GPN
$68.13
Global Payments
$1.71
2.57%
Earnings Details
1st Quarter August 2016
Wednesday, October 05, 2016 6:58:00 AM
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Summary

Global Payments Beats

Global Payments (GPN) reported 1st Quarter August 2016 earnings of $0.89 per share on revenue of $939.5 million. The consensus earnings estimate was $0.82 per share on revenue of $812.4 million. The Earnings Whisper number was $0.86 per share. Revenue grew 25.5% on a year-over-year basis.

The company said it now expects fiscal 2017 non-GAAP earnings of $3.45 to $3.55 per share and continues to expect revenue of $3.20 billion to $3.30 billion. The company's previous guidance was earnings of $3.40 to $3.50 per share and the current consensus earnings estimate is $3.47 per share on revenue of $3.24 billion for the year ending May 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
$0.89
Earnings Whisper
$0.86
Consensus Estimate
$0.82
Reported Revenue
$939.5 Mil
Revenue Estimate
$812.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Global Payments Reports First Quarter Earnings and Increases Fiscal 2017 Outlook

Global Payments Inc. (GPN) today announced results for its fiscal first quarter ended August 31, 2016.

"Our fiscal 2017 is off to a terrific start, with organic growth accelerating sequentially across our key markets in the first quarter," said Jeff Sloan, Chief Executive Officer. "Heartland continued its strong growth momentum in the United States. Our businesses in Europe performed exceptionally well, and our Asia business produced its highest rate of organic revenue growth in several quarters." Sloan concluded, "We also could not be more pleased with our Heartland integration efforts, which continue to track ahead of our expectations."

First Quarter Fiscal 2017 Summary

GAAP revenues were $939.5 million, compared to $748.8 million in the first quarter of fiscal 2016; diluted earnings per share were $0.55 compared to $0.66 in the prior year; and operating margin was 12.9% compared to 18.4% in the first quarter of fiscal 2016.

Adjusted net revenue grew 52% to $817.3 million, compared to $537.0 million in the first quarter of fiscal 2016. On a constant currency basis, adjusted net revenue grew 55%.

Adjusted earnings per share grew 9% to $0.86, compared to $0.79 in the first quarter of fiscal 2016. On a constant currency basis, adjusted earnings per share grew 15%.

Adjusted operating margin was 29.5%, which includes the impact of Heartland. On a constant currency basis, adjusted operating margin was 29.9%.

Fiscal 2017 Outlook

"As a result of our strong first quarter performance and progress with Heartland integration efforts, we are increasing our outlook for fiscal 2017 adjusted earnings per share to a range of $3.45 to $3.55, reflecting growth of 16% to 19% over fiscal 2016," stated Cameron Bready, Executive Vice President and Chief Financial Officer. "We also now expect adjusted operating margin for fiscal 2017 to expand by as much as 50 basis points. We continue to expect adjusted net revenue to range from $3.2 billion to $3.3 billion, or growth of 47% to 52% over fiscal 2016."

Capital Allocation

Global Payments’ Board of Directors approved a quarterly dividend of $0.01 per share payable November 25, 2016 to shareholders of record as of November 11, 2016.

