COLUMBUS, Ga.--(BUSINESS WIRE)--TSYS (NYSE: TSS) today reported results for the third quarter of 2017.
“We delivered another outstanding quarter driven by the growth in our consolidated and segment operating income margins over 2016 that exceeded our expectations. Our strong organic revenue growth reflects the exceptional execution of our strategic goals as we remain focused on delivering outstanding performance across our company,” said M. Troy Woods, chairman, president and chief executive officer of TSYS.
Highlights for the third quarter of 2017 vs. 2016:
- Total revenues were $1.2 billion, an increase of 8.8%.
- Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expenses, was $852.8 million, an increase of 8.0%.
- Net income attributable to TSYS common shareholders was $123.1 million, an increase of 44.2%. Diluted EPS were $0.66, an increase of 43.3%.
- Adjusted earnings (non-GAAP) were $162.7 million, an increase of 24.5%. Adjusted diluted EPS (non-GAAP) were $0.88, an increase of 23.7%.
- Adjusted EBITDA (non-GAAP) was $309.5 million, an increase of 15.0%.
- Debt was reduced an additional $175 million bringing the year-to-date reduction to $400 million and bringing the total over the past six quarters to $800 million.
“During the quarter, we also completed our deleveraging commitments and resumed our share buyback activity with the purchase of 400,000 shares of our stock for $27.6 million. Our third quarter outperformance and fourth quarter outlook allow us to increase our revenue and earnings per share guidance for 2017,” said Woods.
2017 Revised Outlook
The 2017 revised guidance is below.
|
2017 Revised |
Percent Change |
|||||||||||||
| (in millions, except per share amounts) | ||||||||||||||
| Revenue: | ||||||||||||||
| Total revenues (GAAP) | $4,839 | to | $4,889 | 16% | to | 17% | ||||||||
| Net revenue (non-GAAP) | $3,345 | to | $3,395 | 10% | to | 12% | ||||||||
| Earnings per share: | ||||||||||||||
| Diluted EPS (GAAP) | $2.37 | to | $2.43 | 37% | to | 40% | ||||||||
| Adjusted diluted EPS attributable to TSYS common shareholders (non-GAAP) |
$3.29 |
to |
$3.35 |
18% |
to |
20% |
||||||||
| Weighted average diluted shares outstanding | 186 | |||||||||||||
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 24. The conference call can be accessed via simultaneous Internet broadcast on the “Investor Relations” section of TSYS’ website at investors.tsys.com where an accompanying slide presentation will also be available. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call.
Non-GAAP Measures
This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.
Additional information about non-GAAP financial measures, including, but not limited to, net revenue, adjusted earnings, adjusted EBITDA and adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 11 to 14 in the financial schedules of this release.
About TSYS
TSYS® (NYSE: TSS) is a leading global payments provider, offering seamless, secure and innovative solutions across the payments spectrum — from issuer processing and merchant acquiring to prepaid program management . We succeed because we put people, and their needs, at the heart of every decision. It’s an approach we call ‘People-Centered Payments®’.
Our headquarters are located in Columbus, Ga., U.S.A., with approximately 11,500 team members and local offices spread across 13 countries. TSYS generated revenue of $4.2 billion in 2016, while processing more than 25.5 billion transactions. We are a member of The Civic 50 and were named one of the 2017 World's Most Ethical Companies by Ethisphere magazine. TSYS is a member of the S&P 500 and routinely posts all important information on its website. For more, visit tsys.com.
Forward-Looking Statements
This press release contains “forward-looking statements” – that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as “expect,” “anticipate,” “intend,” “believe,” “should,” “plan,” “potential,” “will,” “could,” and similar expressions. These forward-looking statements include, among others, statements regarding TSYS’ earnings guidance for 2017 total revenues, net revenue, diluted EPS and adjusted diluted EPS, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results or events to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to, the material breach of security of any of TSYS’ systems; TSYS’ ability to integrate acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions, particularly the TransFirst acquisition; the effect of current domestic and worldwide economic conditions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates, and in particular with respect to the current environment, adverse developments with respect to foreign currency exchange rates as a result of the United Kingdom’s decision to leave the European Union (Brexit); expenses incurred associated with the signing of a significant client; TSYS does not convert clients’ portfolios as scheduled; the deconversion of a significant client; changes occur in laws, rules, regulations, credit card association rules, prepaid industry rules or other industry standards affecting TSYS and our clients that may result in costly new compliance burdens on TSYS and our clients and lead to a decrease in the volume and/or number of transactions processed or limit the types and amounts of fees that can be charged to customers, and in particular the CFPB’s new rule regarding prepaid financial products; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; adverse developments with respect to the payment card industry in general, including a decline in the use of cards as a payment mechanism; and growth rates of TSYS’ existing clients are lower than anticipated or attrition rates of existing clients are higher than anticipated. Additional risks and other factors that could cause actual results or events to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. TSYS disclaims any obligation to update any forward-looking statements as a result of new information, future developments or otherwise except as required by law.
