Document
false0001123360 0001123360 2020-02-12 2020-02-12


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): February 12, 2020
 
 
 Commission file number 001-16111

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13362144&doc=9
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
 
NONE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Trading symbol
Name of exchange on which registered
Common stock, no par value
GPN
New York Stock Exchange
 
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 February 12, 2020, Global Payments Inc. (the "Company") issued a press release announcing its financial results for the quarter and year ended December 31, 2019. 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
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).








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:
February 12, 2020
 
 
 
 
 
By: /s/ Paul M. Todd
 
 
 
Paul M. Todd
 
 
 
Senior Executive Vice President and Chief Financial Officer




Exhibit



PRESS RELEASE
 
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Global Payments Reports Fourth Quarter and Full Year 2019 Results and
Establishes 2020 Growth Outlook

ATLANTA, February 12, 2020 -- Global Payments Inc. (NYSE: GPN) today announced results for the fourth quarter and year ended December 31, 2019.
"We delivered one of the finest strategic, operational and financial years in our history in 2019. Our transformational merger with TSYS redefined our industry landscape, creating the worldwide leader in payments technology," said Jeff Sloan, Chief Executive Officer. "Our differentiated focus on software, partnered and owned, omnichannel solutions and faster growth markets generated significant competitive wins and enabled our expansion into new geographies, further validating the distinctiveness of our business model."
Sloan added, "Our momentum continued in the fourth quarter of 2019, with growth accelerating as we exceeded our expectations for the quarter and year. Looking forward, we are tremendously excited about the opportunities that will enable us to maintain industry leading growth as a combined company."

Full Year 2019 Summary
GAAP revenues were $4.91 billion, compared to $3.37 billion in 2018; diluted earnings per share were $2.16 compared to $2.84 in the prior year; and operating margin was 16.1%.
Adjusted net revenue1 grew 48% to $4.59 billion, compared to $3.10 billion in 2018. As previously disclosed, this new non-GAAP revenue convention does not include the addition of network fees.
Adjusted earnings per share grew 20% to $6.22, compared to $5.19 in 2018.
Adjusted operating margin was 39.7%, substantially exceeding our expectations.
                       
1 Excludes $1.05 billion and $0.87 billion in 2019 and 2018, respectively, previously included in our prior non-GAAP guidance convention that included network fees.

1





Fourth Quarter 2019 Summary
GAAP revenues were $2.0 billion, compared to $881 million in the fourth quarter of 2018; diluted earnings per share were $0.34 compared to $0.47 in the prior year; and operating margin was 9.9%.
Adjusted net revenue1 grew 120% to $1.80 billion, compared to $819 million in the fourth quarter of 2018. As previously disclosed, this new non-GAAP revenue convention does not include the addition of network fees.
Adjusted earnings per share grew 22% to $1.62, compared to $1.33 in the fourth quarter of 2018.
Adjusted operating margin was 38.3%, substantially exceeding our expectations.
                       
1 Excludes $0.37 billion and $0.22 billion in 2019 and 2018, respectively, previously included in our prior non-GAAP guidance convention that included network fees.

Synergy Update
“We could not be more excited about the outlook for 2020 as we leverage our differentiated payments technology model and execute on the significant cross-selling opportunities as a combined company. We now expect annual run-rate expense synergies of at least $350 million within three years, an increase from our prior expectation of more than $325 million. Further, we continue to expect annual run-rate revenue synergies of at least $125 million from the merger within that same period,” stated Cameron Bready, President and Chief Operating Officer. “Our strong fourth quarter results serve as an early indication of the value creation enabled by our merger with TSYS and reflect the tremendous progress we have already made in integrating our premier payments businesses.”

