10-KPeriod: FY2007

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2007

Filed July 30, 2007For Securities:GPN

Summary

Global Payments Inc. (GPN) reported a solid performance for the fiscal year ended May 31, 2007, with total revenues increasing by 17% to $1.06 billion. This growth was primarily driven by its domestic direct merchant services and its newly acquired Asia-Pacific merchant services operations. The company saw a 14% increase in net income, reaching $143 million, translating to diluted earnings per share of $1.75, up from $1.53 in the prior year. While the merchant services segment showed robust revenue and operating income growth, the money transfer segment experienced a decline in operating income and margins due to increased price competition and evolving market dynamics. Despite a slight decrease in operating margin to 20.5% from 22.1%, attributed to higher sales, general, and administrative expenses (including share-based compensation) and the dilutive effect of ISO commissions and investments in the Asia-Pacific region, the company demonstrated strong overall revenue and net income growth. GPN also highlighted its strategic focus on expanding its international presence, enhancing its product offerings, and optimizing its infrastructure through technology platform development and facility consolidations. The company also announced a $100 million share repurchase program in April 2007.

Key Highlights

  • 1Total revenue increased 17% to $1.06 billion in fiscal year 2007.
  • 2Net income grew 14% to $143 million, with diluted EPS rising to $1.75 from $1.53.
  • 3Merchant services segment revenue rose 18% to $929.1 million, driven by domestic direct and Asia-Pacific operations.
  • 4Money transfer segment revenue increased 11% to $132.4 million, but operating income decreased by 23%.
  • 5Operating margin for merchant services slightly decreased to 27.9% from 28.4% due to higher ISO commissions and Asia-Pacific investments.
  • 6The company announced a $100 million share repurchase program in April 2007.
  • 7Significant expansion into the Asia-Pacific market through the acquisition of a 56% stake in HSBC's merchant acquiring business.

Frequently Asked Questions

Global Payments Inc.'s revenue growth in fiscal year 2007 was primarily driven by its domestic direct merchant services channel and the newly acquired Asia-Pacific merchant services operations. These segments demonstrated strong performance, contributing significantly to the overall 17% increase in total revenue.

The Merchant Services segment performed robustly, with revenue increasing 18% to $929.1 million and operating income rising 16%. However, the Money Transfer segment saw revenue grow 11% to $132.4 million, but its operating income decreased by 23% and its operating margin declined significantly due to intensified price competition and other market factors.

Global Payments Inc. aims to achieve future growth by increasing penetration in existing markets, expanding into new geographic regions (particularly in the Asia-Pacific and European markets), developing new payment services, and optimizing its infrastructure through technology upgrades and operational consolidations. Strategic acquisitions are also a key part of their growth strategy.

The acquisition of a 56% stake in HSBC's merchant acquiring business in the Asia-Pacific region, completed in July 2006, contributed $48.4 million in revenue in fiscal year 2007. This expansion marks a strategic move into a high-growth market, although it also contributed to an increase in selling, general, and administrative expenses due to initial investments in the sales force and infrastructure.