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Global Payments Reports First Quarter Earnings and
Increases Fiscal 2017 Outlook

ATLANTA, October 5, 2016 -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal first quarter ended August 31, 2016.
“Our fiscal 2017 is off to a terrific start, with organic growth accelerating sequentially across our key markets in the first quarter,” said Jeff Sloan, Chief Executive Officer.  “Heartland continued its strong growth momentum in the United States.  Our businesses in Europe performed exceptionally well, and our Asia business produced its highest rate of organic revenue growth in several quarters.”  Sloan concluded, “We also could not be more pleased with our Heartland integration efforts, which continue to track ahead of our expectations.”

First Quarter Fiscal 2017 Summary
•
GAAP revenues were $939.5 million, compared to $748.8 million in the first quarter of fiscal 2016; diluted earnings per share were $0.55 compared to $0.66 in the prior year; and operating margin was 12.9% compared to 18.4% in the first quarter of fiscal 2016.
•
Adjusted net revenue grew 52% to $817.3 million, compared to $537.0 million in the first quarter of fiscal 2016. On a constant currency basis, adjusted net revenue grew 55%.
•
Adjusted earnings per share grew 9% to $0.86, compared to $0.79 in the first quarter of fiscal 2016. On a constant currency basis, adjusted earnings per share grew 15%.
•
Adjusted operating margin was 29.5%, which includes the impact of Heartland. On a constant currency basis, adjusted operating margin was 29.9%.

Fiscal 2017 Outlook
“As a result of our strong first quarter performance and progress with Heartland integration efforts, we are increasing our outlook for fiscal 2017 adjusted earnings per share to a range of $3.45 to $3.55, reflecting growth of 16% to 19% over fiscal 2016,” stated Cameron Bready, Executive Vice President and Chief Financial Officer. “We also now expect adjusted operating margin for fiscal 2017 to expand by as

1

much as 50 basis points. We continue to expect adjusted net revenue to range from $3.2 billion to $3.3 billion, or growth of 47% to 52% over fiscal 2016.”

Capital Allocation
Global Payments’ Board of Directors approved a quarterly dividend of $0.01 per share payable November 25, 2016 to shareholders of record as of November 11, 2016.

Conference Call
Global Payments’ management will host a conference call today, October 5, 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 those measures on an adjusted basis 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”

2

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.

Investor contact:
investor.relations@globalpay.com
 
Media contact:
media.relations@globalpay.com
 
Isabel Janci
 
 
Amy Corn
 
770-829-8991
 
 
770-829-8755


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SCHEDULE 1
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
Three Months Ended
 
August 31, 2016
 
August 31, 2015
 
% Change
 
 
 
 
 
 
Revenues
$
939,492

 
$
748,796

 
25.5
 %
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Cost of service
462,626

 
272,666

 
69.7
 %
Selling, general and administrative
355,760

 
338,358

 
5.1
 %
 
818,386

 
611,024

 
33.9
 %
 
 
 
 
 

Operating income
121,106

 
137,772

 
(12.1
)%
 
 
 
 
 
 
Interest and other income
42,473

 
1,142

 
NM

Interest and other expense
(43,077
)
 
(13,243
)
 
225.3
 %
 
(604
)
 
(12,101
)
 
(95.0
)%
 
 
 
 
 

Income before income taxes
120,502

 
125,671

 
(4.1
)%
Provision for income taxes
(28,044
)
 
(32,623
)
 
(14.0
)%
Net income
92,458

 
93,048

 
(0.6
)%
Less: Net income attributable to noncontrolling interests, net of income tax
(7,365
)
 
(6,402
)
 
15.0
 %
Net income attributable to Global Payments
$
85,093

 
$
86,646

 
(1.8
)%
 
 
 
 
 
 
Earnings per share attributable to Global Payments1:
 
 
 
 
 
    Basic
$
0.55

 
$
0.66

 
(16.7
)%
    Diluted
$
0.55

 
$
0.66

 
(16.7
)%
 
 
 
 
 
