Morningstar | Global Payments Maintains Strong Growth Trajectory in 2Q
Global Payments continued to see strong top-line growth and margin improvement in the second quarter, and it announced an acquisition that fits its pattern of supplementing and supporting its payments business with software solutions in select verticals. Overall, we don't see anything in the quarter that alters our long-term view, and will maintain our $99 fair value estimate and narrow-moat rating.Excluding an accounting change, revenue was up 18% on a year-over-year basis. The firm saw strong growth across all regions, with North America, Europe and Asia-Pacific up 18%, 19% and 14%, respectively. In our view, the regional uniformity highlights the secular trends that are driving the company's business. Adjusted operating margins, meanwhile, improved to 31.4% from 29.8% in the year-ago period. In our view, the scalable nature of the business model provides potential for significant margin improvement over time considering the strong growth the company is seeing.
Concurrent with earnings, Global Payments announced a $700 million cash-based acquisition of AdvancedMD, a cloud-based software provider to ambulatory physician practices in the U.S. This deal fits Global Payments' ongoing strategy to support its payments business with software solutions in targeted verticals, which we view as the right move given the trends in the payments space. AdvancedMD will add relationships with 33,000 physicians and 11,000 practice groups. Global Payments currently has only 20% of the group's payment volume, which should allow for a meaningful level of opportunities.
Global Payments is a pure play payment technology company providing payments and software solutions to merchants and financial institutions. The company has three segments: Merchant Solutions, which includes authorization services, chargeback resolution, and payment security services; Issuer Solutions, which provides solutions that enable financial institutions and other financial service providers to manage their card portfolios and reduces technical difficulty and overhead on a single platform; and Business and Consumer Solutions, which provides general purpose reloadable prepaid debit and payroll cards, demand deposit accounts and other financial service solutions through its Netspend? brand.
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