Global Payments Reports Third Quarter 2020 Results

October 29, 2020

Delivers EPS Growth and Strong Margin Performance

Increases Synergy Expectations

Re-Commences Capital Allocation Strategy

ATLANTA--(BUSINESS WIRE)-- Global Payments Inc. (NYSE: GPN) today announced results for the third quarter ended September 30, 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201029005439/en/

“We are pleased with our results for the third quarter, which demonstrate substantial ongoing improvement across our markets and significant margin expansion for each of our segments," said Jeff Sloan, Chief Executive Officer. "These results validate the actions we took at the start of the pandemic to position our businesses and return to growth. We are grateful to our team members for their extraordinary commitments to our customers, to each other and to the communities in which they live and work during this difficult time.

“We have made meaningful progress strategically this year, with an emphasis on driving further digital growth. We are delighted with our collaboration with Amazon Web Services, our preferred cloud provider of issuer technologies, a relationship that is already generating significant momentum since our August announcement; the acquisition of an incremental stake in our joint venture with CaixaBank in October, bringing our ownership to 80%; and the ongoing mix shift of our revenues toward technology enablement, where we recently crossed the 60% target that we set in March 2018, ahead of our plan.”

Sloan concluded, “We accomplished these goals during the pandemic while also extending relationships with some of the largest, most sophisticated and complex worldwide financial institutions including HSBC Group in Europe and CIBC in Canada for merchant services, as well as by taking share in card issuing services through partnerships with market leaders in technology and financial services. As a result of our strong performance through the third quarter, we are returning to our traditional capital priorities, including share repurchases.”

Third Quarter 2020 Summary

  • GAAP revenues were $1.918 billion, compared to $1.106 billion in the third quarter of 2019; diluted earnings per share were $0.74 compared to $0.54 in the prior year; and operating margin was 15.1%.
  • Adjusted net revenues declined 4% to $1.746 billion, compared to $1.820 billion in the third quarter of 2019 on a combined basis.
  • Adjusted earnings per share increased 1% to $1.71, compared to $1.70 in the third quarter of 2019.
  • Adjusted operating margin of 41.1% expanded 250 basis points on a combined basis.

Financial Highlights

“We delivered solid financial performance for the third quarter, enabled by the continued recovery across our markets, our attractive business mix and ongoing outstanding execution,” said Paul Todd, Senior Executive Vice President and Chief Financial Officer. “Importantly, the immediate and significant cost actions we took in response to the pandemic drove strong adjusted operating margin expansion this quarter, and we are pleased to have delivered adjusted earnings per share growth from the prior year period.

“Based on progress on our integration activities, we are raising our expectations for annual run rate expense synergies from the TSYS merger to $375 million, an increase from our prior estimate of $350 million. We also remain on track to deliver at least $125 million in annual run rate revenue synergies and $400 million in additional annual run rate expense savings related to the pandemic, which is incremental to the TSYS merger cost synergies.”

Todd concluded, “The extraordinary health of our business, including our strong cash flows and investment grade balance sheet, has served us well during this period. We are pleased to announce that our Board of Directors has increased our share repurchase authorization to $1.25 billion, and we look forward to re-commencing the return of capital to our shareholders and managing our pipeline.”

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.195 per share payable December 31, 2020 to shareholders of record as of December 17, 2020.

Conference Call

Global Payments’ management will host a live audio webcast today, October 29, 2020, at 8:00 a.m. ET to discuss financial results and business highlights. All interested parties may access the audio webcast via the investor relations page of the company’s website at investors.globalpaymentsinc.com. A replay of the audio webcast will be archived on the company's website following the live event.

Non-GAAP Financial Measures

Global Payments supplements revenues, income, operating income, operating margin and earnings per share determined in accordance with GAAP by providing these measures with certain adjustments (such measures being non-GAAP financial measures) in this earnings release 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.

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. (NYSE: GPN) is a leading pure play payments technology company delivering innovative software and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to operate their businesses more efficiently across a variety of channels around the world.

Headquartered in Georgia with nearly 24,000 employees worldwide, Global Payments is a member of the S&P 500 with worldwide reach spanning over 100 countries throughout North America, Europe, Asia Pacific and Latin America. For more information, visit www.globalpaymentsinc.com and follow Global Payments on Twitter (@globalpayinc), LinkedIn and Facebook.

