Segment Reporting and Major Customers (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting and Major Customers

Schedule of operating income and revenue by segment

Operating Segments	Three months ended June 30,			Six months ended June 30,
(in thousands)		2018	2017		2018	2017
Adjusted operating income by segment:
Issuer Solutions (a)	$	151,490	147,277		302,481	281,150
Merchant Solutions (b)		124,817	101,996		234,831	193,275
Consumer Solutions (c)		50,232	46,044		99,585	94,692
Corporate Administration and Other		(39,166)	(36,036)		(77,567)	(71,608)
Adjusted segment operating income1 (d)		287,373	259,281		559,330	497,509
Less:
Share-based compensation		14,229	11,008		20,524	20,055
Cayan and TransFirst merger & acquisition (M&A) and integration expenses2		2,581	4,165		16,949	9,034
Litigation, claims, judgments or settlements		-	(83)		-	1,878
Acquisition intangible amortization		61,865	50,943		124,888	106,111
Operating income		208,698	193,248		396,969	360,431
Nonoperating expenses, net		(41,170)	(30,042)		(78,812)	(59,945)
Income before income taxes and equity in income of equity investments	$	167,528	163,206		318,157	300,486
Net revenue by segment:
Issuer Solutions (e)	$	421,015	392,760		844,589	780,015
Merchant Solutions (f)		346,389	278,588		663,792	539,149
Consumer Solutions (g)		200,293	183,065		410,781	380,530
Segment net revenue		967,697	854,413		1,919,162	1,699,694
Less: intersegment revenues		11,149	10,345		27,117	22,734
Net revenue3 (h)		956,548	844,068		1,892,045	1,676,960
Add: reimbursable items, interchange and payment network fees4		51,032	378,307		102,705	730,140
Total revenues	$	1,007,580	1,222,375		1,994,750	2,407,100
Adjusted segment operating margin on net revenue:
Issuer Solutions (a)/(e)		36.0%	37.5%		35.8%	36.0%
Merchant Solutions (b)/(f)		36.0%	36.6%		35.4%	35.9%
Consumer Solutions (c)/(g)		25.1%	25.2%		24.2%	24.9%
Adjusted segment operating margin on net revenue (d)/(h)		30.0%	30.7%		29.6%	29.7%

¹ Adjusted segment operating income excludes acquisition intangible amortization, Cayan and TransFirst 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			Six months ended
	June 30,			June 30,
(in thousands)		2018	2017		2018	2017
Depreciation and amortization by segment:
Issuer Solutions	$	29,640	35,735	$	57,971	72,588
Merchant Solutions		7,523	7,380		15,348	14,402
Consumer Solutions		4,313	4,180		8,573	8,272
Segment depreciation and amortization		41,476	47,295		81,892	95,262
Acquisition intangible amortization		61,865	50,943		124,888	106,111
Corporate administration and other		949	1,121		1,899	2,164
Total depreciation and amortization1	$	104,290	99,359	$	208,679	203,537

Client incentive/contract asset amortization is 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)	June 30, 2018		December 31, 2017
Issuer Solutions	$	6,961,342	5,735,195
Merchant Solutions		4,174,743	3,136,395
Consumer Solutions		1,391,672	1,418,644
Intersegment assets		(5,061,267)	(3,958,545)
Total assets	$	7,466,490	6,331,689

Schedule of property and equipment, net by geographic area

	As of
(in thousands)	June 30, 2018		December 31, 2017
United States	$	304,186	273,690
Europe		46,895	43,586
Other		12,255	7,942
Total	$	363,336	325,218

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

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, 2018
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	266,274	348,012	200,265	$	814,551
Europe1		89,339	127	-		89,466
Canada1		81,076	279	-		81,355
Other1		21,912	296	-		22,208
Total	$	458,601	348,714	200,265	$	1,007,580

	Six months ended June 30, 2018
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	530,306	666,762	410,653	$	1,607,721
Europe1		184,483	252	-		184,735
Canada1		158,657	558	-		159,215
Other1		42,514	565	-		43,079
Total	$	915,960	668,137	410,653	$	1,994,750

	Three months ended June 30, 2017
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions		Total
United States	$	258,120	607,663	182,637	$	1,048,420
Europe1		86,433	59	-		86,492
Canada1		78,761	346	-		79,107
Other1		8,051	305	-		8,356
Total	$	431,365	608,373	182,637	$	1,222,375

	Six months ended June 30, 2017
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	518,849	1,170,771	379,695	$	2,069,315
Europe1		156,548	138	-		156,686
Canada1		154,956	623	-		155,579
Other1		24,894	626	-		25,520
Total	$	855,247	1,172,158	379,695	$	2,407,100

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