TSYS Reports Third Quarter Earnings

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

TSYS TSS reported results for the third quarter of 2016.

"We were very pleased with this quarter's financial performance as all four of our operating segments exceeded our expectations. We remain on track with our TransFirst integration activities and continue to be laser-focused on successfully combining our legacy merchant businesses with TransFirst," said M. Troy Woods, chairman and chief executive officer of TSYS.

Highlights for the third quarter of 2016 include:

• Total revenues were $1.1 billion, an increase of 62.0% over last year's $707.9 million.
• Net revenue (non-GAAP), which excludes reimbursable items, interchange and assessment expense, was $789.6 million, an increase of 24.1% over last year's $636.4 million.
• GAAP net income attributable to TSYS common shareholders was $85.4 million, a decrease of 29.2% from last year's $120.6 million. GAAP basic earnings per share (EPS) were $0.46 per share, a decrease of 29.2% from last year's $0.66.
• Adjusted EBITDA (non-GAAP) was $269.1 million, an increase of 12.7% over last year's $238.9 million. Q3 '15 results included tax benefits of $15.1 million that did not recur in 2016.
• Adjusted earnings (non-GAAP) were $130.7 million, a decrease of 8.8% over last year's $143.3 million. Q3 '15 adjusted earnings and adjusted EPS (non-GAAP) included $23.6 million and $0.13, respectively, of tax related benefits that did not recur in 2016. Q3 '16 adjusted EPS was $0.71, which included $0.06 of headwinds for currency and severance expenses, a decrease of 8.7% over last year's $0.78.

"Our cash flow from operating activities and free cash flow for the first nine months of the year were both records. This allowed us to reduce our debt by $175 million during the quarter, bringing the total debt reduction to $300 million year to date," said Woods.

During the third quarter, currencies, including the rapid and steep decline in the British Pound compared to the U. S. Dollar, negatively impacted total revenues and net revenue by $14 million and $13 million, respectively, on a constant currency basis compared to 2015. A similar impact is expected in Q4. This same constant currency comparison negatively impacted EPS by $0.03 in Q3 ‘16 and is expected to have a similar impact in Q4.

The Consumer Financial Protection Bureau released its long-awaited rule on prepaid financial products on October 5, 2016. The new rule is not expected to have a significant financial impact on 2016 results. Additional details on the impact of the new rule will be discussed at today's quarterly conference call.

Updated 2016 Outlook

As a result of currency headwinds, total and net revenue guidance are being adjusted. EPS guidance remains unchanged. The resulting revised guidance is below.

			2016 Revised Financial Outlook Range							Percent Change
(in millions, except per share amounts)
Revenue:
Total revenues (GAAP)			$4,150		to		$4,170			49%		to		50%
Net revenue (non-GAAP)			$3,030		to		$3,045			21%		to		22%
Earnings per share:
Basic EPS (GAAP)			$1.77		to		$1.83			(10%)		to		(7%)
Adjusted EPS attributable to TSYS common shareholders from continuing operations (non-GAAP)			$2.78		to		$2.85			13%		to		16%
Average basic weighted shares					183.7

Conference Call

TSYS will host its quarterly conference call at 5:00 p.m. ET on Tuesday, October 25. The conference call can be accessed via simultaneous Internet broadcast 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-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 EPS, and a reconciliation of those measures to the most directly comparable GAAP measures is included on pages 11 to 15 of this release.

About TSYS

TSYS^® TSS unlocks opportunities in payments for payment providers, businesses and consumers. Our headquarters are in Columbus, Georgia, USA, and we operate in more than 80 countries with local offices across the Americas, EMEA and Asia-Pacific.

We provide seamless, secure and innovative solutions across the payments spectrum — from issuer processing and merchant acquiring to prepaid program management — delivered through partnership and expertise. We succeed because we put people, and their needs, at the heart of every decision. It's an approach we call ‘People-Centered Payments^®'.

Our industry is changing every day — and we're leading the way toward the payments of tomorrow. We routinely post all important information on our website. For more, visit us at 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' expectation with respect to the impact of constant currency on revenues and EPS in the fourth quarter of 2016, the expected impact of the Consumer Financial Protection Bureau's new rule regarding prepaid financial products on TSYS' 2016 results, TSYS' earnings guidance for 2016 total revenues, net revenue, basic EPS 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, particularly the recently closed TransFirst 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 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, and in particular the CFPB's new rule regarding prepaid financial products; 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.

