Global Payments Reports Second Quarter Earnings, Sets Calendar 2017 Growth Targets and Increases Synergy Estimates

January 9, 2017

 

ATLANTA--(BUSINESS WIRE)-- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal second quarter ended November 30, 2016.

"The strong momentum from our first quarter accelerated in the second quarter of fiscal 2017. We delivered double digit organic growth across our key markets, including in our U.S. direct business and across most of Europe and Asia Pacific," said Jeff Sloan, Chief Executive Officer. "Our technology enabled businesses continue to spearhead our growth, with particularly strong performance from our integrated payments businesses, OpenEdge and Ezidebit, and from our software led solutions at Heartland Commerce and Campus Solutions. We achieved these results while also making significant progress integrating Heartland. We have raised our expectations for synergies from the merger, highlighting ongoing strength in execution."

Second Quarter Fiscal 2017 Summary

  • GAAP revenues were $941.8 million, compared to $722.4 million in the second quarter of fiscal 2016; diluted earnings per share were $0.32 compared to $0.60 in the prior year; and operating margin was 11.2% compared to 17.1% in the second quarter of fiscal 2016.
  • Adjusted net revenue grew 58% to $817.2 million, compared to $518.3 million in the second quarter of fiscal 2016. On a constant currency basis, adjusted net revenue grew 61%.
  • Adjusted earnings per share grew 17% to $0.89, compared to $0.76 in the second quarter of fiscal 2016. On a constant currency basis, adjusted earnings per share grew 22%.
  • Adjusted operating margin was 29.5%. On a constant currency basis, adjusted operating margin was 30.0%, a 50 basis point increase over the second quarter of fiscal 2016.

"We exceeded our expectations for organic adjusted net revenue growth, operating margin expansion and adjusted earnings per share growth for the quarter," stated Cameron Bready, Executive Vice President and Chief Financial Officer. "As a result of this strong performance and momentum, we are introducing accelerated growth expectations for calendar 2017. We are also raising our expectation for expense synergies from the Heartland merger to $135 million, a $10 million increase from our prior target."

Calendar 2017 Outlook

For calendar 2017, the company expects reported adjusted net revenue of $3.35 to $3.45 billion, representing estimated growth of 18% to 21% over our calendar 2016 estimate, or 20% to 24% on a constant currency basis. The company further expects reported adjusted earnings per share of $3.70 to $3.90, which represents estimated growth of 16% to 23% over our calendar 2016 estimate, or 21% to 27% on a constant currency basis. Calendar 2017 adjusted earnings per share expectations represents annualized growth of approximately 17% relative to the company's last fiscal 2017 guide, or approximately 20% on a constant currency basis.

Capital Allocation

Global Payments' Board of Directors approved a quarterly dividend of $0.01 per share payable February 24, 2017 to shareholders of record as of February 10, 2017. The board also approved an increase to the existing authorization for the company's share repurchase program, raising the total available authorization to $300 million.

Conference Call

Global Payments' management will host a conference call today, January 9, 2017 at 8:00 a.m. ET to discuss financial results and business highlights. Participants may access the conference call via the investor relations page of the company's website at www.globalpaymentsinc.com; or participants in North America may dial 877-674-6428 and 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. (NYSE: GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our technologies, partnerships and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world.

Headquartered in Atlanta, Georgia with more than 8,500 employees worldwide, Global Payments is a member of the S&P 500 with merchants and partners in 30 countries throughout North America, Europe, the Asia-Pacific region and Brazil. For more information about Global Payments, our Service. Driven. Commerce brand and our technologies, please visit www.globalpaymentsinc.com.

Forward-Looking Statements

This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management's expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include our potential failure to safeguard our data; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; increased merchant, referral partner or ISO attrition; our ability to increase our share of existing markets and expand into new markets; political, economic and regulatory changes in the foreign countries in which we operate; system interruptions in service; increases in credit card network fees; future performance, integration and conversion of acquired operations; and other risk factors presented in our most recent Annual Report on Form 10-K and any subsequent SEC filings, which we advise you to review. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

 
 
 
 
 

SCHEDULE 1
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
        Three Months Ended     Six Months Ended
       

November 30,

2016

   

November 30,

2015

   

%

Change

   

November 30,

2016

   

November 30,

2015

   

%

Change

                                       
Revenues       $ 941,821       $ 722,350       30.4 %     $ 1,881,313       $ 1,471,146       27.9 %
                                       
Operating expenses:                                      
Cost of service       468,383       270,565       73.1 %     931,009       543,231       71.4 %
Selling, general and administrative       368,171       328,620       12.0 %     723,931       666,978       8.5 %
        836,554       599,185       39.6 %     1,654,940       1,210,209        
                                       
