GPN
$102.43
Global Payments
($.78)
(.76%)
Earnings Details
3rd Quarter September 2017
Wednesday, November 08, 2017 6:55:00 AM
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Summary

Global Payments Beats

Global Payments (GPN) reported 3rd Quarter September 2017 earnings of $1.20 per share on revenue of $1.0 billion. The consensus earnings estimate was $1.10 per share. The Earnings Whisper number was $1.13 per share.

The company said it expects 2017 non-GAAP earnings of $3.94 to $4.02 per share on revenue of $3.505 billion to $3.530 billion. The company's previous guidance was earnings of $3.85 to $4.00 per share on revenue of $3.40 billion to $3.475 billion and the current consensus earnings estimate is $3.95 per share on revenue of $3.49 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
$1.20
Earnings Whisper
$1.13
Consensus Estimate
$1.10
Reported Revenue
$1.04 Bil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Global Payments Reports Third Quarter 2017 Earnings and Increases 2017 Outlook

Global Payments Inc. (GPN) today announced results for the third quarter ended September 30, 2017.

"We delivered another quarter of double digit organic adjusted net revenue growth, underscoring the ongoing successful execution of our technology enabled, software driven strategy," said Jeff Sloan, Chief Executive Officer. "Our integrated and vertical markets and ecommerce and omnichannel solutions businesses, which now comprise 40% of our adjusted net revenue, provide further opportunities for sustained share gains. Additionally, we are delighted with the pace of revenue cross-sell efforts around the world from our recent acquisitions, which positions us well for future growth."

Third Quarter 2017 Summary

GAAP revenues were $1,038.9 million, compared to $951.9 million in the third quarter of 2016; diluted earnings per share were $0.71 compared to $0.36 in the prior year; and operating margin was 16.6% compared to 12.6% in the third quarter of 2016.

Adjusted net revenue grew 12% to $930.4 million, compared to $828.4 million in the third quarter of 2016.

Adjusted earnings per share grew 29% to $1.15, compared to $0.89 in the third quarter of 2016.

-- Adjusted operating margin expanded 110 basis points to 31.3%.

2017 Outlook

"We are very pleased with our performance in the third quarter and year-to-date period, again delivering results in excess of our targets for the business," stated Cameron Bready, Senior Executive Vice President and Chief Financial Officer. "As a result of this strong performance and to reflect the impacts of the ACTIVE Network transaction, we are increasing our outlook for 2017. We now expect adjusted net revenue to range from $3.505 billion to $3.53 billion, or growth of 23% to 24% over 2016 and adjusted earnings per share to be in a range of $3.94 to $4.02, reflecting growth of 24% to 26% over 2016. We continue to expect adjusted operating margin to expand by as much as 120 basis points."

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.01 per share payable December 29, 2017 to shareholders of record as of December 15, 2017.