| TSYS | ||||||||||||||||||||||
| Financial Highlights | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||
| Percent | Percent | |||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
| Total revenues | $ | 1,247,576 | 1,146,888 | 8.8 | % | $ | 3,654,676 | 3,037,853 | 20.3 | % | ||||||||||||
| Cost of services* | 898,471 | 840,300 | 6.9 | 2,638,214 | 2,166,731 | 21.8 | ||||||||||||||||
| Selling, general and administrative expenses* | 149,413 | 151,261 | (1.2 | ) | 456,339 | 428,287 | 6.5 | |||||||||||||||
| Total expenses | 1,047,884 | 991,561 | 5.7 | 3,094,553 | 2,595,018 | 19.2 | ||||||||||||||||
| Operating income | 199,692 | 155,327 | 28.6 | 560,123 | 442,835 | 26.5 | ||||||||||||||||
| Nonoperating expenses* | (28,835 | ) | (30,368 | ) | 5.0 | (88,780 | ) | (82,225 | ) | (8.0 | ) | |||||||||||
|
Income before income taxes and equity in income of equity investments |
170,857 | 124,959 | 36.7 | 471,343 | 360,610 | 30.7 | ||||||||||||||||
| Income taxes | 54,628 | 44,247 | 23.5 | 153,917 | 127,966 | 20.3 | ||||||||||||||||
| Income before equity in income of equity investments | 116,229 | 80,712 | 44.0 | 317,426 | 232,644 | 36.4 | ||||||||||||||||
| Equity in income of equity investments, net of tax* | 8,497 | 6,729 | 26.3 | 30,919 | 18,953 | 63.1 | ||||||||||||||||
| Net income | 124,726 | 87,441 | 42.6 | 348,345 | 251,597 | 38.5 | ||||||||||||||||
| Net income attributable to noncontrolling interests | (1,631 | ) | (2,089 | ) | 21.9 | (4,368 | ) | (5,909 | ) | 26.1 | ||||||||||||
| Net income attributable to TSYS common shareholders | $ | 123,095 | 85,352 | 44.2 | % | $ | 343,977 | 245,688 | 40.0 | % | ||||||||||||
| Earnings per share (EPS): | ||||||||||||||||||||||
| Basic EPS | $ | 0.67 | 0.46 | 43.9 | % | $ | 1.87 | 1.34 | 39.6 | % | ||||||||||||
| Diluted EPS | $ | 0.66 | 0.46 | 43.3 | % | $ | 1.85 | 1.33 | 39.2 | % | ||||||||||||
|
Weighted average shares outstanding: (includes participating securities) |
||||||||||||||||||||||
| Basic | 184,272 | 183,830 | 184,107 | 183,601 | ||||||||||||||||||
| Diluted | 185,809 | 184,640 | 185,472 | 184,429 | ||||||||||||||||||
| Dividends declared per share | $ | 0.13 | 0.10 | $ | 0.33 | 0.30 | ||||||||||||||||
|
Non-GAAP measures:** |
||||||||||||||||||||||
| Net revenue | $ | 852,759 | 789,588 | 8.0 | % | $ | 2,529,719 | 2,256,169 | 12.1 | % | ||||||||||||
| Adjusted EBITDA | $ | 309,461 | 269,142 | 15.0 | % | $ | 904,396 | 774,003 | 16.8 | % | ||||||||||||
| Adjusted earnings | $ | 162,667 | 130,673 | 24.5 | % | $ | 473,148 | 386,799 | 22.3 | % | ||||||||||||
| Adjusted diluted EPS | $ | 0.88 | 0.71 | 23.7 | % | $ | 2.55 | 2.10 | 21.6 | % | ||||||||||||
| * Certain prior year amounts have been reclassified between nonoperating expenses and equity in income of equity investments, net of tax. | ||||||||||||||||||||||
| ** See reconciliation of non-GAAP measures. | ||||||||||||||||||||||
| TSYS | ||||||||||||||||||||||||||||
| Segment Breakdown | ||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
| Change | Change | |||||||||||||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | 2016 | $ | % | |||||||||||||||||||||
| Adjusted operating income by segment: | ||||||||||||||||||||||||||||
| Issuer Solutions (a) | $ | 147,758 | 128,949 | 18,809 | 14.6 | % | $ | 428,909 | 392,519 | 36,390 | 9.3 | % | ||||||||||||||||
