| | | | | | | | |
| Global Payments Reports Third Quarter 2020 Results | | |
October 29, 2020
Delivers EPS Growth and Strong Margin Performance
Increases Synergy Expectations
Re-Commences Capital Allocation Strategy
ATLANTA -- Global Payments Inc. (NYSE: GPN) today announced results for the third quarter ended September 30, 2020.
“We are pleased with our results for the third quarter, which demonstrate substantial ongoing improvement across our markets and significant margin expansion for each of our segments," said Jeff Sloan, Chief Executive Officer. "These results validate the actions we took at the start of the pandemic to position our businesses and return to growth. We are grateful to our team members for their extraordinary commitments to our customers, to each other and to the communities in which they live and work during this difficult time.
“We have made meaningful progress strategically this year, with an emphasis on driving further digital growth. We are delighted with our collaboration with Amazon Web Services, our preferred cloud provider of issuer technologies, a relationship that is already generating significant momentum since our August announcement; the acquisition of an incremental stake in our joint venture with CaixaBank in October, bringing our ownership to 80%; and the ongoing mix shift of our revenues toward technology enablement, where we recently crossed the 60% target that we set in March 2018, ahead of our plan.”
Sloan concluded, “We accomplished these goals during the pandemic while also extending relationships with some of the largest, most sophisticated and complex worldwide financial institutions including HSBC Group in Europe and CIBC in Canada for merchant services, as well as by taking share in card issuing services through partnerships with market leaders in technology and financial services. As a result of our strong performance through the third quarter, we are returning to our traditional capital priorities, including share repurchases.”
Third Quarter 2020 Summary
•GAAP revenues were $1.918 billion, compared to $1.106 billion in the third quarter of 2019; diluted earnings per share were $0.74 compared to $0.54 in the prior year; and operating margin was 15.1%.
•Adjusted net revenues declined 4% to $1.746 billion, compared to $1.820 billion in the third quarter of 2019 on a combined basis.
•Adjusted earnings per share increased 1% to $1.71, compared to $1.70 in the third quarter of 2019.
•Adjusted operating margin of 41.1% expanded 250 basis points on a combined basis.
Financial Highlights
“We delivered solid financial performance for the third quarter, enabled by the continued recovery across our markets, our attractive business mix and ongoing outstanding execution,” said Paul Todd, Senior Executive Vice President and Chief Financial Officer. “Importantly, the immediate and significant cost actions we took in response to the pandemic drove strong adjusted operating margin expansion this quarter, and we are pleased to have delivered adjusted earnings per share growth from the prior year period.
“Based on progress on our integration activities, we are raising our expectations for annual run rate expense synergies from the TSYS merger to $375 million, an increase from our prior estimate of $350 million. We also remain on track to deliver at least $125 million in annual run rate revenue synergies and $400 million in additional annual run rate expense savings related to the pandemic, which is incremental to the TSYS merger cost synergies.”
Todd concluded, “The extraordinary health of our business, including our strong cash flows and investment grade balance sheet, has served us well during this period. We are pleased to announce that our Board of Directors has increased our share repurchase authorization to $1.25 billion, and we look forward to re-commencing the return of capital to our shareholders and managing our pipeline.”
Capital Allocation
Global Payments’ Board of Directors approved a dividend of $0.195 per share payable December 31, 2020 to shareholders of record as of December 17, 2020.
Conference Call
Global Payments’ management will host a live audio webcast today, October 29, 2020, at 8:00 a.m. ET to discuss financial results and business highlights. All interested parties may access the audio webcast via the investor relations page of the company’s website at investors.globalpaymentsinc.com. A replay of the audio webcast will be archived on the company's website following the live event.
Non-GAAP Financial Measures
Global Payments supplements revenues, income, operating income, operating margin and earnings per share determined in accordance with GAAP by providing these measures with certain adjustments (such measures being non-GAAP financial measures) 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 nearly 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 (@globalpayinc), LinkedIn and Facebook.
