Global Payments Reports Third Quarter Earnings and Raises Annual Fiscal 2016 Outlook

April 6, 2016

 

ATLANTA--(BUSINESS WIRE)-- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal third quarter ended February 29, 2016.

"We delivered strong financial results for the quarter, accelerating growth across our key markets. We are especially pleased with our performance in North America and Europe, with sequentially higher adjusted net revenue growth in the United States direct channel and the United Kingdom," said Chief Executive Officer Jeff Sloan. "We also grew margins in each region, highlighting solid execution."

Sloan continued, "We are delighted with the progress we have made on the partnership with Heartland Payment Systems and look forward to closing the transaction later this month. The combination with Heartland will transform Global Payments into the leading provider of payments technology solutions worldwide."

Third Quarter 2016 Summary

  • Adjusted net revenue grew 6% to $497.0 million, compared to $467.8 million in the third quarter of fiscal 2015. On a constant currency basis, adjusted net revenue grew 11%.
  • Cash diluted earnings per share grew 17% to $0.70, compared to $0.60 in the third quarter of fiscal 2015. On a constant currency basis, cash diluted earnings per share grew 28%.
  • Cash operating margin expanded to 28.7%, a 50 basis point increase over the third quarter of fiscal 2015. On a constant currency basis, cash operating margin increased 110 basis points.
  • GAAP revenues were $679.9 million, compared to $665.0 million in the third quarter of fiscal 2015, and diluted earnings per share were $0.53, compared to $0.46 in the prior year.

"We exceeded our expectations for organic adjusted net revenue growth, cash operating margin expansion and cash earnings per share growth for the quarter," stated Cameron Bready, Executive Vice President and Chief Financial Officer. "As a result of this performance and despite the impacts of continued foreign exchange headwinds, we are pleased to again raise our expectations for fiscal 2016."

Increased Fiscal 2016 Outlook

For the full year of fiscal 2016, the company expects to be at the upper end of its constant currency adjusted net revenue growth expectation of 10% to 12% over fiscal 2015. Global Payments is also raising expectations for margin expansion and cash earnings per share and now expects annual fiscal 2016 cash operating margin to increase by at least 100 basis points on a constant currency basis and earnings per share on a cash basis to range from $2.93 to $3.00, reflecting growth of 16% to 19% over fiscal 2015. The company's fiscal 2016 outlook does not include any impact from the Heartland acquisition.

Capital Allocation

Global Payments' Board of Directors approved a fiscal 2016 third quarter dividend of $0.01 per share payable May 27, 2016 to shareholders of record as of May 13, 2016.

In addition, upon the closing of the Heartland Payment Systems transaction, the company intends to resume its normal capital allocation policies, including being a consistent buyer of its stock.

Conference Call

Global Payments' management will host a conference call today, April 6, 2016 at 8:00 a.m. ET to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company's website at www.globalpaymentsinc.com; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company's website within two hours of the live call.

Non-GAAP Financial Measures

Global Payments supplemented revenues, income and earnings per share information determined in accordance with GAAP by providing income and related earnings per share on a "cash earnings" basis and adjusted net revenue 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 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 approximately 4,500 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 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

Investors are cautioned that some of the statements we use in this release 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 involve a number of risks and uncertainties and depend upon future events or conditions. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Such statements may include, but are not limited to, statements about the benefits of the proposed merger between Global Payments and Heartland, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts. Important factors, among others, associated with the proposed acquisition of Heartland that could cause actual events or results to differ materially from those anticipated by our forward-looking statements or historical performance include the ability to meet closing conditions to the merger at all or on the expected terms and schedule, including without limitation the approval of Heartland's stockholders; delay in closing the merger or failure to consummate the merger; difficulties and delays in integrating the Heartland business or fully realizing cost savings and other benefits of the merger at all or within the expected time period; business disruption during the pendency of the merger or following the merger making it more difficult to maintain business and operational relationships, including financial institution sponsorship; loss of key personnel, Global Payments' and Heartland's ability to accurately predict future market conditions; and changes in laws, regulations or network rules or interpretations thereof impacting Global Payments or Heartland. Additional factors not directly associated with the proposed acquisition of Heartland but that may otherwise cause events or results to differ materially from those anticipated by our forward-looking statements or historical performance can be found in Global Payments' Annual Report on Form 10-K for the year ended May 31, 2015, Heartland's Annual Report on Form 10-K for the year ended December 31, 2015 and each company's subsequent filings with the SEC. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