| Merchant Solutions (b) | 103,275 | 90,784 | 12,491 | 13.8 | 296,551 | 219,056 | 77,495 | 35.4 | ||||||||||||||||||||
| Netspend (c) | 48,560 | 40,856 | 7,704 | 18.9 | 143,251 | 125,538 | 17,713 | 14.1 | ||||||||||||||||||||
| Corporate admin and other | (39,560 | ) | (37,022 | ) | (2,538 | ) | (6.9 | ) | (111,170 | ) | (99,830 | ) | (11,340 | ) | (11.4 | ) | ||||||||||||
| Adjusted segment operating income (d) | 260,033 | 223,567 | 36,466 | 16.3 | 757,541 | 637,283 | 120,258 | 18.9 | ||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||
| Share-based compensation | 8,407 | 13,069 | (4,662 | ) | (35.7 | ) | 28,462 | 33,792 | (5,330 | ) | (15.8 | ) | ||||||||||||||||
| TransFirst M&A and integration expenses | 1,052 | 1,830 | (778 | ) | (42.5 | ) | 10,086 | 25,908 | (15,822 | ) | (61.1 | ) | ||||||||||||||||
| Litigation, claims, judgments or settlements | 26 | - | 26 | na | 1,904 | - | 1,904 | na | ||||||||||||||||||||
| Acquisition intangible amortization | 50,856 | 53,341 | (2,485 | ) | (4.7 | ) | 156,966 | 134,748 | 22,218 | 16.5 | ||||||||||||||||||
| Operating income | 199,692 | 155,327 | 44,365 | 28.6 | 560,123 | 442,835 | 117,288 | 26.5 | ||||||||||||||||||||
| Nonoperating expenses, net | (28,835 | ) | (30,368 | ) | 1,533 | 5.0 | (88,780 | ) | (82,225 | ) | (6,555 | ) | (8.0 | ) | ||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Income before income taxes and equity in income of equity investments |
$ | 170,857 | 124,959 | 45,898 | 36.7 | % | $ | 471,343 | 360,610 | 110,733 | 30.7 | % | ||||||||||||||||
| Net revenue by segment: | ||||||||||||||||||||||||||||
| Issuer Solutions (e) | $ | 401,074 | 379,145 | 21,929 | 5.8 | % | $ | 1,181,090 | 1,135,016 | 46,074 | 4.1 | % | ||||||||||||||||
| Merchant Solutions (f) | 281,819 | 262,494 | 19,325 | 7.4 | 820,968 | 644,573 | 176,395 | 27.4 | ||||||||||||||||||||
| Netspend (g) | 179,918 | 155,349 | 24,569 | 15.8 | 560,448 | 502,961 | 57,487 | 11.4 | ||||||||||||||||||||
| Segment net revenue | 862,811 | 796,988 | 65,823 | 8.3 | 2,562,506 | 2,282,550 | 279,956 | 12.3 | ||||||||||||||||||||
| Less: Intersegment revenues | 10,052 | 7,400 | 2,652 | 35.8 | 32,787 | 26,381 | 6,406 | 24.3 | ||||||||||||||||||||
| Net revenue (h) | 852,759 | 789,588 | 63,171 | 8.0 | 2,529,719 | 2,256,169 | 273,550 | 12.1 | ||||||||||||||||||||
| Add: reimbursable items, interchange and assessments expenses | 394,817 | 357,300 | 37,517 | 10.5 | 1,124,957 | 781,684 | 343,273 | 43.9 | ||||||||||||||||||||
| Total revenues | $ | 1,247,576 | 1,146,888 | 100,688 | 8.8 | % | $ | 3,654,676 | 3,037,853 | 616,823 | 20.3 | % | ||||||||||||||||
| Adjusted segment operating margin on segment net revenue: | ||||||||||||||||||||||||||||
| Issuer Solutions (a)/(e) | 36.8 | % | 34.0 | % | 36.3 | % | 34.6 | % | ||||||||||||||||||||
| Merchant Solutions (b)/(f) | 36.6 | % | 34.6 | % | 36.1 | % | 34.0 | % | ||||||||||||||||||||
| Netspend (c)/(g) | 27.0 | % | 26.3 | % | 25.6 | % | 25.0 | % | ||||||||||||||||||||
| Adjusted segment operating margin on net revenue: (d)/(h) | 30.5 | % | 28.3 | % | 29.9 | % | 28.2 | % | ||||||||||||||||||||
| na = not applicable | ||||||||||||||||||||||||||||
| TSYS | ||||||||||||||||||||||||
| Segment Breakdown | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
| Change | Change | |||||||||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | 2016 | $ | % | |||||||||||||||||