2020 Outlook
“We delivered outstanding financial results that exceeded our expectations for both the fourth quarter and the full year 2019,” said Paul Todd, Senior Executive Vice President and Chief Financial Officer. “Based on our strong performance and continuing momentum, we are optimistic about the financial outlook for our business. The company expects full year 2020 adjusted net revenue of $7.68 billion to $7.75 billion, representing growth of 67% to 69%, or 8% to 9% on a combined basis. Annual adjusted operating margin for 2020 is expected to expand by up to 250 basis points on a combined basis and by up to 75 basis points on a reported basis. We expect adjusted earnings per share growth of 20% to 23% over 2019.”
(in billions, except per share)
 
2019 Actual
 
2020 Outlook
 
% Change
GAAP revenue
 
$4.91
 
$8.45 to $8.52
 
72% to 74%
Adjusted net revenue1
 
$4.59
 
$7.68 to $7.75
 
67% to 69%
Adjusted earnings per share
 
$6.22
 
$7.43 to $7.62
 
20% to 23%
1 Excludes $1.60 billion and $1.05 billion in 2020 and 2019, respectively, previously included in our prior non-GAAP guidance convention that included network fees.



2




Capital Allocation
Global Payments’ Board of Directors approved a dividend of $0.195 per share payable March 27, 2020 to shareholders of record as of March 13, 2020.

Conference Call
Global Payments’ management will host a conference call today, February 12, 2020, 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 supplements revenues, income, operating income, operating margin and earnings per share information determined in accordance with GAAP by providing these measures, and other measures with certain adjustments (such measures being non-GAAP financial measures) on an adjusted basis in this earnings release to assist with evaluating our performance. In addition to GAAP measures, management uses these non-GAAP financial measures to focus on the factors the company believes are pertinent to the daily management of our operations.
Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments
Global Payments Inc. (NYSE: GPN) is a leading pure play payments technology company delivering innovative software and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to operate their businesses more efficiently across a variety of channels around the world.
Headquartered in Georgia with over 24,000 employees worldwide, Global Payments is a member of the S&P 500 with worldwide reach spanning over 100 countries throughout North America, Europe, Asia Pacific and Latin America. For more information, visit www.globalpaymentsinc.com and follow Global Payments on Twitter (@globalpayments), LinkedIn and Facebook.

Forward-Looking Statements
Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which Global Payments operates, beliefs of and assumptions made by Global Payments management, and the anticipated outcome and benefits of the merger of Global Payments and TSYS, involve uncertainties that could significantly affect the financial condition, results of

3




operations, business plans and the future performance of Global Payments. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “estimates,” “forecasts,” “projects,” “plans,” “may,” “could,” “should,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Such forward-looking statements include, but are not limited to, statements about the strategic rationale and financial benefits of the merger transaction, including expected future financial and operating results and the combined company’s plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future —including statements relating to projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; statements of plans and objectives of Global Payments or its management or Board of Directors, including those relating to products or services; and statements of future economic performance — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.
Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. In addition to factors previously disclosed in Global Payments’ reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the outcome of any legal proceedings that may be instituted against Global Payments or its or TSYS’ current or former directors; difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and TSYS, including with respect to implementing systems to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; failing to fully realize anticipated cost savings and other anticipated benefits of the merger when expected or at all; business disruptions from the merger or integration that will harm Global Payments’ business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the merger, including as it relates to the businesses’ ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability of Global Payments to maintain Visa and Mastercard registration and financial institution sponsorship; the ability of Global Payments to retain and hire key personnel; the diversion of management’s attention from ongoing business operations; the continued availability of capital and financing following the merger; the business, economic and political conditions in the markets in which Global Payments operates; increased competition in the markets in which Global Payments operates and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness, foreign currency exchange and interest rate risks; the impact of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and cybersecurity laws and regulations; and events beyond Global

4




Payments’ control, such as acts of terrorism, and other factors included in the “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2018, and in other documents that the company files with the SEC, which are available at http://www.sec.gov. Any forward-looking statements speak only as of the date of this communication or as of the date they were made, and Global Payments undertakes no obligation to update forward-looking statements.
As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements.

