Global Payments Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement or cash-flow summary. Global Payments is a payments technology and software company serving approximately 4.0 million merchant locations and more than 1,350 financial institutions in over 170 countries. Its segments are Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $8.524 billion | $7.424 billion | +14.8% |
| Operating income | $1.359 billion | $894.0 million | +52.0% |
| Operating margin | 15.9% | 12.0% | +3.9 percentage points |
| Net income attributable to Global Payments | $965.5 million | $584.5 million | +65.2% |
| Diluted EPS | $3.29 | $1.95 | +$1.34 |
| Net cash from operating activities | $2.781 billion | $2.314 billion | +$466.7 million |
| Capital expenditures | $493.2 million | $436.2 million | +$57.0 million |
Revenue growth reflected higher transaction volumes as economic activity recovered and digital payment use expanded. Management also cited Merger-related cost synergies and lower credit-loss expense as contributors to operating-income growth. The comparison is affected by pandemic-related weakness in 2020, acquired businesses, and temporary cost-saving measures taken in 2020.
Segments and margins
| Segment | 2021 revenue | Revenue growth | 2021 operating income | 2021 margin |
|---|---|---|---|---|
| Merchant Solutions | $5.666 billion | 20.8% | $1.726 billion | 30.5% |
| Issuer Solutions | $2.066 billion | 4.3% | $301.1 million | 14.6% |
| Business and Consumer Solutions | $886.4 million | 6.9% | $167.8 million | 18.9% |
All three segments increased revenue, operating income, and operating margin compared with 2020. Business and Consumer Solutions benefited from consumer spending and U.S. government stimulus distributions; the company does not expect a recurring revenue benefit from stimulus distributions in 2022.
Liquidity, debt, and capital allocation
- Cash and cash equivalents were $1.979 billion at year-end; management identified $894.6 million as available for general purposes. The remaining cash includes settlement-related balances, merchant reserves, and customer funds. Restricted cash was a further $143.7 million.
- Operating activities generated $2.781 billion of cash. Investing activities used $2.294 billion, including $1.905 billion for acquisitions and $493.2 million for capital expenditures. Financing activities used $405.4 million.
- Long-term debt was $11.493 billion, including $9.4 billion of senior notes and a $2.0 billion term loan. The company had no borrowings under its $3.0 billion revolving credit facility and reported $1.9 billion of available commitments. Settlement lines of credit had $484.2 million outstanding, with $1.693 billion of additional settlement capacity.
- The company issued $1.1 billion of 1.20% notes due 2026 and $2.0 billion of notes bearing 1.50%–2.90% interest, due 2024, 2027, and 2031. Proceeds were used to refinance debt, repay revolving-credit borrowings, and for general corporate purposes. The company reported compliance with applicable debt covenants.
- Share repurchases totaled $2.534 billion in cash during 2021; dividends paid totaled $259.7 million. Remaining repurchase authorization was $1.54 billion at year-end; the board increased total available authorization to $2.0 billion in January 2022.
Material changes and unusual items
- Acquisitions included Zego for approximately $933 million in cash and other strategic acquisitions with an aggregate purchase price of approximately $963 million, including MineralTree and European acquiring businesses. Acquisition cash outflows were $1.905 billion for 2021.
- Acquisition and integration expenses were $335.5 million in Corporate operating costs, compared with $313.0 million in 2020; selling, general and administrative acquisition and integration expenses were $340.2 million, compared with $319.5 million.
- Facilities-exit actions associated with remote and flexible work resulted in $56.8 million of charges in 2021. Management said additional charges could occur as exits continue in 2022.
- Cost of service was 44.3% of revenue versus 49.2% in 2020, reflecting revenue leverage and synergies. Selling, general and administrative expenses increased to 39.8% of revenue from 38.8%, partly due to compensation, share-based compensation, and integration costs.
- The effective income tax rate rose to 16.2% from 13.0%, primarily due to geographic earnings mix and a U.K. tax-rate change, partly offset by valuation-allowance changes.
- Goodwill and other intangible assets were approximately 80% of total assets. The company reported no goodwill impairment in 2021; its impairment tests found reporting-unit fair values above carrying amounts, though some units had a smaller cushion.
Outlook, risks, and contingencies
- Management expects continued investment in technology, cloud migration, product development, and platform modernization. Capital expenditures in 2022 are expected to grow at a similar rate to revenue growth. The filing does not provide a clear numerical revenue or earnings guidance range.
- Management sees longer-term opportunity in ecommerce, omnichannel, contactless and digital payments, software-led solutions, and B2B payments. The company began a strategic evaluation of the consumer portion of Business and Consumer Solutions, with an intended greater focus on its growing B2B portfolio.
- The pace and durability of recovery remain uncertain, including the effects of COVID-19 resurgence or variants, inflation, supply-chain disruption, and changes in consumer and business spending.
- Key risks include cybersecurity incidents and service outages; fraud, chargebacks and merchant credit losses; dependence on card-network registration, sponsor banks, clearing providers and certain issuing-bank relationships; competition and pricing pressure; acquisition integration; regulation and privacy requirements; foreign-exchange and interest-rate exposure; and substantial indebtedness.
- The Frontline Processing dispute judgment of $135.2 million was reversed by the Georgia Court of Appeals in June 2021; the Georgia Supreme Court denied Frontline’s review petition in January 2022 and the case was remanded. The company had not accrued a loss, having concluded a loss was not probable. Management said other ordinary-course claims and lawsuits were not expected to have a material adverse effect.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Management’s control assessment excluded Zego’s acquired operations, which represented approximately 1% of consolidated assets excluding goodwill and less than 1% of 2021 revenue and operating income.
Important facts for investors to verify
- Whether transaction-volume recovery and digital-payment growth persist, especially after the fourth-quarter 2021 slowdown in recovery noted by management.
- The extent to which 2021 margin and earnings gains reflect durable operating improvements versus recovery effects, cost synergies, stimulus-related spending, and lower credit losses.
- Acquisition integration progress, expected returns, and the performance of Zego, MineralTree, and other acquired businesses.
- Cash genuinely available for corporate purposes after separating settlement balances, merchant reserves, and customer funds; and the company’s debt-service and refinancing needs.
- Whether share repurchases and dividends remain consistent with acquisition plans, investment needs, and debt reduction priorities.
- Potential further facility-exit charges, goodwill or intangible-asset impairment exposure, and outcomes of legal, regulatory, tax, and cybersecurity matters.