Global Payments Inc.
Jul 28, 2016

Global Payments Reports Fiscal 2016 Earnings, Establishes Fiscal 2017 Growth Targets and Announces Fiscal Year Change to Calendar Year End

ATLANTA--(BUSINESS WIRE)-- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal fourth quarter and year ended May 31, 2016.

"Fiscal 2016 was a transformative year for Global Payments. We are delighted with our performance as results exceeded our expectations, reflecting continued strong execution throughout the year," said Jeff Sloan, Chief Executive Officer. "Our partnership with Heartland Payments is off to a strong start. Our combined senior management team is in place, we are executing initiatives to drive incremental revenue enhancements and we are realizing the integration synergies we previously outlined. We expect continued positive momentum in 2017."

Full-Year Fiscal 2016 Summary

Fourth Quarter Fiscal 2016 Summary

Fiscal 2017 Outlook

"Following another year of strong financial performance, as well as the completion of our transformational merger with Heartland, we are pleased to announce accelerated growth guidance for fiscal 2017," stated Cameron Bready, Executive Vice President and Chief Financial Officer.

For fiscal 2017, the company expects constant currency adjusted net revenue of $3.25 billion to $3.35 billion, or 50% to 54% growth over fiscal 2016. Annual adjusted operating margin for fiscal 2017 is expected to expand by up to 70 basis points on a constant currency basis. The company also expects constant currency diluted cash earnings per share of $3.50 to $3.60, representing growth of 17% to 21% over fiscal 2016.

Change in Fiscal Year End

Global Payments' Board of Directors has approved a change in the company's fiscal year end from May 31 to December 31. As a result, the company will report transitional financial statements for the seven-month period from June 1, 2016 to December 31, 2016 in February 2017. This change in fiscal year end is being made to allow our stakeholders to better compare the company's performance to that of its peers.

Capital Allocation

Global Payments' Board of Directors approved a quarterly dividend of $0.01 per share payable August 26, 2016 to shareholders of record as of August 12, 2016.

Conference Call

Global Payments' management will host a conference call today, July 28, 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 our operations.

Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments

Global Payments Inc. (NYSE: GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our technologies, partnerships and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world.

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

Forward-Looking Statements

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

       

SCHEDULE 1

CONSOLIDATED STATEMENTS OF INCOME  

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
Three Months Ended May 31, Year Ended May 31,
2016     2015    

%

Change

2016     2015    

%

Change

 
Revenues $ 747,064 $ 706,549 5.7 % $ 2,898,150 $ 2,773,718 4.5 %
 
Operating expenses:
Cost of service 345,680 254,217 36.0 % 1,147,639 1,022,107 12.3 %
Selling, general and administrative 345,182   348,732   (1.0 )% 1,325,567   1,295,014   2.4 %
690,862   602,949   14.6 % 2,473,206   2,317,121   6.7 %
 
Operating income 56,202   103,600   (45.8 )% 424,944   456,597   (6.9 )%
 
Interest and other income 1,758 1,315 33.7 % 5,284 4,949 6.8 %
Interest and other expense (28,647 ) (9,647 ) 197.0 % (69,316 ) (44,436 ) 56.0 %
(26,889 ) (8,332 ) 222.7 % (64,032 ) (39,487 ) 62.2 %
 
Income before income taxes 29,313 95,268 (69.2 )% 360,912 417,110 (13.5 )%
Benefit (provision) for income taxes 11,866   (25,158 ) NM (70,695 ) (107,995 ) (34.5 )%
Net income 41,179 70,110 (41.3 )% 290,217 309,115 (6.1 )%
Less: Net income attributable to noncontrolling interests, net of income tax (3,991 ) (4,785 ) (16.6 )% (18,551 ) (31,075 ) (40.3 )%
Net income attributable to Global Payments $ 37,188   $ 65,325   (43.1 )% $ 271,666   $ 278,040   (2.3 )%
 
Earnings per share attributable to Global Payments1:
Basic $ 0.27 $ 0.50 (46.0 )% $ 2.05 $ 2.07 (1.0 )%
Diluted $ 0.26 $ 0.49 (46.9 )% $ 2.04 $ 2.06 (1.0 )%
 
Weighted-average number of shares outstanding1:
Basic 139,952 131,488 132,284 134,072
Diluted 140,948 132,392 133,167 134,922
 
 

1 Earnings per share data and weighted-average number of 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.

 
NM = Not Meaningful
 
       

