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TRANSCRIPT
WELCOME
CONSUMERS
solutions for
ISSUERS MERCHANTS
©2018 Total System Services, Inc.® Proprietary. All rights reserved worldwide.
Forward-Looking Statements
This presentation and comments made by management contain forward-looking statements
including, among others, statements regarding the expected future operating results of TSYS
and the expected growth rate of TSYS’ core markets. These statements are based on
management’s current expectations and assumptions and are subject to risks, uncertainties
and changes in circumstances. Forward-looking statements include all statements that are
not historical facts and can be identified by the use of forward-looking terminology as the
words “believe,” “expect,” “anticipate,” “intend,” “plan,” “potential,” “estimate” or similar
expressions. Actual results may differ materially from those set forth in the forward-looking
statements due to a variety of factors. More information about these risks, uncertainties and
factors may be found in TSYS’ filings with the Securities and Exchange Commission, including
its 2017 Annual Report on Form 10-K. TSYS disclaims any obligation to update any forward-
looking statement as a result of new information, future developments or otherwise except as
required by law.
2
Use of Non-GAAP Financial Measures
This slide presentation and comments made by management contain certain non-GAAP
financial measures determined by methods other than in accordance with generally
accepted accounting principles. Such non-GAAP financial measures include the following:
net revenue, adjusted EBITDA, adjusted diluted earnings per share and free cash flow. The
most comparable GAAP measures to these measures include the following: revenues, net
income, diluted earnings per share and cash flows from operating activities, respectively.
Management uses these non-GAAP financial measures to assess the performance of TSYS’
core business. TSYS believes that these non-GAAP financial measures provide meaningful
additional information about TSYS to assist investors in evaluating TSYS’ operating results. These
non-GAAP financial measures should not be considered as a substitute for operating results
determined in accordance with GAAP and may not be comparable to other similarly titled
measures of other companies. The computations of the non-GAAP financial measures used in
this slide presentation are set forth in the Appendix to this slide presentation.
3
Agenda• CEO Opening Remarks
• Issuer Solutions
• Consumer Solutions
• Merchant Solutions
• Financial Summary
4
(1) Non-GAAP financial measure; see appendix.Note: rankings based on net revenue, unless otherwise indicated; financials as of 12/31/17.6
A Market Leader in 3 Great Fintech Businesses…
28 billionTransactions
$20 billion Enterprise Value
$1.2 billion Adj. EBITDA(1)
$3.4 billion Net Revenue(1)
#1 U.S., Canada, UK,Ireland & China
U.S. Program Manager#2Gross Dollar Volume#1
SMB#5Integrated Payments#3
ISSUERSOLUTIONS
MERCHANTSOLUTIONS
Western Europe#2
CONSUMERSOLUTIONS
7
…in Large & Growing Areas in Payments
Core Markets(1)
Market Size(2)
Long-Term Market Growth(2)
~$7B
~3%
~$4B ~$20B
~5%~15%+ for Integrated
ISSUERSOLUTIONS
MERCHANTSOLUTIONS
Source: McKinsey, Accenture, Deutsche Bank, and TSYS analysis.(1) Core markets: Issuer is TSYS’ traditional offerings for issuers in U.S., Canada, and Western Europe (including UK/Ireland); Consumer Solutions is U.S. GPR and Payroll Prepaid Cards; Merchant is U.S. Merchant Acquiring. (2) Market size refers to estimated revenue pool as of 2017. Growth is projected 2017-2021 CAGR.
~8%
CONSUMERSOLUTIONS
A Highly Attractive Business Model…
8
Partner-Centric
Recurring
Revenue
Positioned to Accelerate Growth
Operating Leverage
Strong
Cash Flows
Differentiated
Adj. Diluted EPS(1)
2013 2014 2015 2016 2017 2018G
9
…with a Track Record of Strong Financial Performance
Net Revenue(1)
2013 2014 2015 2016 2017 2018G
Free Cash Flow(1)
2013 2014 2015 2016 2017 2018G
(1) Non-GAAP financial measure; see appendix; 2018 figures based on mid-point of revised guidance.
