TSYS (NYSE: TSS) today reported results for the second quarter
of 2019.
“We were pleased to deliver another quarter of solid performance
with increases in net revenue and adjusted diluted EPS, and margin
expansion,” said M. Troy Woods, Chairman, President and CEO of
TSYS. “We also remain confident that the combined strengths of
merging with Global Payments will enhance shareholder value and
create opportunities for our team members and customers.”
Highlights for the second quarter of 2019 vs. 2018:
- Total revenues were $1.04 billion, an increase of 2.8%. On a
constant currency basis (non-GAAP), total revenues increased
3.4%.
- Net revenue (non-GAAP), which excludes reimbursable items, was
$979.9 million, an increase of 2.4%. On a constant currency basis
(non-GAAP), net revenue increased 3.1%.
- Net income attributable to TSYS common shareholders was $162.8
million, an increase of 14.3%. Diluted EPS was $0.91, an increase
of 17.5%.
- Adjusted earnings (non-GAAP) were $226.7 million, an increase
of 11.2%. Adjusted diluted EPS (non-GAAP) was $1.27, an increase of
14.4%.
- Adjusted EBITDA (non-GAAP) was $368.9 million, an increase of
6.9%.
2019 Full Year Guidance
TSYS reiterates its full year
2019 financial guidance which is included on page 16 in the
financial schedules of this release. The guidance does not include
any impact related to the previously announced merger with Global
Payments.
Conference Call
Due to the pending merger with
Global Payments, TSYS will not host a conference call/webcast to
review the second quarter 2019 financial results.
Non-GAAP Measures
This press release contains
information prepared in conformity with U.S. generally accepted
accounting principles (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-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, revenues measured on a
constant currency basis, 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 12 to
16 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 needs 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 $4.0 billion in 2018, while
processing more than 32.3 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’ expectations for
its financial performance for the full year 2019, 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) and the uncertainty over the terms and
timing of the expected departure; expenses incurred associated with
the signing of a significant client; conversions and deconversions
of clients’ portfolios do not occur 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 Consumer Financial Protection
Bureau’s new rule regarding prepaid financial products; 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; one or more of the assumptions upon which
earnings guidance for 2019 is based is inaccurate; growth rates of
TSYS’ existing clients are lower than anticipated or attrition
rates of existing clients are higher than anticipated; the
occurrence of any event, change or other circumstances that could
give rise to the right of one or both of TSYS and Global Payments
to terminate the merger agreement; the outcome of any legal
proceedings that may be instituted against TSYS, Global Payments or
their respective directors; the ability to obtain regulatory
approvals and meet other closing conditions to the merger on a
timely basis or at all, including the risk that regulatory
approvals required for the merger are not obtained on a timely
basis or at all, or are obtained subject to conditions that are not
anticipated or that could adversely affect the combined company or
the expected benefits of the transaction; the ability to obtain
approval by TSYS shareholders and Global Payments shareholders on
the expected terms and schedule; difficulties and delays in
integrating the TSYS and Global Payments businesses, including with
respect to implementing systems to prevent a material security
breach of any internal systems or to successfully manage credit and
fraud risks in business units; failing to fully realize anticipated
cost savings and other anticipated benefits of the merger when
expected or at all; business disruptions from the proposed merger
that will harm TSYS’ or Global Payments’ business, including
current plans and operations; potential adverse reactions or
changes to business relationships resulting from the announcement
or completion of the merger, including as it relates to TSYS’ or
Global Payments’ ability to successfully renew existing client
contracts on favorable terms or at all and obtain new clients;
failing to comply with the applicable requirements of Visa,
Mastercard or other payment networks or card schemes or changes in
those requirements; the ability of TSYS or Global Payments to
retain and hire key personnel; the diversion of management’s
attention from ongoing business operations; uncertainty as to the
long-term value of the common stock of Global Payments following
the merger, including the dilution caused by Global Payments’
issuance of additional shares of its common stock in connection
with the transaction; the continued availability of capital and
financing following the merger; the business, economic and
political conditions in the markets in which TSYS and Global
Payments operate; the impact of new or changes in current laws,
regulations, credit card association rules or other industry
standards, including privacy and cybersecurity laws and
regulations; and events beyond TSYS’ or Global Payments’ control,
such as acts of terrorism.