Forward-Looking Statements

Investors are cautioned that some of the statements we use in this report contain forward-looking statements and are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of and assumptions made by our management, involve risks, uncertainties and assumptions that could significantly affect the financial condition, results of operations, business plans and the future performance of Global Payments. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Examples of forward-looking statements include, but are not limited to, statements we make regarding the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues, financial operating results and liquidity, the effects of actions taken by us in response to the pandemic, the anticipated benefits of the merger with TSYS (the “Merger’), including our future financial and operating results, the combined company’s plans, objectives, expectations and intentions, our expected financial and operating results, projected future growth of business, or completion of anticipated benefits of strategic initiatives, and other statements that are not historical facts. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

In addition to factors previously disclosed in Global Payments’ reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the effects and duration of global economic, political, market, health and social events or other conditions, including the effects and duration of the COVID-19 pandemic; regulatory measures or voluntary actions, including social distancing, shelter-in-place orders, operating restrictions on nonessential businesses and similar measures imposed or undertaken in an effort to combat the spread of the COVID-19 pandemic; management’s assumptions and projections used in their estimates of the timing and severity of the effects of the COVID-19 pandemic on our future revenues, results of operations; our ability to meet our liquidity needs in light of the effects of the COVID-19 pandemic; the outcome of any legal proceedings that may be instituted against Global Payments or its or TSYS’ current or former directors; difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and TSYS, including with respect to implementing systems to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; failing to fully realize anticipated cost savings and other anticipated benefits of the Merger when expected or at all; business disruptions from the Merger integration that may harm our business, including current plans and operations; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability to maintain Visa and Mastercard registration and financial institution sponsorship; the ability to retain and hire key personnel; the diversion of management’s attention from ongoing business operations; the continued availability of capital and financing following the Merger; the business, economic and political conditions in the markets in which we operate; increased competition in the markets in which we operate and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness, foreign currency exchange and interest rate risks; the effects of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and cybersecurity laws and regulations; and events beyond our control, such as acts of terrorism, and other factors included in the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and in other documents that we file with the SEC, which are available at http://www.sec.gov. Any forward-looking statements speak only as of the date of this communication or as of the date they were made, and we undertake no obligation to update forward-looking statements, except as required by law.

SCHEDULE 1

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

 

2019

 

 

% Change

 

2020

 

 

2019

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

1,917,815

 

 

 

$

1,105,941

 

 

 

73.4

 

%

 

$

5,493,365

 

 

 

$

2,924,131

 

 

 

87.9

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of service

900,921

 

 

 

427,720

 

 

 

110.6

 

%

 

2,728,532

 

 

 

1,035,225

 

 

 

163.6

 

%

Selling, general and administrative

726,475

 

 

 

504,184

 

 

 

44.1

 

%

 

2,122,862

 

 

 

1,293,651

 

 

 

64.1

 

%

 

1,627,396

 

 

 

931,904

 

 

 

74.6

 

%

 

4,851,394

 

 

 

2,328,876

 

 

 

108.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

290,419

 

 

 

174,037

 

 

 

66.9

 

%

 

641,971

 

 

 

595,255

 

 

 

7.8

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

29,983

 

 

 

11,232

 

 

 

166.9

 

%

 

35,277

 

 

 

20,342

 

 

 

73.4

 

%

Interest and other expense

(82,976

)

 

 

(96,161

)

 

 

(13.7

)

%

 

(258,475

)

 

 

(220,858

)

 

 

17.0

 

%

 

(52,993

)

 

 

(84,929

)

 

 

(37.6

)

%

 

(223,198

)

 

 

(200,516

)

 

 

11.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and equity in income of equity method investments

237,426

 

 

 

89,108

 

 

 

166.4

 

%

 

418,773

 

 

 

394,739

 

 

 

6.1

 

%

Income tax expense

(42,834

)

 

 

16,623

 

 

 

(357.7

)

%

 

(59,173

)

 

 

(39,765

)

 

 

48.8

 

%

Income before equity in income of equity method investments

194,592

 

 

 

105,731

 

 

 

84.0

 

%

 

359,600

 

