Total System Services Inc

Total System Services — Investor Day (May 2014)

64 slides from Total System Services's investor day presentation, May 13, 2014

  1. Slide 1: TSYS Analyst Day

    TSYS Analyst Day May 13, 2014 ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  2. Slide 2: Forward-Looking Statements

    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 subjec

  3. Slide 3: Use of Non-GAAP Financial Measures

    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

  4. Slide 4: Opening Comments - Philip W. Tomlinson

    Opening Comments Philip W. Tomlinson Chairman & Chief Executive Officer ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  5. Slide 5: 2014 Strategic Update - M. Troy Woods

    2014 Strategic Update M. Troy Woods President & Chief Operating Officer ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  6. Slide 6: Transformation Journey

    Transformation Journey TSYS’ Revenue Mix and Customer Base Revenue Mix 2003 2008 2013* 9% 16% 22% North America Merchant 21% International 21% 63% 41% NetSpend 91% 16% Issuers, Acquirers, Type of Customers Issuers Issuers and Acquirers Merchants & Consumers # of Unique Customers ~200 ~400 ~2.9 milli

  7. Slide 7: Available Free Cash Flow

    Available Free Cash Flow Free Cash Flow Allocation: 2010-2013 7 ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  8. Slide 8: People-Centered Payments

    People- Centered Payments® 8 ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  9. Slide 9: North America - William A. Pruett

    North America William A. Pruett President, North America Services ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  10. Slide 10: North America Segment Overview

    North America Segment Overview #1 Provider of processing & related solutions to North American Consumer & Commercial credit card issuers  Key offerings & Target customers Segment Revenue by Line of Business* ‒ Solutions for Consumer and Commercial 4% credit card issuers • 3rd party processing – Cre

  11. Slide 11: Our Plan to Win

    Our Plan to Win GROW & Grow and perfect our market leading position in serving credit card issuers EXECUTE • Complete conversion pipeline flawlessly and on time • Pursue new big client wins • Expand our clients’ use of existing offerings • Continue to conquer complexity and improve efficiency INNOVA

  12. Slide 12: 1Q 2014 North America Segment Highlights

    1Q 2014 North America Segment Highlights  Improving revenue growth ‒ 6th Straight positive growth quarter  Adjusted segment operating income up 8.5%  Adjusted operating margin: 33.2% ‒ Chase license expiration ‒ Increased incentive pay ‒ Market salary adjustments Segment Revenue* Adjusted Segment

  13. Slide 13: 1Q 2014 North America Segment Highlights

    1Q 2014 North America Segment Highlights  Thirteenth straight quarter of account on file YOY growth  Large account conversion pipeline  Sixteenth straight quarter of transaction YOY growth  Same client transactions up 12.9%: Eighteenth straight quarter of YOY growth Accounts on File Transaction

  14. Slide 14: Segment Summary

    Segment Summary  Market leader – Strong conversion and sales pipeline – Increased acquisition activity by current clients – Opportunity for growth in new and existing markets  Scale and reliability – Intense focus on regulation and compliance – Proven secure environment  Customer service – Tenure

  15. Slide 15: Merchant - Mark D. Pyke

    Merchant Mark D. Pyke President, Merchant Services © 2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  16. Slide 16: Merchant Segment Overview - A Tale of Two Cities

    Merchant Segment Overview - A Tale of Two Cities INDIRECT 1Q2014 Revenue Mix DIRECT Business model: Business model: 3rd Party processing Direct acquiring Customer type: Indirect Direct Bank & Non-bank acquirers Customer type: Merchants Key metrics: 43% 57% Key metrics: • ~200 Customers • 375K Mercha

  17. Slide 17: Market Overview - U.S. Acquiring

    Market Overview - U.S. Acquiring Indirect industry size $0.5B, Direct industry size $12.5B, growing 5-8% declining ~8% TSYS #11 Based on revenue, TSYS market share ~40% #7 Based on merchant outlets Why we remain committed DIRECT to INDIRECT: industry dynamics: • Strong margins and cash flow to fund