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 (SEC), 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.
Additional Information About the Merger and Where to Find
It
In connection with the proposed merger, Global Payments filed
with the SEC a registration statement on Form S-4 to register the
shares of Global Payments’ common stock to be issued in connection
with the merger on July 23, 2019. The registration statement
includes a joint proxy statement/prospectus. Global Payments and
TSYS commenced mailing the joint proxy statement/prospectus to
shareholders on or about July 25, 2019. INVESTORS AND SECURITY
HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4
AND THE RELATED JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN
THE REGISTRATION STATEMENT ON FORM S-4, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THOSE DOCUMENTS AND ANY OTHER RELEVANT DOCUMENTS
FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED
MERGER, WHEN THEY BECOME AVAILABLE, BECAUSE THEY DO AND WILL
CONTAIN IMPORTANT INFORMATION ABOUT TSYS, GLOBAL PAYMENTS AND THE
PROPOSED MERGER.
Investors and security holders may obtain copies of these
documents free of charge through the website maintained by the SEC
at www.sec.gov or from TSYS at its website, www.tsys.com, or from
Global Payments at its website, www.globalpaymentsinc.com.
Documents filed with the SEC by TSYS will be available free of
charge by accessing TSYS’ website at www.tsys.com under the heading
Investor Relations, or, alternatively, by directing a request by
telephone or mail to TSYS at One TSYS Way, Columbus, Georgia 31901,
and documents filed with the SEC by Global Payments will be
available free of charge by accessing Global Payments’ website at
www.globalpaymentsinc.com under the heading Investor Relations or,
alternatively, by directing a request by telephone or mail to
Global Payments at 3550 Lenox Road, Suite 3000, Atlanta, Georgia
30326, Attention: Investor Relations.
Participants In The Solicitation
TSYS and Global Payments and certain of their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies from the shareholders of Global
Payments and TSYS in respect of the proposed merger under the rules
of the SEC. Information about Global Payments’ directors and
executive officers is available in Global Payments’ proxy statement
dated March 13, 2019 for its 2019 Annual Meeting of Shareholders.
Information about TSYS’ directors and executive officers is
available in TSYS’ proxy statement dated March 20, 2019 for its
2019 Annual Meeting of Shareholders. Other information regarding
the participants in the proxy solicitation and a description of
their direct and indirect interests, by security holdings or
otherwise, are contained in the joint proxy statement/prospectus
referenced above and other relevant materials to be filed with the
SEC regarding the merger when they become available. Investors
should read the joint proxy statement/prospectus carefully when it
becomes available before making any voting or investment decisions.
You may obtain free copies of these documents from Global Payments
or TSYS using the sources indicated above.
No Offer Or Solicitation
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities, in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act.
