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Global Payments' (GPN) Q1 Earnings Beat, Hikes '23 EPS View
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Global Payments Inc. (GPN - Free Report) reported first-quarter 2023 adjusted earnings per share (EPS) of $2.40, which outpaced the Zacks Consensus Estimate by 4.4% and our estimate of $2.32. The bottom line improved 16% year over year.
Adjusted net revenues of $2,049.5 million rose 5% year over year in the quarter under review. The top line beat the consensus mark by 2.3% and our estimate of $2,003.2 million.
The quarterly results gained on the back of solid contributions from its merchant and core issuer businesses. The merchant business benefited from its expanding presence across worldwide markets. However, an elevated expense level partly offset the upside.
Global Payments Inc. Price, Consensus and EPS Surprise
The adjusted operating income advanced 10% year over year to $882.5 million in the first quarter and came higher than our estimate of $862.5 million.
The adjusted operating margin of 43.1% improved 200 basis points (bps) year over year and matched our estimate.
Total operating expenses escalated 25.6% year over year to $2,235.7 million in the quarter under review. The increase was due to a significant rise in selling, general and administrative expenses. Interest and other expenses of $122.9 million rose 31.8% year over year but came lower than our estimate of $138.9 million.
Segmental Performances
Merchant Solutions: Adjusted revenues of the segment amounted to $1,456.4 million, which grew 8.9% year over year in the first quarter. The improvement came on the back of global constant currency volume growth of 10%, excluding the impact of dispositions. The reported figure surpassed the Zacks Consensus Estimate of $1,420 million and our estimate of $1,429.3 million.
The segment’s adjusted operating income of $688.3 million improved 8.9% year over year and beat the consensus mark of $670 million as well as our estimate of $673.3 million.
Issuer Solutions: The segment recorded adjusted revenues of $490.2 million, which rose 4.7% year over year in the quarter under review, thanks to core issuer constant currency growth and expanding commercial card transactions. The figure outpaced the Zacks Consensus Estimate of $486 million and our estimate of $477.5 million.
Adjusted operating income came in at $215.2 million, up 6.7% year over year but fell short of the consensus mark of $220 million and our estimate of $215.4 million.
Consumer Solutions: The segment’s adjusted revenues of $129.2 million fell 23.6% year over year in the first quarter. However, adjusted operating income soared 50.4% year over year to $57.3 million.
Financial Position (as of Mar 31, 2023)
Global Payments exited the first quarter with cash and cash equivalents of $2,001.7 million, which inched up 0.2% from the figure at 2022 end.
Total assets of $48,638.6 million grew 8.5% from the 2022-end level.
Long-term debt amounted to $16,534.1 million, which increased 34.5% from the figure as of Dec 31, 2022. The current portion of long-term debt amounted to $1,185.4 million at the end of the first quarter.
Total equity of $22,326.8 million dipped 0.9% from the 2022-end level.
In the reported quarter, GPN generated operating cash flows of $599.5 million, which tumbled 4.8% year over year.
Capital Deployment Update
In the first quarter, Global Payments bought back common shares worth $202.8 million. Management sanctioned a quarterly dividend of 25 cents per share, which will be paid out on Jun 30, 2023, to its shareholders of record as of Jun 15, 2023.
Business Update
Global Payments completed the buyout of the leading payment technology and services provider EVO Payments in late March 2023. It has also closed the divestiture of Netspend’s consumer assets in late April. GPN completed the sale of its Gaming Solutions business at the close of the reported quarter.
2023 Guidance
On the basis of the robust financial results delivered in the first quarter of 2023, management hiked the 2023 guidance for some metrics.
Adjusted net revenues are currently forecast to lie between $8,635 million and $8,735 million, up from the prior guidance of $8,575-$8,675 million. The midpoint of the revised outlook implies an improvement of 7-8% from the 2022 reported figure.
Adjusted net revenue growth in the Merchant Solutions segment is estimated to stay at the higher end of the 15-16% range in 2023. Meanwhile, the Issuer Solutions segment’s adjusted net revenues are projected within the 5-6% band.
Adjusted EPS is anticipated to lie between $10.32 and $10.44 this year, up from the previous guidance of $10.25-$10.37. The midpoint of the updated guidance suggests 11-12% growth from the 2022 figure. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The adjusted operating margin is continued to be expected to increase up to 120 bps in 2023.
