Global Payments Inc. (NYSE: GPN) today announced results for the first
quarter ended March 31, 2019.
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“2019 is off to a terrific start as we delivered double digit growth in
the first quarter, demonstrating the ongoing durability and resiliency
of our differentiated business model,” said Jeff Sloan, Chief Executive
Officer. “We continue to expand our competitive moat through a balanced
technology-enabled strategy across multiple vertical markets, virtual
and physical payment worlds and faster growth geographies.”
“The success of these investments is clearly evident in our largest
target addressable markets, such as restaurants and food service, in
which our payment and software capabilities span the full spectrum of
merchant sizes and provide our customers with end-to-end technology
solutions to better manage their businesses,” Sloan continued.
First Quarter 2019 Summary
-
GAAP revenues were $883.0 million, compared to $795.0 million in the
first quarter of 2018; diluted earnings per share were $0.71 compared
to $0.57 in the prior year; and operating margin was 22.6% compared to
19.6% in 2018. -
Adjusted net revenue plus network fees grew 12.9% to $1.043 billion,
compared to $924.3 million in 2018. -
Adjusted earnings per share grew 18.6% to $1.34, compared to $1.13 in
2018. - Adjusted operating margin expanded 110 basis points to 31.5%.
2019 Outlook
“We are pleased with the outstanding financial results we delivered for
the first quarter, despite the impact of adverse foreign currency
exchange rates,” stated Cameron Bready, Senior Executive Vice President
and Chief Financial Officer. “This strong execution and performance
provides us with confidence in our increased financial outlook for the
full year. The company now expects adjusted net revenue plus network
fees to range from $4.44 billion to $4.49 billion, reflecting growth of
12% to 13%, or 14% to 15% on a constant currency basis, over 2018
results and adjusted earnings per share to be in a range of $5.95 to
$6.12, reflecting growth of 15% to 18% over 2018. Annual adjusted
operating margin for 2019 is now expected to expand by up to 80 basis
points.”
Capital Allocation
Global Payments’ Board of Directors approved a dividend of $0.01 per
share payable June 28, 2019 to shareholders of record as of June 14,
2019.
Conference Call
Global Payments’ management will host a conference call today, May 2,
2019 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, operating income and
earnings per share information determined in accordance with GAAP by
providing those measures on an adjusted basis, and other measures, in
this earnings release to assist with evaluating performance. In addition
to GAAP measures, management uses these non-GAAP measures to focus on
the factors the company believes are pertinent to the daily management
of our operations.
Reconciliations of the non-GAAP measures to the most directly comparable
GAAP measure are included in the schedules to this release.
About Global Payments
Global Payments Inc. (NYSE: GPN) is a leading worldwide provider of
payment technology and software solutions delivering innovative services
to our customers globally. Our technologies, services and employee
expertise enable us to provide a broad range of solutions that allow our
customers to accept all payment types and operate their businesses more
efficiently across a variety of distribution channels in many markets
around the world.
Headquartered in Atlanta, Georgia with approximately 11,000 employees
worldwide, Global Payments is a member of the S&P 500 with customers and
partners in 32 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 concerning our business operations, economic performance and
financial condition, including in particular: our business strategy and
means to implement the strategy, measures of future results of
operations, such as revenues, expenses, operating margins, income tax
rates, and earnings per share and other operating metrics; our success
and timing in developing and introducing new services and expanding our
business; statements about the benefits of our acquisitions, including
future financial and operating results, the combined company’s plans,
objectives, expectations and intentions, and the successful integration
of our acquisitions, and other statements that are not historical facts.