Operating income       105,267       123,165       (14.5 )%    

226,373

      260,937       (13.2 )%
                                       
Interest and other income       1,353       1,292       4.7 %     43,826       2,434       NM  
Interest and other expense       (52,448 )     (14,126 )     271.3 %     (95,524 )     (27,369 )     249.0 %
        (51,095 )     (12,834 )     298.1 %     (51,698 )     (24,935 )     107.3 %
                                       
Income before income taxes       54,172       110,331       (50.9 )%     174,675       236,002       (26.0 )%
Provision for income taxes       (1,557 )     (27,253 )     (94.3 )%     (29,601 )     (59,876 )     (50.6 )%
Net income       52,615       83,078       (36.7 )%     145,074       176,126       (17.6 )%
Less: Net income attributable to noncontrolling interests, net of income tax       (3,163 )     (4,307 )     (26.6 )%     (10,529 )     (10,708 )     (1.7 )%
Net income attributable to Global Payments       $ 49,452       $ 78,771       (37.2 )%     $ 134,545       $ 165,418       (18.7 )%
                                       
Earnings per share attributable to Global Payments:                                      
Basic       $ 0.32       $ 0.61       (47.5 )%     $ 0.88       $ 1.27       (30.7 )%
Diluted       $ 0.32       $ 0.60       (46.7 )%     $ 0.87       $ 1.27       (31.5 )%
                                       
Weighted-average number of shares outstanding:                                      
Basic       153,173       129,505             153,539       129,919        
Diluted       153,991       130,353             154,435       130,752        
 

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
       

November 30,

2016

   

November 30,

2015

   

%

Change

   

November 30,

2016

   

November 30,

2015

   

%

Change

                                       
Adjusted net revenue       $ 817,188       $ 518,302       57.7 %     $ 1,634,443       $ 1,055,255       54.9 %
                                       
Adjusted operating income       $ 240,819       $ 153,208       57.2 %     $ 481,536       $ 316,776       52.0 %
                                       
Adjusted net income       $ 136,618       $ 99,501       37.3 %     $ 270,300       $ 202,530       33.5 %
                                       
Adjusted EPS:       $ 0.89       $ 0.76       17.1 %     $ 1.75       $ 1.55       12.9 %
 

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            
        November 30, 2016     November 30, 2015     % Change
        GAAP     Non-GAAP1     GAAP     Non-GAAP1     GAAP     Non-GAAP1
                                       
Revenues:                                      
North America       $ 701,300       $ 604,067       $ 511,335       $ 325,889       37.2 %     85.4 %
Europe         174,904         147,504         158,016         139,414       10.7 %     5.8 %
Asia-Pacific         65,617         65,617         52,999         52,999       23.8 %     23.8 %
        $ 941,821       $ 817,188       $ 722,350       $ 518,302       30.4 %     57.7 %
                                       
Operating income:                                      
North America       $ 105,746       $ 181,753       $ 79,121       $ 93,034       33.7 %     95.4 %
Europe         60,875         68,899         62,012         68,188       (1.8 )%     1.0 %
Asia-Pacific         16,658         19,406         11,857         14,515       40.5 %     33.7 %
Corporate         (78,012 )       (29,239 )       (29,825 )       (22,529 )     161.6 %     29.8 %
        $ 105,267       $ 240,819       $ 123,165       $ 153,208       (14.5 )%     57.2 %
 
 
        Six Months Ended            
        November 30, 2016     November 30, 2015     % Change
        GAAP     Non-GAAP1     GAAP

 

 

Non-GAAP1

    GAAP     Non-GAAP1
                                       
Revenues:                                      
North America       $ 1,413,064       $ 1,212,737       $ 1,042,192       $ 666,320       35.6 %     82.0 %
Europe         344,469         297,926         326,373         286,354       5.5 %     4.0 %
Asia-Pacific         123,780         123,780         102,581         102,581       20.7 %     20.7 %
        $ 1,881,313       $ 1,634,443       $ 1,471,146       $ 1,055,255       27.9 %     54.9 %
                                       
Operating income:                                      
North America       $ 211,446       $ 360,115       $ 162,635       $ 190,002       30.0 %     89.5 %
Europe         126,414         141,012         134,745         145,219       (6.2 )%     (2.9 )%
Asia-Pacific         30,680         35,895         24,089         28,325       27.4 %     26.7 %
Corporate         (142,167 )       (55,486 )       (60,532 )       (46,770 )     134.9 %     18.6 %
        $ 226,373       $ 481,536       $ 260,937       $ 316,776       (13.2 )%     52.0 %
 

