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Global Payments Reports Third Quarter 2021 Results

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·16 min read
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  • GPN

Delivers Record Third Quarter Results

Provides Updated Outlook for 2021

Closes MineralTree Acquisition to Enter B2B Market

Completes Purchase of Bankia’s Merchant Services Business

Closes Acquisition of Worldline’s PAYONE Austrian POS Acquiring Business

ATLANTA, November 02, 2021--(BUSINESS WIRE)--Global Payments Inc. (NYSE: GPN) today announced results for the third quarter ended September 30, 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211102005352/en/

"We are pleased to have delivered the strongest performance in our history in the third quarter despite facing incremental challenges from COVID-19 during the period," said Jeff Sloan, Chief Executive Officer. "Our businesses continued to demonstrate their resilience, and our results highlight our consistent execution across cycles. As we have throughout the pandemic, we benefit from accelerated digitization across our markets. This quarter provided further proof points that our four-pillared strategy drives differentiated growth."

Sloan concluded, "Today we are a top quartile software-as-a-service (SaaS) technology company, the leading issuer technology provider and program manager with unique partnerships, and a leading e-commerce and omnichannel acquirer with unmatched virtual and physical presence. And we deliver our technologies with tremendous breadth across developed and attractive growth markets while benefiting from innovation in the ecosystem."

Strategic Highlights

  • Renewed key issuer technology partnerships with CIBC and CITI as a top SaaS provider to the most complex and sophisticated institutions worldwide;

  • Significantly expanded the duration and scope of our relationship with PayPal, including support of cryptocurrencies as a leading e-commerce technology partner;

  • Selected by Mercedes-Benz Stadium to maximize its connected commerce environment as a leading software and omnichannel enabler;

  • Announced plans to launch a two-sided ecosystem with Virgin Money to redefine consumer and merchant digital experiences as a unique network provider;

  • Formally entered the B2B market with our acquisition of MineralTree as a leading B2B company;

  • Completed the acquisition of Bankia’s merchant services business together with our partners at CaixaBank, deepening our presence in one of the most attractive markets in Europe; and

  • Closed the acquisition of Worldline’s PayOne Austrian POS acquiring assets through our Erste joint venture, bringing our distinctive distribution and market-leading technologies at scale to another strong secular growth market.

Third Quarter 2021 Summary

  • GAAP revenues were $2.20 billion, compared to $1.92 billion in the third quarter of 2020; diluted earnings per share were $1.01 compared to $0.74 in the prior year; and operating margin was 18.2% compared to 15.1% in the prior year.

  • Adjusted net revenues increased 15% to $2.00 billion, compared to $1.75 billion in the third quarter of 2020.

  • Adjusted earnings per share increased 28% to $2.18, compared to $1.71 in the third quarter of 2020.

  • Adjusted operating margin of 42.8% expanded 170 basis points.

Business Outlook

"We are delighted with the growth we achieved across our businesses despite facing incremental headwinds from the delta variant of COVID-19 in the third quarter. We are also pleased that we delivered consistent performance in our Merchant Solutions business. In particular, our worldwide acquiring businesses generated 19% adjusted net revenue growth compared to 2019, continuing our track record of strong execution and performance," said Cameron Bready, President and Chief Operating Officer.

2021 Outlook

"We are gratified by the strong financial performance we delivered in the third quarter, which exceeded our expectations despite the incremental impact of the pandemic," said Paul Todd, Senior Executive Vice President and Chief Financial Officer. "We achieved double digit adjusted net revenue growth, strong adjusted operating margin expansion and impressive adjusted earnings per share growth compared to both 2020 and 2019."

Todd concluded, "We remain encouraged by the trends we are seeing in our business, and we are increasing the lower ends of our adjusted net revenue and adjusted earnings per share guidance by $10 million and $0.03 per share, respectively. We now expect full year 2021 adjusted net revenue to be in the range of $7.71 billion to $7.73 billion, reflecting growth of 14% to 15%, and adjusted earnings per share to be in a range of $8.10 to $8.20, or growth of 27% to 28% over 2020. This presumes a consistent macroeconomic environment for the remainder of the year with no change to the COVID-19 outlook globally."

Capital Allocation

Global Payments’ Board of Directors approved a dividend of $0.25 per share payable December 30, 2021 to shareholders of record as of December 16, 2021.

Conference Call

Global Payments’ management will host a live audio webcast today, November 2, 2021, at 8:00 a.m. EDST to discuss financial results and business highlights. All interested parties may access the audio webcast 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, operating income, operating margin and earnings 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.