Conference Call

Global Payments’ management will host a conference call today, October 5, 2016 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 most recent Annual Report on Form 10-K 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
August 31,
August 31,
% Change
2016
2015
Revenues
$ 939,492
$ 748,796
25.5 %
Operating expenses:
Cost of service
462,626
272,666
69.7 %
Selling, general and administrative
355,760
338,358
5.1 %
818,386
611,024
33.9 %
Operating income
121,106
137,772
(12.1 )%
Interest and other income
42,473
1,142
NM
Interest and other expense
(43,077 )
(13,243 )
225.3 %
(604 )
(12,101 )
(95.0 )%
Income before income taxes
120,502
125,671
(4.1 )%
Provision for income taxes
(28,044 )
(32,623 )
(14.0 )%
Net income
92,458
93,048
(0.6 )%
Less: Net income attributable to noncontrolling interests, net of
(7,365 )
(6,402 )
15.0 %
income tax
Net income attributable to Global Payments
$
85,093
$
86,646
(1.8 )%
Earnings per share attributable to Global Payments(1):
Basic
$
0.55
$
0.66
(16.7 )%
Diluted
$
0.55
$
0.66
(16.7 )%
Weighted-average shares outstanding(1):
Basic
153,901
130,328
Diluted
154,875
131,146
(1) Earnings per share data and weighted-average shares
outstanding for prior periods have been adjusted for a two-for-one
stock split in the form of a stock dividend paid on November 2,
2015.
NM - Not meaningful.
SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended
August 31,
August 31,
% Change
2016
2015
Adjusted net revenue
$ 817,255
$ 536,953
52.2 %
Adjusted operating income
$ 240,718
$ 163,566
47.2 %
Adjusted net income
$ 133,682
$ 103,025
29.8 %
Adjusted EPS(1):
$
0.86
$
0.79
8.9 %
(1) Earnings per share data and weighted-average shares
outstanding for prior periods have been adjusted for a two-for-one
stock split in the form of a stock dividend paid on November 2,
2015.
(2) 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
August 31, 2016
August 31, 2015
% Change
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
Revenues:
North America
$ 711,765
$ 608,671
$ 530,857
$ 340,431
34.1 %
78.8 %
Europe
169,565
150,422
168,357
146,940
0.7 %
2.4 %
Asia-Pacific
58,162
58,162
49,582
49,582
17.3 %
17.3 %
$ 939,492
$ 817,255
$ 748,796
$ 536,953
25.5 %
52.2 %
Operating income:
North America
$ 105,700
$ 178,361
$
83,513
$
96,966
26.6 %
83.9 %
Europe
65,539
72,113
72,733
77,031
(9.9 )%
(6.4 )%
Asia-Pacific
14,022
16,490
12,233
13,810
14.6 %
19.4 %
Corporate
(64,155 )
(26,246 )
(30,707 )
(24,241 )
108.9 %
8.3 %
$ 121,106
$ 240,718
$ 137,772
$ 163,566
(12.1 )%
47.2 %
(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)
August 31, 2016
May 31, 2016
ASSETS
Current assets:
Cash and cash equivalents
$
977,776
$
1,044,728
Accounts receivable, net of allowances for doubtful accounts of $326
286,645
281,612
and $353, respectively
Claims receivable, net of allowances for doubtful accounts of $5,106
7,974
6,799
and $4,868, respectively
Settlement processing assets
1,105,470
1,336,326
Prepaid expenses and other current assets
206,964
181,848
Total current assets
2,584,829
2,851,313
Goodwill
4,849,015
4,829,405
Other intangible assets, net
2,211,954
2,264,708
Property and equipment, net
512,079
493,678
Deferred income taxes
20,921
22,719
Other
58,982
48,129
Total assets
$ 10,237,780
$ 10,509,952
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit
$
332,078
$
378,436
Current portion of long-term debt
182,012
135,542
Accounts payable and accrued liabilities
702,277
696,414
Settlement processing obligations
1,015,805
1,220,315
Total current liabilities
2,232,172
2,430,707
Long-term debt
4,289,666
4,379,744
Deferred income taxes
724,023
744,862
Other noncurrent liabilities
86,707
77,235
Total liabilities
7,332,568
7,632,548
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;
--
--
153,684,060 issued and outstanding at August 31, 2016 and
154,421,585 issued and outstanding at May 31, 2016
Paid-in capital
1,913,164
1,976,715
Retained earnings
1,099,026
1,015,811
Accumulated other comprehensive loss
(265,511 )
(246,050 )
Total Global Payments shareholders’ equity
2,746,679