Conference Call

Global Payments’ management will host a conference call today, November 8, 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 10,000 employees worldwide, Global Payments is a member of the S&P 500 with customers 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, 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 ability to safeguard our data; increased competition from larger companies and non-traditional competitors, our ability to update our services in a timely manner; 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; potential systems interruptions or failures; software defects or undetected errors; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; change in laws, regulations or network rules or interpretations thereof; foreign currency exchange and interest rate risks; political, economic and regulatory changes in the foreign countries in which we operate; future performance, integration and conversion of acquired operations; including without limitation difficulties and delays in integrating the Heartland or ACTIVE Network businesses or fully realizing cost savings and other benefits of the acquisitions at all or within the expected time period; fully realizing anticipated annual interest expense savings from refinancing our corporate debt facilities; our loss of key personnel and other risk factors presented in Item 1- Risk Factors of 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. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. 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
Nine Months Ended
September 30
September 30
2017
2016
% Change
2017
2016
% Change
Revenues
$ 1,038,907
$ 951,885
9.1 %
$ 2,920,910
$ 2,420,789
20.7 %
Operating expenses:
Cost of service
493,883
469,980
5.1 %
1,418,969
1,125,041
26.1 %
Selling, general and administrative
372,553
361,516
3.1 %
1,092,648
1,019,626
7.2 %
866,436
831,496
4.2 %
2,511,617
2,144,667
17.1 %
Operating income
172,471
120,389
43.3 %
409,293
276,122
48.2 %
Interest and other income
2,347
1,465
60.2 %
5,787
45,312
(87.2 )%
Interest and other expense
(40,764 )
(45,609 )
(10.6 )%
(130,422 )
(95,280 )
36.9 %
(38,417 )
(44,144 )
(13.0 )%
(124,635 )
(49,968 )
149.4 %
Income before income taxes
134,054
76,245
75.8 %
284,658
226,154
25.9 %
Provision for income taxes
(15,692 )
(14,021 )
11.9 %
(40,893 )
(33,350 )
22.6 %
Net income
118,362
62,224
90.2 %
243,765
192,804
26.4 %
Less: Net income attributable to noncontrolling interests, net of
(7,622 )
(6,714 )
13.5 %
(17,302 )
(15,150 )
14.2 %
income tax
Net income attributable to Global Payments
$
110,740
$
55,510
99.5 %
$
226,463
$
177,654
27.5 %
Earnings per share attributable to Global Payments:
Basic
$
0.72
$
0.36
100.0 %
$
1.48
$
1.24
19.4 %
Diluted
$
0.71
$
0.36
97.2 %
$
1.47
$
1.23
19.5 %
Weighted-average number of shares outstanding:
Basic
154,560
153,668
153,138
143,794
Diluted
155,402
154,530
154,079
144,731
SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL
PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per
share data)
Three Months Ended
Nine Months Ended
September 30
September 30
2017
2016
% Change
2017
2016
% Change
Adjusted net revenue
$ 930,411
$ 828,436
12.3 %
$ 2,582,231
$ 2,024,346
27.6 %
Adjusted operating income
$ 290,773
$ 249,943
16.3 %
$
767,260
$
581,749
31.9 %
Adjusted net income
$ 178,313
$ 137,925
29.3 %
$
452,714
$
335,736
34.8 %
Adjusted EPS
$
1.15
$
0.89
29.2 %
$
2.94
$
2.32
26.7 %
See Schedules 6 and 7 for a reconciliation of each non-GAAP
financial measure to the most comparable GAAP measure and Schedule
10 for a discussion of non-GAAP financial measures.
SCHEDULE 3
SEGMENT INFORMATION (UNAUDITED)
GLOBAL
PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended
September 30, 2017
September 30, 2016
% Change
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
Revenues:
North America
$
764,902
$
685,776
$
718,977
$
618,712
6.4 %
10.8 %
Europe
205,203
175,833
173,246
150,062
18.4 %
17.2 %
Asia-Pacific
68,802
68,802
59,662
59,662
15.3 %
15.3 %
$ 1,038,907
$
930,411
$
951,885
$
828,436
9.1 %
12.3 %
Operating income:
North America
$
138,345
$
216,870
$
110,983
$
188,197
24.7 %
15.2 %
Europe
76,214
83,130
63,727
71,017
19.6 %
17.1 %
Asia-Pacific
20,032
22,197
14,657
17,291
36.7 %
28.4 %
Corporate
(62,120 )
(31,424 )
(68,978 )
(26,562 )
(9.9 )%
18.3 %
$
172,471
$
290,773
$
120,389
$
249,943
43.3 %
16.3 %
Nine Months Ended
September 30, 2017
September 30, 2016
% Change