             

SCHEDULE 1

UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME  

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

             
      Three Months Ended     Nine Months Ended
      February 29, 2016     February 28, 2015     % Change     February 29, 2016     February 28, 2015     % Change
                                     
Revenues     $ 679,940       $ 664,983       2.2 %     $ 2,151,086       $ 2,067,169       4.1 %
                                     
Operating expenses:                                    
Cost of service     258,728       250,255       3.4 %     801,959       767,890       4.4 %
Selling, general and administrative     313,407       310,113       1.1 %     980,385       946,282       3.6 %
      572,135       560,368       2.1 %     1,782,344       1,714,172       4.0 %
                                     
Operating income     107,805       104,615       3.0 %     368,742       352,997       4.5 %
                                     
Interest and other income     1,092       1,160       (5.9 )%     3,526       3,634       (3.0 )%
Interest and other expense     (13,300 )     (13,429 )     (1.0 )%     (40,669 )     (34,789 )     16.9 %
      (12,208 )     (12,269 )     (0.5 )%     (37,143 )     (31,155 )     19.2 %
                                     
Income before income taxes     95,597       92,346       3.5 %     331,599       321,842       3.0 %
Provision for income taxes     (22,685 )     (23,031 )     (1.5 )%     (82,561 )     (82,837 )     (0.3 )%
Net income     72,912       69,315       5.2 %     249,038       239,005       4.2 %

Less: Net income attributable to noncontrolling interests, net of income tax

    (3,851 )     (6,747 )     (42.9 )%     (14,559 )     (26,290 )     (44.6 )%
Net income attributable to Global Payments     $ 69,061       $ 62,568       10.4 %     $ 234,479       $ 212,715       10.2 %
                                     
Earnings per share attributable to Global Payments1:                                    
Basic     $ 0.53       $ 0.47       12.8 %     $ 1.81       $ 1.58       14.6 %
Diluted     $ 0.53       $ 0.46       15.2 %     $ 1.80       $ 1.57       14.6 %
                                     
Weighted-average shares outstanding1:                                    
Basic     129,287       133,780             129,709       134,952        
Diluted     130,160       134,612             130,555       135,782        
                                             

1 Earnings per share data and weighted-average shares outstanding for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

             

 

SCHEDULE 2

UNAUDITED CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS2

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

             
      Three Months Ended     Nine Months Ended
      February 29, 2016     February 28, 2015     % Change     February 29, 2016     February 28, 2015     % Change
                                     
Adjusted net revenue     $ 496,969       $ 467,757       6.2 %     $ 1,552,224       $ 1,456,634       6.6 %
                                     
Operating expenses:                                    
Cost of service     221,127       212,764       3.9 %     683,331       652,921       4.7 %
Selling, general and administrative     133,434       122,881       8.6 %     409,710       380,898       7.6 %
      354,561       335,645       5.6 %     1,093,041       1,033,819       5.7 %
                                     
Operating income     142,408       132,112       7.8 %     459,183       422,815       8.6 %
                                     
Interest and other income     1,092       1,160       (5.9 )%     3,526       3,634       (3.0 )%
Interest and other expense     (13,300 )     (13,429 )     (1.0 )%     (40,669 )     (34,789 )     16.9 %
      (12,208 )     (12,269 )     (0.5 )%     (37,143 )     (31,155 )     19.2 %
                                     
Income before income taxes     130,200       119,843       8.6 %     422,040       391,660       7.8 %
Provision for income taxes     (34,204 )     (31,844 )     7.4 %     (111,000 )     (106,086 )     4.6 %
Net income     95,996       87,999       9.1 %     311,040       285,574       8.9 %
Less: Net income attributable to noncontrolling interests, net of income tax     (4,914 )     (7,825 )     (37.2 )%     (17,429 )     (29,776 )     (41.5 )%
Net income attributable to Global Payments     $ 91,082       $ 80,174       13.6 %     $ 293,611       $ 255,798       14.8 %
                                     