TSYS
Financial Highlights
(unaudited)
(in thousands, except per share data)
			Three Months Ended								Nine Months Ended
			September 30,								September 30,
							Percent								Percent
			2016		2015		Change				2016		2015		Change
Total revenues		$	1,146,888		707,890		62.0	%		$	3,037,853		2,062,698		47.3	%
Cost of services			840,300		456,465		84.1				2,166,731		1,366,141		58.6
Selling, general and administrative expenses			151,261		88,321		71.3				428,287		280,355		52.8
Total expenses*			991,561		544,786		82.0				2,595,018		1,646,496		57.6
Operating income			155,327		163,104		(4.8)				442,835		416,202		6.4
Nonoperating expenses			(30,005)		(8,564)		nm				(82,506)		(27,982)		nm
Income before income taxes, noncontrolling interests
and equity in income of equity investments			125,322		154,540		(18.9)				360,329		388,220		(7.2)
Income taxes			44,247		37,825		17.0				127,966		119,204		7.4
Income before noncontrolling interests and equity in income of equity investments			81,075		116,715		(30.5)				232,363		269,016		(13.6)
Equity in income of equity investments, net of tax			6,366		5,336		19.3				19,234		15,309		25.6
Net income			87,441		122,051		(28.4)				251,597		284,325		(11.5)
Net income attributable to noncontrolling interests			(2,089)		(1,429)		(46.2)				(5,909)		(3,109)		(90.1)
Net income attributable to TSYS common shareholders		$	85,352		120,622		(29.2)	%		$	245,688		281,216		(12.6)	%
Earnings per share (EPS):
Basic EPS		$	0.46		0.66		(29.2)	%		$	1.34		1.53		(12.3)	%
Diluted EPS		$	0.46		0.65		(29.0)	%		$	1.33		1.52		(12.1)	%
Weighted average shares outstanding:
(includes participating securities)
Basic			183,830		183,954						183,601		184,320
Diluted			184,642		185,281						184,430		185,534
Dividends declared per share		$	0.10		0.10					$	0.30		0.30
Non-GAAP measures:
Net revenue		$	789,588		636,386		24.1	%		$	2,256,169		1,854,254		21.7	%
Adjusted EPS		$	0.71		0.78		(8.7)	%		$	2.11		1.89		11.5	%
Adjusted EBITDA		$	269,142		238,898		12.7	%		$	774,003		638,889		21.1	%
* Certain amounts in prior quarters in 2016 have been reclassed between cost of services and selling, general and administrative expenses.
** See reconciliation of non-GAAP measures.
nm = not meaningful

TSYS
Segment Breakdown
(unaudited)
(in thousands)
			Three Months Ended September 30,														Nine Months Ended September 30,
									Change														Change
			2016			2015			$			%					2016			2015			$			%
Operating income (a)		$	155,327			163,104			(7,777	)		(4.8	)	%		$	442,835			416,202			26,633			6.4		%
Share-based compensation			13,069			11,295			1,774			15.7					33,792			31,468			2,324			7.4
TransFirst M&A expenses			1,830			-			1,830			na					25,908			-			25,908			na
Acquisition intangible amortization			53,341			22,883			30,458			nm					134,748			69,601			65,147			93.6
Adjusted operating income (b)		$	223,567			197,282			26,285			13.3		%		$	637,283			517,271			120,012			23.2		%
Adjusted segment operating income:
North America Services (c)		$	113,425			113,946			(521	)		(0.5	)	%		$	350,955			324,902			26,053			8.0		%
International Services (d)			15,524			18,370			(2,846	)		(15.5	)				41,564			38,706			2,858			7.4
Merchant Services (e)			90,784			42,387			48,397			nm					219,056			117,192			101,864			86.9
NetSpend (f)			40,856			37,315			3,541			9.5					125,538			109,224			16,314			14.9
Corporate admin and other			(37,022	)		(14,736	)		(22,286	)		nm					(99,830	)		(72,753	)		(27,077	)		(37.2	)
Adjusted segment operating income		$	223,567			197,282			26,285			13.3		%		$	637,283			517,271			120,012			23.2		%
Total revenues (g)		$	1,146,888			707,890			438,998			62.0		%		$	3,037,853			2,062,698			975,155			47.3		%
Less: reimbursable items, interchange and assessments expenses			357,300			71,504			285,796			nm					781,684			208,444			573,240			nm
Net revenue (h)			789,588			636,386			153,202			24.1					2,256,169			1,854,254			401,915			21.7
Intersegment revenues			8,454			7,000			1,454			20.8					29,498			25,098			4,400			17.5
Segment net revenue		$	798,042			643,386			154,656			24.0		%		$	2,285,667			1,879,352			406,315			21.6		%
Segment net revenue
North America Services (i)		$	300,754			293,571			7,183			2.4		%		$	901,563			846,989			54,574			6.4		%
International Services (j)			79,445			86,446			(7,001	)		(8.1	)				236,570			244,033			(7,463	)		(3.1	)
Merchant Services (k)			262,494			123,721			138,773			nm					644,573			351,987			292,586			83.1
NetSpend (l)			155,349			139,648			15,701			11.2					502,961			436,343			66,618			15.3
Segment net revenue		$	798,042			643,386			154,656			24.0		%		$	2,285,667			1,879,352			406,315			21.6		%
Operating margin (GAAP) (a)/(g)			13.5	%		23.0	%										14.6	%		20.2	%
Adjusted operating margin on net revenue (b)/(h)			28.3	%		31.0	%										28.3	%		27.9	%
Adjusted segment operating margin on net revenue
North America Services(c)/(i)			37.7	%		38.8	%										38.9	%		38.4	%
International Services (d)/(j)			19.5	%		21.3	%										17.6	%		15.9	%
Merchant Services (e)/(k)			34.6	%		34.3	%										34.0	%		33.3	%
NetSpend (f)/(l)			26.3	%		26.7	%										25.0	%		25.0	%
nm = not meaningful
na = not applicable

