GPN
$93.67
Global Payments
($.93)
(.98%)
Earnings Details
2nd Quarter June 2017
Thursday, August 03, 2017 6:55:02 AM
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Summary

Global Payments Misses

Global Payments (GPN) reported 2nd Quarter June 2017 earnings of $0.93 per share on revenue of $962.2 million. The consensus earnings estimate was $0.91 per share on revenue of $837.4 million. The Earnings Whisper number was $0.95 per share.

The company said it expects 2017 non-GAAP earnings of $3.85 to $4.00 per share on revenue of $4.30 billion to $4.75 billion. The company's previous guidance was earnings of $3.78 to $3.95 per share on revenue of $3.38 billion to $3.46 billion and the current consensus earnings estimate is $3.91 per share on revenue of $3.44 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
$0.93
Earnings Whisper
$0.95
Consensus Estimate
$0.91
Reported Revenue
$962.2 Mil
Revenue Estimate
$837.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Global Payments Reports Second Quarter 2017 Earnings and Increases 2017 Outlook

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

"We delivered another outstanding quarter highlighted by double digit organic net revenue growth across our markets, building on the momentum of the last several quarters," said Jeff Sloan, Chief Executive Officer. "Our results reflect strong execution worldwide and our strategy of continuing to invest in and grow our technology-enabled businesses. Today’s agreement to acquire the communities and sports divisions of ACTIVE Network adds complementary vertical-specific solutions to our portfolio and positions us well to continue to gain share going forward."

Second Quarter 2017 Summary

GAAP revenues were $962.2 million, compared to $842.6 million in the second quarter of 2016; diluted earnings per share were $0.44 compared to $0.42 in the prior year; and operating margin was 13.7% compared to 7.3% in the second quarter of 2016.

Adjusted net revenue grew 18.4% to $847.9 million, compared to $716.3 million in the second quarter of 2016.

Adjusted earnings per share grew 24% to $0.94, compared to $0.76 in the second quarter of 2016.

-- Adjusted operating margin expanded 130 basis points to 29.2%.

2017 Outlook

"We are delighted with our performance in the second quarter and year-to-date period, which reflects continued strong execution across our businesses and positions us to increase our outlook for 2017 results," stated Cameron Bready, Senior Executive Vice President and Chief Financial Officer. "We now expect adjusted net revenue to range from $3.40 billion to $3.475 billion, or growth of 20% to 22% over 2016 and adjusted operating margin to expand by as much as 120 basis points. Adjusted earnings per share are now expected to be in a range of $3.85 to $4.00, reflecting growth of 21% to 25% over 2016. Our outlook for calendar 2017 does not include any impact from the ACTIVE Network acquisition, which we expect to be immaterial to 2017 adjusted earnings per share."

Capital Allocation

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

Conference Call

Global Payments’ management will host a conference call today, August 3, 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, earnings estimates and management’s expectations regarding future events and developments, and statements about the proposed acquisition of ACTIVE Network, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions 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 business or fully realizing cost savings and other benefits of the acquisition 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.

Additional important factors that could cause actual events or results to differ materially from those anticipated by our forward-looking statements or historical performance associated with the proposed acquisition of ACTIVE Network include the ability to meet closing conditions at all or on the expected terms and schedule, business disruption during the pendency of the acquisition or thereafter making it more difficult to maintain business and operational relationships, including the possibility that our announcement of the acquisition could disrupt our or ACTIVE Network’s relationships with financial institutions, customers, employees or other partners; and difficulties and delays in integrating the ACTIVE Network business or fully realizing benefits of the acquisition at all or within the expected time period.

