Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TOTAL SYSTEM SERVICES INC | d663052d8k.htm |
| EX-99.1 - EX-99.1 - TOTAL SYSTEM SERVICES INC | d663052dex991.htm |
 2013
Fourth Quarter and YTD Results January 28, 2014
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Exhibit 99.2 |
 Forward-Looking Statements
2
This presentation and comments made by management contain forward-
looking statements including, among others, statements regarding
the
expected future operating results of TSYS. 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 such 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
2012 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K. TSYS does not assume any obligation to
update any forward-looking statements as a result of new information,
future developments or otherwise.
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 Use of
Non-GAAP Financial Measures 3
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This slide presentation contains 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: revenues before reimbursable items; operating margin excluding
reimbursable items; revenues measured on a constant currency basis; free
cash flow; EBITDA, adjusted EBITDA , adjusted cash earnings per share,
adjusted segment operating income and adjusted segment operating
margin.
The most comparable GAAP measures to these measures are revenues;
operating margin; revenues; cash flows from operating activities; net income;
net income; earnings per share, operating income and operating margin,
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. |
 Phil
Tomlinson Chairman and Chief Executive Officer
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 Troy
Woods President & Chief Operating Officer
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 Improving Revenue Growth
Annual Total Revenues Exceeded $1.0B
Operating Income Up 8.1%
Margin Expansion: Up 126 BPS Over 4Q12
4Q 2013 North America Segment Highlights
6
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($ in millions)
(*) Revenues Before Reimbursable Items
($ in millions)
4.9%
3.4%
(1.3%)
1.9%
0.8%
4.4%
4.5%
6.8%
Adjusted Segment Operating Income
Operating Margin*
3%
(1)
Includes Credit, Debit,
Retail, Prepaid & Loyalty
(2)
Includes Healthcare |
 Twelfth
Straight Quarter of Account On File YOY Growth Fifteenth Straight Quarter of
Transaction YOY Growth Third Largest Quarter of Transaction Volume
Same Client Transactions Up 10.6%: Seventeenth Straight Quarter of YOY Growth
4Q 2013 North America Segment Highlights
7
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(*)
Growth
Excluding
Prepaid,
Government
Services
and
Single
Use
Accounts
*
(in millions)
(in millions)
16.9%
7.2%
7.2%
3.4%
5.5%
5.2%
6.3%
16.2%
16.5%
18.0%
20.9%
20.9%
16.9%
11.2%
11.6%
13.4%
15.0%
12.1%
9.5%
12.7%
7.8%
11.5%
17.6%
13.4% |
 Revenue
$108.3M* – Up 5.8%
–
Up 9.6% on Constant Currency
Currency Headwinds Slowed: Q4 $4.0M* YTD $20.6M*
Continued Focus on Margin Improvement
Plans in Place to Accelerate Growth
Expansion of Debit Opportunities
4Q 2013 International Segment Highlights
8
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($ in millions)
Reported
Constant
Currency
(*) Revenues Before Reimbursable Items
($ in millions)
Adjusted Segment Operating Income
Operating Margin*
10.4%
5.6%
2.1%
(0.4%)
(4.0%)
(5.9%)
(2.8%)
11.6%
8.4%
4.7%
(0.3%)
0.1%
0.4%
3.7%
5.8%
9.6%
74%
16%
4%
6% |
 4Q
2013 International Segment Highlights 9
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Strong AOF Growth, Despite Some Client Purging in Q4 2013
Irish Debit AOF Grew By 109.3%
Double-digit Transaction Growth of 17.2%
Same Client Transaction Growth 8.0%
Debit Transactions More Than Doubled
(in millions)
(in millions)
14.7%
11.1%
4.9%
3.5%
3.2%
9.5%
12.0%
8.5%
17.5%
18.1%
15.1%
18.6%
13.3%
22.4%
26.6%
17.2% |
 4Q
2013 Merchant Segment Highlights ©2014
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10
(*)
Revenues
Before
Reimbursable
Items
($ in millions)
13.7%
5.0%
15.6%
5.5%
11.1%
15.6%
5.4%
4.3%
Adjusted Segment Operating Income
Operating Margin*
($ in millions)
43%
57%
Acquisitions Performing Well
Sales Productivity Continues to Improve
Expect Improved Operating Margins in 2H 2014 |