 

 

354,974

 

 

 

1.3

 

%

Equity in income of equity method investments, net of tax

35,638

 

 

 

 

 

 

nm

 

60,682

 

 

 

 

 

 

nm

Net income

230,230

 

 

 

105,731

 

 

 

117.8

 

%

 

420,282

 

 

 

354,974

 

 

 

18.4

 

%

Net income attributable to noncontrolling interests, net of income tax

(9,259

)

 

 

(10,687

)

 

 

(13.4

)

%

 

(18,406

)

 

 

(27,132

)

 

 

(32.2

)

%

Net income attributable to Global Payments

$

220,971

 

 

 

$

95,044

 

 

 

132.5

 

%

 

$

401,876

 

 

 

$

327,842

 

 

 

22.6

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Global Payments:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.74

 

 

 

$

0.54

 

 

 

37.0

 

%

 

$

1.34

 

 

 

$

2.00

 

 

 

(33.0

)

%

Diluted

$

0.74

 

 

 

$

0.54

 

 

 

37.0

 

%

 

$

1.34

 

 

 

$

2.00

 

 

 

(33.0

)

%

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

299,255

 

 

 

177,039

 

 

 

 

 

299,261

 

 

 

163,846

 

 

 

 

Diluted

300,491

 

 

 

177,543

 

 

 

 

 

300,525

 

 

 

164,331

 

 

 

 

----------------------------------------------------------------------------------

nm - not meaningful

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,

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net revenue

$

1,745,905

 

 

$

1,062,217

 

 

64.4

%

 

$

4,995,654

 

 

$

2,783,697

 

 

79.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income

$

717,669

 

 

$

441,753

 

 

62.5

%

 

$

1,954,596

 

 

$

1,131,079

 

 

72.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income attributable to Global Payments

$

513,756

 

 

$

301,106

 

 

70.6

%

 

$

1,381,915

 

 

$

750,033

 

 

84.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share attributable to Global Payments

$

1.71

 

 

$

1.70

 

 

0.6

%

 

$

4.60

 

 

$

4.56

 

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Information with 2019 on Combined Basis(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net revenue(1)

$

1,745,905

 

 

$

1,819,629

 

 

(4.1)

%

 

$

4,995,654

 

 

$

5,316,602

 

 

(6.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income(1)

$

717,669

 

 

$

702,429

 

 

2.2

%

 

$

1,954,596

 

 

$

1,985,851

 

 

(1.6)

%

----------------------------------------------------------------------------------

(1)

 

The non-GAAP information for 2019 is presented on a combined basis and includes TSYS results for the three and nine months ended September 30, 2019 determined in accordance with GAAP applied by TSYS and presented with Global Payments' adjustments to revenue and operating income.

 

See Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income, operating income, operating margin and EPS 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 operating margin, 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 expense, acquisition and integration expense and certain other items, such as unusual, direct and discrete costs due to the global pandemic, specific to each reporting period as more fully described in the accompanying reconciliations in Schedules 6 and 7. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenue. The tax rate used in determining the income 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.

SCHEDULE 3

SEGMENT INFORMATION (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

 

Three Months Ended

 

 

 

 

 

 

September 30, 2020

 

September 30, 2019

 

% Change

 

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP(1)

 

GAAP

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

1,243,961

 

 

$

1,125,405

 

 

$

1,004,943

 

 

$

1,199,645

 

 

23.8

%

 

(6.2)

%

Issuer Solutions

 

487,409

 

 

433,372

 

 

75,628

 

 

444,639

 

 

nm

 

(2.5)

%

Business and Consumer Solutions

 

204,106

 

 

204,106

 

 

27,896

 

 

190,479

 

 

nm

 

7.2

%

Intersegment Elimination

 

(17,661)

 

 

(16,978)

 

 

(2,526)

 

 

(15,134)

 

 

nm

 

(12.2)

%

 

 

$

1,917,815

 

 

$

1,745,905

 

 

$

1,105,941

 

 

$

1,819,629

 

 

73.4

%

 

(4.1)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

344,981

 

 

$

532,287

 

 

$

318,786

 

 

$

562,108

 

 

8.2

%

 

(5.3)

%

Issuer Solutions

 

70,800

 

 

187,658

 