2,746,476
Noncontrolling interests
158,533
130,928
Total equity
2,905,212
2,877,404
Total liabilities and equity
$ 10,237,780
$ 10,509,952
SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended
August 31, 2016
August 31, 2015
Cash flows from operating activities:
Net income
$
92,458
$
93,048
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment
22,657
17,909
Amortization of acquired intangibles
80,529
20,848
Share-based compensation expense
7,619
6,467
Provision for operating losses and bad debts
9,626
4,263
Deferred income taxes
(20,861 )
3,584
Gain on sale of investments
(41,150 )
--
Other, net
8,855
1,333
Changes in operating assets and liabilities, net of the effects of
acquisitions:
Accounts receivable
(7,726 )
(7,512 )
Claims receivable
(7,097 )
(12,261 )
Settlement processing assets and obligations, net
30,409
402,676
Prepaid expenses and other assets
(50,498 )
(18,114 )
Accounts payable and other liabilities
30,846
1,151
Net cash provided by operating activities
155,667
513,392
Cash flows from investing activities:
Business acquisitions, net of cash acquired
(34,563 )
(241,530 )
Capital expenditures
(41,381 )
(16,858 )
Proceeds from sale of investments
37,717
--
Net cash used in investing activities
(38,227 )
(258,388 )
Cash flows from financing activities:
Net payments on settlement lines of credit
(47,336 )
(236,041 )
Proceeds from issuance of long-term debt
215,000
2,821,425
Principal payments of long-term debt
(261,219 )
(2,626,925 )
Payment of debt issuance costs
--
(4,934 )
Repurchase of common stock
(67,633 )
(34,296 )
Proceeds from stock issued under share-based compensation plans
3,037
2,513
Common stock repurchased - share-based compensation plans
(22,204 )
(8,154 )
Tax benefit from share-based compensation plans
12,303
5,760
Distributions to noncontrolling interests
(5,475 )
(8,158 )
Dividends paid
(1,539 )
(1,305 )
Net cash used in financing activities
(175,066 )
(90,115 )
Effect of exchange rate changes on cash
(9,326 )
(12,319 )
(Decrease) increase in cash and cash equivalents
(66,952 )
152,570
Cash and cash equivalents, beginning of the period
1,044,728
650,739
Cash and cash equivalents, end of the period
$ 977,776
$ 803,309
SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
(UNAUDITED)
THREE MONTHS ENDED AUGUST 31, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended August 31, 2016
GAAP
Net Revenue
Earnings
Income Taxes
Non-GAAP
Adjustments(1)
Adjustments(2)
on
Adjustments(3)
Revenues
$ 939,492
$
(122,237 )
$ --
$ --
$
817,255
Operating income
$ 121,106
$ --
$
119,612
$ --
$
240,718
Net income attributable to Global Payments
$
85,093
$ --
$
76,992
$
(28,403 )
$
133,682
Diluted earnings per share attributable to Global Payments(4)
$
0.55
$
0.86
Three Months Ended August 31, 2015
GAAP
Net Revenue
Earnings
Income Taxes
Non-GAAP
Adjustments(1)
Adjustments(2)
on
Adjustments(3)
Revenues
$ 748,796
$
(211,843 )
$ --
$ --
$
536,953
Operating income
$ 137,772
$ --
$
25,794
$ --
$
163,566
Net income attributable to Global Payments
$
86,646
$ --
$
24,916
$
(8,537 )
$
103,025
Diluted earnings per share attributable to Global Payments(4)
$
0.66
$
0.79
(1)Represents adjustments to revenues for gross-up
related payments (included in operating expenses) associated with
certain wholesale lines of business to reflect economic benefits
to the company.
(2)Earnings adjustments to operating income for the
three months ended August 31, 2016 include $81.7 million and $37.9
million in cost of service and selling, general and administrative
expenses, respectively. Adjustments to cost of service include
amortization of acquired intangibles of $81.1 million and other
adjustments of $0.6 million. Adjustments to selling, general and
administrative expenses include share-based compensation expense
of $7.4 million and merger-related costs of $30.5 million. Net
income attributable to Global Payments was also adjusted to remove
a gain on the sale of membership interests in Visa Europe of $41.2
million.
Earnings adjustments to operating income for the three months
