Global Payments Reports Results for Second Quarter 2019 and Increases 2019 Outlook

July 30, 2019

ATLANTA--(BUSINESS WIRE)--Jul. 30, 2019-- Global Payments Inc. (NYSE: GPN) today announced results for the second quarter ended June 30, 2019.

"We are pleased to report double digit growth this quarter, an acceleration from terrific first quarter results and further validation of our technology-enabled strategies," said Jeff Sloan, Chief Executive Officer. "We also made substantial progress on our landmark partnership with TSYS announced in May, which we now expect to close as early as the beginning of the fourth quarter."

Sloan continued, "Our preliminary integration work with TSYS has reinforced our confidence in the value creation from the transaction, particularly the ability to drive significant revenue enhancements. We believe there are meaningful opportunities that are worldwide in scope across all three of TSYS' business segments. We look forward to a successful closing."

Second Quarter 2019 Summary

  • GAAP revenues were $935.2 million, compared to $833.2 million in the second quarter of 2018; diluted earnings per share were $0.77 compared to $0.68 in the prior year; and operating margin was 23.7% compared to 22.9% in 2018.
  • Adjusted net revenue plus network fees grew 13.4% to $1.114 billion, compared to $982.5 million in 2018.
  • Adjusted earnings per share grew 17.1% to $1.51, compared to $1.29 in 2018.
  • Adjusted operating margin expanded 100 basis points to 32.4%.

2019 Outlook

“We are delighted with our financial results for the second quarter and year-to-date period, which we delivered while simultaneously advancing our transformational merger with TSYS,” stated Cameron Bready, Senior Executive Vice President and Chief Financial Officer. “Our performance positions us well to exceed our expectations for the year, despite facing further incremental headwinds from foreign currency exchange rates.

“We continue to expect adjusted net revenue plus network fees to range from $4.44 billion to $4.49 billion, reflecting growth of 12% to 13%, which includes an incremental headwind of approximately 50 basis points from foreign currency relative to our May guidance. Despite this impact, we are increasing our outlook for adjusted earnings per share to a range of $6.00 to $6.15, reflecting growth of 16% to 18% over 2018, and we now expect adjusted operating margin for 2019 to expand by up to 90 basis points,” Bready concluded.

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.01 per share payable September 27, 2019 to shareholders of record as of September 13, 2019.

Conference Call

Global Payments’ management will host a conference call today, July 30, 2019 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, operating income and earnings per share information determined in accordance with GAAP by providing those measures on an adjusted basis, and other measures, 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. (NYSE: GPN) is a leading worldwide provider of payment technology and software solutions delivering innovative 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 accept all payment types and operate their businesses more efficiently across a variety of distribution channels in many markets around the world.

Headquartered in Atlanta, Georgia with approximately 11,000 employees worldwide, Global Payments is a member of the S&P 500 with customers and partners in 32 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

Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning 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 Global Payments and TSYS operate and beliefs of and assumptions made by Global Payments management and TSYS management, involve uncertainties that could significantly affect the financial condition, results of operations, business plans and the future performance of Global Payments, TSYS or the combined company. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “estimates,” “forecasts,” “projects,” “plans,” “may,” “could,” “should,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Such forward-looking statements include, but are not limited to, statements about the strategic rationale and financial benefits of the merger transaction, including expected future financial and operating results and the combined company’s plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; statements of plans and objectives of Global Payments or TSYS or their management or Board of Directors, including those relating to products or services; and statements of future economic performance — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. 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’ and TSYS’ 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 occurrence of any event, change or other circumstances that could give rise to the right of one or both of Global Payments and TSYS to terminate the merger agreement; the outcome of any legal proceedings that may be instituted against Global Payments, TSYS or their respective directors; the ability to obtain regulatory approvals and meet other closing conditions to the merger on a timely basis or at all, including the risk that regulatory approvals required for the merger are not obtained on a timely basis or at all, or are obtained subject to conditions that are not anticipated or that could adversely affect the combined company or the expected benefits of the transaction; the ability to obtain approval by Global Payments shareholders and TSYS shareholders on the expected terms and schedule; difficulties and delays in integrating the Global Payments and TSYS businesses, 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 proposed merger that will harm Global Payments’ or TSYS’ business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger, including as it relates to Global Payments’ or TSYS’ ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability of Global Payments or TSYS to retain and hire key personnel; the diversion of management’s attention from ongoing business operations; uncertainty as to the long-term value of the common stock of Global Payments following the merger, including the dilution caused by Global Payments’ issuance of additional shares of its common stock in connection with the transaction; the continued availability of capital and financing following the merger; the business, economic and political conditions in the markets in which Global Payments and TSYS operate; the impact 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 Global Payments’ or TSYS’ control, such as acts of terrorism.

