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

 

ATLANTA--()--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.

 

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.

 

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 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 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.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

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.

 

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

 

 

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

 

 

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.

 

 

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.

 

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.

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.

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.

Contacts

Investor contact:
investor.relations@globalpay.com
Winnie Smith
770-829-8478

Media contact:
media.relations@globalpay.com
Emily Edmonds
770-829-8755

Contacts

Investor contact:
investor.relations@globalpay.com
Winnie Smith
770-829-8478

Media contact:
media.relations@globalpay.com
Emily Edmonds
770-829-8755