ended August 31, 2015 include $19.3 million and $6.5 million in
cost of service and selling, general and administrative expenses,
respectively. Adjustments to cost of service represent
amortization of acquired intangibles of $20.8 million and other
adjustments of $1.5 million. Adjustments to selling, general and
administrative expenses include share-based compensation expense
of $6.5 million.
(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. The shares
outstanding and diluted earnings per share for prior periods have
been adjusted for a two-for-one stock split in the form of a stock
dividend paid on November 2, 2015.
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 AUGUST 31, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended August 31, 2016
Three Months Ended August 31, 2015
GAAP
Net Revenue
Earnings
Non-
GAAP
Net Revenue
Earnings
Non-
Adjustments(1)
Adjustments(2)
GAAP
Adjustments(1)
Adjustments(2)
GAAP
Revenues:
North America
$ 711,765
$
(103,094 )
$ --
$ 608,671
$ 530,857
$
(190,426 )
$ --
$ 340,431
Europe
169,565
(19,143 )
--
150,422
168,357
(21,417 )
--
146,940
Asia-Pacific
58,162
--
--
58,162
49,582
--
--
49,582
$ 939,492
$
(122,237 )
$ --
$ 817,255
$ 748,796
$
(211,843 )
$ --
$ 536,953
Operating income:
North America
$ 105,700
$ --
$
72,661
$ 178,361
$
83,513
$ --
$
13,453
$
96,966
Europe
65,539
--
6,574
72,113
72,733
--
4,298
77,031
Asia-Pacific
14,022
--
2,468
16,490
12,233
--
1,577
13,810
Corporate
(64,155 )
--
37,909
(26,246 )
(30,707 )
--
6,466
(24,241 )
$ 121,106
$ --
$
119,612
$ 240,718
$ 137,772
$ --
$
25,794
$ 163,566
(1)Represents adjustments to revenues for gross-up
related payments (included in operating expenses) associated with
certain wholesale lines of business to reflect economic benefits
to the company.
(2)Earnings adjustments to operating income for the
three months ended August 31, 2016 include $81.7 million and $37.9
million in cost of service and selling, general and administrative
expenses, respectively. Adjustments to cost of service include
amortization of acquired intangibles of $81.1 million and other
adjustments of $0.6 million. Adjustments to selling, general and
administrative expenses include share-based compensation expense
of $7.4 million and merger-related costs of $30.5 million.
Earnings adjustments to operating income for the three months
ended August 31, 2015 include $19.3 million and $6.5 million in
cost of service and selling, general and administrative expenses,
respectively. Adjustments to cost of service represent
amortization of acquired intangibles of $20.8 million and other
adjustments of $1.5 million. Adjustments to selling, general and
administrative expenses include share-based compensation expense
of $6.5 million.
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)
Fiscal 2016
Fiscal 2017
% Change
Actual
Outlook
Revenues:
GAAP revenues
$
2.90
$3.70 to $3.80
28% to 31%
Adjustments(1)
(0.73 )
(0.50 )
Adjusted net revenue
$
2.17
$3.20 to $3.30
47% to 52%
Earnings Per Share ("EPS"):
GAAP diluted EPS
$
2.04
$1.88 to $1.98
(8)% to (3)%
Acquisition-related amortization expense, share-based compensation
0.94
1.57
expense and non-recurring items(2)
Adjusted EPS
$
2.98
$3.45 to $3.55
16% to 19%
(1)Represents adjustments to revenues for gross-up
related payments (included in operating expenses) associated with
certain wholesale lines of business to reflect economic benefits
to the company.
(2)Fiscal 2016 reflects adjustments for acquisition
related amortization expense of $0.58, share-based compensation
expense of $0.14 and non-recurring items of $0.22, including
merger-related costs, employee termination benefits and a reserve
for litigation in Russia, partially offset by recoveries
associated with a U.K. vendor outage. Earnings adjustments to GAAP
diluted EPS include the items affecting operating income as well
as noncontrolling interests, net of tax.

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 wholesale 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 Schedule 6 and Schedule 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