| Depreciation and amortization by segment: | ||||||||||||||||||||||||
| Issuer Solutions | $ | 36,699 | 34,590 | 2,109 | 6.1 | % | $ | 109,287 | 105,858 | 3,429 | 3.2 | % | ||||||||||||
| Merchant Solutions | 7,588 | 6,846 | 742 | 10.8 | 21,990 | 18,702 | 3,288 | 17.6 | ||||||||||||||||
| Netspend | 3,785 | 3,241 | 544 | 16.8 | 12,057 | 9,466 | 2,591 | 27.4 | ||||||||||||||||
| Depreciation and amortization | 48,072 | 44,677 | 3,395 | 7.6 | 143,334 | 134,026 | 9,308 | 6.9 | ||||||||||||||||
| Acquisition intangible amortization | 50,856 | 53,341 | (2,485 | ) | (4.7 | ) | 156,966 | 134,748 | 22,218 | 16.5 | ||||||||||||||
| Corporate admin and other | 1,356 | 898 | 458 | 51.0 | 3,521 | 2,694 | 827 | 30.7 | ||||||||||||||||
| Total depreciation and amortization | $ | 100,284 | 98,916 | 1,368 | 1.4 | % | $ | 303,821 | 271,468 | 32,353 | 11.9 | % | ||||||||||||
|
Segment statistical data: |
||||||||||||||||||||||||
|
Issuer Solutions |
||||||||||||||||||||||||
| Total transactions (in millions) | 5,494.9 | 5,060.3 | 434.6 | 8.6 | % | 15,712.1 | 14,633.4 | 1,078.7 | 7.4 | % | ||||||||||||||
| Total Accounts on file (AOF) (in millions) | 797.3 | 738.8 | 58.5 | 7.9 | % | |||||||||||||||||||
| Total Traditional AOF (in millions) | 562.1 | 511.2 | 50.9 | 10.0 | % | |||||||||||||||||||
|
Merchant Solutions |
||||||||||||||||||||||||
| Point-of-sale transactions (in millions) | 1,260.9 | 1,177.1 | 83.8 | 7.1 | % | 3,622.2 | 3,427.6 | 194.6 | 5.7 | % | ||||||||||||||
| Dollar sales volume (in millions) | $ | 31,478.2 | 28,680.7 | 2,797.5 | 9.8 | % | $ | 91,726.1 | 69,024.9 | 22,701.2 | 32.9 | % | ||||||||||||
| Segment net revenue per transaction | $ | 0.223 | 0.223 | 0.001 | 0.2 | % | $ | 0.227 | 0.188 | 0.039 | 20.5 | % | ||||||||||||
|
Netspend |
||||||||||||||||||||||||
| Gross dollar volume (in millions) | $ | 7,242.3 | 6,367.0 | 875.3 | 13.7 | % | $ | 24,455.1 | 22,143.3 | 2,311.8 | 10.4 | % | ||||||||||||
| Direct deposit 90-day active cards (in thousands) | 2,315.3 | 2,079.8 | 235.5 | 11.3 | % | |||||||||||||||||||
| 90-day active cards (in thousands) | 4,697.2 | 4,162.7 | 534.5 | 12.8 | % | |||||||||||||||||||
| % of 90-day active cards with direct deposit | 49.3 | % | 50.0 | % | ||||||||||||||||||||
| TSYS | |||||||
| Condensed Balance Sheet | |||||||
| (unaudited) | |||||||
| (in thousands) | |||||||
| September 30, 2017 | December 31, 2016 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 413,622 | 425,354 | ||||
| Accounts receivable, net | 409,167 | 432,847 | |||||
| Other current assets | 176,049 | 164,488 | |||||
| Total current assets | 998,838 | 1,022,689 | |||||
| Goodwill | 3,272,792 | 3,270,952 | |||||
| Software and other intangible assets, net | 1,166,098 | 1,329,864 | |||||
| Property and equipment, net | 282,490 | 282,345 | |||||
| Other long term assets | 498,672 | 460,327 | |||||
| Total assets | $ | 6,218,890 | 6,366,177 | ||||
| Liabilities | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 53,460 | 38,712 | ||||
|
Current portion of long-term borrowings, capital leases and license agreements |
565,660 | 50,727 | |||||
| Other current liabilities | 352,560 | 330,914 | |||||
| Total current liabilities | 971,680 | 420,353 | |||||
|
Long-term borrowings, capital leases and license agreements, excluding current portion |
2,394,283 | 3,313,276 | |||||
