TSYS Reports First Quarter Adjusted EPS Grew 41.2%

COLUMBUS, Ga.--(BUSINESS WIRE)--

TSYS TSS today reported results for the first quarter.

"Through diligent planning and execution, along with the extraordinary efforts of many to complete the largest credit card portfolio conversion in the history of payments, we delivered exceptional results for the first quarter," said M. Troy Woods, chairman, president and chief executive officer of TSYS.

Highlights for the first quarter of 2015 include:

• Adjusted earnings per share (EPS) from continuing operations were $0.54, an increase of 41.2%. On a GAAP basis, basic EPS from continuing operations were $0.42, an increase of 60.4%.
• Income from continuing operations attributable to TSYS' shareholders was $77.8 million, an increase of 57.7%.
• Adjusted EBITDA was $193.5 million, an increase of 29.3%.
• Total revenues for the quarter were $662.2 million, an increase of 11.7%. Revenues before reimbursable items were $595.8 million, an increase of 11.8%.
• Adjusted operating margin was 25.9%. GAAP operating margin was 18.5%.

"During the quarter, we repurchased 1.45 million shares of our stock, and including dividends, we returned 73% of available free cash flow to our shareholders. As a result of the great start to the year, we are revising our adjusted EPS guidance to grow between 12-14% from the previous range of 11-13%," said Woods.

			2015 Revised Financial Outlook
			Range
			(in millions, except per share amounts)									Percent Change
Total revenues			$2,620			to			$2,660			7%			to			9%
Revenues before reimbursable items			$2,370			to			$2,410			8%			to			10%
Adjusted EPS attributable to TSYS
common shareholders from
continuing operations*			$2.19			to			$2.23			12%			to			14%
* Average Basic Weighted Shares			185

TSYS Reports First Quarter Adjusted EPS Grew 41.2%

In other business, M. Troy Woods has assumed the position of chairman, to succeed Philip W. Tomlinson, who will continue to serve as a director.

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, April 28. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the link under "Webcasts" on the main homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. A slide presentation to accompany the call will be available by clicking on the link under "Webcasts" on the main homepage of tsys.com.

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-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, adjusted EBITDA and adjusted EPS, and a reconciliation of those measures to the most directly comparable GAAP measures are included on pages 8 to 11 of this release.

About TSYS

At TSYS^® TSS, we believe payments should revolve around people, not the other way around. We call this belief People-Centered Payments^®. By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend^®, A TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions.

TSYS' headquarters are located in Columbus, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific. TSYS is a member of The Civic 50 and has been named one of the 2015 World's Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website. For more, please visit us at www.tsys.com.

TSYS Reports First Quarter Adjusted EPS Grew 41.2%

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 2015 total revenues, revenues before reimbursable items and adjusted 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; the effect of current domestic and worldwide economic conditions; risks associated with foreign operations, including adverse developments with respect to foreign currency exchange rates; expenses are incurred associated with the signing of a significant client; TSYS does not convert clients' portfolios 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; 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. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
			Three Months Ended
			March 31,
									Percent
			2015			2014			Change
Total revenues		$	662,156			592,848			11.7		%
Cost of services			449,705			422,883			6.3
Selling, general and administrative expenses			89,955			89,268			0.8
Total expenses			539,660			512,151			5.4
Operating income			122,496			80,697			51.8
Nonoperating expenses			(9,209	)		(9,813	)		6.2
Income before income taxes, noncontrolling interests
and equity in income of equity investments			113,287			70,884			59.8
Income taxes			39,782			24,335			63.5
Income before noncontrolling interests and
equity in income of equity investments			73,505			46,549			57.9
Equity in income of equity investments, net of tax			5,394			4,096			31.7
Income from continuing operations, net of tax			78,899			50,645			55.8
Gain (Loss) from discontinued operations, net of tax			-			980			nm
Net income			78,899			51,625			52.8
Net income attributable to noncontrolling interests			(1,144	)		(2,322	)		50.7
Net income attributable to TSYS common shareholders		$	77,755			49,303			57.7		%
Basic earnings per share(EPS):
Income from continuing operations to TSYS
common shareholders*		$	0.42			0.26			60.4		%
Gain (Loss) from discontinued operations to TSYS
common shareholders*			-			(0.00	)		nm
Basic EPS		$	0.42			0.26			60.5		%
Diluted EPS:
Income from continuing operations to TSYS
common shareholders*		$	0.42			0.26			61.8		%
Gain (Loss) from discontinued operations to TSYS
common shareholders*			-			(0.00	)		nm
Diluted EPS		$	0.42			0.26			61.8		%
Weighted average shares outstanding:
Basic			184,481			187,752
Diluted			185,563			190,384
Dividends declared per share		$	0.10			0.10
Amounts attributable to TSYS common shareholders:
Income from continuing operations, net of tax		$	77,755			49,321			57.7		%
Gain (Loss) from discontinued operations, net of tax			-			(18	)		nm
Net income		$	77,755			49,303			57.7		%
Non-GAAP measures:
Adjusted EPS from continuing operations		$	0.54			0.38			41.2		%
Adjusted EBITDA		$	193,454			149,596			29.3		%
nm = not meaningful
* EPS amounts may not total due to rounding.

