EX-99.1 2 d59596dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

Total System Services, Inc.

One TSYS Way

P.O. Box 2567

Columbus, GA 31902-2567

   

+1.706.649.2307

+1.706.649.5740

www.tsys.com

For immediate release:

Contacts:

Shawn Roberts

TSYS Investor Relations

+1.706.644.6081

shawnroberts@tsys.com

TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

Raises 2015 Adjusted EPS Guidance Growth to 15-17%

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

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

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

Highlights for the second quarter of 2015 include:

 

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

 

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

 

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

 

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

 

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

 

1

LOGO

 

TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

Highlights for the first six months of 2015 include:

 

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

 

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

 

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

 

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

 

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

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

 

     2015 Revised Financial Outlook
     Range
(in millions, except per
share amounts)		    Percent
Change

Total revenues

    $2,667 to $2,716      9% to 11%

Revenues before reimbursable items

    $2,412 to $2,456    10% to 12%

Adjusted EPS attributable to TSYS common shareholders from continuing operations*

    $  2.25 to $  2.29    15% to 17%

* Average Basic Weighted Shares

    184   

 

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

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, July 28. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the link under “Webcasts” on the main homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. A slide presentation to accompany the call will be available by clicking on the link under “Webcasts” on the main homepage of tsys.com.

 

2

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TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

Non-GAAP Measures

This press release contains information prepared in conformity with GAAP as well as non-GAAP information. It is management’s intent to provide non-GAAP financial information to enhance understanding of its consolidated financial information as prepared in accordance with GAAP. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure and the most directly comparable GAAP financial measure are presented so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.

Additional information about non-GAAP financial measures, including, but not limited to, adjusted EBITDA and adjusted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 9 to 12 of this release.

About TSYS

At TSYS® (NYSE: TSS), we believe payments should revolve around people, not the other way around. We call this belief People-Centered Payments®. By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend®, A TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions.

TSYS’ headquarters are located in Columbus, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS is a member of The Civic 50 and has been named one of the 2015 World’s Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website. For more, please visit us at www.tsys.com.

 

3

LOGO

 

TSYS Reports Second Quarter Adjusted EPS Grew 29.0%

Forward-Looking Statements

This press release contains “forward-looking statements” – that is, statements related to future, not past, events. Forward-looking statements often address our expected future business and financial performance and often contain words such as “expect,” “anticipate,” “intend,” “believe,” “should,” “plan,” “potential,” “will,” “could,” and similar expressions. These forward-looking statements include, among others, statements regarding TSYS’ revised earnings guidance for 2015 total revenues, revenues before reimbursable items and adjusted EPS, and the assumptions underlying such statements. These statements are based on the current beliefs and expectations of TSYS’ management, are based on management’s assumptions and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results or events to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to, the material breach of security of any of TSYS’ systems; TSYS’ ability to integrate acquisitions and achieve the anticipated growth opportunities and other benefits of the acquisitions; the effect of current domestic and worldwide economic conditions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates; expenses are incurred associated with the signing of a significant client; TSYS does not convert clients’ portfolios as scheduled; the deconversion of a significant client; changes occur in laws, rules, regulations, credit card association rules, prepaid industry rules or other industry standards affecting TSYS and our clients that may result in costly new compliance burdens on TSYS and our clients and lead to a decrease in the volume and/or number of transactions processed or limit the types and amounts of fees that can be charged to customers; the costs and effects of litigation, investigations or similar matters or adverse facts and developments relating thereto; adverse developments with respect to the payment card industry in general, including a decline in the use of cards as a payment mechanism; and growth rates of TSYS’ existing clients are lower than anticipated or attrition rates of existing clients are higher than anticipated. Additional risks and other factors that could cause actual results or events to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

— more —

 

4

TSYS Announces Second Quarter 2015 Earnings

Page 5 of 12

 

 

TSYS

Financial Highlights

(unaudited)

(in thousands, except per share data)

 

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
     2015     2014     Percent
Change		     2015     2014     Percent
Change		  

Total revenues

    $ 692,652        602,036        15.1 %    $ 1,354,808        1,194,883        13.4 % 

Cost of services

      459,941        416,489        10.4        909,646        839,372        8.4   

Selling, general and administrative expenses

      102,109        86,784        17.7        192,064        176,051        9.1   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total expenses