CONSUMER SOLUTIONSISSUER SOLUTIONS MERCHANT SOLUTIONS
11
Growing Our Businesses at Market-Leading Rates…
Source: Company Filings, McKinsey, Accenture, TSYS Analysis. (1) Non-GAAP financial measure; constant currency; see appendix. Pro forma as though TransFirst and Cayan acquisitions had closed January 1, 2016.(2) Non-GAAP financial measure; constant currency; pro forma as though acquisitions completed during 2016 and 2017 had closed on January 1, 2016. Issuer Solutions Peer: FDC’s GFS Segment for North America and EMEA; Consumer Solutions Peer: Green Dot;
Merchant Solutions Peers: GPN North America and WPAY’s U.S. Merchant business (as though VNTV/WPAY merged Jan 1, 2016).(3) Markets: Issuer Solutions is TSYS’ traditional offerings for issuers in U.S., Canada, and Western Europe (including UK/Ireland); Consumer Solutions is U.S. GPR and Payroll Prepaid Cards; Merchant Solutions is U.S. Merchant Acquiring.
2016-17 Organic Net Revenue Growth
ISSUERSOLUTIONS
MERCHANTSOLUTIONS
6%
~2%
~3%
13%
~11%
~8%
9%
~9%
~5%
TSYS(1)
Leading Peers(2)
Market(3)
CONSUMERSOLUTIONS
12
…and Delivering Outstanding Shareholder Returns
TSR equals the change in stock price plus dividends for the period
2013-2017
278.9%
102.3%
TSYS S&P 500
5-YEAR TSR
2015-2017
136.6%
36.5%
TSYS S&P 500
3-YEAR TSR
2017TSYS S&P 500
1-YEAR TSR
62.2%
21.6%
14
Strategic Pillars for Accelerating Growth
Capitalizing on Industry Growth
Leveraging Existing Footprint to Grow
Wallet Share
Growing Distribution Network to Increase
Market Share
Investing to Expand Addressable Market
STRATEGIC POSITIONING
DEEPENING RELATIONSHIPS
EXTENDING OUR REACH
BROADENING OUR OFFERINGS
15
Strategic Enablers
Focus, Rigor &
Commitment
Focusing on Partner-CentricBusiness Development
Enhancing the Customer Experience
Accelerating Product Investment
Deploying Leading Technology
16
Smart Capital Allocation & Deployment
Investing in Growth
Returning Capital to Shareholders
Leveraging Strong Balance Sheet
Key TakeawaysMerchant Solutions | KEY TAKEAWAYS
17
Focused on Shareholder Value; Positioned for Long-Term Growth
• Market leader in 3 great businesses
• Long-term upside
• Focused on the right things; a sound strategy to accelerate growth
• We will win by:
Being the partner of choice
Being easy to connect to and do business with
Broadening offerings to address more of our customers’ needs
19
An Industry Leader Positioned to Build on Our Strengths
Best Security/Anti-Fraud
Development(2)
Thomson Reuters Top 100 Global Tech Company
#1 U.S., Canada, UK& Ireland #2 Western
Europe
(1)Via CUP Data joint venture
(2)TSYS Foresight Score; The Card & Payments Awards 2018
(3)Technology Association of Georgia
Note: rankings based on net revenue, unless otherwise indicated; financials as of 12/31/17
572 millionTraditional Accounts on File
22 billionCardholder Transactions
2018 Top 10 Most Innovative Companies(3)
China(1)#1
40% U.S. Top 10 Consumer Card Portfolios
70% U.S. Top 10 Commercial Card Portfolios
60% UK Top 10 Issuing Banks
80% IRELAND Top 5 Issuing Banks
70% CANADA Top 10 Issuing Banks
20
We Serve the World’s Leading Financial Institutions…
80% U.S. Top 10 Issuing Banks
Source: Nilson Report, Global Data, TSYS Analysis
22
Broad Solutions for Issuers
• Transaction Services
• Messaging
• Software Licensing
PROCESSING
SOLUTIONS
• Card Production
• Managed Services
• Document Production
PRODUCTION &
ACCOUNT SERVICING
• Fraud & Risk Management
• Digital Engagement
& Loyalty
• Data & Analytics
PRODUCTS
~7%
~6%
~3%
Corporate (T&E and P-Card)
Small Business
Industry
Source: McKinsey, S&P Global Market Intelligence and TSYS Analysis(1) $7 billion in estimated annual spending as of 2017 (market revenue pool) by credit card issuers in the U.S., Canada, and Western Europe (including UK and Ireland) on processing and other functions outsourceable to TSYS based on offerings
traditionally offered by TSYS and its major competitors.(2) Growth rates are projected CAGR for the market revenue pool from 2017 through 2021.