TSYS
Segment Breakdown
(unaudited)
(in thousands)
			Three Months Ended March 31,
										Change
			2015				2014			$			%
Revenues before reimbursable items:
North America Services	$		266,219				224,368			41,851			18.7			%
International Services			73,730				76,773			(3,043	)		(4.0	)
Merchant Services			110,398				104,625			5,773			5.5
NetSpend			155,074				132,640			22,434			16.9
Intersegment revenues			(9,637	)			(5,656	)		(3,981	)		(70.4	)
Revenues before reimbursable items
from external customers	$		595,784				532,750			63,034			11.8			%
Total revenues:
North America Services	$		309,233				262,178			47,055			17.9			%
International Services			79,802				82,378			(2,576	)		(3.1	)
Merchant Services			129,104				122,690			6,414			5.2
NetSpend			155,074				132,640			22,434			16.9
Intersegment revenues			(11,057	)			(7,038	)		(4,019	)		(57.1	)
Revenues from external customers	$		662,156				592,848			69,308			11.7			%
Depreciation and amortization:
North America Services	$		23,064				20,276			2,788			13.8			%
International Services			8,778				9,805			(1,027	)		(10.5	)
Merchant Services			4,277				3,400			877			25.8
NetSpend			2,293				1,735			558			32.2
Segment depreciation and amortization			38,412				35,216			3,196			9.1
Acquisition intangible amortization			23,867				24,313			(446	)		(1.8	)
Corporate admin and other			536				506			30			5.9
Total depreciation and amortization	$		62,815				60,035			2,780			4.6			%
Adjusted segment operating income:
North America Services	$		102,570				74,578			27,992			37.5			%
International Services			6,983				4,555			2,428			53.3
Merchant Services			34,115				30,168			3,947			13.1
NetSpend			35,467				28,717			6,750			23.5
Total adjusted segment operating income			179,135				138,018			41,117			29.8
Acquisition intangible amortization			(23,867	)			(24,313	)		446			1.8
NetSpend M&A operating expenses			-				(1,253	)		1,253			nm
Share-based compensation			(8,143	)			(7,611	)		(532	)		(7.0	)
Corporate admin and other			(24,629	)			(24,144	)		(485	)		(2.0	)
Operating income	$		122,496				80,697			41,799			51.8			%
Other:
Reimbursable items:
North America Services	$		43,014				37,810			5,204			13.8			%
International Services			6,072				5,605			467			8.3
Merchant Services			18,706				18,065			641			3.5
NetSpend			-				-			-			na
Intersegment revenues			(1,420	)			(1,382	)		(38	)		(2.7	)
Reimbursable items	$		66,372				60,098			6,274			10.4			%

TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
				Mar 31, 2015			Dec 31, 2014
Assets
Current assets:
Cash and cash equivalents			$	328,112			289,183
Accounts receivable, net				315,524			283,203
Other current assets				117,004			118,167
Total current assets				760,640			690,553
Goodwill				1,546,185			1,547,397
Other intangible assets, net				385,161			404,107
Property, equipment and software, net				650,795			656,733
Other long term assets				434,657			434,791
Total assets			$	3,777,438			3,733,581
Liabilities
Current liabilities:
Accounts payable			$	58,473			48,793
Bonds, notes and capital leases				45,526			50,911
Other current liabilities				240,494			196,809
Total current liabilities				344,493			296,513
Bonds, notes and capital leases, excluding current portion				1,396,044			1,405,106
Other long-term liabilities				299,480			309,826
Total liabilities				2,040,017			2,011,445
Redeemable noncontrolling interest				23,397			22,492
Equity
Shareholders' equity				1,707,677			1,692,762
Noncontrolling interests in consolidated subsidiaries				6,347			6,882
Total equity				1,714,024			1,699,644
Total liabilities and equity			$	3,777,438			3,733,581
TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
				Three Months Ended March 31,
				2015			2014
Cash flows from operating activities:
Net income			$	78,899			51,625
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of equity investments				(5,394	)		(4,096	)
Depreciation and amortization				62,815			61,432
Other non cash adjustments				16,836			20,350
Changes in operating assets and liabilities:				5,336			19,395
Net cash provided by operating activities				158,492			148,706
Net cash used in investing activities				(41,714	)		(48,064	)
Net cash used in financing activities				(73,756	)		(72,474	)
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents				(4,093	)		1,015
Net increase in cash and cash equivalents				38,929			29,183
Cash and cash equivalents at beginning of period				289,183			278,230
Cash and cash equivalents at end of period				328,112			307,413
Less cash and cash equivalents of discontinued
operations at end of period				-			33,252
Cash and cash equivalents of continuing operations at end of period			$	328,112			274,161
Free cash flow			$	114,938			101,464