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4Q 2013 Merchant Segment Highlights
(*) Excludes Managed Accounts
Segment Revenue by LOB
($ in billions)
30.0%
12.3%
23.0%
32.2%
35.3%
40.6%
22.0%
11.1%
Direct Revenues Up 21.8%
Indirect Revenues Down 12.2%
Significant Milestone Achieved on Journey to Transform Merchant Segment
POS Transactions Increased 3.8%, Excluding Deconverted Accounts
Double-digit Small Business Sales Volume Growth
(12%)
45%
55%
26%
22%
(11%)
(12%)
(12%)
($ in millions) |
 Adjusted Segment Operating Income
Operating Margin*
Segment Revenue
YOY Growth %
4Q 2013 NetSpend Segment Highlights
12
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($ in millions)
Revenue $104.1M –
up 16.1%
Significant Year over Year Margin Expansion
Added 4k Retail Locations
Added 80+ New PayCard Clients
($ in millions)
(*)
Operating
Income
Excluding
Amortization
of
Acquisition
Intangibles,
M&A
Costs
and
Non-recurring
Items,
and
beginning
in
3Q13
also
excludes
corporate
administrative
expenses
3Q13
and
4Q13
Adjusted
Operating
Income
represents
NetSpend
Segment
Op.Inc |
 4Q
2013 NetSpend Segment Highlights 13
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Direct Deposit Active Cards
YOY Growth %
Direct Deposit Active Cards up 22.1%
Gross Dollar Volume (GDV) up 21.5%
(in thousands)
($ in millions)
22.9%
24.2%
24.8%
25.1%
66.7%
42.3%
23.8%
22.1%
17.1%
17.9%
18.2%
42.8%
30.1%
22.4%
18.4%
Gross Dollar Volume
YOY Growth % |
 Jim
Lipham Chief Financial Officer
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 Consolidated Selected Financial Highlights
15
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$600,840
$ 479,100
25.4%
Total Revenues
$2,132,353
$ 1,870,972
14.0%
542,996
418,569
29.7
Revenues Before Reimbursable Items
1,891,755
1,618,491
16.9
110,402
89,831
22.9
Operating Income
386,247
357,652
8.0
65,655
60,862
7.9
Net Income Attributable to TSYS
Common Shareholders
244,750
244,280
0.2
Basic Earnings Per Share (EPS)
Attributable to TSYS Common
Shareholders:
$0.35
$0.33
6.2
As Reported (GAAP)
$1.30
$1.30
0.0
$0.48
$0.37
26.9
Adjusted Cash EPS*
$1.72
$1.46
17.8
$184,234
$139,385
32.2
Adjusted EBITDA*
$634,165
$546,883
16.0
YTD
2013
YTD
2012
Percent
Change
(in thousands, except per share data)
4
th
Qtr
2013
4
th
Qtr
2012
Percent
Change
(*) Adjusted Cash EPS and Adjusted EBITDA definitions are contained in
Appendix |
 2013
YTD Revenue Change Revenues Before Reimbursable Items
16
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15%
20%
5%
0%
5.8%
Internal
Growth
New
Clients
3.5%
Acquisitions
Lost
Business
(5.3%)
Non-recurring
Items
(0.6%)
Price
Compression
(1.9%)
(7.8%)
Reported
16.9%
Currency
(1.3%)
16.7%
10% |
 External
Revenue
Composition
–
Revenues
before
Reimbursable Items
4
th
Qtr. 2013
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4
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17 |
 Revenues before
Reimbursable
Items
Adjusted
Operating Margin
Adjusted
Segment
Operating Income
North America
$85,205
$223,266
38.2%
International
19,463
108,332
18.0%
Merchant
35,526
110,375
32.2%
NetSpend
28,470
104,144
27.3%
Eliminations
--
(3,121)
Total Segments
$168,664
$542,996
31.1%
Amortization of acquisition intangibles
(24,751)
--
M&A expenses
(2,211)
--
Corporate administration
(31,300)
--
Consolidated
$110,402
$542,996
20.3%
Reconciliation of Segment Operating Margin to
Consolidated Operating Margin
(in thousands)
18
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Three Months Ended December 31, 2013 |
 Revenues before
Reimbursable
Items
Adjusted
Operating Margin
Adjusted
Segment
Operating Income
North America
$314,577
$860,645
36.6%
International
45,911
389,532
11.8%
Merchant
154,047
446,277
34.5%
NetSpend
59,717
207,851
28.7%
Eliminations
--
(12,550)
Total Segments
$574,252
$1,891,755
30.4%
Amortization of acquisition intangibles
(65,893)
--
M&A expenses
(14,220)
--
Corporate administration
(107,892)
--
Consolidated
$386,247
$1,891,755
20.4%
Reconciliation of Segment Operating Margin to
Consolidated Operating Margin
(in thousands)
19
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Twelve Months Ended December 31, 2013 |
 Consumer Credit
229.0
200.5
14.2
229.0
224.2
2.2
Retail
27.8
25.0
11.0
27.8
26.8
3.6
Total Consumer
256.8
225.5
13.9
256.8
251.0
2.3
Commercial
39.9
37.1
7.6
39.9
38.9
