Total System Services Inc

Total System Services — Q4 2015 Earnings Presentation

44 slides from Total System Services's earnings presentation, Jan 26, 2016

  1. Slide 1: 2015 Fourth Quarter and Full Year Results; Acquisition of TransFirst

    2015 Fourth Quarter and Full Year Results Acquisition of TransFirst January 26, 2016 © 2016 Total System Services, Inc.® All rights reserved worldwide.

  2. Slide 2: Cautionary Note Regarding Forward-Looking Statements

    > CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements include, among others, statements about TSYS’ expected future operating result

  3. Slide 3: Non-GAAP Financial Measures

    > NON-GAAP FINANCIAL MEASURES Throughout this presentation, we reference certain non-GAAP financial measures, including revenues before reimbursable items, operating margin excluding reimbursable items, revenues measured on a constant currency basis, free cash flow, EBITDA, adjusted EBITDA, adjusted

  4. Slide 4: Agenda

    > AGENDA ➔ Introduction － M. Troy Woods, Chief Executive Officer, TSYS ➔ 2015 Fourth Quarter and Full Year Results; 2016 Guidance － Paul Todd, Chief Financial Officer, TSYS ➔ Transaction Overview and Strategic Rationale － M. Troy Woods, Chief Executive Officer, TSYS ➔ TransFirst Overview － John Shlo

  5. Slide 5: Introduction

    Introduction M. Troy Woods Chief Executive Officer, TSYS © 2016 Total System Services, Inc.® All rights reserved worldwide. 5

  6. Slide 6: 2015 Fourth Quarter and Full Year Results; 2016 Guidance

    2015 Fourth Quarter and Full Year Results; 2016 Guidance Paul Todd Chief Financial Officer, TSYS © 2016 Total System Services, Inc.® All rights reserved worldwide. 6

  7. Slide 7: Consolidated Selected Financial Highlights

    2015 Fourth Quarter and Full Year Results > CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS (in thousands, except per share data) 4rth Qtr 4th Qtr Percent YTD YTD Percent 2015 2014 Change 2015 2014 Change $716,843 $635,104 12.9% Total Revenues $2,779,541 $2,446,877 13.6% 645,095 569,301 13.3 Revenues Bef

  8. Slide 8: 4Q 2015 Consolidated Highlights

    2015 Fourth Quarter and Full Year Results > 4Q 2015 CONSOLIDATED HIGHLIGHTS Revenue by Segment* ➔ Double digit revenue growth ➔ Strong cross segment delivery of performance North America ➔ Record volume gains 22% International 46% Merchant 19% NetSpend 13% Consolidated Revenue* Adjusted Operating In

  9. Slide 9: 4Q 2015 North America Segment Highlights

    2015 Fourth Quarter and Full Year Results > 4Q 2015 NORTH AMERICA SEGMENT HIGHLIGHTS Accounts on File ➔ Revenue – 6th straight quarter of record-setting YOY Growth % 677.5 685.5 results and double digit growth 653.2 654.1 ➔ Record level of Traditional AOF at 415.1M (in millions) ➔ Transactions – 6th

  10. Slide 10: 4Q 2015 International Segment Highlights

    2015 Fourth Quarter and Full Year Results > 4Q 2015 INTERNATIONAL SEGMENT HIGHLIGHTS Accounts on File ➔ Revenue down (0.6%) constant currency YOY Growth % 78.5 − Up 6.3% excluding 4Q14 one-time item (in millions) 74.9 73.9 ➔ AOF increased 17.8% 70.5 ➔ Transactions increased 7.0% 64.1 66.6 62.5 ➔ Str

  11. Slide 11: 4Q 2015 Merchant Segment Highlights

    2015 Fourth Quarter and Full Year Results > 4Q 2015 MERCHANT SEGMENT HIGHLIGHTS Segment Revenue by LOB ➔ Revenue up 13.4% ($ in millions) YOY Growth % ➔ Revenue mix: 61% Direct; 39% Indirect $45 $46 $50 $44 $43 $46 $48 $50 ➔ SBS Sales Volume at $6.4B, up 11.3% YOY (14%) (10%) (2%) (9%) (4%) (0%) (1%

