Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TOTAL SYSTEM SERVICES INC | tss-20181023x8k.htm |
Exhibit 99.1
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TSYS Reports Third Quarter Earnings and Increases 2018 Outlook
Columbus, Ga., October 23, 2018 – TSYS (NYSE: TSS) today reported results for the third quarter of 2018.
“We were very pleased to continue our momentum and performance for the third quarter as all three of our segments delivered exceptional results. This performance enables us to again raise our guidance for the year while continuing to invest for the long term,” said M. Troy Woods, chairman, president and chief executive officer of TSYS.
Highlights for the third quarter of 2018 vs. 2017:
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Total revenues were $1,015.4 million, a decrease of 18.6%. The decrease is the result of adopting ASC 606.(1) |
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Net revenue (non-GAAP), which excludes reimbursable items, interchange and payment network fees, was $964.6 million, an increase of 13.1%. |
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Net income attributable to TSYS common shareholders was $156.0 million, an increase of 26.7%. Diluted EPS were $0.85, an increase of 28.0%. |
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Adjusted earnings (non-GAAP) were $212.4 million, an increase of 30.6%. Adjusted diluted EPS (non-GAAP) were $1.16, an increase of 32.0%. |
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Adjusted EBITDA (non-GAAP) was $348.5 million, an increase of 12.6%. |
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(1) |
On January 1, 2018, TSYS adopted Accounting Standards Codification (ASC) 606 “Revenue from Contracts with Customers” using the modified retrospective transition method. The most significant impact of adopting ASC 606 in 2018 is primarily the result of gross versus net presentation of interchange and payment network fees. In 2018, these fees collected on behalf of the payment networks and card issuers are presented “net” of the amounts paid to them, as opposed to the “gross” presentation for certain of these fees in 2017. |
Page 2 of 16
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Revised 2018 Outlook
TSYS’ revised 2018 guidance is as follows:
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Revised 2018 Financial |
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(in millions, except per share amounts) |
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Outlook Range(1)(2) |
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Percent Change |
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Revenue: |
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Total revenues (GAAP) |
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$ |
3,990 |
to |
$ |
4,040 |
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(19%) |
to |
(18%) |
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Net revenue (non-GAAP) |
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$ |
3,790 |
to |
$ |
3,840 |
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11% |
to |
13% |
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Earnings per share: |
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Diluted EPS (GAAP) |
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$ |
3.09 |
to |
$ |
3.15 |
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(2%) |
to |
0% |
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Adjusted diluted EPS attributable to TSYS common shareholders (non-GAAP) |
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$ |
4.41 |
to |
$ |
4.47 |
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31% |
to |
33% |
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Weighted average diluted shares outstanding |
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184 |
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(2) |
The estimated impact of the adoption of ASC 606(1) on TSYS’ revised 2018 Outlook is as follows: |
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Total revenues |
($1,700) |
to |
($1,675) |
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Net revenue |
($69) |
to |
($62) |
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Diluted EPS |
($0.04) |
to |
($0.03) |
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Adjusted diluted EPS |
($0.04) |
to |
($0.03) |
Conference Call
TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 23. The conference call can be accessed via live webcast on the “Investor Relations” section of TSYS’ website at investors.tsys.com where an accompanying slide presentation will also be available. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call.
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-
Page 3 of 16
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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, net revenue, adjusted earnings, adjusted EBITDA and adjusted diluted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 11 to 15 in the financial schedules of this release.
About TSYS
TSYS® (NYSE: TSS) is a leading global payments provider, offering seamless, secure and innovative solutions across the payments spectrum — for issuers, merchants and consumers. We succeed because we put people and their need at the heart of every decision to help them unlock payment opportunities. It’s an approach we call ‘People-Centered Payments®.
Our headquarters are located in Columbus, Ga., U.S.A., with approximately 13,000 team members and local offices across 13 countries. TSYS generated revenue of $4.9 billion in 2017, while processing more than 27.8 billion transactions. We are a member of The Civic 50 and were named one of the 2018 World's Most Ethical Companies by Ethisphere magazine. TSYS is a member of the S&P 500 and routinely posts all important information on its website. For more, visit tsys.com.
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 2018 total revenues, net revenue, diluted EPS and adjusted diluted 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, particularly the recently completed Cayan acquisition; the effect of current domestic and worldwide economic conditions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates, and in particular with respect to the current environment, adverse developments with respect to foreign currency exchange rates as a result of the United Kingdom’s decision to leave the European Union (Brexit);expenses incurred associated with the signing of a significant client; conversions of clients’ portfolios do not occur
Page 4 of 16
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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, and in particular the CFPB’s new rule regarding prepaid financial products, including its effective date; the potential for our systems and software to contain undetected errors, viruses or defects; 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. TSYS disclaims any obligation to update any forward-looking statements as a result of new information, future developments or otherwise except as required by law.
