10-KPeriod: FY2003

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2003

Filed August 26, 2003For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported robust financial performance for the fiscal year ended May 31, 2003, demonstrating significant growth and improved profitability. Revenue increased by 12% to $516.1 million, driven primarily by the company's direct merchant services in the United States and Canada. Operating income saw a substantial rise, with margins improving from 15.4% to 18.1%, indicating effective cost management and operational efficiencies. Net income more than doubled to $53.3 million, translating to a significant increase in diluted earnings per share to $1.41. This strong performance was achieved despite restructuring and other charges incurred during the year. The company also announced a significant pending acquisition of Latin America Money Services, LLC (DolEx) for $190 million, which is expected to expand its reach into the consumer-to-consumer money transfer market. This strategic move, coupled with consistent revenue growth and margin expansion, positions Global Payments for continued success in the electronic transaction processing sector.

Key Highlights

  • 1Revenue increased 12% year-over-year to $516.1 million, primarily driven by direct merchant services in the US and Canada.
  • 2Operating income grew to $93.3 million from $71.4 million in the prior year, with operating margins improving to 18.1% from 15.4%.
  • 3Net income more than doubled, reaching $53.3 million, up from $23.8 million in the prior year.
  • 4Diluted earnings per share increased significantly to $1.41 from $0.63.
  • 5The company entered into a definitive agreement to acquire Latin America Money Services, LLC (DolEx) for approximately $190 million, expanding its funds transfer services.
  • 6Cost of service as a percentage of revenue decreased to 50% from 54%, reflecting integration and cost reduction initiatives.
  • 7The company maintained a strong focus on mid-market merchant acquisition in the US and a similar strategy in Canada.

Frequently Asked Questions

Revenue growth was primarily driven by the expansion of the company's direct merchant services offering in both the United States and Canadian portfolios. Growth in direct card transactions domestically was in the mid-teens, outperforming market trends and indicating market share gains.

The acquisition of DolEx for $190 million is a strategic move to expand Global Payments' presence in the consumer-to-consumer electronic money transfer services market, particularly targeting the Latino community. DolEx is a leading provider in this space, and its integration is expected to enhance the company's funds transfer offering.

Global Payments demonstrated improved expense management. The cost of service as a percentage of revenue decreased to 50% from 54% due to acquisition integration and cost reduction initiatives, such as facility consolidations. While sales, general, and administrative expenses increased as a percentage of revenue due to higher commission payments tied to growth, the overall operational efficiencies contributed to a significant increase in operating income and improved profit margins.

For fiscal year 2004, Global Payments projected revenue growth of 5% to 9%, reaching $542 million to $562 million. The company also anticipated diluted earnings per share growth of 10% to 15%, targeting $1.57 to $1.64, excluding restructuring charges. This outlook is based on continued growth in its domestic and Canadian operations, expansion of its sales channels, and strategic acquisitions.