Dive Brief:

• Global Payments has agreed to sell its AdvancedMD software subsidiary to Francisco Partners Management for $1.13 billion, according to a filing it made Wednesday with the Securities and Exchange Commission. That business “was not the best strategic fit,” Global Payments CEO Cameron Bready said during an earnings webcast Wednesday.
• The transaction is expected to close before the end of the year, the payments processor said in the filing.
• As part of the accord with Franscisco Partners, Global Payments will continue to provide payment acceptance services to AdvancedMD, a Wednesday press release from the companies said.

Dive Insight:

Global Payments provides payments software to merchants for card, check and other payment processing. Top executives of the Atlanta-based company told investors last month that they planned to divest some assets as part of an effort to streamline, simplify and modernize the overall business. The company has also cut employees as part of its trimming campaign.

“There probably are some growthier, for lack of a better term, assets that we think don’t necessarily fit well strategically around what it is we want to focus on as a business going forward,” Bready said during the September presentation.

The AdvancedMD unit wasn’t a good fit for several reasons, Bready told analysts on a webcast Wednesday to discuss the company’s third-quarter results.

Specifically, the CEO said that being in the healthcare industry requires “significant investments” in capabilities and compliance that can’t be stretched to other parts of the business. In addition, the regulatory aspects of healthcare made it difficult to integrate the business in the company’s evolving operating model. Finally, due to increased healthcare exposure in other areas of the business, the company foresaw “channel conflict with partners,” he said.

AdvancedMD provides cloud-based software to thousands of small and mid-sized U.S. ambulatory physicians and healthcare offices, allowing them to manage their practices, handle electronic health records, engage with their patients and use payments software, according to the filing and release. Its revenue this year was expected to be about $250 million, Global Payments Chief Financial Officer Josh Whipple said during the webcast.

AdvancedMD will continue to be led by its current management, with the existing president, Amanda Sharp, taking the additional CEO title, according to the release from the companies. 

With respect to any additional divestitures, Bready said “we have more things that we’re working on,” without disclosing any specific details.

The company’s executives also said last month that 2025 will be a “transition year,” with revenue growth expected to be slower than in subsequent years as the company resets its strategy.

Even the current third-quarter results started to show some softening. Net income for the quarter dropped 13% to $361.8 million, relative to the year-earlier quarter, as revenue rose 5% to $2.6 billion.

The slowdown was due to sluggish consumer transactions as well as a decrease in demand from commercial clients that are cutting overall spending, given macroeconomic uncertainty, the company’s executives told analysts on the webcast.

“We have seen certain bank customers delaying product and service investments in the current environment,” Whipple said during the webcast. “While we're seeing broader, incremental softness, these trends have been more acute with the regional and smaller partners.”

There were also weather-related issues, including hurricanes in the southeastern U.S. as well as storms in Europe, that negatively impacted results as they halted some transactions, and disrupted payment systems.

Despite the company’s efforts to jump-start revenue growth, analysts at William Blair told their investment clients Wednesday that they don’t believe the company offers point-of-sale software that will “accelerate long-term merchant organic revenue growth.”

“While the company’s POS solutions, integrated, and core processing offerings are diversified across capabilities, vertical, and geographies, we contend these assets are neither cohesive nor differentiated,” the analysts wrote.