  12. Slide 12: 4Q 2015 NetSpend Segment Highlights

    2015 Fourth Quarter and Full Year Results > 4Q 2015 NETSPEND SEGMENT HIGHLIGHTS Gross Dollar Volume ➔ Gross Dollar Volume (GDV) up 21.3% ($ in billions) YOY Growth % ➔ Total active cards at 3.9M, up 21.1% $7.7 ➔ Direct deposit active cards at 1.9M, up 17.7% $6.6 (1%) ➔ Added over 7,000 distributing

  13. Slide 13: Segment Operating Margin and Consolidated Adjusted Operating Margin (Q4)

    2015 Fourth Quarter and Full Year Results > SEGMENT OPERATING MARGIN AND CONSOLIDATED ADJUSTED OPERATING MARGIN Three Months Ended December 31, 2015 Adjusted Revenues before Segment Reimbursable Adjusted (in thousands) Operating Income Items Operating Margin North America $104,162 $300,265 34.69% In

  14. Slide 14: Segment Operating Margin and Consolidated Adjusted Operating Margin (FY)

    2015 Fourth Quarter and Full Year Results > SEGMENT OPERATING MARGIN AND CONSOLIDATED ADJUSTED OPERATING MARGIN Twelve Months Ended December 31, 2015 Adjusted Revenues before Segment Reimbursable Adjusted (in thousands) Operating Income Items Operating Margin North America $429,064 $1,147,254 37.40%

  15. Slide 15: Rollforward of Quarterly Cash Balance

    2015 Fourth Quarter and Full Year Results > ROLLFORWARD OF QUARTERLY CASH BALANCE (in millions) $700 Operating Share Activities Repurchase $600 $140 ($159) Beginning $500 Balance Cap Ex $448 Ending ($67) Dividends Other Balance $400 ($18) Debt Pmts $58 $389 ($13) $300 $200 $100 $0 9/30/2015 12/31/20

  16. Slide 16: Cash Flow Strength: 2015 Consolidated Financial Highlights

    2015 Fourth Quarter and Full Year Results > CASH FLOW STRENGTH: 2015 Consolidated Financial Highlights (in millions) $900 $834 $825 $750 $675 $600 $600 $525 $450 $397 $389 $369 $375 $300 $225 $150 $75 $0 Adjusted EBITDA Cash flow from operations Free cash flow Net income Ending cash (TTM = Trailing

  17. Slide 17: 2016 Guidance

    2015 Fourth Quarter and Full Year Results > 2016 GUIDANCE* (in millions, except per share data) Range Range Percent Change Total Revenues $2,900 to $2,946 4% to 6% Revenues Before Reimbursable Items $2,624 to $2,674 5% to 7% Adjusted EPS attributable to TSYS common shareholders from continuing opera

  18. Slide 18: Transaction Overview and Strategic Rationale

    Transaction Overview and Strategic Rationale M. Troy Woods Chief Executive Officer, TSYS © 2016 Total System Services, Inc.® All rights reserved worldwide. 18

  19. Slide 19: Winning Combination of Technology, Scale and Partner-Centric Distribution

    Winning Combination of Technology, Scale and Partner-Centric Distribution © 2016 Total System Services, Inc.® All rights reserved worldwide. 19

  20. Slide 20: Transaction Overview

    > TRANSACTION OVERVIEW ➔ Creates winning combination of technology, scale and distribution Compelling ➔ Accelerates growth in integrated payments Combination & ➔ Strengthens sales and distribution through expanded partnership network Strategic Fit ➔ Enhances access to high-growth markets and attract