 
Weighted-average shares outstanding1:
 
 
 
 
 
    Basic
153,901

 
130,328

 
 
    Diluted
154,875

 
131,146

 
 

1 Earnings per share data and weighted-average 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
 
August 31, 2016
 
August 31, 2015
 
% Change
 
 
 
 
 
 
Adjusted net revenue
$
817,255

 
$
536,953

 
52.2
%
 
 
 
 
 
 
Adjusted operating income
$
240,718

 
$
163,566

 
47.2
%
 
 
 
 
 
 
Adjusted net income
$
133,682

 
$
103,025

 
29.8
%
 
 
 
 
 
 
Adjusted EPS1:
$
0.86

 
$
0.79

 
8.9
%

1 Earnings per share data and weighted-average 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.

2 See Schedule 6 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
SEGMENT INFORMATION (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three Months Ended
 
 
 
 
 
 
August 31, 2016
 
August 31, 2015
 
 % Change
 
 
GAAP
 
Non-GAAP1
 
 GAAP
 
Non-GAAP1
 
 GAAP
 
Non-GAAP1
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
711,765

 
$
608,671

 
$
530,857

 
$
340,431

 
34.1
 %
 
78.8
 %
Europe
 
169,565

 
150,422

 
168,357

 
146,940

 
0.7
 %
 
2.4
 %
Asia-Pacific
 
58,162

 
58,162

 
49,582

 
49,582

 
17.3
 %
 
17.3
 %
 
 
$
939,492

 
$
817,255

 
$
748,796

 
$
536,953

 
25.5
 %
 
52.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
105,700

 
$
178,361

 
$
83,513

 
$
96,966

 
26.6
 %
 
83.9
 %
Europe
 
65,539

 
72,113

 
72,733

 
77,031

 
(9.9
)%
 
(6.4
)%
Asia-Pacific
 
14,022

 
16,490

 
12,233

 
13,810

 
14.6
 %
 
19.4
 %
Corporate
 
(64,155
)
 
(26,246
)
 
(30,707
)
 
(24,241
)
 
108.9
 %
 
8.3
 %
 
 
$
121,106

 
$
240,718

 
$
137,772

 
$
163,566

 
(12.1
)%
 
47.2
 %


1 See Schedule 7 for a reconciliation of adjusted net revenue 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
UNAUDITED CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
 
August 31, 2016
 
May 31, 2016
 
 
 
 
ASSETS
 
  
 
Current assets:
 
  
 
Cash and cash equivalents
$
977,776

 
$
1,044,728

Accounts receivable, net of allowances for doubtful accounts of $326 and $353, respectively
286,645

 
281,612

Claims receivable, net of allowances for doubtful accounts of $5,106 and $4,868, respectively
7,974

 
6,799

Settlement processing assets
1,105,470

 
1,336,326

Prepaid expenses and other current assets
206,964

 
181,848

Total current assets
2,584,829

 
2,851,313

Goodwill
4,849,015

 
4,829,405

Other intangible assets, net
2,211,954

 
2,264,708

Property and equipment, net
512,079

 
493,678

Deferred income taxes
20,921

 
22,719

Other
58,982

 
48,129

Total assets
$
10,237,780

 
$
10,509,952

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement lines of credit
$
332,078

 
$
378,436

Current portion of long-term debt
182,012

 
135,542

Accounts payable and accrued liabilities
702,277

 
696,414

Settlement processing obligations
1,015,805

 
1,220,315

Total current liabilities
2,232,172

 
2,430,707

Long-term debt
4,289,666

 
4,379,744

Deferred income taxes
724,023

 
744,862

Other noncurrent liabilities
86,707

 
77,235

Total liabilities
7,332,568

 
7,632,548

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; 153,684,060 issued and outstanding at August 31, 2016 and 154,421,585 issued and outstanding at May 31, 2016
—

 
—

Paid-in capital
1,913,164

 
1,976,715

Retained earnings
1,099,026

 
1,015,811

Accumulated other comprehensive loss
(265,511
)
 