SCHEDULE 2

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
Three Months Ended May 31, Year Ended May 31,
2016     2015     % Change 2016     2015     % Change
 
Adjusted net revenue $ 620,868 $ 496,258 25.1 % $ 2,173,093 $ 1,952,892 11.3 %
 
Adjusted operating income $ 174,460 $ 137,192 27.2 % $ 633,643 $ 560,007 13.1 %
 
Cash net income attributable to Global Payments $ 103,012 $ 84,259 22.3 % $ 396,621 $ 340,084 16.6 %
 
Cash diluted earnings per share attributable to Global Payments1: $ 0.73 $ 0.64 14.1 % $ 2.98 $ 2.52 18.3 %
 

1 Earnings per share data 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 Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and Schedule 10 for a discussion of non-GAAP financial measures.

         

SCHEDULE 3

SEGMENT INFORMATION (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Three Months Ended May 31,
2016     2015

%

Change

GAAP     Non-GAAP1 GAAP     Non-GAAP1 GAAP Non-GAAP1
Revenues:
North America $ 532,372 $ 427,566 $ 503,044 $ 314,114 5.8 % 36.1

%

Europe 158,524 137,134 154,827 133,466 2.4 % 2.7

%

Asia-Pacific 56,168   56,168   48,678   48,678   15.4 % 15.4 %
$ 747,064   $ 620,868   $ 706,549   $ 496,258   5.7 % 25.1 %
 
Operating income:
North America $ 73,612 $ 117,648 $ 74,233 $ 85,500 (0.8 )% 37.6 %
Europe 51,036 65,576 55,696 66,077 (8.4 )% (0.8

)%

Asia-Pacific 10,628 14,780 9,068 10,671 17.2 % 38.5 %
Corporate (79,074 ) (23,544 ) (35,397 ) (25,056 ) 123.4 % (6.0

)%

$ 56,202   $ 174,460   $ 103,600   $ 137,192   (45.8 )% 27.2 %
 
Year Ended May 31,
2016 2015

%

Change

GAAP Non-GAAP1 GAAP Non-GAAP1 GAAP Non-GAAP1
Revenues:
North America $ 2,052,623 $ 1,405,502 $ 1,968,890 $ 1,228,334 4.3 % 14.4 %
Europe 631,900 553,964 615,966 535,696 2.6 % 3.4 %
Asia-Pacific 213,627   213,627   188,862   188,862   13.1 % 13.1 %
$ 2,898,150   $ 2,173,093   $ 2,773,718   $ 1,952,892   4.5 % 11.3 %
 
Operating income:
North America $ 307,626 $ 392,486 $ 293,139 $ 337,980 4.9 % 16.1 %
Europe 244,837 275,698 240,014 266,768 2.0 % 3.3 %
Asia-Pacific 50,743 60,898 39,697 44,472 27.8 % 36.9 %
Corporate (178,262 ) (95,439 ) (116,253 ) (89,213 ) 53.3 % 7.0 %
$ 424,944   $ 633,643   $ 456,597   $ 560,007   (6.9 )% 13.1 %

1 See Schedules 8 and 9 for a reconciliation of adjusted net revenue and adjusted operating income by segment to the most comparable GAAP measures and Schedule 10 for a discussion of non-GAAP financial measures.

       

SCHEDULE 4

CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except share data)

 
May 31, 2016 May 31, 2015
ASSETS
Current assets:
Cash and cash equivalents $ 1,044,728 $ 650,739
Accounts receivable, net of allowances for doubtful accounts of $353 and $468, respectively 281,612 202,390
Claims receivable, net of allowances for doubtful accounts of $4,868 and $2,684, respectively 6,799 548
Settlement processing assets 1,336,326 2,394,822
Prepaid expenses and other current assets 181,848   41,416  
Total current assets 2,851,313 3,289,915
Goodwill 4,829,405 1,491,833
Other intangible assets, net 2,264,708 560,136
Property and equipment, net 493,678 374,143
Deferred income taxes 22,719 30,428
Other noncurrent assets 48,129   32,846  
Total assets $ 10,509,952   $ 5,779,301  
 
