EX-99.1 2 tss-20170331ex991ee9d1f.htm EX-99.1 tss_Ex_99_1

 

 

Exhibit 99.1

 

 

Picture 6

 

Picture 7

 

 

Total System Services, Inc.

One TSYS Way

P.O. Box 2567

Columbus, GA, 31902-2567

www.tsys.com

 

Picture 1

 

TSYS Reports First Quarter Earnings

Increases 2017 Revenue and Earnings per Share Outlook

 

 

Columbus, Ga., April 25, 2017 —  TSYS (NYSE: TSS) today reported results for the first quarter of 2017.

“We are extremely pleased to report an outstanding beginning to 2017 with across the board high double digit growth in our consolidated revenues, income and earnings per share in the first quarter.  We continue to execute on our strategy of diversification and growth of our businesses while maintaining our leadership in technology, product innovation and service to our customers,” said M. Troy Woods, chairman and chief executive officer of TSYS.    

 

Highlights for the first quarter of 2017:

·

Total revenues were $1.2 billion, an increase of 60.2% over last year’s $739.4 million.

·

Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expenses, was $832.9 million, an increase of 24.0% over last year’s $671.6 million.

·

Net income attributable to TSYS common shareholders was $105.9 million, an increase of 16.8% over last year’s $90.6 million.  Diluted earnings per share were $0.57, an increase of 16.1% over last year’s $0.49.

·

Adjusted earnings (non-GAAP) were $152.3 million, an increase of 26.1% over last year’s $120.7 million.  Adjusted diluted earnings per share (non-GAAP) were $0.82, an increase of 25.4% over last year’s $0.66.

·

Adjusted EBITDA (non-GAAP) was $287.2 million, an increase of 24.4% over last year’s $230.8 million.

 

 

 

 

         

 

Page 2 of 14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total System Services, Inc.

One TSYS Way

P.O. Box 2567

Columbus, GA, 31902-2567

www.tsys.com

 

 

 

          Increasing 2017 Outlook

“As a result of our strong first quarter performance and the six-month delay in the effective date of the CFPB's rule governing prepaid accounts, we are increasing our revenue and EPS guidance for 2017.  We are raising our total revenue and net revenue guidance by $20 million as a result of the rule's delay.  We are also raising our EPS guidance by $0.11 per share,” said Woods.  

 

The 2017 revised guidance is below. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017 Revised Financial

 

 

 

 

(in millions, except per share amounts)

 

 

 

Outlook Range

 

Percent Change

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Total revenues (GAAP)

 

 

$

4,770

to

$

4,870

 

14%

to

17%

Net revenue (non-GAAP)

 

 

$

3,295

to

$
3,395

 

8%

to

12%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (EPS)

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS (GAAP)

 

 

$

2.25

to

$
2.32

 

30%

to

34%

Adjusted diluted EPS attributable to TSYS common shareholders (non-GAAP)

 

 

$

3.16

to

$
3.26

 

13%

to

17%

 Weighted average diluted shares outstanding

 

 

 

 

185

 

 

 

 

 

 

 

 

Conference Call

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

 

 

 

 

 

Page 3 of 14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total System Services, Inc.

One TSYS Way

P.O. Box 2567

Columbus, GA, 31902-2567

www.tsys.com

 

 

 

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

 

 

 

 

Page 4 of 14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total System Services, Inc.

One TSYS Way

P.O. Box 2567

Columbus, GA, 31902-2567

www.tsys.com

 

 

 

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. 