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)

 
        November 30, 2016     May 31, 2016
               
ASSETS              
Current assets:              
Cash and cash equivalents       $ 995,816       $ 1,044,728  
Accounts receivable, net of allowances for doubtful accounts of $294 and $353, respectively       266,245       281,612  
Claims receivable, net of allowances for doubtful accounts of $4,771 and $4,868, respectively       8,772       6,799  
Settlement processing assets       1,117,666       1,336,326  
Prepaid expenses and other current assets       186,464       181,848  
Total current assets       2,574,963       2,851,313  
Goodwill       4,823,756       4,829,405  
Other intangible assets, net       2,115,842       2,264,708  
Property and equipment, net       520,714       493,678  
Deferred income taxes       20,419       22,719  
Other       57,420       48,129  
Total assets       $ 10,113,114       $ 10,509,952  
               
LIABILITIES AND EQUITY              
Current liabilities:              
Settlement lines of credit       $ 467,293       $ 378,436  
Current portion of long-term debt       177,759       135,542  
Accounts payable and accrued liabilities       681,356       696,414  
Settlement processing obligations       883,447       1,220,315  
Total current liabilities       2,209,855       2,430,707  
Long-term debt       4,316,391       4,379,744  
Deferred income taxes       695,258       744,862  
Other noncurrent liabilities       89,773       77,235  
Total liabilities       7,311,277       7,632,548  
Commitments and contingencies              
Equity:              
Preferred stock, no par value; 5,000,000 shares authorized and none issued              
Common stock, no par value; 200,000,000 shares authorized; 152,267,428 issued and outstanding at November 30, 2016 and 154,421,585 issued and outstanding at May 31, 2016              
Paid-in capital       1,818,487       1,976,715  
Retained earnings       1,146,844       1,015,811  
Accumulated other comprehensive loss       (309,717 )     (246,050 )
Total Global Payments shareholders' equity       2,655,614       2,746,476  
Noncontrolling interests       146,223       130,928  
Total equity       2,801,837       2,877,404  
Total liabilities and equity       $ 10,113,114       $ 10,509,952  
 
 
 
 
 
 
 

SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)

 
        Six Months Ended
       

November 30,

2016

   

November 30,

2015

Cash flows from operating activities:              
Net income       $ 145,074       $ 176,126  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization of property and equipment       45,681       35,697  
Amortization of acquired intangibles       166,188       41,809  
Share-based compensation expense       16,366       13,472  
Provision for operating losses and bad debts       19,024       11,257  
Amortization of capitalized customer acquisition costs       12,291        
Deferred income taxes       (52,710 )     2,900  
Gain on sale of investments       (41,150 )      
Other, net       18,784       2,198  
Changes in operating assets and liabilities, net of the effects of acquisitions:              
Accounts receivable       9,693       (4,271 )
Claims receivable       (14,067 )     (18,723 )
Settlement processing assets and obligations, net       (113,359 )     208,446  
Prepaid expenses and other assets       (5,846 )     (14,097 )
Accounts payable and other liabilities       (12,426 )     (744 )
Net cash provided by operating activities       193,543       454,070  
Cash flows from investing activities:              
Business acquisitions, net of cash acquired       (35,260 )     (241,934 )
Capital expenditures       (83,268 )     (36,246 )
Proceeds from sale of investments       37,717        
Net cash used in investing activities       (80,811 )     (278,180 )
Cash flows from financing activities:              
Net borrowings on settlement lines of credit       94,757       101,464  
Proceeds from issuance of long-term debt       1,289,000       3,030,175  
Principal payments of long-term debt       (1,314,799 )     (2,852,175 )
Payment of debt issuance costs       (9,279 )     (4,934 )
Repurchase of common stock       (172,405 )     (71,748 )
Proceeds from stock issued under share-based compensation plans       4,882       6,317  
Common stock repurchased - share-based compensation plans       (20,390 )     (11,579 )
Tax benefit from share-based compensation plans       13,017       6,521  
Purchase of subsidiary shares from noncontrolling interest             (7,550 )
Distributions to noncontrolling interests       (12,365 )     (8,158 )
Dividends paid       (3,069 )     (2,602 )
Net cash (used in) provided by financing activities       (130,651 )     185,731  
Effect of exchange rate changes on cash       (30,993 )     (23,903 )
(Decrease) increase in cash and cash equivalents       (48,912 )     337,718  
Cash and cash equivalents, beginning of the period       1,044,728       650,739  
Cash and cash equivalents, end of the period       $ 995,816       $ 988,457  
 
