Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
    
FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2018
 
 
 
Commission file number 001-16111
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GLOBAL PAYMENTS INC.
(Exact name of registrant as specified in charter)
 
Georgia
 
58-2567903
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

 
3550 Lenox Road, Atlanta, Georgia
 
30326
(Address of principal executive offices)
 
(Zip Code)
 

Registrant’s telephone number, including area code:     (770) 829-8000
 


(Former name, former address and former fiscal year, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Item 2.02.    Results of Operations and Financial Condition

On May 3, 2018, Global Payments Inc. (the "Company") issued a press release announcing its financial results for the quarter ended March 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this "Report") and is incorporated herein by reference.

The information being furnished pursuant to Item 2.02 of this Report, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01.    Financial Statements and Exhibits
(d) Exhibits
Exhibit No.
Description
99.1
Press Release of Global Payments Inc., containing financial information for the quarter ended March 31, 2018, dated May 3, 2018








Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
GLOBAL PAYMENTS INC.
 
 
 
 
 
Date:
May 3, 2018
By: /s/ Cameron M. Bready
 
 
 
Cameron M. Bready
 
 
 
Senior Executive Vice President and Chief Financial Officer
 



    






EXHIBIT INDEX
 
Exhibit
Number
  
Description
 
 
99.1
  


Exhibit


PRESS RELEASE
 
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Global Payments Reports First Quarter 2018 Earnings and
Increases 2018 Outlook

ATLANTA, May 3, 2018 -- Global Payments Inc. (NYSE: GPN) today announced results for the first quarter ended March 31, 2018.
"We delivered double digit organic growth across our markets in the first quarter of 2018, an acceleration that led to one of the strongest results we have yet achieved,” said Jeff Sloan, Chief Executive Officer. “Our integrated and vertical markets businesses and ecommerce and omnichannel offerings continue to gain share through technology enablement. Our financial and operating performance, technology and software assets and exposure to faster growth markets highlight the ongoing strengths and differentiation of our business model."

First Quarter 2018 Summary
GAAP revenues were $795.0 million, compared to $919.8 million in the first quarter of 2017; diluted earnings per share were $0.57 compared to $0.32 in the prior year; and operating margin was 19.6% compared to 11.4% in the first quarter of 2017; 2018 results reflect the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
Adjusted net revenue plus network fees grew 17% to $924.3 million, compared to $787.7 million in the first quarter of 2017.
Adjusted earnings per share grew 33% to $1.13, compared to $0.85 in the first quarter of 2017.
Adjusted operating margin expanded 140 basis points to 30.4%.

2018 Outlook
“As a result of our strong first quarter performance, we are increasing our outlook for 2018,” stated Cameron Bready, Senior Executive Vice President and Chief Financial Officer. “We now expect adjusted net revenue plus network fees to range from $3.90 billion to $3.975 billion, or growth of 13% to 15% over 2017 and adjusted operating margin to expand by as much as 120 basis points. Adjusted earnings per share are now expected to be in a range of $5.00 to $5.20, reflecting growth of 25% to 30% over 2017.”

Capital Allocation
Global Payments’ Board of Directors approved a dividend of $0.01 per share payable June 29, 2018 to shareholders of record as of June 15, 2018.

1




Conference Call
Global Payments’ management will host a conference call today, May 3, 2018 at 8:00 a.m. ET to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company’s website at www.globalpaymentsinc.com; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company's website within two hours of the live call.

Non-GAAP Financial Measures
Global Payments supplemented revenues, income and earnings per share information determined in accordance with GAAP by providing those measures on an adjusted basis, 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 driven by customer needs globally. Our technologies, solutions and employee expertise enable us to provide a broad range of products and services 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 more than 10,000 employees worldwide, Global Payments is a member of the S&P 500 with customers and partners in 30 countries throughout North America, Europe, the Asia-Pacific region and Brazil. For more information about Global Payments, our Service. Driven. Commerce brand and our technologies, please visit www.globalpaymentsinc.com.

Forward-Looking Statements
This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue, earnings estimates and management’s expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties.
Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include our ability to safeguard our data; increased competition from larger companies and non-traditional competitors, our ability to update our services in a

2



timely manner; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; potential systems interruptions or failures; software defects or undetected errors; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; change in laws, regulations or network rules or interpretations thereof; foreign currency exchange and interest rate risks; political, economic and regulatory changes in the foreign countries in which we operate; future performance, integration and conversion of acquired operations; including without limitation difficulties and delays in integrating or fully realizing cost savings and other benefits of our acquisitions at all or within the expected time period; fully realizing anticipated annual interest expense savings from refinancing our corporate debt facilities; our loss of key personnel and other risk factors presented in Item 1- Risk Factors of our Report on Form 10-K for the year ended December 31, 2017 and any subsequent SEC filings, which we advise you to review. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.
    