Any forward-looking statements speak only as of the date of this communication or as of the date they were made, and neither Global Payments nor TSYS undertakes any obligation to update forward-looking statements. For a more detailed discussion of these factors, also see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Global Payments’ and TSYS’ most recent annual reports on Form 10-K for the year ended December 31, 2018 and in other documents that the companies file with the SEC, which are available at www.sec.gov.

As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements.

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,

 

2019

 

2018

 

%

Change

 

2019

 

2018

 

%

Change

Revenues

$

935,152

 

 

$

833,164

 

 

12.2

%

 

$

1,818,190

 

 

$

1,628,141

 

 

11.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of service

302,276

 

 

264,544

 

 

14.3

%

 

607,505

 

 

516,930

 

 

17.5

%

Selling, general and administrative

411,150

 

 

377,883

 

 

8.8

%

 

789,467

 

 

764,304

 

 

3.3

%

 

713,426

 

 

642,427

 

 

11.1

%

 

1,396,972

 

 

1,281,234

 

 

9.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

221,726

 

 

190,737

 

 

16.2

%

 

421,218

 

 

346,907

 

 

21.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

6,176

 

 

2,568

 

 

140.5

%

 

9,112

 

 

14,262

 

 

(36.1

)%

Interest and other expense

(65,616

)

 

(47,720

)

 

37.5

%

 

(124,697

)

 

(93,325

)

 

33.6

%

 

(59,440

)

 

(45,152

)

 

31.6

%

 

(115,585

)

 

(79,063

)

 

46.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

162,286

 

 

145,585

 

 

11.5

%

 

305,633

 

 

267,844

 

 

14.1

%

Provision for income taxes

(32,247

)

 

(27,856

)

 

15.8

%

 

(56,388

)

 

(52,529

)

 

7.3

%

Net income

130,039

 

 

117,729

 

 

10.5

%

 

249,245

 

 

215,315

 

 

15.8

%

Net income attributable to noncontrolling interests, net of income tax

(9,581

)

 

(8,660

)

 

10.6

%

 

(16,445

)

 

(14,847

)

 

10.8

%

Net income attributable to Global Payments

$

120,458

 

 

$

109,069

 

 

10.4

%

 

$

232,800

 

 

$

200,468

 

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Global Payments:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.77

 

 

$

0.69

 

 

11.6

%

 

$

1.48

 

 

$

1.26

 

 

17.5

%

Diluted

$

0.77

 

 

$

0.68

 

 

13.2

%

 

$

1.48

 

 

$

1.25

 

 

18.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

156,768

 

 

159,003

 

 

 

 

157,141

 

 

159,161

 

 

 

Diluted

157,262

 

 

159,677

 

 

 

 

157,638

 

 

159,840

 

 

 

SCHEDULE 2

UNAUDITED NON-GAAP FINANCIAL MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

%

Change

 

2019

 

2018

 

%

Change

Adjusted net revenue plus network fees

$

1,114,456

 

 

$

982,500

 

 

13.4

%

 

$

2,157,557

 

 

$

1,906,780

 

 

13.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income

$

360,694

 

 

$

308,147

 

 

17.1

%

 

$

689,326

 

 

$

589,487

 

 

16.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income attributable to Global Payments

$

236,830

 

 

$

205,998

 

 

15.0

%

 

$

448,928

 

 

$

386,821

 

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share attributable to Global Payments

$

1.51

 

 

$

1.29

 

 

17.1

%

 

$

2.85

 

 

$

2.42

 

 

17.8

%

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

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

UNAUDITED SEGMENT INFORMATION

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

 

Three Months Ended

 

 

 

 

 

 

 

 

June 30, 2019

 

June 30, 2018

 

% Change

 

 

GAAP

 

Non-GAAP

 

Non-GAAP
Adjusted Net

Revenue

Plus

Network

Fees

 

GAAP

 

Non-GAAP

 

Non-GAAP
Adjusted Net

Revenue

Plus

Network

Fees

 

GAAP

 