 

 

Contacts:

Cyle Mims

TSYS Media Relations

+1.706.644.3110

cylemims@tsys.com

 

Shawn Roberts

TSYS Investor Relations

+1.706.644.6081

shawnroberts@tsys.com

- more -

 

 

 

TSYS Announces First Quarter 2017 Earnings

Page 5 of 14

 

 

 

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

 

 

 

 

Percent

 

 

  

2017

  

2016

  

Change

    

Total revenues

 

$

1,184,725

 

739,378

 

60.2

% 

 

 

 

 

 

 

 

 

 

Cost of services*

 

 

861,856

 

484,507

 

77.9

 

Selling, general and administrative expenses*

 

 

155,686

 

103,184

 

50.9

 

Total expenses

 

 

1,017,542

 

587,691

 

73.1

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

167,183

 

151,687

 

10.2

 

 

 

 

 

 

 

 

 

 

Nonoperating expenses*

 

 

(29,903)

 

(22,098)

 

(35.3)

 

Income before income taxes, noncontrolling interests and equity in income of equity investments

 

 

137,280

 

129,589

 

5.9

 

Income taxes

 

 

43,082

 

43,429

 

(0.8)

 

Income before noncontrolling interests and equity in income of equity investments

 

 

94,198

 

86,160

 

9.3

 

Equity in income of equity investments, net of tax*

 

 

12,909

 

6,248

 

nm

 

Net income

 

 

107,107

 

92,408

 

15.9

 

Net income attributable to noncontrolling interests

 

 

(1,239)

 

(1,780)

 

30.4

 

Net income attributable to TSYS common shareholders

 

$

105,868

 

90,628

 

16.8

%  

 

 

 

 

 

 

 

 

 

Earnings per share (EPS):

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.58

 

0.49

 

16.4

%  

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$

0.57

 

0.49

 

16.1

%  

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

(includes participating securities)

 

 

 

 

 

 

 

 

Basic

 

 

183,880

 

183,256

 

 

 

Diluted

 

 

184,938

 

183,886

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.10

 

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP measures:**

 

 

 

 

 

 

 

 

Net revenue

 

$

832,892

 

671,644

 

24.0

%  

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

287,237

 

230,829

 

24.4

%  

 

 

 

 

 

 

 

 

 

Adjusted earnings

 

$

152,265

 

120,710

 

26.1

%  

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS

 

$

0.82

 

0.66

 

25.4

%  

 

 

 

 

 

 

 

 

 

 

*   Certain prior year amounts have been reclassified between nonoperating expenses and equity in income of equity investments, net of tax and between cost of services and selling, general and administrative expenses.

**  See reconciliation of non-GAAP measures.

 

nm = not meaningful

- more  -

 

 

TSYS Announces First Quarter 2017 Earnings

Page 6 of 14

 

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

Change

 

 

    

2017

    

2016

    

$

    

%

    

Operating income: (a)

 

$

167,183

 

151,687

 

15,496

 

10.2

%    

Share-based compensation

 

 

9,047

 

8,158

 

889

 

10.9

 

TransFirst M&A expenses

 

 

4,868

 

3,401

 

1,467

 
43.1

 

Litigation, claims, judgments or settlements

 

 

1,961

 

 —

 

1,961

 

na 

 

Acquisition intangible amortization

 

 

55,167

 

22,921

 

32,246

 

nm 

 

Adjusted operating income (b)

 

$

238,226

 

186,167

 

52,059

 
28.0

%  

 

 

 

 

 

 

 

 

 

 

 

Adjusted segment operating income:

 

 

 

 

 

 

 

 

 

 

Issuer Solutions (c)

 

$

133,873

 

135,077

 

(1,204)

 
(0.9)

%  

Merchant Solutions (d)

 

 

91,279

 

38,357

 

52,922

 

nm 

 

Netspend (e)

 

 

48,648

 

42,201

 

6,447

 
15.3

 

Corporate admin and other

 

 

(35,574)

 

(29,468)

 

(6,106)

 

(20.7)

 

Adjusted segment operating income

 

$

238,226

 

186,167

 

52,059

 

28.0

%  

 

 

 

 

 

 

 

 

 

 

 

Total revenues: (f)

 

$

1,184,725

 

739,378

 

445,347

 

60.2

%  

Less: reimbursable items, interchange and assessments expenses

 

 

351,833

 

67,734

 

284,099

 

nm 

 

Net revenue (g)

 

 

832,892

 

671,644

 