    
Investor contact:
investor.relations@globalpay.com
Media contact:    
media.relations@globalpay.com
 
Winnie Smith
 
Emily Edmonds
 
770-829-8478
 
770-829-8755


5


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

 
Three Months Ended December 31,
 
Years Ended December 31,
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
1,987,760

 
$
880,555

 
125.7
 %
 
$
4,911,892

 
$
3,366,366

 
45.9
 %
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of service
1,041,136

 
313,071

 
232.6
 %
 
2,073,803

 
1,095,014

 
89.4
 %
Selling, general and administrative
750,462

 
400,498

 
87.4
 %
 
2,046,672

 
1,534,297

 
33.4
 %
 
1,791,598

 
713,569

 
151.1
 %
 
4,120,475

 
2,629,311

 
56.7
 %
Operating income
196,162

 
166,986

 
17.5
 %
 
791,417

 
737,055

 
7.4
 %
Interest and other income
11,068

 
3,323

 
233.1
 %
 
31,413

 
20,719

 
51.6
 %
Interest and other expense
(84,047
)
 
(55,939
)
 
50.2
 %
 
(304,905
)
 
(195,619
)
 
55.9
 %
 
(72,979
)
 
(52,616
)
 
38.7
 %
 
(273,492
)
 
(174,900
)
 
56.4
 %
Income before income taxes and equity in income of equity method investments
123,183

 
114,370

 
7.7
 %
 
517,925

 
562,155

 
(7.9
)%
Income tax expense
(22,423
)
 
(31,047
)
 
(27.8
)%
 
(62,190
)
 
(77,488
)
 
(19.7
)%
Income before equity in income of equity method investments
100,760

 
83,323

 
20.9
 %
 
455,735

 
484,667

 
(6.0
)%
Equity in income of equity method investments, net of tax
13,541

 

 
NM

 
13,541

 

 
NM

Net income
114,301

 
83,323

 
37.2
 %
 
469,276

 
484,667

 
(3.2
)%
Less: Net income attributable to noncontrolling interests, net of income tax
(11,531
)
 
(8,109
)
 
42.2
 %
 
(38,663
)
 
(32,614
)
 
18.5
 %
Net income attributable to Global Payments
$
102,770

 
$
75,214

 
36.6
 %
 
$
430,613

 
$
452,053

 
(4.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Global Payments:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.48

 
(29.2
)%
 
$
2.17

 
$
2.85

 
(23.9
)%
Diluted
$
0.34

 
$
0.47

 
(27.7
)%
 
$
2.16

 
$
2.84

 
(23.9
)%
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
300,528

 
158,213

 
 
 
198,298

 
158,672

 
 
Diluted
302,342

 
158,711

 
 
 
199,134

 
159,271

 
 

NM - Not Meaningful.





6


SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
Three Months Ended December 31,
 
Years Ended December 31,
 
2019
 
2018
 
% Change
 
2019(1)
 
2018
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenue
$
1,803,902

 
$
819,040

 
120.2%
 
$
4,587,601

 
$
3,097,320

 
48.1%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating income
$
690,224

 
$
328,256

 
110.3%
 
$
1,821,302

 
$
1,256,447

 
45.0%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to Global Payments
$
488,618

 
$
211,551

 
131.0%
 
$
1,238,653

 
$
826,337

 
49.9%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share attributable to Global Payments
$
1.62

 
$
1.33

 
21.8%
 
$
6.22

 
$
5.19

 
19.8%

___________________

(1) Non-GAAP financial measures included in these schedules reflect TSYS results from the date the merger closed through the end of the period presented.

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.