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
GAAP
Non-GAAP(1)
Revenues:
North America
$ 2,162,911
$ 1,907,670
$ 1,770,957
$ 1,435,680
22.1 %
32.9 %
Europe
557,258
473,820
479,620
418,454
16.2 %
13.2 %
Asia-Pacific
200,741
200,741
170,212
170,212
17.9 %
17.9 %
$ 2,920,910
$ 2,582,231
$ 2,420,789
$ 2,024,346
20.7 %
27.6 %
Operating income:
North America
$
344,604
$
574,391
$
258,648
$
409,302
33.2 %
40.3 %
Europe
196,394
219,305
172,293
199,612
14.0 %
9.9 %
Asia-Pacific
57,321
62,756
40,266
49,021
42.4 %
28.0 %
Corporate
(189,026 )
(89,192 )
(195,085 )
(76,186 )
(3.1 )%
17.1 %
$
409,293
$
767,260
$
276,122
$
581,749
48.2 %
31.9 %
(1)See Schedules 8 and 9 for a reconciliation of
adjusted net revenue and adjusted operating income by segment to
the most comparable GAAP measures and Schedule 10 for a discussion
of non-GAAP financial measures.
SCHEDULE 4
UNAUDITED CONSOLIDATED BALANCE SHEETS
GLOBAL
PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share
data)
September 30,
December 31,
2017
2016
ASSETS
Current assets:
Cash and cash equivalents
$
1,186,050
$
1,162,779
Accounts receivable, net of allowances for doubtful accounts of
296,366
275,032
$1,423 and $1,092, respectively
Settlement processing assets
1,847,232
1,546,854
Prepaid expenses and other current assets
220,649
131,341
Total current assets
3,550,297
3,116,006
Goodwill
5,616,414
4,807,594
Other intangible assets, net
2,328,709
2,085,292
Property and equipment, net
577,188
526,370
Deferred income taxes
16,736
15,789
Other noncurrent assets
192,205
113,299
Total assets
$ 12,281,549
$ 10,664,350
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit
$
487,513
$
392,072
Current portion of long-term debt
93,408
177,785
Accounts payable and accrued liabilities
992,363
804,887
Settlement processing obligations
1,550,627
1,477,212
Total current liabilities
3,123,911
2,851,956
Long-term debt
4,677,910
4,260,827
Deferred income taxes
632,648
676,472
Other noncurrent liabilities
152,127
95,753
Total liabilities
8,586,596
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;
--
--
158,762,894 issued and outstanding at September 30, 2017 and
152,185,616 issued and outstanding at December 31, 2016
Paid-in capital
2,376,331
1,816,278
Retained earnings
1,357,526
1,137,230
Accumulated other comprehensive loss
(202,508 )
(322,717 )
Total Global Payments shareholders’ equity
3,531,349
2,630,791
Noncontrolling interests
163,604
148,551
Total equity
3,694,953
2,779,342
Total liabilities and equity
$ 12,281,549
$ 10,664,350
SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In
thousands)
Nine Months Ended
September 30,
September 30,
2017
2016
Cash flows from operating activities:
Net income
$
243,765
$
192,804
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment
80,868
62,964
Amortization of acquired intangibles
249,095
173,345
Share-based compensation expense
30,771
26,060
Provision for operating losses and bad debts
37,203
26,069
Amortization of capitalized customer acquisition costs
32,863
9,337
Deferred income taxes
(51,093 )
(30,504 )
Gain on sale of investments
--
(41,150 )
Other, net
34,190
26,790
Changes in operating assets and liabilities, net of the effects of
acquisitions:
Accounts receivable
(6,070 )
14,216
Settlement processing assets and obligations, net
(232,713 )
(109 )
Prepaid expenses and other assets
(12,605 )
(27,474 )
Capitalized customer acquisition costs
(65,697 )
(45,425 )
Accounts payable and other liabilities
19,546
(19,491 )
Net cash provided by operating activities
360,123
367,432
Cash flows from investing activities:
Business acquisitions, net of cash acquired
(563,009 )
(1,825,975 )
Capital expenditures
(136,612 )
(102,442 )
Proceeds from sale of investments
--
37,783
Proceeds from sales of property and equipment
37,520
--
Other, net
(48,056 )
(1,409 )
Net cash used in investing activities
(710,157 )
(1,892,043 )
Cash flows from financing activities:
Net proceeds from (repayments of) settlement lines of credit
77,397
(952 )
Proceeds from long-term debt
1,713,324
3,263,045
Repayments of long-term debt
(1,386,721 )
(1,110,258 )
Payment of debt issuance costs
(9,520 )
(58,448 )
Repurchase of common stock
(32,811 )
(130,314 )
Proceeds from stock issued under share-based compensation plans
7,068
5,614
Common stock repurchased - share-based compensation plans
(21,171 )
(15,622 )
Proceeds from sale of subsidiary shares to noncontrolling interest
--
16,374
Distributions to noncontrolling interests
(9,301 )
(10,216 )
