2013 Second Quarter and YTD Results July 23, 2013 © 2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Exhibit 99.2 |
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. 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,” “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. 2 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Use of Non-GAAP Financial Measures 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 and Adjusted cash earnings per share. The most comparable GAAP measures to these measures are revenues; operating margin; revenues; cash flows from operating activities; net income; net income; and earnings per share, 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 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Phil Tomlinson Chairman and Chief Executive Officer ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Troy Woods President & Chief Operating Officer ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
2Q 2013 North America Segment Highlights 6 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Improving Revenue Operating Income up 10.6% Margin Expansion: up 210 BPS over 2Q12 Shifting Conversion Pipeline (*) Revenues Before Reimbursable Items |
2Q 2013 North America Segment Highlights 7 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. (*) Growth Excluding Prepaid, Government Services and Single Use Accounts Tenth Straight Quarter of Account On File YOY Growth Thirteenth Straight Quarter of Transaction YOY Growth Same Client Transactions up 11.4%: Fifteenth Straight Quarter of YOY Growth |
© 2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 8 North America Conversion Pipeline Reporting Period 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Conversion Pipeline Net Total 4Q12 0.20 0.10 11.80 14.10 0.10 75.40 — 0.70 102.40 2013 Total 26.20 1Q13 — 0.10 10.90 0.50 0.70 79.50 9.40 0.30 101.40 2013 Total 11.50 2Q13 — — 0.50 (1) 0.50 — 79.40 9.20 — 89.60 2013 Total 1.00 (1) Converted 10.7M Accounts 7/13/13 2Q 2013 North America Segment Highlights (in millions) |
2Q 2013 International Segment Highlights 9 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Revenue $93.2M* – down 5.9% – Up 0.4% on Constant Currency Currency Headwinds Continue: Q2 $6.2M* YTD $10.2M* Margin Expansion Continues 1M Account Conversion Pipeline Renewed Focus on Growth (*) Revenues Before Reimbursable Items |
2Q 2013 International Segment Highlights 10 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Record Number Accounts Processed Solid Transaction Growth Same Client Transaction Growth 9.3% |
2Q 2013 Merchant Segment Highlights 11 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Acquisitions Fueling Growth Direct Exceeds Indirect Sequential Quarter Margin Expansion Bank of America Merchant Services Extended EMV Certification Complete Back-end Integration on Schedule – Headwind on Margin (*) Revenues Before Reimbursable Items |
2Q 2013 Merchant Segment Highlights 12 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. (*) Excludes Managed Accounts and ProPay Record SBS Sales Volume Indirect Faces Headwinds but Optimistic Growth Still Achievable POS Transactions, Excluding Deconverted Accounts, Increased 4.8% |
2Q 2013 NetSpend Segment Highlights 13 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Revenue $105M – up 23% Significant Sequential Quarter Margin Expansion Extended Exclusive ACE Agreement 5 Years Added Over 3,500 Retail Locations Added 75 New PayCard Clients (*) Operating Income Excluding Amortization of Acquisition Intangibles, M&A Costs and Non-recurring Items |
14 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 2Q 2013 NetSpend Segment Highlights Gross Dollar Volume YOY Growth % Direct Deposit Active Cards YOY Growth % Direct Deposit Active Cards up 42% Total Active Accounts up 38% Gross Dollar Volume (GDV) up 30% |
Jim Lipham Chief Financial Officer ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Consolidated Selected Financial Highlights 16 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. $ 478,443 $ 462,651 3.4% Total Revenues $ 943,439 $ 923,813 2.1% 417,512 398,691 4.7 Revenues Before Reimbursable Items 821,749 793,870 3.5 95,314 92,096 3.5 Operating Income 170,217 176,927 (3.8) 57,716 66,710 (13.5) Net Income Attributable to TSYS Common Shareholders 114,745 123,105 (6.8) 2,727.4 2,406.1 13.4 Total Cardholder Transactions (in millions) 5,175.0 4,656.4 11.1 Basic Earnings Per Share (EPS) Attributable to TSYS Common Shareholders: $0.31 $0.35 (12.9) As Reported (GAAP) $0.61 $0.65 (6.0) $0.34 $0.35 (4.3) Excluding M&A expenses $0.67 $0.65 2.9 $0.38 $0.40 (3.5) Adjusted Cash EPS* $0.77 $0.73 5.2 $142,324 $140,338 1.4 Adjusted EBITDA* $267,799 $269,640 (0.7) YTD 2013 YTD 2012 Percent Change (in thousands, except per share data) 2 Qtr 2013 2 Qtr 2012 Percent Change (*) Adjusted Cash EPS and Adjusted EBITDA definitions are contained in Appendix nd nd |