 

5,885

 

 

170,132

 

 

nm

 

10.3

%

Business and Consumer Solutions

 

31,052

 

 

52,252

 

 

3,365

 

 

35,237

 

 

nm

 

48.3

%

Corporate

 

(156,414)

 

 

(54,528)

 

 

(153,999)

 

 

(65,048)

 

 

(1.6)

%

 

16.2

%

 

 

$

290,419

 

 

$

717,669

 

 

$

174,037

 

 

$

702,429

 

 

66.9

%

 

2.2

%

 

 

Nine Months Ended

 

 

 

 

 

 

September 30, 2020

 

September 30, 2019

 

% Change

 

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP(1)

 

GAAP

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

3,460,785

 

 

$

3,132,412

 

 

$

2,812,640

 

 

$

3,433,101

 

 

23.0

%

 

(8.8)

%

Issuer Solutions

 

1,461,196

 

 

1,289,565

 

 

86,122

 

 

1,321,053

 

 

nm

 

(2.4)

%

Business and Consumer Solutions

 

624,774

 

 

624,774

 

 

27,896

 

 

605,800

 

 

nm

 

3.1

%

Intersegment Elimination

 

(53,390)

 

 

(51,097)

 

 

(2,527)

 

 

(43,352)

 

 

nm

 

(17.9)

%

 

 

$

5,493,365

 

 

$

4,995,654

 

 

$

2,924,131

 

 

$

5,316,602

 

 

87.9

%

 

(6.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

824,212

 

 

$

1,404,189

 

 

$

840,326

 

 

$

1,556,195

 

 

(1.9)

%

 

(9.8)

%

Issuer Solutions

 

188,131

 

 

539,450

 

 

12,920

 

 

483,713

 

 

nm

 

11.5

%

Business and Consumer Solutions

 

110,358

 

 

174,842

 

 

3,365

 

 

141,226

 

 

nm

 

23.8

%

Corporate

 

(480,730)

 

 

(163,885)

 

 

(261,356)

 

 

(195,283)

 

 

(83.9)

%

 

16.1

%

 

 

$

641,971

 

 

$

1,954,596

 

 

$

595,255

 

 

$

1,985,851

 

 

7.8

%

 

(1.6)

%

----------------------------------------------------------------------------------

nm - not meaningful

(1)

The non-GAAP information for 2019 is presented on a combined basis and includes TSYS results for the three and nine months ended September 30, 2019 determined in accordance with GAAP applied by TSYS and presented with Global Payments' adjustments to revenue and operating income and segment reporting structure.

 

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 2 for a discussion of non-GAAP financial measures.

SCHEDULE 4

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except share data)

 

September 30, 2020

 

December 31, 2019

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

2,220,822

 

 

$

1,678,273

 

Accounts receivable, net

822,033

 

 

895,232

 

Settlement processing assets

1,385,308

 

 

1,353,778

 

Prepaid expenses and other current assets

540,487

 

 

439,165

 

Total current assets

4,968,650

 

 

4,366,448

 

Goodwill

23,745,340

 

 

23,759,740

 

Other intangible assets, net

12,251,680

 

 

13,154,655

 

Property and equipment, net

1,526,178

 

 

1,382,802

 

Deferred income taxes

6,822

 

 

6,292

 

Other noncurrent assets

2,051,112

 

 

1,810,225

 

Total assets

$

44,549,782

 

 

$

44,480,162

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Settlement lines of credit

$

439,371

 

 

$

463,237

 

Current portion of long-term debt

831,500

 

 

35,137

 

Accounts payable and accrued liabilities

1,696,048

 

 

1,822,166

 

Settlement processing obligations

1,448,335

 

 

1,258,806

 

Total current liabilities

4,415,254

 

 

3,579,346

 

Long-term debt

8,436,962

 

 

9,090,364

 

Deferred income taxes

2,966,020

 

 

3,145,641

 

Other noncurrent liabilities

767,704

 

 

609,822

 

Total liabilities

16,585,940

 

 

16,425,173

 

Commitments and contingencies

 

 

 

Equity:

 

 

 

Preferred stock, no par value; 5,000,000 shares authorized and none issued

 

 

 

