10-KPeriod: FY2006

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2006

Filed August 4, 2006For Securities:GPN

Summary

Global Payments Inc. reported strong financial performance for the fiscal year ended May 31, 2006. Total revenue grew by 16% to $908.1 million, driven primarily by growth in its North American direct merchant services and its money transfer segment. Net income increased by a significant 35% to $125.5 million, leading to diluted earnings per share of $1.53, up from $1.16 in the prior year. The company also saw an improvement in its operating margin to 22.1%. The company highlighted strategic developments including the formation of an Asia-Pacific joint venture with HSBC and the completion of its primary data center relocation. The report also detailed a two-for-one stock split effective in October 2005. Global Payments operates two core segments: Merchant Services and Money Transfer, both showing robust revenue growth. The company is well-positioned for continued expansion, with a clear strategy focusing on increasing market penetration, geographic diversification, and leveraging its existing infrastructure and technology.

Key Highlights

  • 1Revenue increased 16% to $908.1 million in fiscal 2006, fueled by merchant services and money transfer growth.
  • 2Net income surged 35% to $125.5 million, with diluted EPS rising to $1.53 from $1.16.
  • 3Operating margin improved to 22.1% from 20.4% in the prior fiscal year.
  • 4Announced a significant Asia-Pacific joint venture with HSBC to expand global reach.
  • 5Completed data center relocation, complying with IRS requirements.
  • 6Executed a two-for-one stock split in October 2005, increasing outstanding shares.
  • 7Merchant Services segment revenue grew 15% and Money Transfer segment revenue grew 24%.

Frequently Asked Questions

The primary drivers of revenue growth in fiscal 2006 were the strong performance of its North American direct merchant services offerings and its money transfer segment. Merchant services revenue increased by 15% and money transfer revenue increased by 24%.

Global Payments' strategy focuses on increasing penetration in existing markets, expanding into new geographic regions (such as the Asia-Pacific region through its joint venture), and expanding into new payment areas. This includes growing its direct and indirect merchant services, expanding its money transfer customer base, and developing new products and services.

Key risks include reliance on VISA and MasterCard certifications and financial institution sponsorships, potential loss of key Independent Sales Organizations (ISOs), foreign currency fluctuations due to international operations, competition from larger entities with greater resources, and exposure to merchant customer credit risk and business cycles.

The joint venture agreement was signed in September 2005, but the transaction closed on July 24, 2006, after the fiscal year end. Therefore, its financial impact was not included in the fiscal year 2006 results, but the company anticipates consolidating its results going forward.