Dividends paid
(5,141 )
(4,376 )
Net cash provided by financing activities
333,124
1,954,847
Effect of exchange rate changes on cash
40,181
(7,142 )
Increase in cash and cash equivalents
23,271
423,094
Cash and cash equivalents, beginning of the period
1,162,779
587,751
Cash and cash equivalents, end of the period
$ 1,186,050
$ 1,010,845
SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES TO GAAP MEASURES (UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30, 2017 AND 2016
GLOBAL PAYMENTS INC. AND
SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended September 30, 2017
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 1,038,907
$
(108,496 )
$ --
$ --
$ 930,411
Operating income
$
172,471
$
2,008
$
116,294
$ --
$ 290,773
Net income attributable to Global Payments
$
110,740
$
2,008
$
114,496
$
(48,931 )
$ 178,313
Diluted earnings per share attributable to Global Payments(4)
$
0.71
$
1.15
Three Months Ended September 30, 2016
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$
951,885
$
(123,449 )
$ --
$ --
$ 828,436
Operating income
$
120,389
$ --
$
129,554
$ --
$ 249,943
Net income attributable to Global Payments
$
55,510
$ --
$
127,723
$
(45,308 )
$ 137,925
Diluted earnings per share attributable to Global Payments(4)
$
0.36
$
0.89
(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. For the three months ended September 30, 2017, includes
$2.0 million to eliminate the effect of acquisition accounting
fair value adjustments for software deferred revenue associated
with the ACTIVE Network transaction.
(2)Earnings adjustments to operating income for the
three months ended September 30, 2017 include $84.9 million in
cost of service and $31.4 million in selling, general and
administrative expenses. Adjustments to cost of service include
amortization of acquired intangibles of $84.5 million, $0.3
million of acquisition and integration costs and employee
termination costs of $0.1 million. Adjustments to selling, general
and administrative expenses include share-based compensation
expense of $9.9 million, acquisition and integration costs of
$21.2 million and employee termination costs of $0.3 million.
Earnings adjustments to operating income for the three months
ended September 30, 2016 include $87.0 million in cost of service
and $42.6 million in selling, general and administrative expenses.
Adjustments to cost of service include amortization of acquired
intangibles of $86.2 million and employee termination costs and
other adjustments of $0.8 million. Adjustments to selling, general
and administrative expenses include share-based compensation
expense of $8.4 million, acquisition and integration costs of
$34.0 million and employee termination costs and other adjustments
of $0.2 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. In addition, income taxes on adjustments for the three
months ended September 30, 2017 reflect the removal of a $7.7
million tax benefit associated with the vesting of share-based
awards.
(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 10.
SCHEDULE 7
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES TO GAAP MEASURES (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, 2017 AND 2016
GLOBAL PAYMENTS INC. AND
SUBSIDIARIES
(In thousands, except per share data)
Nine Months Ended September 30, 2017
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 2,920,910
$
(338,679 )
$ --
$ --
$ 2,582,231
Operating income
$
409,293
$
2,008
$
355,959
$ --
$
767,260
Net income attributable to Global Payments
$
226,463
$
2,008
$
357,372
$
(133,129 )
$
452,714
Diluted earnings per share attributable to Global Payments(4)
$
1.47
$
2.94
Nine Months Ended September 30, 2016
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 2,420,789
$
(396,443 )
$ --
$ --
$ 2,024,346
Operating income
$
276,122
$ --
$
305,627
$ --
$
581,749
Net income attributable to Global Payments
$
177,654
$ --
$
260,596
$
(102,514 )
$
335,736
Diluted earnings per share attributable to Global Payments(4)
$
1.23
$
2.32
(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. For the nine months ended September 30, 2017, includes
$2.0 million to eliminate the effect of acquisition accounting
fair value adjustments for software deferred revenue associated
with the ACTIVE Network transaction.
(2)Earnings adjustments to operating income for the nine
months ended September 30, 2017 include $252.8 million in cost of
service and $103.2 million in selling, general and administrative