Contacts:
Cyle Mims
TSYS Media Relations
+1.706.644.3110
cylemims@tsys.com
Shawn Roberts
TSYS Investor Relations
+1.706.644.6081
shawnroberts@tsys.com
- more -
TSYS Announces Third Quarter 2018 Earnings
Page 5 of 16
TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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Percent |
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Percent |
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2018 |
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2017 |
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Change |
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2018 |
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2017 |
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Change |
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Total revenues |
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$ |
1,015,371 |
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1,247,576 |
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(18.6) |
% |
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$ |
3,010,121 |
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3,654,676 |
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(17.6) |
% |
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Cost of services |
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624,363 |
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898,471 |
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(30.5) |
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1,855,546 |
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2,638,214 |
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(29.7) |
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Selling, general and administrative expenses |
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175,025 |
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149,413 |
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17.1 |
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541,623 |
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456,339 |
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18.7 |
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Total expenses |
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799,388 |
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1,047,884 |
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(23.7) |
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2,397,169 |
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3,094,553 |
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(22.5) |
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Operating income |
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215,983 |
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199,692 |
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8.2 |
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612,952 |
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560,123 |
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9.4 |
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Nonoperating expenses |
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(41,294) |
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(28,835) |
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(43.2) |
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(120,106) |
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(88,780) |
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(35.3) |
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Income before income taxes and equity in income of equity investments |
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174,689 |
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170,857 |
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2.2 |
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492,846 |
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471,343 |
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4.6 |
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Income tax expense |
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31,112 |
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54,628 |
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(43.0) |
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86,662 |
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153,917 |
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(43.7) |
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Income before equity in income of equity investments |
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143,577 |
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116,229 |
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23.5 |
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406,184 |
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317,426 |
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28.0 |
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Equity in income of equity investments, net of tax |
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12,383 |
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8,497 |
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45.7 |
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35,313 |
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30,919 |
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14.2 |
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Net income |
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155,960 |
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124,726 |
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25.0 |
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441,497 |
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348,345 |
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26.7 |
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Net income attributable to noncontrolling interests |
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— |
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(1,631) |
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100.0 |
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(1,261) |
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(4,368) |
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71.1 |
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Net income attributable to TSYS common shareholders |
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$ |
155,960 |
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123,095 |
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26.7 |
% |
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$ |
440,236 |
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343,977 |
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28.0 |
% |
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Earnings per share (EPS): |
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Basic EPS |
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$ |
0.85 |
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0.67 |
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28.0 |
% |
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$ |
2.42 |
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1.87 |
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29.4 |
% |
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Diluted EPS |
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$ |
0.85 |
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0.66 |
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28.0 |
% |
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$ |
2.40 |
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1.85 |
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29.3 |
% |
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Weighted average shares outstanding: |
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(includes participating securities) |
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Basic |
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182,428 |
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184,272 |
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182,140 |
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184,107 |
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Diluted |
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183,846 |
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185,809 |
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183,601 |
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185,472 |
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Dividends declared per share |
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$ |
0.13 |
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0.13 |
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— |
% |
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$ |
0.39 |
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0.33 |
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18.2 |
% |
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Non-GAAP measures:* |
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Net revenue |
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$ |
964,594 |
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852,759 |
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13.1 |
% |
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$ |
2,856,639 |
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2,529,719 |
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12.9 |
% |
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Adjusted EBITDA |
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$ |
348,488 |
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309,461 |
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12.6 |
% |
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$ |
1,024,431 |
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904,396 |
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13.3 |
% |
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Adjusted earnings |
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$ |
212,412 |
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162,667 |
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30.6 |
% |
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$ |
623,795 |
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473,148 |
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31.8 |
% |
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Adjusted diluted EPS |
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$ |
1.16 |
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0.88 |
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32.0 |
% |
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$ |
3.40 |
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2.55 |
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33.2 |
% |
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* See reconciliation of non-GAAP measures.