LARGE CORE MARKET OPPORTUNITY(1)
~$7B
WITH FASTER GROWING SWIM LANES(2)
23
Attractive, Growing Market
~$15B+
CORE MARKET TODAY(1)
Extend our Products to Address More of an Issuer’s P&L
Potentially Doubling Addressable Market
NEW MARKET OPPORTUNITY(2)
~$8B+~$7B
• Enhanced fraud & risk management
• Digital experiences
• Cardholder acquisition & retention
• Commercial payments/ePayables
24
Expanded Market Opportunity
Source: Source: McKinsey, S&P Global Market Intelligence and TSYS Analysis(1) $7 billion in estimated annual spending as of 2017 (market revenue pool) by credit card issuers in the U.S., Canada, and Western Europe (including UK and Ireland) on processing and other functions outsourceable to TSYS based on offerings
traditionally offered by TSYS and its major competitors(2) $8 billion is estimated increase in addressable market revenue pool by expanding beyond TSYS’ traditional offerings into the areas referenced on this page.
Path to Continued Industry Leadership
Drive Business Development
Extend Our Product Suite
Be Experts in Our Clients’ Business
Invest in People, Mobilize the Best Talent
Expand Our Technology Edge
Partner of Choice & Trusted Advisor
#1
#2
#3
#4
#5
26
Our Success Always Starts with People
27
OUR STRATEGY
Invest in People, Mobilize the Best Talent
Grow Talent
Align for Success
Sustain Culture
To be a Valued Partner at all Levels of Client Leadership
28
OUR STRATEGY
Be Experts in Our Clients’ Business
Building Centers of Excellence Around Client Domain Practices
Fraud & Risk Management
Analytics/Business Intelligence
Digital Experiences
Commercial Payments
29
OUR STRATEGY
Expand Our Technology Edge
Cloud-Enabled Platforms
Open APIs/API-first Development
Integrated Data & Analytics
Global Sales Organization
31
OUR STRATEGY
Drive Business Development
Consultative Selling
Sharpened Go-to-Market
Strategies
Cross-Sell Incentive Programs
We are Winning in the Market
Key TakeawaysMerchant Solutions | KEY TAKEAWAYS
Proven, trusted leader
Positioned to grow
Extending our products
32
Winning in the market
Experts in our clients’ business
~8%
~7%
~6%
GPR
Paycard
Attractive & Growing Market
LARGE PREPAID MARKET OPPORTUNITY(1)WITH FASTER GROWING SWIM LANES(2)
Product Expansion/Diversification ... DDA, Affinity & Small Business
~$4B
35
Source: McKinsey, Accenture and TSYS Analysis(1) $4 billion is estimated revenue pool as of 2017 for U.S. GPR and Payroll Prepaid Cards.(2) Growth rates are projected CAGR for the overall U.S. Prepaid market revenue pool from 2017 through 2021.
