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Global Payments Reports Second Quarter 2022 Results

Reaffirms Constant Currency Outlook (Excluding Dispositions)

Enters Agreement to Purchase EVO Payments

Silver Lake Commits Strategic Investment

Executes Agreement to Sell Netspend Consumer Assets

ATLANTA, August 01, 2022--(BUSINESS WIRE)--Global Payments Inc. (NYSE: GPN) today announced results for the second quarter ended June 30, 2022.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220801005237/en/

"Our second quarter performance was the best in our history and exceeded our expectations despite incremental challenges throughout the period," said Jeff Sloan, Chief Executive Officer. "Our Merchant and Issuer businesses both exceeded our targets, with our Issuer business delivering significant sequential improvement as expected. And we achieved this performance while further aligning our business with our strategy, expanding our unique partnerships, extending our lead and deepening our competitive moat."

"We made substantial progress on our strategy during the quarter. First, we are delighted to announce we have entered into a definitive agreement to acquire EVO Payments for $4.0 billion, significantly increasing our target addressable markets, enhancing our leadership in integrated payments worldwide, expanding our presence in new and further scaling in existing faster growth geographies, and augmenting our business-to-business (or B2B) software and payment solutions."

"Second, we are thrilled to announce that Silver Lake, the global leader in technology investing, has committed a $1.5 billion long-term strategic investment in Global Payments in the form of convertible senior notes. Silver Lake has an outstanding track record of successful investments in technology-driven companies, and we are humbled by their confidence in us as a winner in the digital payments space. This new partnership serves as further proof of the distinctiveness of our model, provides more evidence of the success of our disruptive role in the payments ecosystem, and positions us as a leading driver and beneficiary of innovation in payments for many years to come."

"Third, we made significant progress in refining our portfolio to focus on our core corporate clients this quarter by entering into a definitive agreement to sell Netspend’s consumer assets to Searchlight Capital and Rev Worldwide for $1.0 billion. Consistent with our strategy, we will retain Netspend’s B2B assets, which will be included in our Issuer Solutions business beginning with the third quarter of 2022."

Sloan concluded, "The completion of these important transactions will provide us with enhanced confidence in the raised growth and margin targets over the cycle that we articulated at our investor conference last September. Upon closing, Merchant Solutions will represent approximately 75% of our adjusted net revenue with Issuer Solutions, including B2B, comprising roughly 25%."

Second Quarter 2022 Summary

  • GAAP revenues were $2.28 billion, compared to $2.14 billion in the second quarter of 2021; diluted (loss) earnings per share were $(2.42) compared to $0.89 in the prior year; and operating margin was (23.0)% compared to 17.0% in the prior year.

  • Adjusted net revenues increased 6.1% to $2.06 billion, compared to $1.94 billion in the second quarter of 2021; excluding the Netspend consumer assets, now classified as held for sale, adjusted net revenue increased 9.0%.

  • Adjusted earnings per share increased 15.7% to $2.36, compared to $2.04 in the second quarter of 2021.

  • Adjusted operating margin expanded 200 basis points to 43.8%; excluding the Netspend consumer assets, adjusted operating margin was 45.3%.

2022 Outlook

"We are pleased with our strong financial performance in the second quarter, which exceeded our expectations despite ongoing macro concerns, the exit of our Russian business and incremental headwinds from adverse foreign currency exchange rates," said Josh Whipple, Senior Executive Vice President and Chief Financial Officer. "On a constant currency basis, we achieved high-single-digit adjusted net revenue growth, expanded adjusted operating margins meaningfully and delivered high-teens adjusted earnings per share growth driven by consistent execution of our technology-enabled strategy."

"For 2022, we expect constant currency adjusted net revenue before dispositions in a range of $8.48 billion to $8.55 billion, reflecting growth of 10% to 11% over 2021 and consistent with our prior outlook. Further, adjusted earnings per share on a constant currency basis are expected to be in a range of $9.53 to $9.75, reflecting growth of 17% to 20% over 2021 and consistent with our prior outlook. Also, we are raising our expectation for adjusted operating margin expansion to up to 150 basis points, an increase from the prior outlook of up to 125 basis points."

"Our 2022 outlook presumes continuing recovery from the pandemic worldwide and a stable global macroeconomic environment throughout the remainder of this calendar year."

Whipple concluded, "We expect the acquisition of EVO Payments and the disposition of Netspend’s consumer business to close in the first quarter of 2023, subject to receipt of regulatory approvals and satisfaction of customary closing conditions."

