Global Payments saw consistent growth in Q3 23, driven by the company’s acquisition of EVO Payments and resilient consumer spending, while offset slightly by FX headwinds. Adjusted net revenue rose 9% to $2.23bn, or 17% excluding dispositions. Adjusted operating margin was 45.7%, up 50 bps on Q3 last year.
The company says it has made good progress with EVO, which it fully acquired back in May. However, the company’s revenue and operating margin guidance for the full year has remained the same, estimating 7-8% revenue growth to around $8.7bn and adjusted operating margin to expand by up to 120 basis points for the year. According to Global Payments, the guidance accommodates a ‘more tempered economic environment’ given ‘continued uncertainty’.
Global Payments key revenue drivers for Q3 2023
Merchant solutions continued to be the biggest segment for Global Payments, and saw 19% revenue growth to $1.73bn, though its adjusted operating margin declined 90 bps to 49.1%. Merchant volumes grew by 21%, the highest rate since Q4 2021. Having said this, merchant revenue growth was 9% excluding the EVO acquisition and dispositions, which is lower than the 11% for the same period last year.
During the quarter, EVO has contributed $165m, and Global Payments forecasts that the company’s overall revenue contribution for this year will be $490m. The acquisition has allowed Global Payments to enter new markets in Poland, Greece and Ireland, contributing to double-digit growth in Central Europe.
Alongside EVO, strength in tech-enabled businesses and 20% PoS growth also helped drive increased revenues in the merchant division. However, executives noted that it was offset by the unfavourable macroeconomic environment in certain markets, including the UK and Canada.
Meanwhile, adjusted revenues for Global Payments’ issuer solutions segment rose 6% to $520m, while adjusted operating margin rose 110 bps to 47.5%. This was the first quarter when Global Payments has not reported revenue for its consumer solutions segment, which was phased out after the company’s sale of Netspend in May.
Executives on the call said that spending had remained resilient overall, but that at the moment it was seeing greater trends towards non-discretionary spending, potentially hinting at the impact of higher interest rates and inflation. Having said this, the company has made efforts to diversify, highlighted by the consistent revenue rise in Q3 despite the removal of Netspend.
Expanding to new markets and B2B
Moving forward, Global Payments wants to grow the penetration of Global Payments’ PoS solution across more markets outside the US, as well as continue its focus on B2B, where it has seen a rise in cross-border corporate travel.
Last quarter, the company also hinted at new acquisitions in the B2B space, and this time said that it had “a full pipeline” for mergers and acquisitions. M&A activity in cross-border payments has continued this year, even if the total number of notable acquisitions in this space appears to have declined compared to 2022.
Global Payments continues to reap the benefits of its acquisition and believes it will yield similar revenue growth in Q4. Despite mentioning that it is heavily diversified, the company continues to stress that its guidance assumes macroeconomic conditions remain the same and that it is carefully monitoring inflation, softness in European markets and the ongoing crisis in the Middle East.