Investor contact:
investor.relations@globalpay.com
 
Media contact:
media.relations@globalpay.com
 
Heather Ross
 
 
Laura Coerper
 
770-829-8478
 
 
770-829-8755


3



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

 
Three Months Ended
 
March 31,
 
2018
 
2017
 
% Change
 
 
 
 
 
 
Revenues
$
794,977

 
$
919,762

 
(13.6
)%
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Cost of service
252,386

 
455,936

 
(44.6
)%
Selling, general and administrative
386,421

 
358,856

 
7.7
 %
 
638,807

 
814,792

 
(21.6
)%
 
 
 
 
 


Operating income
156,170

 
104,970

 
48.8
 %
 
 
 
 
 
 
Interest and other income
11,694

 
1,607

 
NM

Interest and other expense
(45,605
)
 
(41,297
)
 
10.4
 %
 
(33,911
)
 
(39,690
)
 
NM

 
 
 
 
 


Income before income taxes
122,259

 
65,280

 
87.3
 %
Provision for income taxes
(24,673
)
 
(12,321
)
 
100.3
 %
Net income
97,586

 
52,959

 
84.3
 %
Less: Net income attributable to noncontrolling interests, net of income tax
(6,187
)
 
(4,146
)
 
49.2
 %
Net income attributable to Global Payments
$
91,399

 
$
48,813

 
87.2
 %
 
 
 
 
 
 
Earnings per share attributable to Global Payments:
 
 
 
 
 
    Basic
$
0.57

 
$
0.32

 
78.1
 %
    Diluted
$
0.57

 
$
0.32

 
78.1
 %
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
    Basic
159,321

 
152,304

 
 
    Diluted
160,035

 
153,255

 
 

NM - Not Meaningful

4



SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
Three Months Ended
 
March 31,
 
2018
 
2017
 
% Change
 
 
 
 
 
 
Adjusted net revenue plus network fees
$
924,280

 
$
787,716

 
17.3
%
 
 
 
 
 
 
Adjusted operating income
$
281,340

 
$
228,749

 
23.0
%
 
 
 
 
 
 
Adjusted net income attributable to Global Payments
$
180,823

 
$
130,034

 
39.1
%
 
 
 
 
 
 
Adjusted diluted earnings per share attributable to Global Payments
$
1.13

 
$
0.85

 
32.9
%

See Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and Schedule 8 for a discussion of non-GAAP financial measures.


  



5



SCHEDULE 3
SEGMENT INFORMATION (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three Months Ended
 
 
 
 
 
 
 
 
March 31, 2018
 
March 31, 2017
 
 % Change
 
 
GAAP
 
Non-GAAP
 
Non-GAAP
adjusted net revenue plus network fees
(1)
 
 GAAP
 
Non-GAAP
 
Non-GAAP
adjusted net revenue plus network fees
(1)
 
 GAAP(2)
 
Non-GAAP(2)
 
Non-GAAP
adjusted net revenue plus network fees
(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
594,029

 
$
521,790

 
$
676,506

 
$
687,044

 
$
597,482

 
$
580,612

 
NM

 
NM

 
16.5%
Europe
 
143,277

 
143,277

 
170,866

 
165,549

 
139,228

 
139,935

 
NM

 
NM

 
22.1%
Asia-Pacific
 
57,671

 
57,671

 
76,908

 
67,169

 
67,169

 
67,169

 
NM

 
NM

 
14.5%
 
 
$
794,977

 
$
722,738

 
$
924,280

 
$
919,762

 
$
803,879

 
$
787,716

 
NM

 
NM

 
17.3%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
125,404

 
$
213,840

 
 
 
$
94,083

 
$
172,377

 
 
 
33.3
%
 
24.1
%
 
 
Europe
 
70,548

 
77,679

 
 
 
54,507

 
63,908

 
 
 
29.4
%
 
21.5
%
 
 
Asia-Pacific
 
23,774

 
25,863

 
 
 
19,754

 
20,970

 
 
 
20.4
%
 
23.3
%
 
 
Corporate
 
(63,556
)
 
(36,042
)
 
 
 
(63,374
)
 
(28,506
)
 
 
 
0.3
%
 
26.4
%
 
 
 
 
$
156,170

 
$
281,340

 
 
 
$
104,970

 
$
228,749

 
 
 
48.8
%
 
23.0
%
 
 

NM - Not Meaningful

See Schedules 6 and 7 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 8 for a discussion of non-GAAP financial measures.