TSYS
Segment Breakdown
(unaudited)
(in thousands)
			Three Months Ended September 30,												Nine Months Ended September 30,
							Change														Change
			2016		2015		$			%					2016			2015			$			%
Depreciation and amortization:
North America Services		$	27,540		25,300		2,240			8.9		%		$	82,464			72,831			9,633			13.2		%
International Services			7,050		8,678		(1,628	)		(18.8	)				23,394			26,084			(2,690	)		(10.3	)
Merchant Services			6,846		4,670		2,176			46.6					18,702			13,394			5,308			39.6
NetSpend			3,241		2,632		609			23.1					9,466			7,547			1,919			25.4
Segment depreciation and amortization			44,677		41,280		3,397			8.2					134,026			119,856			14,170			11.8
Acquisition intangible amortization			53,341		22,883		30,458			nm					134,748			69,601			65,147			93.6
Corporate admin and other			898		336		562			nm					2,694			1,762			932			52.9
Total depreciation and amortization		$	98,916		64,499		34,417			53.4		%		$	271,468			191,219			80,249			42.0		%
Segment statistical data:
Transactions (in millions)
North America Services:			4,361.5		4,156.7		204.8			4.9		%			12,657.7			11,509.6			1,148.1			10.0		%
International Services:			698.8		626.1		72.7			11.6					1,975.7			1,812.0			163.7			9.0
Total transactions			5,060.3		4,782.8		277.5			5.8		%			14,633.4			13,321.6			1,311.8			9.8		%
Accounts on file (AOF) (in millions)
North America Services:															652.5			685.5			(33.0	)		(4.8	)	%
International Services:															86.3			74.9			11.4			15.2
Total AOF															738.8			760.4			(21.6	)		(2.8	)	%
Traditional accounts on file (AOF) (in millions)
North America Services:															444.6			404.6			40.0			9.9		%
International Services:															66.6			63.3			3.3			5.2
Total Traditional AOF															511.2			467.9			43.3			9.2		%
Merchant Services
Point-of-sale transactions (in millions)			1,177.1		1,117.3		59.8			5.4		%			3,427.6			3,191.3			236.3			7.4		%
Dollar sales volume (in millions)		$	28,680.7		12,055.7		16,625.0			nm		%		$	69,024.9			35,671.5			33,353.4			93.5		%
NetSpend
Gross dollar volume (in millions)		$	6,367.0		5,391.2		975.8			18.1		%		$	22,143.3			18,582.8			3,560.5			19.2		%
Direct deposit 90-day active cards (in thousands)															2,079.8			1,796.0			283.8			15.8		%
90-day active cards (in thousands)															4,162.7			3,643.4			519.3			14.3		%
% of 90-day active cards with direct deposit															50.0	%		49.3	%