Non-GAAP

 

Non-GAAP
Adjusted Net

Revenue

Plus

Network

Fees

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

715,919

 

 

$

668,568

 

 

$

840,427

 

 

$

621,801

 

 

$

549,957

 

 

$

718,574

 

 

15.1

%

 

21.6

%

 

17.0%

Europe

 

160,349

 

 

160,349

 

 

194,871

 

 

155,631

 

 

155,631

 

 

190,179

 

 

3.0

%

 

3.0

%

 

2.5%

Asia-Pacific

 

58,884

 

 

59,501

 

 

79,158

 

 

55,732

 

 

55,732

 

 

73,747

 

 

5.7

%

 

6.8

%

 

7.3%

 

 

$

935,152

 

 

$

888,418

 

 

$

1,114,456

 

 

$

833,164

 

 

$

761,320

 

 

$

982,500

 

 

12.2

%

 

16.7

%

 

13.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

185,286

 

 

$

285,926

 

 

 

 

$

147,184

 

 

$

232,896

 

 

 

 

25.9

%

 

22.8

%

 

 

Europe

 

86,345

 

 

94,729

 

 

 

 

82,682

 

 

90,152

 

 

 

 

4.4

%

 

5.1

%

 

 

Asia-Pacific

 

23,257

 

 

26,193

 

 

 

 

19,577

 

 

23,255

 

 

 

 

18.8

%

 

12.6

%

 

 

Corporate

 

(73,162

)

 

(46,154

)

 

 

 

(58,706

)

 

(38,156

)

 

 

 

24.6

%

 

21.0

%

 

 

 

 

$

221,726

 

 

$

360,694

 

 

 

 

$

190,737

 

 

$

308,147

 

 

 

 

16.2

%

 

17.1

%

 

 

 

 

Six Months Ended

 

 

 

 

 

 

 

 

June 30, 2019

 

June 30, 2018

 

% Change

 

 

GAAP

 

Non-GAAP

 

Non-GAAP
Adjusted Net

Revenue

Plus

Network

Fees

 

GAAP

 

Non-GAAP

 

Non-GAAP
Adjusted Net

Revenue

Plus

Network

Fees

 

GAAP

 

Non-GAAP

 

Non-GAAP
Adjusted Net

Revenue

Plus

Network

Fees

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

1,394,341

 

 

$

1,296,385

 

 

$

1,626,871

 

 

$

1,215,830

 

 

$

1,071,746

 

 

$

1,395,079

 

 

14.7

%

 

21.0

%

 

16.6%

Europe

 

303,218

 

 

303,218

 

 

368,890

 

 

298,908

 

 

298,908

 

 

361,045

 

 

1.4

%

 

1.4

%

 

2.2%

Asia-Pacific

 

120,631

 

 

121,877

 

 

161,796

 

 

113,403

 

 

113,403

 

 

150,656

 

 

6.4

%

 

7.5

%

 

7.4%

 

 

$

1,818,190

 

 

$

1,721,480

 

 

$

2,157,557

 

 

$

1,628,141

 

 

$

1,484,057

 

 

$

1,906,780

 

 

11.7

%

 

16.0

%

 

13.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

341,433

 

 

$

548,388

 

 

 

 

$

272,588

 

 

$

446,736

 

 

 

 

25.3

%

 

22.8

%

 

 

Europe

 

158,306

 

 

174,696

 

 

 

 

153,230

 

 

167,831

 

 

 

 

3.3

%

 

4.1

%

 

 

Asia-Pacific

 

50,530

 

 

56,310

 

 

 

 

43,351

 

 

49,118

 

 

 

 

16.6

%

 

14.6

%

 

 

Corporate

 

(129,051

)

 

(90,068

)

 

 

 

(122,262

)

 

(74,198

)

 

 

 

5.6

%

 

21.4

%

 

 

 

 

$

421,218

 

 

$

689,326

 

 

 

 

$

346,907

 

 

$

589,487

 

 

 

 

21.4

%

 

16.9

%

 

 

See Schedules 8 and 9 for a reconciliation of adjusted net revenue, adjusted net revenue plus network fees 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, 2019

 

December 31, 2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,047,727

 

 

$

1,210,878

 

Accounts receivable, net

394,603

 

 

348,400

 

Settlement processing assets

2,844,267

 

 

1,600,222

 

Prepaid expenses and other current assets

261,082

 

 