Other Prepaid
36
Market Dynamics Create Opportunities
Platform Scale & Flexibility Increasingly Important to Success
Shift to electronic payments
Adoption of new solutions
Awareness of prepaid value
propositions
Regulatory & network
compliance
Fraud prevention &
security
Note: Prepaid ranking based on net revenue; Debit ranking based on purchase volume37
An Industry Leader
4.9 millionActive Cards
>130,000Reload Locations
>120,000 Employers & Distributing Locations
2.4 million Direct Deposit Cards
#2 U.S. Prepaid Program Manager U.S. Debit IssuerTop-20
$32 billion Gross Dollar Volume
Extensive Distribution Capabilities
PARTNER
• Dominant position in the FSC market
• Consultative in-store sales & service approach
COMMERCIAL
• Expanded product mix generating efficiencies
• Direct sales & multiple referral relationships
RETAIL
• Distribution across multiple categories
• Loyalty integration drives retention & LTV
DIRECT
• Industry-leading marketing capabilities
• Deep expertise in data analytics & modeling
38
Product Evolution & Diversification
39
Future
New Opportunities
2017
DDA/1099/ Loyalty
2013
Incentives/ Disbursements
2008
Paycard
1999
General Purpose Reloadable
Integrated Capabilities Drive Differentiation
40
Acquisition & Activation
Network
Settlement
ProductProcessing
Distributor Relationships
Marketing & Promotion
Risk Management
Regulatory Compliance
Customer Service & Support
Three Key Pillars of Our Strategy
Product Diversification
& Execution
Customer
Acquisition Through Multiple
Channels &
Brands
Exceptional Partner &
Consumer
Experience
42
PRODUCT
• Consumer prepaid
• Consumer DDA
• Micro-business prepaid
ACQUISITION
• Industry leader
• Affinity relationships
• Other white-label programs
EXPERIENCE
• End-to-end agency
• Extensive research & testing
OUR STRATEGY
Direct Channel ... Digital Marketing Expertise
43
PRODUCT
• Consumer prepaid
• Consumer DDA
• Disbursements
• Micro-business prepaid
ACQUISITION
• Financial service centers
• Tax preparers
• In-store & digital
EXPERIENCE
• Custom solutions
• Dedicated partner support
• Capabilities in partner locations
OUR STRATEGY
Partner Channel ... Extensive FSC Distribution Network
44
PRODUCT
• Consumer prepaid
• Consumer DDA
• Loyalty propositions
ACQUISITION
• Multiple retail categories
• In-store & digital
EXPERIENCE
• Driving foot traffic to partners
• Product engagement & retention
OUR STRATEGY
Retail Channel ... Loyalty Integration Drives Retention
45
PRODUCT
• Prepaid, DDA & 1099 accounts
• Disbursements
• Incentives
• Expense management
ACQUISITION
• Direct sales
• Bank & non-bank referrals
• Joint propositions from TSYS
EXPERIENCE
• Enhancing employer efficiency
• Employee & product retention
OUR STRATEGY
Commercial Channel ... Enabling Electronic Payroll
46
Key Takeaways
Well positioned in an attractive &
growing market
Prepared for changing regulatory
& network environment
Differentiated platform & product set
drive above-market growth
Extensive distribution capabilities across
diverse channels
47
51
Attractive Market with Opportunity for Growth
~15%+
~10%
~5%
Integrated Payments
eCommerce
Industry
$20B
Signifant Expansion Opportunity Beyond Our Core Market
Through Business Software & Emerging Verticals
Merchant Solutions | OUR MARKET
LARGE CORE MARKET OPPORTUNITY(1)
WITH FASTER GROWING SWIM LANES(2)
Source: McKinsey, Accenture , Deutsche Bank, and TSYS Analysis(1) $20 billion is estimated revenue pool as of 2017 for U.S. Merchant Acquiring.(2) Growth rates are projected CAGR for the revenue pool from 2017 through 2021.
THEN
‘Dumb’ Terminals
Single Channel
One Size Fits All
Simple Data
52
Rapidly Evolving Payments Landscape
Traditional Competitors – Banks & ISOs
Merchant Solutions | OUR MARKET
NOW
Smart Point of Sale
Omnichannel
Industry Specific
Complex Data
Diverse Competitors & New Entrants Fueled by VC
Payments has Gone from Simple to Complex –Winners will Make the Complex Simple
CHANGING CONSUMER & MERCHANT EXPECTATIONS
53
Strategy Evolution
Expand distribution & capabilities
Become a top 10 acquirer
Partner-led distribution & integrated capabilities
Play in high growth areas
Software-led verticals
Merchant Solutions | OUR BUSINESS
2012
2016
2017
2010
$0.4B
$0.9B
$1.1B
$0.3BNET REVENUE
$4B+ Deployed in Capital
Note: Cayan acquisition announced December 2017, closed January 2018
54
We are a Leading Merchant AcquirerMerchant Solutions | OUR BUSINESS
Leader in Integrated, Healthcare, PayFac &
Emerging Verticals
Best-in-Class Customer Service
with 60+ NPS
The Industry’s Partner of Choice
#5 SMB U.S. Acquirer
787,000Serving Approximately
Merchant Outlets
1,400+Scaled Distribution Through
Partner Network
#3 Integrated Payments
Note: rankings based on net revenue.
