10-QPeriod: Q3 FY2018

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported its financial results for the third quarter and the first nine months of 2018. For the third quarter, revenues were $857.7 million, a decrease of 17.4% compared to $1,038.9 million in the prior year, largely due to the adoption of a new revenue recognition standard. However, excluding this accounting change, revenues would have increased by 10.6%. Operating income significantly increased by 29.4% to $223.2 million from $172.5 million in the prior year. Net income attributable to Global Payments rose to $176.4 million from $110.7 million, leading to a substantial improvement in diluted earnings per share to $1.11 from $0.71. For the nine-month period, revenues were $2,485.8 million, down 14.9% from $2,920.9 million year-over-year, again impacted by the new revenue standard. Excluding this impact, revenues would have grown by 13.3%. Operating income saw a robust increase of 39.3% to $570.1 million from $409.3 million. Net income attributable to Global Payments grew to $376.8 million from $226.5 million, and diluted EPS improved to $2.36 from $1.47. The company continues to expand through strategic acquisitions, including AdvancedMD and SICOM Systems, Inc. post-quarter end, indicating a focus on growth and technological advancement.

Financial Highlights

52 data points
Beta

Revenue

$857.67M

69.1% Gross Margin

Net Income

$176.37M

20.6% Net Margin

EPS (Diluted)

$1.11

Total Assets

$13.84B

Cash & Equivalents

$990.60M

Free Cash Flow

$154.25M

Financial Statements
Beta
Revenue$857.67M
Cost of Revenue$265.01M
Gross Profit$592.66M
SG&A Expenses$369.50M
Operating Expenses$634.51M
Operating Income$223.16M
Interest Expense$46.00M
Net Income$176.37M
EPS (Basic)$1.12
EPS (Diluted)$1.11
Shares Outstanding (Basic)158.17M
Shares Outstanding (Diluted)158.71M

Key Highlights

  • 1Revenues for the three months ended September 30, 2018 were $857.7 million, a decrease of 17.4% YoY, primarily due to the adoption of ASC 606. Excluding this, revenue growth was 10.6%.
  • 2Operating income for the third quarter surged by 29.4% to $223.2 million, demonstrating improved operational efficiency.
  • 3Net income attributable to Global Payments increased by 59.3% to $176.4 million for the quarter and by 66.4% to $376.8 million for the nine-month period.
  • 4Diluted earnings per share (EPS) saw significant growth, rising to $1.11 in Q3 2018 from $0.71 in Q3 2017, and to $2.36 for the nine months from $1.47.
  • 5The company continues its acquisition strategy with the mention of AdvancedMD acquisition in September 2018 and SICOM Systems, Inc. in October 2018.
  • 6Consolidated revenues for the nine months ended September 30, 2018 were $2,485.8 million, a decrease of 14.9% YoY, but showed 13.3% growth when adjusted for the new revenue recognition standard.
  • 7Operating income for the nine months increased by 39.3% to $570.1 million, reflecting strong performance and effective cost management.

Frequently Asked Questions

The primary reason for the reported decrease in revenues is the adoption of a new revenue recognition standard (ASC 606) effective January 1, 2018. This standard requires revenues to be presented net of certain fees paid to third parties, such as payment networks. Excluding this accounting change, Global Payments Inc. actually experienced revenue growth in both periods.

Profitability significantly improved. For the three months ended September 30, 2018, operating income increased by 29.4% year-over-year, and net income attributable to Global Payments grew by 59.3%. This trend is also evident in the nine-month period, with operating income up 39.3% and net income up 66.4%.

Global Payments Inc. is actively pursuing a growth strategy that includes both organic growth and strategic acquisitions. The company has acquired businesses like AdvancedMD in September 2018 and SICOM Systems, Inc. in October 2018, indicating a focus on expanding its technology-enabled software solutions and entering new vertical markets.

The company has a substantial credit facility with multiple term loans and a revolving credit facility. They have actively managed their debt, including refinancing and extending maturities in 2018. As of September 30, 2018, they had $990.6 million in cash and cash equivalents and maintained compliance with their debt covenants, suggesting a stable liquidity and capital resources position.