216,708

 

Total current assets

4,547,679

 

 

3,376,208

 

Goodwill

6,345,563

 

 

6,341,355

 

Other intangible assets, net

2,308,333

 

 

2,488,618

 

Property and equipment, net

712,396

 

 

653,542

 

Deferred income taxes

6,950

 

 

8,128

 

Other noncurrent assets

663,151

 

 

362,923

 

Total assets

$

14,584,072

 

 

$

13,230,774

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Settlement lines of credit

$

736,209

 

 

$

700,486

 

Current portion of long-term debt

151,062

 

 

115,075

 

Accounts payable and accrued liabilities

1,117,938

 

 

1,176,703

 

Settlement processing obligations

2,478,373

 

 

1,276,356

 

Total current liabilities

4,483,582

 

 

3,268,620

 

Long-term debt

5,000,585

 

 

5,015,168

 

Deferred income taxes

556,130

 

 

585,025

 

Other noncurrent liabilities

368,659

 

 

175,618

 

Total liabilities

10,408,956

 

 

9,044,431

 

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; 156,674,688 issued and outstanding at June 30, 2019 and 157,961,982 issued and outstanding at December 31, 2018

 

 

 

Paid-in capital

2,126,065

 

 

2,235,167

 

Retained earnings

2,204,445

 

 

2,066,415

 

Accumulated other comprehensive loss

(339,906

)

 

(310,175

)

Total Global Payments shareholders’ equity

3,990,604

 

 

3,991,407

 

Noncontrolling interests

184,512

 

 

194,936

 

Total equity

4,175,116

 

 

4,186,343

 

Total liabilities and equity

$

14,584,072

 

 

$

13,230,774

 

SCHEDULE 5

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

Six Months Ended

 

June 30, 2019

 

June 30, 2018

Cash flows from operating activities:

 

 

 

Net income

$

249,245

 

 

$

215,315

 

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

 

 

 

Depreciation and amortization of property and equipment

82,760

 

 

69,088

 

Amortization of acquired intangibles

210,993

 

 

176,303

 

Amortization of capitalized contract costs

31,965

 

 

23,835

 

Share-based compensation expense

27,914

 

 

30,104

 

Provision for operating losses and bad debts

18,637

 

 

22,942

 

Deferred income taxes

(6,483

)

 

(3,061

)

Other, net

22,469

 

 

(6,228

)

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

 

 

 

Accounts receivable

(49,774

)

 

(21,763

)

Settlement processing assets and obligations, net

(41,715

)

 

95,232

 

Prepaid expenses and other assets

(148,435

)

 

(92,154

)

Accounts payable and other liabilities

(150,223

)

 

(2,857

)

Net cash provided by operating activities

247,353

 

 

506,756

 

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

(78,245

)

 

 

Capital expenditures

(133,312

)

 

(102,669

)

Other, net

13,182

 

 

(1,436

)

Net cash used in investing activities

(198,375

)

 

(104,105

)

Cash flows from financing activities:

 

 

 

Net borrowings (repayments) of settlement lines of credit

32,163

 

 

(88,325

)

Proceeds from long-term debt

586,000

 

 

694,214

 

Repayments of long-term debt

(569,119

)

 

(1,024,695

)

Payment of debt issuance costs

 

 

(10,884

)

Repurchase of common stock

(233,996

)

 

(177,261

)

Proceeds from stock issued under share-based compensation plans

12,952

 

 

6,340

 

Common stock repurchased - share-based compensation plans

(11,167

)

 

(9,989

)

Distributions to noncontrolling interests

(26,239

)

 

 

Dividends paid

(3,137

)

 

(3,171

)

Net cash used in financing activities

(212,543

)

 

(613,771

)

Effect of exchange rate changes on cash

414

 

 

(25,206

)

Decrease in cash and cash equivalents

(163,151

)

 

(236,326

)

Cash and cash equivalents, beginning of the period

1,210,878

 

 

1,335,855

 

Cash and cash equivalents, end of the period

$

1,047,727

 

 

$

1,099,529

 

SCHEDULE 6

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

Three Months Ended June 30, 2019

 

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Income
Taxes on

Adjustments(3)

 

Non-GAAP

 

Network Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues

 

$

935,152

 

 

$

(46,734

)

 

$

 

 

$

 

 

$

888,418

 

 

$

226,038

 

 

$

1,114,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

221,726

 

 