Forward-Looking Statements
Investors are cautioned that some of the statements we use in this report contain forward-looking statements and are made pursuant to the "safe-harbor" provisions 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 we operate, and beliefs of and assumptions made by our management, involve risks, uncertainties and assumptions that could significantly affect the financial condition, results of operations, business plans and the future performance of Global Payments. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Examples of forward-looking statements include, but are not limited to, statements we make regarding the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues, financial operating results and liquidity, the effects of actions taken by us in response to the pandemic, the anticipated benefits of the merger with TSYS (the “Merger’), including our future financial and operating results, the combined company’s plans, objectives, expectations and intentions, our expected financial and operating results, projected future growth of business, or completion of anticipated benefits of strategic initiatives, and other statements that are not historical facts. 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 effects and duration of global economic, political, market, health and social events or other conditions, including the effects and duration of the COVID-19 pandemic; regulatory measures or voluntary actions, including social distancing, shelter-in-place orders, operating restrictions on nonessential businesses and similar measures imposed or undertaken in an effort to combat the spread of the COVID-19 pandemic; management’s assumptions and projections used in their estimates of the timing and severity of the effects of the COVID-19 pandemic on our future revenues, results of operations; our ability to meet our liquidity needs in light of the effects of the COVID-19 pandemic; 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 integration that may harm our business, including current plans and operations; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability to maintain Visa and Mastercard registration and financial institution sponsorship; the ability 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 we operate; increased competition in the markets in which we operate 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 effects 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 our control, such as acts of terrorism, and other factors included in the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and in other documents that we file 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 we undertake no obligation to update forward-looking statements, except as required by law.
| | | | | | | | | | | | | | |
| Investor contact: | investor.relations@globalpay.com | | Media contact: | media.relations@globalpay.com |
| Winnie Smith | | | Emily Edmonds |
| 770-829-8478 | | | 770-829-8755 |
SCHEDULE 1
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2020 | | 2019 | | % Change | | 2020 | | 2019 | | % Change |
| | | | | | | | | | | |
| Revenues | $ | 1,917,815 | | | $ | 1,105,941 | | | 73.4 | % | | $ | 5,493,365 | | | $ | 2,924,131 | | | 87.9 | % |
| | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | |
| Cost of service | 900,921 | | | 427,720 | | | 110.6 | % | | 2,728,532 | | | 1,035,225 | | | 163.6 | % |
| Selling, general and administrative | 726,475 | | | 504,184 | | | 44.1 | % | | 2,122,862 | | | 1,293,651 | | | 64.1 | % |
| 1,627,396 | | | 931,904 | | | 74.6 | % | | 4,851,394 | | | 2,328,876 | | | 108.3 | % |
| | | | | | | | | | | |
| Operating income | 290,419 | | | 174,037 | | | 66.9 | % | | 641,971 | | | 595,255 | | | 7.8 | % |
| | | | | | | | | | | |
| Interest and other income | 29,983 | | | 11,232 | | | 166.9 | % | | 35,277 | | | 20,342 | | | 73.4 | % |
| Interest and other expense | (82,976) | | | (96,161) | | | (13.7) | % | | (258,475) | | | (220,858) | | | 17.0 | % |
| (52,993) | | | (84,929) | | | (37.6) | % | | (223,198) | | | (200,516) | | | 11.3 | % |
| | | | | | | | | | | |
| Income before income taxes and equity in income of equity method investments | 237,426 | | | 89,108 | | | 166.4 | % | | 418,773 | | | 394,739 | | | 6.1 | % |
| Income tax expense | (42,834) | | | 16,623 | | | (357.7) | % | | (59,173) | | | (39,765) | | | 48.8 | % |
| Income before equity in income of equity method investments | 194,592 | | | 105,731 | | | 84.0 | % | | 359,600 | | | 354,974 | | | 1.3 | % |
| Equity in income of equity method investments, net of tax | 35,638 | | | — | | | nm | | 60,682 | | | — | | | nm |