You can sometimes identify forward-looking statements by our use of the
words “believes,” “anticipates,” “expects,” “intends,” “plan,”
“forecast,” “guidance” and similar expressions. For these statements, we
claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
Although we believe that the plans and expectations reflected in or
suggested by our forward-looking statements are reasonable, those
statements are based on a number of assumptions, estimates, projections
or plans that are inherently subject to significant risks, uncertainties
and contingencies, many of which are beyond our control, cannot be
foreseen and reflect future business decisions that are subject to
change. Accordingly, we cannot guarantee you that our plans and
expectations will be achieved. Our actual revenues, revenue growth rates
and margins, other results of operations and shareholder values could
differ materially from those anticipated in our forward-looking
statements as a result of many known and unknown factors, many of which
are beyond our ability to predict or control. Important factors that may
cause actual events or results to differ materially from those
anticipated by such forward-looking statements include our ability to
safeguard our data; increased competition from larger companies and
non-traditional competitors; our ability to update our services in a
timely manner; our ability to maintain Visa and Mastercard registration
and financial institution sponsorship; our reliance on financial
institutions to provide clearing services in connection with our
settlement activities; our potential failure to comply with card network
requirements; potential systems interruptions or failures; software
defects or undetected errors; increased attrition of merchants, referral
partners or independent sales organizations; our ability to increase our
share of existing markets and expand into new markets; development of
market trends and technologies; a decline in the use of cards for
payment generally; unanticipated increases in chargeback liability;
increases in credit card network fees; changes in laws, regulations or
network rules or interpretations thereof; foreign currency exchange and
interest rate risks; political, economic and regulatory changes in the
foreign countries in which we operate; future performance, integration
and conversion of acquired operations, including without limitation
difficulties and delays in integrating or fully realizing cost savings
and other benefits of our acquisitions at all or within the expected
time period; fully realizing anticipated annual interest expense savings
from refinancing our corporate debt facilities; our loss of key
personnel and other risk factors presented in Item 1- Risk Factors of
our Report on Form 10-K for the year ended December 31, 2018 and any
subsequent SEC filings, which we advise you to review. These cautionary
statements qualify all of our forward-looking statements, and you are
cautioned not to place undue reliance on these forward-looking
statements.
Our forward-looking statements speak only as of the date they are made
and should not be relied upon as representing our plans and expectations
as of any subsequent date. While we may elect to update or revise
forward-looking statements at some time in the future, we specifically
disclaim any obligation to publicly release the results of any revisions
to our forward-looking statements, except as required by law.
|
SCHEDULE 1 |
||||||||||||||||
| Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2019 | 2018 | % Change | ||||||||||||||
| Revenues | $ | 883,039 | $ | 794,977 | 11.1 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of service | 305,230 | 252,386 | 20.9 | % | ||||||||||||
| Selling, general and administrative | 378,317 | 386,421 | (2.1 | )% | ||||||||||||
| 683,547 | 638,807 | 7.0 | % | |||||||||||||
| Operating income | 199,492 | 156,170 | 27.7 | % | ||||||||||||
| Interest and other income | 2,934 | 11,694 | (74.9 | )% | ||||||||||||
| Interest and other expense | (59,081 | ) | (45,605 | ) | 29.5 | % | ||||||||||
| (56,147 | ) | (33,911 | ) | 65.6 | % | |||||||||||
| Income before income taxes | 143,345 | 122,259 | 17.2 | % | ||||||||||||
| Provision for income taxes | (24,140 | ) | (24,673 | ) | (2.2 | )% | ||||||||||
| Net income | 119,205 | 97,586 | 22.2 | % | ||||||||||||
|
Net income attributable to noncontrolling interests, net of income tax |
(6,864 | ) | (6,187 | ) | 10.9 | % | ||||||||||
| Net income attributable to Global Payments | $ | 112,341 | $ | 91,399 | 22.9 | % | ||||||||||
| Earnings per share attributable to Global Payments: | ||||||||||||||||
| Basic | $ | 0.71 | $ | 0.57 | 24.6 | % | ||||||||||
| Diluted | $ | 0.71 | $ | 0.57 | 24.6 | % | ||||||||||
| Weighted-average number of shares outstanding: | ||||||||||||||||
| Basic | 157,519 | 159,321 | ||||||||||||||
| Diluted | 158,018 | 160,035 | ||||||||||||||
|
SCHEDULE 2 |
||||||||||||||||
| Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2019 | 2018 | % Change | ||||||||||||||
| Adjusted net revenue plus network fees | $ | 1,043,102 | $ | 924,280 | 12.9 | % | ||||||||||
| Adjusted operating income | $ | 328,632 | $ | 281,340 | 16.8 | % | ||||||||||
| Adjusted net income attributable to Global Payments | $ | 212,098 | $ | 180,823 | 17.3 | % | ||||||||||
| Adjusted diluted earnings per share attributable to Global Payments | $ | 1.34 | $ | 1.13 | 18.6 | % | ||||||||||
__________________________________________
See Schedules 6 and 7
for a reconciliation of each non-GAAP financial measure to the most
comparable GAAP measure and Schedule 8 for a discussion of non-GAAP
financial measures.