  18. Slide 18: Our Plan to Win

    Our Plan to Win Become a Top 10 global acquirer Make Direct 80% of segment revenue via M&A DIRECT Expand new business generation capacity • Improve sales productivity of existing channels • Develop new distribution channels INDIRECT Leverage technology and operational advantages • Leverage single pl

  19. Slide 19: 1Q 2014 Merchant Segment Highlights

    1Q 2014 Merchant Segment Highlights  Direct revenue mix holds at 57%  Direct revenues up 4.2% and Indirect revenues Indirect Direct down 13.5%  Anniversary of acquisitions 43% 57%  Expanded CPay ownership to 75%  Completed clearing & Settlement conversion Segment Revenue by LOB Adjusted Segment

  20. Slide 20: Segment Summary

    Segment Summary • Indirect – Strong operating leverage with solid margins and cash flow – Single, Scalable platform to power direct business – Source for lower risk M&A candidates • Direct – Successful acquisition track record – Innovative products to capitalize on industry trends – Growth of Direct

  21. Slide 21: Break

    Break ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  22. Slide 22: International - Gaylon Jowers Jr.

    International Gaylon Jowers Jr. President, International Services ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  23. Slide 23: International Segment Overview

    International Segment Overview Business Model Segment Revenue by LOB • Channel for TSYS services outside North America • Processing, PRIME Licensing and Managed Services 12% Processing Customer Focus (74%) 14% Licensing (14%) • Top 100 Banks/Retailers • Consumer Credit, Debit and 74% Managed Commerc

  24. Slide 24: 2014 International Segment Highlights

    2014 International Segment Highlights 1Q 2014 Financial Highlights Historical Operating Margins (Adjusted for Japan exit)  Revenue $76.8M* – Up 0.5% ‒ Down 4.6% on constant currency  2012 – 7.9%  Dependable AOF growth, Despite client purging  2013 – 12.4%  Irish debit AOF grew by 71.2%  2014 –

  25. Slide 25: Our Plan to Win

    Our Plan to Win Accelerate Growth Accelerate Change TS2 Managed PRIME Prime Processing Services Licensing Japan Processing Brazil TS2 European expansion Close sub-scale platforms Enhance VAP solutions/Delivery Consolidate Prime Processing Expand PRIME Licensing margins Streamline Brazil operating mo

  26. Slide 26: Segment Summary

    Segment Summary  Delivering our goals – Multi-year operating margin targets being met – Market leader in client engagement/Satisfaction  Strategic focus – Streamline Prime Processing solutions – Enhance PRIME Licensing LOB/Margins  Partnerships – Extend/Leverage CUP Data capabilities – Selective

  27. Slide 27: NetSpend - Dan Henry

    NetSpend Dan Henry Chief Executive Officer, NetSpend ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  28. Slide 28: NetSpend Segment Overview

    NetSpend Segment Overview MISSION: Empower consumers with the convenience, security and freedom to be self-banked  Key offerings & Target customers  Key Metrics ‒ Open loop GPR & Commercial prepaid ‒ 2M DDA (90-day) • 68 Million underbanked/unbanked ‒ 500+ AFS distributors ‒ Self-banked consumer n

  29. Slide 29: Our Plan to Win

    Our Plan to Win Product innovation to Mobile-friendly suite of innovative PRODUCT features that are easy to use maintain leadership Ability to buy and reload anywhere Acquire customers directly our customers shop, live, work DISTRIBUTION through partners and play Higher engagement in self-service Lo

  30. Slide 30: Business Development and Synergies Update

    Business Development and Synergies Update ACTIVE DIRECT DEPOSIT ACCOUNTS (DDA)1 (in thousands) 1,321 1,082 865 719 515 361 165 2007 2008 2009 2010 2011 2012 2013F 1 Number of active cards that have had a direct deposit load in the past three months REVENUE (in millions) $430.0 $351.3 $275.4 $306.3 

