GPN
$91.85
Global Payments
($.52)
(.56%)
Earnings Details
1st Quarter March 2017
Thursday, May 04, 2017 6:58:00 AM
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Summary

Global Payments Raises Guidance but Remains In-line with Estimates

Global Payments (GPN) reported 1st Quarter March 2017 earnings of $0.81 per share on revenue of $919.8 million. The consensus earnings estimate was $0.75 per share on revenue of $766.3 million.

The company said it expects 2017 non-GAAP earnings of $3.78 to $3.95 per share on revenue of $3.38 billion to $3.46 billion. The company's previous guidance was earnings of $3.70 to $3.90 per share on revenue of $3.35 billion to $3.45 billion and the current consensus earnings estimate is $3.84 per share on revenue of $3.38 billion for the year ending December 31, 2017.

Global Payments Inc is a provider of payment solutions for merchants, value-added resellers, enterprise software providers, financial institutions, government agencies, multi-national corporations and independent sales organizations.

Results
Reported Earnings
$0.81
Earnings Whisper
-
Consensus Estimate
$0.75
Reported Revenue
$919.8 Mil
Revenue Estimate
$766.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Global Payments Reports First Quarter Earnings, Increases 2017 Outlook and Refinances Debt Facilities

Global Payments Inc. (GPN) today announced results for the first quarter ended March 31, 2017.

"We are off to an exceptional start to 2017, producing double digit organic growth across our markets worldwide in the first quarter," said Jeff Sloan, Chief Executive Officer. "In particular, organic growth in our integrated and vertical markets business accelerated, contributing significantly to our strong performance," Sloan continued. "We have completed the first anniversary of our Heartland partnership, and our combined results underscore our consistency of execution and position us as the leading provider of technology-enabled, software-driven solutions worldwide."

First Quarter 2017 Summary

GAAP revenues were $919.8 million, compared to $626.3 million in the first quarter of 2016; diluted earnings per share were $0.32 compared to $0.46 in the prior year; and operating margin was 11.4% compared to 15.1% in the first quarter of 2016.

Adjusted net revenue grew 68% to $803.9 million, compared to $479.6 million in the first quarter of 2016.

Adjusted earnings per share grew 33% to $0.85, compared to $0.64 in the first quarter of 2016.

-- Adjusted operating margin expanded 110 basis points to 28.5%.

2017 Outlook

"As a result of our strong first quarter performance and progress with Heartland integration efforts, we are increasing our outlook for 2017," stated Cameron Bready, Senior Executive Vice President and Chief Financial Officer. "We now expect adjusted net revenue to range from $3.38 billion to $3.46 billion, or growth of 19% to 22% over 2016 and adjusted operating margin to expand by as much as 110 basis points. Adjusted earnings per share are now expected to be in a range of $3.78 to $3.95, reflecting growth of 19% to 24% over 2016, which includes the impact of our recent refinancing."

Debt Refinancing

On May 2, 2017, Global Payments successfully closed an amendment to its credit facility agreement. Under the terms of the amendment, the company increased its aggregate term loan B facilities by $610 million with the proceeds being used to reduce a portion of the term loan A facilities and outstanding revolving credit facility borrowings. The company’s total borrowings remain unchanged as a result of the amendment.

The amendment reduced the interest rate spread on all credit facilities by 50 basis points (subject to adjustment based on an amended leveraged-based pricing grid). Further, the amendment extended the maturities of the term loan A facilities and the revolving credit facility to May 2022.

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.0133 per share payable June 23, 2017 to shareholders of record as of June 9, 2017. This dividend includes the period from December 1, 2016 through March 31, 2017 to reflect the company’s transition to a calendar year fiscal period.

Conference Call

Global Payments’ management will host a conference call today, May 4, 2017 at 8:00 a.m. ET to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company’s website at www.globalpaymentsinc.com; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company’s website within two hours of the live call.