(1) Global Payments adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"), on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income.

(2) As a result of adopting ASC 606, results for 2018 and 2017 revenues and adjusted net revenue are not comparable, thus the change from the prior year is not meaningful.  

6




SCHEDULE 4
UNAUDITED CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
 
March 31, 2018
 
December 31, 2017
 
 
 
 
ASSETS
 
  
 
Current assets:
 
  
 
Cash and cash equivalents
$
1,005,823

 
$
1,335,855

Accounts receivable, net of allowances for doubtful accounts of $1,949 and $1,827, respectively
288,101

 
301,887

Settlement processing assets
2,650,113

 
2,459,292

Prepaid expenses and other current assets
213,841

 
206,545

Total current assets
4,157,878

 
4,303,579

Goodwill
5,714,945

 
5,703,992

Other intangible assets, net
2,096,261

 
2,181,707

Property and equipment, net
599,774

 
588,348

Deferred income taxes
11,420

 
13,146

Other noncurrent assets
323,019

 
207,297

Total assets
$
12,903,297

 
$
12,998,069

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement lines of credit
$
447,617

 
$
635,166

Current portion of long-term debt
107,479

 
100,308

Accounts payable and accrued liabilities
1,039,379

 
1,039,607

Settlement processing obligations
2,314,444

 
2,040,509

Total current liabilities
3,908,919

 
3,815,590

Long-term debt
4,176,851

 
4,559,408

Deferred income taxes
452,470

 
436,879

Other noncurrent liabilities
225,267

 
220,961

Total liabilities
8,763,507

 
9,032,838

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; 159,532,631 issued and outstanding at March 31, 2018 and 159,180,317 issued and outstanding at December 31, 2017

 

Paid-in capital
2,390,022

 
2,379,774

Retained earnings
1,738,545

 
1,597,897

Accumulated other comprehensive loss
(176,961
)
 
(183,144
)
Total Global Payments shareholders’ equity
3,951,606

 
3,794,527

Noncontrolling interests
188,184

 
170,704

Total equity
4,139,790

 
3,965,231

Total liabilities and equity
$
12,903,297

 
$
12,998,069


7



SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Cash flows from operating activities:
 
 
 
Net income
$
97,586

 
$
52,959

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

 
 
Depreciation and amortization of property and equipment
33,918

 
24,984

Amortization of acquired intangibles
87,825

 
84,049

Share-based compensation expense
14,898

 
8,816

Provision for operating losses and bad debts
9,237

 
13,482

Amortization of capitalized contract costs
10,213

 
8,948

Deferred income taxes
910

 
(19,391
)
Other, net
(1,937
)
 
4,692

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

Accounts receivable
13,050

 
11,929

Settlement processing assets and obligations, net
82,235

 
122,948

Prepaid expenses and other assets
(56,906
)
 
(6,472
)
Accounts payable and other liabilities
(6,488
)
 
(12,979
)
Net cash provided by operating activities
284,541

 
293,965

Cash flows from investing activities:
 
 
 
Capital expenditures
(43,775
)
 
(46,219
)
Other, net
(1,586
)
 
(422
)
Net cash used in investing activities
(45,361
)
 
(46,641
)
Cash flows from financing activities:
 
 
 
Net repayments of settlement lines of credit
(192,517
)
 
(117,789
)
Proceeds from long-term debt
309,000

 
149,000

Repayments of long-term debt
(687,820
)
 
(189,732
)
Payment of debt issuance costs
(586
)
 
(896
)
Proceeds from stock issued under share-based compensation plans
2,613

 
1,149

Common stock repurchased - share-based compensation plans
(1,058
)
 
(167
)
Distributions to noncontrolling interests

 
(8
)
Dividends paid
(1,593
)
 
(1,522
)
Net cash used in financing activities
(571,961
)
 
(159,965
)
Effect of exchange rate changes on cash
2,749

 
11,707

Increase (decrease) in cash and cash equivalents
(330,032
)
 
99,066

Cash and cash equivalents, beginning of the period
1,335,855

 
1,162,779

Cash and cash equivalents, end of the period
$
1,005,823

 
$
1,261,845




8



SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
 
Three Months Ended March 31, 2018
 
 
GAAP
 
Net revenue adjustments(1)
 