TSYS Announces Third Quarter 2018 Earnings
Page 6 of 16
Segment Breakdown
(unaudited)
(in thousands)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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Change |
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Change |
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2018 |
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2017 |
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$ |
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% |
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2018 |
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2017 |
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$ |
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% |
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Adjusted operating income by segment: |
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Issuer Solutions (a) |
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$ |
154,107 |
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147,758 |
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6,349 |
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4.3 |
% |
$ |
456,588 |
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428,909 |
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27,679 |
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6.5 |
% |
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Merchant Solutions (b) |
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125,153 |
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103,275 |
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21,878 |
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21.2 |
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359,983 |
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296,551 |
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63,432 |
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21.4 |
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Consumer Solutions (c) |
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49,503 |
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48,560 |
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943 |
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1.9 |
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149,089 |
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143,251 |
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5,838 |
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4.1 |
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Corporate admin and other |
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(39,911) |
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(39,560) |
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(351) |
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(0.9) |
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(117,477) |
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(111,170) |
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(6,307) |
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(5.7) |
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Adjusted segment operating income (d) |
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288,852 |
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260,033 |
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28,819 |
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11.1 |
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848,183 |
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757,541 |
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90,642 |
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12.0 |
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Less: |
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Share-based compensation |
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12,392 |
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8,407 |
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3,985 |
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47.4 |
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32,916 |
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28,462 |
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4,454 |
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15.6 |
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Cayan and Transfirst M&A and integration expenses |
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2,887 |
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1,052 |
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1,835 |
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nm |
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19,836 |
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10,086 |
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9,750 |
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96.7 |
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Litigation, claims, judgments or settlements |
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— |
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26 |
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(26) |
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(100.0) |
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— |
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1,904 |
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(1,904) |
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(100.0) |
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Acquisition intangible amortization |
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57,590 |
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50,856 |
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6,734 |
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13.2 |
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182,479 |
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156,966 |
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25,513 |
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16.3 |
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Operating income |
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215,983 |
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199,692 |
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16,291 |
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8.2 |
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612,952 |
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560,123 |
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52,829 |
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9.4 |
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Nonoperating expenses |
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(41,294) |
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(28,835) |
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(12,459) |
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(43.2) |
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(120,106) |
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(88,780) |
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(31,326) |
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(35.3) |
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Income before income taxes and equity in income of equity investments |
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$ |
174,689 |