2013 YTD Revenue Change Revenues Before Reimbursable Items 17 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 12% 16% 4% 0% 5.4% Internal Growth New Clients 2.9% Acquisitions Lost Business (5.3%) Non-recurring Items (0.6%) Price Compression (2.3%) (8.2%) Reported 3.5% Currency (1.3%) 4.7% 8% |
Consumer Credit 208.6 199.4 4.7 208.6 203.8 2.4 Retail 25.9 25.2 2.8 25.9 25.2 2.6 Total Consumer 234.5 224.6 4.5 234.5 229.0 2.4 Commercial 38.6 36.1 6.7 38.6 37.9 1.8 Other 15.3 9.6 60.5 15.3 13.4 14.1 Subtotal 288.4 270.3 6.7 288.4 280.3 2.9 Prepaid / Stored Value 102.8 105.4 (2.4 ) 102.8 107.3 (4.2 ) Government Services 60.6 30.8 96.4 60.6 59.4 2.1 Commercial Card Single Use 37.0 34.0 8.8 37.0 31.6 17.0 Total AOF 488.8 440.5 11.0 488.8 478.6 2.1 Consolidated Accounts on File Portfolio Summary (in millions) Jun 2013 Jun 2012 % Change Jun 2013 Mar 2013 % Change 18 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Cash Flow Strength: 2013 TTM Consolidated Financial Highlights $545 $410 $271 $244 $0 $75 $150 $225 $300 $375 $450 $525 $600 Adjusted EBITDA Cash flow from operations Free cash flow Net income 19 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. TTM = Trailing Twelve Months (in millions) |
NetSpend Acquisition Closed July 1 Approximately $1.4 billion in consideration – Includes cash from borrowings and equity – Conversion of NetSpend unvested options and nonvested awards to TSYS’ equity New operating segment named “NetSpend” One-time M&A costs will also impact second half of 2013 of $11.3 million Interest expense with new borrowings $23.0-$24.5 million in 2013 Approximately $67 million annual amortization of acquisition intangibles Synergies ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 20 |
NetSpend Acquisition Financing May Bond Issuance: $1,100M* – $550M of 5-year notes with a 2.375% coupon – $550M of 10-year notes with a 3.750% coupon July 5-year Term Debt: $200M July Credit Facility Revolver Draw: $100M Total Acquisition Debt: $1,400M Other Outstanding Long-term Debt: $ 44M Credit Facility Term Loan Balance: $143M ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 21 (*) Shown at par value; does not include bond issuance discounts or fees |
2013 Revised Guidance* Range Range Percent Change Total Revenues $2,137 to $2,180 14 % to 17 % Revenues Before Reimbursable Items $1,898 to $1,936 17% to 20% Adjusted EBITDA $639 to $652 17% to 19% Adjusted Cash EPS $1.69 to $1.72 16% to 18% (in millions, except per share data) 22 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. (*) See Appendix for guidance assumptions |
2013 Guidance Reconciliation Total Revenues Revenues Before Reimbursables Original Guidance $1,955 to $1,995 $1,711 to $1,746 NetSpend Acquisition 197 to 200 197 to 200 Reimbursable Items (5) to (5) -- -- Currency Translation (Jun YTD) (10) to (10) (10) to (10) Revised Guidance $2,137 to $2,180 $1,898 to $1,936 (in millions) 23 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
2013 Revised Guidance Revenue Change Revenues Before Reimbursable Items 24 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 30% 15% 0% Internal Growth New Clients 3-4% Acquisitions Lost Business, Non-recurring Items and Price Compression (5-7%) Guidance 17-20% Currency 5-7% 15-17% (1%) |
Closing Remarks ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Q&A ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Appendix ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
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. • 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. ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 28 |
Appendix: Non-GAAP Reconciliation – Revenues Before Reimbursable Items Three Months Ended Six Months Ended 6/30/13 6/30/12 6/30/13 6/30/12 Total Revenues $ 478,443 $ 462,651 $ 943,439 $ 923,813 Reimbursable Items 60,931 63,959 121,690 129,942 Revenues Before Reimbursable Items $ 417,512 $ 398,692 $ 821,749 $ 793,871 (in thousands) 29 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Three Months Ended 6/30/13 6/30/12 Three Months Ended 6/30/13 6/30/12 Three Months Ended 6/30/13 6/30/12 Operating Income (a) $ 79,896 $ 72,231 $ 8,056 $ 9,438 $ 33,590 $ 32,950 Total Revenues (b) 248,640 239,557 98,087 103,415 136,458 124,903 Reimbursable Items 34,114 33,992 4,878 4,368 23,506 27,202 Revenues Before Reimbursable Items(c) 214,526 205,565 93,209 99,047 112,952 97,701 Operating Margin (a)/(b) 32.13% 30.15% 8.21% 9.13% 24.62% 26.38% Operating Margin Excluding Reimbursables (a)/(c) 37.24% 35.14% 8.64% 9.53% 29.74% 33.73% Appendix: Non-GAAP Reconciliation – Segment Operating Margin Excluding Reimbursable Items North America International Merchant (in thousands) 30 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Six Months Ended 6/30/13 6/30/12 Percentage Change Three Months