2.7
Other
18.9
12.8
47.6
18.9
16.9
11.6
Subtotal
315.6
275.4
14.6
315.6
306.7
2.9
Prepaid */
Stored Value
118.0
115.9
1.8
118.0
110.7
6.6
Government
Services
62.2
57.0
9.2
62.2
61.6
1.0
Commercial Card
Single Use
45.3
31.1
45.4
45.3
41.6
8.8
Total AOF
541.1
479.4
12.9
541.1
520.7
3.9
Consolidated Accounts on File Portfolio Summary
(in millions)
Dec
2013
Dec
2012
%
Change
Dec
2013
Sep
2013
%
Change
20
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(* -
Prepaid does not include NetSpend accounts) |
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Rollforward of Quarterly Cash Balance
$400
$800
$200
$0
$600
Beginning
Balance
$397
Operating
Activities
$145
Cap Ex
($75)
Debt Pmts
($84)
Dividends
($19)
Share
Repurchase
($98)
Other
$12
Ending Balance
$278
(in millions)
09/30/2013
12/31/2013
21 |
 Cash
Flow Strength: 2013 Consolidated Financial Highlights
22
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(in millions)
$634
$452
$259
$257
$278
$0
$75
$150
$225
$300
$375
$450
$525
$600
$675
Adjusted EBITDA
Cash flow from operations
Free cash flow
Net income
Ending cash |
 Debt
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23
7/1/2013*
12/31/2013
DEBT
$1,618
$1,493
EBITDA (ex. 1-times)
618
656
EBITDA Multiple
2.62x
2.27x
(in millions)
* June 30, 2013 plus $300M draw
Trailing Twelve Months
(TSYS + NetSpend) |
 Share
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($ in millions)
Capital Deployed
(in millions)
Number of Shares Repurchased
Current Plan –
Up to 28M with 12M Remaining
Expires April 2015 |
 2014
Guidance* Range
Range
Percent Change
Total Revenues
$2,491
to
$2,542
17%
to
19%
Revenues Before Reimbursable Items
$2,252
to
$2,297
19%
to
21%
Adjusted EBITDA
$744
to
$759
17%
to
20%
Adjusted Cash EPS
$1.90
to
$1.93
11%
to
13%
Average Basic Weighted Shares
188.4
(in millions, except per share data)
25
(*) See Appendix for guidance assumptions
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 Appendix
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 Appendix: Non-GAAP Items –
Adjusted EBITDA
and Adjusted Cash EPS
•
Adjusted EBITDA is net income excluding equity in income of equity investments,
nonoperating income/(expense), taxes, depreciation, amortization and
stock-based compensation expenses and other non-recurring items.
•
Adjusted cash EPS is adjusted cash earnings divided by weighted average shares
outstanding used for basic EPS calculations. Adjusted cash earnings is net
income excluding the after-tax impact of stock-based compensation expenses, amortization of
acquisition intangibles, and other non-recurring items.
•
Adjusted segment operating income is operating income at the segment level adjusted
for acquisition intangible amortization. •
Adjusted segment operating margin is adjusted segment operating income divided by
segment revenues before reimbursable items. •
The Company believes that these non-GAAP financial measures it presents are
useful to investors in evaluating the Company’s operating performance
for the following reasons: –
adjusted EBITDA and adjusted cash EPS are widely used by investors to measure a
company’s operating performance without regard to items, such as
interest expense, income tax expense, depreciation and amortization, merger and acquisition expenses and employee
stock-based compensation expense that can vary substantially from company to
company depending upon their respective financing structures and accounting
policies, the book values of their assets, their capital structures and the methods by which their assets were
acquired; and
–
securities
analysts
use
adjusted
EBITDA
and
adjusted
cash
EPS
as
supplemental
measures
to
evaluate
the
overall
operating
performance of companies.
•
By comparing the Company’s adjusted EBITDA and adjusted cash EPS in different
historical periods, investors can evaluate the Company’s operating
results without the additional variations caused by employee stock-based compensation expense, which may
not be comparable from period to period due to changes in the fair market value of
the Company’s common stock (which is influenced by external factors
like the volatility of public markets and the financial performance of the Company’s peers) and is not a
key measure of the Company’s operations.