  31. Slide 31: The NetSpend Customer

    The NetSpend Customer PAYCHECK ALTERNATIVE: AMY Saves time and money with the Skylight ONE Card Does not want a traditional checking account Portable from one employer to the next No more payday check-cashing hassles Anytime Alerts give her a sense of control Payback Rewards treats her family to mea

  32. Slide 32: 1Q 2014 NetSpend Segment Highlights

    1Q 2014 NetSpend Segment Highlights  Direct deposit active cards up 21.2% ‒ Exceeded 2M for the first time in history  Gross dollar volume (GDV) up 22.1% ‒ Record tax season Direct Deposit Active Cards Gross Dollar Volume $6,567.2 YOY Growth % 2,070.3 YOY Growth % (in thousands) ($ in millions) 1,

  33. Slide 33: 1Q 2014 NetSpend Segment Highlights

    1Q 2014 NetSpend Segment Highlights Segment Revenue by Channel  Revenue $132.6M – up 13.1% QTD  Added 2K retail locations 12% Partner  Added 70+ new PayCard clients Retail 52% 28%  Announced PayChex and Western Union Direct partnerships Paycard 8% Segment Revenue Adjusted Segment Operating Incom

  34. Slide 34: Segment Summary

    Segment Summary High growth market Strong tailwinds toward electronic forms of payment Large underpenetrated and underserved market Product differentiation and diversity Maintaining strong market position through investment of distribution channels in innovative products and expanding distribution R

  35. Slide 35: Questions & Answer Panel Discussion

    Questions & Answer Panel Discussion ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  36. Slide 36: Closing Comments - Philip W. Tomlinson

    Closing Comments Philip W. Tomlinson Chairman & Chief Executive Officer ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  37. Slide 37: 2014 First Quarter Results

    2014 First Quarter Results April 22, 2014 ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  38. Slide 38: Forward-Looking Statements

    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 subjec

  39. Slide 39: Use of Non-GAAP Financial Measures

    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

  40. Slide 40: 1Q 2014 North America Segment Highlights

    1Q 2014 North America Segment Highlights  Improving Revenue Growth Segment Revenue by Line of Business* ‒ 6th Straight Positive Growth Quarter 4%  Adjusted Segment Operating Income Up 8.5% Consumer (1) 23%  Adjusted Operating Margin: 33.2% Commercial (2) ‒ Chase License Payments Expired 73% Other

  41. Slide 41: 1Q 2014 North America Segment Highlights

    1Q 2014 North America Segment Highlights  Thirteenth Straight Quarter of Account On File YOY Growth  Large Account Conversion Pipeline  Sixteenth Straight Quarter of Transaction YOY Growth  Same Client Transactions Up 12.9%: Eighteenth Straight Quarter of YOY Growth Accounts on File Transaction

  42. Slide 42: 1Q 2014 International Segment Highlights

    1Q 2014 International Segment Highlights Segment Revenue by Region  Revenue $76.8M* – Up 0.5% QTD 6% ‒ Down 4.6% on Constant Currency 5%  Currency Tailwinds Europe  Continued Margin Improvement Focus MEA  Reemphasis on Accelerating Growth 89%  Japan Market Divestitures Rest Of World Segment Rev

  43. Slide 43: 1Q 2014 International Segment Highlights

    1Q 2014 International Segment Highlights  Strong AOF Growth, Despite Some Client Purging  Irish Debit AOF Grew By 71.2%  Double-digit Transaction Growth of 19.3%  Same Client Transaction Growth of 17.3% Accounts on File Transaction Volume YOY Growth % YOY Growth % 555.6 (in millions) (in million

  44. Slide 44: 1Q 2014 Merchant Segment Highlights

    1Q 2014 Merchant Segment Highlights  Anniversary of Acquisitions Segment Revenue by Mix* QTD  Completed Clearing and Settlement Conversion  Direct Revenue Mix Holds at 57%  Expanded CPAY Ownership to 75% 57% 43% Direct Indirect Segment Revenue* Adjusted Segment Operating Income YOY Growth % Oper