TSYS
Financial Highlights
(unaudited)
(in thousands, except per share
data)
Three Months Ended
Six Months Ended
June 30,
June 30,
Percent
Percent
2019
2018
Change
2019
2018
Change
Total revenues
$
1,035,485
1,007,580
2.8
%
$
2,070,016
1,994,750
3.8
%
Cost of services
630,821
617,818
2.1
1,263,032
1,231,183
2.6
Selling, general and administrative expenses
185,577
181,064
2.5
364,627
366,598
(0.5
)
Total expenses
816,398
798,882
2.2
1,627,659
1,597,781
1.9
Operating income
219,087
208,698
5.0
442,357
396,969
11.4
Nonoperating
expenses
(37,416
)
(41,170
)
9.1
(80,407
)
(78,812
)
(2.0
)
Income before
income taxes and equity in income of equity investments
181,671
167,528
8.4
361,950
318,157
13.8
Income tax expense
31,128
37,415
(16.8
)
61,027
55,549
9.9
Income before equity in income of equity investments
150,543
130,113
15.7
300,923
262,608
14.6
Equity in income of equity investments, net of tax
12,217
12,322
(0.9
)
23,444
22,929
2.2
Net income
162,760
142,435
14.3
324,367
285,537
13.6
Net income attributable to noncontrolling interests
-
-
na
-
(1,261
)
100.0
Net income
attributable to TSYS common shareholders
$
162,760
142,435
14.3
%
$
324,367
284,276
14.1
%
Earnings per share
(EPS): Basic EPS
$
0.92
0.78
17.7
%
$
1.83
1.56
16.9
%
Diluted EPS
$
0.91
0.78
17.5
%
$
1.81
1.55
16.8
%
Weighted average
shares outstanding:
(includes participating securities)
Basic
176,962
182,355
177,697
181,991
Diluted
178,514
183,575
179,198
183,456
Dividends
declared per share
$
0.13
0.13
$
0.26
0.26
Non-GAAP measures:*
Net revenue
$
979,920
956,548
2.4
%
$
1,960,189
1,892,045
3.6
%
Adjusted EBITDA
$
368,939
345,021
6.9
%
$
726,226
675,943
7.4
%
Adjusted earnings
$
226,686
203,796
11.2
%
$
442,132
411,383
7.5
%
Adjusted diluted
EPS
$
1.27
1.11
14.4
%
$
2.47
2.24
10.0
%
* See
reconciliation of non-GAAP measures.
na =
not applicable
TSYS
Segment Breakdown
(unaudited)
(in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
Change
Change
2019
2018
$
%
2019
2018
$
%
Adjusted segment EBITDA:
Issuer Solutions (a)
$
209,845
195,275
14,570
7.5
%
$
414,779
391,040
23,739
6.1
%
Merchant Solutions (b)
138,366
133,418
4,948
3.7
267,201
252,358
14,843
5.9
Consumer Solutions (c)
53,595
54,545
(950
)
(1.7
)
117,288
108,212
9,076
8.4
Corporate admin and other
(32,867
)
(38,217
)
5,350
14.0
(73,042
)
(75,667
)
2,625
3.5
Total (d)
368,939
345,021
23,918
6.9
726,226
675,943
50,283
7.4
Less:
Share-based
compensation
11,500
14,229
(2,729
)
(19.2
)
22,214
20,524
1,690
8.2
M&A and integration expenses
17,150
2,581
14,569
nm
20,860
16,949
3,911
23.1
Depreciation and amortization
104,773
104,290
483
0.5
208,483
208,679
(196
)
(0.1
)
Client incentive/contract cost amortization
8,250
6,712
1,538
22.9
16,288
13,584
2,704
19.9
Contract cost asset amortization
8,179
8,511
(332
)
(3.9
)
16,024
19,238
(3,214
)
(16.7
)
Operating income
219,087
208,698
10,389
5.0
442,357
396,969
45,388
11.4
Nonoperating expenses
(37,416
)
(41,170
)
3,754
9.1
(80,407
)
(78,812
)
(1,595
)
(2.0
)
Income before income taxes and equity in income of equity
investments
$
181,671
167,528
14,143
8.4
%
$
361,950
318,157
43,793
13.8
%
Net revenue
by segment:
Issuer Solutions
(e)
$
432,445
421,015
11,430
2.7
%
$
865,919
844,589
21,330
2.5
%
Merchant Solutions (f)
364,210
346,389
17,821
5.1
707,166
663,792
43,374
6.5
Consumer Solutions (g)
196,143
200,293
(4,150
)
(2.1
)
415,321
410,781
4,540
1.1
Segment net revenue
992,798
967,697
25,101
2.6
1,988,406
1,919,162
69,244
3.6
Less: Intersegment revenues
12,878
11,149
1,729
15.5
28,217
27,117
1,100
4.1
Net revenue (h)
979,920
956,548
23,372
2.4
1,960,189
1,892,045
68,144
3.6
Add: reimbursable items
55,565
51,032
4,533
8.9
109,827
102,705
7,122
6.9
Total revenues