7


SCHEDULE 3
SEGMENT INFORMATION (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three months ended December 31,
 
 
 
 
 
 
2019
2018
 % Change
 
 
GAAP(1)
 
Non-GAAP(2)
 
GAAP(1)
 
Non-GAAP(2)
 
 GAAP
 
Non-GAAP
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Merchant Solutions
 
$
1,285,940

 
$
1,160,963

 
$
875,221

 
$
813,706

 
46.9
%
 
42.7
%
Issuer Solutions
 
518,532

 
459,004

 
5,334

 
5,334

 
NM

 
NM

Business and Consumer Solutions
 
199,544

 
199,544

 

 

 
NM

 
NM

Intersegment Elimination
 
(16,256
)
 
(15,609
)
 

 

 
NM

 
NM

 
 
$
1,987,760

 
$
1,803,902

 
$
880,555

 
$
819,040

 
125.7
%
 
120.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
Merchant Solutions
 
$
308,649

 
$
522,460

 
$
219,477

 
$
355,600

 
40.6
%
 
46.9
%
Issuer Solutions
 
69,252

 
184,735

 
3,399

 
3,399

 
NM

 
NM

Business and Consumer Solutions
 
16,108

 
42,812

 

 

 
NM

 
NM

Corporate
 
(197,847
)
 
(59,783
)
 
(55,890
)
 
(30,743
)
 
254.0
%
 
94.5
%
 
 
$
196,162

 
$
690,224

 
$
166,986

 
$
328,256

 
17.5
%
 
110.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Years Ended December 31,
 
 
 
 
 
 
2019
2018
 % Change
 
 
GAAP(1)
 
Non-GAAP(2)
 
GAAP(1)
 
Non-GAAP(2)
 
 GAAP
 
Non-GAAP
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Merchant Solutions
 
$
4,098,580

 
$
3,843,547

 
$
3,345,181

 
$
3,076,135

 
22.5
%
 
24.9
%
Issuer Solutions
 
604,654

 
534,749

 
21,185

 
21,185

 
NM

 
NM

Business and Consumer Solutions
 
227,440

 
227,440

 

 

 
NM

 
NM

Intersegment Elimination
 
(18,782
)
 
(18,135
)
 

 

 
NM

 
NM

 
 
$
4,911,892

 
$
4,587,601

 
$
3,366,366

 
$
3,097,320

 
45.9
%
 
48.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
Merchant Solutions
 
$
1,148,975

 
$
1,722,133

 
$
940,157

 
$
1,364,009

 
22.2
%
 
26.3
%
Issuer Solutions
 
82,172

 
215,678

 
14,084

 
14,084

 
NM

 
NM

Business and Consumer Solutions
 
19,473

 
50,820

 

 

 
NM

 
NM

Corporate
 
(459,203
)
 
(167,329
)
 
(217,186
)
 
(121,646
)
 
111.4
%
 
37.6
%
 
 
$
791,417

 
$
1,821,302

 
$
737,055

 
$
1,256,447

 
7.4
%
 
45.0
%
______________________

NM - not meaningful. Due to the merger with TSYS and the new segment structure resulting from it, year-over-year growth rates are not meaningful.
 
(1) 
In the fourth quarter of 2019, as a result of the merger with TSYS, the company realigned its organizational structure. Management has determined that the company's new reportable segments as of December 31, 2019 were: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. On January 15, 2020, the company filed an 8-K furnishing Supplemental Combined Financial Information that included the presentation of Global Payments historical GAAP under the new reporting segment structure.

(2) 
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.


8


SCHEDULE 4
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
    
 
December 31,
 
2019
 
2018
ASSETS
 
  
 
Current assets:
 
  
 
Cash and cash equivalents
$
1,678,273

 
$
1,210,878

Accounts receivable, net
895,232

 
348,400

Settlement processing assets
1,353,778

 
1,600,222

Prepaid expenses and other current assets
439,165

 
216,708

Total current assets
4,366,448

 
3,376,208

Goodwill
23,759,740

 
6,341,355

Other intangible assets, net
13,154,655

 
2,488,618

Property and equipment, net
1,382,802

 
653,542

Deferred income taxes
6,292

 
8,128

Other noncurrent assets
1,810,225

 
362,923

Total assets
$
44,480,162

 
$
13,230,774

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement lines of credit
$
463,237