TSYS
Condensed Balance Sheet
(unaudited)
(in thousands)
			September 30, 2016			December 31, 2015
Assets
Current assets:
Cash and cash equivalents		$	446,883			389,328
Accounts receivable, net			413,867			314,705
Other current assets			124,118			154,199
Total current assets			984,868			858,232
Goodwill			3,254,422			1,545,424
Other intangible assets, net			954,821			328,320
Property, equipment and software, net			722,749			694,968
Other long term assets			458,318			450,951
Total assets		$	6,375,178			3,877,895
Liabilities
Current liabilities:
Accounts payable		$	36,659			52,213
Notes payable and capital leases			43,244			53,546
Other current liabilities			289,572			233,173
Total current liabilities			369,475			338,932
Bonds payable, notes payable and capital leases, excluding current portion			3,425,147			1,377,541
Deferred tax liability			398,083			192,445
Other long-term liabilities			91,751			96,885
Total liabilities			4,284,456			2,005,803
Redeemable noncontrolling interest			25,053			23,410
Equity
Shareholders' equity			2,065,669			1,843,018
Noncontrolling interests in consolidated subsidiaries			-			5,664
Total equity			2,065,669			1,848,682
Total liabilities and equity		$	6,375,178			3,877,895
Note: TSYS adopted Accounting Standards Update (ASU) 2015-03 "Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Cost" on January 1, 2016. This ASU requires TSYS to present debt issuance costs in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. All prior periods presented have been restated for this ASU.
TSYS also adopted ASU 2015-17 "Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes" on January 1, 2016. This ASU requires the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. All prior periods presented have been restated for this ASU.

TSYS
Selected Cash Flow Highlights
(unaudited)
(in thousands)
			Nine Months Ended September 30,
			2016				2015
Cash flows from operating activities:
Net income		$	251,597				284,325
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of equity investments			(19,234	)			(15,309	)
Dividends received from equity investments			15,246				12,092
Depreciation and amortization			271,468				191,219
Amortization of debt issuance costs			12,499				1,378
Share-based compensation			33,792				31,468
Deferred income tax expense(benefit)			4,110				(25,960	)
Other noncash adjustments			35,508				29,039
Changes in operating assets and liabilities			(54,026	)			(47,698	)
Net cash provided by operating activities			550,960				460,554
Net cash used in investing activities			(2,457,138	)			(138,618	)
Net cash provided by (used in) financing activities			1,969,628				(158,429	)
Cash and cash equivalents:
Effect of exchange rate changes on cash and cash equivalents			(5,895	)			(4,840	)
Net increase in cash and cash equivalents			57,555				158,667
Cash and cash equivalents at beginning of period			389,328				289,183
Cash and cash equivalents at end of period		$	446,883				447,850

TSYS
Supplemental Information
(unaudited)
Other
AOF:				Total Accounts on File
(in millions)				At September 2016			At September 2015			% Change
Consumer				433.5			399.0			8.6
Commercial				48.0			44.1			8.9
Other				29.7			24.8			19.5
Traditional AOF				511.2			467.9			9.2
Prepaid*/Stored Value				58.9			133.8			(56.0	)
Government Services				85.7			78.7			9.0
Commercial Card Single Use				83.0			80.0			3.8
Total AOF				738.8			760.4			(2.8	)
* Prepaid does not include NetSpend accounts
Growth in Accounts on File (in millions):
				September 2015 to September 2016			September 2014 to September 2015
Beginning balance				760.4			605.5
Change in accounts on file due to:
	Internal growth of existing clients			53.8			41.0
	New clients			31.6			153.7
	Purges/Sales			(16.7	)		(38.3	)
	Deconversions			(90.3	)		(1.5	)
Ending balance				738.8			760.4

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 2016 financial results using the previous year's foreign currency exchange rates. On a constant currency basis, TSYS' total revenues grew 48.5% as compared to a reported GAAP increase of 47.3%.

The schedules below also provide a reconciliation of EPS to adjusted EPS.

The schedules below also provide a reconciliation of net income to EBITDA and adjusted EBITDA.

The schedules below also provide a reconciliation of operating margin to adjusted operating margin excluding severance.

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 2016 guidance of total revenues to net revenue and EPS 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.