Earnings per share attributable to Global Payments1:                                    
Basic     $ 0.70       $ 0.60       16.7 %     $ 2.26       $ 1.90       18.9 %
Diluted     $ 0.70       $ 0.60       16.7 %     $ 2.25       $ 1.88       19.7 %
                                     
Weighted-average shares outstanding1:                                    
Basic     129,287       133,780             129,709       134,952        
Diluted     130,160       134,612             130,555       135,782        
                                             
 
 

1 Earnings per share data and weighted-average shares outstanding for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

2 See Schedules 7 and 8 for a reconciliation of adjusted net revenue and cash earnings to the most comparable GAAP measures 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            
      February 29, 2016     February 28, 2015     % Change
      GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

    GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

    GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

                                     
Revenues:                                    
North America     $ 478,059       $ 311,617       $ 473,063       $ 293,385       1.1 %     6.2 %
Europe     147,002       130,473       138,378       120,830       6.2 %     8.0 %
Asia-Pacific     54,879       54,879       53,542       53,542       2.5 %     2.5 %
Total     $ 679,940       $ 496,969       $ 664,983       $ 467,757       2.2 %     6.2 %
                                     
Operating income:                                    
North America     $ 71,379       $ 84,838       $ 66,723       $ 77,746       7.0 %     9.1 %
Europe     59,056       64,902       52,710       59,986       12.0 %     8.2 %
Asia-Pacific     16,025       17,792       12,192       13,836       31.4 %     28.6 %
Corporate     (38,655 )     (25,124 )     (27,010 )     (19,456 )     43.1 %     29.1 %
Total     $ 107,805       $ 142,408       $ 104,615       $ 132,112       3.0 %     7.8 %
                                                         
                                                         
      Nine Months Ended            
      February 29, 2016     February 28, 2015     % Change
      GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

    GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

    GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

                                     
Revenues:                                    
North America     $ 1,520,250       $ 977,935       $ 1,465,845       $ 914,219       3.7 %     7.0 %
Europe     473,376       416,829       461,140       402,231       2.7 %     3.6 %
Asia-Pacific     157,460       157,460       140,184       140,184       12.3 %     12.3 %
Total     $ 2,151,086       $ 1,552,224       $ 2,067,169       $ 1,456,634       4.0 %     7.0 %
                                     
Operating income:                                    
North America     $ 234,014       $ 274,838       $ 218,906       $ 252,480       6.9 %     8.9 %
Europe     193,801       210,122       184,318       200,691       5.1 %     4.7 %
Asia-Pacific     40,115       46,118       30,629       33,801       31.0 %     36.4 %
Corporate     (99,188 )     (71,895 )     (80,856 )     (64,157 )     22.7 %     12.1 %
Total     $ 368,742       $ 459,183       $ 352,997       $ 422,815       4.0 %     9.0 %
                                                         

1 See Schedule 9 for a reconciliation of adjusted net revenue and cash earnings segment information 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)

             
     

February 29,
2016

    May 31, 2015
             
ASSETS            
Current assets:            
Cash and cash equivalents     $ 825,500       $ 650,739  
Accounts receivable, net of allowances for doubtful accounts of $621 and $468, respectively     172,848       202,390  
Claims receivable, net of allowances for doubtful accounts of $3,902 and $2,684, respectively     7,575       548  
Settlement processing assets     1,000,683       2,394,822  
Prepaid expenses and other current assets     58,497       41,416  
Total current assets     2,065,103       3,289,915  
Goodwill     1,556,904       1,491,833  
Other intangible assets, net     645,541       560,136  
Property and equipment, net     366,445       374,143  
Deferred income taxes     24,549       30,428  
Other     40,559       32,846  
Total assets     $ 4,699,101       $ 5,779,301  
             