      562,050        503,273        11.7        1,101,710        1,015,423        8.5   
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating income

      130,602        98,763        32.2        253,098        179,460        41.0   

Nonoperating expenses

      (10,209 )      (10,385 )      1.7        (19,418 )      (20,198 )      3.9   
  

 

 

    

 

 

      

 

 

    

 

 

    

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

      120,393        88,378        36.2        233,680        159,262        46.7   

Income taxes

      41,597        30,771        35.2        81,379        55,106        47.7   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income before noncontrolling interests and equity in income of equity investments

      78,796        57,607        36.8        152,301        104,156        46.2   

Equity in income of equity investments, net of tax

      4,579        3,600        27.2        9,973        7,696        29.6   
  

 

 

    

 

 

      

 

 

    

 

 

    

Income from continuing operations, net of tax

      83,375        61,207        36.2        162,274        111,852        45.1   

Gain from discontinued operations, net of tax

      —          50,133        nm        —          51,113        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

      83,375        111,340        (25.1 )      162,274        162,965        (0.4 ) 

Net income attributable to noncontrolling interests

      (536 )      (1,436 )      62.7        (1,680 )      (3,759 )      55.3   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income attributable to TSYS common shareholders

    $ 82,839        109,904        (24.6 )%    $ 160,594        159,206        0.9 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic earnings per share (EPS):

             

Income from continuing operations to TSYS common shareholders*

    $ 0.45        0.32        40.5 %    $ 0.87        0.58        49.6 % 

Gain from discontinued operations to TSYS common shareholders*

      —          0.27        nm        —          0.27        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Basic EPS

    $ 0.45        0.59        (23.6 )%    $ 0.87        0.85        2.5 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted EPS:

             

Income from continuing operations to TSYS common shareholders*

    $ 0.45        0.32        41.1 %    $ 0.87        0.58        50.5 % 

Gain from discontinued operations to TSYS common shareholders*

      —          0.27        nm        —          0.26        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted EPS

    $ 0.45        0.58        (23.3 )%    $ 0.87        0.84        3.1 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Weighted average shares outstanding:

             

(includes participating securities)

             

Basic

      183,829        186,373          184,153        187,058     
  

 

 

    

 

 

      

 

 

    

 

 

    

Diluted

      185,020        188,367          185,299        189,437     
  

 

 

    

 

 

      

 

 

    

 

 

    

Dividends declared per share

    $ 0.10        0.10        $ 0.20        0.20     
  

 

 

    

 

 

      

 

 

    

 

 

    

Amounts attributable to TSYS common shareholders:

             

Income from continuing operations, net of tax

    $ 82,839        59,771        38.6 %    $ 160,594        109,092        47.2 % 

Gain from discontinued operations, net of tax

      —          50,133        nm        —          50,114        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income

    $ 82,839        109,904        (24.6 )%    $ 160,594        159,206        0.9 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Non-GAAP measures:

             

Adjusted EPS from continuing operations

    $ 0.58        0.45        29.0 %    $ 1.11        0.83        34.6 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 206,537        170,894        20.9 %    $ 399,991        320,489        24.8 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

nm = not meaningful

* EPS amounts may not total due to rounding.

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 6 of 12

 

 

TSYS

Segment Breakdown

(unaudited)

(in thousands)

 

 

     Three Months Ended June 30,     Six Months Ended June 30,  
                 Change                 Change  
     2015     2014     $     %     2015     2014     $     %  

Revenues before reimbursable items:

                 

North America Services

    $ 287,199        233,217        53,982        23.1 %    $ 553,418        457,585        95,833        20.9 % 

International Services

      83,857        84,732        (875 )      (1.0 )      157,587        161,505        (3,918 )      (2.4 ) 

Merchant Services

      117,868        108,335        9,533        8.8        228,266        212,960        15,306        7.2   

NetSpend

      141,621        116,833        24,788        21.2        296,695        249,473        47,222        18.9   

Intersegment revenues

      (8,461 )      (5,050 )      (3,411 )      (67.5 )      (18,098 )      (10,705 )      (7,393 )      (69.1 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues before reimbursable items from external customers

    $ 622,084        538,067        84,017        15.6 %    $ 1,217,868        1,070,818        147,050        13.7 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total revenues:

                 

North America Services

    $ 333,844        273,324        60,520        22.1 %    $ 643,077        535,502        107,575        20.1 % 

International Services

      89,618        90,466        (848 )      (0.9 )      169,420        172,844        (3,424 )      (2.0 ) 

Merchant Services

      137,472        128,017        9,455        7.4        266,576        250,707        15,869        6.3   

NetSpend

      141,621        116,833        24,788        21.2        296,695        249,473        47,222        18.9   

Intersegment revenues

      (9,903 )      (6,604 )      (3,299 )      (50.0 )      (20,960 )      (13,643 )      (7,317 )      (53.6 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Revenues from external customers

    $ 692,652        602,036        90,616        15.1 %    $ 1,354,808        1,194,883        159,925        13.4 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Depreciation and amortization:

                 

North America Services

    $ 24,468        20,928        3,540        16.9 %    $ 47,532        41,204        6,328        15.4 % 

International Services

      8,628        9,761        (1,133 )      (11.6 )      17,406        19,566        (2,160 )      (11.0 ) 

Merchant Services

      4,446        3,567        879        24.6        8,723        6,967        1,756        25.2   

NetSpend

      2,622        1,890        732        38.7        4,915        3,625        1,290        35.6   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Segment depreciation and amortization

      40,164        36,146        4,018        11.1        78,576        71,362        7,214        10.1   

Acquisition intangible amortization

      22,852        24,282        (1,430 )      (5.9 )      46,718        48,595        (1,877 )      (3.9 ) 

Corporate admin and other

      889        533        356        66.8        1,426        1,038        388        37.4   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total depreciation and amortization

    $ 63,905        60,961        2,944        4.8 %    $ 126,720        120,995        5,725        4.7 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Adjusted segment operating income:

                 

North America Services

    $ 108,385        84,578        23,807        28.1 %    $ 210,956        159,155        51,801        32.5 % 

International Services

      13,353        11,743        1,610        13.7        20,336        16,298        4,038        24.8   

Merchant Services

      40,690        32,896        7,794        23.7        74,805        63,064        11,741        18.6   

NetSpend

      36,442        30,703        5,739        18.7        71,909        59,421        12,488        21.0   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Total adjusted segment operating income

      198,870        159,920        38,950        24.4        378,006        297,938        80,068        26.9   

Acquisition intangible amortization

      (22,852 )      (24,282 )      1,430        5.9        (46,718 )      (48,595 )      1,877        3.9   

NetSpend M&A operating expenses

      —          (1,182 )      1,182        nm        —          (2,435 )      2,435        nm   

Share-based compensation

      (12,030 )      (9,988 )      (2,042 )      (20.4 )      (20,173 )      (17,599 )      (2,574 )      (14.6 ) 

Corporate admin and other

      (33,386 )      (25,705 )      (7,681 )      (29.9 )      (58,017 )      (49,849 )      (8,168 )      (16.4 ) 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Operating income

    $ 130,602        98,763        31,839        32.2 %    $ 253,098        179,460        73,638        41.0 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Other:

                 

Reimbursable items:

                 

North America Services

    $ 46,645        40,107        6,538        16.3 %    $ 89,659        77,917        11,742        15.1 % 

International Services

      5,761        5,734        27        0.5        11,833        11,339        494        4.4   

Merchant Services

      19,604        19,682        (78 )      (0.4 )      38,310        37,747        563        1.5   

NetSpend

      —          —          —          na        —          —          —          na   

Intersegment revenues

      (1,442 )      (1,554 )      112        7.2        (2,862 )      (2,938 )      76        2.6   
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

Reimbursable items

    $ 70,568        63,969        6,599        10.3 %    $ 136,940        124,065        12,875        10.4 % 
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 7 of 12

 

 

TSYS

Condensed Balance Sheet

(unaudited)

(in thousands)

 

 

     Jun 30, 2015      Dec 31, 2014  

Assets

      

Current assets:

      

Cash and cash equivalents

    $ 349,378         289,183   

Accounts receivable, net

      314,678         283,203   

Other current assets

      123,689         118,167   
  

 

 

     

 

 

  