| Deferred income tax liabilities | 374,778 | 419,552 | |||||
| Other long-term liabilities | 107,987 | 88,983 | |||||
| Total liabilities | 3,848,728 | 4,242,164 | |||||
| Redeemable noncontrolling interest | 13,402 | 24,093 | |||||
| Equity | 2,356,760 | 2,099,920 | |||||
| Total liabilities and equity | $ | 6,218,890 | 6,366,177 | ||||
| TSYS | |||||||||
| Selected Cash Flow Highlights | |||||||||
| (unaudited) | |||||||||
| (in thousands) | |||||||||
| Nine Months Ended September 30, | |||||||||
| 2017 | 2016 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 348,345 | 251,597 | ||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||
| Equity in income of equity investments, net of tax | (30,919 | ) | (18,953 | ) | |||||
| Dividends received from equity investments | 20,589 | 15,246 | |||||||
| Depreciation and amortization | 303,821 | 271,468 | |||||||
| Amortization of debt issuance costs | 3,247 | 12,499 | |||||||
| Share-based compensation | 28,462 | 33,792 | |||||||
| Deferred income tax (benefit) expense | (46,435 | ) | 4,110 | ||||||
| Other noncash adjustments | 55,764 | 35,689 | |||||||
| Changes in operating assets and liabilities | (30,849 | ) | (54,368 | ) | |||||
| Net cash provided by operating activities | 652,025 | 551,080 | |||||||
| Purchases of property and equipment | (42,572 | ) | (32,134 | ) | |||||
| Additions to licensed computer software from vendors | (23,114 | ) | (11,112 | ) | |||||
| Additions to internally developed computer software | (22,011 | ) | (25,705 | ) | |||||
| Additions to contract acquisition costs | (21,662 | ) | (38,384 | ) | |||||
| Cash used in acquisitions, net of cash acquired | - | (2,345,493 | ) | ||||||
| Other investing activities | (1,436 | ) | (4,430 | ) | |||||
| Net cash used in investing activities | (110,795 | ) | (2,457,258 | ) | |||||
|
Principal payments on long-term borrowings, capital lease obligations and license agreements |
(415,788 | ) | (618,598 | ) | |||||
| Proceeds from long-term borrowings | - | 2,666,295 | |||||||
| Debt issuance costs | - | (26,563 | ) | ||||||
| Purchase of noncontrolling interests | (70,000 | ) | (5,878 | ) | |||||
| Dividends paid on common stock | (55,151 | ) | (55,000 | ) | |||||
| Proceeds from exercise of stock options | 15,499 | 9,980 | |||||||
| Other financing activities | (33,111 | ) | (608 | ) | |||||
| Net cash (used in) provided by financing activities | (558,551 | ) | 1,969,628 | ||||||
| Cash and cash equivalents: | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 5,589 | (5,895 | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | (11,732 | ) | 57,555 | ||||||
| Cash and cash equivalents at beginning of period | 425,354 | 389,328 | |||||||
| Cash and cash equivalents at end of period | $ | 413,622 | 446,883 | ||||||
| Supplemental | |||||||||
| Capital expenditures | $ | 109,359 | 107,335 | ||||||
| Free cash flow (non-GAAP)* | $ | 542,666 | 443,745 | ||||||
| * See reconciliation of non-GAAP measures. | |||||||||
| TSYS | |||||||||||||||
| Supplemental Information | |||||||||||||||
| (unaudited) | |||||||||||||||
| Other | |||||||||||||||
| AOF: | Total Accounts on File | ||||||||||||||
| (in millions) |
At |
At |
% |
||||||||||||
| Consumer | 474.7 | 433.5 | 9.5 | ||||||||||||
| Commercial | 52.8 | 48.0 | 9.9 | ||||||||||||
| Other | 34.6 | 29.7 | 16.5 | ||||||||||||