$
1,035,485
1,007,580
27,905
2.8
%
$
2,070,016
1,994,750
75,266
3.8
%
Adjusted segment EBITDA margin on segment 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
%
Adjusted EBITDA margin on net revenue (d)/(h)
37.6
%
36.1
%
37.0
%
35.7
%
nm = not meaningful TSYS Segment
Breakdown (unaudited) (in thousands)
Three Months Ended June
30, Six Months Ended June 30, Change
Change
2019
2018
$
%
2019
2018
$
%
Depreciation and amortization by segment:
Issuer Solutions
$
36,129
29,640
6,489
21.9
%
$
71,296
57,971
13,325
23.0
%
Merchant Solutions
8,257
7,523
734
9.8
15,940
15,348
592
3.9
Consumer Solutions
5,202
4,313
889
20.6
9,618
8,573
1,045
12.2
Depreciation and amortization
49,588
41,476
8,112
19.6
96,854
81,892
14,962
18.3
Acquisition intangible amortization
53,706
61,865
(8,159
)
(13.2
)
108,663
124,888
(16,225
)
(13.0
)
Corporate admin and other
1,479
949
530
55.8
2,966
1,899
1,067
56.2
Total depreciation and amortization
$
104,773
104,290
483
0.5
%
$
208,483
208,679
(196
)
(0.1
)
%
Segment statistical data:
Issuer Solutions
Total transactions
(in millions)
6,645.4
6,050.0
595.4
9.8
%
12,594.2
11,598.0
996.2
8.6
%
Total Accounts on File (AOF) (in millions)
769.0
829.3
(60.3
)
(7.3
)
%
Total Traditional AOF (in millions)
638.9
588.9
50.0
8.5
%
Merchant Solutions
Point-of-sale
transactions (in millions)
1,700.3
1,498.5
201.8
13.5
%
3,224.7
2,838.0
386.7
13.6
%
Dollar sales volume (in millions)
$
43,890.0
40,362.1
3,527.9
8.7
%
$
84,131.6
77,628.8
6,502.8
8.4
%
Segment net revenue per transaction
$
0.214
0.231
(0.017
)
(7.3
)
%
$
0.219
0.234
(0.015
)
(6.2
)
%
Consumer Solutions
Gross dollar
volume (in millions)
$
8,659.8
8,336.2
323.6
3.9
%
$
18,713.3
18,030.5
682.8
3.8
%
Direct deposit 90-day active cards (in thousands)
2,453.3
2,518.7
(65.4
)
(2.6
)
%
90-day active cards (in thousands)
4,973.6
5,078.5
(104.9
)
(2.1
)
%
% of 90-day active cards with direct deposit
49.3
%
49.6
%
TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
June 30, 2019
December 31, 2018
Assets Current assets: Cash and
cash equivalents
$
458,220
471,156
Accounts receivable, net
513,712
450,322
Contract assets
43,847
30,950
Other current assets
224,048
188,355
Total current assets
1,239,827
1,140,783
Goodwill
4,114,851
4,114,838
Software and other intangible assets, net
1,224,111
1,331,238
Property and equipment, net
373,868
383,074
Operating lease right-of-use assets, net
198,539
-
Contract assets - long-term
56,925
47,839
Contract cost assets - long-term
148,938
145,598
Other long term assets
349,747
305,339
Total assets
$
7,706,806
7,468,709
Liabilities Current
liabilities: Accounts payable
$
57,911
97,956
Current portion of long-term borrowings, finance leases and license
agreements
35,523
29,125
Current portion of operating lease liabilities
43,346
-
Contract liabilities
51,553
47,227
Other current liabilities
312,994
341,293
Total current liabilities
501,327
515,601
Long-term borrowings, finance leases and license agreements,
excluding current portion
4,042,738
3,889,541
Long-term operating lease liabilities, excluding current portion
167,102
-
Deferred income tax liabilities
401,486
380,278
Contract liabilities - long-term
25,281
21,489
Other long-term liabilities
74,278
75,894
Total liabilities
5,212,212
4,882,803
Equity
2,494,594
2,585,906
Total liabilities and equity
$
7,706,806
7,468,709
TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
Six Months Ended June 30,
2019
2018
Cash flows from operating activities: Net
income
$
324,367
285,537
Adjustments to reconcile net income to net cash provided by
operating activities: Equity in income of equity investments, net
of tax
(23,444
)
(22,929
)
Dividends received from equity investments