(246,050
)
Total Global Payments shareholders’ equity
2,746,679

 
2,746,476

Noncontrolling interests
158,533

 
130,928

Total equity
2,905,212

 
2,877,404

Total liabilities and equity
$
10,237,780

 
$
10,509,952





SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Three Months Ended
 
August 31, 2016
 
August 31, 2015
Cash flows from operating activities:
 
 
 
Net income
$
92,458

 
$
93,048

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

 
 
Depreciation and amortization of property and equipment
22,657

 
17,909

Amortization of acquired intangibles
80,529

 
20,848

Share-based compensation expense
7,619

 
6,467

Provision for operating losses and bad debts
9,626

 
4,263

Deferred income taxes
(20,861
)
 
3,584

Gain on sale of investments
(41,150
)
 
—

Other, net
8,855

 
1,333

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

 

Accounts receivable
(7,726
)
 
(7,512
)
Claims receivable
(7,097
)
 
(12,261
)
Settlement processing assets and obligations, net
30,409

 
402,676

Prepaid expenses and other assets
(50,498
)
 
(18,114
)
Accounts payable and other liabilities
30,846

 
1,151

Net cash provided by operating activities
155,667

 
513,392

Cash flows from investing activities:
 
 
 
Business acquisitions, net of cash acquired
(34,563
)
 
(241,530
)
Capital expenditures
(41,381
)
 
(16,858
)
Proceeds from sale of investments
37,717

 
—

Net cash used in investing activities
(38,227
)
 
(258,388
)
Cash flows from financing activities:
 
 
 
Net payments on settlement lines of credit
(47,336
)
 
(236,041
)
Proceeds from issuance of long-term debt
215,000

 
2,821,425

Principal payments of long-term debt
(261,219
)
 
(2,626,925
)
Payment of debt issuance costs
—

 
(4,934
)
Repurchase of common stock
(67,633
)
 
(34,296
)
Proceeds from stock issued under share-based compensation plans
3,037

 
2,513

Common stock repurchased - share-based compensation plans
(22,204
)
 
(8,154
)
Tax benefit from share-based compensation plans
12,303

 
5,760

Distributions to noncontrolling interests
(5,475
)
 
(8,158
)
Dividends paid
(1,539
)
 
(1,305
)
Net cash used in financing activities
(175,066
)
 
(90,115
)
Effect of exchange rate changes on cash
(9,326
)
 
(12,319
)
(Decrease) increase in cash and cash equivalents
(66,952
)
 
152,570

Cash and cash equivalents, beginning of the period
1,044,728

 
650,739

Cash and cash equivalents, end of the period
$
977,776

 
$
803,309








SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
THREE MONTHS ENDED AUGUST 31, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
 
Three Months Ended August 31, 2016
 
 
GAAP
Net Revenue Adjustments1
Earnings Adjustments2
Income Taxes on Adjustments3
Non-GAAP
Revenues
 
$
939,492

$
(122,237
)
$
—

$
—

$
817,255

 
 
 
 
 
 
 
Operating income
 
$
121,106

$
—

$
119,612

$
—

$
240,718

 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
85,093

$
—

$
76,992

$
(28,403
)
$
133,682

 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments4
 
$
0.55

 
 
 
$
0.86

 
 
 
 
 
 
 
 
 
Three Months Ended August 31, 2015
 
 
GAAP
Net Revenue Adjustments1
Earnings Adjustments2
Income Taxes on Adjustments3
Non-GAAP
Revenues
 
$
748,796

$
(211,843
)
$
—

$
—

$
536,953

 
 
 
 
 
 
 
Operating income
 
$
137,772

$
—

$
25,794

$
—

$
163,566

 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
86,646

$
—

$
24,916

$
(8,537
)
$
103,025

 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments4
 
$
0.66

 
 
 
$
0.79


1Represents 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 August 31, 2016 include $81.7 million and $37.9 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $81.1 million and other adjustments of $0.6 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $7.4 million and merger-related costs of $30.5 million. Net income attributable to Global Payments was also adjusted to remove a gain on the sale of membership interests in Visa Europe of $41.2 million.