| Traditional AOF | 562.1 | 511.2 | 10.0 | ||||||||||||
| Prepaid*/Stored Value | 50.6 | 58.9 | (14.0 | ) | |||||||||||
| Government Services | 92.1 | 85.7 | 7.5 | ||||||||||||
| Commercial Card Single Use | 92.5 | 83.0 | 11.4 | ||||||||||||
| Total AOF | 797.3 | 738.8 | 7.9 | ||||||||||||
| * Prepaid does not include Netspend accounts | |||||||||||||||
|
Growth in Accounts on File (in millions): |
|||||||||||||||
|
September 2016 to |
September 2015 to |
||||||||||||||
| Beginning balance | 738.8 | 760.4 | |||||||||||||
| Change in accounts on file due to: | |||||||||||||||
| Internal growth of existing clients | 53.2 | 53.8 | |||||||||||||
| New clients | 29.5 | 31.6 | |||||||||||||
| Purges/Sales | (23.6 | ) | (16.7 | ) | |||||||||||
| Deconversions | (0.6 | ) | (90.3 | ) | |||||||||||
| Ending balance | 797.3 | 738.8 | |||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |
| Non-GAAP Measures | |
| The schedules below provide a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents third quarter and year-to-date 2017 financial results using the previous year’s foreign currency exchange rates. On a constant currency basis, TSYS’ total year-to-date revenues for the third quarter of 2017 grew 21.0% as compared to a reported GAAP increase of 20.3%. | |
| The schedules below also provide a reconciliation of diluted EPS to adjusted diluted EPS. | |
| The schedules below also provide a reconciliation of net income to adjusted EBITDA. | |
| The schedules below also provide a reconciliation of cash flows from operating activities and capital expenditures to free cash flow. | |
| The schedules below also provide a reconciliation of 2017 guidance of total revenues to net revenue and diluted EPS to adjusted diluted EPS. | |
| The tax rate used in the calculation of adjusted diluted EPS for the quarter and year is equal to an estimate of our annual effective tax rate on GAAP income. This effective rate is estimated annually and may be adjusted during the year to take into account events or trends that materially impact the effective tax rate including, but not limited to, significant changes resulting from tax legislation, material changes in the mix of revenues and expenses by entity and other significant events. | |
| TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS’ current and ongoing business operations. | |
| Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation. | |
| TSYS believes that its provision of non-GAAP financial measures provides investors with important key financial performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources. | |
| Reconciliation of GAAP to Non-GAAP | |||||||||||||||||
| Constant Currency Comparison | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| Percent | Percent | ||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||
|
Consolidated |
|||||||||||||||||
| Constant currency (1) | $ | 1,247,808 | 1,146,888 | 8.8 | % | $ | 3,676,013 | 3,037,853 | 21.0 | % | |||||||
| Foreign currency impact (2) | (232 | ) | - | (21,337 | ) | - | |||||||||||
| Total revenues | $ | 1,247,576 | 1,146,888 | 8.8 | % | $ | 3,654,676 | 3,037,853 | 20.3 | % | |||||||
| Constant currency (1) | $ | 852,975 | 789,588 | 8.0 | % | $ | 2,549,574 | 2,256,169 | 13.0 | % | |||||||
| Foreign currency impact (2) | (216 | ) | - | (19,855 | ) | - | |||||||||||