Our Strategy is Straightforward
56
Excel at Platform Integration
Leverage Scaled Partner Channels
Lead with Integrated Solutions
Win in Market Consolidation
57
OUR STRATEGY
Excel at Platform Integration
Ring-Fenced Integration Team
• Rapid core integration
• Upgrade boarding & servicing platform
• Consolidate to differentiated gateways
• Single authorization platform
• Single settlement platform
• Consolidated organization
• Exceeded synergy targets
OUR STRATEGY
Lead with Integrated Solutions
58
Established Leadership Positions
Software-Led Expansion into New Verticals
• 500+ ISV partnerships
• Healthcare
• Specialty retail
• Direct selling
• Charitable giving
• Health & wellness
• Field services
• B2B
Best-in-Class Platforms with Differentiated CapabilitiesCreate Unmatched Distribution & Reach
OUR STRATEGY
Lead with Integrated Solutions
Cayan’s Genius Solution – A Unified Commerce Platform
59
Marketing & loyalty solutions
OmnichannelCapabilities
Cloud-based tech stack
Split payment
Seamless onboarding
Closed-loop
OUR STRATEGY
Lead with Integrated Solutions
Payment Facilitator Model Creates Unique Marketplace Ecosystems
60
The Partner of Choice Across all Channels
61
OUR STRATEGY
Leverage Scaled Partner Channels
Leading Agent Channel
2,500+ Active Agents
Scaled Financial Institutions Channel
Cross-selling with TSYS Issuer Solutions
An Emerging B2B Channel
Leveraging TSYS Enterprise
Assets
Leader in Retail & Wholesale ISO
Partnerships
50+ ISOs Won in 2017 &
400+ total ISOs
OUR STRATEGY
Leverage Scaled Partner Channels
Launching a SMART POS Solution, which delivers broad marketplace
offerings through a simplified customer experience
CRAWLLaunch Smart
POS Offer
WALKDevelop Full
Marketplace
RUNPackage Products
& Higher Cross Sell
62
CRAWLLaunch Pilot Across
Central Payment
WALKConsolidate Tool Across
All Agent Channels
RUNDevelop Next Gen Lead
Generation & Portfolio
Management Capabilities
Unique Capabilities Create an Agent Channel Designed for
the Gig Economy
63
OUR STRATEGY
Leverage Scaled Partner Channels
Deploy Capital to Deliver New Sources of Growth & Differentiation
64
OUR STRATEGY
Win in Market Consolidation
Strong Integration Opportunity
Software &Vertical Capabilities
Increase Scale in U.S. SMB
M&A PRIORITIES
Key TakeawaysMerchant Solutions | KEY TAKEAWAYS
65
Well-positioned in rapidly evolving landscape
Leading U.S. merchant acquirer
We have big ambitions
Deploying a winning strategy
Win in market consolidation
Adj. Diluted EPS(1)
2013 2014 2015 2016 2017 2018G
68
Strong Financial Performance
Net Revenue(1)
2013 2014 2015 2016 2017 2018G
Free Cash Flow(1)
2013 2014 2015 2016 2017 2018G
CONSUMER SOLUTIONSISSUER SOLUTIONS MERCHANT SOLUTIONS
(1) Non-GAAP financial measure; see appendix; 2018 figures based on mid-point of revised guidance.