-
892
Depreciation and amortization
208,483
208,679
Amortization of debt issuance costs
2,652
2,362
Amortization of operating lease right-of-use assets
25,555
-
Share-based compensation
22,214
20,524
Deferred income tax expense
21,258
18,657
Other noncash adjustments
27,293
43,187
Changes in operating assets and liabilities
(212,948
)
(86,316
)
Net cash provided by operating activities
395,430
470,593
Purchases of property and equipment
(30,844
)
(48,608
)
Additions to licensed computer software from vendors
(61,209
)
(19,216
)
Additions to internally developed computer software
(24,817
)
(19,934
)
Cash used in acquisitions, net of cash acquired
-
(1,051,629
)
Other investing activities
(2,700
)
(4,119
)
Net cash used in investing activities
(119,570
)
(1,143,506
)
Principal payments on long-term borrowings,
finance lease obligations and license agreements
(299,499
)
(2,626,534
)
Proceeds from long-term borrowings
450,000
3,477,000
Debt issuance costs
-
(15,979
)
Purchase of noncontrolling interests
-
(126,000
)
Dividends paid on common stock
(46,534
)
(47,189
)
Proceeds from exercise of stock options
6,911
29,289
Repurchase of common stock
(400,023
)
(82
)
Other financing activities
-
(3,779
)
Net cash (used in) provided by financing activities
(289,145
)
686,726
Cash, cash equivalents and restricted
cash: Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(332
)
(4,143
)
Net (decrease) increase in cash, cash equivalents and restricted
cash
(13,617
)
9,670
Cash, cash equivalents and restricted cash at beginning of period
474,279
451,370
Cash, cash equivalents and restricted cash at end of period
$
460,662
461,040
Supplemental Capital
expenditures
$
116,870
87,758
Free cash flow (non-GAAP)*
$
278,560
382,835
* See reconciliation of non-GAAP measures.
TSYS
Supplemental Information
(unaudited)
Other
Accounts on File (AOF):
Total Accounts on File
(in millions)
At June 2019
At June 2018
Percent Change
Consumer
532.2
493.8
7.8
%
Commercial
61.6
56.8
8.4
Other
45.1
38.3
18.0
Traditional AOF
638.9
588.9
8.5
Prepaid*/Stored Value
8.4
37.0
(77.2
)
Commercial Card Single Use
121.7
106.0
14.8
Government Services
-
97.4
(100.0
)
Total AOF
769.0
829.3
(7.3
)
%
* Prepaid does not include Consumer Solutions accounts.
Growth
in AOF: (in millions)
June 2018 to June 2019
June 2017 to June 2018
Beginning balance
829.3
773.6
Change in accounts on file due to:
Internal growth of existing clients
56.7
53.7
New clients
23.8
37.3
Purges/Sales
(22.3
)
(34.4
)
Deconversions
(118.5
)
(0.9
)
Ending balance
769.0
829.3
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 second quarter 2019 financial results
using the previous year’s foreign currency exchange rates. On a
constant currency basis, TSYS’ total revenues for the second
quarter of 2019 were higher 3.4% as compared to a reported GAAP
increase of 2.8%. On a constant currency basis, TSYS’ total
revenues for the first six months of 2019 were higher 4.5% as
compared to a reported GAAP increase of 3.8%. The schedules
below also provide a reconciliation of total revenues to net
revenue. The schedules below also provide a reconciliation
of net income attributable to TSYS common shareholders to adjusted
earnings, and diluted EPS to adjusted diluted EPS. Although
the Company excludes the amortization of purchased intangibles from
these non-GAAP measures, management believes that it is important
for investors to understand that such intangible assets were
recorded as part of purchase accounting and contribute to revenue
generation. 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 2019
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 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.