Of the other Business Services sector players that have reported first-quarter results so far, the bottom-line results of Mastercard Incorporated (MA - Free Report) , Bread Financial Holdings, Inc. (BFH - Free Report) and Republic Services, Inc. (RSG - Free Report) beat the respective Zacks Consensus Estimate.
Mastercard reported first-quarter 2023 adjusted earnings of $2.80 per share, which beat the Zacks Consensus Estimate by 3.3%. The bottom line inched up 1% year over year. MA’s net revenues climbed 11% year over year to $5,748 million. The top line outpaced the consensus mark by 2.1% and our estimate of $5,616.3 million. Gross dollar volume amounted to $2,108 billion in the first quarter, up 15% year over year on a local-currency basis. Cross-border volumes soared 35% year over year on a local-currency basis. MA’s clients issued 3.2 billion Mastercard and Maestro-branded cards as of Mar 31, 2023.
Bread Financial’s operating income of $9.08 per share for the first quarter of 2023 beat the Zacks Consensus Estimate by 26.1% and came ahead of our estimate of $4.06. The bottom line more than doubled year over year. Revenues increased 40% year over year to $1.3 billion and beat the consensus estimate by 23.9%. Credit sales of BFH amounted to $7.4 billion, which increased 7% year over year. Average receivables of $19.4 billion were up 17% year over year. Total interest income increased 13% to $1.1 billion and missed our estimate of $1.2 billion. The net interest margin contracted 40 bps to 19%.
Republic Services reported first-quarter 2023 adjusted earnings (excluding 3 cents from non-recurring items) per share of $1.24, which outpaced the Zacks Consensus Estimate by 9.7% and our estimates by 8.8%. The bottom line also improved 8.8% year over year. Quarterly revenues of $3.58 billion surpassed the Zacks Consensus Estimate by 4.9% and increased 20.6% year over year. The revenues beat our estimates by 5.8%. Revenues from the Collection segment totaled $2.46 billion, up 12.9% year over year. The adjusted EBITDA margin of RSG came in at 29%, which declined 140 bps from the prior-year quarter’s level.
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Global Payments' (GPN) Q1 Earnings Beat, Hikes '23 EPS View
Global Payments Inc. (GPN - Free Report) reported first-quarter 2023 adjusted earnings per share (EPS) of $2.40, which outpaced the Zacks Consensus Estimate by 4.4% and our estimate of $2.32. The bottom line improved 16% year over year.
Adjusted net revenues of $2,049.5 million rose 5% year over year in the quarter under review. The top line beat the consensus mark by 2.3% and our estimate of $2,003.2 million.
The quarterly results gained on the back of solid contributions from its merchant and core issuer businesses. The merchant business benefited from its expanding presence across worldwide markets. However, an elevated expense level partly offset the upside.
Global Payments Inc. Price, Consensus and EPS Surprise
Global Payments Inc. price-consensus-eps-surprise-chart | Global Payments Inc. Quote
Operating Performance
The adjusted operating income advanced 10% year over year to $882.5 million in the first quarter and came higher than our estimate of $862.5 million.
The adjusted operating margin of 43.1% improved 200 basis points (bps) year over year and matched our estimate.
Total operating expenses escalated 25.6% year over year to $2,235.7 million in the quarter under review. The increase was due to a significant rise in selling, general and administrative expenses. Interest and other expenses of $122.9 million rose 31.8% year over year but came lower than our estimate of $138.9 million.
Segmental Performances
Merchant Solutions: Adjusted revenues of the segment amounted to $1,456.4 million, which grew 8.9% year over year in the first quarter. The improvement came on the back of global constant currency volume growth of 10%, excluding the impact of dispositions. The reported figure surpassed the Zacks Consensus Estimate of $1,420 million and our estimate of $1,429.3 million.
The segment’s adjusted operating income of $688.3 million improved 8.9% year over year and beat the consensus mark of $670 million as well as our estimate of $673.3 million.
Issuer Solutions: The segment recorded adjusted revenues of $490.2 million, which rose 4.7% year over year in the quarter under review, thanks to core issuer constant currency growth and expanding commercial card transactions. The figure outpaced the Zacks Consensus Estimate of $486 million and our estimate of $477.5 million.
Adjusted operating income came in at $215.2 million, up 6.7% year over year but fell short of the consensus mark of $220 million and our estimate of $215.4 million.