161,248

 

24.0

 

Intersegment revenues

 

 

12,389

 

11,969

 

420

 

3.5

 

Segment net revenue

 

$

845,281

 

683,613

 

161,668

 

23.6

%  

 

 

 

 

 

 

 

 

 

 

 

Segment net revenue:

 

 

 

 

 

 

 

 

 

 

Issuer Solutions (h)

 

$

387,255

 

378,009

 

9,246

 

2.4

%  

Merchant Solutions (i)

 

 

260,561

 

120,612

 

139,949

 

nm 

 

Netspend (j)

 

 

197,465

 

184,992

 

12,473

 

6.7

 

Segment net revenue

 

$

845,281

 

683,613

 

161,668

 

23.6

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin (GAAP): (a)/(f)

 

 
14.11%

 
20.52%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating margin on net revenue: (b)/(g)

 

 
28.60%

 
27.72%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted segment operating margin on net revenue:

 

 

 

 

 

 

 

 

 

 

  Issuer Solutions (c)/(h)

 

 
34.57%

 
35.73%

 

 

 

 

 

  Merchant Solutions (d)/(i)

 

 
35.03%

 
31.80%

 

 

 

 

 

  Netspend (e)/(j)

 

 
24.64%

 
22.81%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment external net revenue:

 

 

 

 

 

 

 

 

 

 

Issuer Solutions

 

$

375,529

 

366,884

 

8,645

 

2.4

%  

Merchant Solutions

 

 

260,305

 

120,561

 

139,744

 

nm 

 

Netspend

 

 

197,058

 

184,199

 

12,859

 

7.0

 

Segment external net revenue

 

$

832,892

 

671,644

 

161,248

 

24.0

%  

nm = not meaningful

na = not applicable

- more -

 

 

 

TSYS Announces First Quarter 2017 Earnings

Page 7 of 14

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

Change

 

 

    

2017

    

2016

    

$

    

%

    

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

Issuer Solutions

 

$

36,853

 

35,619

 

1,234

 

3.5

%

Merchant Solutions

 

 

7,022

 

5,050

 

1,972

 

39.0

 

Netspend

 

 

4,092

 

3,110

 

982

 

31.6

 

Segment depreciation and amortization

 

 

47,967

 

43,779

 

4,188

 

9.6

 

Acquisition intangible amortization

 

 

55,167

 

22,921

 

32,246

 

nm 

 

Corporate admin and other

 

 

1,044

 

883

 

161

 

18.2

 

Total depreciation and amortization

 

$

104,178

 

67,583

 

36,595

 

54.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment statistical data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuer Solutions

 

 

 

 

 

 

 

 

 

 

Total transactions (in millions)

 

 

4,876.6

 

4,587.9

 

288.7

 

6.3

%

Total Accounts on file (AOF) (in millions)

 

 

762.0

 

750.5

 

11.5

 

1.5

%

Total traditional AOF (in millions)

 

 

532.3

 

488.8

 

43.5

 

8.9

%

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

 

 

 

 

 

 

 

 

 

Point-of-sale transactions (in millions)

 

 

1,127.7

 

1,091.0

 

36.7

 

3.4

%

Dollar sales volume (in millions)

 

$

29,120.4

 

11,783.4

 

17,337.0

 

nm 

%

Net revenue per transaction

 

$

0.231

 

0.111

 

0.120

 

nm 

%

 

 

 

 

 

 

 

 

 

 

 

Netspend

 

 

 

 

 

 

 

 

 

 

Gross dollar volume (in millions)

 

$

9,607.2

 

9,161.5

 

445.7

 

4.9

%

Direct deposit 90-day active cards (in thousands)

 

 

2,854.0

 

2,789.2

 

64.8

 

2.3

%

90-day active cards (in thousands)

 

 

5,147.4

 

4,881.6

 

265.8

 

5.4

%

% of 90-day active cards with direct deposit

 

 
55.4%

 
57.1%

 

 

 

 

 

nm = not meaningful

- more -

 