 
 
 
 
 
 

SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
        Three Months Ended November 30, 2016
        GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

   

Income Taxes on

Adjustments3

    Non-GAAP
Revenues       $ 941,821       $ (124,633 )     $       $       $ 817,188
                                 
Operating income       $ 105,267       $       $ 135,552       $       $ 240,819
                                 
Net income attributable to Global Payments       $ 49,452       $       $ 141,499       $ (54,333 )     $ 136,618
                                 
Diluted earnings per share attributable to Global Payments4       $ 0.32                         $ 0.89
 
        Three Months Ended November 30, 2015
        GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

   

Income Taxes on

Adjustments3

   

Non-GAAP

Revenues       $ 722,350       $ (204,048 )     $       $       $ 518,302
                                 
Operating income       $ 123,165       $       $ 30,043       $       $ 153,208
                                 
Net income attributable to Global Payments       $ 78,771       $       $ 29,114       $ (8,384 )     $ 99,501
                                 
Diluted earnings per share attributable to Global Payments4       $ 0.60                         $ 0.76
                                       

1Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

2 Earnings adjustments to operating income for the three months ended November 30, 2016 include $86.5 million and $49.0 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $86.2 million and employee termination expenses of $0.3 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $8.7 million, merger-related costs of $36.6 million, litigation settlement of $2.7 million and employee termination expenses of $1.0 million. Net income attributable to Global Payments also reflects an adjustment for a non-cash charge of $8.2 million for previously deferred issuance costs written off in connection with the refinancing of our corporate debt.

Earnings adjustments to operating income for the three months ended November 30, 2015 include $21.7 million and $8.3 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles of $21.5 million and other adjustments of $0.2 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $7.0 million and $1.3 million of other adjustments.

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. Income tax adjustments for the three months ended November 30, 2016 include the removal of a $5.1 million tax benefit associated with a change in estimate of certain U.S. inclusion items relating to the gain on sale of Visa Europe.

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 NOVEMBER 30, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
        Six Months Ended November 30, 2016
        GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

   

Income Taxes on

Adjustments3

    Non-GAAP
                                 
Revenues       $ 1,881,313       $ (246,870 )     $       $       $ 1,634,443
                                 
Operating income       $ 226,373       $       $ 255,163       $       $ 481,536
                                 
Net income attributable to Global Payments       $ 134,545       $       $ 218,490       $ (82,735 )     $ 270,300
                                 
Diluted earnings per share attributable to Global Payments4       $ 0.87                         $ 1.75
 
 
        Six Months Ended November 30, 2015
        GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

   

Income Taxes on

Adjustments3

 

    Non-GAAP
                                 
Revenues       $ 1,471,146       $ (415,891 )     $       $       $ 1,055,255
                                 
Operating income       $ 260,937       $       $ 55,839       $       $ 316,776
                                 
Net income attributable to Global Payments       $ 165,418       $       $ 54,032       $ (16,920 )     $ 202,530
                                 
Diluted earnings per share attributable to Global Payments4       $ 1.27                         $ 1.55
 

1Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

2 Earnings adjustments to operating income for the six months ended November 30, 2016 include $168.2 million and $87.0 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $167.3 million and employee termination expenses of $0.9 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $16.1 million, merger-related costs of $67.2 million, litigation settlement of $2.7 million and employee termination expenses of $1.0 million. Net income attributable to Global Payments also reflects an adjustment of $41.2 million to remove a gain on the sale of membership interests in VisaEurope and an adjustment for a non-cash charge of $8.2 million for previously deferred issuance costs written off in connection with the refinancing of our corporate debt.

Earnings adjustments to operating income for the six months ended November 30, 2015 include $41.0 million and $14.8 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles of $42.9 million and offsetting other adjustments of $1.9 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $13.5 million and $1.3 million of other adjustments.

3 Income taxes on adjustments reflect the tax effect of earnings adjustments to income before income taxes. The tax rate used in determining the tax impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.

4 Adjusted EPS is calculated by dividing adjusted net income attributable to Global Payments by the diluted weighted-average number of shares outstanding.