  45. Slide 45: 1Q 2014 Merchant Segment Highlights

    1Q 2014 Merchant Segment Highlights  Direct Revenues Up 4.2%  Indirect Revenues Down 13.5%  POS Transactions Increased 2.7%, Excluding Deconverted Accounts  High Single-digit Direct Small Business Sales Volume Growth SBS Sales Volume* Segment Revenue by LOB ($ in billions) YOY Growth % ($ in mil

  46. Slide 46: 1Q 2014 NetSpend Segment Highlights

    1Q 2014 NetSpend Segment Highlights Segment Revenue by Channel  Revenue $132.6M – up 13.1% QTD  Added 2k Retail Locations 12% Partner  Added 70+ New PayCard Clients Retail 52% 28%  Announced PayChex and Western Union Direct Partnerships Paycard 8% Segment Revenue Adjusted Segment Operating Incom

  47. Slide 47: 1Q 2014 NetSpend Segment Highlights

    1Q 2014 NetSpend Segment Highlights  Direct Deposit Active Cards up 21.2% ‒ Exceeded 2M for the first time in history  Gross Dollar Volume (GDV) up 22.1% ‒ Record Tax Season Direct Deposit Active Cards Gross Dollar Volume $6,567.2 YOY Growth % 2,070.3 YOY Growth % (in thousands) ($ in millions) 1,

  48. Slide 48: Consolidated Selected Financial Highlights

    Consolidated Selected Financial Highlights (in thousands, except per share data) 1St Qtr 1st Qtr Percent 2014 2013 Change Total Revenues $592,848 $448,791 32.1% Revenues Before Reimbursable Items 532,750 388,032 37.3 Adjusted EBITDA* 149,596 123,446 21.2 Adjusted Cash EPS* from Continuing Operations

  49. Slide 49: Segment Operating Margin and Consolidated Adjusted Operating Margin

    Segment Operating Margin and Consolidated Adjusted Operating Margin Three Months Ended March 31, 2014 Adjusted Revenues before (in thousands) Segment Reimbursable Adjusted Operating Income Items Operating Margin North America $74,578 $224,368 33.24% International 4,555 76,773 5.93% Merchant 30,168 1

  50. Slide 50: Rollforward of Quarterly Cash Balance

    Rollforward of Quarterly Cash Balance (in millions) $500 Operating Activities Cap Ex $149 ($47) $400 Debt Pmts ($22) Acquisition ($38) Beginning Dividends Other Ending Balance $300 ($19) $3 $274 Balance $248 $200 $100 $0 12/31/2013 3/31/2014 50 ©2014 Total System Services, Inc.® Proprietary. All rig

  51. Slide 51: Cash Flow Strength: 2014 TTM Consolidated Financial Highlights

    Cash Flow Strength: 2014 TTM Consolidated Financial Highlights (in millions) $750 $675 $650 $600 $549 $525 $450 $375 $363 $300 $274 $249 $225 $150 $75 $0 Adjusted EBITDA Cash flow from operations Free cash flow Net income Ending cash TTM = Trailing Twelve Months 51 ©2014 Total System Services, Inc.®

  52. Slide 52: 2014 Revised Guidance

    2014 Revised Guidance* (in millions, except per share data) Range Range Percent Change Total Revenues $2,422 to $2,471 17% to 20% Revenues Before Reimbursable Items $2,182 to $2,226 20% to 22% Adjusted EBITDA $732 to $746 17% to 20% Adjusted Cash EPS from continuing operations $1.90 to $1.93 10% to

  53. Slide 53: Appendix

    Appendix ©2014 Total System Services, Inc.® Proprietary. All rights reserved worldwide.

  54. Slide 54: Appendix: Non-GAAP Items – Adjusted EBITDA and Adjusted Cash EPS

    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

  55. Slide 55: Appendix: Accounts on File Portfolio Summary

    Appendix: Accounts on File Portfolio Summary (in millions) Mar Mar % Mar Dec % 2014 2013 Change 2014 2013 Change Consumer Credit 234.8 203.7 15.3 234.8 228.9 2.6 Retail 27.5 25.2 9.3 27.5 27.8 (0.9) Total Consumer 262.3 228.9 14.6 262.3 256.7 2.2 Commercial 40.4 37.9 6.7 40.4 39.9 1.2 Other 19.7 13.