Reconciliations of each of the non-GAAP 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 nearly 24,000 team members worldwide, Global Payments is a Fortune 500® company and a member of the S&P 500 with worldwide reach spanning over 100 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, uncertainties and assumptions 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 2021; the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues, financial operating results and liquidity; the effects of actions taken by us in response to the pandemic; the anticipated benefits of the merger with TSYS (the "Merger’), including the combined company’s plans, objectives, expectations and intentions; timing and completion of anticipated benefits of acquisitions or strategic initiatives; our success and timing in developing and introducing new services; and future financial and operating results. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our 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 the COVID-19 pandemic and actions taken in response; management’s assumptions and projections used in their estimates of the timing and severity of the effects of the COVID-19 pandemic on our future revenues, results of operations and liquidity; our ability to meet our liquidity needs in light of the effects of the COVID-19 pandemic or otherwise; the outcome of any legal proceedings that may be instituted against the Company and our directors; difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and TSYS, 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; failing to fully realize anticipated cost savings and other anticipated benefits of the Merger when expected or at all; business disruptions from the Merger integration that may harm our business, including current plans and operations; 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 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, foreign currency exchange and interest rate risks; the effects of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and cybersecurity laws and regulations; and 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, 2020, and in other documents that we file with the SEC, which are available at https://www.sec.gov. Any forward-looking statements speak only as of the date of this communication or as of the date they were made, and we undertake no obligation to update 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

Nine Months Ended

September 30,

September 30,

2021

2020

%
Change

2021

2020

%
Change

Revenues

$

2,202,337

$

1,917,815

14.8

%

$

6,329,781

$

5,493,365

15.2

%

Operating expenses:

Cost of service

944,172

900,921

4.8

%

2,805,728

2,728,532

2.8

%

Selling, general and administrative

858,082

726,475

18.1

%

2,486,153

2,122,862

17.1

%

1,802,254

1,627,396

10.7

%

5,291,881

4,851,394

9.1

%

Operating income

400,083

290,419

37.8

%

1,037,900

641,971

61.7

%

Interest and other income

6,320

29,983

(78.9

)%

16,009

35,277

(54.6

)%

Interest and other expense

(82,187

)

(82,976

)

(1.0

)%

(245,884

)

(258,475

)

(4.9

)%

(75,867

)

(52,993

)

43.2

%

(229,875

)

(223,198

)

3.0

%

Income before income taxes and equity in income of equity method investments

324,216

237,426

36.6

%

808,025

418,773

93.0

%

Income tax expense

50,117

42,834

17.0

%

131,600

59,173

122.4

%

Income before equity in income of equity method investments

274,099

194,592

40.9

%

676,425

359,600

88.1

%

Equity in income of equity method investments, net of tax

31,364

35,638

(12.0

)%

94,261

60,682

55.3

%

Net income

305,463

230,230

32.7

%

770,686

420,282

83.4

%

Net income attributable to noncontrolling interests, net of income tax

(8,727

)

(9,259

)

(5.7

)%

(13,679

)

(18,406

)

(25.7

)%

Net income attributable to Global Payments

$

296,736

$

220,971

34.3

%

$

757,007

$

401,876

88.4

%

Earnings per share attributable to Global Payments:

Basic

$

1.02

$

0.74

37.8

%

$

2.57

$

1.34

91.8

%

Diluted

$

1.01

$

0.74

36.5

%

$

2.56

$

1.34

91.0

%

Weighted-average number of shares outstanding:

Basic

291,502

299,255

294,262

299,261

Diluted

292,507

300,491

295,421

300,525

SCHEDULE 2

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

% Change

2021

2020

% Change

Adjusted net revenue

$

2,000,327

$

1,745,905

14.6

%

$

5,753,082

$

4,995,654

15.2

%

Adjusted operating income

855,573

717,669

19.2

%

2,400,876

1,954,596

22.8

%

Adjusted net income attributable to Global Payments

637,328

513,756

24.1

%

1,781,696

1,381,915

28.9

%

Adjusted diluted earnings per share attributable to Global Payments

$

2.18

$

1.71

27.5

%

$

6.03

$

4.60

31.1

%

______________________________

See Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure 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

September 30, 2021

September 30, 2020

% Change

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenues:

Merchant Solutions

$

1,495,898

$

1,357,617

$

1,243,961

$

1,125,405

20.3

%

20.6

%

Issuer Solutions

522,166

457,755

487,409

433,372

7.1

%

5.6

%

Business and Consumer Solutions

207,670

207,671

204,106

204,106

1.7

%

1.7

%

Intersegment Elimination

(23,397

)

(22,716

)

(17,661

)

(16,978

)

(32.5

)%

(33.8

)%

$

2,202,337

$

2,000,327

$

1,917,815

$

1,745,905

14.8

%

14.6

%

Operating income:

Merchant Solutions

$

488,407

$

669,462

$

344,981

$

532,287

41.6

%

25.8

%

Issuer Solutions

77,692

198,462

70,800

187,658

9.7

%

5.8

%

Business and Consumer Solutions

35,233

53,092

31,052

52,252

13.5

%

1.6

%

Corporate

(201,249

)

