Press release

Global Payments Reports First Quarter 2021 Results

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Sponsored by Businesswire

Global Payments Inc. (NYSE: GPN) today announced results for the first quarter ended March 31, 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210504005419/en/

“We returned to growth in the first quarter and delivered the fastest rate of sequential expansion across our markets since the end of 2019,” said Jeff Sloan, Chief Executive Officer of Global Payments. “And our performance improved substantially as the quarter progressed with growth in each of our three segments in March. We also continued to deliver on our strategic priorities with today’s announcements of our agreements to acquire Zego, a leading property technology company with a comprehensive resident management software and payments platform, and Worldline’s PAYONE Austrian acquiring business.

“We have further widened our competitive moat. With Zego we underscore our distinctive focus on software driven solutions with an emphasis on commerce enablement. With Worldline’s PAYONE Austrian acquiring business, we deepen our presence in the most attractive markets worldwide.”

Sloan concluded, “By combining strategic investments in future growth with our entry into unique relationships with two of the world’s largest technology companies, ongoing consistency in execution and our longstanding focus on returning capital efficiently to our shareholders, we are as optimistic today as we have been since prior to the pandemic. We exited the first quarter of 2021 in a better position than we entered it.”

First Quarter 2021 Summary

  • GAAP revenues were $1.99 billion, compared to $1.90 billion in the first quarter of 2020; diluted earnings per share were $0.66 compared to $0.48 in the prior year; and operating margin was 13.8% compared to 12.8% in the prior year.
  • Adjusted net revenues increased 5% to $1.81 billion, compared to $1.73 billion in the first quarter of 2020.
  • Adjusted earnings per share increased 15% to $1.82, compared to $1.58 in the first quarter of 2020.
  • Adjusted operating margin of 40.6% expanded 160 basis points.

2021 Outlook

“We are pleased with our financial performance in the first quarter, which demonstrated meaningful sequential momentum,” said Paul Todd, Senior Executive Vice President and Chief Financial Officer. “Consistent execution of our technology-enabled strategy resulted in adjusted net revenue growth, adjusted operating margin expansion and double-digit adjusted earnings per share growth during the quarter despite a difficult comparison given the late March onset of COVID-19 last year.

“While achieving these strong results, we have also made substantial progress with our integration activities and remain on track to realize our targeted synergies within three years from the close of the TSYS merger. Specifically, we continue to expect annual run rate revenue synergies to amount to at least $150 million and annual run rate expense synergies to amount to at least $400 million by September 2022.

“We are raising our expectations for full year 2021 adjusted net revenue to be in the range of $7.55 billion to $7.625 billion, reflecting growth of 12% to 13%, and we are increasing our adjusted earnings per share estimate to be in a range of $7.87 to $8.07, or growth of 23% to 26% over 2020.”

Todd concluded, “This outlook presumes we remain on a path toward recovery worldwide over the balance of the year and does not include any impact from the transactions we announced today. We expect the Zego and Worldline Austrian business acquisitions to close by the end of the second quarter and in the second half of 2021, respectively.”

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.195 per share payable June 25, 2021 to shareholders of record as of June 11, 2021.

Conference Call

Global Payments’ management will host a live audio webcast today, May 4, 2021, at 8:00 a.m. EDST 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.globalpayments.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 guidance and projected financial results for the year 2021; 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 the combined company’s plans, objectives, expectations and intentions; timing and completion of anticipated benefits of acquisitions or strategic initiatives; our success and timing in developing and introducing new services; and future financial and operating results. 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 continued or prolonged 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 and liquidity; 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 the Company and our 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; 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, 2020, and in other documents that we file with the SEC, which are available at https://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.

 

SCHEDULE 1

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 

Three Months Ended

 

March 31,

 

2021

 

2020

 

% Change

 

 

 

 

 

 

Revenues

$

1,990,007

 

$

1,903,598

 

4.5%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Cost of service

925,246

 

933,871

 

(0.9)%

Selling, general and administrative

789,502

 

725,748

 

8.8%

 

1,714,748

 

1,659,619

 

3.3%

 

 

 

 

 

 

Operating income

275,259

 

243,979

 

12.8%

 

 

 

 

 

 

Interest and other income

4,234

 

2,506

 

69.0%

Interest and other expense

(83,141)

 

(92,644)

 

(10.3)%

 

(78,907)

 

(90,138)

 

(12.5)%

 

 

 

 

 

 