|
SCHEDULE 3 |
||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2019 | March 31, 2018 | % Change | ||||||||||||||||||||||||||||||||||||||||||
| GAAP | Non-GAAP |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
GAAP | Non-GAAP |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
GAAP | Non-GAAP |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||
| North America | $ | 678,423 | $ | 627,818 | $ | 786,445 | $ | 594,029 | $ | 521,790 | $ | 676,506 | 14.2 | % | 20.3 | % | 16.3 | % | ||||||||||||||||||||||||||
| Europe | 142,869 | 142,869 | 174,019 | 143,277 | 143,277 | 170,866 | (0.3 | )% | (0.3 | )% | 1.8 | % | ||||||||||||||||||||||||||||||||
| Asia-Pacific | 61,747 | 62,376 | 82,638 | 57,671 | 57,671 | 76,908 | 7.1 | % | 8.2 | % | 7.5 | % | ||||||||||||||||||||||||||||||||
| $ | 883,039 | $ | 833,063 | $ | 1,043,102 | $ | 794,977 | $ | 722,738 | $ | 924,280 | 11.1 | % | 15.3 | % | 12.9 | % | |||||||||||||||||||||||||||
| Operating income: | ||||||||||||||||||||||||||||||||||||||||||||
| North America | $ | 156,146 | $ | 262,461 | $ | 125,404 | $ | 213,840 | 24.5 | % | 22.7 | % | ||||||||||||||||||||||||||||||||
| Europe | 71,961 | 79,967 | 70,548 | 77,679 | 2.0 | % | 2.9 | % | ||||||||||||||||||||||||||||||||||||
| Asia-Pacific | 27,274 | 30,118 | 23,774 | 25,863 | 14.7 | % | 16.5 | % | ||||||||||||||||||||||||||||||||||||
| Corporate | (55,889 | ) | (43,914 | ) | (63,556 | ) | (36,042 | ) | (12.1 | )% | 21.8 | % | ||||||||||||||||||||||||||||||||
| $ | 199,492 | $ | 328,632 | $ | 156,170 | $ | 281,340 | 27.7 | % | 16.8 | % | |||||||||||||||||||||||||||||||||
See Schedules 6 and 7 for a reconciliation of adjusted net revenue,
adjusted net revenue plus network fees and adjusted operating income by
segment to the most comparable GAAP measures and Schedule 8 for a
discussion of non-GAAP financial measures.
|
SCHEDULE 4 |
||||||||||||
| March 31, 2019 | December 31, 2018 | |||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 1,277,633 | $ | 1,210,878 | ||||||||
|
Accounts receivable, net of allowances for doubtful accounts of $4,247 and $3,164, respectively |
381,608 | 348,400 | ||||||||||
| Settlement processing assets | 2,775,371 | 1,600,222 | ||||||||||
| Prepaid expenses and other current assets | 235,139 | 216,708 | ||||||||||
| Total current assets | 4,669,751 | 3,376,208 | ||||||||||
| Goodwill | 6,345,998 | 6,341,355 | ||||||||||
| Other intangible assets, net | 2,405,333 | 2,488,618 | ||||||||||
| Property and equipment, net | 674,199 | 653,542 | ||||||||||
| Deferred income taxes | 7,288 | 8,128 | ||||||||||
| Other noncurrent assets | 647,052 | 362,923 | ||||||||||
| Total assets | $ | 14,749,621 | $ | 13,230,774 | ||||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Settlement lines of credit | $ | 641,906 | $ | 700,486 | ||||||||
| Current portion of long-term debt | 133,019 | 115,075 | ||||||||||
| Accounts payable and accrued liabilities | 1,161,421 | 1,176,703 | ||||||||||
| Settlement processing obligations | 2,579,876 | 1,276,356 | ||||||||||
| Total current liabilities | 4,516,222 | 3,268,620 | ||||||||||
| Long-term debt | 5,170,377 | 5,015,168 | ||||||||||
| Deferred income taxes | 569,169 | 585,025 | ||||||||||
| Other noncurrent liabilities | 351,392 | 175,618 | ||||||||||
| Total liabilities | 10,607,160 | 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; 200,000,000 shares authorized; 157,130,438 issued and outstanding at March 31, 2019 and 157,961,982 issued and outstanding at December 31, 2018 |
— | — | ||||||||||
| Paid-in capital | 2,151,623 | 2,235,167 | ||||||||||
| Retained earnings | 2,111,798 | 2,066,415 | ||||||||||
| Accumulated other comprehensive loss | (312,608 | ) | (310,175 | ) | ||||||||
| Total Global Payments shareholders’ equity | 3,950,813 | 3,991,407 | ||||||||||
| Noncontrolling interests | 191,648 | 194,936 | ||||||||||
| Total equity | 4,142,461 | 4,186,343 | ||||||||||
| Total liabilities and equity | $ | 14,749,621 | $ | 13,230,774 | ||||||||
|
SCHEDULE 5 |
||||||||||||
| Three Months Ended | ||||||||||||
