Payment processor Global Payments has announced its latest earnings, with its adjusted operating margin rising for the first time since Q3 2021 (it now stands at 43.8%), as well as a 6% YoY increase in revenue to $2.06bn. However, the big news was its announcement of the acquisition of rival EVO Payments in a $4bn deal – the latest step in its bid to expand into the B2B payments space.
The benefits of the EVO acquisition for Global Payments
Global Payments expects the EVO acquisition to increase its addressable market, as well as improve its B2B software and payment capabilities. With a customer base spanning 4.5 million merchants and over 1,500 financial institutions, EVO will also help Global Payments attract business in new markets, including Poland, Germany, Greece and Chile. It also expects to be able to enhance its scale in existing markets, such as Mexico, Spain, the UK, the US and Canada.
As part of the EVO acquisition, the company is also set to receive a $1.5bn investment in the form of convertible notes from Silver Lake, reportedly the largest investment the US-based private equity firm has ever made.
Looking at performance, the key driver of Q2 growth was the company’s merchant solutions segment, which saw adjusted net revenues of $1.43bn (a 10.1% rise YoY) and an adjusted operating margin of 50.2%. This segment did better than expected given the loss of Russian business, with the company beginning to see recovery in markets that have slightly lower margin profiles. For example, Asia Pacific saw double-digit growth during Q2.
Global Payments also agreed to sell the consumer assets of pre-paid debit card business Netspend to Searchlight Capital and Rêv Worldwide for $1bn. Following this sale and the acquisition of EVO, merchant solutions will make up approximately 75% of adjusted net revenue (previously 66%) for the business as a whole, with the other 25% being made up of its issuer segment, which includes B2B.
Looking forward, the company is projecting revenue to increase 10-11% in FY 2022. However, it warned that this outlook depended on continued recovery from the pandemic and a stable macroeconomic environment throughout the rest of the year.