Income before income taxes and equity in income of equity method investments

196,352

 

153,841

 

27.6%

Income tax expense

20,675

 

15,502

 

33.4%

Income before equity in income of equity method investments

175,677

 

138,339

 

27.0%

Equity in income of equity method investments, net of tax

22,733

 

12,269

 

85.3%

Net income

198,410

 

150,608

 

31.7%

Net income attributable to noncontrolling interests, net of income tax

(1,729)

 

(7,033)

 

(75.4)%

Net income attributable to Global Payments

$

196,681

 

$

143,575

 

37.0%

 

 

 

 

 

 

Earnings per share attributable to Global Payments:

 

 

 

 

 

Basic

$

0.66

 

$

0.48

 

37.5%

Diluted

$

0.66

 

$

0.48

 

37.5%

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

Basic

296,425

 

299,388

 

 

Diluted

297,671

 

300,838

 

 

 
SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

Three Months Ended

 

March 31,

 

2021

 

2020

 

% Change

 

 

 

 

 

 

Adjusted net revenue

$

1,812,218

 

$

1,728,851

 

4.8%

 

 

 

 

 

 

Adjusted operating income

$

735,115

 

$

674,708

 

9.0%

 

 

 

 

 

 

Adjusted net income attributable to Global Payments

$

541,363

 

$

473,847

 

14.2%

 

 

 

 

 

 

Adjusted diluted earnings per share attributable to Global Payments

$

1.82

 

$

1.58

 

15.2%

 
____________________

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

SEGMENT INFORMATION (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

Three Months Ended

 

 

 

 

 

March 31, 2021

 

March 31, 2020

 

% Change

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

$

1,267,872

 

$

1,149,820

 

$

1,215,269

 

$

1,101,344

 

4.3%

 

4.4%

Issuer Solutions

500,251

 

439,380

 

503,762

 

441,986

 

(0.7)%

 

(0.6)%

Business and Consumer Solutions

243,585

 

243,585

 

203,946

 

203,946

 

19.4%

 

19.4%

Intersegment Elimination

(21,701)

 

(20,567)

 

(19,379)

 

(18,425)

 

(12.0)%

 

(11.6)%

 

$

1,990,007

 

$

1,812,218

 

$

1,903,598

 

$

1,728,851

 

4.5%

 

4.8%

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

Merchant Solutions

$

339,989

 

$

532,142

 

$

304,153

 

$

500,425

 

11.8%

 

6.3%

Issuer Solutions

68,455

 

189,788

 

59,304

 

174,678

 

15.4%

 

8.7%

Business and Consumer Solutions

61,923

 

80,862

 

31,112

 

52,486

 

99.0%

 

54.1%

Corporate

(195,108)

 

(67,677)

 

(150,590)

 

(52,881)

 

(29.6)%

 

(28.0)%

 

$

275,259

 

$

735,115

 

$

243,979

 

$

674,708

 

12.8%

 

9.0%

____________________

See Schedules 6 and 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
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)

 

March 31, 2021

 

December 31, 2020

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

2,082,414

 

$

1,945,868

Accounts receivable, net

824,822

 

794,172

Settlement processing assets

1,397,002

 

1,230,853

Prepaid expenses and other current assets

574,592

 

621,467

Total current assets

4,878,830

 

4,592,360

Goodwill

23,853,850

 

23,871,451

Other intangible assets, net

11,698,884

 

12,015,883

Property and equipment, net

1,580,743

 

1,578,532

Deferred income taxes

8,120

 

7,627

Other noncurrent assets

2,237,301

 

2,135,692

Total assets

$

44,257,728

 

$

44,201,545

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Settlement lines of credit

$

459,360

 

$

358,698

Current portion of long-term debt

64,530

 

827,357

Accounts payable and accrued liabilities

2,096,637

 

2,061,384

Settlement processing obligations

1,495,638

 

1,301,652

Total current liabilities

4,116,165

 

4,549,091

Long-term debt

9,627,052

 

8,466,407

Deferred income taxes

2,895,401

 

2,948,390

Other noncurrent liabilities

776,919

 

750,613

Total liabilities

17,415,537

 

16,714,501

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 March 31, 2021 and December 31, 2020; 295,157,603 issued and outstanding at March 31, 2021 and 298,332,459 issued and outstanding at December 31, 2020

 

Paid-in capital

24,403,323

 

24,963,769

Retained earnings

2,500,812

 