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit $ 378,436 $ 592,629
Current portion of long-term debt 135,542 61,784
Accounts payable and accrued liabilities 696,414 326,875
Settlement processing obligations 1,220,315   2,033,900  
Total current liabilities 2,430,707 3,015,188
Long-term debt 4,379,744 1,678,283
Deferred income taxes 744,862 202,855
Other noncurrent liabilities 77,235   19,422  
Total liabilities 7,632,548   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; 154,421,585 issued and outstanding at May 31, 2016 and 130,557,676 issued and outstanding at May 31, 2015
Paid-in capital 1,976,715 148,742
Retained earnings 1,015,811 795,226
Accumulated other comprehensive loss (246,050 ) (185,992 )
Total Global Payments shareholders' equity 2,746,476 757,976
Noncontrolling interests 130,928   105,577  
Total equity 2,877,404   863,553  
Total liabilities and equity $ 10,509,952   $ 5,779,301  
   

SCHEDULE 5

CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Year Ended May 31,
2016     2015
Cash flows from operating activities:
Net income $ 290,217 $ 309,115
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 74,192 64,918
Amortization of acquired intangibles 113,689 72,587
Share-based compensation expense 30,809 21,056
Provision for operating losses and bad debts 27,202 14,506
Deferred income taxes (18,162 ) 81,079
Other, net 9,257 3,073
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable (14,542 ) 1,248
Claims receivable (29,078 ) (9,317 )
Settlement processing assets and obligations, net 218,061 (78,794 )
Prepaid expenses and other assets (35,138 ) 14,743
Accounts payable and other liabilities (81,506 ) (69,513 )
Net cash provided by operating activities 585,001   424,701  
Cash flows from investing activities:
Business, intangible and other asset acquisitions, net of cash acquired (2,035,657 ) (359,187 )
Capital expenditures (91,591 ) (92,550 )
Other   10,816  
Net cash used in investing activities (2,127,248 ) (440,921 )
Cash flows from financing activities:
Net borrowings (repayments) on settlement lines of credit (206,009 ) 198,884
Proceeds from issuance of long-term debt 6,078,230 2,496,842
Principal payments of long-term debt (3,691,608 ) (2,148,907 )
Payment of debt issuance costs (63,382 )
Repurchase of common stock (135,954 ) (372,387 )
Proceeds from stock issued under share-based compensation plans 8,480 22,550
Common stock repurchased - share-based compensation plans (12,236 ) (15,690 )
Tax benefit from share-based compensation plans 7,889 5,176
Purchase of subsidiary shares from noncontrolling interest (7,550 )
Proceeds from sale of subsidiary shares to noncontrolling interest 16,374
Distributions to noncontrolling interests (23,308 ) (39,753 )
Dividends paid (5,439 ) (5,340 )
Net cash provided by financing activities 1,965,487   141,375  
Effect of exchange rate changes on cash (29,251 ) (56,288 )
Increase in cash and cash equivalents 393,989 68,867
Cash and cash equivalents, beginning of the period 650,739   581,872  
Cash and cash equivalents, end of the period $ 1,044,728   $ 650,739  
   

SCHEDULE 6

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

THREE MONTHS ENDED MAY 31, 2016 AND 2015

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
Three Months Ended May 31, 2016
GAAP    

Net Revenue

Adjustment1

   

Earnings

Adjustments2

   

Income Taxes on

Adjustements3

    Non-GAAP
Revenues $ 747,064 $ (126,196 ) $ $ $ 620,868
 
Operating income $ 56,202 $ $ 118,258 $ $ 174,460
 
Net income attributable to Global Payments $ 37,188 $ $ 117,163 $ (51,339 ) $ 103,012
 
Diluted earnings per share4 $ 0.26 $ 0.73
 
Three Months Ended May 31, 2015
GAAP

Net Revenue

Adjustment1

Earnings

Adjustments2

Income Taxes on

Adjustements3

Non-GAAP
Revenues $ 706,549 $ (210,291 ) $ $ $ 496,258
 
Operating income $ 103,600 $ $ 33,592 $ $ 137,192
 
Net income attributable to Global Payments $ 65,325 $ $ 28,953 $ (10,019 ) $ 84,259
 
Diluted earnings per share4 $ 0.49 $ 0.64
 

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

2 Earnings adjustments to operating income for the three months ended May 31, 2016 include $52.2 million and $66.1 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $51.9 million and other adjustments of $0.3 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $9.6 million, acquisition-related costs of $45.1 million, employee termination benefits and a reserve for litigation in Russia. Earnings adjustments to net income attributable to Global Payments include the items affecting operating income as well as noncontrolling interests, net of tax.