 
$
700,486

Current portion of long-term debt
35,137

 
115,075

Accounts payable and accrued liabilities
1,822,166

 
1,176,703

Settlement processing obligations
1,258,806

 
1,276,356

Total current liabilities
3,579,346

 
3,268,620

Long-term debt
9,090,364

 
5,015,168

Deferred income taxes
3,145,641

 
585,025

Other noncurrent liabilities
609,822

 
175,618

Total liabilities
16,425,173

 
9,044,431

Commitments and contingencies
 
 
 
Equity:
 
 
 
Preferred stock, no par value; 5,000,000 shares authorized and none issued

 

Common stock, no par value; 400,000,000 shares authorized at December 31, 2019 and 200,000,000 shares authorized at December 31, 2018; 300,225,590 shares issued and outstanding at December 31, 2019 and 157,961,982 shares issued and outstanding at December 31, 2018

 

Paid-in capital
25,833,307

 
2,235,167

Retained earnings
2,333,011

 
2,066,415

Accumulated other comprehensive loss
(310,571
)
 
(310,175
)
Total Global Payments shareholders’ equity
27,855,747

 
3,991,407

Noncontrolling interests
199,242

 
194,936

Total equity
28,054,989

 
4,186,343

Total liabilities and equity
$
44,480,162

 
$
13,230,774



9


SCHEDULE 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Years Ended December 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
469,276

 
$
484,667

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property and equipment
211,200

 
145,128

Amortization of acquired intangibles
667,135

 
377,685

Amortization of capitalized contract costs
66,086

 
51,541

Share-based compensation expense
89,634

 
57,826

Provision for operating losses and bad debts
100,188

 
43,237

Noncash lease expense
52,612

 

Deferred income taxes
(108,309
)
 
(1,451
)
Other, net
(570
)
 
(8,025
)
Changes in operating assets and liabilities, net of the effects of business combinations:
 
 
 
Accounts receivable
(115,528
)
 
(33,386
)
Settlement processing assets and obligations, net
213,701

 
83,478

Prepaid expenses and other assets
(159,056
)
 
(160,800
)
Accounts payable and other liabilities
(95,091
)
 
66,182

Net cash provided by operating activities
1,391,278

 
1,106,082

Cash flows from investing activities:
 
 
 
Acquisitions, net of cash acquired
(644,622
)
 
(1,259,692
)
Capital expenditures
(307,868
)
 
(213,290
)
Other, net
35,404

 
(3,305
)
Net cash used in investing activities
(917,086
)
 
(1,476,287
)
Cash flows from financing activities:
 
 
 
Net (repayments of) borrowings from settlement lines of credit
(236,473
)
 
70,783

Proceeds from long-term debt
7,203,903

 
2,774,214

Repayments of long-term debt
(6,484,689
)
 
(2,304,314
)
Payments of debt issuance costs
(43,599
)
 
(16,345
)
Repurchases of common stock
(311,383
)
 
(208,198
)
Proceeds from stock issued under share-based compensation plans
24,514

 
14,318

Common stock repurchased - share-based compensation plans
(62,577
)
 
(31,510
)
Distributions to noncontrolling interests
(31,632
)
 
(5,686
)
Preacquisition dividends paid to former TSYS shareholders
(23,240
)
 

Dividends paid
(63,498
)
 
(6,332
)
Net cash (used in) provided by financing activities
(28,674
)
 
286,930

Effect of exchange rate changes on cash
21,877

 
(41,702
)
Increase (decrease) in cash and cash equivalents
467,395

 
(124,977
)
Cash and cash equivalents, beginning of the period
1,210,878

 
1,335,855

Cash and cash equivalents, end of the period
$
1,678,273

 
$
1,210,878



10


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 December 31, 2019
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
Revenues
$
1,987,760

 
$
(183,858
)
 
