Global Payments Inc. EBITDA surged on 24.7% while Revenue dropped on 15.3%
02/13/2019 • About Global Payments Inc. (
$GPN) • By InTwits
Global Payments Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Global Payments Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.1%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $213m in 2018, $182m in 2017, $92m in 2016, $93m in 2015, $81m in 2014
- In the last 5 years the company invested considerably less than D&A: $661m vs. $1,421m. In 2018 this situation was still the same: CAPEX was 213 while D&A was 523
- The company has business model with low profitability: ROIC is 7.2%
- It operates with high leverage: Net Debt/EBITDA is 3.7x while industry average is 2.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Global Payments Inc.'s Revenue dropped on 15.3%. Revenue decline showed acceleration in 18Q4 - it was 16.5% YoY. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin jumped on 12.0 pp from 25.4% to 37.4% in 2018.
Gross Margin jumped on 16.0 pp from 51.5% to 67.5% in 2018. SG&A as a % of Revenue increased on 8.1 pp from 37.4% to 45.6% in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2017 at 37.4%. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.73 pp from 0.98% to 1.7% in 2018.
Net Income margin increased slightly on 1.6 pp from 11.8% to 13.4% in 2018. The efficient tax rate was 14.6% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 6.3% in 2018. CAPEX/Revenue increased on 3.0 pp from 3.3% in 2015 to 6.3% in 2018. It's average level of CAPEX/Revenue for the last three years was 4.7%. CAPEX as a % of Revenue grew at 0.75 pp per annum in 2014-2018.
Accounts receivable as a % of Revenue increased on 2.8 pp from 7.6% to 10.3% in 2018.
Global Payments Inc. has spent
$1,260m on M&A in 2018 which accounts for 37.4% of revenue.
Return on investment
The company operates at low ROIC (7.2%) and ROE (11.6%). ROIC increased slightly on 1.0 pp from 6.2% to 7.2% in 2018. ROE decreased on 3.0 pp from 14.6% to 11.6% in 2018. ROIC followed a declining trend at -2.2 pp per annum in 2014-2018. During 2014-2018 ROE topped in 2015 at 31.7% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.7x and Debt / EBITDA is 4.6x. Net Debt / EBITDA dropped on 0.3x from 3.9x to 3.7x in 2018. Debt surged on 10.1% while cash decreased on 9.4%. During the last 5 years Net Debt/EBITDA topped in 2016 at 6.0x and was declining since that time.
Global Payments Inc. has good short term financial stability: Interest coverage ratio (ICR) is 3.8x. Global Payments Inc. has no short term refinancing risk: cash is higher than short term debt (148.5%).
Average interest expence paid by the company was 3.4% in 2018.
Valuation and dividends
Global Payments Inc.'s trades at EV/EBITDA 19.4x and P/E 43.7x.
The company paid 1.3% of Net Income as dividends in 2018. Dividends grew on average at 0.0% per annum in the last 5 years).
Management team
The company's CEO is Jeffrey Steven Sloan. Jeffrey Steven Sloan is a founder and has 5 years tenure with the company. CEO total compensation was
$16,818,560 in 2018 which included
$1,000,000 salary. Cameron M Bready is a the company's CFO. Cameron M Bready has spent 2 years at the company.
Insider ownership is 0.71%. Insider ownership didn't change in 2018.
At the end of financial year the company had 11,000 employees. The number of employees surged on 10%. Average revenue per employee in 2018 was
$306,033 and it dropped on 23.0%.