Non-GAAP Financial Measures

Global Payments supplemented revenues, income and earnings per share information determined in accordance with GAAP by providing those measures on an adjusted basis in this earnings release to assist with evaluating performance. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors the company believes are pertinent to the daily management of our operations.

Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments

Global Payments Inc. (GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our technologies, partnerships and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world.

Headquartered in Atlanta, Georgia with more than 8,500 employees worldwide, Global Payments is a member of the S&P 500 with merchants and partners in 30 countries throughout North America, Europe, the Asia-Pacific region and Brazil. For more information about Global Payments, our Service. Driven. Commerce brand and our technologies, please visit www.globalpaymentsinc.com.

Forward-Looking Statements

This announcement and comments made by Global Payments’ management during the conference call may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management’s expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include our potential failure to safeguard our data; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; increased merchant, referral partner or ISO attrition; our ability to increase our share of existing markets and expand into new markets; political, economic and regulatory changes in the foreign countries in which we operate; system interruptions in service; increases in credit card network fees; future performance, integration and conversion of acquired operations; and other risk factors presented in our Transition Report on Form 10-K for the seven months ended December 31, 2016 and any subsequent SEC filings, which we advise you to review. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

SCHEDULE 1
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended
March 31,
March 31,
%
2017
2016
Change
Revenues
$ 919,762
$ 626,259
46.9 %
Operating expenses:
Cost of service
455,936
248,187
83.7 %
Selling, general and administrative
358,856
283,499
26.6 %
814,792
531,686
53.2 %
Operating income
104,970
94,573
11.0 %
Interest and other income
1,607
1,282
25.4 %
Interest and other expense
(41,297 )
(13,075 )
215.8 %
(39,690 )
(11,793 )
236.6 %
Income before income taxes
65,280
82,780
(21.1 )%
Provision for income taxes
(12,321 )
(19,333 )
(36.3 )%
Net income
52,959
63,447
(16.5 )%
Less: Net income attributable to noncontrolling interests, net of
(4,146 )
(3,536 )
17.3 %
income tax
Net income attributable to Global Payments
$
48,813
$
59,911
(18.5 )%
Earnings per share attributable to Global Payments:
Basic
$
0.32
$
0.46
(30.4 )%
Diluted
$
0.32
$
0.46
(30.4 )%
Weighted-average number of shares outstanding:
Basic
152,304
129,268
Diluted
153,255
130,137
SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended
March 31,
March 31,
%
2017
2016
Change
Adjusted net revenue
$ 803,879
$ 479,599
67.6 %
Adjusted operating income
$ 228,749
$ 131,635
73.8 %
Adjusted net income
$ 130,034
$
83,547
55.6 %
Adjusted EPS:
$
0.85
$
0.64
32.8 %
See Schedule 6 for a reconciliation of each non-GAAP financial
measure to the most comparable GAAP measure and Schedule 8 for a
discussion of non-GAAP financial measures.
SCHEDULE 3
SEGMENT INFORMATION (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended
March 31, 2017
March 31, 2016
% Change
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
Revenues:
North America
$ 687,044
$ 597,482
$ 427,860
$ 297,957
60.6 %
100.5 %
Europe
165,549
139,228
144,119
127,362
14.9 %
9.3 %
Asia-Pacific
67,169
67,169
54,280
54,280
23.7 %
23.7 %
$ 919,762
$ 803,879
$ 626,259
$ 479,599
46.9 %
67.6 %
Operating income:
North America
$
94,083
$ 172,377
$
65,190
$
78,649
44.3 %
119.2 %
Europe
54,507
63,908
55,778
61,638
(2.3 )%
3.7 %
Asia-Pacific
19,754
20,970
14,559
16,597
35.7 %
26.3 %
Corporate
(63,374 )