$

 
$

 
$
1,803,902

 
 
 
 
 
 
 
 
 
 
Operating income
$
196,162

 
$
2,708

 
$
491,354

 
$

 
$
690,224

 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
102,770

 
$
2,708

 
$
485,041

 
$
(101,901
)
 
$
488,618

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
0.34

 
 
 
 
 
 
 
$
1.62

 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
302,342

 
 
 
 
 
 
 
302,342

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2018
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
Revenues
$
880,555

 
$
(61,515
)
 
$

 
$

 
$
819,040

 
 
 
 
 
 
 
 
 
 
Operating income
$
166,986

 
$
4,469

 
$
156,801

 
$

 
$
328,256

 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
75,214

 
$
4,469

 
$
153,877

 
$
(22,009
)
 
$
211,551

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
0.47

 
 
 
 
 
 
 
$
1.33

 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
158,711

 
 
 
 
 
 
 
158,711

______________________
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the three months ended December 31, 2019 and December 31, 2018, includes $2.7 million and $4.5 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(2) 
For the three months ended December 31, 2019, earnings adjustments to operating income include $351.6 million in cost of services (COS) and $139.7 million in selling, general and administrative expenses (SG&A). Adjustments to COS include amortization of acquired intangibles of $322.2 million and acquisition and integration expenses of $29.4 million. Adjustments to SG&A include share-based compensation expense of $33.8 million and acquisition and integration expenses of $105.9 million. Net income attributable to Global Payments also reflects the removal of a $4.4 million gain related to the partial sale of our investment in Brazil.
For the three months ended December 31, 2018, earnings adjustments to operating income include $122.8 million in COS and $34.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $114.5 million and acquisition and integration expenses of $8.3 million. Adjustments to SG&A include share-based compensation expense of $12.9 million, acquisition and integration expenses of $13.4 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $0.1 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.
For the three months ended December 31, 2018, also includes the removal of $9.7 million income tax expense related to tax reform and the removal of tax expense associated with the vesting of share-based awards.

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

11


SCHEDULE 7
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
Year Ended December 31, 2019
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
Revenues
$
4,911,892

 
$
(324,291
)
 
$

 
$

 
$
4,587,601

 
 
 
 
 
 
 
 
 
 
Operating income
$
791,417

 
$
15,351

 
$
1,014,534

 
$

 
$
1,821,302

 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
430,613

 
$
15,351

 
$
1,036,550

 
$
(243,861
)
 
$
1,238,653

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
2.16

 
 
 
 
 
 
 
$
6.22

 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
199,134

 
 
 
 
 
 
 
199,134

 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2018
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
Revenues
$
3,366,366

 
$
(269,046
)
 
$

 
$

 
$
3,097,320

 
 
 
 
 
 
 
 
 
 
Operating income
$
737,055

 
$
11,534

 
$
507,858

 
$

 
$
1,256,447

 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
452,053

 
$
11,534

 
$
495,798

 
$
(133,048
)
 
$
826,337

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
2.84

 
 
 
 
 
 
 
$
5.19

 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
159,271

 
 
 
 
 
 
 
159,271

______________________
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the twelve months ended December 31, 2019 and December 31, 2018, includes $15.4 million and $11.5 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
For the year ended December 31, 2019, earnings adjustments to operating income include $711.1 million in COS and $303.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $669.3 million and acquisition and integration expenses of $41.8 million. Adjustments to SG&A include share-based compensation expense of $89.6 million and acquisition and integration expenses of $213.8 million.
Net income attributable to Global Payments also reflects the removal of $34.3 million in charges from interest expense in connection with the merger with TSYS. These include fees related to the bridge facility the company entered into, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new senior notes attributable to the period between issuance and merger close, net of interest income earned from these notes while in escrow. Also includes the removal of a $4.4 million gain related to the partial sale of our investment in Brazil.