Earnings adjustments(2)
 
Income taxes on adjustments(3)
 
Non-GAAP
 
Network fees(4)
 
Non-GAAP adjusted net revenue plus network fees
Revenues
 
$
794,977

 
$
(72,240
)
 
$

 
$

 
$
722,737

 
$
201,543

 
$
924,280

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
156,170

 
$
3,593

 
$
121,577

 
$

 
$
281,340

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
91,399

 
$
3,593

 
$
112,142

 
$
(26,311
)
 
$
180,823

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
 
$
0.57

 
 
 
 
 
 
 
$
1.13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
160,035

 
 
 
 
 
 
 
160,035

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
GAAP
 
Net revenue adjustments(1)
 
Earnings adjustments(2)
 
Income taxes on adjustments(3)
 
Non-GAAP
 
Gaming cash advance / other(4)
 
Non-GAAP adjusted net revenue plus network fees
Revenues
 
$
919,762

 
$
(115,883
)
 
$

 
$

 
$
803,879

 
$
16,163

 
$
787,716

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
104,970

 
$

 
$
123,779

 
$

 
$
228,749

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
48,813

 
$

 
$
121,992

 
$
(40,771
)
 
$
130,034

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
 
$
0.32

 
 
 
 
 
 
 
$
0.85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
153,255

 
 
 
 
 
 
 
153,255

 
 
 
 
(1) Amounts represent adjustments to revenue for gross-up related payments (included in operating expense) associated with certain lines of business to reflect economic benefits to the company. Also, for the three months ended March 31, 2018, includes $3.6 million to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with the acquisition of ACTIVE Network.

(2) For the three months ended March 31, 2018, earnings adjustments to operating income include $88.9 million in cost of service and $32.7 million in selling, general and administrative expenses. Adjustments to cost of service include amortization of acquired intangibles of $88.4 million and acquisition and integration expenses of $0.5 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $14.9 million and acquisition and integration expenses of $17.8 million.

For the three months ended March 31, 2018, earnings adjustments to net income attributable to Global Payments also 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. The earnings adjustments also include the removal of $1.9 million in expense associated with the write-off of unamortized debt issuance cost related to the refinancing of a term loan.

For the three months ended March 31, 2017, earnings adjustments to operating income include $86.3 million in cost of service and $37.5 million in selling, general and administrative expenses. Adjustments to cost of service include amortization of acquired intangibles of $84.6 million and employee termination costs of $1.7 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $8.8 million, acquisition and integration expenses of $26.1 million, and employee termination costs of $2.6 million.

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

(4) Global Payments adopted ASC 606, on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income.

For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees are presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the three months ended March 31, 2018 is presented on a basis that is comparable to the prior year. Adjusted net revenue plus network fees for the three months ended March 31, 2017 includes an adjustment for our gaming cash advance solutions to present it on a basis that is comparable to the current year.

9



SCHEDULE 7
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three Months Ended March 31, 2018
 
 
GAAP
 
Net revenue adjustments (1)
 
Earnings adjustments(2)
 
Non-GAAP
 
Network fees(3)
 
Non-GAAP adjusted net revenue plus network fees
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
594,029

 
$
(72,239
)
 
$

 
$
521,790

 
$
154,716

 
$
676,506

Europe
 
143,277

 

 

 
143,277

 
27,589

 
170,866

Asia-Pacific
 
57,671

 

 

 
57,671

 
19,237

 
76,908

 
 
$
794,977

 
$
(72,239
)
 
$

 
$
722,738

 
$
201,543

 
$
924,280

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
125,404

 
$
3,593

 
$
84,843

 
$
213,840

 
 
 
 
Europe
 
70,548

 

 
7,131

 
77,679

 
 
 
 
Asia-Pacific
 
23,774

 

 
2,089

 
25,863

 
 
 
 
Corporate
 
(63,556
)
 

 
27,514

 
(36,042
)
 
 
 
 
 
 
$
156,170

 
$
3,593

 
$
121,577

 
$
281,340

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
GAAP
 
Net revenue adjustments(1)
 
Earnings adjustments(2)
 
Non-GAAP
 
Gaming cash advance /other(3)
 
Non-GAAP adjusted net revenue plus network fees
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
687,044

 
$
(89,562
)
 
$

 
$
597,482

 
$
16,870

 
$
580,612

Europe
 
165,549

 
(26,321
)
 