 

 

TSYS Announces First Quarter 2017 Earnings

Page 8 of 14

 

 

TSYS

Condensed Balance Sheet

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

    

March 31, 2017

    

December 31, 2016

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

464,740

 

425,354

Accounts receivable, net

 

 

405,746

 

432,847

Other current assets

 

 

180,325

 

164,488

Total current assets

 

 

1,050,811

 

1,022,689

Goodwill

 

 

3,272,237

 

3,270,952

Software and other intangible assets, net

 

 

1,268,403

 

1,329,864

Property and equipment, net

 

 

281,430

 

282,345

Other long term assets

 

 

477,799

 

460,327

Total assets

 

$

6,350,680

 

6,366,177

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

45,656

 

38,712

Long-term borrowings and capital leases

 

 

33,097

 

50,727

Other current liabilities

 

 

373,505

 

330,914

Total current liabilities

 

 

452,258

 

420,353

Long-term borrowings and capital leases, excluding current portion

 

 

3,229,137

 

3,313,276

Deferred income tax liabilities

 

 

419,786

 

419,552

Other long-term liabilities

 

 

90,032

 

88,983

Total liabilities

 

 

4,191,213

 

4,242,164

Redeemable noncontrolling interest

 

 

14,737

 

24,093

Equity

 

 

2,144,730

 

2,099,920

Total liabilities and equity

 

$

6,350,680

 

6,366,177

 

 

 

 

 

- more -

 

 

TSYS Announces First Quarter 2017 Earnings

Page 9 of 14

 

 

TSYS

Selected Cash Flow Highlights

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

    

2017

    

2016

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

107,107

 

92,408

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Equity in income of equity investments, net of tax

 

 

(12,909)

 

(6,248)

Depreciation and amortization

 

 

104,178

 

67,583

Amortization of debt issuance costs

 

 

1,079

 

10,386

Share-based compensation

 

 

9,047

 

8,158

Deferred income tax expense

 

 

891

 

20,156

Other noncash adjustments

 

 

16,916

 

8,719

Changes in operating assets and liabilities

 

 

33,852

 

(55,334)

Net cash provided by operating activities

 

 

260,161

 

145,828

 

 

 

 

 

 

Purchases of property and equipment

 

 

(12,240)

 

(9,940)

Additions to licensed computer software from vendors

 

 

(5,162)

 

(4,894)

Additions to internally developed computer software

 

 

(7,355)

 

(8,544)

Additions to contract acquisition costs

 

 

(7,668)

 

(21,010)

Other investing activities

 

 

(379)

 

 —

Net cash used in investing activities

 

 

(32,804)

 

(44,388)

 

 

 

 

 

 

Principal payments on long-term borrowings and capital lease obligations

 

 

(104,654)

 

(304,654)

Proceeds from long-term borrowings

 

 

 —

 

1,796,295

Debt issuance costs

 

 

 —

 

(26,592)

Purchase of noncontrolling interests

 

 

(70,000)

 

(5,879)

Dividends paid on common stock

 

 

(18,333)

 

(18,283)

Proceeds from exercise of stock options

 

 

4,207

 

626

Other financing activities

 

 

(769)

 

499

Net cash (used in) provided by financing activities

 

 

(189,549)

 

1,442,012

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

1,578

 

(669)

Net increase in cash and cash equivalents

 

 

39,386

 

1,542,783

Cash and cash equivalents at beginning of period

 

 

425,354

 

389,328

Cash and cash equivalents at end of period

 

$

464,740

 

1,932,111

 

 

 

 

 

 

Supplemental

 

 

 

 

 

Capital expenditures

 

$

32,425

 

44,388

Free cash flow (non-GAAP)*

 

$

227,736

 

101,440

 

*  See reconciliation of non-GAAP measures.