Consumer Solutions: The segment’s adjusted revenues of $129.2 million fell 23.6% year over year in the first quarter. However, adjusted operating income soared 50.4% year over year to $57.3 million.
Financial Position (as of Mar 31, 2023)
Global Payments exited the first quarter with cash and cash equivalents of $2,001.7 million, which inched up 0.2% from the figure at 2022 end.
Total assets of $48,638.6 million grew 8.5% from the 2022-end level.
Long-term debt amounted to $16,534.1 million, which increased 34.5% from the figure as of Dec 31, 2022. The current portion of long-term debt amounted to $1,185.4 million at the end of the first quarter.
Total equity of $22,326.8 million dipped 0.9% from the 2022-end level.
In the reported quarter, GPN generated operating cash flows of $599.5 million, which tumbled 4.8% year over year.
Capital Deployment Update
In the first quarter, Global Payments bought back common shares worth $202.8 million. Management sanctioned a quarterly dividend of 25 cents per share, which will be paid out on Jun 30, 2023, to its shareholders of record as of Jun 15, 2023.
Business Update
Global Payments completed the buyout of the leading payment technology and services provider EVO Payments in late March 2023. It has also closed the divestiture of Netspend’s consumer assets in late April. GPN completed the sale of its Gaming Solutions business at the close of the reported quarter.
2023 Guidance
On the basis of the robust financial results delivered in the first quarter of 2023, management hiked the 2023 guidance for some metrics.
Adjusted net revenues are currently forecast to lie between $8,635 million and $8,735 million, up from the prior guidance of $8,575-$8,675 million. The midpoint of the revised outlook implies an improvement of 7-8% from the 2022 reported figure.
Adjusted net revenue growth in the Merchant Solutions segment is estimated to stay at the higher end of the 15-16% range in 2023. Meanwhile, the Issuer Solutions segment’s adjusted net revenues are projected within the 5-6% band.
Adjusted EPS is anticipated to lie between $10.32 and $10.44 this year, up from the previous guidance of $10.25-$10.37. The midpoint of the updated guidance suggests 11-12% growth from the 2022 figure. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The adjusted operating margin is continued to be expected to increase up to 120 bps in 2023.
Zacks Rank
Global Payments currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Business Services Sector Releases
Of the other Business Services sector players that have reported first-quarter results so far, the bottom-line results of Mastercard Incorporated (MA - Free Report) , Bread Financial Holdings, Inc. (BFH - Free Report) and Republic Services, Inc. (RSG - Free Report) beat the respective Zacks Consensus Estimate.
Mastercard reported first-quarter 2023 adjusted earnings of $2.80 per share, which beat the Zacks Consensus Estimate by 3.3%. The bottom line inched up 1% year over year. MA’s net revenues climbed 11% year over year to $5,748 million. The top line outpaced the consensus mark by 2.1% and our estimate of $5,616.3 million. Gross dollar volume amounted to $2,108 billion in the first quarter, up 15% year over year on a local-currency basis. Cross-border volumes soared 35% year over year on a local-currency basis. MA’s clients issued 3.2 billion Mastercard and Maestro-branded cards as of Mar 31, 2023.
Bread Financial’s operating income of $9.08 per share for the first quarter of 2023 beat the Zacks Consensus Estimate by 26.1% and came ahead of our estimate of $4.06. The bottom line more than doubled year over year. Revenues increased 40% year over year to $1.3 billion and beat the consensus estimate by 23.9%. Credit sales of BFH amounted to $7.4 billion, which increased 7% year over year. Average receivables of $19.4 billion were up 17% year over year. Total interest income increased 13% to $1.1 billion and missed our estimate of $1.2 billion. The net interest margin contracted 40 bps to 19%.
Republic Services reported first-quarter 2023 adjusted earnings (excluding 3 cents from non-recurring items) per share of $1.24, which outpaced the Zacks Consensus Estimate by 9.7% and our estimates by 8.8%. The bottom line also improved 8.8% year over year. Quarterly revenues of $3.58 billion surpassed the Zacks Consensus Estimate by 4.9% and increased 20.6% year over year. The revenues beat our estimates by 5.8%. Revenues from the Collection segment totaled $2.46 billion, up 12.9% year over year. The adjusted EBITDA margin of RSG came in at 29%, which declined 140 bps from the prior-year quarter’s level.