69
Affirming 2018 Revised Guidance*
(1) Non-GAAP financial measure; see appendix
* See guidance assumptions in appendix
$3,900 to $4,000 million
TOTAL REVENUES (GAAP)
$3,700 to $3,800 million
DILUTED EARNINGS PER SHARE (GAAP) ADJUSTED DILUTED EPS(1)
NET REVENUE(1)
$3.00 to $3.10 $4.25 to $4.35
RANGE PERCENT CHANGE
(21%) to (19%)RANGE PERCENT CHANGE
9% to 12%
RANGE PERCENT CHANGE
26% to 29%RANGE PERCENT CHANGE
(5%) to (2%)
70
Strategic Pillars for Accelerating Growth
Capitalizing on Industry Growth
Investing to Expand Addressable Market
STRATEGIC POSITIONING
DEEPENING RELATIONSHIPS
EXTENDING OUR REACH
BROADENING OUR OFFERINGS
GROWING SHARE
ISSUERSOLUTIONS
71
Longer-Term Financial Outlook
INDUSTRY
~3%+CAGR
TSYS
5-7%CAGR
UPSIDE
GROW SHARE
• Cross-selling
• New client wins
• Risk & fraud management
EXPAND ADDRESSABLE MARKET
• Digital experiences
• Analytics & business intelligence
• Cardholder acquisition & retention
• Commercial payments/ePayables
72
Longer-Term Financial Outlook
INDUSTRY
~8%CAGR
TSYS
8-10%CAGR
UPSIDE
GROW SHARE
• Grow existing distribution channels
• DDA as a complement to GPR
• Partner loyalty integration
EXPAND ADDRESSABLE MARKET
• Incremental DDA customers
• Affinity partnerships
• Digital solutions
CONSUMERSOLUTIONS
INDUSTRY
~5%+CAGR
TSYS
7-9%CAGR
UPSIDE
73
Longer-Term Financial Outlook
GROW SHARE
• Lead with integrated solutions in high growth verticals
• Leverage strengths in distribution
• Product capabilities & single platform drive differentiated offerings
EXPAND ADDRESSABLE MARKET
• Expand beyond payments
• Expand capabilities beyond traditional card rails
MERCHANTSOLUTIONS
74
Longer-Term Financial Outlook
Strategy Drives Long-Term Organic Growth
Organic Net Revenue Growth(1)
6-8%
Organic Adj. Diluted EPS Growth(1)
10-14%
MarginExpansion
Share Repurchases
Issuer Solutions 5-7%
Merchant Solutions7-9%
Consumer Solutions 8-10%
(1) Non-GAAP financial measure; constant currency; see appendix
75
Value through Capital Allocation & Deployment
INTERNAL INVESTMENTS ACQUISITIONS
• Product
• Technology
• Tools & capabilities
• Leadership in U.S. merchant SMB
• Product focus in all3 businesses
RETURN OF CAPITAL TO SHAREHOLDERS
• Target to return 75% of available FCF via share repurchases & dividends
LEVERAGE STRONG BALANCE SHEET
76
$7 Billion of Capital Deployed for Growth
2013-2017 including Cayan acquisition in January 2018
SHARE REPURCHASES
& DIVIDENDS
$1.2 billion
ACQUISITIONS
$4.9 billion
CAPITAL
EXPENDITURES
$1.0 billion
77
Investment Value Drivers
CONSISTENCY, STABILITY & STRENGTH
• Long-term contracts
• Recurring revenue
• Strong cash flow conversion
• Investment-grade balance sheet
LONG-TERM GROWTH
• Strong organic growth of top- & bottom-line
• Expanding margins
• Accretive, growth-enhancing M&A
• Smart capital allocation & deployment
• Attractive valuationSHAREHOLDER
FRIENDLY
Twelve Months Ended
12/31/17
Net Income (GAAP) $592,216
ADJUST FOR:
Deduct: Equity in income of equity investments (40,532)
Add: Income taxes 65,878
Add: Interest expense, net 116,028
Add: Depreciation and amortization 405,906
Deduct: Loss on foreign currency translations 907
Deduct: Other nonoperating (income) / expenses (453)
Add: Share-based compensation 42,409
Add: TransFirst and Cayan M&A and integration expenses(1)
13,367
Add: Litigation, claims, judgments or settlements 1,947
Adjusted EBITDA (non-GAAP) $1,197,673
Adjusted EBITDA
Appendix: Non-GAAP Reconciliation
(in thousands)
(1) Costs associated with TransFirst and Cayan acquisition and integration are included in selling, general and administrative expenses80
Appendix: Non-GAAP Reconciliation
Twelve Months Ended
12/31/17 12/31/16 12/31/15 12/31/14 12/31/13
Total revenues $4,927,965 $4,170,077 $2,779,541 $2,446,877 $2,064,305
Less: reimbursable items, interchange and payment network fees
1,527,633 1,128,201 280,192 253,899 240,597
Net revenue $3,400,332 $3,041,876 $2,499,349 $2,192,978 $1,823,708
(in thousands)
Net Revenue
81
Twelve Months Ended
12/31/17 12/31/16 12/31/15 12/31/14 12/31/13
INCOME ATTRIBUTABLE TO TSYS COMMON SHAREHOLDERS FROM CONTINUING OPERATIONS :
As reported (GAAP) $586,185 $319,638 $362,633 $275,216 $246,893
ADJUSTED FOR AMOUNTS ATTRIBUTABLE TO TSYS COMMON SHAREHOLDERS:
Add: Acquisition intangible amortization 207,172 188,887 91,418 95,743 63,821
Add: Share-based compensation 42,399 43,691 41,535 30,790 28,933
Add: TransFirst, Cayan & Netspend M&A and integration expenses(1)
13,306 37,957 -- 3,217 19,594
Add: Litigation, claims, judgments and settlements 1,947 19,913 -- -- --
Less: Tax impact of adjustments(2)
(90,955) (93,667) (43,474) (40,564) (33,524)
Less: Impact of Tax Cuts and Jobs Act(3)
(135,871) -- -- -- --
Adjusted earnings (non-GAAP) $624,183 $516,419 $452,112 $364,402 $325,717
Weighted average diluted shares outstanding and participating securities 185,430 184,448 185,239 187,681 190,039
Diluted EPS - income from continuing operations available to TSYS common shareholders
$3.16 $1.73 $1.96 $1.47 $1.30
Adjusted diluted EPS- income from continuing operations available to TSYS common shareholders
$3.37 $2.80 $2.44 $1.94 $1.71
Appendix: Non-GAAP Reconciliation – Adjusted Diluted EPS
(in thousands, except per share data)
(1) Costs associated with Netspend, TransFirst and Cayan acquisition and integration are included in selling, general and administrative expenses and nonoperating expenses
(2) 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
(3) On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). Based on its preliminary analysis of the Tax Act, including the reduction in the federal corporate income tax
rate, TSYS estimates that it will receive an additional, non-recurring income tax benefit of approximately $135.9 million due to the reduction of certain deferred tax liabilities and the repatriation of foreign earnings
as a result of the Tax Act82
Appendix: Non-GAAP Reconciliation
83
Twelve Months Ended
12/31/17 12/31/16 12/31/15 12/31/14 12/31/13
Cash flows from operating activities $856,492 $718,029 $602,034 $560,201 $452,398
Less:
Capital expenditures (196,026) (142,573) (203,315) (235,923) (193,798)
Free cash flow $660,466 $575,456 $398,719 $324,278 $258,600
(in thousands)
Free Cash Flow
83
Appendix: 2018 Revised Guidance*
(1) The estimated impact of the adoption of ASC 606 in TSYS’ 2018 Revised Guidance is as follows: Total revenues ($1,640) to ($1,615), Net revenue ($69) to ($62), Diluted EPS and Adjusted diluted EPS ($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.
*See guidance assumptions in this appendix.
84
Range Percent ChangeRange
(1)
Total revenues (GAAP) $3,900 to $4,000 (21%) to (19%)
Less: reimbursable items, interchange and payment
network fees 200 to 200
Net revenue (non-GAAP) $3,700 to $3,800 9% to 12%
Diluted EPS (GAAP) $3.00 to $3.10 (5%) to (2%)
Acquisition intangible amortization, share-based
compensation, litigation, claims, judgments or
settlements and the TransFirst and Cayan M&A
expenses, less the tax impact of adjustments $1.25 to $1.25
Adjusted diluted EPS attributable to TSYS common
shareholders (non-GAAP) $4.25 to $4.35 26% to 29%
Weighted average diluted shares outstanding 184
(in millions, except per share data)
Appendix: 2018 Revised Guidance Assumptions
The guidance assumes:
• There will be no significant movements in the London Interbank Offered Rate;
• There will be no additional significant movement in foreign currency exchange
rates related to TSYS’ business;
• TSYS will not incur significant expenses associated with the conversion of new
large clients, additional acquisitions, or any significant impairment of goodwill
or other intangibles;
• There will be no deconversions of large clients during the year other than as
previously disclosed;
• There are no significant changes to our expectations regarding the impact of
the Tax Cuts and Jobs Act, the implementation of ASC 606 or the acquisition of
Cayan; and
• The economy will not worsen.
• Additionally, the impact of future share repurchases is not included.
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Appendix
• The Company has not provided a quantitative reconciliation for the
longer-term growth targets contained in this slide presentation to the
most directly comparable GAAP measures as a reconciliation cannot
be provided without unreasonable efforts because management
cannot reliably predict the necessary components of such measures.
86