SCHEDULE 1
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
%
June 30,
June 30,
%
2017
2016
Change
2017
2016
Change
Revenues
$ 962,240
$ 842,644
14.2 %
$ 1,882,002
$ 1,468,904
28.1 %
Operating expenses:
Cost of service
469,149
406,873
15.3 %
925,085
655,060
41.2 %
Selling, general and administrative
361,239
374,610
(3.6 )%
720,095
658,110
9.4 %
830,388
781,483
6.3 %
1,645,180
1,313,170
25.3 %
Operating income
131,852
61,161
115.6 %
236,822
155,734
52.1 %
Interest and other income
1,832
42,565
(95.7 )%
3,439
43,847
(92.2 )%
Interest and other expense
(48,361 )
(36,597 )
32.1 %
(89,658 )
(49,672 )
80.5 %
(46,529 )
5,968
NM
(86,219 )
(5,825 )
NM
Income before income taxes
85,323
67,129
27.1 %
150,603
149,909
0.5 %
(Provision for) benefit from income taxes
(12,880 )
4
NM
(25,201 )
(19,329 )
30.4 %
Net income
72,443
67,133
7.9 %
125,402
130,580
(4.0 )%
Less: Net income attributable to noncontrolling interests, net of
(5,534 )
(4,900 )
12.9 %
(9,679 )
(8,436 )
14.7 %
income tax
Net income attributable to Global Payments
$
66,909
$
62,233
7.5 %
$
115,723
$
122,144
(5.3 )%
Earnings per share attributable to Global Payments:
Basic
$
0.44
$
0.42
4.8 %
$
0.76
$
0.88
(13.6 )%
Diluted
$
0.44
$
0.42
4.8 %
$
0.75
$
0.87
(13.8 )%
Weighted-average number of shares outstanding:
Basic
152,525
148,338
152,415
138,803
Diluted
153,555
149,418
153,405
139,778
NM - Not meaningful.
SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
% Change
June 30,
June 30,
% Change
2017
2016
2017
2016
Adjusted net revenue
$ 847,941
$ 716,310
18.4 %
$ 1,651,820
$ 1,195,910
38.1 %
Adjusted operating income
$ 247,738
$ 200,172
23.8 %
$
476,487
$
331,808
43.6 %
Adjusted net income
$ 144,366
$ 114,263
26.3 %
$
274,402
$
197,811
38.7 %
Adjusted EPS
$
0.94
$
0.76
23.7 %
$
1.79
$
1.42
26.1 %
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
June 30, 2017
June 30, 2016
% Change
GAAP
Non-
GAAP
Non-
GAAP
Non-
GAAP(1)
GAAP(1)
GAAP(1)
Revenues:
North America
$ 710,965
$ 624,413
$ 624,120
$ 519,011
13.9 %
20.3 %
Europe
186,506
158,759
162,255
141,030
14.9 %
12.6 %
Asia-Pacific
64,769
64,769
56,269
56,269
15.1 %
15.1 %
$ 962,240
$ 847,941
$ 842,644
$ 716,310
14.2 %
18.4 %
Operating income:
North America
$ 112,176
$ 185,144
$
82,476
$ 142,458
36.0 %
30.0 %
Europe
65,673
72,268
52,788
66,958
24.4 %
7.9 %
Asia-Pacific
17,535
19,590
11,050
15,134
58.7 %
29.4 %
Corporate
(63,532 )
(29,264 )
(85,153 )
(24,378 )
(25.4 )%
20.0 %
$ 131,852
$ 247,738
$
61,161
$ 200,172
115.6 %
23.8 %
Six Months Ended
June 30, 2017
June 30, 2016
% Change
GAAP
Non-
GAAP
Non-
GAAP
Non-
GAAP(1)
GAAP(1)
GAAP(1)
Revenues:
North America
$ 1,398,009
$ 1,221,895
$ 1,051,980
$
816,969
32.9 %
49.6 %
Europe
352,054
297,986
306,374
268,391
14.9 %
11.0 %
Asia-Pacific
131,939
131,939
110,550
110,550
19.3 %
19.3 %
$ 1,882,002
$ 1,651,820
$ 1,468,904
$ 1,195,910
28.1 %
38.1 %
Operating income:
North America
$
206,259
$
357,521
$
147,665
$
221,105
39.7 %
61.7 %
Europe
120,180
136,176
108,566
128,596
10.7 %
5.9 %
Asia-Pacific
37,289
40,559
25,609
31,731
45.6 %
27.8 %
Corporate
(126,906 )
(57,769 )
(126,106 )
(49,624 )
0.6 %
16.4 %
$
236,822
$
476,487
$
155,734
$
331,808
52.1 %
43.6 %
(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)
June 30, 2017
December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents
$
1,080,576
$
1,162,779
Accounts receivable, net of allowances for doubtful accounts of
283,640
275,032
$1,295 and $1,092 respectively
Claims receivable, net of allowances for doubtful accounts of $6,616
4,513
8,202
and $5,786, respectively
Settlement processing assets
999,946
1,546,854
Prepaid expenses and other current assets
147,396
123,139
Total current assets
2,516,071
3,116,006
Goodwill
4,890,016
4,807,594
Other intangible assets, net
1,927,167
2,085,292
Property and equipment, net
537,879
526,370
Deferred income taxes
16,388
15,789
Other noncurrent assets
149,260
113,299
Total assets
$ 10,036,781
$ 10,664,350
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit
$
318,284
$
392,072
Current portion of long-term debt
86,510
177,785
Accounts payable and accrued liabilities
823,236