(28,506 )
(40,954 )
(25,249 )
54.7 %
12.9 %
$ 104,970
$ 228,749
$
94,573
$ 131,635
11.0 %
73.8 %
(1)See Schedule 7 for a reconciliation of adjusted net
revenue and adjusted operating income by segment to the most
comparable GAAP measures and Schedule 8 for a discussion of
non-GAAP financial measures.
SCHEDULE 4
UNAUDITED CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
March 31, 2017
December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents
$ 1,261,845
$
1,162,779
Accounts receivable, net of allowances for doubtful accounts of
264,042
275,032
$1,280 and $1,092 respectively
Claims receivable, net of allowances for doubtful accounts of $5,740
7,961
8,202
and $5,786, respectively
Settlement processing assets
751,509
1,546,854
Prepaid expenses and other current assets
113,823
123,139
Total current assets
2,399,180
3,116,006
Goodwill
4,859,387
4,807,594
Other intangible assets, net
1,997,420
2,085,292
Property and equipment, net
551,951
526,370
Deferred income taxes
15,838
15,789
Other
135,940
113,299
Total assets
$ 9,959,716
$ 10,664,350
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit
$
276,403
$
392,072
Current portion of long-term debt
179,004
177,785
Accounts payable and accrued liabilities
824,319
804,887
Settlement processing obligations
813,136
1,477,212
Total current liabilities
2,092,862
2,851,956
Long-term debt
4,221,258
4,260,827
Deferred income taxes
636,908
676,472
Other noncurrent liabilities
132,397
95,753
Total liabilities
7,083,425
7,885,008
Commitments and contingencies
Equity:
Preferred stock, no par value; 5,000,000 shares authorized and none
--
--
issued
Common stock, no par value; 200,000,000 shares authorized;
--
--
152,502,543 issued and outstanding at March 31, 2017 and 152,185,616
issued and outstanding at December 31, 2016
Paid-in capital
1,826,166
1,816,278
Retained earnings
1,192,519
1,137,230
Accumulated other comprehensive loss
(287,806 )
(322,717 )
Total Global Payments shareholders’ equity
2,730,879
2,630,791
Noncontrolling interests
145,412
148,551
Total equity
2,876,291
2,779,342
Total liabilities and equity
$ 9,959,716
$ 10,664,350
SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended
March 31, 2017
March 31, 2016
Cash flows from operating activities:
Net income
$
52,959
$
63,447
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment
24,984
18,767
Amortization of acquired intangibles
84,049
20,545
Share-based compensation expense
8,816
7,047
Provision for operating losses and bad debts
13,482
6,553
Amortization of capitalized customer acquisition costs
8,948
--
Deferred income taxes
(19,391 )
(2,328 )
Other, net
4,692
2,598
Changes in operating assets and liabilities, net of the effects of
acquisitions:
Accounts receivable
11,929
52,461
Claims receivable
(6,557 )
(4,970 )
Settlement processing assets and obligations, net
122,948
66,233
Prepaid expenses and other assets
4,644
(12,587 )
Capitalized customer acquisition costs
(4,559 )
--
Accounts payable and other liabilities
(12,979 )
(9,553 )
Net cash provided by operating activities
293,965
208,213
Cash flows from investing activities:
Capital expenditures
(46,219 )
(24,367 )
Other, net
(422 )
(74 )
Net cash used in investing activities
(46,641 )
(24,441 )
Cash flows from financing activities:
Net payments on settlement lines of credit
(117,789 )
(135,071 )
Proceeds from long-term debt
149,000
142,000
Repayments of long-term debt
(189,732 )
(157,000 )
Payment of debt issuance costs
(896 )
(2,099 )
Repurchase of common stock
--
(2,901 )
Proceeds from stock issued under share-based compensation plans
1,149
179
Common stock repurchased - share-based compensation plans
(167 )
(527 )
Distributions to noncontrolling interests
(8 )
(4,740 )
Dividends paid
(1,522 )
(1,293 )
Net cash used in financing activities
(159,965 )
(161,452 )
Effect of exchange rate changes on cash
11,707
17,849
Increase in cash and cash equivalents
99,066
40,169
Cash and cash equivalents, beginning of the period
1,162,779
587,751
Cash and cash equivalents, end of the period