For the year ended December 31, 2018, earnings adjustments to operating income include $392.4 million in COS and $115.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $379.9 million, acquisition and integration expenses of $9.5 million, employee termination benefits of $1.4 million and other adjustments of $1.6 million. Adjustments to SG&A include share-based compensation expense of $57.8 million, acquisition and integration expenses of $46.6 million, employee termination benefits of $3.3 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $0.1 million.
Net income attributable to Global Payments also reflects adjustments to remove a $9.6 million gain recognized on the reorganization of Interac Association, of which we were a member through one of our Canadian subsidiaries, and a charge of $5.2 million associated with the refinancing of our corporate credit facility.

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

For the twelve months ended December 31, 2018, also includes the removal of a $22.9 million income tax benefit related to tax reform and a $4.7 million tax expense associated with certain discrete tax items related to the impact of changes in state effective income tax rates on deferred liabilities.
See "Non-GAAP Financial Measures" discussion on Schedule 10.

12


SCHEDULE 8
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Three Months Ended December 31, 2019
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Merchant Solutions
$
1,285,940

 
$
(124,977
)
 
$

 
$
1,160,963

Issuer Solutions
518,532

 
(59,528
)
 

 
459,004

Business and Consumer Solutions
199,544

 

 

 
199,544

Intersegment Elimination
(16,256
)
 
647

 

 
(15,609
)
 
$
1,987,760

 
$
(183,858
)
 
$

 
$
1,803,902

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Merchant Solutions
$
308,649

 
$
131

 
$
213,680

 
$
522,460

Issuer Solutions
69,252

 
2,577

 
112,906

 
184,735

Business and Consumer Solutions
16,108

 

 
26,704

 
42,812

Corporate
(197,847
)
 

 
138,064

 
(59,783
)
 
$
196,162

 
$
2,708

 
$
491,354

 
$
690,224

 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2018
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Merchant Solutions
$
875,221

 
$
(61,515
)
 
$

 
$
813,706

Issuer Solutions
5,334

 

 

 
5,334

Business and Consumer Solutions

 

 

 

 
$
880,555

 
$
(61,515
)
 
$

 
$
819,040

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Merchant Solutions
$
219,477

 
$
4,469

 
$
131,654

 
$
355,600

Issuer Solutions
3,399

 

 

 
3,399

Business and Consumer Solutions

 

 

 

Corporate
(55,890
)
 

 
25,147

 
(30,743
)
 
$
166,986

 
$
4,469

 
$
156,801

 
$
328,256

______________________
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the three months ended December 31, 2019 and December 31, 2018, includes $2.7 million and $4.5 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(2) 
For the three months ended December 31, 2019, earnings adjustments to operating income include $351.6 million in COS and $139.7 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $322.2 million and acquisition and integration expenses of $29.4 million. Adjustments to SG&A include share-based compensation expense of $33.8 million and acquisition and integration expenses of $105.9 million.
For the three months ended December 31, 2018, earnings adjustments to operating income include $122.8 million COS and $34.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $114.5 million and acquisition and integration expenses of $8.3 million. Adjustments to SG&A include share-based compensation expense of $12.9 million, acquisition and integration expenses of $13.4 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $0.1 million.


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

13


SCHEDULE 9  
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)  
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands)  
 
Year Ended December 31, 2019
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Merchant Solutions
$
4,098,580

 
$
(255,033
)
 
$

 
$
3,843,547

Issuer Solutions
604,654

 
(69,905
)
 

 
534,749

Business and Consumer Solutions
227,440

 

 

 
227,440

Intersegment Elimination
(18,782
)
 
647

 

 
(18,135
)
 
$
4,911,892

 
$
(324,291
)
 
$

 
$
4,587,601

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Merchant Solutions
$
1,148,975

 
$
12,774

 
$
560,384

 
$
1,722,133

Issuer Solutions
82,172

 
2,577

 
130,929

 
215,678

Business and Consumer Solutions
19,473

 

 
31,347

 
50,820

Corporate
(459,203
)
 