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.25 per share payable September 30, 2022 to shareholders of record as of September 16, 2022, and authorized an increase of the company's share repurchase program to a total available authorization of $1.5 billion.

Conference Call

Global Payments’ management will host a live audio webcast today, August 1, 2022, at 8:00 a.m. EDT to discuss financial results and business highlights. The audio webcast, along with supplemental financial information, can be accessed via the investor relations page of the company’s website at investors.globalpaymentsinc.com. A replay of the audio webcast will be archived on the company's website following the live event.

Non-GAAP Financial Measures

Global Payments supplements revenues, income (loss), operating income (loss), operating margin and earnings (loss) per share determined in accordance with GAAP by providing these measures with certain adjustments (such measures being non-GAAP financial measures) in this earnings release to assist with evaluating our performance. In addition to GAAP measures, management uses these non-GAAP financial measures to focus on the factors the company believes are pertinent to the daily management of our operations.

Global Payments also has provided supplemental non-GAAP information to reflect the planned divestiture of the consumer portion of our Business and Consumer Solutions segment and the realignment of the retained business-to-business portion of the Business and Consumer Solutions segment to the Issuer Solutions segment that we anticipate will take place during the third quarter of 2022. Management believes that providing such supplemental financial information should enhance shareholders’ ability to evaluate how the business will be managed going forward.

Reconciliations of each of the non-GAAP financial measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments

Global Payments Inc. (NYSE: GPN) is a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.

Headquartered in Georgia with approximately 25,000 team members worldwide, Global Payments is a Fortune 500® company and a member of the S&P 500 with worldwide reach spanning over 170 countries throughout North America, Europe, Asia Pacific and Latin America. For more information, visit www.globalpayments.com and follow Global Payments on Twitter (@globalpayinc), LinkedIn and Facebook.

Forward-Looking Statements

Investors are cautioned that some of the statements we use in this report contain forward-looking statements and are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of and assumptions made by our management, involve risks and uncertainties that could significantly affect the financial condition, results of operations, business plans and the future performance of Global Payments. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Examples of forward-looking statements include, but are not limited to, statements we make regarding guidance and projected financial results for the year 2022; the effects of the COVID-19 pandemic and other global events and economic conditions on our business; statements about the strategic rationale and benefits of the proposed acquisition of EVO Payments, Inc. ("EVO"), including future financial and operating results, the combined company’s plans, objectives, expectation and intentions and the expected timing of completion of the proposed transaction; planned divestitures or strategic initiatives; our success and timing in developing and introducing new services; and future financial and operating results. Although we believe that the plans and expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our plans and expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

In addition to factors previously disclosed in Global Payments’ reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the effects of global economic, political, market, health and social events or other conditions, including the effects and duration of, and actions taken in response to, the COVID-19 pandemic and the evolving situation involving Ukraine and Russia; foreign currency exchange, inflation and rising interest rates; difficulties, delays and higher than anticipated costs related to integrating the businesses of acquired companies, including with respect to implementing controls to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; our ability to complete the proposed transaction with EVO on the proposed terms or on the proposed timeline, or at all, including risks and uncertainties related to securing the necessary regulatory and stockholder approvals and the satisfaction of other closing conditions; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive merger agreement relating to the transaction with EVO; our ability to obtain the expected financing to the consummate the proposed transaction with EVO; effects relating to the announcement of the proposed transaction with EVO, including on the market price of our common stock and our relationships with customers, employees and suppliers; the risk of potential stockholder litigation associated with the proposed transaction with EVO; the effect of a security breach or operational failure on our business; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability to maintain Visa and Mastercard registration and financial institution sponsorship; the ability to retain, develop and hire key personnel; the diversion of management’s attention from ongoing business operations; the continued availability of capital and financing; increased competition in the markets in which we operate and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness; our ability to meet environmental, social or governance targets, goals and commitments; the potential effect of climate change including natural disasters; the effects of new or changes in current laws, regulations, credit card association rules or other industry standards on us or our partners and customers, including privacy and cybersecurity laws and regulations; and other events beyond our control, such as acts of terrorism, and other factors included in the "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, and in other documents that we file with the SEC, which are available at https://www.sec.gov.

Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements, except as required by law.