Ended 6/30/13 6/30/12 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) $ 484,810 $ 462,651 4.8% $953,825 $ 923,813 3.2% Foreign Currency (2) (6,367) --- (10,386) --- Total Revenues $478,443 $462,651 3.4% $943,439 $923,813 2.1% International Services: Constant Currency (1) $ 104,480 $103,415 1.0% $ 205,665 $ 203,775 0.9% Foreign Currency (2) (6,393) --- (10,482) --- Total Revenues $98,087 $103,415 (5.2%) $195,183 $203,775 (4.2%) 31 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Six Months Ended 6/30/13 6/30/12 Percentage Change Three Months Ended 6/30/13 6/30/12 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) $ 423,725 $ 398,692 6.3% $831,918 $ 793,871 4.8% Foreign Currency (2) (6,213) --- (10,169) --- Revenues before reimbursable items $417,512 $398,692 4.7% $821,749 $793,871 3.5% International Services: Constant Currency (1) $ 99,449 $99,047 0.4% $ 196,067 $ 195,538 0.3% Foreign Currency (2) (6,240) --- (10,265) --- Revenues before reimbursable items $93,209 $99,047 (5.9%) $185,802 $195,538 (5.0%) 32 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Appendix: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA (in thousands) 33 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Three Months Ended Six Months Ended Mar Jun Sep Dec Mar Jun Jun Jun 2012 2012 2012 2012 2013 2013 2013 2012 Net income : As reported (GAAP) (a) $57,644 $67,977 $62,043 $62,257 $59,149 $60,561 $119,710 $125,622 Adjusted for: Deduct: Equity in Income of Equity Investments (2,774) (2,252) (1,957) (3,188) (3,817) (2,748) (6,565) (5,026) Add: Income Taxes 29,556 24,553 30,228 30,767 17,845 29,947 47,793 54,108 Add: Nonoperating expenses 405 1,818 579 (5) 1,726 7,554 9,279 2,223 Add: Depreciation and amortization 40,873 43,213 43,243 43,281 42,498 40,546 83,044 84,086 EBITDA $125,704 $135,309 $134,136 $133,112 $117,401 $135,860 $253,261 $261,013 Adjust for: Add: Share-based compensation 3,598 5,029 3,722 6,273 4,593 5,211 9,804 8,627 Add: NetSpend M&A expenses -- -- -- -- 3,481 1,253 4,734 -- Adjusted EBITDA $129,302 $140,338 $137,858 $139,385 $125,475 $142,324 $267,799 $269,640 |
Appendix: Non-GAAP Reconciliation – Adjusted Cash EPS (in thousands) 34 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Three Months Ended Six Months Ended Mar Jun Sep Dec Mar Jun Jun Jun 2012 2012 2012 2012 2013 2013 2013 2012 Net income Available to TSYS Common Shareholders: As reported (GAAP) (a) $56,395 $66,710 $60,312 $60,862 $57,028 $57,716 $114,745 $123,106 Adjusted for amounts attributable to TSYS common shareholders (net of taxes): Acquisition intangible amortization 3,933 4,409 4,383 4,528 6,096 4,847 10,848 8,355 Share-based compensation 2,363 3,686 2,489 4,169 3,494 3,431 6,917 6,004 Cash earnings $62,691 $74,805 $67,184 $69,559 $66,618 $65,994 $132,510 $137,465 M&A expenses -- -- -- -- $5,222 $5,653 $10,875 -- Adjusted cash earnings (b) $62,691 $74,805 $67,184 $69,559 $71,840 $71,647 $143,385 $137,465 Average common shares outstanding and participating securities(c) 188,718 189,070 187,878 186,471 186,807 187,738 187,277 188,894 Basic EPS Available to TSYS Common Shareholders (a) / (c) $0.30 $0.35 $0.32 $0.32 $0.31 $0.31 $0.71 $0.73 Adjusted cash EPS Available to TSYS Common Shareholders (b) / (c) $0.33 $0.40 $0.36 $0.37 $0.38 $0.38 $0.77 $0.73 |
Appendix: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA Trailing Twelve Months Ended 6/30/2013 Net Income $ 244,010 Adjusted for: Deduct: Equity in Income of Equity Investments (11,709) Add: Income Taxes 108,787 Add: Nonoperating expense 9,854 Add: Depreciation and Amortization 169,568 EBITDA $ 520,510 Adjust for: Share-based compensation 19,798 NetSpend M&A Operating Expenses 4,734 Adjusted EBITDA $ 545,042 (in thousands) 35 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. |
Appendix: Non-GAAP Reconciliation – Free Cash Flow Trailing Twelve Months Ended 6/30/2013 Cash Flows from Operating Activities $ 409,596 Less: Purchase of Property and Equipment (31,286) Additions to Licensed Computer Software from Vendors (43,434) Additions to Internally Developed Computer Software (21,686) Additions to Contract Acquisition Costs (42,150) Free Cash Flow $ 271,040 (in thousands) 36 ©2013 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 ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. Three Months Ended |
Appendix: 2013 Revised Guidance Assumptions The guidance includes: ©2013 Total System Services, Inc.® Proprietary. All rights reserved worldwide. 38 • NetSpend’s operating results for six months of 2013; • Excludes one-time expenses incurred in connection with the NetSpend acquisition of $16.0 million; • Assumes approximately $33.5 million ($67 million on an annual basis) of acquisition intangible amortization associated with the NetSpend acquisition; • No significant movement in foreign exchange rates; and • Minimal synergies for 2013. |