| Net income | 230,230 | | | 105,731 | | | 117.8 | % | | 420,282 | | | 354,974 | | | 18.4 | % |
| Net income attributable to noncontrolling interests, net of income tax | (9,259) | | | (10,687) | | | (13.4) | % | | (18,406) | | | (27,132) | | | (32.2) | % |
| Net income attributable to Global Payments | $ | 220,971 | | | $ | 95,044 | | | 132.5 | % | | $ | 401,876 | | | $ | 327,842 | | | 22.6 | % |
| | | | | | | | | | | |
| Earnings per share attributable to Global Payments: | | | | | | | | | | | |
| Basic | $ | 0.74 | | | $ | 0.54 | | | 37.0 | % | | $ | 1.34 | | | $ | 2.00 | | | (33.0) | % |
| Diluted | $ | 0.74 | | | $ | 0.54 | | | 37.0 | % | | $ | 1.34 | | | $ | 2.00 | | | (33.0) | % |
| | | | | | | | | | | |
| Weighted-average number of shares outstanding: | | | | | | | | | | | |
| Basic | 299,255 | | | 177,039 | | | | | 299,261 | | | 163,846 | | | |
| Diluted | 300,491 | | | 177,543 | | | | | 300,525 | | | 164,331 | | | |
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SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2020 | | 2019 | | % Change | | 2020 | | 2019 | | % Change |
| | | | | | | | | | | |
| Adjusted net revenue | $ | 1,745,905 | | | $ | 1,062,217 | | | 64.4 | % | | $ | 4,995,654 | | | $ | 2,783,697 | | | 79.5 | % |
| | | | | | | | | | | |
| Adjusted operating income | $ | 717,669 | | | $ | 441,753 | | | 62.5 | % | | $ | 1,954,596 | | | $ | 1,131,079 | | | 72.8 | % |
| | | | | | | | | | | |
| Adjusted net income attributable to Global Payments | $ | 513,756 | | | $ | 301,106 | | | 70.6 | % | | $ | 1,381,915 | | | $ | 750,033 | | | 84.2 | % |
| | | | | | | | | | | |
| Adjusted diluted earnings per share attributable to Global Payments | $ | 1.71 | | | $ | 1.70 | | | 0.6 | % | | $ | 4.60 | | | $ | 4.56 | | | 0.9 | % |
| | | | | | | | | | | |
Non-GAAP Information with 2019 on Combined Basis(1): | | | | | | | | | | | |
| | | | | | | | | | | |
Adjusted net revenue(1) | $ | 1,745,905 | | | $ | 1,819,629 | | | (4.1) | % | | $ | 4,995,654 | | | $ | 5,316,602 | | | (6.0) | % |
| | | | | | | | | | | |
Adjusted operating income(1) | $ | 717,669 | | | $ | 702,429 | | | 2.2 | % | | $ | 1,954,596 | | | $ | 1,985,851 | | | (1.6) | % |
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(1)The non-GAAP information for 2019 is presented on a combined basis and includes TSYS results for the three and nine months ended September 30, 2019 determined in accordance with GAAP applied by TSYS and presented with Global Payments' adjustments to revenue and operating income.
See Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure.
NON-GAAP FINANCIAL MEASURES
Global Payments supplements revenues, income, operating income, operating margin and EPS 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 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 expense, acquisition and integration expense and certain other items, such as unusual, direct and discrete costs due to the global pandemic, 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. 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.
SCHEDULE 3
SEGMENT INFORMATION (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | |
| | September 30, 2020 | | September 30, 2019 | | % Change |
| | GAAP | | Non-GAAP | | GAAP | | Non-GAAP(1) | | GAAP | | Non-GAAP |
| | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
| Merchant Solutions | | $ | 1,243,961 | | | $ | 1,125,405 | | | $ | 1,004,943 | | | $ | 1,199,645 | | | 23.8 | % | | (6.2) | % |
| Issuer Solutions | | 487,409 | | | 433,372 | | | 75,628 | | | 444,639 | | | nm | | (2.5) | % |
| Business and Consumer Solutions | | 204,106 | | | 204,106 | | | 27,896 | | | 190,479 | | | nm | | 7.2 | % |
| Intersegment Elimination | | (17,661) | | | (16,978) | | | (2,526) | | | (15,134) | | | nm | | (12.2) | % |
| | $ | 1,917,815 | | | $ | 1,745,905 | | | $ | 1,105,941 | | | $ | 1,819,629 | | | 73.4 | % | | (4.1) | % |
| | | | | | | | | | | | |
| Operating income: | | | | | | | | | | | | |
| Merchant Solutions | | $ | 344,981 | | | $ | 532,287 | | | $ | 318,786 | | | $ | 562,108 | | | 8.2 | % | | (5.3) | % |
| Issuer Solutions | | 70,800 | | | 187,658 | | | 5,885 | | | 170,132 | | | nm | | 10.3 | % |
| Business and Consumer Solutions | | 31,052 | | | 52,252 | | | 3,365 | | | 35,237 | | | nm | | 48.3 | % |
| Corporate | | (156,414) | | | (54,528) | | | (153,999) | | | (65,048) | | | (1.6) | % | | 16.2 | % |
| | $ | 290,419 | | | $ | 717,669 | | | $ | 174,037 | | | $ | 702,429 | | | 66.9 | % | | 2.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | | | |
| | September 30, 2020 | | September 30, 2019 | | % Change |
