10-QPeriod: Q1 FY2016

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 29, 2016

Filed April 6, 2016For Securities:GPN

Summary

Global Payments Inc. (GPN) reported solid financial results for the third quarter ended February 29, 2016, demonstrating steady revenue growth and improved profitability. Total revenues for the quarter rose by 2.2% to $679.9 million, driven by a 1.1% increase in the North America segment and a 6.2% increase in the Europe segment. Net income attributable to Global Payments increased by 10.4% to $69.1 million, leading to a 15.2% rise in diluted earnings per share to $0.53. The company also provided year-to-date figures, showing revenues up 4.1% to $2.2 billion and net income attributable to Global Payments up 10.2% to $234.5 million. Diluted earnings per share for the nine-month period increased by 14.6% to $1.80. These results were achieved despite unfavorable currency fluctuations, highlighting the underlying operational strength of the business. Investors should note the significant pending acquisition of Heartland Payment Systems, Inc., which is expected to close in the fiscal fourth quarter of 2016 and is being financed through a substantial debt facility.

Financial Highlights

47 data points
Beta

Revenue

$626.26M

Net Income

$59.91M

9.6% Net Margin

EPS (Diluted)

$0.46

Total Assets

$4.70B

Cash & Equivalents

$627.92M

Free Cash Flow

$208.21M

Financial Statements
Beta
Revenue$626.26M
SG&A Expenses$283.50M
Operating Expenses$531.69M
Operating Income$94.57M
Interest Expense$13.50M
Net Income$59.91M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)129.27M
Shares Outstanding (Diluted)130.14M

Key Highlights

  • 1Consolidated revenues increased by 2.2% to $679.9 million for the three months ended February 29, 2016, compared to $665.0 million in the prior-year period.
  • 2Net income attributable to Global Payments increased by 10.4% to $69.1 million for the three months ended February 29, 2016, from $62.6 million in the prior-year period.
  • 3Diluted earnings per share increased by 15.2% to $0.53 for the three months ended February 29, 2016, from $0.46 in the prior-year period.
  • 4Year-to-date (nine months) revenues increased by 4.1% to $2.2 billion.
  • 5Year-to-date (nine months) net income attributable to Global Payments increased by 10.2% to $234.5 million.
  • 6The company is progressing with its proposed acquisition of Heartland Payment Systems, Inc., expected to close in fiscal 2016 fourth quarter, and has secured significant financing for the transaction.
  • 7The company maintained compliance with all applicable financial covenants under its credit facilities.

Frequently Asked Questions

Revenue growth in the three months ended February 29, 2016 was driven by increases in the North America segment (primarily from direct distribution channels, including the FIS Gaming Business acquisition and organic growth) and the Europe segment (due to increased card transactions and volume growth in the UK and Spain). Despite these increases, unfavorable currency fluctuations had a $23.2 million impact on consolidated revenues.

The proposed acquisition of Heartland is a significant event. The company has entered into a merger agreement and secured up to $4.78 billion in financing, which will be used to fund the cash portion of the transaction, repay Heartland's existing debt, and cover acquisition costs. This financing arrangement will substantially increase Global Payments' outstanding debt and future interest expense.

Global Payments reported $825.5 million in cash and cash equivalents as of February 29, 2016. The company believes that its current liquidity, borrowing capacity, and future operating cash flows, including the committed financing for the Heartland acquisition, are sufficient to meet its existing operations and future requirements.

Currency fluctuations had an unfavorable impact on the company's reported results. For the three months ended February 29, 2016, currency fluctuations negatively impacted consolidated revenues by $23.2 million and operating income by $9.1 million. For the nine months ended February 29, 2016, the impact on revenues was $105.9 million and on operating income was $41.7 million.