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170,857 |
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3,832 |
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2.2 |
% |
$ |
492,846 |
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471,343 |
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21,503 |
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4.6 |
% |
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Net revenue by segment: |
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Issuer Solutions (e) |
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$ |
434,332 |
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401,074 |
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33,258 |
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8.3 |
% |
$ |
1,278,921 |
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1,181,090 |
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97,831 |
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8.3 |
% |
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Merchant Solutions (f) |
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346,309 |
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281,819 |
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64,490 |
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22.9 |
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1,010,101 |
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820,968 |
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189,133 |
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23.0 |
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Consumer Solutions (g) |
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195,810 |
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179,918 |
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15,892 |
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8.8 |
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606,591 |
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560,448 |
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46,143 |
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8.2 |
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Segment net revenue |
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976,451 |
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862,811 |
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113,640 |
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13.2 |
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2,895,613 |
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2,562,506 |
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333,107 |
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13.0 |
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Less: Intersegment revenues |
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11,857 |
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10,052 |
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1,805 |
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18.0 |
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38,974 |
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32,787 |
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6,187 |
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18.9 |
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Net revenue (h) |
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964,594 |
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852,759 |
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111,835 |
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13.1 |
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2,856,639 |
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2,529,719 |
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326,920 |
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12.9 |
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Add: reimbursable items, interchange and payment network fees |
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50,777 |
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394,817 |
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(344,040) |
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(87.1) |
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153,482 |
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1,124,957 |
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(971,475) |
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(86.4) |
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Total revenues |
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$ |
1,015,371 |
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1,247,576 |
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(232,205) |
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(18.6) |
% |
$ |
3,010,121 |
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3,654,676 |
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(644,555) |
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(17.6) |
% |
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Adjusted segment operating margin on segment net revenue: |
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|
|
|
|
Issuer Solutions (a)/(e) |
|
|
35.5% |
|
36.8% |
|
|
|
|
|
|
35.7% |
|
36.3% |
|
|
|
|
|
|
Merchant Solutions (b)/(f) |
|
|
36.1% |
|
36.6% |
|
|
|
|
|
|
35.6% |
|
36.1% |
|
|
|
|
|
|
Consumer Solutions (c)/(g) |
|
|
25.3% |
|
27.0% |
|
|
|
|
|
|
24.6% |
|
25.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted segment operating margin on net revenue: (d)/(h) |
|
|
29.9% |
|
30.5% |
|
|
|
|
|
|
29.7% |
|
29.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm = not meaningful
TSYS Announces Third Quarter 2018 Earnings
Page 7 of 16
TSYS
Segment Breakdown
(unaudited)
(in thousands)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
Change |
|
||||||
|
|
|
2018 |
|
2017 |
|
$ |
|
% |
|
|
2018 |
|
2017 |
|
$ |
|
% |
|
||
|
Depreciation and amortization by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Solutions |
|
$ |
30,411 |
|
36,699 |
|
(6,288) |
|
(17.1) |
% |
XX |
$ |
88,382 |
|
109,287 |
|
(20,905) |
|
(19.1) |
% |
|
Merchant Solutions |
|
|
8,014 |
|
7,588 |
|
426 |
|
5.6 |
|
|
|
23,362 |
|
21,990 |
|
1,372 |
|
6.2 |
|
|
Consumer Solutions |
|
|
4,303 |
|
3,785 |
|
518 |
|
13.7 |
|
|
|
12,875 |
|
12,057 |
|
818 |
|
6.8 |
|
|
Depreciation and amortization |
|
|
42,728 |
|
48,072 |
|
(5,344) |
|
(11.1) |
|
|
|
124,619 |
|
143,334 |
|
(18,715) |
|
(13.1) |
|
|
Acquisition intangible amortization |
|
|
57,590 |
|
50,856 |
|
6,734 |
|
13.2 |
|
|
|
182,479 |
|
156,966 |
|
25,513 |
|
16.3 |
|
|
Corporate admin and other |
|
|
1,014 |
|
1,356 |
|
(342) |
|
(25.2) |
|
|
|
2,912 |
|
3,521 |
|
(609) |
|
(17.3) |
|
|
Total depreciation and amortization* |
|
$ |
101,332 |
|
100,284 |
|
1,048 |
|
1.0 |
% |
|
$ |
310,010 |
|
303,821 |
|
6,189 |
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Client incentive/contract asset amortization and contract cost asset amortization are no longer included in depreciation and amortization due to the adoption of ASC 606 on January 1,2018 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment statistical data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total transactions (in millions) |
|
|
6,154.7 |
|
5,494.9 |
|
659.8 |
|
12.0 |
% |
|
|
17,752.7 |
|
15,712.1 |
|
2,040.6 |
|
13.0 |
% |
|