2,570,874

Accumulated other comprehensive loss

(212,373)

 

(202,273)

Total Global Payments shareholders’ equity

26,691,762

 

27,332,370

Noncontrolling interests

150,429

 

154,674

Total equity

26,842,191

 

27,487,044

Total liabilities and equity

$

44,257,728

 

$

44,201,545

 
SCHEDULE 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

Three Months Ended

 

March 31, 2021

 

March 31, 2020

 

 

 

 

Cash flows from operating activities:

 

 

 

Net income

$

198,410

 

$

150,608

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

 

 

 

Depreciation and amortization of property and equipment

96,372

 

83,573

Amortization of acquired intangibles

329,201

 

314,245

Amortization of capitalized contract costs

21,050

 

18,738

Share-based compensation expense

37,165

 

27,822

Provision for operating losses and credit losses

23,405

 

37,629

Noncash lease expense

27,066

 

25,924

Deferred income taxes

(56,390)

 

(47,957)

Equity in income of equity investments, net of tax

(22,733)

 

(12,269)

Other, net

(5,847)

 

512

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

 

 

 

Accounts receivable

(37,141)

 

47,624

Settlement processing assets and obligations, net

21,714

 

12,966

Prepaid expenses and other assets

(33,128)

 

(53,540)

Accounts payable and other liabilities

262

 

(169,301)

Net cash provided by operating activities

599,406

 

436,574

Cash flows from investing activities:

 

 

 

Business combinations and other acquisitions, net of cash acquired

(11,074)

 

(67,196)

Capital expenditures

(86,159)

 

(104,802)

Other, net

293

 

2,348

Net cash used in investing activities

(96,940)

 

(169,650)

Cash flows from financing activities:

 

 

 

Net borrowings from (repayments of) settlement lines of credit

108,488

 

(78,092)

Proceeds from long-term debt

1,987,005

 

607,000

Repayments of long-term debt

(1,575,435)

 

(110,978)

Payments of debt issuance costs

(6,819)

 

Repurchases of common stock

(802,955)

 

(421,162)

Proceeds from stock issued under share-based compensation plans

17,705

 

28,283

Common stock repurchased – share-based compensation plans

(39,437)

 

(44,253)

Dividends paid

(57,574)

 

(58,279)

Net cash used in financing activities

(369,022)

 

(77,481)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(21,141)

 

(67,655)

Increase in cash, cash equivalents and restricted cash

112,303

 

121,788

Cash, cash equivalents and restricted cash, beginning of the period

2,089,771

 

1,678,273

Cash, cash equivalents and restricted cash, end of the period

$

2,202,074

 

$

1,800,061

 

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 March 31, 2021

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Income

Taxes on

Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

Revenues

$

1,990,007

 

$

(177,789)

 

$

 

$

 

$

1,812,218

 

 

 

 

 

 

 

 

 

 

Operating income

$

275,259

 

$

1,749

 

$

458,107

 

$

 

$

735,115

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

$

196,681

 

$

1,749

 

$

450,935

 

$

(108,002)

 

$

541,363

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

$

0.66

 

 

 

 

 

 

 

$

1.82

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

297,671

 

 

 

 

 

 

 

297,671

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Income

Taxes on

Adjustments(3)

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

Revenues

$

1,903,598

 

$

(174,747)

 

$

 

$

 

$

1,728,851

 

 

 

 

 

 

 

 

 

 

Operating income

$

243,979

 

$

2,899

 

$

427,830

 

$

 

$

674,708

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Payments

$

143,575

 

$

2,899

 

$

432,941

 

$

(105,568)

 

$

473,847

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Global Payments

$

0.48

 

 

 

 

 

 

 

$

1.58

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

300,838

 

 

 

 

 

 

 

300,838

 
____________________

(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, 2021 and March 31, 2020, includes $1.7 million and $2.9 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, 2021, earnings adjustments to operating income include $329.2 million in cost of services (COS) and $128.9 million in selling, general and administrative expenses (SG&A). Adjustments to COS represent amortization of acquired intangibles of $329.2 million. Adjustments to SG&A include share-based compensation expense of $37.2 million and acquisition and integration expenses of $91.7 million. Net income attributable to Global Payments also reflects the removal of $6.3 million of equity method investment earnings from our interest in a private equity investment fund.