| March 31, 2019 | March 31, 2018 | |||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 119,205 | $ | 97,586 | ||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization of property and equipment | 41,155 | 33,918 | ||||||||||
| Amortization of acquired intangibles | 107,475 | 87,825 | ||||||||||
| Amortization of capitalized contract costs | 15,847 | 10,213 | ||||||||||
| Share-based compensation expense | 11,418 | 14,898 | ||||||||||
| Provision for operating losses and bad debts | 12,709 | 9,237 | ||||||||||
| Deferred income taxes | (5,774 | ) | 910 | |||||||||
| Other, net | 9,043 | (1,937 | ) | |||||||||
|
Changes in operating assets and liabilities, net of the effects of business combinations: |
||||||||||||
| Accounts receivable | (36,493 | ) | 13,050 | |||||||||
| Settlement processing assets and obligations, net | 118,347 | 82,235 | ||||||||||
| Prepaid expenses and other assets | (76,740 | ) | (56,906 | ) | ||||||||
| Accounts payable and other liabilities | (86,463 | ) | (6,488 | ) | ||||||||
| Net cash provided by operating activities | 229,729 | 284,541 | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Acquisitions, net of cash acquired | (74,830 | ) | — | |||||||||
| Capital expenditures | (55,123 | ) | (43,775 | ) | ||||||||
| Other, net | 13,672 | (1,586 | ) | |||||||||
| Net cash used in investing activities | (116,281 | ) | (45,361 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Net repayments of settlement lines of credit | (55,350 | ) | (192,517 | ) | ||||||||
| Proceeds from long-term debt | 344,000 | 309,000 | ||||||||||
| Repayments of long-term debt | (173,060 | ) | (687,820 | ) | ||||||||
| Payment of debt issuance costs | — | (586 | ) | |||||||||
| Repurchase of common stock | (155,997 | ) | — | |||||||||
| Proceeds from stock issued under share-based compensation plans | 7,848 | 2,613 | ||||||||||
| Common stock repurchased – share-based compensation plans | (9,507 | ) | (1,058 | ) | ||||||||
| Distributions to noncontrolling interests | (5,572 | ) | — | |||||||||
| Dividends paid | (1,571 | ) | (1,593 | ) | ||||||||
| Net cash used in financing activities | (49,209 | ) | (571,961 | ) | ||||||||
| Effect of exchange rate changes on cash | 2,516 | 2,749 | ||||||||||
| Increase (decrease) in cash and cash equivalents | 66,755 | (330,032 | ) | |||||||||
| Cash and cash equivalents, beginning of the period | 1,210,878 | 1,335,855 | ||||||||||
| Cash and cash equivalents, end of the period | $ | 1,277,633 | $ | 1,005,823 | ||||||||
|
SCHEDULE 6 |
||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||||||||
| GAAP |
Net Revenue Adjustments(1) |
Earnings Adjustments(2) |
Income Taxes on Adjustments(3) |
Non-GAAP |
Network Fees |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
||||||||||||||||||||||||||
| Revenues | $ | 883,039 | $ | (49,976 | ) | $ | — | $ | — | $ | 833,063 | $ | 210,039 | $ | 1,043,102 | |||||||||||||||||
| Operating income | $ | 199,492 | $ | 4,407 | $ | 124,733 | $ | — | $ | 328,632 | ||||||||||||||||||||||
| Net income attributable to Global Payments | $ | 112,341 | $ | 4,407 | $ | 122,733 | $ | (27,383 | ) | $ | 212,098 | |||||||||||||||||||||
| Diluted earnings per share attributable to Global Payments | $ | 0.71 | $ | 1.34 | ||||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 158,018 | 158,018 | ||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||||||
| GAAP |
Net Revenue Adjustments(1) |
Earnings Adjustments(2) |
Income Taxes on Adjustments(3) |
Non-GAAP |
Network Fees |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
||||||||||||||||||||||||||
| Revenues | $ | 794,977 | $ | (72,240 | ) | $ | — | $ | — | $ | 722,737 | $ | 201,543 | $ | 924,280 | |||||||||||||||||
| Operating income | $ | 156,170 | $ | 3,593 | $ | 121,577 | $ | — | $ | 281,340 | ||||||||||||||||||||||
| Net income attributable to Global Payments | $ | 91,399 | $ | 3,593 | $ | 112,142 | $ | (26,311 | ) | $ | 180,823 | |||||||||||||||||||||
| Diluted earnings per share attributable to Global Payments | $ | 0.57 | $ | 1.13 | ||||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 160,035 | 160,035 | ||||||||||||||||||||||||||||||