| | GAAP | | Non-GAAP | | GAAP | | Non-GAAP(1) | | GAAP | | Non-GAAP |
| | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
| Merchant Solutions | | $ | 3,460,785 | | | $ | 3,132,412 | | | $ | 2,812,640 | | | $ | 3,433,101 | | | 23.0 | % | | (8.8) | % |
| Issuer Solutions | | 1,461,196 | | | 1,289,565 | | | 86,122 | | | 1,321,053 | | | nm | | (2.4) | % |
| Business and Consumer Solutions | | 624,774 | | | 624,774 | | | 27,896 | | | 605,800 | | | nm | | 3.1 | % |
| Intersegment Elimination | | (53,390) | | | (51,097) | | | (2,527) | | | (43,352) | | | nm | | (17.9) | % |
| | $ | 5,493,365 | | | $ | 4,995,654 | | | $ | 2,924,131 | | | $ | 5,316,602 | | | 87.9 | % | | (6.0) | % |
| | | | | | | | | | | | |
| Operating income: | | | | | | | | | | | | |
| Merchant Solutions | | $ | 824,212 | | | $ | 1,404,189 | | | $ | 840,326 | | | $ | 1,556,195 | | | (1.9) | % | | (9.8) | % |
| Issuer Solutions | | 188,131 | | | 539,450 | | | 12,920 | | | 483,713 | | | nm | | 11.5 | % |
| Business and Consumer Solutions | | 110,358 | | | 174,842 | | | 3,365 | | | 141,226 | | | nm | | 23.8 | % |
| Corporate | | (480,730) | | | (163,885) | | | (261,356) | | | (195,283) | | | (83.9) | % | | 16.1 | % |
| | $ | 641,971 | | | $ | 1,954,596 | | | $ | 595,255 | | | $ | 1,985,851 | | | 7.8 | % | | (1.6) | % |
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(1)The non-GAAP information for 2019 is presented on a combined basis and includes TSYS results for the three and nine months ended September 30, 2019 determined in accordance with GAAP applied by TSYS and presented with Global Payments' adjustments to revenue and operating income and segment reporting structure.
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 2 for a discussion of non-GAAP financial measures.
SCHEDULE 4
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
| | | | | | | | | | | |
| | September 30, 2020 | | December 31, 2019 |
| | | |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 2,220,822 | | | $ | 1,678,273 | |
| Accounts receivable, net | 822,033 | | | 895,232 | |
| Settlement processing assets | 1,385,308 | | | 1,353,778 | |
| Prepaid expenses and other current assets | 540,487 | | | 439,165 | |
| Total current assets | 4,968,650 | | | 4,366,448 | |
| Goodwill | 23,745,340 | | | 23,759,740 | |
| Other intangible assets, net | 12,251,680 | | | 13,154,655 | |
| Property and equipment, net | 1,526,178 | | | 1,382,802 | |
| Deferred income taxes | 6,822 | | | 6,292 | |
| Other noncurrent assets | 2,051,112 | | | 1,810,225 | |
| Total assets | $ | 44,549,782 | | | $ | 44,480,162 | |
| | | |
| LIABILITIES AND EQUITY | | | |
| Current liabilities: | | | |
| Settlement lines of credit | $ | 439,371 | | | $ | 463,237 | |
| Current portion of long-term debt | 831,500 | | | 35,137 | |
| Accounts payable and accrued liabilities | 1,696,048 | | | 1,822,166 | |
| Settlement processing obligations | 1,448,335 | | | 1,258,806 | |
| Total current liabilities | 4,415,254 | | | 3,579,346 | |
| Long-term debt | 8,436,962 | | | 9,090,364 | |
| Deferred income taxes | 2,966,020 | | | 3,145,641 | |
| Other noncurrent liabilities | 767,704 | | | 609,822 | |
| Total liabilities | 16,585,940 | | | 16,425,173 | |
| 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 September 30, 2020 and December 31, 2019; 299,286,847 issued and outstanding at September 30, 2020 and 300,225,590 issued and outstanding at December 31, 2019 | — | | | — | |
| Paid-in capital | 25,620,599 | | | 25,833,307 | |
| Retained earnings | 2,476,962 | | | 2,333,011 | |
| Accumulated other comprehensive loss | (351,904) | | | (310,571) | |
| Total Global Payments shareholders’ equity | 27,745,657 | | | 27,855,747 | |
| Noncontrolling interests | 218,185 | | | 199,242 | |
| Total equity | 27,963,842 | | | 28,054,989 | |
| Total liabilities and equity | $ | 44,549,782 | | | $ | 44,480,162 | |
SCHEDULE 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2020 | | September 30, 2019 |
| | | |
| Cash flows from operating activities: | | | |
| Net income | $ | 420,282 | | | $ | 354,974 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization of property and equipment | 265,738 | | | 132,043 | |
| Amortization of acquired intangibles | 941,654 | | | 345,455 | |
| Amortization of capitalized contract costs | 57,888 | | | 47,778 | |
| Share-based compensation expense | 105,081 | | | 55,791 | |
| Provision for operating losses and bad debts | 98,967 | | | 34,877 | |
| Noncash lease expense | 73,493 | | | 29,135 | |
| Deferred income taxes | (118,466) | | | (42,990) | |
| Equity in income of equity investments, net of tax | (60,682) | | | — | |
| Other, net | (13,584) | | | (22,469) | |
