10-QPeriod: Q1 FY2018

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:GPN

Summary

Global Payments Inc. (GPN) reported its first-quarter results for 2018, showing a notable increase in net income attributable to shareholders, rising to $91.4 million from $48.8 million in the prior year period. This growth was accompanied by a significant improvement in diluted earnings per share, which increased to $0.57 from $0.32. Despite a reported decrease in consolidated revenues to $795.0 million from $919.8 million, the company's operating income saw a substantial rise to $156.2 million from $105.0 million. This performance was significantly influenced by the adoption of new revenue recognition standards (ASC 606) effective January 1, 2018, which changed the presentation of revenue and cost of service by netting certain third-party fees. When adjusted for this accounting change, consolidated revenues actually grew by 13.7% on an organic basis. The company also benefited from acquisitions, particularly the ACTIVE Network acquisition contributing to growth in the North America segment. Management highlighted continued expansion opportunities through acquisitions and joint ventures in the evolving payments industry.

Financial Highlights

52 data points
Beta

Revenue

$794.98M

68.3% Gross Margin

Net Income

$91.40M

11.5% Net Margin

EPS (Diluted)

$0.57

Total Assets

$12.90B

Cash & Equivalents

$1.01B

Free Cash Flow

$284.54M

Financial Statements
Beta
Revenue$794.98M
Cost of Revenue$252.39M
Gross Profit$542.59M
SG&A Expenses$386.42M
Operating Expenses$638.81M
Operating Income$156.17M
Interest Expense$45.50M
Net Income$91.40M
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)159.32M
Shares Outstanding (Diluted)160.03M

Key Highlights

  • 1Net income attributable to Global Payments significantly increased by 87.2% to $91.4 million for Q1 2018, up from $48.8 million in Q1 2017.
  • 2Diluted Earnings Per Share (EPS) improved by 78.1% to $0.57 from $0.32 in the same period.
  • 3Consolidated operating income rose by 48.8% to $156.2 million, indicating strong operational performance.
  • 4The company adopted new revenue recognition standards (ASC 606) starting January 1, 2018, which impacted the presentation of revenues and expenses but not operating income. On a pro forma basis, adjusted revenues increased by 13.7%.
  • 5Acquisitions, such as ACTIVE Network, contributed to the growth in the North America segment.
  • 6The company maintained compliance with its debt covenants and has sufficient liquidity from cash and credit facilities to meet its operational and growth needs.
  • 7Share-based compensation expense increased from $8.8 million to $14.9 million, reflecting higher equity awards.

Frequently Asked Questions

Effective January 1, 2018, Global Payments adopted ASC 606. This standard changed the presentation of revenues and cost of service by netting certain fees paid to third parties. While this reduced reported revenues and cost of service by the same amount, it had no impact on operating income. On a pro forma basis, excluding the presentation change, consolidated revenues actually grew by 13.7% year-over-year for the first quarter of 2018.

The acquisition of ACTIVE Network, completed in September 2017, played a role in the performance, particularly in the North America segment. The company noted that revenues from its North America segment, excluding the impact of the new accounting standard, increased by 11.1%, partly due to the addition of ACTIVE Network.

As of March 31, 2018, Global Payments had $1,005.8 million in cash and cash equivalents. The company also has access to significant borrowing capacity under its Credit Facility and settlement lines of credit. Management believes its current cash, borrowing capacity, and operating cash flows are sufficient to meet its foreseeable needs. The company reported compliance with its debt covenants, including leverage and fixed charge coverage ratios.

Profitability saw significant improvement. Net income attributable to Global Payments increased by 87.2% to $91.4 million, and diluted EPS rose by 78.1% to $0.57. This was driven by a substantial increase in operating income, which grew by 48.8% to $156.2 million, reflecting improved operational efficiency and contributions from acquisitions.