Earnings adjustments to operating income for the three months ended May 31, 2015 include $18.4 million and $15.2 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles. Adjustments to selling, general and administrative expenses include share-based compensation expense of $5.5 million and other adjustments of $9.7 million, including employee termination benefits, non-cash losses from the retirement of property and equipment and a transaction-related tax associated with our acquisition of Realex. Earnings adjustments to net income attributable to Global Payments include the items affecting operating income and the reversal of previously recorded interest expense associated with a previously uncertain tax position as well as noncontrolling interests, net of tax.

3 Income taxes on adjustments reflect the tax effect of earnings adjustments to operating income and, for the three months ended May 31, 2016, the removal of a tax benefit of $10.9 million associated with our decision to indefinitely reinvest earnings in Canada. 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 Cash diluted EPS is calculated by dividing cash net income attributable to Global Payments by the diluted weighted-average number of shares outstanding. The 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 7

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)

YEARS ENDED MAY 31, 2016 AND 2015

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
Year Ended May 31, 2016
GAAP    

Net Revenue

Adjustment1

   

Earnings

Adjustments2

   

Income Taxes on

Adjustments3

    Non-GAAP
Revenues $ 2,898,150 $ (725,057 ) $ $ $ 2,173,093
 
Operating income $ 424,944 $ $ 208,699 $ $ 633,643
 
Net income attributable to Global Payments $ 271,666 $ $ 204,734 $ (79,779 ) $ 396,621
 
Diluted earnings per share4 $ 2.04 $ 2.98
 
Year Ended May 31, 2015
GAAP

Net Revenue

Adjustment1

Earnings

Adjustments2

Income Taxes on

Adjustments3

Non-GAAP
Revenues $ 2,773,718 $ (822,702 ) $ 1,876 $ $ 1,952,892
 
Operating income $ 456,597 $ $ 103,410 $ $ 560,007
 
Net income attributable to Global Payments $ 278,040 $ $ 95,312 $ (33,268 ) $ 340,084
 
Diluted earnings per share4 $ 2.06 $ 2.52
 

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

2 Earnings adjustments to operating income for the year ended May 31, 2016 include reductions of $114.3 million and $94.4 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $115.9 million partially offset by recoveries associated with a U.K. vendor outage. Adjustments to selling, general and administrative expenses include share-based compensation expense of $30.1 million, acquisition-related costs of $51.3 million, employee termination benefits and a reserve for litigation in Russia. Earnings adjustments to net income attributable to Global Payments include the items affecting operating income as well as noncontrolling interests, net of tax.

Earnings adjustments to revenues for the year ended May 31, 2015 reflect payments to select U.K. customers related to a vendor outage. Earnings adjustments to operating income also include reductions of $72.6 million and $28.9 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles. Adjustments to selling, general and administrative expenses include share-based compensation expense of $20.3 million and other adjustments of $8.6 million, including employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with our acquisition of Realex, certain business tax assessments in the U.S. for prior periods and a gain on the sale of our Russia ATM business. Earnings adjustments to net income attributable to Global Payments include the items affecting operating income and the reversal of previously recorded interest expense associated with a previously uncertain tax position as well as noncontrolling interests, net of tax.

3 Income taxes on adjustments reflects the tax effect of earnings adjustments to operating income and, for the three months ended May 31, 2016, the removal of a tax benefit of $10.9 million associated with our decision to indefinitely reinvest earnings in Canada. 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 Cash diluted EPS is calculated by dividing cash net income attributable to Global Payments by the diluted weighted-average number of shares outstanding. The 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

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

THREE MONTHS ENDED MAY 31, 2016 AND 2015

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Three months ended May 31,
2016   2015
GAAP    

Net Revenue

Adjustment1

   

Earnings

Adjustments2

    Non-GAAP     GAAP    

Net Revenue

Adjustment1

   

Earnings

Adjustments2

    Non-GAAP
Revenues:
North America $ 532,372 $ (104,806 ) $ $ 427,566 $ 503,044 $ (188,930 ) $ $ 314,114
Europe 158,524 (21,390 ) 137,134 154,827 (21,361 ) 133,466
Asia-Pacific 56,168       56,168   48,678       48,678  
$ 747,064   $ (126,196 ) $   $ 620,868   $ 706,549   $ (210,291 ) $   $ 496,258  
 

Operating income:

North America $ 73,612 $ $ 44,036 $ 117,648 $ 74,233 $ $ 11,267 $ 85,500
Europe 51,036 14,540 65,576 55,696 10,381 66,077
Asia-Pacific 10,628 4,152 14,780 9,068 1,603 10,671
Corporate (79,074 )   55,530   (23,544 ) (35,397 )   10,341   (25,056 )
$ 56,202   $   $ 118,258   $ 174,460   $ 103,600   $   $ 33,592   $ 137,192  
 

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

2 Earnings adjustments to operating income for the three months ended May 31, 2016 include $52.2 million and $66.1 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $51.9 million and other adjustments of $0.3 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $9.6 million, acquisition-related costs of $45.1 million, employee termination benefits and a reserve for litigation in Russia.