Financial and operational results
FY ended 12/31/2018
Global Payments Inc. ($GPN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,554 | 2,774 | 2,898 | 3,975 | 3,366 | -15.3% |
| Gross Profit | 1,602 | 1,752 | 1,751 | 2,047 | 2,271 | 11.0% |
| SG&A | 1,197 | 1,295 | 1,326 | 1,488 | 1,534 | 3.1% |
| EBITDA | 528 | 594 | 613 | 1,010 | 1,260 | 24.7% |
| EBIT | 405 | 457 | 425 | 559 | 737 | 31.9% |
| Interest expence | 38 | 40 | 109 | 174 | 196 | 12.2% |
| Tax | 107 | 108 | 71 | -101 | 77 | |
| Net Income | 245 | 278 | 272 | 468 | 452 | -3.5% |
| Stock Based Compensation | 30 | 21 | 31 | 39 | 58 | 47.9% |
Balance Sheet
|
|---|
| Cash | 582 | 651 | 1,163 | 1,336 | 1,211 | -9.4% |
| Accounts Receivable | 215 | 202 | 275 | 302 | 348 | 15.4% |
| Inventory | 7 | | | | | |
| Short Term Debt | 458 | 654 | 570 | 735 | 816 | 10.9% |
| Long Term Debt | 1,376 | 1,678 | 4,261 | 4,559 | 5,015 | 10.0% |
Cash flow
|
|---|
| Capex | 81 | 93 | 92 | 182 | 213 | 17.3% |
| Dividends | 6 | 5 | 5 | 7 | 6 | -14.3% |
| Acquisitions | 427 | 356 | 2,034 | 563 | 1,260 | 123.9% |
Ratios
|
|---|
| Revenue growth | 7.5% | 8.6% | 4.5% | 37.2% | -15.3% | |
| EBITDA growth | 12.5% | 12.6% | 3.2% | 64.8% | 24.7% | |
|
|---|
| Gross Margin | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% | 16.0% |
| EBITDA Margin | 20.7% | 21.4% | 21.1% | 25.4% | 37.4% | 12.0% |
| EBIT Margin | 15.9% | 16.5% | 14.7% | 14.1% | 21.9% | 7.8% |
| SG&A, % of revenue | 46.8% | 46.7% | 45.7% | 37.4% | 45.6% | 8.1% |
| SBC, % of revenue | 1.2% | 0.8% | 1.1% | 1.0% | 1.7% | 0.7% |
| Net Income Margin | 9.6% | 10.0% | 9.4% | 11.8% | 13.4% | 1.6% |
| CAPEX, % of revenue | 3.2% | 3.3% | 3.2% | 4.6% | 6.3% | 1.8% |
|
|---|
| ROIC | 14.4% | 14.1% | 7.3% | 6.2% | 7.2% | 1.0% |
| ROE | 22.9% | 31.7% | 16.0% | 14.6% | 11.6% | -3.0% |
| Net Debt/EBITDA | 2.4x | 2.8x | 6.0x | 3.9x | 3.7x | -0.3x |
| Interest expence / Average debt | 2.0% | 1.9% | 3.0% | 3.4% | 3.4% | -0.1% |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | 4,135 | 4,438 | 8,995 | 10,000 | 11,000 | 10.0% |
| Revenue/Employee, th. $ | 618 | 625 | 322 | 398 | 306 | -23.0% |
Global Payments Inc. ($GPN) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 795 | 833 | 858 | 881 | | -13.6% | -13.4% | -17.4% | -16.5% |
| EBITDA | 278 | 314 | 347 | 320 | | 29.9% | 31.5% | 21.4% | 18.3% |
| Net Income | 91 | 109 | 176 | 75 | | 87.2% | 63.0% | 59.3% | -68.9% |
Balance Sheet
|
|---|
| Cash | 1,006 | 1,100 | 991 | 1,211 | | -20.3% | 1.8% | -16.5% | -9.4% |
| Short Term Debt | 555 | 622 | 779 | 816 | | 21.9% | 53.7% | 34.0% | 10.9% |
| Long Term Debt | 4,177 | 4,255 | 4,708 | 5,015 | | -1.1% | 1.9% | 0.6% | 10.0% |
Ratios
|
|---|
| Gross Margin | 68.3% | 68.2% | 69.1% | 64.4% | | 17.8% | 17.0% | 16.6% | 12.7% |
| EBITDA Margin | 35.0% | 37.7% | 40.5% | 36.4% | | 11.7% | 12.9% | 12.9% | 10.7% |
| Net Income Margin | 11.5% | 13.1% | 20.6% | 8.5% | | 6.2% | 6.1% | 9.9% | -14.4% |
Peers in Data Processing & Outsourced S
Below we provide Global Payments Inc. benchmarking against other companies in Data Processing & Outsourced S industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.0% | 7.7% | 10.1% | 7.5% |
|---|
| Global Payments Inc. ($GPN) | | 8.6% | 4.5% | 37.2% | -15.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| WEX Inc. ($WEX) | 85.3% | 83.8% | 54.7% | 58.8% | 63.3% |
| |
|---|
| Median (44 companies) | 38.4% | 39.5% | 39.2% | 38.9% | 40.9% |
|---|
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.4% | 21.0% | 21.3% | 20.6% | 19.2% |
|---|
| Global Payments Inc. ($GPN) | 20.7% | 21.4% | 21.1% | 25.4% | 37.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.0% |
|---|
| Global Payments Inc. ($GPN) | 3.2% | 3.3% | 3.2% | 4.6% | 6.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.7% | 10.7% | 12.1% |
|---|
| Global Payments Inc. ($GPN) | 14.4% | 14.1% | 7.3% | 6.2% | 7.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.4x | 0.5x | 1.3x | 2.3x | 2.0x |
|---|
| Global Payments Inc. ($GPN) | 2.4x | 2.8x | 6.0x | 3.9x | 3.7x |
