Global Payments Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Global Payments provides payment technology, merchant services and issuer processing globally. Following the 2023 sale of its consumer business, it reports Merchant Solutions and Issuer Solutions as its two segments.
Financial performance
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Revenue | $9.654 billion | $8.976 billion | Up 7.6%; growth reflected higher transaction volumes and EVO, partly offset by divestitures. |
| Merchant Solutions revenue | $7.152 billion | $6.205 billion | Up 15.3%, including EVO and software/subscription growth. |
| Issuer Solutions revenue | $2.399 billion | $2.246 billion | Up 6.8%, primarily from higher transaction volumes. |
| Operating income | $1.716 billion | $640 million | Operating margin was 17.8% versus 7.1%; 2022 included an $833 million goodwill impairment. |
| Net income attributable to Global Payments | $986 million | $111 million | Increase reflects operating results and unusual prior-year charges. |
| Diluted EPS | $3.77 | $0.40 | Weighted-average diluted shares declined to 261.7 million from 275.6 million. |
| Operating cash flow | $2.249 billion | $2.244 billion | Essentially flat year over year. |
| Capital expenditures | $658 million | $616 million | Investment in technology, infrastructure and product development. |
Liquidity, debt and capital allocation
- Cash and cash equivalents were $2.089 billion at year-end; management identified $703 million as available for general purposes. Restricted cash was $167 million. Other cash balances support settlement, merchant reserves or customer funds.
- Long-term debt, including its current portion, totaled $16.313 billion. Separately, settlement lines of credit had $981 million outstanding. Revolver borrowings were $1.570 billion and commercial paper outstanding was $1.372 billion; the revolver had $2.8 billion of available commitments.
- Interest and other expense was $660 million, up from $449 million, reflecting higher average borrowings and rates. The company reported compliance with applicable debt covenants at year-end.
- Financing activities provided $2.141 billion, including debt and commercial-paper activity. The company repurchased $418 million of shares and paid $260 million in dividends, versus $2.921 billion of repurchases and $274 million of dividends in 2022.
Material changes and unusual items
- Global Payments acquired EVO Payments on March 24, 2023, for total purchase consideration of approximately $4.27 billion. EVO contributed less than 10% of consolidated revenue and operating income from acquisition through year-end; purchase accounting remained provisional.
- The company sold its consumer Netspend business in April for approximately $1 billion and its gaming business for approximately $400 million. 2023 included a $243.6 million consumer-disposition loss and a $106.9 million gaming-disposition gain.
- 2022 results included an $833.1 million goodwill impairment, a $127.2 million loss on the sale of the Russia business and consumer-disposition charges. Consequently, reported 2023 earnings growth is not a clean measure of underlying year-over-year growth.
- Acquisition and integration expenses were $341.9 million in 2023, up from $259.2 million. Acquired-intangible amortization was $1.319 billion.
- The effective tax rate was 17.9%, compared with 74.3% in 2022; the prior-year rate was affected substantially by the goodwill impairment and other items.
Outlook, commentary and risks
- Management expects continued growth in digital, ecommerce, omnichannel, software-enabled and B2B payments, and continued investment in technology modernization and integration. No specific 2024 revenue, earnings or EPS guidance is provided in the supplied filing text.
- Management expects 2024 capital expenditures to grow at a similar rate as revenue growth. It believes available and projected liquidity will meet near- and long-term operating needs.
- Key risks include cybersecurity incidents and service outages; intense competition and customer attrition; dependence on card-network registrations, sponsors and clearing banks; merchant fraud, chargebacks and credit losses; acquisition integration; regulation and data privacy requirements; foreign-exchange and interest-rate changes; and substantial indebtedness.
- Goodwill and other intangible assets represented approximately 73% of total assets. No 2023 goodwill impairment was recorded, but Issuer Solutions’ estimated fair value exceeded its carrying amount by approximately 4%, leaving it comparatively more sensitive to adverse assumptions or conditions.
- The company reported no material cybersecurity incidents in the past calendar years and stated that pending legal matters are not expected to have a material adverse effect. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- How much of Merchant Solutions’ growth and margin performance is organic versus attributable to EVO, and how divestitures affect comparable-period results.
- The pace and total cost of EVO integration, expected synergies and remaining acquisition-related expenses.
- Cash available for general corporate purposes versus settlement-related, reserve and customer balances, alongside debt maturities, refinancing needs and interest costs.
- Credit quality and collectability of $753.5 million of seller-financed notes, including the $15.2 million credit-loss allowance and the notes’ estimated fair value of $735.6 million.
- Whether Issuer Solutions’ relatively limited goodwill valuation cushion or other reporting units’ assumptions change in future periods.
- Progress against the stated 2024 capital-investment outlook and the board-authorized $2.0 billion share-repurchase program; authorization does not require the company to complete repurchases.