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 September 30,										Nine Months Ended September 30,
									Percent											Percent
				2016			2015		Change					2016				2015		Change
Consolidated
Constant currency (1)			$	1,161,181			707,890		64.0		%		$	3,063,788				2,062,698		48.5		%
Foreign currency impact (2)				(14,293	)		-							(25,935	)			-
Total revenues			$	1,146,888			707,890		62.0		%		$	3,037,853				2,062,698		47.3		%
Constant currency (1)			$	802,958			636,386		26.2		%		$	2,280,389				1,854,254		23.0		%
Foreign currency impact (2)				(13,370	)		-							(24,220	)			-
Net revenue			$	789,588			636,386		24.1		%		$	2,256,169				1,854,254		21.7		%
Constant currency (1)			$	161,567			163,104		(0.9	)	%		$	452,196				416,202		8.6		%
Foreign currency impact (2)				(6,240	)		-							(9,361	)			-
Operating income			$	155,327			163,104		(4.8	)	%		$	442,835				416,202		6.4		%
International Services
Constant currency (1)			$	99,171			92,177		7.6		%		$	279,332				261,597		6.8		%
Foreign currency impact (2)				(14,338	)		-							(25,917	)			-
Total revenues			$	84,833			92,177		(8.0	)	%		$	253,415				261,597		(3.1	)	%
Constant currency (1)			$	92,861			86,446		7.4		%		$	260,772				244,033		6.9		%
Foreign currency impact (2)				(13,416	)		-							(24,202	)			-
Net revenue			$	79,445			86,446		(8.1	)	%		$	236,570				244,033		(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.
Net Revenue
(unaudited)
(in thousands)
				Three Months Ended September 30,										Nine Months Ended September 30,
									Percent											Percent
				2016			2015		Change					2016				2015		Change
Total revenues			$	1,146,888			707,890		62.0		%		$	3,037,853				2,062,698		47.3		%
Less: reimbursable items, interchange and assessments expenses				357,300			71,504		nm					781,684				208,444		nm
Net revenue			$	789,588			636,386		24.1		%		$	2,256,169				1,854,254		21.7		%
nm = not meaningful

Reconciliation of GAAP to Non-GAAP
Adjusted Earnings per Share
(unaudited)
(in thousands, except per share data)
				Three Months Ended September 30,											Nine Months Ended September 30,
										Percent											Percent
				2016			2015			Change					2016			2015			Change
Income attributable to TSYS common shareholders			$	85,352			120,622			(29.2	)	%		$	245,688			281,216			(12.6	)	%
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization			$	53,065			22,607			nm				$	133,920			68,774			94.7
Add: Share-based compensation				13,059			11,291			15.7					33,766			31,459			7.3
Add: TransFirst M&A expenses*				1,830			-			na					35,689			-			na
Less: Tax impact of adjustments**				(22,633	)		(11,250	)		nm					(62,264	)		(33,267	)		(87.2	)
Adjusted earnings			$	130,673			143,270			(8.8	)	%		$	386,799			348,182			11.1		%
Add: Severance impact				8,749			-			na					8,749			-			na
Add: Severance impact - Share-based compensation				147			-			na					147			-			na
Add: Currency impact				6,320			-			na					9,564			-			na
Less: Federal & state R&D tax credits and related expenses				-			(15,084	)		nm					-			(15,084	)		nm
Less: Tax impact of adjustments				(4,671	)		(8,473	)		nm					(5,686	)		(8,473	)		nm
Adjusted earnings excluding impact of severance, currency and tax credits			$	141,218			119,713			18.0		%		$	399,573			324,625			23.1		%
Basic EPS - Income attributable to TSYS common shareholders
As reported (GAAP)			$	0.46			0.66			(29.2	)	%		$	1.34			1.53			(12.3	)	%
Adjusted EPS			$	0.71			0.78			(8.7	)	%		$	2.11			1.89			11.5		%
Add/Less: Impact of severance, currency and tax credits				0.06			(0.13	)		nm					0.07			(0.13	)		nm
Adjusted EPS without impact of severance, currency and tax credits			$	0.77			0.65			18.1		%		$	2.18			1.76			23.6		%
Weighted average shares outstanding				183,830			183,954								183,601			184,320
* Costs associated with the TransFirst acquisition and integration that are included in selling, general and administrative expenses and nonoperating expenses.
** Certain of these merger and acquisition costs are nondeductible for income tax purposes. Income tax impact includes a discrete item as a result of the acquisition.
Adjusted EBITDA
(unaudited)
(in thousands)
				Three Months Ended September 30,											Nine Months Ended September 30,
										Percent											Percent
				2016			2015			Change					2016			2015			Change
Net income			$	87,441			122,051			(28.4	)	%		$	251,597			284,325			(11.5	)	%
Adjust for:
Less: Equity in income of equity investments				(6,366	)		(5,336	)		(19.3	)				(19,234	)		(15,309	)		(25.6	)
Add: Income taxes				44,247			37,825			17.0					127,966			119,204			7.4
Add: Nonoperating expense				30,005			8,564			nm					82,506			27,982			nm
Add: Depreciation and amortization				98,916			64,499			53.4					271,468			191,219			42.0
EBITDA			$	254,243			227,603			11.7		%		$	714,303			607,421			17.6		%
Adjust for:
Add: Share-based compensation				13,069			11,295			15.7					33,792			31,468			7.4
Add: TransFirst M&A expenses*				1,830			-			na					25,908			-			na
Adjusted EBITDA			$	269,142			238,898			12.7		%		$	774,003			638,889			21.1		%
* Costs associated with the TransFirst acquisition and integration that are included in selling, general and administrative expenses.
nm = not meaningful
na = not applicable