| Changes in operating assets and liabilities, net of the effects of business combinations: | | | |
| Accounts receivable | 23,352 | | | (80,709) | |
| Settlement processing assets and obligations, net | 155,385 | | | 623,985 | |
| Prepaid expenses and other assets | (240,804) | | | (148,421) | |
| Accounts payable and other liabilities | (163,544) | | | 19,940 | |
| Net cash provided by operating activities | 1,544,760 | | | 1,349,389 | |
| Cash flows from investing activities: | | | |
| Acquisitions, net of cash acquired | (77,180) | | | (334,383) | |
| Capital expenditures | (329,413) | | | (201,017) | |
| Other, net | 11,575 | | | 29,112 | |
| Net cash used in investing activities | (395,018) | | | (506,288) | |
| Cash flows from financing activities: | | | |
| Net repayments of settlement lines of credit | (31,069) | | | (144,473) | |
| Proceeds from long-term debt | 1,868,199 | | | 6,704,838 | |
| Repayments of long-term debt | (1,829,637) | | | (6,097,229) | |
| Payments of debt issuance costs | (8,075) | | | (32,637) | |
| Repurchases of common stock | (421,162) | | | (233,995) | |
| Proceeds from stock issued under share-based compensation plans | 51,055 | | | 22,008 | |
| Common stock repurchased - share-based compensation plans | (41,966) | | | (49,037) | |
| Distributions to noncontrolling interests | (6,955) | | | (31,632) | |
| Preacquisition dividends paid to former TSYS shareholders | — | | | (23,240) | |
| Dividends paid | (175,025) | | | (4,727) | |
| Net cash (used in) provided by financing activities | (594,635) | | | 109,876 | |
| Effect of exchange rate changes on cash | (12,558) | | | (36,239) | |
| Increase in cash and cash equivalents | 542,549 | | | 916,738 | |
| Cash and cash equivalents, beginning of the period | 1,678,273 | | | 1,210,878 | |
| Cash and cash equivalents, end of the period | $ | 2,220,822 | | | $ | 2,127,616 | |
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 September 30, 2020 |
| | GAAP | | Net Revenue Adjustments(1) | | Earnings Adjustments(2) | | Income Taxes on Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues | | $ | 1,917,815 | | | $ | (171,910) | | | $ | — | | | $ | — | | | $ | 1,745,905 | |
| | | | | | | | | | |
| Operating income | | $ | 290,419 | | | $ | 2,555 | | | $ | 424,695 | | | $ | — | | | $ | 717,669 | |
| | | | | | | | | | |
| Net income attributable to Global Payments | | $ | 220,971 | | | $ | 2,555 | | | $ | 375,340 | | | $ | (85,110) | | | $ | 513,756 | |
| | | | | | | | | | |
| Diluted earnings per share attributable to Global Payments | | $ | 0.74 | | | | | | | | | $ | 1.71 | |
| | | | | | | | | | |
| Diluted weighted average shares outstanding | | 300,491 | | | | | | | | | 300,491 | |
| | | | | | | | | | |
| | Three Months Ended September 30, 2019 |
| | GAAP | | Net Revenue Adjustments(1) | | Earnings Adjustments(2) | | Income Taxes on Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues | | $ | 1,105,941 | | | $ | (43,724) | | | $ | — | | | $ | — | | | $ | 1,062,217 | |
| | | | | | | | | | |
| Operating income | | $ | 174,037 | | | $ | 4,002 | | | $ | 263,714 | | | $ | — | | | $ | 441,753 | |
| | | | | | | | | | |
| Net income attributable to Global Payments | | $ | 95,044 | | | $ | 4,002 | | | $ | 293,132 | | | $ | (91,072) | | | $ | 301,106 | |
| | | | | | | | | | |
| Diluted earnings per share attributable to Global Payments | | $ | 0.54 | | | | | | | | | $ | 1.70 | |
| | | | | | | | | | |
| Diluted weighted average shares outstanding | | 177,543 | | | | | | | | | 177,543 | |
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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 benefits to the company. Also, for the three months ended September 30, 2020 and September 30, 2019, includes $2.6 million and $4.0 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 September 30, 2020, earnings adjustments to operating income included $317.3 million in Cost of Service (COS) and $107.4 million in Selling, General, & Administrative (SG&A) expenses. Adjustments to COS include $313.4 million of amortization of acquired intangibles and $3.9 million of other items. Adjustments to SG&A include $42.3 million of share-based compensation expense, $59.8 million of acquisition and integration expenses and $5.3 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19. Net income attributable to Global Payments also reflects the removal of a $27.3 million gain associated with the fair value of shares received from the conversion of certain Visa Inc. preferred shares and the removal of $23.1 million of equity method investment earnings from our interest in a private equity investment fund.