|
________________________________________________ |
||
|
(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 March 31, 2019 and March 31, 2018, includes $4.4 million and $3.6 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 March 31, 2019, earnings adjustments to |
|
|
For the three months ended March 31, 2018, earnings adjustments to operating income include $88.9 million in COS and $32.7 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $88.4 million and other adjustments of $0.5 million. Adjustments to SG&A include share-based compensation expense of $14.9 million and acquisition and integration expenses of $17.8 million. Also, earnings adjustments to net income attributable to Global Payments include the removal of a $9.6 million gain recognized on the reorganization of Interac Association of which we were a member through one of our Canadian subsidiaries and the removal of $1.9 million in expense associated with the write-off of unamortized debt issuance cost related to the refinancing of a term loan. |
||
|
(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. |
|
| See “Non-GAAP Financial Measures” discussion on Schedule 8. | ||
|
SCHEDULE 7 |
|||||||||||||||||||||||||||||
| Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||
| GAAP |
Net Revenue Adjustments(1) |
Earnings Adjustments(2) |
Non-GAAP | Network Fees |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| North America | $ | 678,423 | $ | (50,605 | ) | $ | — | $ | 627,818 | $ | 158,627 | $ | 786,445 | ||||||||||||||||
| Europe | 142,869 | — | — | 142,869 | 31,150 | 174,019 | |||||||||||||||||||||||
| Asia-Pacific | 61,747 | 629 | — | 62,376 | 20,262 | 82,638 | |||||||||||||||||||||||
| $ | 883,039 | $ | (49,976 | ) | $ | — | $ | 833,063 | $ | 210,039 | $ | 1,043,102 | |||||||||||||||||
| Operating income: | |||||||||||||||||||||||||||||
| North America | $ | 156,146 | $ | 3,778 | $ | 102,537 | $ | 262,461 | |||||||||||||||||||||
| Europe | 71,961 | — | 8,006 | 79,967 | |||||||||||||||||||||||||
| Asia-Pacific | 27,274 | 629 | 2,215 | 30,118 | |||||||||||||||||||||||||
| Corporate | (55,889 | ) | — | 11,975 | (43,914 | ) | |||||||||||||||||||||||
| $ | 199,492 | $ | 4,407 | $ | 124,733 | $ | 328,632 | ||||||||||||||||||||||
| Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||||
| GAAP |
Net Revenue Adjustments(1) |
Earnings Adjustments(2) |
Non-GAAP | Network Fees |
Non-GAAP Adjusted Net Revenue Plus Network Fees |
||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| North America | $ | 594,029 | $ | (72,239 | ) | $ | — | $ | 521,790 | $ | 154,716 | $ | 676,506 | ||||||||||||||||
| Europe | 143,277 | — | — | 143,277 | 27,589 | 170,866 | |||||||||||||||||||||||
| Asia-Pacific | 57,671 | — | — | 57,671 | 19,237 | 76,908 | |||||||||||||||||||||||
| $ | 794,977 | $ | (72,239 | ) | $ | — | $ | 722,738 | $ | 201,542 | $ | 924,280 | |||||||||||||||||
| Operating income: | |||||||||||||||||||||||||||||
| North America | $ | 125,404 | $ | 3,593 | $ | 84,843 | $ | 213,840 | |||||||||||||||||||||
| Europe | 70,548 | — | 7,131 | 77,679 | |||||||||||||||||||||||||
| Asia-Pacific | 23,774 | — | 2,089 | 25,863 | |||||||||||||||||||||||||
| Corporate | (63,556 | ) | — | 27,514 | (36,042 | ) | |||||||||||||||||||||||
| $ | 156,170 | $ | 3,593 | $ | 121,577 | $ | 281,340 | ||||||||||||||||||||||
|
________________________________________________ |
||
|
(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 March 31, 2019 and March 31, 2018, includes $4.4 million and $3.6 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 March 31, 2019, earnings adjustments to operating income include $108.8 million in COS and $15.9 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $108.0 million and acquisition and integration expenses of $0.8 million. Adjustments to SG&A include share-based compensation expense of $11.4 million and acquisition and integration expenses of $4.5 million. |
|
|