Total Accounts on file (AOF) (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
823.7 |
|
797.3 |
|
26.4 |
|
3.3 |
% |
|
Total traditional AOF (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
594.4 |
|
562.1 |
|
32.3 |
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchant Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Point-of-sale transactions (in millions) |
|
|
1,533.9 |
|
1,260.9 |
|
273.0 |
|
21.7 |
% |
|
|
4,371.9 |
|
3,622.2 |
|
749.7 |
|
20.7 |
% |
|
Dollar sales volume (in millions) |
|
$ |
40,910.2 |
|
31,478.2 |
|
9,432.0 |
|
30.0 |
% |
|
$ |
118,539.0 |
|
91,726.1 |
|
26,812.9 |
|
29.2 |
% |
|
Segment net revenue per transaction |
|
$ |
0.226 |
|
0.223 |
|
0.002 |
|
1.0 |
% |
|
$ |
0.231 |
|
0.227 |
|
0.004 |
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross dollar volume (in millions) |
|
$ |
8,053.2 |
|
7,242.3 |
|
810.9 |
|
11.2 |
% |
|
$ |
26,083.7 |
|
24,455.1 |
|
1,628.6 |
|
6.7 |
% |
|
Direct deposit 90-day active cards (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
2,503.7 |
|
2,315.3 |
|
188.4 |
|
8.1 |
% |
|
90-day active cards (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
4,948.3 |
|
4,697.2 |
|
251.1 |
|
5.3 |
% |
|
% of 90-day active cards with direct deposit |
|
|
|
|
|
|
|
|
|
|
|
|
50.6% |
|
49.3% |
|
|
|
|
|
- more -
TSYS Announces Third Quarter 2018 Earnings
Page 8 of 16
TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
|
|
|
September 30, 2018 |
|
December 31, 2017 |
|
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
484,581 |
|
450,357 |
|
Accounts receivable, net |
|
|
485,722 |
|
412,322 |
|
Contract assets |
|
|
32,604 |
|
— |
|
Other current assets |
|
|
197,010 |
|
216,565 |
|
Total current assets |
|
|
1,199,917 |
|
1,079,244 |
|
Goodwill |
|
|
4,113,669 |
|
3,264,071 |
|
Software and other intangible assets, net |
|
|
1,296,431 |
|
1,110,861 |
|
Property and equipment, net |
|
|
372,900 |
|
325,218 |
|
Contract assets - long-term |
|
|
49,956 |
|
— |
|
Contract costs assets - long-term |
|
|
147,732 |
|
258,665 |
|
Other long term assets |
|
|
292,439 |
|
293,630 |
|
Total assets |
|
$ |
7,473,044 |
|
6,331,689 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
59,770 |
|
62,310 |
|
Current portion of long-term borrowings, capital leases and license agreements |
|
|
21,171 |
|
565,812 |
|
Contract liabilities |
|
|
50,673 |
|
52,913 |
|
Other current liabilities |
|
|
335,557 |
|
308,057 |
|
Total current liabilities |
|
|
467,171 |
|
989,092 |
|
Long-term borrowings, capital leases and license agreements, excluding current portion |
|
|
3,874,815 |
|
2,628,002 |
|
Deferred income tax liabilities |
|
|
394,119 |
|
238,317 |
|
Contract liabilities - long-term |
|
|
21,730 |
|
48,526 |
|
Other long-term liabilities |
|
|
75,027 |
|
71,070 |
|
Total liabilities |
|
|
4,832,862 |
|
3,975,007 |
|
Redeemable noncontrolling interest |
|
|
— |
|
115,689 |
|
Equity |
|
|
2,640,182 |
|
2,240,993 |
|
Total liabilities and equity |
|
$ |
7,473,044 |
|
6,331,689 |
TSYS Announces Third Quarter 2018 Earnings
Page 9 of 16
TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
|
|
|
Nine Months Ended September 30, |
|||
|
|
|
2018 |
|
2017 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net income |
|
$ |
441,497 |
|
348,345 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Equity in income of equity investments, net of tax |
|
|
(35,313) |
|
(30,919) |
|
Dividends received from equity investments |
|
|
24,921 |
|
20,589 |
|
Depreciation and amortization |
|
|
310,010 |
|
303,821 |
|
Amortization of debt issuance costs |
|
|
3,668 |
|
3,247 |
|
Share-based compensation |
|
|
32,916 |
|
28,462 |
|
Deferred income tax expense (benefit) |
|
|
21,173 |
|
(46,435) |
|
Other noncash adjustments |
|
|
63,541 |
|
55,764 |
|
Changes in operating assets and liabilities |
|
|
(109,905) |
|
(23,446) |
|
Net cash provided by operating activities |
|
|
752,508 |
|
659,428 |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(77,841) |
|
(42,572) |
|
Additions to licensed computer software from vendors |
|
|
(32,496) |
|
(23,114) |
|
Additions to internally developed computer software |
|
|
(29,692) |
|
(22,011) |
|
Additions to contract acquisition costs |
|
|
— |
|
(21,662) |
|
Cash used in acquisitions, net of cash acquired |
|
|
(1,051,629) |
|
— |
|
Other investing activities |
|
|
(5,670) |
|
(1,436) |
|
Net cash used in investing activities |
|
|
(1,197,328) |
|
(110,795) |
|
|
|
|
|
|
|
|
Principal payments on long-term borrowings, capital lease obligations and license agreements |
|
|
(2,807,187) |
|
(415,788) |
|
Proceeds from long-term borrowings |
|
|
3,477,000 |
|
— |
|
Debt issuance costs |
|
|
(16,004) |
|
— |
|
Purchase of noncontrolling interests |
|
|
(126,000) |
|
(70,000) |
|
Dividends paid on common stock |
|
|
(70,897) |
|
(55,151) |
|
Proceeds from exercise of stock options |
|
|
31,024 |
|
15,499 |
|
Repurchase of common stock |
|
|
(443) |
|
(27,895) |
|
Other financing activities |
|
|
(3,778) |
|
(5,216) |
|
Net cash provided by (used in ) financing activities |
|
|
483,715 |
|
(558,551) |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(3,639) |
|
5,589 |
|
Net increase in cash, cash equivalents and restricted cash |
|
|
35,256 |
|
(4,329) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
451,370 |
|
425,810 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
486,626 |
|
421,481 |
|
|
|
|
|
|
|
|
Supplemental |
|
|
|
|
|
|
Capital expenditures |
|
$ |
140,029 |
|
109,359 |
|
Free cash flow (non-GAAP)* |
|
$ |
612,479 |
|
550,069 |
* See reconciliation of non-GAAP measures.
Certain prior year amounts have changed due to the adoption of ASU 2016-18 “Statement of Cash Flows (Topic 230):Restricted Cash,” which requires that a statement of cash flows explain the change in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
TSYS Announces Third Quarter 2018 Earnings
Page 10 of 16
TSYS
Supplemental Information
(unaudited)
Other
AOF:
|
|
|
Total Accounts on File |
||||
|
|
|
At |
|
At |
|
% |
|
(in millions) |
|
September 2018 |
|
September 2017 |
|
Change |
|
Consumer |
|
499.3 |
|
474.7 |
|
5.2 |
|
Commercial |
|
55.6 |
|
52.8 |
|
5.3 |
|
Other |
|
39.5 |
|
34.6 |
|
14.3 |
|
Traditional AOF |
|
594.4 |
|
562.1 |
|
5.8 |
|
Prepaid*/Stored Value |
|
17.1 |
|
50.6 |
|
(66.3) |
|
Government Services |
|
98.0 |
|
92.1 |
|
6.4 |
|
Commercial Card Single Use |
|
114.2 |
|
92.5 |
|
23.4 |
|
Total AOF |
|
823.7 |
|
797.3 |
|
3.3 |
* Prepaid does not include Netspend accounts.
|
Growth in Accounts on File (in millions): |
|
|
|
|
|
|
|
September 2017 to |
|
September 2016 to |
|
|
|
September 2018 |
|
September 2017 |
|
Beginning balance |
|
797.3 |
|
738.8 |
|
Change in accounts on file due to: |
|
|
|
|
|
Internal growth of existing clients |
|
54.1 |
|
53.2 |
|
New clients |
|
32.3 |
|
29.5 |
|
Purges/Sales |
|
(39.3) |
|
(23.6) |
|
Deconversions |
|
(20.7) |
|
(0.6) |
|
Ending balance |
|
823.7 |
|
797.3 |
TSYS Announces Third Quarter 2018 Earnings
Page 11 of 16
Reconciliation of GAAP to Non-GAAP Financial Measures
Non-GAAP Measures
The schedules below provide a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents third quarter and year-to-date 2018 financial results using the previous year’s foreign currency exchange rates. On a constant currency basis, TSYS’ total year-to-date revenues for the third quarter of 2018 were lower 18.0% as compared to a reported GAAP decrease of 17.6%.