804,887
Settlement processing obligations
870,434
1,477,212
Total current liabilities
2,098,464
2,851,956
Long-term debt
4,175,411
4,260,827
Deferred income taxes
617,308
676,472
Other noncurrent liabilities
140,960
95,753
Total liabilities
7,032,143
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;
--
--
152,556,769 issued and outstanding at June 30, 2017 and 152,185,616
issued and outstanding at December 31, 2016
Paid-in capital
1,838,889
1,816,278
Retained earnings
1,255,552
1,137,230
Accumulated other comprehensive loss
(243,459 )
(322,717 )
Total Global Payments shareholders’ equity
2,850,982
2,630,791
Noncontrolling interests
153,656
148,551
Total equity
3,004,638
2,779,342
Total liabilities and equity
$ 10,036,781
$ 10,664,350
SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Six Months Ended
June 30, 2017
June 30, 2016
Cash flows from operating activities:
Net income
$
125,402
$
130,580
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment
51,197
40,079
Amortization of acquired intangibles
165,117
87,675
Share-based compensation expense
21,153
17,372
Provision for operating losses and bad debts
25,940
16,720
Amortization of capitalized customer acquisition costs
19,681
3,352
Deferred income taxes
(38,603 )
(19,719 )
Gain on sale of investments
--
(41,150 )
Other, net
17,057
8,901
Changes in operating assets and liabilities, net of the effects of
acquisitions:
Accounts receivable
(4,901 )
8,907
Claims receivable
(11,335 )
(10,854 )
Settlement processing assets and obligations, net
(63,523 )
14,307
Prepaid expenses and other assets
30,679
(47,940 )
Capitalized customer acquisition costs
(44,351 )
(20,127 )
Accounts payable and other liabilities
(25,452 )
61,194
Net cash provided by operating activities
268,061
249,297
Cash flows from investing activities:
Business acquisitions, net of cash acquired
--
(1,826,657 )
Capital expenditures
(89,958 )
(62,910 )
Proceeds from sale of investments
--
37,717
Proceeds from sales of property and equipment
37,497
57
Other, net
(34,242 )
(370 )
Net cash used in investing activities
(86,703 )
(1,852,163 )
Cash flows from financing activities:
Net payments on settlement lines of credit
(88,490 )
(97,652 )
Proceeds from long-term debt
902,324
3,047,052
Repayments of long-term debt
(1,082,898 )
(809,933 )
Payment of debt issuance costs
(9,461 )
(58,448 )
Repurchase of common stock
(5,342 )
(82,836 )
Proceeds from stock issued under share-based compensation plans
6,188
2,424
Common stock repurchased - share-based compensation plans
(418 )
(337 )
Proceeds from sale of subsidiary shares to noncontrolling interest
--
16,374
Distributions to noncontrolling interests
(9,301 )
(4,740 )
Dividends paid
(3,551 )
(2,837 )
Net (used in) provided by financing activities
(290,949 )
2,009,067
Effect of exchange rate changes on cash
27,388
(5,582 )
(Decrease) increase in cash and cash equivalents
(82,203 )
400,619
Cash and cash equivalents, beginning of the period
1,162,779
587,751
Cash and cash equivalents, end of the period
$
1,080,576
$
988,370
SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2017 AND 2016
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended June 30, 2017
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 962,240
$
(114,299 )
$ --
$ --
$
847,941
Operating income
$ 131,852
$ --
$
115,886
$ --
$
247,738
Net income attributable to Global Payments
$
66,909
$ --
$
120,884
$
(43,427 )
$
144,366
Diluted earnings per share attributable to Global Payments(4)
$
0.44
$
0.94
Three Months Ended June 30, 2016
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 842,644
$
(126,334 )
$ --
$ --
$
716,310
Operating income
$
61,161
$ --
$
139,011
$ --
$
200,172
Net income attributable to Global Payments
$
62,233
$ --
$
96,877
$
(44,847 )
$
114,263
Diluted earnings per share attributable to Global Payments(4)
$
0.42
$
0.76
(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 June 30, 2017 include $81.6 million of amortization of
acquired intangibles in cost of service and $34.2 million in
selling, general and administrative expenses, consisting of