Common stock, no par value; 400,000,000 shares authorized at September 30, 2020 and December 31, 2019; 299,286,847 issued and outstanding at September 30, 2020 and 300,225,590 issued and outstanding at December 31, 2019

 

 

 

Paid-in capital

25,620,599

 

 

25,833,307

 

Retained earnings

2,476,962

 

 

2,333,011

 

Accumulated other comprehensive loss

(351,904)

 

 

(310,571)

 

Total Global Payments shareholders’ equity

27,745,657

 

 

27,855,747

 

Noncontrolling interests

218,185

 

 

199,242

 

Total equity

27,963,842

 

 

28,054,989

 

Total liabilities and equity

$

44,549,782

 

 

$

44,480,162

 

SCHEDULE 5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

Nine Months Ended

 

September 30, 2020

 

September 30, 2019

 

 

 

 

Cash flows from operating activities:

 

 

 

Net income

$

420,282

 

 

$

354,974

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization of property and equipment

265,738

 

 

132,043

 

Amortization of acquired intangibles

941,654

 

 

345,455

 

Amortization of capitalized contract costs

57,888

 

 

47,778

 

Share-based compensation expense

105,081

 

 

55,791

 

Provision for operating losses and bad debts

98,967

 

 

34,877

 

Noncash lease expense

73,493

 

 

29,135

 

Deferred income taxes

(118,466)

 

 

(42,990)

 

Equity in income of equity investments, net of tax

(60,682)

 

 

 

Other, net

(13,584)

 

 

(22,469)

 

Changes in operating assets and liabilities, net of the effects of business combinations:

 

 

 

Accounts receivable

23,352

 

 

(80,709)

 

Settlement processing assets and obligations, net

155,385

 

 

623,985

 

Prepaid expenses and other assets

(240,804)

 

 

(148,421)

 

Accounts payable and other liabilities

(163,544)

 

 

19,940

 

Net cash provided by operating activities

1,544,760

 

 

1,349,389

 

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

(77,180)

 

 

(334,383)

 

Capital expenditures

(329,413)

 

 

(201,017)

 

Other, net

11,575

 

 

29,112

 

Net cash used in investing activities

(395,018)

 

 

(506,288)

 

Cash flows from financing activities:

 

 

 

Net repayments of settlement lines of credit

(31,069)

 

 

(144,473)

 

Proceeds from long-term debt

1,868,199

 

 

6,704,838

 

Repayments of long-term debt

(1,829,637)

 

 

(6,097,229)

 

Payments of debt issuance costs

(8,075)

 

 

(32,637)

 

Repurchases of common stock

(421,162)

 

 

(233,995)

 

Proceeds from stock issued under share-based compensation plans

51,055

 

 

22,008

 

Common stock repurchased - share-based compensation plans

(41,966)

 

 

(49,037)

 

Preacquisition dividends paid to former TSYS shareholders

 

 

(23,240)

 

Distributions to noncontrolling interests

(6,955)

 

 

(31,632)

 

Dividends paid

(175,025)

 

 

(4,727)

 

Net cash (used in) provided by financing activities

(594,635)

 

 

109,876

 

Effect of exchange rate changes on cash

(12,558)

 

 

(36,239)

 

Increase in cash and cash equivalents

542,549

 

 

916,738

 

Cash and cash equivalents, beginning of the period

1,678,273

 

 

1,210,878

 

Cash and cash equivalents, end of the period

$

2,220,822

 

 

$

2,127,616

 

SCHEDULE 6

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

Three Months Ended September 30, 2020

 

 

GAAP

 

Net Revenue Adjustments(1)

 

Earnings Adjustments(2)

 

Income

Taxes on Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

1,917,815

 

 

$

(171,910)

 

 

$

 

 

$

 

 

$

1,745,905

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

290,419

 

 

$

2,555

 

 

$

424,695

 

 

$

 

 

$

717,669

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

220,971

 

 

$

2,555

 

 

$

375,340

 

 

$

(85,110)

 

 

$

513,756

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

0.74

 

 

 

 

 

 

 

 

$

1.71

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

300,491

 

 

 

 

 

 

 

 

300,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2019

 

 

GAAP

 

Net Revenue Adjustments(1)

 

Earnings Adjustments(2)

 