(65,443

)

(156,414

)

(54,528

)

(28.7

)%

(20.0

)%

$

400,083

$

855,573

$

290,419

$

717,669

37.8

%

19.2

%

Nine Months Ended

September 30, 2021

September 30, 2020

% Change

GAAP

Non-GAAP

GAAP

Non-GAAP

GAAP

Non-GAAP

Revenues:

Merchant Solutions

$

4,190,524

$

3,796,146

$

3,460,785

$

3,132,412

21.1

%

21.2

%

Issuer Solutions

1,528,349

1,343,542

1,461,196

1,289,565

4.6

%

4.2

%

Business and Consumer Solutions

678,611

678,613

624,774

624,774

8.6

%

8.6

%

Intersegment Elimination

(67,703

)

(65,218

)

(53,390

)

(51,097

)

(26.8

)%

(27.6

)%

$

6,329,781

$

5,753,082

$

5,493,365

$

4,995,654

15.2

%

15.2

%

Operating income:

Merchant Solutions

$

1,265,689

$

1,826,260

$

824,212

$

1,404,189

53.6

%

30.1

%

Issuer Solutions

220,954

584,202

188,131

539,450

17.4

%

8.3

%

Business and Consumer Solutions

139,439

195,178

110,358

174,842

26.4

%

11.6

%

Corporate

(588,182

)

(204,764

)

(480,730

)

(163,885

)

(22.4

)%

(24.9

)%

$

1,037,900

$

2,400,876

$

641,971

$

1,954,596

61.7

%

22.8

%

______________________________

See Schedules 8 and 9 for a reconciliation of adjusted net revenue and adjusted operating income by segment to the most comparable GAAP measures and Schedule 10 for a discussion of non-GAAP financial measures.

Note: Amounts may not sum due to rounding.

SCHEDULE 4

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except share data)

September 30, 2021

December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

2,347,732

$

1,945,868

Accounts receivable, net

904,142

794,172

Settlement processing assets

1,912,421

1,230,853

Prepaid expenses and other current assets

628,042

621,467

Total current assets

5,792,337

4,592,360

Goodwill

24,344,275

23,871,451

Other intangible assets, net

11,529,826

12,015,883

Property and equipment, net

1,667,287

1,578,532

Deferred income taxes

8,480

7,627

Other noncurrent assets

2,412,270

2,135,692

Total assets

$

45,754,475

$

44,201,545

LIABILITIES AND EQUITY

Current liabilities:

Settlement lines of credit

$

588,347

$

358,698

Current portion of long-term debt

39,148

827,357

Accounts payable and accrued liabilities

2,387,972

2,061,384

Settlement processing obligations

2,018,840

1,301,652

Total current liabilities

5,034,307

4,549,091

Long-term debt

10,709,791

8,466,407

Deferred income taxes

2,831,349

2,948,390

Other noncurrent liabilities

824,679

750,613

Total liabilities

19,400,126

16,714,501

Commitments and contingencies

Equity:

Preferred stock, no par value; 5,000,000 shares authorized and none issued

Common stock, no par value; 400,000,000 shares authorized at September 30, 2021 and December 31, 2020; 290,086,635 issued and outstanding at September 30, 2021 and 298,332,459 issued and outstanding at December 31, 2020

Paid-in capital

23,544,800

24,963,769

Retained earnings

2,845,192

2,570,874

Accumulated other comprehensive loss

(242,965

)

(202,273

)

Total Global Payments shareholders’ equity

26,147,027

27,332,370

Noncontrolling interests

207,322

154,674

Total equity

26,354,349

27,487,044

Total liabilities and equity

$

45,754,475

$

44,201,545

SCHEDULE 5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Nine Months Ended

September 30, 2021

September 30, 2020

Cash flows from operating activities:

Net income

$

770,686

$

420,282

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property and equipment

292,230

265,738

Amortization of acquired intangibles

973,948

941,654

Amortization of capitalized contract costs

68,112

57,888

Share-based compensation expense

146,097

105,081

Provision for operating losses and credit losses

73,286

98,967

Noncash lease expense

80,371

73,493

Deferred income taxes

(136,004

)

(118,466

)

Equity in income of equity investments, net of tax

(94,261

)

(60,682

)

Other, net

19,967

(13,584

)

Changes in operating assets and liabilities, net of the effects of business combinations:

Accounts receivable

(123,370

)

23,352

Settlement processing assets and obligations, net

28,242

Prepaid expenses and other assets

(185,973

)

(240,804

)

Accounts payable and other liabilities

114,279

(163,544

)

Net cash provided by operating activities

2,027,610

1,544,760

Cash flows from investing activities:

Business combinations and other acquisitions, net of cash acquired

(946,377

...