The schedules below also provide a reconciliation of diluted EPS to adjusted diluted EPS.
The schedules below also provide a reconciliation of net income to Adjusted EBITDA.
The schedules below also provide a reconciliation of cash flows from operating activities and capital expenditures to free cash flow.
The schedules below also provide a reconciliation of 2018 revised guidance of total revenues to net revenue and diluted EPS to adjusted diluted EPS.
The tax rate used in the calculation of adjusted diluted 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.
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 measures of other companies due to potential inconsistencies in the method of calculation.
TSYS believes that its provision of non-GAAP financial measures provides investors with important 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 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.
TSYS Announces Third Quarter 2018 Earnings
Page 12 of 16
Reconciliation of GAAP to Non-GAAP
Constant Currency Comparison
(unaudited)
(in thousands)
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|||||||||||
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
|
||
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant currency (1) |
|
$ |
1,017,279 |
|
1,247,576 |
|
(18.5) |
% |
$ |
2,995,442 |
|
3,654,676 |
|
(18.0) |
% |
|
Foreign currency impact (2) |
|
|
(1,908) |
|
— |
|
|
|
|
14,679 |
|
— |
|
|
|
|
Total revenues |
|
$ |
1,015,371 |
|
1,247,576 |
|
(18.6) |
% |
$ |
3,010,121 |
|
3,654,676 |
|
(17.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant currency (1) |
|
$ |
966,416 |
|
852,759 |
|
13.3 |
% |
$ |
2,842,948 |
|
2,529,719 |
|
12.4 |
% |
|
Foreign currency impact (2) |
|
|
(1,822) |
|
— |
|
|
|
|
13,691 |
|
— |
|
|
|
|
Net revenue |
|
$ |
964,594 |
|
852,759 |
|
13.1 |
% |
$ |
2,856,639 |
|
2,529,719 |
|
12.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant currency (1) |
|
$ |
215,968 |
|
199,692 |
|
8.2 |
% |
$ |
607,630 |
|
560,123 |
|
8.5 |
% |
|
Foreign currency impact (2) |
|
|
15 |
|
— |
|
|
|
|
5,322 |
|
— |
|
|
|
|
Operating income |
|
$ |
215,983 |
|
199,692 |
|
8.2 |
% |
$ |
612,952 |
|
560,123 |
|
9.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant currency (1) |
|
$ |
436,263 |
|
401,074 |
|
8.8 |
% |
$ |
1,265,346 |
|
1,181,090 |
|
7.1 |
% |
|
Foreign currency impact (2) |
|
|
(1,931) |
|
— |
|
|
|
|
13,575 |
|
— |
|
|
|
|
Segment net revenue |
|
$ |
434,332 |
|
401,074 |
|
8.3 |
% |
$ |
1,278,921 |
|
1,181,090 |
|
8.3 |
% |
(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.
Net Revenue
(unaudited)
(in thousands)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
||
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
|
||
|
Total revenues |
$ |
1,015,371 |
|
1,247,576 |
|
(18.6) |
% |
|
$ |
3,010,121 |
|
3,654,676 |
|
(17.6) |
% |
|
Less: reimbursable items, interchange and payment network fees |
|
50,777 |
|
394,817 |
|
(87.1) |
|
|
|
153,482 |
|
1,124,957 |
|
(86.4) |
|
|
Net revenue |
$ |
964,594 |
|
852,759 |
|
13.1 |
% |
|
|
2,856,639 |
|
2,529,719 |
|
12.9 |
% |
- more -
TSYS Announces Third Quarter 2018 Earnings
Page 13 of 16
Reconciliation of GAAP to Non-GAAP
Adjusted Diluted Earnings per Share
(unaudited)
(in thousands, except per share data)
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|||||||||||
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
Percent |
|
|||
|
|
|
2018 |
|
2017 |
Change |
|
2018 |
|
2017 |
|
Change |
|
||||
|
Net income attributable to TSYS common shareholders (GAAP) |
|
|
$ |
155,960 |
|
123,095 |
|
26.7 |
% |
$ |
440,236 |
|
343,977 |
|
28.0 |
% |
|
Adjust for amounts attributable to TSYS common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Acquisition intangible amortization |
|
$ |
57,555 |
|
50,704 |
|
13.5 |
|
$ |
182,373 |
|
156,489 |
|
16.5 |
|
|
|
Add: Share-based compensation |
|
|