Income

Taxes on Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

1,105,941

 

 

$

(43,724)

 

 

$

 

 

$

 

 

$

1,062,217

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

174,037

 

 

$

4,002

 

 

$

263,714

 

 

$

 

 

$

441,753

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

95,044

 

 

$

4,002

 

 

$

293,132

 

 

$

(91,072)

 

 

$

301,106

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

0.54

 

 

 

 

 

 

 

 

$

1.70

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

177,543

 

 

 

 

 

 

 

 

177,543

 

----------------------------------------------------------------------------------

(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. Also, for the three months ended September 30, 2020 and September 30, 2019, includes $2.6 million and $4.0 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

 

 

(2)

 

For the three months ended September 30, 2020, earnings adjustments to operating income included $317.3 million in Cost of Service (COS) and $107.4 million in Selling, General, & Administrative (SG&A) expenses. Adjustments to COS include $313.4 million of amortization of acquired intangibles and $3.9 million of other items. Adjustments to SG&A include $42.3 million of share-based compensation expense, $59.8 million of acquisition and integration expenses and $5.3 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19. Net income attributable to Global Payments also reflects the removal of a $27.3 million gain associated with the fair value of shares received from the conversion of certain Visa Inc. preferred shares and the removal of $23.1 million of equity method investment earnings from our interest in a private equity investment fund.

 

 

 

 

 

For the three months ended September 30, 2019, earnings adjustments to operating income included $145.5 million in COS and $118.2 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $135.0 million and acquisition and integration expenses of $10.5 million. Adjustments to SG&A include share-based compensation expense of $27.9 million and acquisition and integration expenses of $90.4 million. Net income attributable to Global Payments reflects the removal of $31.4 million in charges from interest expense associated with the financing of the merger with TSYS. These include fees related to the bridge facility the company entered into to support the merger financing, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new secured senior notes attributable to the period between issuance and merger close, net of interest income earned from these funds while in escrow.

 

 

 

(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.

 

 

 

 

 

See "Non-GAAP Financial Measures" discussion on Schedule 2.

SCHEDULE 7

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

Nine Months Ended September 30, 2020

 

 

GAAP

 

Net Revenue Adjustments(1)

 

Earnings Adjustments(2)

 

Income
Taxes on Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

5,493,365

 

 

$

(497,711)

 

 

$

 

 

$

 

 

$

4,995,654

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

641,971

 

 

$

8,139

 

 

$

1,304,486

 

 

$

 

 

$

1,954,596

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

401,876

 

 

$

8,139

 

 

$

1,260,724

 

 

$

(288,824)

 

 

$

1,381,915

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

1.34

 

 

 

 

 

 

 

 

$

4.60

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

300,525

 

 

 

 

 

 

 

 

300,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

 

GAAP

 

Net Revenue Adjustments(1)

 

Earnings Adjustments(2)

 

Income
Taxes on Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

2,924,131

 

 

$

(140,434)

 

 

$

 

 

$

 

 

$

2,783,697

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

595,255

 

 

$

12,643

 

 

$

523,181

 

 

$

 

 

$

1,131,079

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

327,842

 

 

$

12,643

 

 

$

551,508

 

 

$

(141,960)

 

 

$

750,033

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

2.00

 

 

 

 

 

 

 

 

$

4.56

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

164,331

 

 

 

 

 

 

 

 

164,331

 

----------------------------------------------------------------------------------

(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. Also, for the nine months ended September 30, 2020 and September 30, 2019, includes $8.1 million and $12.6 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

 

 

(2)

 

For the nine months ended September 30, 2020, earnings adjustments to operating income included $965.9 million in COS and $338.5 million in SG&A expenses. Adjustments to COS include $942.6 million of amortization of acquired intangibles and $23.3 million of other items. Adjustments to SG&A include $105.1 million of share-based compensation expense, $213.6 million of acquisition and integration expenses and $19.8 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19. Net income attributable to Global Payments also reflects the removal of a $27.3 million gain associated with the fair value of shares received from the conversion of certain Visa Inc. preferred shares, the removal of $23.1 million of equity method investment earnings from our interest in a private equity investment fund, and the removal of a $8.7 million loss associated with the partial sale of an ownership position in a strategic partner.