$ 1,261,845
$ 627,920
SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2017 AND 2016
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended March 31, 2017
GAAP
Net Revenue
Earnings
Income Taxes
Non-GAAP
Adjustments(1)
Adjustments(2)
on
Adjustments(3)
Revenues
$ 919,762
$
(115,883 )
$ --
$ --
$
803,879
Operating income
$ 104,970
$ --
$
123,779
$ --
$
228,749
Net income attributable to Global Payments
$
48,813
$ --
$
121,992
$
(40,771 )
$
130,034
Diluted earnings per share attributable to Global Payments(4)
$
0.32
$
0.85
Three Months Ended March 31, 2016
GAAP
Net Revenue
Earnings
Income Taxes
Non-GAAP
Adjustments(1)
Adjustments(2)
on
Adjustments(3)
Revenues
$ 626,259
$
(146,660 )
$ --
$ --
$
479,599
Operating income
$
94,573
$ --
$
37,062
$ --
$
131,635
Net income attributable to Global Payments
$
59,911
$ --
$
35,996
$
(12,360 )
$
83,547
Diluted earnings per share attributable to Global Payments(4)
$
0.46
$
0.64
(1)Represents adjustments to revenues for gross-up
related payments (included in operating expenses) associated with
certain lines of business to reflect economic benefits to the
company.
(2)Earnings adjustments to operating income for the
three months ended March 31, 2017 include $86.3 million and $37.5
million in cost of service and selling, general and administrative
expenses, respectively. Adjustments to cost of service include
amortization of acquired intangibles of $84.6 million and employee
termination expenses of $1.7 million. Adjustments to selling,
general and administrative expenses include share-based
compensation expense of $8.8 million, merger-related costs of
$26.1 million, and employee termination expenses of $2.6 million.
Earnings adjustments to operating income for the three months
ended March 31, 2016 include $21.1 million and $16.0 million in
cost of service and selling, general and administrative expenses,
respectively. Adjustments to cost of service represent
amortization of acquired intangibles of $21.1 million. Adjustments
to selling, general and administrative expenses include
share-based compensation expense of $7.0 million, merger-related
costs of $8.7 million and $0.3 million of other adjustments.
(3)Income taxes on adjustments reflect the tax effect of
earnings adjustments to income before income taxes. The tax rate
used in determining the tax impact of earnings adjustments is
either the jurisdictional statutory rate in effect at the time of
the adjustment or the jurisdictional expected annual effective tax
rate for the period, depending on the nature and timing of the
adjustment.
(4)Adjusted EPS is calculated by dividing adjusted net
income attributable to Global Payments by the diluted
weighted-average number of shares outstanding.
See "Non-GAAP Financial Measures" discussion on Schedule 8.
SCHEDULE 7
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP
MEASURES (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2017 AND 2016
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended March 31, 2017
Three Months Ended March 31, 2016
GAAP
Net Revenue
Earnings
Non-
GAAP
Net Revenue
Earnings
Non-
Adjustments(1)
Adjustments(2)
GAAP
Adjustments(1)
Adjustments(2)
GAAP
Revenues:
North America
$ 687,044
$
(89,562 )
$ --
$ 597,482
$ 427,860
$
(129,903 )
$ --
$ 297,957
Europe
165,549
(26,321 )
--
139,228
144,119
(16,757 )
--
127,362
Asia-Pacific
67,169
--
--
67,169
54,280
--
--
54,280
$ 919,762
$
(115,883 )
$ --
$ 803,879
$ 626,259
$
(146,660 )
$ --
$ 479,599
Operating income:
North America
$
94,083
$ --
$
78,294
$ 172,377
$
65,190
$ --
$
13,459
$
78,649
Europe
54,507
--
9,401
63,908
55,778
--
5,860
61,638
Asia-Pacific
19,754
--
1,216
20,970
14,559
--
2,038
16,597
Corporate
(63,374 )
--
34,868
(28,506 )
(40,954 )
--
15,705
(25,249 )
$ 104,970
$ --
$
123,779
$ 228,749
$
94,573
$ --
$
37,062
$ 131,635
(1)Represents adjustments to revenues for gross-up
related payments (included in operating expenses) associated with
certain lines of business to reflect economic benefits to the
company.