For the three months ended September 30, 2019, earnings adjustments to operating income included $145.5 million in COS and $118.2 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $135.0 million and acquisition and integration expenses of $10.5 million. Adjustments to SG&A include share-based compensation expense of $27.9 million and acquisition and integration expenses of $90.4 million. Net income attributable to Global Payments reflects the removal of $31.4 million in charges from interest expense associated with the financing of the merger with TSYS. These include fees related to the bridge facility the company entered into to support the merger financing, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new secured senior notes attributable to the period between issuance and merger close, net of interest income earned from these funds while in escrow.
(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 2.
SCHEDULE 7
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2020 |
| | GAAP | | Net Revenue Adjustments(1) | | Earnings Adjustments(2) | | Income
Taxes on Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues | | $ | 5,493,365 | | | $ | (497,711) | | | $ | — | | | $ | — | | | $ | 4,995,654 | |
| | | | | | | | | | |
| Operating income | | $ | 641,971 | | | $ | 8,139 | | | $ | 1,304,486 | | | $ | — | | | $ | 1,954,596 | |
| | | | | | | | | | |
| Net income attributable to Global Payments | | $ | 401,876 | | | $ | 8,139 | | | $ | 1,260,724 | | | $ | (288,824) | | | $ | 1,381,915 | |
| | | | | | | | | | |
| Diluted earnings per share attributable to Global Payments | | $ | 1.34 | | | | | | | | | $ | 4.60 | |
| | | | | | | | | | |
| Diluted weighted average shares outstanding | | 300,525 | | | | | | | | | 300,525 | |
| | | | | | | | | | |
| | Nine Months Ended September 30, 2019 |
| | GAAP | | Net Revenue Adjustments(1) | | Earnings Adjustments(2) | | Income
Taxes on Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues | | $ | 2,924,131 | | | $ | (140,434) | | | $ | — | | | $ | — | | | $ | 2,783,697 | |
| | | | | | | | | | |
| Operating income | | $ | 595,255 | | | $ | 12,643 | | | $ | 523,181 | | | $ | — | | | $ | 1,131,079 | |
| | | | | | | | | | |
| Net income attributable to Global Payments | | $ | 327,842 | | | $ | 12,643 | | | $ | 551,508 | | | $ | (141,960) | | | $ | 750,033 | |
| | | | | | | | | | |
| Diluted earnings per share attributable to Global Payments | | $ | 2.00 | | | | | | | | | $ | 4.56 | |
| | | | | | | | | | |
| Diluted weighted average shares outstanding | | 164,331 | | | | | | | | | 164,331 | |
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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 benefits to the company. Also, for the nine months ended September 30, 2020 and September 30, 2019, includes $8.1 million and $12.6 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(2)For the nine months ended September 30, 2020, earnings adjustments to operating income included $965.9 million in COS and $338.5 million in SG&A expenses. Adjustments to COS include $942.6 million of amortization of acquired intangibles and $23.3 million of other items. Adjustments to SG&A include $105.1 million of share-based compensation expense, $213.6 million of acquisition and integration expenses and $19.8 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19. Net income attributable to Global Payments also reflects the removal of a $27.3 million gain associated with the fair value of shares received from the conversion of certain Visa Inc. preferred shares, the removal of $23.1 million of equity method investment earnings from our interest in a private equity investment fund, and the removal of a $8.7 million loss associated with the partial sale of an ownership position in a strategic partner.