$

4,234

 

 

$

134,734

 

 

$

 

 

$

360,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

120,458

 

 

$

4,234

 

 

$

135,643

 

 

$

(23,505

)

 

$

236,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

0.77

 

 

 

 

 

 

 

 

$

1.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

157,262

 

 

 

 

 

 

 

 

157,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Income
Taxes on

Adjustments(3)

 

Non-GAAP

 

Network Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues

 

$

833,164

 

 

$

(71,844

)

 

$

 

 

$

 

 

$

761,320

 

 

$

221,180

 

 

$

982,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

190,737

 

 

$

2,276

 

 

$

115,134

 

 

$

 

 

$

308,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

109,069

 

 

$

2,276

 

 

$

116,883

 

 

$

(22,230

)

 

$

205,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

0.68

 

 

 

 

 

 

 

 

$

1.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

159,677

 

 

 

 

 

 

 

 

159,677

 

 

 

 

 

 

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

 

 

(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 June 30, 2019 and June 30, 2018, includes $4.2 million and $2.3 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 June 30, 2019, earnings adjustments to operating income included $105.2 million in cost of service (COS) and $29.5 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $104.1 million and acquisition and integration expenses of $1.1 million. Adjustments to SG&A include share-based compensation expense of $16.5 million, acquisition and integration expenses of $13.0 million, including costs related to the proposed merger with TSYS. Net income attributable to Global Payments also reflects an adjustment to remove a $2.9 million charge to interest expense associated with the bridge facility the company entered into in connection with the proposed TSYS merger.

 

 

 

For the three months ended June 30, 2018, earnings adjustments to operating income included $92.1 million in COS and $23.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $89.0 million and other adjustments of $3.1 million. Adjustments to SG&A include share-based compensation expense of $15.2 million, acquisition and integration expenses of $7.6 million and other adjustments of $0.2 million. Net income attributable to Global Payments also reflects an adjustment to remove a charge of $3.3 million associated with the refinancing of our corporate credit facility.

 

 

(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 10.

SCHEDULE 7

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

Six Months Ended June 30, 2019

 

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Income
Taxes on

Adjustments(3)

 

Non-GAAP

 

Network

Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues

 

$

1,818,190

 

 

$

(96,710

)

 

$

 

 

$

 

 

$

1,721,480

 

 

$

436,077

 

 

$

2,157,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

421,218

 

 

$

8,641

 

 

$

259,467

 

 

$

 

 

$

689,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

232,800

 

 

$

8,641

 

 

$

258,376

 

 

$

(50,889

)

 

$

448,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

1.48

 

 

 

 

 

 

 

 

$

2.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

157,638

 

 

 

 

 

 

 

 

157,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Income
Taxes on

Adjustments(3)

 

Non-GAAP

 

Network

Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues

 

$

1,628,141

 

 

$

(144,084

)

 

$

 

 

$

 

 

$

1,484,057

 

 

$

422,723

 

 

$

1,906,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

346,907

 

 

$

5,869

 

 

$

236,711

 

 

$

 

 

$

589,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

 

$

200,468

 

 

$

5,869

 

 

$

229,025

 

 

$

(48,541

)

 

$

386,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

 

$

1.25

 

 

 

 

 

 

 

 

$

2.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

159,840

 

 

 

 

 

 

 

 

159,840

 

 

 

 

 

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

(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 six months ended June 30, 2019 and June 30, 2018, includes $8.6 million and $5.9 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

(2)

For the six months ended June 30, 2019, earnings adjustments to operating income included $214.0 million in cost of service (COS) and $45.5 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $212.1 million and acquisition and integration expenses of $1.9 million. Adjustments to SG&A include share-based compensation expense of $27.9 million, acquisition and integration expenses of $17.6 million, including costs related to the proposed merger with TSYS. Net income attributable to Global Payments also reflects an adjustment to remove a $2.9 million charge to interest expense associated with the bridge facility the company entered into in connection with the proposed TSYS merger.

 

For the six months ended June 30, 2018, earnings adjustments to operating income include $181.0 million in COS and $55.7 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $177.4 million and other adjustments of $3.6 million. Adjustments to SG&A include share-based compensation expense of $30.1 million, acquisition and integration expenses of $25.4 million and other adjustments of $0.2 million. Also, earnings adjustments to net income attributable to Global Payments include the removal of a $9.6 million gain recognized on the reorganization of Interac Association of which we were a member through one of our Canadian subsidiaries, and a charge of $5.2 million associated with the refinancing of our corporate credit facility.