LIABILITIES AND EQUITY            
Current liabilities:            
Lines of credit     $ 189,921       $ 592,629  
Current portion of long-term debt     86,402       61,784  
Accounts payable and accrued liabilities     285,572       312,647  
Settlement processing obligations     1,160,951       2,033,900  
Income taxes payable     25,286       14,228  
Total current liabilities     1,748,132       3,015,188  
Long-term debt     1,787,675       1,678,283  
Deferred income taxes     195,354       202,855  
Other noncurrent liabilities     15,190       19,422  
Total liabilities     3,746,351       4,915,748  
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; 129,258,574 issued and outstanding at February 29, 2016 and 130,557,676 issued and outstanding at May 31, 2015            
Paid-in capital     136,405       148,742  
Retained earnings     981,013       795,226  
Accumulated other comprehensive loss     (277,301 )     (185,992 )
Total Global Payments shareholders' equity     840,117       757,976  
Noncontrolling interests     112,633       105,577  
Total equity     952,750       863,553  
Total liabilities and equity     $ 4,699,101       $ 5,779,301  
       

 

SCHEDULE 5

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

       
      Nine Months Ended
      February 29, 2016     February 28, 2015
Cash flows from operating activities:            
Net income     $ 249,038       $ 239,005  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization of property and equipment     54,343       48,628  
Amortization of acquired intangibles     62,331       54,184  
Share-based compensation expense     20,472       14,827  
Provision for operating losses and bad debts     15,827       10,530  
Deferred income taxes     (3,292 )     13,479  
Other, net     2,528       469  
Changes in operating assets and liabilities, net of the effects of acquisitions:            
Accounts receivable     23,428       32,124  
Claims receivable     (24,388 )     (7,159 )
Settlement processing assets and obligations, net     523,765       (27,948 )
Prepaid expenses and other assets     (26,146 )     (5,687 )
Accounts payable and other liabilities     (30,514 )     (36,044 )
Income taxes payable     10,627       10,677  
Net cash provided by operating activities     878,019       347,085  
Cash flows from operating activities:            
Business, intangible and other asset acquisitions, net of cash acquired     (241,982 )     (232,864 )
Capital expenditures     (57,548 )     (56,746 )
Principal collections on financing receivables           219  
Net proceeds from sales of investments and business           10,597  
Net cash used in investing activities     (299,530 )     (278,794 )
Cash flows from financing activities:            
Net (repayments) borrowings on lines of credit     (388,120 )     44,622  
Proceeds from issuance of long-term debt     3,186,175       1,593,500  
Principal payments of long-term debt     (3,050,175 )     (1,378,679 )
Payment of debt issuance costs     (4,934 )      
Repurchase of common stock     (82,832 )     (231,844 )
Proceeds from stock issued under share-based compensation plans     7,279       18,867  
Common stock repurchased - share-based compensation plans     (11,812 )     (16,175 )
Tax benefit from share-based compensation plans     6,625       3,851  
Purchase of subsidiary shares from noncontrolling interest     (7,550 )      
Distributions to noncontrolling interests     (18,568 )     (19,355 )
Dividends paid     (3,895 )     (4,035 )
Net cash (used in) provided by financing activities     (367,807 )     10,752  
Effect of exchange rate changes on cash     (35,921 )     (50,767 )
Increase in cash and cash equivalents     174,761       28,276  
Cash and cash equivalents, beginning of the period     650,739       581,872  
Cash and cash equivalents, end of the period     $ 825,500       $ 610,148  
       

SCHEDULE 6

UNAUDITED RECONCILIATION OF FREE CASH FLOW TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

       
      Three Months Ended
      February 29, 2016
Net cash provided by operating activities     $ 423,949  
Changes in settlement processing assets and liabilities, net     (315,319 )
Capital expenditures     (21,302 )
Distributions to noncontrolling interests     (10,410 )
Free Cash Flow1     $ 76,918  
           

 

1Free Cash Flow is a non-GAAP measure. See "Non-GAAP Financial Measures" discussion on Schedule 10.