 
291,874

 
(167,329
)
 
$
791,417

 
$
15,351

 
$
1,014,534

 
$
1,821,302

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2018
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Merchant Solutions
$
3,345,181

 
$
(269,046
)
 
$

 
$
3,076,135

Issuer Solutions
21,185

 

 

 
21,185

Business and Consumer Solutions

 

 

 

 
$
3,366,366

 
$
(269,046
)
 
$

 
$
3,097,320

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Merchant Solutions
$
940,157

 
$
11,534

 
$
412,318

 
$
1,364,009

Issuer Solutions
14,084

 

 

 
14,084

Business and Consumer Solutions

 

 

 

Corporate
(217,186
)
 

 
95,540

 
(121,646
)
 
$
737,055

 
$
11,534

 
$
507,858

 
$
1,256,447

______________________
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the twelve months ended December 31, 2019 and December 31, 2018, includes $15.4 million and $11.5 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
For the year ended December 31, 2019, earnings adjustments to operating income include $711.1 million in COS and $303.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $669.3 million and acquisition and integration expenses of $41.8 million. Adjustments to SG&A include share-based compensation expense of $89.6 million and acquisition and integration expenses of $213.8 million.

For the year ended December 31, 2018, earnings adjustments to operating income include $392.4 million in COS and $115.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $379.9 million, acquisition and integration expenses of $9.5 million, employee termination benefits of $1.4 million and other adjustments of $1.6 million. Adjustments to SG&A include share-based compensation expense of $57.8 million, acquisition and integration expenses of $46.6 million, employee termination benefits of $3.3 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $0.1 million.

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

14


SCHEDULE 10
OUTLOOK SUMMARY (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
 
 
2019
 
2020 Outlook
 
% Change
Revenues:
 
 
 
 
 
 
GAAP revenues
 

$4.91

 
$8.45 to $8.52

 
72% to 74%
Adjustments(1)
 
(0.32
)
 
(0.77
)
 
 
Adjusted net revenue
 

$4.59

 
$7.68 to $7.75

 
67% to 69%
 
 
 
 
 
 
 
Earnings Per Share:
 
 
 
 
 
 
GAAP diluted EPS
 

$2.16

 
$3.75 to $3.94

 
74% to 83%
Adjustments(2)
 
4.06

 
3.69

 
 
Adjusted diluted EPS
 

$6.22

 
$7.43 to $7.62

 
20% to 23%

(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefit to the company. Amounts also include adjustments to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
Adjustments to 2019 GAAP diluted EPS include software-related contract liability adjustments described above of $0.08, acquisition related amortization expense of $3.32 share-based compensation expense of $0.45, acquisition and integration expense of $1.28, the removal of a $0.02 gain related to the partial sale of our Brazil investment and the removal of an interest expense charge of $0.17 in connection with the merger with TSYS. Also, adjustments to 2019 GAAP diluted EPS includes the effect of these adjustments on noncontrolling interests and income taxes, as applicable.


NON-GAAP FINANCIAL MEASURES
Global Payments supplements revenues, income, operating income, operating margin 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 more closely reflects the economic benefits to the company's core business and allows for better comparisons with industry peers. Management uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation. Adjusted net revenue, adjusted operating income, adjusted operating margin, adjusted net income and adjusted EPS should be considered in addition to, and not as substitutes for, revenues, operating income, net income and EPS determined in accordance with GAAP. The non-GAAP financial measures reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

Adjusted net revenue excludes gross-up related payments associated with certain lines of business to reflect economic benefits to the company. On a GAAP basis, these payments are presented gross in both revenues and operating expenses. Adjusted operating income, adjusted net income and adjusted EPS exclude acquisition-related amortization expense, share-based compensation and certain other items specific to each reporting period as more fully described in the accompanying reconciliations in Schedules 6, 7, 8 and 9. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenue. The tax rate used in determining the income tax impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.


15