10-QPeriod: Q1 FY2020

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 6, 2020For Securities:GPN

Summary

Global Payments Inc. (GPN) reported strong revenue growth in the first quarter of 2020, largely driven by the acquisition of TSYS. Consolidated revenues more than doubled year-over-year, reaching $1.90 billion. However, the company also experienced a significant increase in operating expenses, particularly due to amortization of acquired intangibles and merger-related integration costs, which led to a decrease in operating margin to 12.8% from 22.6% in the prior year. Net income attributable to Global Payments increased to $143.6 million, but diluted EPS declined to $0.48 from $0.71, reflecting a higher share count post-merger. The company highlighted that the COVID-19 pandemic began to significantly impact results in mid-March, leading to revenue declines in its Merchant, Issuer, and Business and Consumer Solutions segments. While current liquidity is deemed sufficient, management has implemented cost-saving measures and reduced planned capital expenditures and stock repurchases to mitigate the pandemic's financial effects. The company anticipates continued adverse impacts on its revenues and financial results throughout 2020.

Financial Highlights

51 data points
Beta

Revenue

$1.90B

50.9% Gross Margin

Net Income

$143.57M

7.5% Net Margin

EPS (Diluted)

$0.48

Total Assets

$43.85B

Cash & Equivalents

$1.80B

Free Cash Flow

$436.57M

Financial Statements
Beta
Revenue$1.90B
Cost of Revenue$933.87M
Gross Profit$969.73M
SG&A Expenses$725.75M
Operating Expenses$1.66B
Operating Income$243.98M
Interest Expense$81.10M
Net Income$143.57M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)299.39M
Shares Outstanding (Diluted)300.84M

Key Highlights

  • 1Consolidated revenues surged by 115.6% to $1.90 billion in Q1 2020, primarily due to the TSYS acquisition.
  • 2Operating income increased to $244.0 million, but the operating margin compressed significantly to 12.8% from 22.6% due to increased amortization and integration costs.
  • 3Net income attributable to Global Payments rose to $143.6 million, while diluted EPS decreased to $0.48 from $0.71 due to a higher share count.
  • 4The COVID-19 pandemic began impacting results in mid-March, leading to revenue declines across all segments.
  • 5The company is taking cost-saving actions and has reduced planned capital expenditures and stock repurchases in response to COVID-19.
  • 6Goodwill increased by $34.9 million from acquisitions, but a measurement-period adjustment decreased it by $54.7 million during the quarter.
  • 7Long-term debt increased to $9.64 billion, with $1.4 billion drawn on the revolving credit facility as of March 31, 2020.

Frequently Asked Questions

The primary driver of the substantial revenue increase was the acquisition of Total System Services, Inc. (TSYS), which contributed $1,055.0 million in revenues during the first quarter of 2020. This acquisition more than doubled the company's consolidated revenues compared to the prior year.

The COVID-19 pandemic began to significantly impact Global Payments' results in mid-March 2020. This led to revenue declines across its Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions segments due to reduced consumer spending, business closures, and government-imposed restrictions. The company anticipates continued adverse effects on revenues and financial results throughout 2020.

Global Payments has a significant amount of long-term debt, totaling $9.64 billion as of March 31, 2020. This includes various senior notes and term loans. The company also has a $3.0 billion senior unsecured revolving credit facility, of which $1.4 billion was outstanding at the end of the quarter. While the company was in compliance with its debt covenants, the increased borrowings contributed to higher interest expenses.

Global Payments is implementing cost-saving actions, including reductions in employee compensation costs, business travel, and marketing initiatives. The company has also reduced planned capital expenditures and stock repurchases to help mitigate the financial effects of the pandemic.