share-based compensation expense of $12.3 million and merger-related
costs of $21.9 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 three months ended
June 30, 2016 include $68.0 million in cost of service and $71.0
million in selling, general and administrative expenses. Adjustments
to cost of service include amortization of acquired intangibles of
$67.7 million and other adjustments of $0.3 million. Adjustments to
selling, general and administrative expenses include share-based
compensation expense of $9.6 million, merger-related costs of $51.3
million, litigation related costs of $7.6 million, employee
termination benefits of $2.1 million and $0.4 million of other
adjustments. 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 three
months ended June 30, 2017 reflect the removal of a $2.4 million tax
benefit associated with the elimination of a deferred tax liability.
For the three months ended June 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 7
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2017 AND 2016
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Six Months Ended June 30, 2017
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 1,882,002
$
(230,182 )
$ --
$ --
$
1,651,820
Operating income
$
236,822
$ --
$
239,665
$ --
$
476,487
Net income attributable to Global Payments
$
115,723
$ --
$
242,876
$
(84,197 )
$
274,402
Diluted earnings per share attributable to Global Payments(4)
$
0.75
$
1.79
Six Months Ended June 30, 2016
GAAP
Net Revenue
Earnings
Income
Non-GAAP
Adjustments(1)
Adjustments(2)
Taxes on
Adjustments(3)
Revenues
$ 1,468,904
$
(272,994 )
$ --
$ --
$
1,195,910
Operating income
$
155,734
$ --
$
176,074
$ --
$
331,808
Net income attributable to Global Payments
$
122,144
$ --
$
132,874
$
(57,207 )
$
197,811
Diluted earnings per share attributable to Global Payments(4)
$
0.87
$
1.42
(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 six
months ended June 30, 2017 include $167.9 million and $71.8 million
in cost of service and selling, general and administrative expenses,
respectively. Adjustments to cost of service include amortization of
acquired intangibles of $166.2 million and employee termination
benefits of $1.7 million. Adjustments to selling, general and
administrative expenses include share-based compensation expense of
$21.2 million, merger-related cost of $48.0 million and employee
termination benefits of $2.6 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 six months ended
June 30, 2016 include $89.1 million and $86.9 million in cost of
service and selling, general and administrative expenses,
respectively. Adjustments to cost of service represent amortization
of acquired intangibles of $88.8 million and other adjustments of
$0.3 million. Adjustments to selling, general and administrative
expenses include share-based compensation expense of $16.6 million,
merger-related costs of $60.0 million, litigation related costs of
$7.6 million, employee termination benefits of $2.1 million and $0.6
million of other adjustments. 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 six
months ended June 30, 2017 reflect the removal of a $2.4 million tax
benefit associated with the elimination of a deferred tax liability.
For the six months ended June 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 JUNE 30, 2017 AND 2016
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended June 30, 2017
Three Months Ended June 30, 2016
GAAP
Net Revenue
Earnings
Non-
GAAP
Net Revenue
Earnings
Non-
Adjustments(1)
Adjustments(2)
GAAP
Adjustments(1)
Adjustments(2)
GAAP
Revenues:
North America
$ 710,965
$
(86,552 )
$ --
$ 624,413
$ 624,120
$
(105,109 )
$ --
$ 519,011
Europe
186,506
(27,747 )
--
158,759
162,255
(21,225 )
--
141,030
Asia-Pacific
64,769
--
--
64,769
56,269
--
--
56,269
$ 962,240
$
(114,299 )
$ --
$ 847,941
$ 842,644
$
(126,334 )
$ --
$ 716,310
Operating income:
North America
$ 112,176
$ --
$
72,968
$ 185,144
$
82,476
$ --
$
59,982
$ 142,458
Europe
65,673
--
6,595
72,268
52,788
--
14,170
66,958
Asia-Pacific
17,535
--
2,055
19,590
11,050
--
4,084
15,134
Corporate
(63,532 )