12,391 |
|
8,404 |
|
47.4 |
|
|
32,913 |
|
28,455 |
|
15.7 |
|
|
|
Add: Cayan and Transfirst M&A expenses* |
|
|
2,887 |
|
1,052 |
|
nm |
|
|
19,836 |
|
10,025 |
|
97.9 |
|
|
|
Add: Litigation, claims, judgments or settlements** |
|
|
— |
|
26 |
|
(100.0) |
|
|
— |
|
1,904 |
|
(100.0) |
|
|
|
Less: Tax impact of adjustments*** |
|
|
(16,381) |
|
(20,614) |
|
20.5 |
|
|
(51,563) |
|
(67,702) |
|
23.8 |
|
|
|
Adjusted earnings (non-GAAP) |
|
$ |
212,412 |
|
162,667 |
|
30.6 |
% |
$ |
623,795 |
|
473,148 |
|
31.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS - Net income attributable to TSYS common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported (GAAP) |
|
$ |
0.85 |
|
0.66 |
|
28.0 |
% |
$ |
2.40 |
|
1.85 |
|
29.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted EPS (non-GAAP) |
|
$ |
1.16 |
|
0.88 |
|
32.0 |
% |
$ |
3.40 |
|
2.55 |
|
33.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding |
|
|
183,846 |
|
185,809 |
|
|
|
|
183,601 |
|
185,472 |
|
|
|
|
* Costs associated with the Cayan and Transfirst acquisitions and integrations are included in selling, general and administrative expenses and nonoperating expenses.
** Litigation settlement or settlement discussions and related legal expenses.
*** Certain of these merger and acquisition costs are nondeductible for income tax purposes. Income tax impact includes discrete items as a result of the acquisitions.
nm = not meaningful
- more -
TSYS Announces Third Quarter 2018 Earnings
Page 14 of 16
Reconciliation of GAAP to Non-GAAP
Adjusted EBITDA
(unaudited)
(in thousands)
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
|
|
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
|
|
2018 |
|
2017 |
Change |
|
2018 |
|
2017 |
|
Change |
|
|||
|
Net income (GAAP) (a) |
|
$ |
155,960 |
|
124,726 |
|
25.0 |
% |
$ |
441,497 |
|
348,345 |
|
26.7 |
% |
|
Adjust for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Equity in income of equity investments |
|
|
(12,383) |
|
(8,497) |
|
(45.7) |
|
|
(35,313) |
|
(30,919) |
|
(14.2) |
|
|
Less: Income tax expense |
|
|
31,112 |
|
54,628 |
|
(43.0) |
|
|
86,662 |
|
153,917 |
|
(43.7) |
|
|
Add: Interest expense, net |
|
|
41,093 |
|
28,501 |
|
44.2 |
|
|
118,865 |
|
87,811 |
|
35.4 |
|
|
Add: Depreciation and amortization* |
|
|
101,332 |
|
100,284 |
|
1.0 |
|
|
310,010 |
|
303,821 |
|
2.0 |
|
|
Add: Client incentive/contract asset amortization* |
|
|
7,303 |
|
— |
|
na |
|
|
20,888 |
|
— |
|
na |
|
|
Add: Contract cost asset amortization* |
|
|
8,592 |
|
— |
|
na |
|
|
27,830 |
|
— |
|
na |
|
|
Less: (Gain)/loss on foreign currency translations |
|
|
(187) |
|
427 |
|
nm |
|
|
(295) |
|
1,250 |
|
nm |
|
|
Less: Other nonoperating (income)/expenses |
|
|
388 |
|
(93) |
|
nm |
|
|
1,536 |
|
(281) |
|
nm |
|
|
Add: Share-based compensation |
|
|
12,391 |
|
8,407 |
|
47.4 |
|
|
32,915 |
|
28,462 |
|
15.6 |
|
|
Add: Cayan and Transfirst M&A expenses** |
|
|
2,887 |
|
1,052 |
|
nm |
|
|
19,836 |
|
10,086 |
|
96.7 |
|
|
Add: Litigation, claims, judgments or settlements |
|
|
— |
|
26 |
|
(100.0) |
|
|
— |
|
1,904 |
|
(100.0) |
|
|
Adjusted EBITDA (non-GAAP) (b) |
|
$ |
348,488 |
|
309,461 |
|
12.6 |
% |
$ |
1,024,431 |
|
904,396 |
|
13.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues (c) |
|
$ |
1,015,371 |
|
1,247,576 |
|
|
|
$ |
3,010,121 |
|
3,654,676 |
|
|
|
|
Net income margin on total revenues (GAAP) (a)/(c) |
|
|
15.4% |
|
10.0% |
|
|
|
|
14.7% |
|
9.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue (d) |
|
$ |
964,594 |
|
852,759 |
|
|
|
$ |
2,856,639 |
|
2,529,719 |
|
|
|
|
Adjusted EBITDA margin on net revenue (non-GAAP) (b)/(d) |
|
|
36.1% |
|
36.3% |
|
|
|
|
35.9% |
|
35.8% |
|
|
|
* Client incentive/contract asset amortization and contract cost asset amortization are no longer included in depreciation and amortization due to the adoption of ASC 606 on January 1, 2018.