For the nine months ended September 30, 2019, earnings adjustments to operating income included $359.4 million in COS and $163.7 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $347.1 million and acquisition and integration expenses of $12.4 million. Adjustments to SG&A include share-based compensation expense of $55.8 million and acquisition and integration expenses of $107.9 million. Net income attributable to Global Payments also reflects the removal of $34.3 million in charges from interest expense associated with the financing of the merger with TSYS. These include fees related to the bridge facility the company entered into to support the merger financing, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new secured senior notes attributable to the period between issuance and merger close, net of interest income earned from these funds in escrow.
(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 2.
SCHEDULE 8
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, 2020 |
| | | | GAAP | | Net Revenue Adjustments (2) | | Earnings Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Merchant Solutions | | | | $ | 1,243,961 | | | $ | (118,556) | | | $ | — | | | $ | 1,125,405 | |
| Issuer Solutions | | | | 487,409 | | | (54,037) | | | — | | | 433,372 | |
| Business and Consumer Solutions | | | | 204,106 | | | — | | | — | | | 204,106 | |
| Intersegment Eliminations | | | | (17,661) | | | 683 | | | — | | | (16,978) | |
| | | | $ | 1,917,815 | | | $ | (171,910) | | | $ | — | | | $ | 1,745,905 | |
| | | | | | | | | | |
| Operating income: | | | | | | | | | | |
| Merchant Solutions | | | | $ | 344,981 | | | $ | 316 | | | $ | 186,990 | | | $ | 532,287 | |
| Issuer Solutions | | | | 70,800 | | | 2,239 | | | 114,619 | | | 187,658 | |
| Business and Consumer Solutions | | | | 31,052 | | | — | | | 21,200 | | | 52,252 | |
| Corporate | | | | (156,414) | | | — | | | 101,886 | | | (54,528) | |
| | | | $ | 290,419 | | | $ | 2,555 | | | $ | 424,695 | | | $ | 717,669 | |
| | | | | | | | | | |
| | Three months ended September 30, 2019 |
| | GAAP | | TSYS(1) | | Net Revenue Adjustments(2) | | Earnings Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Merchant Solutions | | $ | 1,004,943 | | | $ | 316,471 | | | $ | (121,769) | | | $ | — | | | $ | 1,199,645 | |
| Issuer Solutions | | 75,628 | | | 423,555 | | | (54,544) | | | — | | | 444,639 | |
| Business and Consumer Solutions | | 27,896 | | | 162,583 | | | — | | | — | | | 190,479 | |
| Intersegment Eliminations | | (2,526) | | | (13,258) | | | 650 | | | — | | | (15,134) | |
| | $ | 1,105,941 | | | $ | 889,351 | | | $ | (175,663) | | | $ | — | | | $ | 1,819,629 | |
| | | | | | | | | | |
| Operating income: | | | | | | | | | | |
| Merchant Solutions | | $ | 318,786 | | | $ | 78,570 | | | $ | 4,002 | | | $ | 160,750 | | | $ | 562,108 | |
| Issuer Solutions | | 5,885 | | | 146,142 | | | — | | | 18,105 | | | 170,132 | |
| Business and Consumer Solutions | | 3,365 | | | 16,305 | | | — | | | 15,567 | | | 35,237 | |
| Corporate | | (153,999) | | | (126,083) | | | — | | | 215,034 | | | (65,048) | |
| | $ | 174,037 | | | $ | 114,934 | | | $ | 4,002 | | | $ | 409,456 | | | $ | 702,429 | |
(1)Represents TSYS financial information determined in accordance with GAAP applied by TSYS and presented in Global Payments new segment reporting structure, net of revenues between legacy Global Payments and TSYS considered intercompany revenue following the merger.
(2)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. Also, for the three months ended September 30, 2020 and September 30, 2019, includes $2.6 million and $4.0 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(3)For the three months ended September 30, 2020, earnings adjustments to operating income included $317.3 million in COS and $107.4 million in SG&A expenses. Adjustments to COS include $313.4 million of amortization of acquired intangibles and $3.9 million of other items. Adjustments to SG&A include $42.3 million of share-based compensation expense, $59.8 million of acquisition and integration expenses and $5.3 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19.
For the three months ended September 30, 2019, earnings adjustments to operating income included $191.0 million in COS and $218.4 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $180.5 million and acquisition and integration expenses of $10.5 million. Adjustments to SG&A include share-based compensation expense of $58.0 million and acquisition and integration expenses of $160.4 million.
