Segment Reporting and Major Customers

6 Months Ended

Jun. 30, 2019

Segment Reporting and Major Customers

Segment Reporting and Major Customers

Note 11 — Segment Reporting and Major Customers

Refer to Note 21 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding segment reporting and major customers.

At TSYS, the chief operating decision maker (“CODM”) is a group consisting of Senior Executive Management. In the first quarter of 2019, the CODM changed the profitability measure for its operating segments to adjusted segment EBITDA. All periods presented have been adjusted to reflect this new measure.

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

	As of
(in thousands)	June 30, 2019		December 31, 2018
Issuer Solutions	$	7,049,467	6,843,451
Merchant Solutions		4,204,758	4,248,183
Consumer Solutions		1,383,015	1,374,667
Intersegment assets		(4,930,434)	(4,997,592)
Total assets	$	7,706,806	7,468,709

The Company maintains property and equipment, net of accumulated depreciation and amortization, in the following geographic areas:

	As of
(in thousands)	June 30, 2019		December 31, 2018
United States	$	312,707	321,119
Europe		46,466	45,872
Other		14,695	16,083
Total	$	373,868	383,074

The following table presents the Company’s depreciation and amortization by segment:

	Three months ended			Six months ended
		June 30,			June 30,
(in thousands)	2019		2018	2019		2018
Depreciation and amortization by segment:
Issuer Solutions	$	36,129	29,640		71,296	57,971
Merchant Solutions		8,257	7,523		15,940	15,348
Consumer Solutions		5,202	4,313		9,618	8,573
Segment depreciation and amortization		49,588	41,476		96,854	81,892
Acquisition intangible amortization		53,706	61,865		108,663	124,888
Corporate administration and other		1,479	949		2,966	1,899
Total depreciation and amortization	$	104,773	104,290		208,483	208,679

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, 2019
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	243,000	365,703	196,143	$	804,846
Europe1		99,038	128	-		99,166
Canada1		107,368	422	-		107,790
Other1		23,300	383	-		23,683
Total	$	472,706	366,636	196,143	$	1,035,485

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

	Six months ended June 30, 2019
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	514,130	710,001	415,334	$	1,639,465
Europe1		193,425	288	-		193,713
Canada1		187,001	810	-		187,811
Other1		48,309	718	-		49,027
Total	$	942,865	711,817	415,334	$	2,070,016

	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

2Certain of these revenues are impacted by movements in foreign currency exchange rates.

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

(in thousands)	Three months ended			Six months ended
	June 30,			June 30,
Operating Segments		2019	2018		2019	2018
Adjusted segment EBITDA1:
Issuer Solutions (a)	$	209,845	195,275		414,779	391,040
Merchant Solutions (b)		138,366	133,418		267,201	252,358
Consumer Solutions (c)		53,595	54,545		117,288	108,212
Corporate administration and other		(32,867)	(38,217)		(73,042)	(75,667)
Total		368,939	345,021		726,226	675,943
Less:
Share-based compensation		11,500	14,230		22,214	20,524
Merger & acquisition (M&A) and integration expenses2		17,150	2,581		20,860	16,949
Depreciation and amortization		104,773	104,290		208,483	208,679
Contract asset amortization		8,250	6,711		16,288	13,584
Contract cost asset amortization		8,179	8,511		16,024	19,238
Operating income		219,087	208,698		442,357	396,969
Nonoperating expenses, net		(37,416)	(41,170)		(80,407)	(78,812)
Income before income taxes and equity in income of equity investments	$	181,671	167,528		361,950	318,157
Net revenue by segment:
Issuer Solutions (e)	$	432,445	421,015		865,919	844,589
Merchant Solutions (f)		364,210	346,389		707,166	663,792
Consumer Solutions (g)		196,143	200,293		415,321	410,781
Segment net revenue		992,798	967,697		1,988,406	1,919,162
Less: intersegment revenues		12,878	11,149		28,217	27,117
Net revenue3		979,920	956,548		1,960,189	1,892,045
Add: reimbursable items		55,565	51,032		109,827	102,705
Total revenues	$	1,035,485	1,007,580		2,070,016	1,994,750
Adjusted segment EBITDA margin on net revenue:
Issuer Solutions (a)/(e)		48.5%	46.4%		47.9%	46.3%
Merchant Solutions (b)/(f)		38.0%	38.5%		37.8%	38.0%
Consumer Solutions (c)/(g)		27.3%	27.2%		28.2%	26.3%

1 Adjusted segment EBITDA is net income excluding equity in income investments, interest expense (net of interest income), income taxes, depreciation, amortization, contract asset amortization, contract cost asset amortization, gains or losses on foreign currency translation, other nonoperating income or expenses, share-based compensation, litigation, claims, judgments or settlements and M&A and integration expenses.

2 Excludes share-based compensation

3 Net revenue is defined as total revenues less reimbursable items (such as postage) that are recorded by TSYS as expense.

Major Customers

For the three and six months ended June 30, 2019 and 2018, the Company did not have any major customers.