 

For the three months ended March 31, 2020, earnings adjustments to operating income included $320.3 million in COS and $107.5 million in SG&A expenses. Adjustments to COS include $314.8 million of amortization of acquired intangibles and $5.5 million of other items. Adjustments to SG&A include $27.8 million of share-based compensation expense, $71.6 million of acquisition and integration expenses and $8.1 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 $6.7 million loss associated with the partial sale of an ownership position in a strategic partner.

 

(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
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 

Three months ended March 31, 2021

 

GAAP

 

Net Revenue

Adjustments (1)

 

Earnings

Adjustments(2)

 

Non-GAAP

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Merchant Solutions

$

1,267,872

 

$

(118,052)

 

$

 

$

1,149,820

Issuer Solutions

500,251

 

(60,871)

 

 

439,380

Business and Consumer Solutions

243,585

 

 

 

243,585

Intersegment Eliminations

(21,701)

 

1,134

 

 

(20,567)

 

$

1,990,007

 

$

(177,789)

 

$

 

$

1,812,218

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

Merchant Solutions

$

339,989

 

$

294

 

$

191,859

 

$

532,142

Issuer Solutions

68,455

 

1,455

 

119,878

 

189,788

Business and Consumer Solutions

61,923

 

 

18,939

 

80,862

Corporate

(195,108)

 

 

127,431

 

(67,677)

 

$

275,259

 

$

1,749

 

$

458,107

 

$

735,115

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2020

 

GAAP

 

Net Revenue

Adjustments(1)

 

Earnings

Adjustments(2)

 

Non-GAAP

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Merchant Solutions

$

1,215,269

 

$

(113,925)

 

$

 

$

1,101,344

Issuer Solutions

503,762

 

(61,776)

 

 

441,986

Business and Consumer Solutions

203,946

 

 

 

203,946

Intersegment Eliminations

(19,379)

 

954

 

 

(18,425)

 

$

1,903,598

 

$

(174,747)

 

$

 

$

1,728,851

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

Merchant Solutions

$

304,153

 

$

197

 

$

196,075

 

$

500,425

Issuer Solutions

59,304

 

2,702

 

112,672

 

174,678

Business and Consumer Solutions

31,112

 

 

21,374

 

52,486

Corporate

(150,590)

 

 

97,709

 

(52,881)

 

$

243,979

 

$

2,899

 

$

427,830

 

$

674,708

 
____________________

(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 March 31, 2021 and March 31, 2020, includes $1.7 million and $2.9 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, 2021, earnings adjustments to operating income include $329.2 million in COS and $128.9 million in SG&A. Adjustments to COS represent amortization of acquired intangibles of $329.2 million. Adjustments to SG&A include share-based compensation expense of $37.2 million and acquisition and integration expenses of $91.7 million.

 

For the three months ended March 31, 2020, earnings adjustments to operating income included $320.3 million in COS and $107.5 million in SG&A expenses. Adjustments to COS include $314.8 million of amortization of acquired intangibles and $5.5 million of other items. Adjustments to SG&A include $27.8 million of share-based compensation expense, $71.6 million of acquisition and integration expenses and $8.1 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.

 

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)

 

2020

 

2021 Outlook

 

% Change

Revenues:

 

 

 

 

 

GAAP revenues

$7.424

 

$8.230 to $8.305

 

11% to 12%

Adjustments(1)

(0.676)

 

(0.680)

 

 

Adjusted net revenue

$6.748

 

$7.550 to $7.625

 

12% to 13%

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

GAAP diluted EPS

$1.95

 

$3.54 to $3.74

 

82% to 92%

Adjustments(2)

4.45

 

4.33

 

 

Adjusted diluted EPS

$6.40

 

$7.87 to $8.07

 

23% to 26%

 
____________________

(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 2020 GAAP diluted EPS include the removal of 1) software-related contract liability adjustments described above of $0.03, 2) acquisition related amortization expense of $3.20, 3) share-based compensation expense of $0.38, 4) acquisition and integration expense of $0.82, 5) other items, inclusive of employee termination benefits and other incremental charges directly related to COVID-19, of $0.13, 6) gain associated with the fair value of common shares received from the conversion of certain Visa Inc. preferred shares of $0.07, 7) equity method investment earnings from our interest in a private equity investment fund of $0.11, 8) loss associated with the partial sale of an ownership position in a strategic partner of $0.02 and 9) discrete tax items of $0.05. Adjustments to 2020 GAAP diluted EPS include the effect on noncontrolling interests and income taxes, as applicable.

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.