SCHEDULE 1

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

%
Change

2022

2021

%
Change

Revenues

$

2,280,906

$

2,137,437

6.7

%

$

4,437,160

$

4,127,444

7.5

%

Operating expenses:

Cost of service

962,299

936,310

2.8

%

1,919,457

1,861,556

3.1

%

Selling, general and administrative

863,179

838,569

2.9

%

1,686,328

1,628,071

3.6

%

Impairment of goodwill

833,075

833,075

Loss on business dispositions

152,211

152,211

2,810,764

1,774,879

4,591,071

3,489,627

Operating (loss) income

(529,858

)

362,558

(246.1

)%

(153,911

)

637,817

(124.1

)%

Interest and other income

2,956

5,455

(45.8

)%

4,667

9,689

(51.8

)%

Interest and other expense

(99,188

)

(80,556

)

23.1

%

(192,471

)

(163,697

)

17.6

%

(96,232

)

(75,101

)

(187,804

)

(154,008

)

(Loss) income before income taxes and equity in income of equity method investments

(626,090

)

287,457

(317.8

)%

(341,715

)

483,809

(170.6

)%

Income tax expense

52,776

60,808

(13.2

)%

104,994

81,483

28.9

%

(Loss) income before equity in income of equity method investments

(678,866

)

226,649

(399.5

)%

(446,709

)

402,326

(211.0

)%

Equity in income of equity method investments, net of tax

13,815

40,164

(65.6

)%

31,294

62,897

(50.2

)%

Net (loss) income

(665,051

)

266,813

(349.3

)%

(415,415

)

465,223

(189.3

)%

Net income attributable to noncontrolling interests, net of tax

(7,948

)

(3,223

)

146.6

%

(12,851

)

(4,952

)

159.5

%

Net (loss) income attributable to Global Payments

$

(672,999

)

$

263,590

(355.3

)%

$

(428,266

)

$

460,271

(193.0

)%

(Loss) earnings per share attributable to Global Payments:

Basic (loss) earnings per share

$

(2.42

)

$

0.89

(371.9

)%

$

(1.53

)

$

1.56

(198.1

)%

Diluted (loss) earnings per share

$

(2.42

)

$

0.89

(371.9

)%

$

(1.53

)

$

1.55

(198.7

)%

Weighted-average number of shares outstanding:

Basic

278,181

294,914

280,130

295,665

Diluted

278,181

296,139

280,130

296,901

SCHEDULE 2

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

% Change

2022

2021

% Change

Adjusted net revenue

$

2,058,450

$

1,940,537

6.1

%

$

4,011,105

$

3,752,755

6.9

%

Adjusted operating income

902,352

810,187

11.4

%

1,704,823

1,545,303

10.3

%

Adjusted net income attributable to Global Payments

657,776

603,004

9.1

%

1,242,616

1,144,368

8.6

%

Adjusted diluted earnings per share attributable to Global Payments

$

2.36

$

2.04

15.7

%

$

4.43

$

3.85

15.1

%

Supplemental Non-GAAP(1)

Adjusted net revenue(1)

$

1,907,371

$

1,749,226

9.0

%

$

3,701,901

$

3,354,128

10.4

%

Adjusted operating income(1)

$

864,926

$

758,861

14.0

%

$

1,629,295

$

1,422,811

14.5

%

__________________________

(1)

The supplemental non-GAAP information reflects the planned divestiture of the consumer portion of our Business and Consumer Solutions segment.

See Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure, Schedules 8 and 9 for a reconciliation of supplemental non-GAAP information to the most comparable GAAP measure, and Schedule 10 for a discussion of non-GAAP financial measures.

SCHEDULE 3

SEGMENT INFORMATION (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended

June 30, 2022

June 30, 2021

% Change

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenues:

Merchant Solutions

$

1,581,716

$

1,433,933

$

1,426,755

$

1,288,709

10.9

%

11.3

%

Issuer Solutions

534,471

459,073

505,932

446,407

5.6

%

2.8

%

Business and Consumer Solutions

187,632

187,632

227,355

227,356

(17.5

)%

(17.5

)%

Intersegment Elimination

(22,913

)

(22,188

)

(22,605

)

(21,934

)

(1.4

)%

(1.2

)%

$

2,280,906

$

2,058,450

$

2,137,437

1,940,537

6.7

%

6.1

%

Operating income (loss):

Merchant Solutions

$

535,359

$

719,779

$

437,293

$

624,656

22.4

%

15.2

%

Issuer Solutions

67,715

199,803

74,806

195,952

(9.5

)%

2.0

%

Business and Consumer Solutions

31,726

49,089

...