Reconciliation of GAAP to Non-GAAP
TSYS
Operating Margins Excluding the Impact of Severance
(unaudited)
(in thousands)
		Three Months Ended September 30,									Nine Months Ended September 30,
		As reported			Severance		Adjusted				As reported			Severance		Adjusted
		2016					2016				2016					2016
Operating income (a)	$	155,327			8,749		164,076			$	442,835			8,749		451,584
Share-based compensation		13,069			147		13,216				33,792			147		33,939
TransFirst M&A expenses		1,830			-		1,830				25,908			-		25,908
Acquisition intangible amortization		53,341			-		53,341				134,748			-		134,748
Adjusted segment operating income (b)	$	223,567			8,896		232,463			$	637,283			8,896		646,179
Adjusted segment operating income:
North America Services (c)	$	113,425			6,103		119,528			$	350,955			6,103		357,058
International Services (d)		15,524			1,882		17,406				41,564			1,882		43,446
Merchant Services (e)		90,784			81		90,865				219,056			81		219,137
NetSpend (f)		40,856			182		41,038				125,538			182		125,720
Corporate admin and other		(37,022	)		648		(36,374	)			(99,830	)		648		(99,182	)
Adjusted segment operating income (b)	$	223,567			8,896		232,463			$	637,283			8,896		646,179
Total revenues (g)	$	1,146,888					1,146,888			$	3,037,853					3,037,853
Less: reimbursable items, interchange and
assessments expenses		357,300					357,300				781,684					781,684
Net revenue (h)	$	789,588					789,588			$	2,256,169					2,256,169
Segment net revenue
North America Services (i)	$	300,754					300,754			$	901,563					901,563
International Services (j)		79,445					79,445				236,570					236,570
Merchant Services (k)		262,494					262,494				644,573					644,573
NetSpend (l)		155,349					155,349				502,961					502,961
Intersegment revenues		(8,454	)				(8,454	)			(29,498	)				(29,498	)
Net revenue (h)	$	789,588					789,588			$	2,256,169					2,256,169
Operating margin (GAAP) (a)/(g)		13.5	%				14.3	%			14.6	%				14.9	%
Adjusted operating margin on net revenue (b)/(h)		28.3	%				29.4	%			28.3	%				28.6	%
Adjusted segment operating margin on net revenue
North America Services(c)/(i)		37.7	%				39.7	%			38.9	%				39.6	%
International Services (d)/(j)		19.5	%				21.9	%			17.6	%				18.4	%
Merchant Services (e)/(k)		34.6	%				34.6	%			34.0	%				34.0	%
NetSpend (f)/(l)		26.3	%				26.4	%			25.0	%				25.0	%

Reconciliation of GAAP to Non-GAAP
Free Cash Flow
(unaudited)
(in thousands)
			Nine Months Ended
Free cash flow:			September 30,
			2016					2015
	Net cash provided by operating activities	$	550,960					460,554
	Capital expenditures		(107,335)					(136,183)
	Free cash flow	$	443,625					324,371
Guidance Summary
(unaudited)
(in thousands, except per share data)
Revenue:			2016							% Change
	Total revenues (GAAP)	$	4,150		to		$	4,170		49%		to		50%
	Less: reimbursable items, interchange and
	assessments expenses		1,120		to			1,125
	Net revenue (non-GAAP)	$	3,030		to		$	3,045		21%		to		22%
Earnings per share (EPS)
	Basic EPS (GAAP)	$	1.77		to		$	1.83		(10%)		to		(7%)
	Acquisition intangible amortization, share-based
	compensation and TransFirst M&A expenses, less
	the tax impact of adjustments		1.01		to			1.02
	Adjusted EPS attributable to TSYS common	$	2.78		to		$	2.85		13%		to		16%
	shareholders from continuing operations* (non-GAAP)
	* Average basic weighted shares				183.7

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