 

 

 

 

 

For the nine months ended September 30, 2019, earnings adjustments to operating income included $359.4 million in COS and $163.7 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $347.1 million and acquisition and integration expenses of $12.4 million. Adjustments to SG&A include share-based compensation expense of $55.8 million and acquisition and integration expenses of $107.9 million. Net income attributable to Global Payments also reflects the removal of $34.3 million in charges from interest expense associated with the financing of the merger with TSYS. These include fees related to the bridge facility the company entered into to support the merger financing, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new secured senior notes attributable to the period between issuance and merger close, net of interest income earned from these funds in escrow.

 

 

 

(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.

 

 

 

 

 

See "Non-GAAP Financial Measures" discussion on Schedule 2.

SCHEDULE 8

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

 

GAAP

 

Net Revenue Adjustments (2)

 

Earnings Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

 

 

$

1,243,961

 

 

$

(118,556)

 

 

$

 

 

$

1,125,405

 

Issuer Solutions

 

 

 

487,409

 

 

(54,037)

 

 

 

 

433,372

 

Business and Consumer Solutions

 

 

 

204,106

 

 

 

 

 

 

204,106

 

Intersegment Eliminations

 

 

 

(17,661)

 

 

683

 

 

 

 

(16,978)

 

 

 

 

 

$

1,917,815

 

 

$

(171,910)

 

 

$

 

 

$

1,745,905

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

 

 

$

344,981

 

 

$

316

 

 

$

186,990

 

 

$

532,287

 

Issuer Solutions

 

 

 

70,800

 

 

2,239

 

 

114,619

 

 

187,658

 

Business and Consumer Solutions

 

 

 

31,052

 

 

 

 

21,200

 

 

52,252

 

Corporate

 

 

 

(156,414)

 

 

 

 

101,886

 

 

(54,528)

 

 

 

 

 

$

290,419

 

 

$

2,555

 

 

$

424,695

 

 

$

717,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2019

 

 

GAAP

 

TSYS(1)

 

Net Revenue Adjustments(2)

 

Earnings Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

1,004,943

 

 

$

316,471

 

 

$

(121,769)

 

 

$

 

 

$

1,199,645

 

Issuer Solutions

 

75,628

 

 

423,555

 

 

(54,544)

 

 

 

 

444,639

 

Business and Consumer Solutions

 

27,896

 

 

162,583

 

 

 

 

 

 

190,479

 

Intersegment Eliminations

 

(2,526)

 

 

(13,258)

 

 

650

 

 

 

 

(15,134)

 

 

 

$

1,105,941

 

 

$

889,351

 

 

$

(175,663)

 

 

$

 

 

$

1,819,629

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

318,786

 

 

$

78,570

 

 

$

4,002

 

 

$

160,750

 

 

$

562,108

 

Issuer Solutions

 

5,885

 

 

146,142

 

 

 

 

18,105

 

 

170,132

 

Business and Consumer Solutions

 

3,365

 

 

16,305

 

 

 

 

15,567

 

 

35,237

 

Corporate

 

(153,999)

 

 

(126,083)

 

 

 

 

215,034

 

 

(65,048)

 

 

 

$

174,037

 

 

$

114,934

 

 

$

4,002

 

 

$

409,456

 

 

$

702,429

 

(1)

 

Represents TSYS financial information determined in accordance with GAAP applied by TSYS and presented in Global Payments new segment reporting structure, net of revenues between legacy Global Payments and TSYS considered intercompany revenue following the merger.

 

 

 

(2)

 

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. Also, for the three months ended September 30, 2020 and September 30, 2019, includes $2.6 million and $4.0 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

 

 

(3)

 

For the three months ended September 30, 2020, earnings adjustments to operating income included $317.3 million in COS and $107.4 million in SG&A expenses. Adjustments to COS include $313.4 million of amortization of acquired intangibles and $3.9 million of other items. Adjustments to SG&A include $42.3 million of share-based compensation expense, $59.8 million of acquisition and integration expenses and $5.3 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19.

 

 

 

 

 

For the three months ended September 30, 2019, earnings adjustments to operating income included $191.0 million in COS and $218.4 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $180.5 million and acquisition and integration expenses of $10.5 million. Adjustments to SG&A include share-based compensation expense of $58.0 million and acquisition and integration expenses of $160.4 million.

