10-QPeriod: Q1 FY2017

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 4, 2017For Securities:GPN

Summary

Global Payments Inc. (GPN) reported its first quarter results for the period ending March 31, 2017. The company saw a significant increase in consolidated revenues, up 46.9% to $919.8 million, primarily driven by the inclusion of Heartland Payment Systems, acquired in April 2016. Despite revenue growth, operating income saw a modest increase of 11.0% to $105.0 million, while operating margin declined to 11.4% from 15.1% in the prior year. Net income attributable to Global Payments decreased by 18.5% to $48.8 million, or $0.32 per diluted share, compared to $59.9 million, or $0.46 per diluted share, in the same period last year. This decline was influenced by increased cost of services, higher depreciation and amortization, and integration expenses related to the Heartland acquisition. The company's balance sheet shows robust liquidity with $1.26 billion in cash and cash equivalents, though long-term debt remains substantial at over $4.2 billion.

Financial Highlights

47 data points
Beta

Revenue

$919.76M

Net Income

$48.81M

5.3% Net Margin

EPS (Diluted)

$0.32

Total Assets

$9.96B

Cash & Equivalents

$1.26B

Free Cash Flow

$293.96M

Financial Statements
Beta
Revenue$919.76M
SG&A Expenses$358.86M
Operating Expenses$814.79M
Operating Income$104.97M
Interest Expense$41.10M
Net Income$48.81M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)152.30M
Shares Outstanding (Diluted)153.25M

Key Highlights

  • 1Consolidated revenues surged by 46.9% to $919.8 million, largely due to the acquisition of Heartland.
  • 2Operating income increased by 11.0% to $105.0 million, but operating margin compressed to 11.4% from 15.1% year-over-year.
  • 3Net income attributable to Global Payments declined by 18.5% to $48.8 million.
  • 4Diluted earnings per share decreased to $0.32 from $0.46 in the prior year's quarter.
  • 5Cost of service increased significantly by 83.7%, driven by variable costs and amortization from acquired intangibles.
  • 6Selling, general, and administrative expenses rose 26.6%, but decreased as a percentage of revenue due to integration synergies.
  • 7The company maintained strong liquidity with $1.26 billion in cash and cash equivalents at quarter-end.

Frequently Asked Questions

The primary driver of the 46.9% increase in consolidated revenues to $919.8 million was the inclusion of results from the acquisition of Heartland Payment Systems, which closed in April 2016.

Net income attributable to Global Payments and diluted earnings per share decreased due to a significant increase in 'Cost of service,' which rose by 83.7%. This was driven by higher variable costs associated with revenue growth, additional amortization of intangible assets from acquisitions, and Heartland integration expenses, which also impacted selling, general and administrative expenses.

Global Payments had $1.26 billion in cash and cash equivalents at March 31, 2017, indicating strong liquidity. However, long-term debt was substantial at over $4.2 billion. The company utilizes a credit facility agreement, which was amended shortly after the quarter to increase financing capacity, and also maintains settlement lines of credit for operational needs. Management believes its current cash levels and borrowing capacity are sufficient for its operations and future growth.

The Heartland acquisition significantly boosted revenues but also led to increased operating expenses, including higher cost of service due to associated variable costs and amortization, and selling, general and administrative expenses related to integration. While synergies are being realized in SG&A expenses, the overall impact of the integration expenses and increased operational costs contributed to the decline in net income and margins for the quarter.