Earnings adjustments to operating income for the three months ended May 31, 2015 include $18.4 million and $15.2 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles. Adjustments to selling, general and administrative expenses include share-based compensation expense of $5.5 million and other adjustments of $9.7 million, including employee termination benefits, non-cash losses from the retirement of property and equipment and a transaction-related tax associated with our acquisition of Realex.

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

   

 

SCHEDULE 9

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

YEARS ENDED MAY 31, 2016 AND 2015

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Year ended May 31,
2016     2015
GAAP    

Net Revenue

Adjustment1

   

Earnings

Adjustments2

    Non-GAAP GAAP    

Net Revenue

Adjustment1

   

Earnings

Adjustments2

    Non-GAAP
Revenues:
North America $ 2,052,623 $ (647,121 ) $ $ 1,405,502 $ 1,968,890 $ (740,556 ) $ $ 1,228,334
Europe 631,900 (77,936 ) 553,964 615,966 (82,146 ) 1,876 535,696
Asia-Pacific 213,627       213,627   188,862       188,862  
$ 2,898,150   $ (725,057 ) $   $ 2,173,093   $ 2,773,718   $ (822,702 ) $ 1,876   $ 1,952,892  
 
Operating income:
North America $ 307,626 $ $ 84,860 $ 392,486 $ 293,139 $ $ 44,841 $ 337,980
Europe 244,837 30,861 275,698 240,014 26,754 266,768
Asia-Pacific 50,743 10,155 60,898 39,697 4,775 44,472
Corporate (178,262 )   82,823   (95,439 ) (116,253 )   27,040   (89,213 )
$ 424,944   $   $ 208,699   $ 633,643   $ 456,597   $   $ 103,410   $ 560,007  
 

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

2 Earnings adjustments to operating income for the year ended May 31, 2016 include reductions of $114.3 million and $94.4 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $115.9 million partially offset by recoveries associated with a U.K. vendor outage. Adjustments to selling, general and administrative expenses include share-based compensation expense of $30.1 million, acquisition-related costs of $51.3 million, employee termination benefits and a reserve for litigation in Russia.

Earnings adjustments to revenues for the year ended May 31, 2015 reflect payments to select U.K. customers related to a vendor outage. Earnings adjustments to operating income also include reductions of $72.6 million and $28.9 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles. Adjustments to selling, general and administrative expenses include share-based compensation expense of $20.3 million and other adjustments of $8.6 million, including employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with our acquisition of Realex, certain business tax assessments in the U.S. for prior periods and a gain on the sale of our Russia ATM business.

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

           

SCHEDULE 10

OUTLOOK SUMMARY (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In billions, except per share data)

 

Fiscal 2016

Actual

Fiscal 2017

Outlook

% Change

Revenues:

GAAP Revenues $ 2.90 $3.70 to $3.80 27% to 32%
Adjustments1 (0.73 ) (0.50)  
Adjusted Net Revenue $ 2.17   $3.20 to $3.30 47% to 52%
 

Earnings Per Share:

GAAP Diluted EPS $ 2.04

$1.83 to $1.93

(10)% to (5)%
Amortization of acquired intangibles, share-based compensation expense and non-recurring items2 0.94   1.57    
Cash EPS $ 2.98   $3.40 to $3.50 14% to 17%
 

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 For fiscal 2016, see Schedule 7.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, operating income and earnings per share information determined in accordance with U.S. GAAP by providing operating income, net income and related earnings per share on a cash earnings basis and Adjusted Net Revenue 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 and income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as substitutes for, revenues, income and earnings per share determined in accordance with GAAP. The measures of Adjusted Net Revenue and income and earnings per share on a cash earnings basis 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.

Income and the related earnings per share on a cash earnings basis exclude amortization of acquired intangibles, share-based compensation and certain other items specific to each reporting period as more fully described in the accompanying reconciliations in Schedule 6, Schedule 7, Schedule 8 and Schedule 9. The tax rate used in determining the net income impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.

Global Payments Inc.
Investor contact:
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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