 

SCHEDULE 7

UNAUDITED RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
      Three Months Ended February 29, 2016
      GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenue and

Cash Earnings

Revenues     $ 679,940       $ (182,971 )     $       $       $ 496,969  
                                 
Operating expenses:                                
Cost of service     258,728       (16,529 )     (21,072 )           221,127  
Selling, general and administrative     313,407       (166,442 )     (7,000 )     (6,531 )     133,434  
      572,135       (182,971 )     (28,072 )     (6,531 )     354,561  
                                 
Operating income     107,805             28,072       6,531       142,408  
                                 
Interest and other income     1,092                         1,092  
Interest and other expense     (13,300 )                       (13,300 )
      (12,208 )                       (12,208 )
Income before income taxes     95,597      

 

    28,072       6,531       130,200  
Provision for income taxes     (22,685 )    

      (9,215 )     (2,304 )     (34,204 )
Net income     72,912             18,857       4,227       95,996  

Less: Net income attributable to noncontrolling interests, net of income tax

    (3,851 )           (1,063 )           (4,914 )
Net income attributable to Global Payments     $ 69,061       $       $ 17,794       $ 4,227       $ 91,082  
Shares outstanding4     130,160                           130,160  
Diluted earnings per share4     $ 0.53       $       $ 0.14       $ 0.03       $ 0.70  
                                 
      Three Months Ended February 28, 2015
      GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenue and

Cash Earnings

Revenues     $ 664,983       $ (199,102 )     $       $ 1,876       $ 467,757  
                                 
Operating expenses:                                
Cost of service     250,255       (19,424 )     (18,067 )           212,764  
Selling, general and administrative     310,113       (179,678 )     (5,682 )     (1,872 )     122,881  
      560,368       (199,102 )     (23,749 )     (1,872 )     335,645  
                                 
Operating income     104,615             23,749       3,748       132,112  
                                 
Interest and other income     1,160                         1,160  
Interest and other expense     (13,429 )                       (13,429 )
      (12,269 )                       (12,269 )
Income before income taxes     92,346      

      23,749       3,748       119,843  
Provision for income taxes     (23,031 )           (7,782 )     (1,031 )     (31,844 )
Net income     69,315             15,967       2,717       87,999  
Less: Net income attributable to noncontrolling interests, net of income tax     (6,747 )           (1,078 )           (7,825 )
Net income attributable to Global Payments     $ 62,568       $       $ 14,889       $ 2,717       $ 80,174  
Shares outstanding4     134,612                           134,612  
Diluted earnings per share4     $ 0.46       $       $ 0.11       $ 0.02       $ 0.60  
 

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 Represents adjustments to exclude acquisition-related amortization expense and share-based compensation expense and the related income tax benefits of each.

 

3 For the three months ended February 29, 2016, represents acquisition-related costs along with the related income tax effects. For the three months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustment represents certain business tax assessments in the U.S. for prior periods along with the related income tax effects of each.

 

4 Shares outstanding and diluted earnings per share for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

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

 

 
 

 

 
 

 

 
 
 
 
 

 

 
 
 

 

SCHEDULE 8

UNAUDITED RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
      Nine Months Ended February 29, 2016
      GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenue and

Cash Earnings

Revenues     $ 2,151,086       $ (598,862 )     $       $       $ 1,552,224  
                                   
Operating expenses:                                  
Cost of service     801,959       (56,547 )     (63,980 )     1,899       683,331  
Selling, general and administrative     980,385       (542,315 )     (20,472 )     (7,888 )     409,710  
      1,782,344       (598,862 )     (84,452 )     (5,989 )     1,093,041  
Operating income     368,742             84,452       5,989       459,183  
                                   
Interest and other income     3,526                         3,526  
Interest and other expense     (40,669 )                       (40,669 )
      (37,143 )                       (37,143 )
                                   
Income before income taxes     331,599      

      84,452       5,989       422,040  
Provision for income taxes     (82,561 )    