Reconciliation of GAAP to
Non-GAAP
Constant Currency Comparison
(unaudited)
(in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
Percent
Percent
2019
2018
Change
2019
2018
Change
Consolidated Total revenues
(GAAP)
$
1,035,485
1,007,580
2.8
%
$
2,070,016
1,994,750
3.8
%
Foreign currency impact (1)
6,839
-
15,107
-
Constant currency (2) (non-GAAP)
$
1,042,324
1,007,580
3.4
%
$
2,085,123
1,994,750
4.5
%
Net revenue (non-GAAP)
$
979,920
956,548
2.4
%
$
1,960,189
1,892,045
3.6
%
Foreign currency impact (1)
6,354
-
14,060
-
Constant currency (2) (non-GAAP)
$
986,274
956,548
3.1
%
$
1,974,249
1,892,045
4.3
%
Operating income (GAAP)
$
219,087
208,698
5.0
%
$
442,357
396,969
11.4
%
Foreign currency impact (1)
1,989
-
3,886
-
Constant currency (2) (non-GAAP)
$
221,076
208,698
5.9
%
$
446,243
396,969
12.4
%
Issuer Solutions Segment
net revenue (GAAP)
$
432,445
421,015
2.7
%
$
865,919
844,589
2.5
%
Foreign currency impact (1)
6,415
-
14,261
-
Constant currency (2) (non-GAAP)
$
438,860
421,015
4.2
%
$
880,180
844,589
4.2
%
(1) Reflects the impact of calculated changes in foreign
currency rates from the comparable period. (2) Reflects current
period results on a non-GAAP basis as if foreign currency rates did
not change from the comparable prior year period.
Net Revenue
(unaudited)
(in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
Percent
Percent
2019
2018
Change
2019
2018
Change
Total revenues
$
1,035,485
1,007,580
2.8
%
$
2,070,016
1,994,750
3.8
%
Less: reimbursable items
55,565
51,032
8.9
109,827
102,705
6.9
Net revenue
$
979,920
956,548
2.4
%
$
1,960,189
1,892,045
3.6
%
Reconciliation of GAAP to
Non-GAAP
Adjusted Diluted Earnings per
Share
(unaudited)
(in thousands, except per share
data)
Three Months Ended June 30,
Six Months Ended June 30,
Percent
Percent
2019
2018
Change
2019
2018
Change
Net income attributable to TSYS common shareholders
(GAAP)
$
162,760
142,435
14.3
%
$
324,367
284,276
14.1
%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition
intangible amortization*
53,707
61,830
(13.1
)
$
108,663
124,818
(12.9
)
Add: Share-based compensation
11,500
14,228
(19.2
)
22,214
20,522
8.2
Add: M&A and integration expenses**
17,150
2,581
nm
20,860
16,949
23.1
Less: Tax impact of adjustments***
(18,431
)
(17,278
)
(6.7
)
(33,972
)
(35,182
)
3.4
Adjusted earnings (non-GAAP)
$
226,686
203,796
11.2
%
$
442,132
411,383
7.5
%
Diluted EPS - Net income attributable to TSYS common
shareholders
As reported (GAAP)
$
0.91
0.78
17.5
%
$
1.81
1.55
16.8
%
Adjusted diluted EPS (non-GAAP)
$
1.27
1.11
14.4
%
$
2.47
2.24
10.0
%
Weighted average diluted shares outstanding
178,514
183,575
179,198
183,456
* The Company’s amortization of acquisition intangible
assets is disclosed in its 2018 Form 10-K filing in the applicable
footnotes to the consolidated financial statements (Note 7 Other
Intangible Assets, Net and the amortization expense associated with
acquisition technology intangibles in Note 8 Intangible Assets –
Computer Software, Net). ** Costs associated with the merger &
acquisitions and integrations are included in selling, general and
administrative expenses and nonoperating expenses. *** Certain of
these merger and acquisition costs are nondeductible for income tax
purposes.