  56. Slide 56: Appendix: Non-GAAP Reconciliation – Revenues Before Reimbursable Items

    Appendix: Non-GAAP Reconciliation – Revenues Before Reimbursable Items (in thousands) Three Months Ended 03/31/14 03/31/13 Total Revenues $592,848 $448,791 Reimbursable Items 60,098 60,759 Revenues Before Reimbursable Items $532,750 $388,032 56 ©2014 Total System Services, Inc.® Proprietary. All rig

  57. Slide 57: Appendix: Non-GAAP Reconciliation – Adjusted Segment Operating Income and Operating Margin

    Appendix: Non-GAAP Reconciliation – Adjusted Segment Operating Income and Operating Margin (in thousands) Three Months Ended 3/31/14 3/31/13 Operating income $80,697 $74,520 Add: Acquisition intangible amort 24,313 8,532 Add: Corporate admin and other 33,008 30,193 Total segment adjusted operating i

  58. Slide 58: Appendix: Non-GAAP Reconciliation – Constant Currency

    Appendix: Non-GAAP Reconciliation – Constant Currency (in thousands) Three Percentage Months Ended Change Consolidated: 3/31/14 3/31/13 Constant Currency (1) $588,485 $448,791 31.1% Foreign Currency (2) 4,363 --- Total Revenues $592,848 $448,791 32.1% International Services: Constant Currency (1) $7

  59. Slide 59: Appendix: Non-GAAP Reconciliation – Constant Currency

    Appendix: Non-GAAP Reconciliation – Constant Currency (in thousands) Three Percentage Months Ended Change Consolidated: 3/31/14 3/31/13 Constant Currency (1) $528,701 $388,032 36.3% Foreign Currency (2) 4,049 --- Revenues before reimbursable items $532,750 $388,032 37.3% International Services: Cons

  60. Slide 60: Appendix: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA

    Appendix: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA (in thousands) Three Months Ended Mar Mar 2014 2013 Net income : As reported (GAAP) (a) $51,625 $59,149 Adjusted for: Deduct: Income from discontinued operations (980) (15) Deduct: Equity in Income of Equity Investments (4,096) (3,817) A

  61. Slide 61: Appendix: Non-GAAP Reconciliation – Adjusted Cash EPS

    Appendix: Non-GAAP Reconciliation – Adjusted Cash EPS (in thousands) Three Months Ended Mar Mar 2014 2013 Income from continuing operations available to TSYS common shareholders: As reported (GAAP) (a) $49,321 $57,905 Adjusted for amounts attributable to TSYS common shareholders (net of taxes): Acqu

  62. Slide 62: Appendix: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA

    Appendix: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA (in thousands) Trailing Twelve Months Ended 3/31/2014 Net Income $249,074 Adjusted for: Deduct: Discontinued operations (3,021) Deduct: Equity in Income of Equity Investments (13,327) Add: Income Taxes 218,210 Add: Nonoperating expense 3

  63. Slide 63: Appendix: Non-GAAP Reconciliation – Free Cash Flow

    Appendix: Non-GAAP Reconciliation – Free Cash Flow Trailing (in thousands) Twelve Months Ended 3/31/2014 Cash Flows from Operating Activities $548,668 Less: Purchase of Property and Equipment (47,757) Additions to Licensed Computer Software from Vendors (40,788) Additions to Internally Developed Com

  64. Slide 64: Appendix: 2014 Guidance Assumptions

    Appendix: 2014 Guidance Assumptions The guidance assumes: • There will be no significant movements in the London Interbank Offered rate and TSYS will not make any significant draws on the remaining balance of its credit facility; • There will be no significant movement in foreign currency exchange r

Total System Services, Inc. (TSYS) — Investor Day (May 2014) on 6ix