Segment Reporting and Major Customers (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting and Major Customers

Schedule of operating income and revenue by segment

Operating Segments	Three Months Ended March 31,
(in thousands)		2018	2017
Adjusted operating income by segment:
Issuer Solutions (a)	$	150,991	133,873
Merchant Solutions (b)		110,014	91,279
Netspend (c)		49,353	48,648
Corporate Administration and Other		(38,401)	(35,574)
Adjusted segment operating income1 (d)		271,957	238,226
Less:
Share-based compensation		6,295	9,047
TransFirst and Cayan merger & acquisition (M&A) and integration expenses2		14,368	4,868
Litigation, claims, judgments or settlements		-	1,961
Acquisition intangible amortization		63,023	55,167
Operating income		188,271	167,183
Nonoperating expenses, net		(37,642)	(29,903)
Income before income taxes and equity in income of equity investments	$	150,629	137,280
Net revenue by segment:
Issuer Solutions (e)	$	423,574	387,255
Merchant Solutions (f)		317,403	260,561
Netspend (g)		210,489	197,465
Segment net revenue		951,466	845,281
Less: intersegment revenues		15,969	12,389
Net revenue3 (h)		935,497	832,892
Add: reimbursable items, interchange and payment network fees4		51,673	351,833
Total revenues	$	987,170	1,184,725
Adjusted segment operating margin on net revenue:
Issuer Solutions (a)/(e)		35.6%	34.6%
Merchant Solutions (b)/(f)		34.7%	35.0%
Netspend (c)/(g)		23.4%	24.6%
Adjusted segment operating margin on net revenue (d)/(h)		29.1%	28.6%

¹ Adjusted segment operating income excludes acquisition intangible amortization, TransFirst and Cayan M&A and integration expenses, share-based compensation and expenses associated with Corporate Administration and Other.

² Excludes share-based compensation.

³ Net revenue is defined as total revenues less reimbursable items (such as postage), as well as, merchant acquiring interchange and payment network fees charged by the card associations or payment networks that are recorded by TSYS as expense.

⁴ As discussed in Note 2 in the Notes to Unaudited Consolidated Financial Statements, the most significant impact of the Company’s adoption of ASC 606 as of January 1, 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers are presented “net” of the amounts paid to them, as opposed to the “gross” presentation for certain of these fees in 2017.

Schedule of depreciation expense by segment

	Three months ended March 31,
(in thousands)		2018	2017
Depreciation and amortization by segment:
Issuer Solutions	$	28,331	36,853
Merchant Solutions		7,825	7,022
Netspend		4,259	4,092
Segment depreciation and amortization		40,415	47,967
Acquisition intangible amortization		63,023	55,167
Corporate administration and other		951	1,044
Total depreciation and amortization1	$	104,389	104,178

Client incentive/contract asset amortization are no longer included in depreciation and amortization due to the adoption of ASC 606 on January 1, 2018.

Schedule of total assets by segment

	As of
(in thousands)	March 31, 2018		December 31, 2017
Issuer Solutions	$	6,911,399	5,735,195
Merchant Solutions		4,204,303	3,136,395
Netspend		1,428,399	1,418,644
Intersegment assets		(5,012,384)	(3,958,545)
Total assets	$	7,531,717	6,331,689

Schedule of property and equipment, net by geographic area

	As of
(in thousands)	March 31, 2018		December 31, 2017
United States	$	295,862	273,690
Europe		50,857	43,586
Other		13,392	7,942
Total	$	360,111	325,218

Schedule of reconciliation of geographic revenues to external revenues by operating segment

	Three months ended March 31, 2018
(in thousands)	Issuer Solutions		Merchant Solutions	Netspend	Total
United States	$	264,032	318,749	210,388	$	793,169
Europe1		95,143	125	-		95,268
Canada1		77,582	279	-		77,861
Other1		20,602	270	-		20,872
Total	$	457,359	319,423	210,388	$	987,170

	Three months ended March 31, 2017
(in thousands)	Issuer Solutions		Merchant Solutions	Netspend		Total
United States	$	260,729	563,108	197,058	$	1,020,895
Europe1		70,115	80	-		70,195
Canada1		76,195	276	-		76,471
Other1		16,842	322	-		17,164
Total	$	423,881	563,786	197,058	$	1,184,725

¹ Certain of these revenues are impacted by movements in foreign currency exchange rates.

As discussed in Note 2 in the Notes to Unaudited Consolidated Financial Statements, the most significant impact of the Company’s adoption of ASC 606 as of January 1, 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers are presented “net” of the amounts paid to them, as opposed to the “gross” presentation for certain of these fees in 2017.