 

 

 

 

 

See "Non-GAAP Financial Measures" discussion on Schedule 2.

SCHEDULE 9

UNAUDITED RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

Nine Months Ended September 30, 2020

 

 

 

 

GAAP

 

Net Revenue Adjustments(2)

 

Earnings Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

 

 

$

3,460,785

 

 

$

(328,373)

 

 

$

 

 

$

3,132,412

 

Issuer Solutions

 

 

 

1,461,196

 

 

(171,631)

 

 

 

 

1,289,565

 

Business and Consumer Solutions

 

 

 

624,774

 

 

 

 

 

 

624,774

 

Intersegment Eliminations

 

 

 

(53,390)

 

 

2,293

 

 

 

 

(51,097)

 

 

 

 

 

$

5,493,365

 

 

$

(497,711)

 

 

$

 

 

$

4,995,654

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

 

 

$

824,212

 

 

$

833

 

 

$

579,144

 

 

$

1,404,189

 

Issuer Solutions

 

 

 

188,131

 

 

7,306

 

 

344,013

 

 

539,450

 

Business and Consumer Solutions

 

 

 

110,358

 

 

 

 

64,484

 

 

174,842

 

Corporate

 

 

 

(480,730)

 

 

 

 

316,845

 

 

(163,885)

 

 

 

 

 

$

641,971

 

 

$

8,139

 

 

$

1,304,486

 

 

$

1,954,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

 

GAAP

 

TSYS(1)

 

Net Revenue Adjustments(2)

 

Earnings Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

2,812,640

 

 

$

1,017,489

 

 

$

(397,028)

 

 

$

 

 

$

3,433,101

 

Issuer Solutions

 

86,122

 

 

1,398,326

 

 

(163,395)

 

 

 

 

1,321,053

 

Business and Consumer Solutions

 

27,896

 

 

577,904

 

 

 

 

 

 

605,800

 

Intersegment Eliminations

 

(2,527)

 

 

(42,794)

 

 

1,969

 

 

 

 

(43,352)

 

 

 

$

2,924,131

 

 

$

2,950,925

 

 

$

(558,454)

 

 

$

 

 

$

5,316,602

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

840,326

 

 

$

239,796

 

 

$

12,643

 

 

$

463,430

 

 

$

1,556,195

 

Issuer Solutions

 

12,920

 

 

452,688

 

 

 

 

18,105

 

 

483,713

 

Business and Consumer Solutions

 

3,365

 

 

95,826

 

 

 

 

42,035

 

 

141,226

 

Corporate

 

(261,356)

 

 

(231,018)

 

 

 

 

297,091

 

 

(195,283)

 

 

 

$

595,255

 

 

$

557,292

 

 

$

12,643

 

 

$

820,661

 

 

$

1,985,851

 

(1)

 

Represents TSYS financial information determined in accordance with GAAP applied by TSYS and presented in Global Payments new segment reporting structure, net of revenues between legacy Global Payments and TSYS considered intercompany revenue following the merger.

 

 

 

(2)

 

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. Also, for the nine months ended September 30, 2020 and September 30, 2019, includes $8.1 million and $12.6 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

 

 

(3)

 

For the nine months ended September 30, 2020, earnings adjustments to operating income included $965.9 million in COS and $338.5 million in SG&A expenses. Adjustments to COS include $942.6 million of amortization of acquired intangibles and $23.3 million of other items. Adjustments to SG&A include $105.1 million of share-based compensation expense, $213.6 million of acquisition and integration expenses and $19.8 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19.

 

 

 

 

 

For the nine months ended September 30, 2019, earnings adjustments to operating income include $513.7 million in COS and $306.9 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $501.3 million and acquisition and integration expenses of $12.4 million. Adjustments to SG&A include share-based compensation expense of $120.3 million and acquisition and integration expenses of $186.6 million.

 

 

 

 

 

See "Non-GAAP Financial Measures" discussion on Schedule 2.

 

Investor Contact:
Winnie Smith  770.829.8478
investor.relations@globalpay.com

Media Contact:
Emily Edmonds  770.829.8755
media.relations@globalpay.com

Source: Global Payments Inc.

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