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 NOVEMBER 30, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
        Three Months Ended November 30, 2016     Three Months Ended November 30, 2015
        GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

    Non-GAAP     GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

    Non-GAAP
Revenues:                                                  
North America       $ 701,300       $ (97,233 )     $       $ 604,067       $ 511,335       $ (185,446 )     $       $ 325,889  
Europe       174,904       (27,400 )           147,504       158,016       (18,602 )           139,414  
Asia-Pacific       65,617                   65,617       52,999                   52,999  
        $ 941,821       $ (124,633 )     $       $ 817,188       $ 722,350       $ (204,048 )     $       $ 518,302  
                                                   
Operating income:                                                  
North America       $ 105,746       $       $ 76,007       $ 181,753       $ 79,121       $       $ 13,913       $ 93,034  
Europe       60,875             8,024       68,899       62,012             6,176       68,188  
Asia-Pacific       16,658             2,748       19,406       11,857             2,658       14,515  
Corporate       (78,012 )           48,773       (29,239 )     (29,825 )           7,296       (22,529 )
        $ 105,267       $       $ 135,552       $ 240,819       $ 123,165       $       $ 30,043       $ 153,208  
 

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

2 Earnings adjustments to operating income for the three months ended November 30, 2016 include $86.5 million and $49.0 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $86.2 million and employee termination expenses of $0.3 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $8.7 million, merger-related costs of $36.6 million, litigation settlement of $2.7 million and employee termination expenses of $1.0 million.

Earnings adjustments to operating income for the three months ended November 30, 2015 include $21.7 million and $8.3 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles of $21.5 million and other adjustments of $0.2 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $7.0 million and $1.3 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 NOVEMBER 30, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
        Six Months Ended November 30,
        2016     2015
        GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

    Non-GAAP     GAAP    

Net Revenue

Adjustments1

   

Earnings

Adjustments2

    Non-GAAP
Revenues:                                                  
North America       $ 1,413,064       $ (200,327 )     $       $ 1,212,737       $ 1,042,192       $ (375,872 )     $       $ 666,320  
Europe       344,469       (46,543 )           297,926       326,373       (40,019 )           286,354  
Asia-Pacific       123,780                   123,780       102,581                   102,581  
        $ 1,881,313       $ (246,870 )     $       $ 1,634,443       $ 1,471,146       $ (415,891 )     $       $ 1,055,255  
                                                   
Operating income:                                                  
North America       $ 211,446       $       $ 148,669       $ 360,115       $ 162,635       $       $ 27,367       $ 190,002  
Europe       126,414             14,598       141,012       134,745             10,474       145,219  
Asia-Pacific       30,680             5,215       35,895       24,089             4,236       28,325  
Corporate       (142,167 )           86,681       (55,486 )     (60,532 )           13,762       (46,770 )
        $ 226,373       $       $ 255,163       $ 481,536       $ 260,937       $       $ 55,839       $ 316,776  
 

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

2 Earnings adjustments to operating income for the six months ended November 30, 2016 include $168.2 million and $87.0 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $167.3 million and employee termination expenses of $0.9 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $16.1 million, merger-related costs of $67.2 million, litigation settlement of $2.7 million and employee termination expenses of $1.0 million.

Earnings adjustments to operating income for the six months ended November 30, 2015 include $41.0 million and $14.8 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles of $42.9 million and offsetting other adjustments of $1.9 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $13.5 million and $1.3 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)

 
          Calendar 2017 Outlook
Revenues:          
GAAP revenue         $3.76 to $3.86
Adjustments1         (0.41)
Adjusted net revenue         $3.35 to $3.45
           
Earnings Per Share ("EPS"):          
GAAP diluted EPS         $2.20 to $2.40
Acquisition-related amortization expense, share-based compensation expense and non-recurring items         1.50

 

Adjusted EPS         $3.70 to $3.90
 

1Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income and earnings per share ("EPS") information determined in accordance with U.S. GAAP by providing these measures with certain adjustments (such measures being non-GAAP financial measures) in this document to assist with evaluating our performance. In addition to GAAP measures, management uses these non-GAAP financial measures to focus on the factors the company believes are pertinent to the daily management of our operations. Management believes adjusted net revenue more closely reflects the economic benefits to the company's core business and allows for better comparisons with industry peers. Management uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation. Adjusted net revenue, adjusted operating income, adjusted net income and adjusted EPS should be considered in addition to, and not as substitutes for, revenues, operating income, net income and EPS determined in accordance with GAAP. The non-GAAP financial measures reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

Adjusted net revenue excludes gross-up related payments associated with certain wholesale lines of business to reflect economic benefits to the company. On a GAAP basis, these payments are presented gross in both revenues and operating expenses.

Adjusted operating income, adjusted net income and adjusted EPS exclude acquisition-related amortization expense, share-based compensation and certain other items specific to each reporting period as more fully described in the accompanying reconciliations in 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.

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

 

Source: Global Payments Inc.

 

 

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