 

(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 10.

SCHEDULE 8

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

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

 

Three Months Ended June 30, 2019

 

 

GAAP

 

Net Revenue

Adjustments (1)

 

Earnings

Adjustments(2)

 

Non-GAAP

 

Network Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

715,919

 

 

$

(47,351

)

 

$

 

 

$

668,568

 

 

$

171,859

 

 

$

840,427

 

Europe

 

160,349

 

 

 

 

 

 

160,349

 

 

34,522

 

 

194,871

 

Asia-Pacific

 

58,884

 

 

617

 

 

 

 

59,501

 

 

19,657

 

 

79,158

 

 

 

$

935,152

 

 

$

(46,734

)

 

$

 

 

$

888,418

 

 

$

226,038

 

 

$

1,114,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

185,286

 

 

$

3,617

 

 

$

97,023

 

 

$

285,926

 

 

 

 

 

Europe

 

86,345

 

 

 

 

8,384

 

 

94,729

 

 

 

 

 

Asia-Pacific

 

23,257

 

 

617

 

 

2,319

 

 

26,193

 

 

 

 

 

Corporate

 

(73,162

)

 

 

 

27,008

 

 

(46,154

)

 

 

 

 

 

 

$

221,726

 

 

$

4,234

 

 

$

134,734

 

 

$

360,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Non-GAAP

 

Network Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

621,801

 

 

$

(71,844

)

 

$

 

 

$

549,957

 

 

$

168,617

 

 

$

718,574

 

Europe

 

155,631

 

 

 

 

 

 

155,631

 

 

34,548

 

 

190,179

 

Asia-Pacific

 

55,732

 

 

 

 

 

 

55,732

 

 

18,015

 

 

73,747

 

 

 

$

833,164

 

 

$

(71,844

)

 

$

 

 

$

761,320

 

 

$

221,180

 

 

$

982,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

147,184

 

 

$

2,276

 

 

$

83,436

 

 

$

232,896

 

 

 

 

 

Europe

 

82,682

 

 

 

 

7,470

 

 

90,152

 

 

 

 

 

Asia-Pacific

 

19,577

 

 

 

 

3,678

 

 

23,255

 

 

 

 

 

Corporate

 

(58,706

)

 

 

 

20,550

 

 

(38,156

)

 

 

 

 

 

 

$

190,737

 

 

$

2,276

 

 

$

115,134

 

 

$

308,147

 

 

 

 

 

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

(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 June 30, 2019 and June 30, 2018, includes $4.2 million and $2.3 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 June 30, 2019, earnings adjustments to operating income include $105.2 million in cost of service (COS) and $29.5 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $104.1 million and acquisition and integration expenses of $1.1 million. Adjustments to SG&A include share-based compensation expense of $16.5 million, acquisition and integration expenses of $13.0 million, including costs related to the proposed TSYS merger.

 

For the three months ended June 30, 2018, earnings adjustments to operating income include $92.1 million in COS and $23.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $89.0 million and other adjustments of $3.1 million. Adjustments to SG&A include share-based compensation expense of $15.2 million and acquisition and integration expenses of $7.6 million and other adjustments of $0.2 million.

See "Non-GAAP Financial Measures" discussion on Schedule 10.

SCHEDULE 9

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

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

 

Six Months Ended June 30, 2019

 

 

GAAP

 

Net Revenue

Adjustments (1)

 

Earnings

Adjustments(2)

 

Non-GAAP

 

Network Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

1,394,341

 

 

$

(97,956

)

 

$

 

 

$

1,296,385

 

 

$

330,486

 

 

$

1,626,871

 

Europe

 

303,218

 

 

 

 

 

 

303,218

 

 

65,672

 

 

368,890

 

Asia-Pacific

 

120,631

 

 

1,246

 

 

 

 

121,877

 

 

39,919

 

 

161,796

 

 

 

$

1,818,190

 

 

$

(96,710

)

 

$

 

 

$

1,721,480

 

 

$

436,077

 

 

$

2,157,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

341,433

 

 

$

7,395

 

 

$

199,560

 

 

$

548,388

 

 

 

 

 

Europe

 

158,306

 

 

 

 

16,390

 

 

174,696

 

 

 

 

 

Asia-Pacific

 

50,530

 