(2)Earnings adjustments to operating income for the
three months ended March 31, 2017 include $86.3 million and $37.5
million in cost of service and selling, general and administrative
expenses, respectively. Adjustments to cost of service include
amortization of acquired intangibles of $84.6 million and employee
termination expenses of $1.7 million. Adjustments to selling,
general and administrative expenses include share-based
compensation expense of $8.8 million, merger-related costs of
$26.1 million, and employee termination expenses of $2.6 million.
Earnings adjustments to operating income for the three months
ended March 31, 2016 include $21.1 million and $16.0 million in
cost of service and selling, general and administrative expenses,
respectively. Adjustments to cost of service represent
amortization of acquired intangibles of $21.1 million. Adjustments
to selling, general and administrative expenses include
share-based compensation expense of $7.0 million, merger-related
costs of $8.7 million and $0.3 million of other adjustments.
See "Non-GAAP Financial Measures" discussion on Schedule 8.
SCHEDULE 8
OUTLOOK SUMMARY (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
2016 Actual
2017 Outlook
% Change
Revenues:
GAAP revenue
$3.37
$3.81 to $3.89
13% to 15%
Adjustments(1)
(0.53 )
(0.43 )
Adjusted net revenue
$2.84
$3.38 to $3.46
19% to 22%
Earnings Per Share ("EPS"):
GAAP diluted EPS
$1.37
$1.91 to $2.08
39% to 52%
Acquisition-related amortization expense, share-based compensation
1.82
1.87
expense and other items(2)
Adjusted EPS
$3.19
$3.78 to $3.95
19% to 24%
(1)Represents adjustments to revenues for gross-up
related payments (included in operating expenses) associated with
certain lines of business to reflect economic benefits to the
company.
(2) Adjustments to Calendar 2016 GAAP diluted EPS include
acquisition related amortization expense of $1.17, share-based
compensation expense of $0.14 and net other items of $0.51,
including merger-related costs of $0.62 and a $0.16 adjustment to
remove a gain on the sale of membership interests in Visa Europe.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income and earnings per share ("EPS") information determined in accordance with U.S. GAAP by providing these measures with certain adjustments (such measures being non-GAAP financial measures) in this document to assist with evaluating our performance. In addition to GAAP measures, management uses these non-GAAP financial measures to focus on the factors the company believes are pertinent to the daily management of our operations. Management believes adjusted net revenue more closely reflects the economic benefits to the company’s core business and allows for better comparisons with industry peers. Management uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation. Adjusted net revenue, adjusted operating income, adjusted net income and adjusted EPS should be considered in addition to, and not as substitutes for, revenues, operating income, net income and EPS determined in accordance with GAAP. The non-GAAP financial measures reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

Adjusted net revenue excludes gross-up related payments associated with certain lines of business to reflect economic benefits to the company. On a GAAP basis, these payments are presented gross in both revenues and operating expenses.

Adjusted operating income, adjusted net income and adjusted EPS exclude acquisition-related amortization expense, share-based compensation and certain other items specific to each reporting period as more fully described in the accompanying reconciliations in Schedules 6 and 7. The tax rate used in determining the net income impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.

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SOURCE: Global Payments Inc.

Global Payments Inc.
Investor contact:
Isabel Janci, 770-829-8478
investor.relations@globalpay.com
or
Media contact:
Amy Corn, 770-829-8755
media.relations@globalpay.com