  21. Slide 21: Highly Attractive Growth Market

    > HIGHLY ATTRACTIVE GROWTH MARKET Merchant acquiring: large and fast-growing Integrated Payments 12% $13 eCommerce 10% BILLION* Acquiring Industry 5% 2014 U.S. GDP 2-3% Large SMB *Total Addressable Market by net revenue. SMB estimated to be $10 billion. Notes: Market growth forecast based on 2014-20

  22. Slide 22: Our Merchant Transformation

    > OUR MERCHANT TRANSFORMATION PRIORITIES TSYS TSYS + TRANSFIRST Emerging presence in integrated #3 in U.S. in integrated payments* Positioned in  High-Growth Areas payments, e-commerce and omni- commerce with enhanced e-commerce and omni-commerce capabilities  Business 60% Direct / 40% Indirect 81

  23. Slide 23: Establishes TSYS' Leadership Position in Acquiring

    > ESTABLISHES TSYS’ LEADERSHIP POSITION IN ACQUIRING EXPANDED SALES AND DISTRIBUTION NETWORK ➔ 1,300 distribution partners ➔ Rich ecosystem of independent software vendors (ISVs), value added resellers (VARs) and financial institutions ➔ Expertise in partner-centric distribution U.S. Merchant Provid

  24. Slide 24: Creates Strong & Balanced Portfolio

    > CREATES STRONG & BALANCED PORTFOLIO ISSUER PROCESSING ➔ #1 in U.S. third-party credit ➔ #2 in Europe ➔ Blue chip relationships and 400+ global clients ISSUER PROCESSING MERCHANT MERCHANT SERVICES SERVICES ➔ #6 U.S. merchant solutions provider based on net revenue ➔ 645,000 merchant outlets ➔ ~$117

  25. Slide 25: TransFirst Overview

    TransFirst Overview John Shlonsky President and Chief Executive Officer, TransFirst © 2016 Total System Services, Inc.® All rights reserved worldwide. 25

  26. Slide 26: Value Proposition

    > VALUE PROPOSITION Unique value proposition drives strong revenue growth and merchant retention Expertise In Partner- Proprietary Integrated Multi-channel Payment centric Distributions Technology Partner Solutions ➔ Economic alignment ➔ One partner ➔ Customized solutions ➔ Collaborative approach ➔

  27. Slide 27: TransFirst Ecosystem

    > TRANSFIRST ECOSYSTEM Single touch point across multiple channels provides differentiated service model INTEGRATED TECHNOLOGY PARTNERS REFERRAL PARTNERS .org Health VAR Not-for- Profit Government Bank Association ISO Agent ecommerce TRANSFIRST Boarding Front-end Back-end Reporting ENGINE Electronic

  28. Slide 28: Great Fit Across the Board

    > GREAT FIT ACROSS THE BOARD Strong cultural fit with shared vision and values Seamless integration transition Enhanced offerings for merchants and partners Fosters a holistic approach to payments © 2016 Total System Services, Inc.® All rights reserved worldwide. 28

  29. Slide 29: Financial Considerations

    Financial Considerations Paul Todd Chief Financial Officer, TSYS © 2016 Total System Services, Inc.® All rights reserved worldwide. 29

  30. Slide 30: Financial Considerations

    > FINANCIAL CONSIDERATIONS VALUATION 2015 Pro Forma Combined Revenues** ➔ $2.35 billion enterprise value ➔ Implied multiple of 13.8x 2016E adjusted EBITDA before synergies FINANCING NETSPEND ➔ All cash offer ➔ Pro forma debt of $3.8 billion ➔ Expected leverage of ~3.9x debt / 2015 TTM PF adjusted EB

  31. Slide 31: Compelling Strategic Rationale

    > COMPELLING STRATEGIC RATIONALE  Highly attractive growth market  Establishes leadership position in merchant solutions Accelerates growth in integrated payments and strengthens  partnership distribution capabilities  Significant value creation  Proven management team and track record © 2016 T

  32. Slide 32: Q&A

    Q&A © 2016 Total System Services, Inc.® All rights reserved worldwide.

