10-QPeriod: Q3 FY2019

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 31, 2019For Securities:GPN

Summary

Global Payments Inc. (GPN) reported its third-quarter and nine-month results for the period ending September 30, 2019. The significant event during this period was the completion of the merger with Total System Services, Inc. (TSYS) on September 18, 2019, a transaction valued at $24.5 billion. This merger positions Global Payments as a leading pure-play payments technology company. The reported financial results for the period reflect the impact of this transformative acquisition, with consolidated revenues showing a substantial increase year-over-year, driven by both the TSYS acquisition and prior acquisitions. Despite revenue growth, the company experienced a decrease in net income and diluted earnings per share for both the three and nine-month periods compared to the prior year. This decline is attributed to increased operating expenses, including significant acquisition and integration costs related to the TSYS merger, as well as higher interest expenses due to increased long-term debt incurred to finance the transaction. The company's balance sheet reflects a substantial increase in goodwill and other intangible assets due to the acquisition.

Financial Highlights

51 data points
Beta

Revenue

$1.11B

61.3% Gross Margin

Net Income

$95.04M

8.6% Net Margin

EPS (Diluted)

$0.54

Total Assets

$45.21B

Cash & Equivalents

$2.13B

Free Cash Flow

$1.10B

Financial Statements
Beta
Revenue$1.11B
Cost of Revenue$427.72M
Gross Profit$678.22M
SG&A Expenses$504.18M
Operating Expenses$931.90M
Operating Income$174.04M
Interest Expense$96.00M
Net Income$95.04M
EPS (Basic)$0.54
EPS (Diluted)$0.54
Shares Outstanding (Basic)177.04M
Shares Outstanding (Diluted)177.54M

Key Highlights

  • 1Completion of the $24.5 billion merger with TSYS on September 18, 2019, significantly expanding the company's scale and capabilities.
  • 2Consolidated revenues increased by 28.9% for the three months and 17.6% for the nine months ended September 30, 2019, primarily driven by the TSYS acquisition and previous acquisitions.
  • 3Net income attributable to Global Payments decreased to $95.0 million for the three months and $327.8 million for the nine months ended September 30, 2019, down from $176.4 million and $376.8 million in the prior year, respectively.
  • 4Diluted earnings per share declined to $0.54 for the three months and $2.00 for the nine months ended September 30, 2019, compared to $1.11 and $2.36 in the prior year.
  • 5Operating income for the three months decreased by 22.0% to $174.0 million due to acquisition and integration expenses, while operating income for the nine months increased by 4.4% to $595.3 million.
  • 6Long-term debt increased substantially to $9.0 billion as of September 30, 2019, largely due to debt assumed and incurred to finance the TSYS acquisition.
  • 7Goodwill and intangible assets saw significant increases on the balance sheet due to the TSYS acquisition, with goodwill growing to $23.8 billion.

Frequently Asked Questions

The most significant event was the completion of the merger with Total System Services, Inc. (TSYS) on September 18, 2019. This was a major strategic transaction that combined two significant players in the payments industry and significantly increased Global Payments' scale and market presence.

The decrease in net income and EPS was primarily due to significant integration and acquisition-related expenses incurred from the TSYS merger. Additionally, the increased debt load to finance the acquisition resulted in higher interest expenses, further impacting profitability.

The balance sheet has been significantly impacted, most notably by a substantial increase in Goodwill (to $23.8 billion) and other intangible assets, reflecting the value attributed to the acquired business. Long-term debt also increased substantially to $9.0 billion to fund the transaction.

The company is now positioned as a leading pure-play payments technology company. While near-term results are impacted by integration costs and higher interest expenses, the strategic rationale for the merger points towards potential long-term benefits from combined operations, enhanced technology offerings, and synergy realization. Management is focused on integrating TSYS and realizing the anticipated benefits.