Earnings adjustments to operating income for the three months ended August 31, 2015 include $19.3 million and $6.5 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles of $20.8 million and other adjustments of $1.5 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $6.5 million.

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

4 Adjusted EPS is calculated by dividing adjusted 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 8.




SCHEDULE 7
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
THREE MONTHS ENDED AUGUST 31, 2016 AND 2015
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
 
Three Months Ended August 31, 2016
 
Three Months Ended August 31, 2015
 
 
GAAP
 
Net Revenue Adjustments1
 
Earnings Adjustments2
 
Non-GAAP
 
GAAP
 
Net Revenue Adjustments1
 
Earnings Adjustments2
 
Non-GAAP
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
711,765

 
$
(103,094
)
 
$
—

 
$
608,671

 
$
530,857

 
$
(190,426
)
 
$
—

 
$
340,431

Europe
 
169,565

 
(19,143
)
 
—

 
150,422

 
168,357

 
(21,417
)
 
—

 
146,940

Asia-Pacific
 
58,162

 
—

 
—

 
58,162

 
49,582

 
—

 
—

 
49,582

 
 
$
939,492

 
$
(122,237
)
 
$
—

 
$
817,255

 
$
748,796

 
$
(211,843
)
 
$
—

 
$
536,953

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
105,700

 
$
—

 
$
72,661

 
$
178,361

 
$
83,513

 
$
—

 
$
13,453

 
$
96,966

Europe
 
65,539

 
—

 
6,574

 
72,113

 
72,733

 
—

 
4,298

 
77,031

Asia-Pacific
 
14,022

 
—

 
2,468

 
16,490

 
12,233

 
—

 
1,577

 
13,810

Corporate
 
(64,155
)
 
—

 
37,909

 
(26,246
)
 
(30,707
)
 
—

 
6,466

 
(24,241
)
 
 
$
121,106

 
$
—

 
$
119,612

 
$
240,718

 
$
137,772

 
$
—

 
$
25,794

 
$
163,566


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 August 31, 2016 include $81.7 million and $37.9 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service include amortization of acquired intangibles of $81.1 million and other adjustments of $0.6 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $7.4 million and merger-related costs of $30.5 million.  

Earnings adjustments to operating income for the three months ended August 31, 2015 include $19.3 million and $6.5 million in cost of service and selling, general and administrative expenses, respectively. Adjustments to cost of service represent amortization of acquired intangibles of $20.8 million and other adjustments of $1.5 million. Adjustments to selling, general and administrative expenses include share-based compensation expense of $6.5 million.  

See "Non-GAAP Financial Measures" discussion on Schedule 8.  




SCHEDULE 8
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

 
 28% to 31%
Adjustments1
 
(0.73
)
 
(0.50
)
 
 
Adjusted net revenue
 
$
2.17

 
 $3.20 to $3.30

 
 47% to 52%
 
 
 
 
 
 
 
Earnings Per Share ("EPS"):
 
 
 
 
 
 
GAAP diluted EPS
 
$
2.04

 
 $1.88 to $1.98

 
 (8)% to (3)%
Acquisition-related amortization expense, share-based compensation expense and non-recurring items2
 
0.94

 
1.57

 
 
Adjusted EPS
 
$
2.98

 
 $3.45 to $3.55

 
 16% to 19%

1Represents 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 Fiscal 2016 reflects adjustments for acquisition related amortization expense of $0.58, share-based compensation expense of $0.14 and non-recurring items of $0.22, including merger-related costs, employee termination benefits and a reserve for litigation in Russia, partially offset by recoveries associated with a U.K. vendor outage. Earnings adjustments to GAAP diluted EPS include the items affecting operating income as well as noncontrolling interests, net of tax.

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income and earnings per share ("EPS") information determined in accordance with U.S. GAAP by providing these 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 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 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.

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 Schedule 6 and Schedule 7. 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.