TSYS
Supplemental Information
(unaudited)
Other:
Supplemental Information:
							Total Accounts on File
(in millions)							March 2015			March 2014			% Change
Consumer Credit								364.5			234.8			55.3
Retail								28.3			27.5			2.6
Total Consumer								392.8			262.3			49.8
Commercial								42.3			40.4			4.8
Other								22.7			19.7			15.2
Subtotal								457.8			322.4			42.0
Prepaid/Stored Value								126.6			120.0			5.5
Government Services								74.5			63.0			18.3
Commercial Card Single Use								64.8			50.8			27.5
Total AOF								723.7			556.2			30.1
Growth in Accounts on File (in millions):
							March 2014 to March 2015						March 2013 to March 2014
Beginning balance								556.2						478.5
Change in accounts on file due to:
Internal growth of existing clients								39.8						38.6
New clients								172.5						64.6
Purges/Sales								(44.2	)					(24.7	)
Deconversions								(0.6	)					(0.8	)
Ending balance								723.7						556.2
							Three Months Ended March 31,
													Change
							2015			2014			Inc(Dec)				%
North America Segment:
Accounts on file (AOF) (in millions)								653.2			495.5			157.7			31.8		%
Transactions (in millions)								3,310.7			2,327.6			983.1			42.2		%
International Segment:
AOF (in millions)								70.5			60.7			9.8			16.1		%
Transactions (in millions)								572.0			517.9			54.1			10.5		%
Merchant Segment:
Point-of-sale transactions (in millions)								984.6			982.2			2.4			0.2		%
Dollar sales volume (in millions)							$	11,301.6		$	10,779.7		$	521.9			4.8		%
NetSpend Segment:
Gross dollar volume (in millions)							$	7,660.7		$	6,567.2		$	1,093.5			16.7		%
Direct deposit 90-day active cards (in thousands)								2,403.5			2,070.3			333.2			16.1		%
90-day active cards (in thousands)								4,193.0			3,654.9			538.1			14.7		%
% of 90-day active cards with direct deposit								57.3	%		56.6	%

Reconciliation of GAAP to Non-GAAP Financial Measures
Non-GAAP Measures
The schedule below provides a reconciliation of revenues and operating results on a constant currency basis to reported revenues and operating income. This non-GAAP measure presents first quarter 2015 financial results using the previous year's foreign currency exchange rates. On a full year constant currency basis, TSYS' total revenues grew 13.0% as compared to a reported GAAP increase of 11.7%.
The schedule below also provides a reconciliation of basic EPS, adjusted for the after-tax impact of acquisition intangible amortization, share-based compensation and merger and acquisition costs, to adjusted EPS.
The tax rate used in the calculation of adjusted 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.
The schedule also provides a reconciliation of net income, adjusted for income from discontinued operations, equity in income of equity investments, income taxes, nonoperating expense, depreciation and amortization, share-based compensation, and merger and acquisition expenses, to adjusted EBITDA.
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 captions of other companies due to potential inconsistencies in the method of calculation.
TSYS believes that its use of non-GAAP financial measures provides investors with the same 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 the presentation of GAAP financial measures alone would not provide its shareholders and potential investors with the ability to appropriately analyze its ongoing operational results, and therefore expected future results. TSYS therefore 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 March 31,
									Percent
				2015			2014		Change
Consolidated
Constant currency (1)			$	669,863			592,848		13.0		%
Foreign currency (2)				(7,707	)		-
Total revenues			$	662,156			592,848		11.7		%
Constant currency (1)			$	602,902			532,750		13.2		%
Foreign currency (2)				(7,118	)		-
Total revenues before reimbursable items			$	595,784			532,750		11.8		%
Constant currency (1)			$	122,337			80,697		51.6		%
Foreign currency (2)				159			-
Operating income			$	122,496			80,697		51.8		%
International Services
Constant currency (1)			$	87,381			82,378		6.1		%
Foreign currency (2)				(7,579	)		-
Total revenues			$	79,802			82,378		(3.1	)	%
(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.
Revenues Before Reimbursable Items
(unaudited)
(in thousands)
				Three Months Ended March 31,
									Percent
				2015			2014		Change
Total revenues			$	662,156			592,848		11.7		%
Reimbursable items				66,372			60,098		10.4
Revenues before reimbursable items			$	595,784			532,750		11.8		%
Reconciliation of Cash Provided by Operating Activities to Available Free Cash Flow
(unaudited)
(in thousands)
				Three Months Ended March 31,
				2015					2014
Net cash provided by operating activities			$	158,492					148,706
Capital expenditures				(43,554	)				(47,242	)
Free cash flow				114,938					101,464
Principal payments on debt and capital leases				(15,085	)				(22,277	)
Available free cash flow			$	99,853					79,187