 

1,246

 

 

4,534

 

 

56,310

 

 

 

 

 

Corporate

 

(129,051

)

 

 

 

38,983

 

 

(90,068

)

 

 

 

 

 

 

$

421,218

 

 

$

8,641

 

 

$

259,467

 

 

$

689,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Non-GAAP

 

Network Fees

 

Non-GAAP

Adjusted Net

Revenue Plus

Network Fees

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

1,215,830

 

 

$

(144,084

)

 

$

 

 

$

1,071,746

 

 

$

323,333

 

 

$

1,395,079

 

Europe

 

298,908

 

 

 

 

 

 

298,908

 

 

62,137

 

 

361,045

 

Asia-Pacific

 

113,403

 

 

 

 

 

 

113,403

 

 

37,253

 

 

150,656

 

 

 

$

1,628,141

 

 

$

(144,084

)

 

$

 

 

$

1,484,057

 

 

$

422,723

 

 

$

1,906,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

272,588

 

 

$

5,869

 

 

$

168,279

 

 

$

446,736

 

 

 

 

 

Europe

 

153,230

 

 

 

 

14,601

 

 

167,831

 

 

 

 

 

Asia-Pacific

 

43,351

 

 

 

 

5,767

 

 

49,118

 

 

 

 

 

Corporate

 

(122,262

)

 

 

 

48,064

 

 

(74,198

)

 

 

 

 

 

 

$

346,907

 

 

$

5,869

 

 

$

236,711

 

 

$

589,487

 

 

 

 

 

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

(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 six months ended June 30, 2019 and June 30, 2018, includes $8.6 million and $5.9 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

(2)

For the six months ended June 30, 2019, earnings adjustments to operating income include $214.0 million in cost of service (COS) and $45.5 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $212.1 million and acquisition and integration expenses of $1.9 million. Adjustments to SG&A include share-based compensation expense of $27.9 million, acquisition and integration expenses of $17.6 million, including costs related to the proposed TSYS merger.

 

 

For the six months ended June 30, 2018, earnings adjustments to operating income include $181.0 million in COS and $55.7 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $177.4 million and other adjustments of $3.6 million. Adjustments to SG&A include share-based compensation expense of $30.1 million acquisition and integration expenses of $25.4 million and other adjustments of $0.2 million.

See "Non-GAAP Financial Measures" discussion on Schedule 10.

SCHEDULE 10

UNAUDITED OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In billions, except per share data)

 

2018 Actual

 

2019 Outlook

 

% Change

Revenues:

 

 

 

 

 

GAAP revenues

$3.37

 

$3.73 to $3.78

 

11% to 12%

Adjustments(1)

(0.27)

 

(0.18)

 

 

Adjusted net revenue

$3.10

 

$3.54 to $3.59

 

14% to 16%

 

 

 

 

 

 

Network fees

0.87

 

0.90

 

 

Adjusted net revenue plus network fees

$3.97

 

$4.44 to $4.49

 

12% to 13%

 

 

 

 

 

 

Earnings Per Share (EPS):

 

 

 

 

 

GAAP diluted EPS

$2.84

 

$3.44 to $3.59

 

21% to 26%

Adjustments(2)

2.35

 

2.56

 

 

Adjusted diluted EPS

$5.19

 

$6.00 to $6.15

 

16% to 18%

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

(1)

Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefit to the company. Amounts also include adjustments to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

 

(2)

Adjustments to 2018 GAAP diluted EPS include software-related contract liability adjustments described above of $0.06, acquisition related amortization expense of $1.85, share-based compensation expense of $0.28, acquisition and integration expense of $0.28, employee termination benefits of $0.01, asset abandonment charges associated with technology integrations of $0.04 and the removal of an income tax benefit of $0.17 associated with tax reform. Also, adjustments to 2018 GAAP diluted EPS include the effect of these adjustments on noncontrolling interests and income taxes, as applicable.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income and EPS information determined in accordance with U.S. GAAP by providing these measures, and other 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 and adjusted net revenue plus network fees more closely reflect the economic benefits to the company's core business and, in the case of adjusted net revenue, 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 net revenue plus network fees, 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 and certain other items 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 plus network fees. 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.

Source: Global Payments Inc.

Investor contact:
investor.relations@globalpay.com
Winnie Smith
770-829-8478

Media contact:
media.relations@globalpay.com
Kimberly Mann
770-829-8755