| Net revenue | $ | 852,759 | 789,588 | 8.0 | % | $ | 2,529,719 | 2,256,169 | 12.1 | % | |||||||
| Constant currency (1) | $ | 200,574 | 155,327 | 29.1 | % | $ | 570,467 | 442,835 | 28.8 | % | |||||||
| Foreign currency impact (2) | (882 | ) | - | (10,344 | ) | - | |||||||||||
| Operating income | $ | 199,692 | 155,327 | 28.6 | % | $ | 560,123 | 442,835 | 26.5 | % | |||||||
|
Issuer Solutions |
|||||||||||||||||
| Constant currency (1) | $ | 453,665 | 429,078 | 5.7 | % | $ | 1,354,497 | 1,288,656 | 5.1 | % | |||||||
| Foreign currency impact (2) | (202 | ) | - | (21,281 | ) | - | |||||||||||
| Total revenues | $ | 453,463 | 429,078 | 5.7 | % | $ | 1,333,216 | 1,288,656 | 3.5 | % | |||||||
| Constant currency (1) | $ | 401,261 | 379,145 | 5.8 | % | $ | 1,200,889 | 1,135,016 | 5.8 | % | |||||||
| Foreign currency impact (2) | (187 | ) | - | (19,799 | ) | - | |||||||||||
| Segment net revenue | $ | 401,074 | 379,145 | 5.8 | % | $ | 1,181,090 | 1,135,016 | 4.1 | % | |||||||
| (1) Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period. | |||||||||||||||||
| (2) Reflects the impact of calculated changes in foreign currency rates from the comparable period. | |||||||||||||||||
| Net Revenue | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| Percent | Percent | ||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||
| Total revenues | $ | 1,247,576 | 1,146,888 | 8.8 | % | $ | 3,654,676 | 3,037,853 | 20.3 | % | |||||||
| Less: reimbursable items, interchange and assessments expenses | 394,817 | 357,300 | 10.5 | 1,124,957 | 781,684 | 43.9 | |||||||||||
| Net revenue | $ | 852,759 | 789,588 | 8.0 | % | $ | 2,529,719 | 2,256,169 | 12.1 | % | |||||||
| Reconciliation of GAAP to Non-GAAP | |||||||||||||||||||||||
| Adjusted Diluted Earnings per Share | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
|
Net income attributable to TSYS common shareholders |
$ | 123,095 | 85,352 | 44.2 | % | $ | 343,977 | 245,688 | 40.0 | % | |||||||||||||
| Adjust for amounts attributable to TSYS common shareholders: | |||||||||||||||||||||||
| Add: Acquisition intangible amortization | $ | 50,704 | 53,065 | (4.4 | ) | $ | 156,489 | 133,920 | 16.9 | ||||||||||||||
| Add: Share-based compensation | 8,404 | 13,059 | (35.6 | ) | 28,455 | 33,766 | (15.7 | ) | |||||||||||||||
| Add: TransFirst M&A expenses* | 1,052 | 1,830 | (42.5 | ) | 10,025 | 35,689 | (71.9 | ) | |||||||||||||||
| Add: Litigation, claims, judgments or settlements** | 26 | - | na | 1,904 | - | na | |||||||||||||||||
| Less: Tax impact of adjustments*** | (20,614 | ) | (22,633 | ) | 8.9 | (67,702 | ) | (62,264 | ) | (8.7 | ) | ||||||||||||
| Adjusted earnings | $ | 162,667 | 130,673 | 24.5 | % | $ | 473,148 | 386,799 | 22.3 | % | |||||||||||||
|
Diluted EPS - Net income attributable to TSYS common shareholders |
|||||||||||||||||||||||
| As reported (GAAP) | $ | 0.66 | 0.46 | 43.3 | % | $ | 1.85 | 1.33 | 39.2 | % | |||||||||||||
| Adjusted diluted EPS | $ | 0.88 | 0.71 | 23.7 | % | $ | 2.55 | 2.10 | 21.6 | % | |||||||||||||
| Weighted average diluted shares outstanding | 185,809 | 184,640 | 185,472 | 184,429 | |||||||||||||||||||
| * Costs associated with the TransFirst acquisition and integration that are included in selling, general and administrative expenses and nonoperating expenses. | |||||||||||||||||||||||
| ** Litigation settlement or settlement discussions and related legal expenses. | |||||||||||||||||||||||
