10-QPeriod: Q1 FY2023

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 3, 2023For Securities:GPN

Summary

Global Payments Inc. (GPN) reported a net loss of $11.0 million, or $0.04 per diluted share, for the first quarter of 2023, a significant shift from the $244.7 million profit recorded in the same period of the prior year. This downturn was primarily driven by a substantial $244.8 million loss on business dispositions and increased selling, general, and administrative expenses, largely due to acquisition and integration costs related to the significant $4.3 billion acquisition of EVO Payments, Inc. Despite these headwinds, consolidated revenues saw a 6.3% increase to $2.29 billion, primarily fueled by growth in transaction volumes and digital payment solutions. The company's strategic activities in the quarter were dominated by the transformative acquisition of EVO Payments, which is expected to bolster its market position and geographic reach. Concurrently, GPN made progress on its portfolio optimization by completing the sale of its consumer business (Netspend) and gaming business shortly after the quarter's end. These divestitures, while contributing to a loss in the current quarter, are part of a broader strategy to streamline operations and focus on core growth areas. Investors should closely monitor the integration of EVO and the financial impact of the divestitures in upcoming quarters.

Financial Highlights

50 data points
Beta

Revenue

$2.29B

58.7% Gross Margin

Net Income

-$11.04M

-0.5% Net Margin

EPS (Diluted)

$-0.04

Total Assets

$48.64B

Cash & Equivalents

$2.00B

Free Cash Flow

$599.53M

Financial Statements
Beta
Revenue$2.29B
Cost of Revenue$947.75M
Gross Profit$1.34B
SG&A Expenses$1.04B
Operating Expenses$2.24B
Operating Income$56.73M
Interest Expense$119.00M
Net Income-$11.04M
EPS (Basic)$-0.04
EPS (Diluted)$-0.04
Shares Outstanding (Basic)263.12M
Shares Outstanding (Diluted)263.12M

Key Highlights

  • 1Consolidated revenues increased by 6.3% to $2.29 billion in Q1 2023, driven by higher transaction volumes and digital payment adoption.
  • 2A significant net loss of $11.0 million ($0.04 per diluted share) was reported for Q1 2023, a reversal from a net profit of $244.7 million in Q1 2022.
  • 3The company recorded a substantial $244.8 million loss on business dispositions in Q1 2023, primarily related to the consumer business held for sale.
  • 4Global Payments completed the acquisition of EVO Payments, Inc. for $4.3 billion on March 24, 2023, significantly increasing goodwill and intangible assets on the balance sheet.
  • 5Selling, general, and administrative expenses rose by 26.7% to $1.04 billion, largely due to acquisition and integration costs for EVO and increased share-based compensation.
  • 6Net cash provided by operating activities was $599.5 million, slightly down from $630.0 million in the prior year.
  • 7The company repurchased $206.6 million of its common stock in Q1 2023, with $1.3 billion remaining under its share repurchase program.

Frequently Asked Questions

The primary driver for the shift from net profit to a net loss was a substantial $244.8 million loss recognized on business dispositions related to assets held for sale, coupled with increased selling, general, and administrative expenses. These expenses were significantly impacted by acquisition and integration costs associated with the $4.3 billion acquisition of EVO Payments, Inc.

The acquisition of EVO Payments added $3.52 billion in goodwill and $1.21 billion in identifiable intangible assets to the balance sheet as of March 31, 2023. This transaction also contributed to increased acquisition and integration expenses, which significantly impacted operating expenses and the company's net loss for the quarter. The company also increased its long-term debt to fund a portion of this acquisition.

Consolidated revenues increased by 6.3% to $2.29 billion in Q1 2023, primarily driven by an increase in transaction volumes due to the growing adoption of digital payment solutions. The Merchant Solutions and Issuer Solutions segments showed notable revenue growth. While this trend is positive, investors should monitor the impact of foreign currency exchange rates and overall economic conditions on future revenue growth.

The report details the completion of the sale of the consumer portion of its Netspend business and its gaming business shortly after the quarter ended. While these divestitures contributed to a significant loss in the current quarter (consumer business), they are part of a strategic move to streamline operations and focus on core growth areas. The sale of the gaming business is expected to result in a gain in the second quarter of 2023.