•
The Company’s management uses the non-GAAP financial measures:
–
as measures of operating performance, because they exclude the impact of items not
directly resulting from the Company’s core operations;
–
for planning purposes, including the preparation of the Company’s annual
operating budget; –
to allocate resources to enhance the financial performance of the Company’s
business; –
to evaluate the effectiveness of the Company’s business strategies; and
–
in communications with the Company’s board of directors concerning the
Company’s financial performance. ©2014
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28 |
 Appendix: Non-GAAP Reconciliation –
Revenues Before Reimbursable Items
Three Months
Ended Twelve Months Ended
12/31/13
12/31/12 12/31/13
12/31/12
Total Revenues
$600,840
$479,100
$2,132,353
$1,870,972
Reimbursable Items
57,844
60,531
240,598
252,481
Revenues Before Reimbursable Items
$542,996
$418,569
$1,891,755
$1,618,491
(in thousands)
29
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 Appendix:
Non-GAAP
Reconciliation
–
Adjusted
Segment Operating Income and Operating Margin
Three Months
Ended Twelve
Months Ended
12/31/13
12/31/12
12/31/13 12/31/12
Operating income
$110,402
$89,831
$386,247
$357,652
Add: Acquisition intangible amort
24,751
7,340
65,893
26,264
Add: Corporate admin and other
33,511
25,495
122,112
91,287
Total segment adjusted operating income
$168,664
$122,666
$574,252
$475,203
By segment: North America services (a)
$85,205
$78,834
$314,577
$289,492
International services (b)
$19,463
$6,584
$45,911
$29,427
Merchant services (c)
$35,526
$37,248
$154,047
$156,284
NetSpend (d)
$28,470
$ --
$59,717
$ --
Total revenues
$600,840
$479,100
$2,132,353
$1,870,972
Reimbursable items
(57,844)
(60,531)
(240,598)
(252,481)
Total segment revenues before reimbursable items
$542,996
$418,569
$1,891,755
$1,618,491
Intersegment revenues
3,121
3,352
12,550
14,106
By segment: North America services (e)
$223,266
$213,639
$860,645
$826,750
International services (f)
$108,332
$102,427
$389,532
$396,149
Merchant services (g)
$110,375
$105,855
$446,277
$409,698
NetSpend (h)
$104,144
$ --
$207,851
$ --
Adjusted segment operating margin:
North America services (a) / (e)
38.16%
36.90%
36.55%
35.02%
International services (b) / (f)
17.97%
6.43%
11.79%
7.43%
Merchant services (c) / (g)
32.19%
35.19%
34.52%
38.15%
NetSpend (d) / (h)
27.34%
na
28.73%
na
(in thousands)
30
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 Twelve
Months Ended
12/31/13 12/31/12
Percentage
Change
Three
Months Ended
12/31/13 12/31/12
Percentage
Change
Appendix: Non-GAAP Reconciliation –
Constant Currency
(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.
(in thousands)
Consolidated:
Constant Currency (1)
$604,665
$479,100
26.2%
$2,152,961
$1,870,972
15.1%
Foreign Currency (2)
(3,825)
---
(20,608)
---
Total Revenues
$600,840
$479,100
25.4%
$2,132,353
$1,870,972
14.0%
International Services:
Constant Currency (1)
$117,806
$107,000
10.1%
$430,521
$413,467
4.1%
Foreign Currency (2)
(3,940)
---
(20,924)
---
Total Revenues
$113,866
$107,000
6.4%
$409,597
$413,467
(0.9%)
31
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 Twelve
Months Ended
12/31/13 12/31/12
Percentage
Change
Three
Months Ended
12/31/13 12/31/12
Percentage
Change
Appendix: Non-GAAP Reconciliation –
Constant Currency
(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.
(in thousands)
32
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Consolidated:
Constant Currency (1)
$546,849
$418,569
30.6%
$1,912,063
$1,618,491
18.1%
Foreign Currency (2)
(3,853)
---
(20,308)
---
Revenues before
reimbursable items
$542,996
$418,569
29.7%
$1,891,755
$1,618,491
16.9%
International Services:
Constant Currency (1)
$112,299
$102,427
9.6%
$410,156
$396,149
3.5%
Foreign Currency (2)
(3,967)
---
(20,624)
---
Revenues before
reimbursable items
$108,332
$102,427
5.8%
$389,532
$396,149
(1.7%) |
 Appendix: Non-GAAP Reconciliation –
EBITDA and Adjusted EBITDA
(in thousands)
33
©2014
Total
System
Services,
Inc.®
Proprietary.