expenses. Adjustments to cost of service include amortization of
acquired intangibles of $250.7 million, employee termination costs
of $1.8 million and acquisition and integration costs of $0.3
million. Adjustments to selling, general and administrative
expenses include share-based compensation expense of $31.1
million, acquisition and integration costs of $69.2 million and
employee termination costs of $2.9 million. Net income
attributable to Global Payments also reflects an adjustment to
remove a non-cash charge of $6.8 million associated with the
refinancing of our corporate credit facility.
Earnings adjustments to operating income for the nine months ended
September 30, 2016 include $176.1 million in cost of service and
$129.5 million in selling, general and administrative expenses.
Adjustments to cost of service represent amortization of acquired
intangibles of $175.0 million and employee termination costs and
other adjustments of $1.1 million. Adjustments to selling, general
and administrative expenses include share-based compensation
expense of $25.0 million, acquisition and integration costs of
$94.0 million, litigation related costs of $7.6 million and
employee termination costs and other adjustments of $2.9 million.
Net income attributable to Global Payments also reflects an
adjustment to remove a gain on the sale of membership interests in
Visa Europe of $41.2 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. In addition, income taxes on adjustments for the nine
months ended September 30, 2017 reflect the removal of a $2.4
million tax benefit associated with the elimination of a deferred
tax liability and the removal of a $4.0 million tax benefit
associated with the vesting of share-based awards. For the nine
months ended September 30, 2016, income taxes on adjustments
reflect the removal of a $10.9 million tax benefit associated with
our decision to indefinitely reinvest earnings in Canada.
(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 10.
SCHEDULE 8
RECONCILIATION OF SEGMENT NON-GAAP
FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
THREE
MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
GLOBAL PAYMENTS INC.
AND SUBSIDIARIES
(In thousands)
Three Months Ended September 30, 2017
Three Months Ended September 30, 2016
GAAP
Net Revenue
Earnings
Non-GAAP
GAAP
Net Revenue
Earnings
Non-GAAP
Adjustments(1)
Adjustments(2)
Adjustments(1)
Adjustments(2)
Revenues:
North America
$
764,902
$
(79,126 )
$ --
$ 685,776
$ 718,977
$
(100,265 )
$ --
$ 618,712
Europe
205,203
(29,370 )
--
175,833
173,246
(23,184 )
--
150,062
Asia-Pacific
68,802
--
--
68,802
59,662
--
--
59,662
$ 1,038,907
$ (108,496 )
$ --
$ 930,411
$ 951,885
$
(123,449 )
$ --
$ 828,436
Operating income:
North America
$
138,345
$
2,008
$
76,517
$ 216,870
$ 110,983
$ --
$
77,214
$ 188,197
Europe
76,214
--
6,916
83,130
63,727
--
7,290
71,017
Asia-Pacific
20,032
--
2,165
22,197
14,657
--
2,634
17,291
Corporate
(62,120 )
--
30,696
(31,424 )
(68,978 )
--
42,416
(26,562 )
$
172,471
$
2,008
$
116,294
$ 290,773
$ 120,389
$ --
$
129,554
$ 249,943
(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. For the three months ended September 30, 2017, includes
$2.0 million to eliminate the effect of acquisition accounting
fair value adjustments for software deferred revenue associated
with the ACTIVE Network transaction.
(2)Earnings adjustments to operating income for the
three months ended September 30, 2017 include $84.9 million in
cost of service and $31.4 million in selling, general and
administrative expenses. Adjustments to cost of service include
amortization of acquired intangibles of $84.5 million, $0.3
million of acquisition and integration costs and employee
termination costs of $0.1 million. Adjustments to selling, general
and administrative expenses include share-based compensation
expense of $9.9 million, acquisition and integration costs of
$21.2 million and employee termination costs of $0.3 million.
Earnings adjustments to operating income for the three months
ended September 30, 2016 include $87.0 million in cost of service
and $42.6 million in selling, general and administrative expenses.
Adjustments to cost of service include amortization of acquired
intangibles of $86.2 million and employee termination costs and
other adjustments of $0.8 million. Adjustments to selling, general
and administrative expenses include share-based compensation
expense of $8.4 million, acquisition and integration costs of