Total current assets

      787,745         690,553   

Goodwill

      1,547,089         1,547,397   

Other intangible assets, net

      366,215         404,107   

Property, equipment and software, net

      647,115         656,733   

Other long term assets

      464,360         434,791   
  

 

 

     

 

 

  

Total assets

    $ 3,812,524         3,733,581   
  

 

 

     

 

 

  

Liabilities

      

Current liabilities:

      

Accounts payable

    $ 57,358         48,793   

Bonds, notes and capital leases

      43,791         50,911   

Other current liabilities

      230,075         196,809   
  

 

 

     

 

 

  

Total current liabilities

      331,224         296,513   

Bonds, notes and capital leases, excluding current portion

      1,387,514         1,405,106   

Other long-term liabilities

      291,249         309,826   
  

 

 

     

 

 

  

Total liabilities

      2,009,987         2,011,445   
  

 

 

     

 

 

  

Redeemable noncontrolling interest

      22,370         22,492   
  

 

 

     

 

 

  

Equity

      

Shareholders’ equity

      1,774,224         1,692,762   
  

 

 

     

 

 

  

Noncontrolling interests in consolidated subsidiaries

      5,943         6,882   
  

 

 

     

 

 

  

Total equity

      1,780,167         1,699,644   
  

 

 

     

 

 

  

Total liabilities and equity

    $ 3,812,524         3,733,581   
  

 

 

     

 

 

  

 

 

TSYS

Selected Cash Flow Highlights

(unaudited)

(in thousands)

 

 

     Six Months Ended June 30,  
     2015     2014  

Cash flows from operating activities:

     

Net income

    $ 162,274        162,965   

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

     

Gain on disposal of subsidiaries

      —          (85,310 ) 

Equity in income of equity investments

      (9,973 )      (7,696 ) 

Dividends received from equity investments

      984        —     

Depreciation and amortization

      126,720        122,393   

Other non cash adjustments

      29,537        31,996   

Changes in operating assets and liabilities:

      (24,249 )      15,094   
  

 

 

    

 

 

  

Net cash provided by operating activities

      285,293        239,442   

Net cash used in investing activities

      (97,512 )      (61,539 ) 

Net cash used in financing activities

      (126,244 )      (207,575 ) 

Cash and cash equivalents:

     

Effect of exchange rate changes on cash and cash equivalents

      (1,342 )      2,399   
  

 

 

    

 

 

  

Net increase in cash and cash equivalents

      60,195        (27,273 ) 

Cash and cash equivalents at beginning of period

      289,183        278,230   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 349,378        250,957   
  

 

 

    

 

 

  

Supplemental - Non GAAP:

     

Net cash provided by operating activities

    $ 285,293        239,442   

Capital expenditures

      (96,552 )      (105,776 ) 
  

 

 

    

 

 

  

Free cash flow

      188,741        133,666   

Principal payments on debt and capital leases

      (26,393 )      (34,467 ) 
  

 

 

    

 

 

  

Available free cash flow

    $ 162,348        99,199   
  

 

 

    

 

 

  

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 8 of 12

 

 

TSYS

Supplemental Information

(unaudited)

 

Other

Accounts on File:

 

     Total Accounts on File  
(in millions)    June 2015      June 2014      %
Change		  

Consumer Credit

      374.1         246.5         51.8   

Retail

      26.4         27.9         (5.6 ) 
  

 

 

     

 

 

     

Total Consumer

      400.5         274.4         45.9   

Commercial

      44.0         40.4         8.7   

Other

      24.0         20.4         18.4   
  

 

 

     

 

 

     

Subtotal

      468.5         335.2         39.8   

Prepaid/Stored Value

      133.1         117.7         13.2   

Government Services

      77.1         65.6         17.4   

Commercial Card Single Use

      72.7         54.2         34.2   
  

 

 

     

 

 

     

Total AOF

      751.4         572.7         31.2   
  

 

 

     

 

 

     

Growth in Accounts on File (in millions):

 

     June 2014 to
June 2015		      June 2013 to
June 2014		  

Beginning balance

      572.7         488.7   

Change in accounts on file due to:

      

Internal growth of existing clients

      42.4         38.4   

New clients

      166.1         71.9   

Purges/Sales

      (29.3 )       (25.4 ) 

Deconversions

      (0.5 )       (0.9 ) 
  

 

 

     

 

 

  

Ending balance

      751.4         572.7   
  

 