--
34,268
(29,264 )
(85,153 )
--
60,775
(24,378 )
$ 131,852
$ --
$
115,886
$ 247,738
$
61,161
$ --
$
139,011
$ 200,172
(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 June 30, 2017 include $81.6 million of amortization of
acquired intangibles in cost of service and $34.2 million in
selling, general and administrative expenses, consisting of
share-based compensation expense of $12.3 million and merger-related
costs of $21.9 million.
Earnings adjustments to operating income for the three months ended
June 30, 2016 include $68.0 million and $71.0 million in cost of
service and selling, general and administrative expenses,
respectively. Adjustments to cost of service include amortization of
acquired intangibles of $67.7 million and other adjustments of $0.3
million. Adjustments to selling, general and administrative expenses
include share-based compensation expense of $9.6 million,
merger-related costs of $51.3 million, litigation related costs of
$7.6 million, employee termination benefits of $2.1 million and $0.4
million of other adjustments.
See "Non-GAAP Financial Measures" discussion on Schedule 10.
SCHEDULE 9
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP
MEASURES (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2017 AND 2016
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Six Months Ended June 30, 2017
Six Months Ended June 30, 2016
GAAP
Net Revenue
Earnings
Non-
GAAP
Net Revenue
Earnings
Non-
Adjustments(1)
Adjustments(2)
GAAP
Adjustments(1)
Adjustments(2)
GAAP
Revenues:
North America
$ 1,398,009
$
(176,114 )
$ --
$ 1,221,895
$ 1,051,980
$
(235,011 )
$ --
$
816,969
Europe
352,054
(54,068 )
--
297,986
306,374
(37,983 )
--
268,391
Asia-Pacific
131,939
--
--
131,939
110,550
--
--
110,550
$ 1,882,002
$
(230,182 )
$ --
$ 1,651,820
$ 1,468,904
$
(272,994 )
$ --
$ 1,195,910
Operating income:
North America
$
206,259
$ --
$
151,262
$
357,521
$
147,665
$ --
$
73,440
$
221,105
Europe
120,180
--
15,996
136,176
108,566
--
20,030
128,596
Asia-Pacific
37,289
--
3,270
40,559
25,609
--
6,122
31,731
Corporate
(126,906 )
--
69,137
(57,769 )
(126,106 )
--
76,482
(49,624 )
$
236,822
$ --
$
239,665
$
476,487
$
155,734
$ --
$
176,074
$
331,808
(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 six
months ended June 30, 2017 include $167.9 million in cost of service
and $71.8 million in selling, general and administrative expenses.
Adjustments to cost of service include amortization of acquired
intangibles of $166.2 million and employee termination benefits of
$1.7 million. Adjustments to selling, general and administrative
expenses include share-based compensation expense of $21.2 million,
merger-related cost of $48.0 million and employee termination
benefits of $2.6 million.
Earnings adjustments to operating income for the six months ended
June 30, 2016 include $89.1 million and $86.9 million in cost of
service and selling, general and administrative expenses,
respectively. Adjustments to cost of service represent amortization
of acquired intangibles of $88.8 million and other adjustments of
$0.3 million. Adjustments to selling, general and administrative
expenses include share-based compensation expense of $16.6 million,
merger-related costs of $60.0 million, litigation related costs of
$7.6 million, employee termination benefits of $2.1 million and $0.6
million of other adjustments.
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(3)
% Change
Revenues:
GAAP revenue
$3.37
$3.83 to $3.91
14% to 16%
Adjustments(1)
(0.53 )
(0.43 )
Adjusted net revenue
$2.84
$3.40 to $3.48
20% to 22%
Earnings Per Share ("EPS"):
GAAP diluted EPS
$1.37
$1.98 to $2.13
45% to 55%
Acquisition-related amortization expense, share-based compensation
1.82
1.87
expense and other items(2)
Adjusted EPS
$3.19
$3.85 to $4.00
21% to 25%
(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, 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.
(3)The 2017 Outlook does not include the effect of the
announced acquisition of the communities and sports divisions of
ACTIVE Network.
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