Grade: D — Significant Concerns
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-20) + Yahoo Finance
Auditor: Deloitte & Touche LLP — Unqualified opinion (2 Critical Audit Matters)
One-line verdict: Global Payments is a payments technology company in the midst of a major strategic transformation — and the financial statements reflect the turbulence. Revenue was essentially flat at $7.7B (-0.4%), net income from continuing operations declined, diluted EPS fell from $5.04 to $4.43, and the company recorded a $33.2M goodwill impairment in discontinued operations. Goodwill and intangibles of $21.3B represent 93% of equity. Debt/EBITDA of 6.6x signals financial stress. Cash of $8.3B covers only 38% of $21.9B in debt. The M-Score of -2.66 is clean, and CFFO/NI of 1.90 shows cash-backed earnings. But the combination of declining revenue, high leverage, massive goodwill, and the pending Worldpay transaction creates a complex risk profile. The January 2026 announced disposition of its Merchant Solutions business to Worldpay will fundamentally restructure this company.
| Metric | Result |
|---|---|
| Red Flags (Engine) | **2** (financial 2 + management 0; C4: cash/debt 38%, D1: goodwill 93% of equity) |
| Watch Items | **2** (financial 2 + management 0; B3: SG&A ratio 73.7%, D2: Debt/EBITDA 6.6x) |
| Checks Completed | **22/23** (financial 17/18 + management 5/5 G1-G5; 1 N/A) |
| Beneish M-Score | **-2.66** (clean; threshold -2.22) |
| F-Score (Fraud Probability) | **1.30** (0.48% probability) |
| Altman Z-Score | **2.05** (grey zone) |
| Auditor | Deloitte & Touche LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
Note on classification: Global Payments is classified by yfinance as "Specialty Business Services" under Industrials, but it operates in the financial technology space. Standard screening checks apply. The M-Score and Z-Score are calculated but should be interpreted carefully given the acquisition-heavy model and pending Worldpay transaction.
Revenue: Flat, With Declining Margins
Per the 10-K:
| Metric | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|
| Total Revenue | $7,380M | $7,736M | **$7,706M** | -0.4% |
| Operating Income | -- | $1,975M | **$1,755M** | -11% |
| Operating Margin | -- | 25.5% | **22.8%** | -2.7pp |
| Net Income | $986M | $1,570M | **$1,400M** | -11% |
| EPS (diluted) | -- | $5.04 | **$4.43** | -12% |
Revenue was essentially flat while operating income declined 11% and operating margin compressed from 25.5% to 22.8%. This is not a growth story — it is a company managing through a strategic pivot.
Segment Performance
Per the 10-K:
| Segment | 2025 Revenue | 2024 Revenue | 2025 Margin | 2024 Margin |
|---|---|---|---|---|
| Merchant Solutions | -- | -- | 35.5% | 33.4% |
| Issuer Solutions | -- | -- | -- | -- |
The Merchant Solutions segment showed margin improvement from 33.4% to 35.5%, which is a positive signal. However, the company announced in January 2026 the sale of the Merchant Solutions segment to Worldpay (owned by GTCR and FIS). Per the filing, the company sold its consumer business to Acrisure for approximately $1.1B, including up to $75M in contingent consideration.
The filing also recorded a $33.2M goodwill impairment charge in discontinued operations during Q2 2025, related to changes in the plan of sale for a component of discontinued operations.
The Goodwill and Debt Problem
Goodwill and intangibles of $21.3B represent 93% of total equity — meaning almost all of the company's equity is intangible. This is the legacy of the $21.5B Merger of Equals with TSYS in 2019 and the $4B EVO Payments acquisition.
Per the filing: "The impairment of a portion of these assets could adversely affect our business, financial condition, and results of operations."