** Costs associated with the Cayan and Transfirst acquisitions and integrations are included in selling, general and administrative expenses.
nm = not meaningful
na = not applicable
-more-
TSYS Announces Third Quarter 2018 Earnings
Page 15 of 16
Reconciliation of GAAP to Non-GAAP
Free Cash Flow
(unaudited)
(in thousands)
|
|
|
|
Nine Months Ended |
||
|
|
Free cash flow: |
|
September 30, |
||
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities (GAAP) |
$ |
752,508 |
|
659,428 |
|
|
Capital expenditures |
|
(140,029) |
|
(109,359) |
|
|
Free cash flow (non-GAAP) |
$ |
612,479 |
|
550,069 |
Revised Guidance Summary
(unaudited)
(in millions, except per share data)
|
|
|
|
2018(1) |
|
% Change |
|||||
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues (GAAP) |
$ |
3,990 |
to |
$ |
4,040 |
|
(19%) |
to |
(18%) |
|
|
Less: reimbursable items, interchange and payment network fees |
|
200 |
to |
|
200 |
|
|
|
|
|
|
Net revenue (non-GAAP) |
$ |
3,790 |
to |
$ |
3,840 |
|
11% |
to |
13% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (EPS) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS (GAAP) |
$ |
3.09 |
to |
$ |
3.15 |
|
(2%) |
to |
0% |
|
|
Acquisition intangible amortization, share-based compensation, litigation, claims, judgments or settlements and Cayan and Transfirst M&A expenses, less the tax impact of adjustments |
|
1.32 |
to |
|
1.32 |
|
|
|
|
|
|
Adjusted diluted EPS attributable to TSYS common shareholders * (non-GAAP) |
$ |
4.41 |
to |
$ |
4.47 |
|
31% |
to |
33% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Weighted average diluted shares outstanding |
|
|
184 |
|
|
|
|
|
|
|
(1) |
The estimated impact of the adoption of ASC 606 on TSYS’ 2018 Outlook is as follows: Total revenues ($1,700) to ($1,675), Net revenue ($69) to ($62), Diluted EPS and Adjusted diluted EPS of ($0.04) to ($0.03). The most significant impact of adopting ASC 606 in 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 will be presented “net” of the amounts paid to them, as opposed to the “gross” presentation for certain of these fees in 2017. |
-more-
TSYS Announces Third Quarter 2018 Earnings
Page 16 of 16
Impact of New Revenue Guidance on Financial Statement Line Items
(unaudited)
(in thousands, except per share data)
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||
|
|
|
September 30, 2018 |
|
September 30, 2018 |
||||||||||
|
|
|
|
|
|
Balances |
|
Effect of |
|
|
|
|
Balances |
|
Effect of |
|
|
|
As |
|
Without Adoption |
|
Change |
|
As |
|
Without Adoption |
|
Change |
||
|
|
|
Reported |
|
of Topic 606 |
|
Higher/(Lower) |
|
Reported |
|
of Topic 606 |
|
Higher/(Lower) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
1,015,371 |
|
1,459,182 |
|
(443,811) |
|
$ |
3,010,121 |
|
4,252,569 |
|
(1,242,448) |
|
Total expenses |
|
|
799,388 |
|
1,239,228 |
|
(439,840) |
|
|
2,397,169 |
|
3,631,739 |
|
(1,234,570) |
|
Operating income |
|
$ |
215,983 |
|
219,954 |
|
(3,971) |
|
$ |
612,952 |
|
620,830 |
|
(7,878) |
|
Income taxes |
|
$ |
31,112 |
|
32,033 |
|
(921) |
|
$ |
86,662 |
|
88,461 |
|
(1,799) |
|
Net income |
|
$ |
155,960 |
|
159,010 |
|
(3,050) |
|
$ |
441,497 |
|
447,575 |
|
(6,078) |
|
Net income attributable to TSYS common shareholders |
|
$ |
155,960 |
|
159,010 |
|
(3,050) |
|
$ |
440,236 |
|
446,314 |
|
(6,078) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (EPS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS* |
|
$ |
0.85 |
|
0.87 |
|
(0.02) |
|
$ |
2.42 |
|
2.45 |
|
(0.03) |
|
Diluted EPS* |
|
$ |
0.85 |
|
0.86 |
|
(0.02) |
|
$ |
2.40 |
|
2.43 |
|
(0.03) |
* EPS amounts may not total due to rounding.
###