All
rights
reserved
worldwide.
Three Months Ended
Twelve Months Ended
Dec
2013
Dec
2012
Dec
2013
Dec
2012
Net income :
As reported (GAAP) (a)
$69,393
$62,257
$256,597
$249,923
Adjusted for:
Deduct: Equity in Income of Equity
Investments
(3,691)
(3,188)
(13,047)
(10,171)
Add: Income Taxes
33,985
30,767
112,369
115,102
Add: Nonoperating expenses
10,715
(5)
30,328
2,798
Add: Depreciation and
amortization
62,862
43,281
205,352
170,610
EBITDA
$173,264
$133,112
$591,599
$528,262
Adjust for:
Add: Share-based compensation
9,345
6,273
28,933
18,621
Add: NetSpend M&A expenses
1,625
--
13,633
--
Adjusted EBITDA
$184,234
$139,385
$634,165
$546,883 |
 Appendix: Non-GAAP Reconciliation –
Adjusted Cash EPS
(in thousands)
34
©2014
Total
System
Services,
Inc.®
Proprietary.
All
rights
reserved
worldwide.
Three Months Ended
Twelve Months Ended
Dec
2013
Dec
2012
Dec
2013
Dec
2012
Net income Available to TSYS Common
Shareholders:
As reported (GAAP) (a)
$65,655
$60,862
$244,750
$244,280
Adjusted for amounts attributable to TSYS
common shareholders (net of taxes):
Acquisition intangible amortization
16,615
4,640
43,759
17,282
Share-based compensation
6,408
4,272
19,838
12,683
Cash earnings
$88,678
$69,774
$308,347
$274,245
NetSpend M&A expenses (nonrecurring)
1,317
--
15,251
--
Adjusted cash earnings (b)
$89,995
$69,774
$323,598
$274,245
Average common shares outstanding and
participating securities (c)
189,446
186,471
188,391
188,030
Basic EPS Available to TSYS Common
Shareholders (a) / (c)
$0.35
$0.33
$1.30
$1.30
Adjusted cash EPS Available to TSYS Common
Shareholders
(b) / (c)
$0.48
$0.37
$1.72
$1.46 |
 Appendix: Non-GAAP Reconciliation –
EBITDA and Adjusted EBITDA
Twelve Months
Ended
12/31/2013
Net Income
$256,597
Adjusted for:
Deduct: Equity in Income of Equity Investments
(13,047)
Add: Income Taxes
112,369
Add: Nonoperating expense
30,328
Add: Depreciation and Amortization
205,352
EBITDA
$591,599
Adjust for: Share-based compensation
28,933
NetSpend M&A Operating Expenses*
13,634
Adjusted EBITDA
$634,165
(in thousands)
35
©2014
Total
System
Services,
Inc.®
Proprietary.
All
rights
reserved
worldwide.
* Excludes share-based compensation |
 Appendix: Non-GAAP Reconciliation –
Free Cash Flow
Twelve Months
Ended
12/31/2013
Cash Flows from Operating Activities
$452,399
Less:
Purchase of Property and Equipment
(40,598)
Additions to Licensed Computer Software from Vendors
(64,729)
Additions to Internally Developed Computer Software
(32,506)
Additions to Contract Acquisition Costs
(55,965)
Free Cash Flow
$258,601
(in thousands)
36
©2014
Total
System
Services,
Inc.®
Proprietary.
All
rights
reserved
worldwide. |
 Mar
31, 2013
Dec 31,
2012
Jun 30,
2012
Jun 30,
2013
Sep 30,
2012
Appendix: Non-GAAP Reconciliation –
NetSpend
Adjusted Operating Income
Mar 31,
2012
Operating income (loss) (GAAP)
($8,964)
$17,430
$7,869
$17,594
$18,332
$15,799
Adjusted for:
Add: Amortization of acquisition
intangibles
881
534
446
434
590
431
Add: Settlement (gains) and
other losses
25,315
1,533
10,300
(160)
48
3,423
Add: M&A expenses
--
--
--
--
2,656
3,219
Adjusted operating income
$17,232
$19,497
$18,615
$17,868
$21,626
$22,872
(in thousands)
37
©2014
Total
System
Services,
Inc.®
Proprietary.
All
rights
reserved
worldwide.
Three Months Ended |
 Appendix: 2014 Guidance Assumptions
The guidance assumes:
•
No significant movement in foreign exchange rates; and
•
Minimal synergies from the NetSpend acquisition for 2014.
38
©2014
Total
System
Services,
Inc.®
Proprietary.
All
rights
reserved
worldwide. |