$34.0 million and employee termination costs and other adjustments
of $0.2 million.
See "Non-GAAP Financial Measures" discussion on Schedule 10.
SCHEDULE 9
RECONCILIATION OF SEGMENT NON-GAAP
FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
NINE
MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
GLOBAL PAYMENTS INC.
AND SUBSIDIARIES
(In thousands)
Nine Months Ended September 30, 2017
Nine Months Ended September 30, 2016
GAAP
Net Revenue
Earnings
Non-GAAP
GAAP
Net Revenue
Earnings
Non-GAAP
Adjustments(1)
Adjustments(2)
Adjustments(1)
Adjustments(2)
Revenues:
North America
$ 2,162,911
$ (255,241 )
$ --
$ 1,907,670
$ 1,770,957
$
(335,277 )
$ --
$ 1,435,680
Europe
557,258
(83,438 )
--
473,820
479,620
(61,166 )
--
418,454
Asia-Pacific
200,741
--
--
200,741
170,212
--
--
170,212
$ 2,920,910
$ (338,679 )
$ --
$ 2,582,231
$ 2,420,789
$
(396,443 )
$ --
$ 2,024,346
Operating income:
North America
$
344,604
$
2,008
$
227,779
$
574,391
$
258,648
$ --
$
150,654
$
409,302
Europe
196,394
--
22,911
219,305
172,293
--
27,319
199,612
Asia-Pacific
57,321
--
5,435
62,756
40,266
--
8,755
49,021
Corporate
(189,026 )
--
99,834
(89,192 )
(195,085 )
--
118,899
(76,186 )
$
409,293
$
2,008
$
355,959
$
767,260
$
276,122
$ --
$
305,627
$
581,749
(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. For the nine months ended September 30, 2017, includes
$2.0 million to eliminate the effect of acquisition accounting
fair value adjustments for software deferred revenue associated
with the ACTIVE Network transaction.
(2)Earnings adjustments to operating income for the nine
months ended September 30, 2017 include $252.8 million in cost of
service and $103.2 million in selling, general and administrative
expenses. Adjustments to cost of service include amortization of
acquired intangibles of $250.7 million, employee termination costs
of $1.8 million and acquisition and integration costs of $0.3
million. Adjustments to selling, general and administrative
expenses include share-based compensation expense of $31.1
million, acquisition and integration costs of $69.2 million and
employee termination costs of $2.9 million.
Earnings adjustments to operating income for the nine months ended
September 30, 2016 include $176.1 million in cost of service and
$129.5 million in selling, general and administrative expenses.
Adjustments to cost of service represent amortization of acquired
intangibles of $175.0 million and employee termination costs and
other adjustments of $1.1 million. Adjustments to selling, general
and administrative expenses include share-based compensation
expense of $25.0 million, acquisition and integration costs of
$94.0 million, litigation related costs of $7.6 million and
employee termination costs and other adjustments of $2.9 million.
See "Non-GAAP Financial Measures" discussion on Schedule 10.
SCHEDULE 10
OUTLOOK SUMMARY (UNAUDITED)
GLOBAL
PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per
share data)
2016 Actual
2017 Outlook
% Change
Revenues:
GAAP revenue
$
3.37
$3.945 to $3.97
17% to 18%
Adjustments(1)
(0.53 )
(0.44 )
Adjusted net revenue
$
2.84
$3.505 to $3.53
23% to 24%
Earnings Per Share ("EPS"):
GAAP diluted EPS
$
1.37
$1.97 to $2.05
44% to 50%
Acquisition-related amortization expense, share-based compensation
1.82
1.97
expense and other items(2)
Adjusted EPS
$
3.19
$3.94 to $4.02
24% to 26%
(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. For 2017, includes adjustments to eliminate the effect of
acquisition accounting fair value adjustments for software
deferred revenue associated with the ACTIVE Network transaction.
(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, a $0.16 adjustment to
remove a gain on the sale of membership interests in Visa Europe
and a $0.07 adjustment to remove a tax benefit associated with our
decision to indefinitely reinvest earnings in Canada. Adjustments
to 2016 GAAP diluted EPS also includes the effect of these
adjustments on noncontrolling interests and income taxes, as
applicable. For 2017, includes the revenue adjustment described
above and adjustments for acquisition-related amortization
expense, share-based compensation expense, acquisition and
integration costs, employee termination costs and certain income
tax benefits.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income and 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, 7, 8 and 9. 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