 
139,228

 
(707
)
 
139,935

Asia-Pacific
 
67,169

 

 

 
67,169

 

 
67,169

 
 
$
919,762

 
$
(115,883
)
 
$

 
$
803,879

 
$
16,163

 
$
787,716

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
94,083

 
$

 
$
78,294

 
$
172,377

 
 
 
 
Europe
 
54,507

 

 
9,401

 
63,908

 
 
 
 
Asia-Pacific
 
19,754

 

 
1,216

 
20,970

 
 
 
 
Corporate
 
(63,374
)
 

 
34,868

 
(28,506
)
 
 
 
 
 
 
$
104,970

 
$

 
$
123,779

 
$
228,749

 
 
 
 

(1) Amounts represent adjustments to revenue for gross-up related payments (included in operating expense) associated with certain lines of business to reflect economic benefits to the company. Also, for the three months ended March 31, 2018, includes $3.6 million to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with the acquisition of ACTIVE Network.

(2) For the three months ended March 31, 2018, earnings adjustments to operating income include $88.9 million in cost of service and $32.7 million in selling, general and administrative expenses. Adjustments to cost of service include amortization of acquired intangibles of $88.4 million and acquisition and integration expenses of $0.5 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $14.9 million and acquisition and integration expenses of $17.8 million.

For the three months ended March 31, 2017, earnings adjustments to operating income include $86.3 million in cost of service and $37.5 million in selling, general and administrative expenses. Adjustments to cost of service include amortization of acquired intangibles of $84.6 million and employee termination costs of $1.7 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $8.8 million, acquisition and integration expenses of $26.1 million, and employee termination costs of $2.6 million.
 

(3) Global Payments adopted ASC 606 on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income.

For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees are presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the three months ended March 31, 2018 are presented on a basis that is comparable to the prior year. Adjusted net revenue plus network fees for the three months ended March 31, 2017 includes an adjustment for our gaming cash advance solutions to present it on a basis that is comparable to the current year.
 

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SCHEDULE 8
OUTLOOK SUMMARY (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)

 
2017 Actual
 
2018 Outlook
 
% Change
Revenues:
 
 
 
 
 
GAAP revenues

$3.98

 
$3.31 to $3.385

 
NM
Adjustments(1)
(0.46
)
 
(0.28
)
 
 
Adjusted net revenue

$3.52

 
$3.03 to $3.105

 
NM
 
 
 
 
 
 
Gaming cash advance / other(2)

($0.07
)
 

$—

 
 
Network fees(2)

 
0.87

 
 
Adjusted net revenue plus network fees

$3.45

 
$3.90 to $3.975

 
13% to 15%
 
 
 
 
 
 
Earnings per share ("EPS"):
 
 
 
 
 
GAAP diluted EPS(3)

$3.01

 
$2.99 to $3.19

 

Adjustments(4)
1.00

 
2.01

 
 
Adjusted diluted EPS

$4.01

 
$5.00 to $5.20

 
25% to 30%

(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. As a result of the adoption of ASC 606 effective January 1, 2018, no adjustment is necessary for our European wholesale business as GAAP revenues in 2018 are presented net of these payments. The 2018 Outlook adjustment is $0.16 billion lower as a result of this change. See footnote 2.

Amounts also include adjustments to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with the acquisition of ACTIVE Network.

(2) Global Payments adopted ASC 606, on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income.

For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees are presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the three months ended March 31, 2018 are presented on a basis that is comparable to the prior year.

Adjusted net revenue plus network fees for the three months ended March 31, 2017 includes an adjustment for our gaming cash advance solutions to present it on a basis that is comparable to the current year.

(3) ASC 606 also changes the amount and timing of revenue and expenses to be recognized under certain of our customer arrangements, the effect of which is reflected in the outlook for GAAP diluted EPS for 2018.

(4) Adjustments to 2017 GAAP diluted EPS include the ACTIVE Network revenue adjustment described above, acquisition related amortization expense of $2.19, share-based compensation expense of $0.25 and net other items of $0.68, including acquisition and integration expense of $0.61. Adjustments to 2017 GAAP diluted EPS also includes the effect of these adjustments on noncontrolling interests and income taxes, as applicable. In addition, these adjustments reflect the removal of income tax benefit of $1.02 representing the effects of the effects of U.S. Tax Cuts and Jobs Act of 2017.
NM - Not Meaningful

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,

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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. Beginning in 2018, 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.

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