10-QPeriod: Q2 FY2019

GLOBAL PAYMENTS INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 30, 2019For Securities:GPN

Summary

Global Payments Inc. (GPN) reported solid financial results for the second quarter and the first half of 2019, demonstrating revenue growth and improved profitability. Revenues increased by 12.2% for the quarter and 11.7% for the six-month period, driven primarily by contributions from acquisitions made in late 2018, specifically SICOM and AdvancedMD. The company also saw an improvement in operating income and margins across its segments, particularly in North America and Asia-Pacific, reflecting effective cost management and revenue expansion. The company is also actively preparing for its significant merger with Total System Services, Inc. (TSYS), announced in May 2019. This merger, valued at approximately $23.7 billion, is expected to close in the fourth quarter of 2019 and represents a major strategic move for Global Payments. The company has secured significant financing to support this transaction and is navigating various regulatory approvals and shareholder votes. Despite ongoing integration costs and potential risks associated with the merger, the company's current performance indicates a strong operational foundation.

Financial Highlights

52 data points
Beta

Revenue

$935.15M

67.7% Gross Margin

Net Income

$120.46M

12.9% Net Margin

EPS (Diluted)

$0.77

Total Assets

$14.58B

Cash & Equivalents

$1.05B

Free Cash Flow

$17.62M

Financial Statements
Beta
Revenue$935.15M
Cost of Revenue$302.28M
Gross Profit$632.88M
SG&A Expenses$411.15M
Operating Expenses$713.43M
Operating Income$221.73M
Interest Expense$65.50M
Net Income$120.46M
EPS (Basic)$0.77
EPS (Diluted)$0.77
Shares Outstanding (Basic)156.77M
Shares Outstanding (Diluted)157.26M

Key Highlights

  • 1Consolidated revenues grew by 12.2% to $935.2 million for Q2 2019 and by 11.7% to $1,818.2 million for the first six months of 2019, primarily due to acquisitions.
  • 2Operating income increased to $221.7 million for Q2 2019 and $421.2 million for the first six months of 2019, with operating margins improving to 23.7% and 23.2% respectively.
  • 3Net income attributable to Global Payments rose to $120.5 million for Q2 2019 and $232.8 million for the first six months of 2019.
  • 4Diluted earnings per share (EPS) increased to $0.77 for Q2 2019 and $1.48 for the first six months of 2019, up from $0.68 and $1.25 in the prior-year periods.
  • 5The company announced a significant merger with TSYS in May 2019, valued at approximately $23.7 billion, expected to close in Q4 2019.
  • 6Global Payments secured commitments for a $2.75 billion bridge facility and entered into new credit agreements for a $2.0 billion term loan and a $3.0 billion revolving credit facility in preparation for the TSYS merger.
  • 7The North America segment showed strong revenue growth of 15.1% for Q2 2019, largely driven by the SICOM and AdvancedMD acquisitions.

Frequently Asked Questions

Revenue growth was primarily driven by the contributions from businesses acquired in the second half of 2018, specifically SICOM Systems, Inc. and AdvancedMD, Inc. Organic growth also contributed, although it was partially offset by unfavorable foreign currency exchange rates in some regions.

Global Payments entered into a Merger Agreement with TSYS on May 27, 2019, with an expected closing in the fourth quarter of 2019, subject to shareholder and regulatory approvals. The company has secured significant financing for the transaction and is actively preparing for integration, though risks and substantial costs are associated with this process.

As of June 30, 2019, the company had significant long-term debt. In anticipation of the TSYS merger, Global Payments obtained commitments for a $2.75 billion bridge facility and entered into new credit agreements for a $2.0 billion term loan and a $3.0 billion revolving credit facility to refinance existing debt and fund the merger. The increased debt level could impact business flexibility.

Cost of service increased by 14.3% for Q2 2019, outpacing revenue growth, partly due to increased amortization of acquired intangibles. Selling, general, and administrative expenses increased by 8.8% for Q2 2019, but as a percentage of revenue, they decreased compared to the prior year. Despite increased costs, operating income and margins improved due to strong revenue growth, especially in the North America segment.