Debt profile:
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 37 days, flat YoY |
| A2 | AR vs Revenue Growth | PASS | AR growth -0.4% vs revenue -0.4% |
| A3 | Revenue vs CFFO | PASS | Revenue -0.4%, CFFO -13.1% |
| B1 | Inventory vs COGS | PASS | No material inventory |
| B2 | CapEx vs Revenue | PASS | CapEx growth -8.5% vs revenue -0.4% |
| B3 | SG&A Ratio | WATCH | SG&A/Gross Profit = 73.7%, exceeds 70% |
| B4 | Gross Margin | PASS | Gross margin 72.6%, -1.1pp |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.90. Cash-backed |
| C2 | Free Cash Flow | PASS | FCF $2.0B, FCF/NI = 1.46 |
| C3 | Accruals Ratio | PASS | -2.4%. Low accruals |
| C4 | Cash vs Debt | **FAIL** | Cash $8.3B covers 38% of $21.9B debt |
| D1 | Goodwill + Intangibles | **FAIL** | $21.3B = 93% of equity |
| D2 | Leverage | WATCH | Debt/EBITDA = 6.6x (>4x) |
| D3 | Soft Asset Growth | PASS | Other assets 0.1% vs revenue -0.4% |
| D4 | Asset Impairment | N/A | No write-off data |
| E1 | Serial Acquirer FCF | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | Goodwill+Intangibles change -2% YoY |
| F1 | Beneish M-Score | PASS | M-Score = -2.66 (< -2.22) |
| **G1-G5** | **Management signals (new)** | **✅✅✅✅✅** |
Management Signals (New G1-G5 Framework)
**Why separate management signals?** Schilit's *Financial Shenanigans* treats abrupt executive, auditor, and director departures as important early-warning signals. 8-K Item 5.02 executive/director changes and auditor-change filings help separate clean financial statements from governance or continuity risk.
| # | Check | Result | Detail |
|---|---|---|---|
| G1 | CEO change | ✅ | No abnormal signal in the last 18 months |
| G2 | CFO / key financial officer change | ✅ | No abnormal signal in the last 18 months |
| G3 | Independent director / audit committee departure | ✅ | No abnormal signal in the last 18 months |
| G4 | Key operating or legal leader departure | ✅ | No abnormal signal in the last 18 months |
| G5 | Auditor change | ✅ | No abnormal signal in the last 18 months |
Data source: SEC EDGAR 8-K filings filtered for Item 5.02 + management-signals-by-ticker.json
Auditor Critical Audit Matters
Deloitte flagged two Critical Audit Matters:
1. Revenue Recognition: Complex revenue arrangements across merchant acquiring, issuer processing, and multiple geographies create estimation challenges.
2. Goodwill Impairment Assessment: Given the magnitude of goodwill on the balance sheet and the strategic transformation underway, the annual impairment test involves significant judgment around long-term assumptions that are inherently uncertain during a period of business restructuring.
Key Financial Trends (4-Year)
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $9.0B | $7.4B | $7.7B | $7.7B |
| Net Income | $111M | $986M | $1,570M | $1,400M |
| Net Margin | 1.2% | 13.4% | 20.3% | 18.2% |
| ROE | 0.5% | 4.3% | 7.0% | 6.1% |
| CFFO | $2.2B | $2.5B | $3.1B | $2.7B |
| FCF | $1.6B | $1.9B | $2.4B | $2.0B |
| Total Debt | $14.3B | $17.4B | $16.7B | $21.9B |
| Cash | $2.0B | $2.1B | $2.4B | $8.3B |
Note: 2022 net income of $111M was depressed by significant charges; 2023-2024 represent recovery. The ROE remains extremely low (6.1%) for a company with this level of leverage, reflecting the massive goodwill-inflated equity base.
Summary
Grade: D. Significant concerns. A payments company in strategic transformation with excessive leverage, massive goodwill, and declining profitability.
The positive signals: M-Score of -2.66 is clean, CFFO/NI of 1.90 shows cash-backed earnings, accruals are low, and DSO is stable. The company is not manipulating its earnings.
The concerns are structural:
**Disclaimer**: This report is based on Global Payments' fiscal year 2025 10-K filed with the SEC on February 20, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade D means significant concerns that warrant careful investigation.