ) | ||||||||||||||||||
| Operating income and margin** | $ | 287,508 | 1,466,581 | 19.60 | % | $ | 253,098 | 1,217,868 | 20.78 | % | ||||||||||||
| Reimbursable items | 133,871 | 136,940 | ||||||||||||||||||||
| Interchange and assessments | 290,513 | - | ||||||||||||||||||||
| Operating income and margin (US GAAP) | ||||||||||||||||||||||
| $ | 287,508 | 1,890,965 | 15.20 | % | $ | 253,098 | 1,354,808 | 18.68 | % | |||||||||||||
|
* Costs associated with the TransFirst acquisition and integration which are included in selling, general and administrative expenses. |
||||||||||||||||||||||
| ** Operating margin on net revenue. | ||||||||||||||||||||||
