Segment Reporting and Major Customers

6 Months Ended

Jun. 30, 2016

Segment Reporting and Major Customers

Note 7 — Segment Reporting and Major Customers

Refer to Note 22 of the Company’s audited financial statements for the year ended December 31, 2015, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC, for a discussion regarding segment reporting and major customers.

The following table presents the Company’s total assets by segment:

	As of
	June 30, 2016		December 31, 2015
North America Services	$	5,783,281		3,485,924
International Services		305,927		348,714
Merchant Services		3,361,007		689,781
NetSpend		1,479,537		1,504,740
Intersegment assets		(4,452,719)		(2,151,264)
Total assets	$	6,477,033		3,877,895

The following table presents the Company’s operating results by segment:

Operating Segments	Three months ended June 30,					Six months ended June 30,
(in thousands)		2016		2015		2016		2015
Operating income (a)		$	135,821		130,602		287,508		253,098
Share-based compensation			12,566		12,030		20,724		20,173
TransFirst M&A expenses			20,676		-		24,078		-
Acquisition intangible amortization			58,486		22,852		81,407		46,718
Adjusted operating income (b)		$	227,549		165,484		413,717		319,989
Adjusted operating income by segment:
North America Services ( c )		$	112,737		108,385		237,525		210,956
International Services (d)			15,751		13,353		26,040		20,336
Merchant Services ( e )			89,915		40,690		128,272		74,805
NetSpend (f)			42,481		36,442		84,682		71,909
Corporate Administration and Other			(33,335)		(33,386)		(62,802)		(58,017)
Adjusted segment operating income		$	227,549		165,484		413,717		319,989
Total revenues (g)		$	1,151,587		692,652		1,890,965		1,354,808
Reimbursable items, interchange and assessment expenses			356,650		70,568		424,384		136,940
Net revenue (h)			794,937		622,084		1,466,581		1,217,868
Intersegment			8,089		8,461		21,045		18,098
Segment net revenue		$	803,026		630,545		1,487,626		1,235,966
Segment net revenue:
North America Services (i)		$	297,168		287,199		600,809		553,418
International Services (j)			81,771		83,857		157,125		157,587
Merchant Services (k)			261,467		117,868		382,079		228,266
NetSpend (l)			162,620		141,621		347,613		296,695
Segment net revenue		$	803,026		630,545		1,487,626		1,235,966
Operating margin (GAAP) (a)/(g)			11.79%		18.86%		15.20%		18.68%
Adjusted operating margin on net revenue (b)/(h)			28.6%		26.6%		28.2%		26.3%
Adjusted segment operating margin on net revenue:
North America Services ( c )/(i)			37.9%		37.7%		39.5%		38.1%
International Services (d)/(j)			19.3%		15.9%		16.6%		12.9%
Merchant Services ( e )/(k)			34.4%		34.5%		33.6%		32.8%
NetSpend (f)/(l)			26.1%		25.7%		24.4%		24.2%
Depreciation and amortization
North America Services		$	27,442		24,468		54,925		47,532
International Services			8,207		8,628		16,343		17,406
Merchant Services			6,806		4,446		11,856		8,723
NetSpend			3,116		2,622		6,225		4,915
Segment depreciation and amortization			45,571		40,164		89,349		78,576
Acquisition intangible amortization			58,486		22,852		81,407		46,718
Corporate Administration and Other			912		889		1,796		1,426
Total depreciation and amortization		$	104,969		63,905		172,552		126,720

¹Net revenue and adjusted segment operating income are non-GAAP measures. Net revenue is total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and assessment fees charged by the card associations or payment networks that are recorded by TSYS as expense. Adjusted segment operating income excludes acquisition intangible amortization, TransFirst M&A expenses, share-based compensation and expenses associated with Corporate Administration and Other.

Assets and Revenues by Geographic Area

The Company maintains property and equipment, net of accumulated depreciation and amortization, in the following geographic areas:
	As of
(in thousands)	June 30, 2016		December 31, 2015
United States	$	241,971		241,814
Europe*		39,153		41,953
Other*		5,719		6,131
Total	$	286,843		289,898
*Property and equipment are impacted by movements in foreign currency exchange rates. The following tables reconcile geographic revenues to external revenues by operating segment based on the domicile of the Company’s customers:

	Three months ended June 30, 2016
(in thousands)	North America     Services		International     Services		Merchant       Services		NetSpend		Total
United States	$	263,292		-		567,258		161,941	$	992,491
Canada*		73,072		-		65		-		73,137
Europe*		200		74,960		-		-		75,160
Mexico		2,944		-		-		-		2,944
Other*		4,295		3,348		212		-		7,855
Total	$	343,803		78,308		567,535		161,941	$	1,151,587
	Six months ended June 30, 2016
(in thousands)	North America Services		International Services		Merchant Services		NetSpend		Total
United States	$	520,941		-		704,978		346,139	$	1,572,058
Canada*		142,922		-		130		-		143,052
Europe*		399		144,574		-		-		144,973
Mexico		9,029		-		-		-		9,029
Other*		8,460		12,987		406		-		21,853
Total	$	681,751		157,561		705,514		346,139	$	1,890,965

	Three months ended June 30, 2015
(in thousands)	North America     Services		International       Services		Merchant        Services		NetSpend		Total
United States	$	244,882		-		137,046		141,621	$	523,549
Canada*		72,360		-		22		-		72,382
Europe*		201		76,646		164		-		77,011
Mexico		4,099		-		-		-		4,099
Other*		4,853		10,585		173		-		15,611
Total	$	326,395		87,231		137,405		141,621	$	692,652
	Six months ended June 30, 2015
(in thousands)	North America Services		International Services		Merchant Services		NetSpend		Total
United States	$	458,305		-		265,847		296,695	$	1,020,847
Canada*		150,169		-		228		-		150,397
Europe*		397		144,269		22		-		144,688
Mexico		8,368		-		-		-		8,368
Other*		9,887		20,269		352		-		30,508
Total	$	627,126		164,538		266,449		296,695	$	1,354,808

*Revenues are impacted by movements in foreign currency exchange rates.

Major Customers

For the three and six months ended June 30, 2016 and 2015, the Company did not have any major customers.