  33. Slide 33: Appendix

    Appendix © 2016 Total System Services, Inc.® All rights reserved worldwide. 33

  34. Slide 34: Appendix: Non-GAAP Items – Adjusted EBITDA and Adjusted EPS

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Items – Adjusted EBITDA and Adjusted 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 NetSpen

  35. Slide 35: Appendix: Accounts on File Portfolio Summary

    2015 Fourth Quarter and Full Year Results > APPENDIX: Accounts on File Portfolio Summary (in millions) Dec Dec % Dec Sep % 2015 2014 Change 2015 2015 Change Consumer Credit 382.1 270.0 41.5 382.1 373.6 2.3 Retail 26.1 28.4 (7.9) 26.1 25.4 2.8 Total Consumer 408.2 298.4 36.8 408.2 399.0 2.3 Commercia

  36. Slide 36: Non-GAAP Reconciliation – Revenues Before Reimbursable Items

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – Revenues Before Reimbursable Items (in thousands) Three Months Ended Twelve Months Ended 12/31/15 12/31/14 12/31/15 12/31/14 Total Revenues $716,843 $635,104 $2,779,541 $2,446,877 Reimbursable Items 71,748 65,803 280,192

  37. Slide 37: Non-GAAP Reconciliation – Adjusted Segment Operating Income and Margin

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – Adjusted Segment Operating Income and Operating Margin Three Months Ended Twelve Months Ended (in thousands) 12/31/15 12/31/14 12/31/15 12/31/14 Operating income $117,905 $122,773 $534,107 $431,640 Add: Acquisition intan

  38. Slide 38: Non-GAAP Reconciliation – Constant Currency

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – Constant Currency (in thousands) Three Percentage Twelve Percentage Months Ended Change Months Ended Change 12/31/15 12/31/14 12/31/15 12/31/14 Consolidated: Constant Currency (1) 722,581 $635,104 13.8% $2,810,999 $2,446

  39. Slide 39: Non-GAAP Reconciliation – Constant Currency

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – Constant Currency (in thousands) Three Percentage Twelve Percentage Months Ended Change Months Ended Change 12/31/15 12/31/14 12/31/15 12/31/14 Consolidated: Constant Currency (1) $650,484 $569,301 14.3% $2,528,775 $2,19

  40. Slide 40: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA (in thousands) Three Months Ended Twelve Months Ended Dec Dec Dec Dec 2015 2014 2015 2014 Net income : As reported (GAAP) (a) $84,716 $81,242 $369,041 $329,406 Adjusted for: Deduct: Income from

  41. Slide 41: Non-GAAP Reconciliation – Adjusted EPS

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – Adjusted EPS Three Months Ended Twelve Months Ended (in thousands) Dec Dec Dec Dec 2015 2014 2015 2014 Income from continuing operations available to TSYS Common Shareholders: As reported (GAAP) (a) $81,417 $83,198 $362,

  42. Slide 42: Non-GAAP Reconciliation – Free Cash Flow

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – Free Cash Flow (in thousands) Twelve Months Ended 12/31/2015 Cash flows from operating activities $600,194 Less: Purchases of property and equipment (54,640) Additions to licensed computer software from vendors (50,728)

  43. Slide 43: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA

    2015 Fourth Quarter and Full Year Results > APPENDIX: Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA Twelve Months (in thousands) Ended 12/31/2015 Net Income $369,041 Adjusted for: Add: Discontinued operations (1,411) Deduct: Equity in Income of Equity Investments (22,106) Add: Income Taxes 15

  44. Slide 44: Appendix: 2016 Guidance Assumptions

    2015 Fourth Quarter and Full Year Results > APPENDIX: 2016 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 signifi

Total System Services — Q4 2015 Earnings Presentation on 6ix