 

     

 

 

  

Segment data:

 

     Three Months Ended June 30,  
                 Change  
     2015     2014     Inc (Dec)      %  

North America Segment:

          

Transactions (in millions)

      4,042.2        2,696.7        1,345.5         49.9 % 

International Segment:

          

Transactions (in millions)

      613.9        558.1        55.8         10.0 % 

Merchant Segment:

          

Point-of-sale transactions (in millions)

      1,089.4        1,045.1        44.3         4.2 % 

Dollar sales volume (in millions)

    $ 12,314.8      $ 11,796.5      $ 518.3         4.4 % 

NetSpend Segment:

          

Gross dollar volume (in millions)

    $ 5,531.0      $ 4,628.0      $ 903.0         19.5 % 
     Six Months Ended June 30,  
                 Change  
     2015     2014     Inc (Dec)      %  

North America Segment:

          

Accounts on file (AOF) (in millions)

      677.5        510.3        167.2         32.8 % 

Transactions (in millions)

      7,353.0        5,024.3        2,328.7         46.3 % 

International Segment:

          

AOF (in millions)

      73.9        62.3        11.6         18.5 % 

Transactions (in millions)

      1,185.9        1,076.0        109.9         10.2 % 

Merchant Segment:

          

Point-of-sale transactions (in millions)

      2,074.0        2,027.3        46.7         2.3 % 

Dollar sales volume (in millions)

    $ 23,616.4      $ 22,576.3      $ 1,040.1         4.6 % 

NetSpend Segment:

          

Gross dollar volume (in millions)

    $ 13,191.7      $ 11,195.2      $ 1,996.5         17.8 % 

Direct deposit 90-day active cards (in thousands)

      1,879.8        1,600.7        279.1         17.4 % 

90-day active cards (in thousands)

      3,885.1        3,388.0        497.1         14.7 % 

% of 90-day active cards with direct deposit

      48.4 %      47.2 %      

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 9 of 12

 

Reconciliation of GAAP to Non-GAAP Financial Measures

Non-GAAP Measures

The schedule below provides a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents second quarter 2015 financial results using the previous year’s foreign currency exchange rates. On a full year constant currency basis, TSYS’ total revenues grew 14.8% as compared to a reported GAAP increase of 13.4%.

The schedule below also provides a reconciliation of basic EPS, adjusted for the after-tax impact of acquisition intangible amortization, share-based compensation and merger and acquisition costs, to adjusted EPS.

The tax rate used in the calculation of adjusted EPS for the quarter and year is equal to an estimate of our annual effective tax rate on GAAP income. This effective rate is estimated annually and may be adjusted during the year to take into account events or trends that materially impact the effective tax rate including, but not limited to, significant changes resulting from tax legislation, material changes in the mix of revenues and expenses by entity and other significant events.

The schedule also provides a reconciliation of net income, adjusted for income from discontinued operations, equity in income of equity investments, income taxes, nonoperating expense, depreciation and amortization, share-based compensation, and merger and acquisition expenses, to adjusted EBITDA.

TSYS believes that non-GAAP financial measures are important to enable investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP financial measures when reporting its financial results to shareholders and potential investors in order to provide them with an additional tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are representative of comparative financial performance that reflects the economic substance of TSYS’ current and ongoing business operations.

Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

TSYS believes that its use of non-GAAP financial measures provides investors with the same key financial performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to be able to compare such information with prior periods. TSYS believes that the presentation of GAAP financial measures alone would not provide its shareholders and potential investors with the ability to appropriately analyze its ongoing operational results, and therefore expected future results. TSYS therefore believes that inclusion of non-GAAP financial measures provides investors with additional information to help them better understand its financial statements just as management utilizes these non-GAAP financial measures to better understand the business, manage budgets and allocate resources.