      (27,426 )     (1,013 )     (111,000 )
Net income     249,038             57,026       4,976       311,040  
Less: Net income attributable to noncontrolling interests, net of income tax     (14,559 )           (2,870 )           (17,429 )
Net income attributable to Global Payments     $ 234,479       $       $ 54,156       $ 4,976       $ 293,611  
                                   
Shares outstanding4     130,555                             130,555  
Diluted earnings per share4     $ 1.80       $       $ 0.41       $ 0.04       $ 2.25  
                                   
      Nine Months Ended February 28, 2015
      GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenue and

Cash Earnings

Revenues     $ 2,067,169       $ (612,411 )     $       $ 1,876       $ 1,456,634  
                                   
Operating expenses:                                  
Cost of service     767,890       (60,785 )     (54,184 )    

      652,921  
Selling, general and administrative     946,282       (551,626 )     (14,827 )     1,069       380,898  
      1,714,172       (612,411 )     (69,011 )     1,069       1,033,819  
Operating income     352,997             69,011       807       422,815  
                                   
Interest and other income     3,634                         3,634  
Interest and other expense     (34,789 )                       (34,789 )
      (31,155 )                       (31,155 )
                                   
Income before income taxes     321,842             69,011       807       391,660  
Provision for income taxes     (82,837 )           (22,806 )     (443 )     (106,086 )
Net income     239,005             46,205       364       285,574  
Less: Net income attributable to noncontrolling interests, net of income tax     (26,290 )           (3,486 )           (29,776 )
Net income attributable to Global Payments     $ 212,715       $       $ 42,719       $ 364       $ 255,798  
                                   
Shares outstanding4     135,782                             135,782  
Diluted earnings per share4     $ 1.57       $       $ 0.31       $       $ 1.88  

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 Represents adjustments to exclude acquisition-related amortization expense and share-based compensation expense and the related income tax benefits of each.

 

3 For the nine months ended February 29, 2016, represents acquisition-related costs, employee termination benefits and recoveries associated with a U.K. vendor outage along with the related income tax effects of each as well as certain other adjustments to the income tax provision.  For the nine months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustments represent certain business tax assessments in the U.S. for prior periods and a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia along with the related income tax effects of each.

 

4 Shares outstanding and diluted earnings per share for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

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

 

   
   

 

   
   

 

   
   
   
   
   
   
   

 

   
   
       

 

 

SCHEDULE 9

UNAUDITED RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS SEGMENT INFORMATION TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

       
      Three Months Ended
      February 29, 2016     February 28, 2015
      GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenues and

Cash Earnings

    GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenues and

Cash Earnings

                                                             
Revenues:                                                            
North America     $ 478,059       $ (166,442 )     $       $       $ 311,617       $ 473,063       $ (179,678 )     $       $       $ 293,385  
Europe     147,002       (16,529 )                 130,473       138,378       (19,424 )           1,876       120,830  
Asia-Pacific     54,879                         54,879       53,542                         53,542  
Total revenues     $ 679,940       $ (182,971 )     $       $       $ 496,969       $ 664,983       $ (199,102 )     $       $ 1,876       $ 467,757  
                                                             
Operating income:                                                            
North America     $ 71,379       $       $ 13,459       $       $ 84,838       $ 66,723       $       $ 11,023       $       $ 77,746  
Europe     59,056             5,846             64,902       52,710             5,400       1,876       59,986  
Asia-Pacific     16,025             1,767             17,792       12,192             1,644             13,836  
Corporate     (38,655 )           7,000       6,531       (25,124 )     (27,010 )           5,682       1,872       (19,456 )
Operating income     $ 107,805       $       $ 28,072       $ 6,531       $ 142,408       $ 104,615       $       $ 23,749       $ 3,748       $ 132,112  
                                                                                                     
                                                                                                     
      Nine Months Ended
      February 29, 2016     February 28, 2015
      GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenues and

Cash Earnings

    GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenues and

Cash Earnings

                                                             
Revenues:                                                            
North America     $ 1,520,250       $ (542,315 )     $       $       $ 977,935       $ 1,465,845       $ (551,626 )     $       $       $ 914,219  
Europe     473,376       (56,547 )                 416,829       461,140       (60,785 )           1,876       402,231  
Asia-Pacific     157,460                         157,460       140,184                         140,184  
Total revenues     $ 2,151,086       $ (598,862 )     $       $       $ 1,552,224       $ 2,067,169       $ (612,411 )     $       $ 1,876       $ 1,456,634  
                                                             