- more -

 

 

 

TSYS Announces First Quarter 2017 Earnings

Page 10 of 14

 

 

TSYS

Supplemental Information

(unaudited)

 

 

Other

AOF:

 

 

 

 

 

 

 

 

 

Total Accounts on File

 

 

At

 

At

 

%

(in millions)

    

March 2017

    

March 2016

    

Change

Consumer

 

450.0

 

414.8

 

8.5

Commercial

 

50.0

 

46.3

 

8.0

Other

 

32.3

 

27.7

 

16.5

Traditional AOF

 

532.3

 

488.8

 

8.9

Prepaid*/Stored Value

 

54.1

 

103.1

 

(47.6)

Government Services

 

90.3

 

82.7

 

9.2

Commercial Card Single Use

 

85.3

 

75.9

 

12.5

Total AOF

 

762.0

 

750.5

 

1.5

 

* Prepaid does not include Netspend accounts

 

 

 

 

 

 

 

 

 

Growth in Accounts on File (in millions):

 

 

 

 

 

 

March 2016 to

 

March 2015 to

 

    

March 2017

    

March 2016

Beginning balance

 

750.5

 

723.7

Change in accounts on file due to:

 

 

 

 

Internal growth of existing clients

 

51.8

 

52.3

New clients

 

23.3

 

43.1

Purges/Sales

 

(16.6)

 

(24.3)

Deconversions

 

(47.0)

 

(44.3)

Ending balance

 

762.0

 

750.5

 

 

 

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TSYS Announces First Quarter 2017 Earnings

Page 11 of 14

 

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 first quarter 2017 financial results using the previous year’s foreign currency exchange rates. On a constant currency basis, TSYS’ total revenues for the first quarter of 2017 grew 61.7% as compared to a reported GAAP increase of 60.2%.

 

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 EBITDA 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.

 

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TSYS Announces First Quarter 2017 Earnings

Page 12 of 14

 

Reconciliation of GAAP to Non-GAAP

 

 

Constant Currency Comparison

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

Percent

 

 

    

2017

    

2016

 

Change

    

Consolidated

 

 

 

 

 

 

 

 

Constant currency (1)

 

$

1,195,848

 

739,378

 

61.7

%  

Foreign currency impact (2)

 

 

(11,123)

 

 —

 

 

 

Total revenues

 

$

1,184,725

 

739,378

 

60.2

%  

 

 

 

 

 

 

 

 

 

Constant currency (1)

 

$

843,231

 

671,644

 

25.5

%  

Foreign currency impact (2)

 

 

(10,339)

 

 —

 

 

 

Net revenue

 

$

832,892

 

671,644

 

24.0

%  

 

 

 

 

 

 

 

 

 

Constant currency (1)

 

$

171,971

 

151,687

 

13.4

%  

Foreign currency impact (2)

 

 

(4,788)

 

 —

 

 

 

Operating income

 

$

167,183

 

151,687

 

10.2

%  

 

 

 

 

 

 

 

 

 

Issuer Solutions

 

 

 

 

 

 

 

 

Constant currency (1)

 

$

448,235

 

429,713

 

4.3

%  

Foreign currency impact (2)

 

 

(11,118)

 

 —

 

 

 

Total revenues

 

$

437,117

 

429,713

 

1.7

%  

 

 

 

 

 

 

 

 

 

Constant currency (1)

 

$

397,590

 

378,009

 

5.2

%  

Foreign currency impact (2)

 

 

(10,335)

 

 —

 

 

 

Net revenue

 

$

387,255

 

378,009

 

2.4

%  

 

(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 March 31,

 

 

 

 

 

 

Percent

 

 

2017

    

2016

    

Change

    

Total revenues

$

1,184,725

 

739,378

 

60.2

%

Less: reimbursable items, interchange and assessments expenses

 

351,833

 

67,734

 

nm

 

Net revenue

 

832,892

 

671,644

 

24.0

%

nm = not meaningful

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TSYS Announces First Quarter 2017 Earnings

Page 13 of 14

 

 

Reconciliation of GAAP to Non-GAAP

 

 

Adjusted Diluted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

Percent

 

 

    

2017

    