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 10 of 12

 

Reconciliation of GAAP to Non-GAAP

 

 

Constant Currency Comparison

(unaudited)

(in thousands)

 

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014      Percent
Change		     2015     2014      Percent
Change		  

Consolidated

               

Constant currency (1)

    $ 702,191        602,036         16.6 %    $ 1,372,054        1,194,883         14.8 % 

Foreign currency (2)

      (9,539 )     —             (17,246 )     —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Total revenues

    $ 692,652       602,036         15.1 %    $ 1,354,808       1,194,883         13.4 % 
  

 

 

    

 

 

       

 

 

    

 

 

     

Constant currency (1)

    $ 631,025        538,067         17.3 %    $ 1,233,927        1,070,818         15.2 % 

Foreign currency (2)

      (8,941 )     —             (16,059 )     —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Total revenues before reimbursable items

    $ 622,084       538,067         15.6 %    $ 1,217,868       1,070,818         13.7 % 
  

 

 

    

 

 

       

 

 

    

 

 

     

Constant currency (1)

    $ 131,105        98,763         32.7 %    $ 253,443        179,460         41.2 % 

Foreign currency (2)

      (503 )     —             (345 )     —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Operating income

    $ 130,602       98,763         32.2 %    $ 253,098       179,460         41.0 % 
  

 

 

    

 

 

       

 

 

    

 

 

     

International Services

               

Constant currency (1)

    $ 99,076        90,466         9.5 %    $ 186,456        172,844         7.9 % 

Foreign currency (2)

      (9,458 )     —             (17,036 )     —        
  

 

 

    

 

 

       

 

 

    

 

 

     

Total revenues

    $ 89,618       90,466         (0.9 )%    $ 169,420       172,844         (2.0 )% 
  

 

 

    

 

 

       

 

 

    

 

 

     

 

(1) Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.
(2) Reflects the impact of calculated changes in foreign currency rates from the comparable period.

 

 

Revenues Before Reimbursable Items

(unaudited)

(in thousands)

 

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015      2014      Percent
Change		     2015      2014      Percent
Change		  

Total revenues

    $ 692,652         602,036         15.1 %    $ 1,354,808         1,194,883         13.4 % 

Reimbursable items

      70,568        63,969         10.3        136,940        124,065         10.4   
  

 

 

     

 

 

       

 

 

     

 

 

     

Revenues before reimbursable items

    $ 622,084        538,067         15.6 %    $ 1,217,868        1,070,818         13.7 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 11 of 12

 

Reconciliation of GAAP to Non-GAAP

 

Adjusted Earnings per Share

(unaudited)

(in thousands, except per share data)

 

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015      2014      Percent
Change		     2015      2014      Percent
Change		  

Income from continuing operations attributable to TSYS common shareholders

    $ 82,839         59,771         38.6 %    $ 160,594         109,092         47.2 % 

Adjust for amounts attributable to TSYS common shareholders:

                 

Add: Acquisition intangible amortization, net of taxes

    $ 15,083         15,799         (4.5 )%      30,844         31,612         (2.4 ) 

Add: Share-based compensation, net of taxes

      8,033         6,584         22.0        13,474         11,601         16.1   

Add: NetSpend M&A expenses, net of taxes*

      —           1,122         nm        —           2,326         nm   
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjusted earnings

    $ 105,955         83,276         27.2 %    $ 204,912         154,631         32.5 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Basic EPS - Income from continuing operations attributable to TSYS common shareholders

                 

As reported (GAAP)

    $ 0.45         0.32         40.5 %    $ 0.87         0.58         49.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjust for amounts attributable to TSYS common shareholders:

                 

Add: Acquisition intangible amortization, net of taxes

      0.08         0.08         (3.3 )      0.17         0.17         (0.9 ) 

Add: Share-based compensation, net of taxes

      0.04         0.04         23.7        0.07         0.06         18.0   

Add: NetSpend M&A expenses, net of taxes*

      —           0.01         nm        —           0.01         nm   
  

 

 

     

 

 

       

 

 

     

 

 

     

Adjusted EPS **

    $ 0.58         0.45         29.0 %    $ 1.11         0.83         34.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Weighted average shares outstanding

      183,829         186,373           184,153         187,058      
  

 

 

     

 

 

       

 

 

     

 

 

     

 

* Certain merger and acquisition costs are nondeductible for income tax purposes
** Adjusted EPS amounts may not total due to rounding.