nm = not meaningful
Reconciliation of GAAP to
Non-GAAP
Adjusted EBITDA
(unaudited)
(in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
Percent
Percent
2019
2018
Change
2019
2018
Change
Net income (GAAP) (a)
$
162,760
142,435
14.3
%
$
324,367
285,537
13.6
%
Adjust for: Less: Equity
in income of equity investments
(12,217)
(12,322)
0.9
(23,444)
(22,929)
(2.2
)
Add: Income tax expense
31,128
37,415
(16.8
)
61,027
55,549
9.9
Add: Interest expense, net
43,014
41,119
4.6
85,783
77,772
10.3
Add: Depreciation and amortization
104,773
104,290
0.5
208,483
208,679
(0.1
)
Add: Client incentive/contract asset amortization
8,250
6,712
22.9
16,288
13,584
19.9
Add: Contract cost asset amortization
8,179
8,511
(3.9
)
16,024
19,238
(16.7
)
Less/Add: (Gain)/ Loss on foreign currency translations
(850)
(535)
(58.9
)
287
(107)
nm
Less/Add: Other nonoperating (income)/expenses
(4,748)
586
nm
(5,663)
1,147
nm
Add: Share-based compensation
11,500
14,229
(19.2
)
22,214
20,524
8.2
Add: M&A and integration expenses*
17,150
2,581
nm
20,860
16,949
23.1
Adjusted EBITDA (non-GAAP) (b)
$
368,939
345,021
6.9
%
$
726,226
675,943
7.4
%
Total revenues
(c)
$
1,035,485
1,007,580
2.8
%
$
2,070,016
1,994,750
Net income margin on total revenues (GAAP) (a)/(c)
15.7%
14.1%
15.7%
14.3%
Net
revenue (d)
$
979,920
956,548
2.4
%
$
1,960,189
1,892,045
Adjusted EBITDA margin on net revenue (non-GAAP) (b)/(d)
37.6%
36.1%
37.0%
35.7%
* Costs
associated with the mergers & acquisitions and integrations are
included in selling, general and administrative expenses.
nm = not meaningful
Reconciliation of GAAP to
Non-GAAP
Free Cash Flow
(unaudited)
(in thousands)
Six Months Ended
Free cash flow:
June 30,
2019
2018
Net cash provided by operating
activities (GAAP)
$
395,430
470,593
Capital expenditures
(116,870
)
(87,758
)
Free cash flow (non-GAAP)
$
278,560
382,835
Guidance Summary
(unaudited)
(in millions, except per share
data)
Revenue:
2019
% Change
Total revenues (GAAP)
$
4,190
to
$
4,290
4
%
to
6
%
Less: reimbursable items
200
to
200
Net revenue (non-GAAP)
$
3,990
to
$
4,090
5
%
to
7
%
Earnings per share (EPS):
Diluted EPS (GAAP)
$
3.48
to
$
3.63
11
%
to
16
%
Acquisition intangible amortization, share-based
compensation, litigation, claims, judgments or
settlements and M&A and integration
expenses, less the tax impact of
adjustments
1.27
to
1.27
Adjusted diluted EPS attributable to TSYS common
shareholders* (non-GAAP)
$
4.75
to
$
4.90
6
%
to
10
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731006005/en/
Cyle Mims TSYS Media Relations +1.706.644.3110
cylemims@tsys.com
Shawn Roberts TSYS Investor Relations +1.706.644.6081
shawnroberts@tsys.com
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