Operating income:                                                            
North America     $ 234,014       $       $ 40,599       $ 225       $ 274,838       $ 218,906       $       $ 33,574       $       $ 252,480  
Europe     193,801             18,220       (1,899 )     210,122       184,318             17,438       (1,065 )     200,691  
Asia-Pacific     40,115             5,161       842       46,118       30,629             3,172             33,801  
Corporate     (99,188 )           20,472       6,821       (71,895 )     (80,856 )           14,827       1,872       (64,157 )
Operating income     $ 368,742       $       $ 84,452       $ 5,989       $ 459,183       $ 352,997       $       $ 69,011       $ 807       $ 422,815  
                                                                                                     

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 Represents adjustments to exclude acquisition-related amortization expense and share-based compensation expense.  

 

3 For the three months ended February 29, 2016, represents acquisition-related costs.  For the nine months ended February 29, 2016, represents acquisition-related costs, employee termination benefits and recoveries associated with a U.K. vendor outage. For the three months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustment represents certain business tax assessments in the U.S. for prior periods. For the nine months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustments represent certain business tax assessments in the U.S. for prior periods and a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia.  

 

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

 

                   

 

SCHEDULE 10

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In billions, except per share data)

                   
      Fiscal 2015 Actual     Fiscal 2016 Outlook3     % Change
Revenues:                  
GAAP Revenues     $ 2.77       $2.87 to $2.95     4% to 6%
Adjustments1     (0.82 )     (0.83 )      
Adjusted Net Revenue     $ 1.95       $2.06 to $2.10     6% to 8%
                   
Earnings Per Share2:                  
GAAP Diluted EPS     $ 2.06       $2.36 to $2.43     15% to 18%

Acquisition-related amortization expense, share-based compensation expense and non-recurring items4

    0.46       0.57        
Cash EPS     $ 2.52       $2.93 to $3.00     16% to 19%
                       
 

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 and, in fiscal 2015, a revenue adjustment for select U.K. customer payments related to a vendor outage.

 

2 Earnings per share data for prior periods have been adjusted to reflect a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

3 The Fiscal 2016 Outlook does not include the effect of the announced acquisition of Heartland Payment Systems.

 

4 Fiscal 2015 reflects acquisition related amortization expense of $0.34, share-based compensation expense of $0.09 and non-recurring items of $0.03, including a revenue adjustment for select U.K. customer payments related to a vendor outage and expense adjustments for charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with the acquisition of Realex, certain business tax assessments in the U.S. for prior periods, a gain on the sale of our Russia ATM business, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each.

 

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income, earnings per share information and cash flows determined in accordance with U.S. GAAP by providing income and related earnings per share on a "cash earnings" basis, Adjusted Net Revenue and Free Cash Flow 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 believes Free Cash Flow is a useful measure of our ability to service debt, return capital to shareholders, invest in the business, and demonstrate value creation of our underlying operations. 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, income and earnings per share reported on a cash earnings basis and Free Cash Flow should be considered in addition to, and not as substitutes for, revenues, income, earnings per share and cash flows determined in accordance with GAAP. The measures of Adjusted Net Revenue, income and earnings per share on a cash earnings basis and Free Cash Flow 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. The company defines Free Cash Flow as cash provided by operating activities, excluding the impact of changes in settlement assets and obligations, less capital expenditures and distributions to noncontrolling interests, each of which is derived from our consolidated statement of cash flows.

Income and the related earnings per share on a cash earnings basis 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 Schedule 7, Schedule 8 and Schedule 9. The tax rate used in determining the net income impact of cash 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:
Andrew Langford, 770-829-8991
investor.relations@globalpay.com
or
Media contact:
Amy Corn, 770-829-8755
media.relations@globalpay.com

 

Source: Global Payments Inc.

 

 

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