2016

Change

    

Net income attributable to TSYS common shareholders

 

 

$

105,868

 

90,628

 

16.8

%  

Adjust for amounts attributable to TSYS common shareholders:

 

 

 

 

 

 

 

 

 

Add: Acquisition intangible amortization

 

$

55,002

 

22,645

 

nm 

 

Add: Share-based compensation

 

 

9,041

 

8,149

 

10.9

 

Add: TransFirst M&A expenses*

 

 

4,825

 

13,183

 

(63.4)

 

Add: Litigation, claims, judgments or settlements**

 

 

1,961

 

 —

 

na 

 

Less: Tax impact of adjustments***

 

 

(24,432)

 

(13,895)

 

(75.8)

 

Adjusted earnings

 

$

152,265

 

120,710

 

26.1

%  

 

 

 

 

 

 

 

 

 

Diluted EPS - Net income attributable to TSYS common shareholders

 

 

 

 

 

 

 

 

As reported (GAAP)

 

$

0.57

 

0.49

 

16.1

%  

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS

 

$

0.82

 

0.66

 

25.4

%  

 

 

 

 

 

 

 

 

 

Weighted average diluted shares outstanding

 

 

184,938

 

183,886

 

 

 

 

*     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 in the 1st quarter.

***  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 March 31,

 

 

 

 

 

 

 

 

Percent

 

 

    

2017

    

2016

    

Change

    

Net income

 

$

107,107

 

92,408

 

15.9

%  

Adjust for:

 

 

 

 

 

 

 

 

Less: Equity in income of equity investments

 

 

(12,909)

 

(6,248)

 

nm 

 

Add: Income taxes

 

 

43,082

 

43,429

 

(0.8)

 

Add: Nonoperating expense

 

 

29,903

 

22,098

 

35.3

 

Add: Depreciation and amortization

 

 

104,178

 

67,583

 

54.1

 

EBITDA

 

$

271,361

 

219,270

 

23.8

%  

Adjust for:

 

 

 

 

 

 

 

 

Add: Share-based compensation

 

 

9,047

 

8,158

 

10.9

 

Add: TransFirst M&A expenses*

 

 

4,868

 

3,401

 

43.1

 

Add: Litigation, claims, judgments or settlements

 

 

1,961

 

 —

 

na 

 

Adjusted EBITDA

 

$

287,237

 

230,829

 

24.4

%  

*     Costs associated with the TransFirst acquisition and integration that are included in selling, general and administative expenses.

 

nm = not meaningful

na = not applicable

- more -

 

 

 

TSYS Announces First Quarter 2017 Earnings

Page 14 of 14

 

Reconciliation of GAAP to Non-GAAP

 

 

Free Cash Flow

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Free cash flow:

 

March 31,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

Net cash provided by operating activities (GAAP)

$

260,161

 

145,828

 

Capital expenditures

 

(32,425)

 

(44,388)

 

Free cash flow (non-GAAP)

$

227,736

 

101,440

 

 

 

Revised Guidance Summary

(unaudited)

(in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

% Change

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues (GAAP)

$

4,770

to

$

4,870

 

14%

to

17%

 

Less: reimbursable items, interchange and assessments expenses

 

1,475

to

 
1,475

 

 

 

 

 

Net revenue (non-GAAP)

$

3,295

to

$
3,395

 

8%

to

12%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (EPS) :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS (GAAP)

$

2.25

to

$
2.32

 

30%

to

34%

 

Acquisition intangible amortization, share-based compensation, litigation, claims, judgments or settlements and TransFirst M&A expenses, less the tax impact of adjustments

 

0.91

to

 
0.94

 

 

 

 

 

Adjusted diluted EPS attributable to TSYS common shareholders * (non-GAAP)

$

3.16

to

$
3.26

 

13%

to

17%

 

 

 

 

 

 

 

 

 

 

 

 

* Weighted average diluted shares outstanding

 

 

185

 

 

 

 

 

 

 

 

 

 

 

- ### -