10-QPeriod: Q3 FY2020

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:GPN

Summary

Global Payments Inc. (GPN) reported a significant increase in revenues for the third quarter and the first nine months of 2020 compared to the prior year, largely driven by the acquisition of TSYS. While consolidated revenues grew substantially, operating income and margins showed mixed performance, impacted by the TSYS acquisition integration costs and the ongoing COVID-19 pandemic. The company navigated these challenges by implementing cost-saving measures and demonstrating resilience in its recovery through the latter half of the second and into the third quarter. Net income attributable to Global Payments also increased year-over-year for both periods, supported by the TSYS contribution and equity in income from investments. Diluted Earnings Per Share (EPS) saw an increase in the third quarter but a decrease for the nine-month period compared to 2019, reflecting the impact of a higher weighted-average share count post-Merger. The company maintained a strong liquidity position and was in compliance with its debt covenants, indicating a stable financial footing despite the macroeconomic uncertainties.

Financial Highlights

51 data points
Beta

Revenue

$1.92B

53.0% Gross Margin

Net Income

$220.97M

11.5% Net Margin

EPS (Diluted)

$0.74

Total Assets

$44.55B

Cash & Equivalents

$2.22B

Free Cash Flow

$584.47M

Financial Statements
Beta
Revenue$1.92B
Cost of Revenue$900.92M
Gross Profit$1.02B
SG&A Expenses$726.48M
Operating Expenses$1.63B
Operating Income$290.42M
Interest Expense$82.10M
Net Income$220.97M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)299.25M
Shares Outstanding (Diluted)300.49M

Key Highlights

  • 1Consolidated revenues increased significantly by 73.4% for the three months ended September 30, 2020, to $1.92 billion and by 87.9% for the nine months ended September 30, 2020, to $5.49 billion, primarily due to the TSYS acquisition.
  • 2Operating income increased for both periods, but operating margins decreased to 15.1% (Q3) and 11.7% (nine months) in 2020, down from 15.7% and 20.4% in 2019, attributed to increased amortization of acquired intangibles and acquisition/integration expenses, partially offset by cost-saving measures.
  • 3Net income attributable to Global Payments rose to $221.0 million for Q3 2020 and $401.9 million for the nine months ended Sept 30, 2020.
  • 4Diluted EPS for Q3 2020 was $0.74, up from $0.54 in Q3 2019. For the nine months, diluted EPS decreased to $1.34 in 2020 from $2.00 in 2019, influenced by a higher share count.
  • 5The company reported $2.22 billion in cash and cash equivalents as of September 30, 2020, indicating solid liquidity.
  • 6Global Payments continued to monitor the impact of COVID-19, noting an adverse effect on revenues but also seeing signs of recovery throughout Q3.
  • 7The company successfully managed its debt obligations, remaining in compliance with all applicable covenants under its credit facilities.

Frequently Asked Questions

The acquisition of TSYS significantly boosted Global Payments' revenue, contributing $1,067.2 million and $3,119.2 million to consolidated revenues for the three and nine months ended September 30, 2020, respectively. This acquisition was the primary driver for the substantial year-over-year revenue growth. However, it also increased operating expenses due to amortization of acquired intangibles and integration costs, impacting operating margins.

Global Payments acknowledged that the COVID-19 pandemic continued to have an adverse effect on its revenues and financial results throughout the third quarter of 2020. However, the company also noted an improvement and positive trends during the latter half of the second quarter and continuing into the third quarter as restrictions eased and economic activity gradually recovered. Management expects the pandemic to continue impacting results for the remainder of 2020, but they have implemented cost-saving measures and are closely monitoring the situation.

As of September 30, 2020, Global Payments held $2.22 billion in cash and cash equivalents, indicating strong liquidity. Long-term debt remained significant, but the company was in compliance with all debt covenants. They also managed their credit facilities effectively, with no outstanding borrowings under the revolving credit facility at the quarter's end, demonstrating financial flexibility.

For the third quarter, Diluted EPS increased to $0.74 from $0.54, benefiting from higher net income. However, for the nine-month period, Diluted EPS decreased to $1.34 from $2.00. This decrease was primarily due to a significant increase in the weighted-average number of shares outstanding as a result of issuing common shares as part of the TSYS acquisition consideration, which diluted the EPS despite overall profit growth.