See "Non-GAAP Financial Measures" discussion on Schedule 2.
SCHEDULE 9
UNAUDITED RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended September 30, 2020 |
| | | | GAAP | | Net Revenue Adjustments(2) | | Earnings Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Merchant Solutions | | | | $ | 3,460,785 | | | $ | (328,373) | | | $ | — | | | $ | 3,132,412 | |
| Issuer Solutions | | | | 1,461,196 | | | (171,631) | | | — | | | 1,289,565 | |
| Business and Consumer Solutions | | | | 624,774 | | | — | | | — | | | 624,774 | |
| Intersegment Eliminations | | | | (53,390) | | | 2,293 | | | — | | | (51,097) | |
| | | | $ | 5,493,365 | | | $ | (497,711) | | | $ | — | | | $ | 4,995,654 | |
| | | | | | | | | | |
| Operating income: | | | | | | | | | | |
| Merchant Solutions | | | | $ | 824,212 | | | $ | 833 | | | $ | 579,144 | | | $ | 1,404,189 | |
| Issuer Solutions | | | | 188,131 | | | 7,306 | | | 344,013 | | | 539,450 | |
| Business and Consumer Solutions | | | | 110,358 | | | — | | | 64,484 | | | 174,842 | |
| Corporate | | | | (480,730) | | | — | | | 316,845 | | | (163,885) | |
| | | | $ | 641,971 | | | $ | 8,139 | | | $ | 1,304,486 | | | $ | 1,954,596 | |
| | | | | | | | | | |
| | Nine Months Ended September 30, 2019 |
| | GAAP | | TSYS(1) | | Net Revenue Adjustments(2) | | Earnings Adjustments(3) | | Non-GAAP |
| | | | | | | | | | |
| Revenues: | | | | | | | | | | |
| Merchant Solutions | | $ | 2,812,640 | | | $ | 1,017,489 | | | $ | (397,028) | | | $ | — | | | $ | 3,433,101 | |
| Issuer Solutions | | 86,122 | | | 1,398,326 | | | (163,395) | | | — | | | 1,321,053 | |
| Business and Consumer Solutions | | 27,896 | | | 577,904 | | | — | | | — | | | 605,800 | |
| Intersegment Eliminations | | (2,527) | | | (42,794) | | | 1,969 | | | — | | | (43,352) | |
| | $ | 2,924,131 | | | $ | 2,950,925 | | | $ | (558,454) | | | $ | — | | | $ | 5,316,602 | |
| | | | | | | | | | |
| Operating income: | | | | | | | | | | |
| Merchant Solutions | | $ | 840,326 | | | $ | 239,796 | | | $ | 12,643 | | | $ | 463,430 | | | $ | 1,556,195 | |
| Issuer Solutions | | 12,920 | | | 452,688 | | | — | | | 18,105 | | | 483,713 | |
| Business and Consumer Solutions | | 3,365 | | | 95,826 | | | — | | | 42,035 | | | 141,226 | |
| Corporate | | (261,356) | | | (231,018) | | | — | | | 297,091 | | | (195,283) | |
| | $ | 595,255 | | | $ | 557,292 | | | $ | 12,643 | | | $ | 820,661 | | | $ | 1,985,851 | |
(1)Represents TSYS financial information determined in accordance with GAAP applied by TSYS and presented in Global Payments new segment reporting structure, net of revenues between legacy Global Payments and TSYS considered intercompany revenue following the merger.
(2)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. Also, for the nine months ended September 30, 2020 and September 30, 2019, includes $8.1 million and $12.6 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(3)For the nine months ended September 30, 2020, earnings adjustments to operating income included $965.9 million in COS and $338.5 million in SG&A expenses. Adjustments to COS include $942.6 million of amortization of acquired intangibles and $23.3 million of other items. Adjustments to SG&A include $105.1 million of share-based compensation expense, $213.6 million of acquisition and integration expenses and $19.8 million of other items. Other items included in COS and SG&A include employee termination benefits and other incremental charges directly related to COVID-19.
For the nine months ended September 30, 2019, earnings adjustments to operating income include $513.7 million in COS and $306.9 million in SG&A expenses. Adjustments to COS include amortization of acquired intangibles of $501.3 million and acquisition and integration expenses of $12.4 million. Adjustments to SG&A include share-based compensation expense of $120.3 million and acquisition and integration expenses of $186.6 million.
See "Non-GAAP Financial Measures" discussion on Schedule 2.