Reconciliation of GAAP to Non-GAAP
Adjusted Earnings per Share
(unaudited)
(in thousands, except per share data)
				Three Months Ended March 31,
									Percent
Income from continuing operations attributable to				2015		2014			Change
TSYS common shareholders			$	77,755		49,321			57.7		%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes				15,761		15,813			(0.3	)
Add: Share-based compensation, net of taxes				5,441		5,017			8.4
Add: NetSpend M&A expenses, net of taxes*				-		1,204			nm
Adjusted earnings			$	98,957		71,355			38.7		%
Basic EPS - Income from continuing operations attributable to
TSYS common shareholders
As reported (GAAP)			$	0.42		0.26			60.4		%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization, net of taxes				0.09		0.08			1.4
Add: Share-based compensation, net of taxes				0.03		0.03			10.5
Add: NetSpend M&A expenses, net of taxes*				-		0.01			nm
Adjusted EPS **			$	0.54		0.38			41.2		%
Average common shares and participating securities				184,481		187,752
* Certain merger and acquisition costs are nondeductible for income tax purposes
** Adjusted EPS amounts may not total due to rounding.
Adjusted EBITDA
(unaudited)
(in thousands)
				Three Months Ended March 31,
									Percent
				2015		2014			Change
Net income			$	78,899		51,625			52.8		%
Adjust for:
Deduct: Loss (Income) from discontinued operations				-		(980	)		nm
Deduct: Equity in income of equity investments				(5,394	)	(4,096	)		(31.7	)
Add: Income taxes				39,782		24,335			63.5
Add: Nonoperating expense				9,209		9,813			(6.2	)
Add: Depreciation and amortization				62,815		60,035			4.6
EBITDA			$	185,311		140,732			31.7		%
Adjust for:
Add: Share-based compensation				8,143		7,611			7.0
Add: NetSpend M&A operating expenses				-		1,253			nm
Adjusted EBITDA			$	193,454		149,596			29.3		%
nm = not meaningful

Reconciliation of GAAP to Non-GAAP
Segment Operating Margin and Consolidated Adjusted Operating Margin
(unaudited)
(in thousands)
				Three Months Ended March 31, 2015											Three Months Ended March 31, 2014
				Adjusted Segment			Revenues before			Adjusted					Adjusted Segment			Revenues before			Adjusted
				Operating Income			Reimbursable Items			Operating Margin					Operating Income			Reimbursable Items			Operating Margin
North America Services			$	102,570			266,219			38.53		%		$	74,578			224,368			33.24		%
International Services				6,983			73,730			9.47					4,555			76,773			5.93
Merchant Services				34,115			110,398			30.90					30,168			104,625			28.83
NetSpend				35,467			155,074			22.87					28,717			132,640			21.65
Intersegment				-			(9,637	)							-			(5,656	)
Corporate admin and other				(24,629	)		-								(24,144	)		-
Adjusted operating margin			$	154,506			595,784			25.93		%		$	113,874			532,750			21.37		%
Acquisition intangible amortization				(23,867	)										(24,313	)
NetSpend M&A operating expenses				-											(1,253	)
Share-based compensation				(8,143	)										(7,611	)
Operating income and margin*			$	122,496			595,784			20.56		%		$	80,697			532,750			15.15		%
Reimbursable items							66,372											60,098
Operating margin (US GAAP)			$	122,496			662,156			18.50		%		$	80,697			592,848			13.61		%
* Operating margin on revenue before reimbursable items