| *** Certain of these merger and acquisition costs are nondeductible for income tax purposes. Income tax impact includes a discrete item as a result of the acquisition. | |||||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Percent | Percent | ||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
| Net income | $ | 124,726 | 87,441 | 42.6 | % | $ | 348,345 | 251,597 | 38.5 | % | |||||||||||||
| Adjust for: | |||||||||||||||||||||||
| Less: Equity in income of equity investments | (8,497 | ) | (6,729 | ) | (26.3 | ) | (30,919 | ) | (18,953 | ) | (63.1 | ) | |||||||||||
| Add: Income taxes | 54,628 | 44,247 | 23.5 | 153,917 | 127,966 | 20.3 | |||||||||||||||||
| Add: Interest expense, net | 28,501 | 30,634 | (7.0 | ) | 87,811 | 83,700 | 4.9 | ||||||||||||||||
| Add: Depreciation and amortization | 100,284 | 98,916 | 1.4 | 303,821 | 271,468 | 11.9 | |||||||||||||||||
| Less: (Gain)/loss on foreign currency translations | 427 | (194 | ) | nm | 1,250 | (1,664 | ) | nm | |||||||||||||||
| Less: Other nonoperating (income)/expenses | (93 | ) | (72 | ) | (29.2 | ) | (281 | ) | 189 | nm | |||||||||||||
| Add: Share-based compensation | 8,407 | 13,069 | (35.7 | ) | 28,462 | 33,792 | (15.8 | ) | |||||||||||||||
| Add: TransFirst M&A expenses* | 1,052 | 1,830 | (42.5 | ) | 10,086 | 25,908 | (61.1 | ) | |||||||||||||||
| Add: Litigation, claims, judgments or settlements | 26 | - | na | 1,904 | - | na | |||||||||||||||||
| Adjusted EBITDA | $ | 309,461 | 269,142 | 15.0 | % | $ | 904,396 | 774,003 | 16.8 | % | |||||||||||||
| * Costs associated with the TransFirst acquisition and integration that are included in selling, general and administrative expenses. | |||||||||||||||||||||||
| nm = not meaningful | |||||||||||||||||||||||
| na = not applicable | |||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP | |||||||||||||||||||
| Free Cash Flow | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||
| Nine Months Ended | |||||||||||||||||||
| Free cash flow: | September 30, | ||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 652,025 | 551,080 | ||||||||||||||||
| Capital expenditures | (109,359 | ) | (107,335 | ) | |||||||||||||||
| Free cash flow (non-GAAP) | $ | 542,666 | 443,745 | ||||||||||||||||
| Revised Guidance Summary | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||||
| Revenue: | 2017 | % Change | |||||||||||||||||
| Total revenues (GAAP) | $ | 4,839 | to | $ | 4,889 | 16 | % | to | 17 | % | |||||||||
|
Less: reimbursable items, interchange and assessments expenses |
1,494 | to | 1,494 | ||||||||||||||||
| Net revenue (non-GAAP) | $ | 3,345 | to | $ | 3,395 | 10 | % | to | 12 | % | |||||||||
| Earnings per share (EPS): | |||||||||||||||||||
| Diluted EPS (GAAP) | $ | 2.37 | to | $ | 2.43 | 37 | % | to | 40 | % | |||||||||
| Acquisition intangible amortization, share-based | |||||||||||||||||||
| compensation, litigation, claims, judgments or | |||||||||||||||||||
| settlements and TransFirst M&A expenses, less | |||||||||||||||||||
|
the tax impact of adjustments |
0.92 | to | 0.92 | ||||||||||||||||
| Adjusted diluted EPS attributable to TSYS common | |||||||||||||||||||
| shareholders* (non-GAAP) | $ | 3.29 | to | $ | 3.35 | 18 | % | to | 20 | % | |||||||||
| * Weighted average diluted shares outstanding | 186 | ||||||||||||||||||
