Global Payments Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Global Payments is a global payments technology company with Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions segments. Results are unaudited and compared with Q1 2021 unless noted.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $2.156 billion | $1.990 billion | +8.4% |
| Operating income | $375.9 million | $275.3 million | +36.6% |
| Operating margin | 17.4% | 13.8% | +3.6 percentage points |
| Net income attributable to Global Payments | $244.7 million | $196.7 million | +24.4% |
| Diluted EPS | $0.87 | $0.66 | +31.8% |
| Net cash from operating activities | $630.0 million | $599.4 million | +5.1% |
| Capital expenditures | $156.1 million | $86.2 million | +81.2% |
Cost of service was 44.4% of revenue versus 46.5%; SG&A was 38.2% versus 39.7%. Management attributed improved operating leverage to revenue growth and lower acquisition and integration costs. Interest and other expense rose to $93.3 million from $83.1 million, reflecting higher average borrowings and interest rates. The effective tax rate increased to 18.4% from 10.5%, partly because of favorable tax items in the prior-year quarter.
Segments and material changes
- Merchant Solutions: Revenue rose 16.2% to $1.473 billion; operating income increased 30.7% to $444.5 million. Growth reflected higher transaction volumes, customer growth, increased digital payments, and economic recovery.
- Issuer Solutions: Revenue increased 2.2% to $511.5 million, while operating income fell 15.1% to $58.1 million. The company cited MineralTree acquisition-related effects.
- Business and Consumer Solutions: Revenue decreased 19.6% to $195.8 million and operating income fell 45.6% to $33.7 million. Q1 2021 benefited from U.S. stimulus and supplementary unemployment payments that did not recur.
Consolidated revenue growth was also partly offset by foreign exchange: currency movements reduced Q1 2022 revenue by approximately $14.7 million and operating income by approximately $4.7 million. Acquisition and integration expenses were $51.0 million, versus $91.8 million in Q1 2021.
Cash, debt and liquidity
- At March 31, 2022, cash and cash equivalents were $2.045 billion. Of this, $797.3 million was considered available for general purposes; this excludes settlement-related balances, merchant reserves, and funds held for customers. Restricted cash was $134.4 million.
- Total long-term debt, including its current portion, was $11.844 billion, up from $11.493 billion at December 31, 2021. Debt included $9.4 billion of senior notes, a $2.0 billion term loan, and $370 million drawn on the revolving facility. Settlement lines of credit had $497.3 million outstanding.
- Available commitments under the revolving credit facility were $1.7 billion, and the company reported compliance with applicable debt covenants.
- Investing activities used $160.8 million, primarily for capital expenditures. Financing activities used $376.3 million, including $649.7 million of share repurchases and $70.2 million of dividends. Management said operating cash flow, cash on hand, and borrowing capacity should meet near- and long-term needs.
Outlook, risks and unusual items
- The filing provides no specific revenue, earnings, or EPS guidance. Management expects 2022 capital expenditures to remain a similar percentage of revenue as in 2021 and anticipates significant continued investment in technology, infrastructure, and product development.
- After additional sanctions, the company sold its Russian merchant business effective April 29, 2022. It estimated a charge of approximately $130 million in Q2 2022, including accumulated foreign-currency translation losses. Russia was less than 0.5% of 2021 consolidated revenue; the company reported no significant operational impact as of March 31.
- Management had begun a strategic evaluation of the consumer portion of Business and Consumer Solutions, with the stated intent to focus on its growing B2B portfolio. No outcome was provided.
- Risks highlighted include uncertain COVID-19 effects and economic recovery; geopolitical disruption and sanctions related to Russia and Ukraine; inflation, currency and interest-rate volatility; lower transaction volumes in an economic downturn; customer credit losses; cybersecurity and operational failures; competition; and the company’s substantial debt and fixed costs.
- The company reported ordinary-course legal claims that it did not expect to materially affect its financial position, liquidity, results, or cash flows. Management concluded disclosure controls were effective, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether transaction-volume growth and improved operating margins persist, especially in Merchant Solutions.
- The Q2 recognition, final amount, and financial-statement treatment of the estimated $130 million Russia-sale charge.
- Progress and any announced outcome of the consumer-business strategic evaluation.
- Debt levels, interest costs, covenant headroom, and the distinction between reported cash and cash available for general purposes.
- Whether higher capital expenditures and share repurchases remain consistent with operating cash generation and management’s liquidity expectations.