For the three months ended March 31, 2018, earnings adjustments to operating income include $88.9 million in COS and $32.7 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $88.4 million and other adjustments of $0.5 million. Adjustments to SG&A include share-based compensation expense of $14.9 million and acquisition and integration expenses of $17.8 million. |
||
| See “Non-GAAP Financial Measures” discussion on Schedule 8. | ||
|
SCHEDULE 8 |
||||||||||||||
| 2018 Actual | 2019 Outlook | % Change | ||||||||||||
| Revenues: | ||||||||||||||
| GAAP revenues | $ | 3.37 | $3.73 to $3.78 | 11% to 12% | ||||||||||
| Adjustments(1) | (0.27 | ) | (0.20 | ) | ||||||||||
| Adjusted net revenue | $ | 3.10 | $3.53 to $3.58 | 14% to 16% | ||||||||||
| Network fees | 0.87 | 0.91 | ||||||||||||
| Adjusted net revenue plus network fees | $ | 3.97 | $4.44 to $4.49 | 12% to 13% | ||||||||||
| Earnings Per Share (EPS): | ||||||||||||||
| GAAP diluted EPS | $ | 2.84 | $3.49 to $3.66 | 23% to 29% | ||||||||||
| Adjustments(2) | 2.35 | 2.46 | ||||||||||||
| Adjusted diluted EPS | $ | 5.19 | $5.95 to $6.12 | 15% to 18% | ||||||||||
|
________________________________________________ |
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| (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 2018 GAAP diluted EPS include software-related contract liability adjustments described above of $0.06, acquisition related amortization expense of $1.85, share-based compensation expense of $0.28, acquisition and integration expense of $0.28, employee termination benefits of $0.01, asset abandonment charges associated with technology integrations of $0.04 and the removal of an income tax benefit of $0.17 associated with tax reform. Also, adjustments to 2018 GAAP diluted EPS include the effect of these adjustments on noncontrolling interests and income taxes, as applicable. |
|
NON-GAAP FINANCIAL MEASURES
Global Payments supplements revenues, income and EPS information
determined in accordance with U.S. GAAP by providing these measures, and
other measures, with certain adjustments (such measures being non-GAAP
financial measures) in this document to assist with evaluating our
performance. In addition to GAAP measures, management uses these
non-GAAP financial measures to focus on the factors the company believes
are pertinent to the daily management of our operations. Management
believes adjusted net revenue and adjusted net revenue plus network fees
more closely reflect the economic benefits to the company’s core
business and, in the case of adjusted net revenue, allows for better
comparisons with industry peers. Management uses these non-GAAP
financial measures, together with other metrics, to set goals for and
measure the performance of the business and to determine incentive
compensation. Adjusted net revenue, adjusted net revenue plus network
fees, adjusted operating income, adjusted operating margin, adjusted net
income and adjusted EPS should be considered in addition to, and not as
substitutes for, revenues, operating income, net income and EPS
determined in accordance with GAAP. The non-GAAP financial measures
reflect management’s judgment of particular items, and may not be
comparable to similarly titled measures reported by other companies.
Adjusted net revenue excludes gross-up related payments associated with
certain lines of business to reflect economic benefits to the company.
On a GAAP basis, these payments are presented gross in both revenues and
operating expenses. Adjusted operating income, adjusted net income and
adjusted EPS exclude acquisition-related amortization expense,
share-based compensation and certain other items specific to each
reporting period as more fully described in the accompanying
reconciliations in Schedules 6 and 7. Adjusted operating margin is
derived by dividing adjusted operating income by adjusted net revenue
plus network fees. The tax rate used in determining the net income
impact of earnings adjustments is either the jurisdictional statutory
rate in effect at the time of the adjustment or the jurisdictional
expected annual effective tax rate for the period, depending on the
nature and timing of the adjustment.
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