 

 

Adjusted EBITDA

(unaudited)

(in thousands)

 

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014     Percent
Change		     2015     2014     Percent
Change		  

Net income

    $ 83,375        111,340        (25.1 )%    $ 162,274        162,965        (0.4 )% 

Adjust for:

             

Deduct: Income from discontinued operations

      —          (50,133 )      nm        —          (51,113 )      nm   

Deduct: Equity in income of equity investments

      (4,579 )      (3,600 )      (27.2 )      (9,973 )      (7,696 )      (29.6 ) 

Add: Income taxes

      41,597        30,771        35.2        81,379        55,106        47.7   

Add: Nonoperating expense

      10,209        10,385        (1.7 )      19,418        20,198        (3.9 ) 

Add: Depreciation and amortization

      63,905        60,961        4.8        126,720        120,995        4.7   
  

 

 

    

 

 

      

 

 

    

 

 

    

EBITDA

    $ 194,507        159,724        21.8 %    $ 379,818        300,455        26.4 % 

Adjust for:

             

Add: Share-based compensation

      12,030        9,988        20.4        20,173        17,599        14.6   

Add: NetSpend M&A operating expenses

      —          1,182        nm        —          2,435        nm   
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted EBITDA

    $ 206,537        170,894        20.9 %    $ 399,991        320,489        24.8 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

nm = not meaningful

 

- more -

TSYS Announces Second Quarter 2015 Earnings

Page 12 of 12

 

Reconciliation of GAAP to Non-GAAP

 

 

Segment Operating Margin and Consolidated Adjusted Operating Margin

(unaudited)

(in thousands)

 

 

     Three Months Ended June 30, 2015     Three Months Ended June 30, 2014  
     Adjusted Segment
Operating Income		     Revenues before
Reimbursable Items		     Adjusted
Operating Margin		     Adjusted Segment
Operating Income		     Revenues before
Reimbursable Items		     Adjusted
Operating Margin		  

North America Services

    $ 108,385        287,199        37.74 %    $ 84,578        233,217        36.27 % 

International Services

      13,353        83,857        15.92        11,743        84,732        13.86   

Merchant Services

      40,690        117,868        34.52        32,896        108,335        30.37   

NetSpend

      36,442        141,621        25.73        30,703        116,833        26.28   

Intersegment

      —          (8,461 )        —          (5,050 )   

Corporate admin and other

      (33,386 )          (25,705 )     
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted operating margin

    $ 165,484        622,084        26.60 %    $ 134,215        538,067        24.94 % 

Acquisition intangible amortization

      (22,852 )          (24,282 )     

NetSpend M&A operating expenses

      —              (1,182 )     

Share-based compensation

      (12,030 )          (9,988 )     
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating income and margin*

    $ 130,602        622,084        20.99 %    $ 98,763        538,067        18.36 % 

Reimbursable items

        70,568            63,969     
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating margin (US GAAP)

    $ 130,602        692,652        18.86 %    $ 98,763        602,036        16.40 % 
  

 

 

    

 

 

      

 

 

    

 

 

    
     Six Months Ended June 30, 2015     Six Months Ended June 30, 2014  
     Adjusted Segment
Operating Income		     Revenues before
Reimbursable Items		     Adjusted
Operating Margin		     Adjusted Segment
Operating Income		     Revenues before
Reimbursable Items		     Adjusted
Operating Margin		  

North America Services

    $ 210,956        553,418        38.12 %    $ 159,155        457,585        34.78 % 

International Services

      20,336        157,587        12.90        16,298        161,505        10.09   

Merchant Services

      74,805        228,266        32.77        63,064        212,960        29.61   

NetSpend

      71,909        296,695        24.24        59,421        249,473        23.82   

Intersegment

      —          (18,098 )        —          (10,705 )   

Corporate admin and other

      (58,017 )          (49,849 )     
  

 

 

    

 

 

      

 

 

    

 

 

    

Adjusted operating margin

    $ 319,989        1,217,868        26.27 %    $ 248,089        1,070,818        23.17 % 

Acquisition intangible amortization

      (46,718 )          (48,595 )     

NetSpend M&A operating expenses

      —              (2,435 )     

Share-based compensation

      (20,173 )          (17,599 )     
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating income and margin*

    $ 253,098        1,217,868        20.78 %    $ 179,460        1,070,818        16.76 % 

Reimbursable items

        136,940            124,065     
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating margin (US GAAP)

    $ 253,098        1,354,808        18.68 %    $ 179,460        1,194,883        15.02 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

 

* Operating margin on revenue before reimbursable items

 

- ### -