10-KPeriod: FY2013

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2013

Filed July 25, 2013For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported a 7.8% increase in revenue to $2,375.9 million for fiscal year 2013, driven by strong performance in its U.S. ISO channel, direct sales, and European operations, partially offset by pricing compression in Canada. The company demonstrated solid earnings growth, with net income attributable to Global Payments increasing by 14.8% to $216.1 million, resulting in diluted earnings per share of $2.76, up from $2.37 in the prior year. This growth was achieved despite significant costs associated with a processing system intrusion in fiscal 2012, which saw reduced charges in fiscal 2013. Strategic acquisitions, including Accelerated Payment Technologies (APT), HSBC Asia's interest in GPAP, and the merchant acquiring business of Banca Civica in Spain, were completed during the year to expand distribution capabilities and market presence. Operationally, the North America merchant services segment saw revenue growth of 8.8%, though operating income declined slightly due to pricing pressures in Canada and investments. Conversely, the International merchant services segment exhibited healthy growth in both revenue (5.3%) and operating income, with improved operating margins. The company also highlighted its focus on leveraging technology and expanding market share through its distribution channels and strategic acquisitions, while managing operational risks, including those related to data security and regulatory compliance.

Financial Highlights

25 data points
Beta

Revenue

$2.38B

Net Income

$216.13M

9.1% Net Margin

EPS (Diluted)

$1.38

Free Cash Flow

$240.55M

Financial Statements
Beta
Revenue$2.38B
SG&A Expenses$1.12B
Operating Expenses$2.02B
Operating Income$357.21M
Interest Expense$31.70M
Net Income$216.13M
EPS (Basic)$1.39
EPS (Diluted)$1.38
Shares Outstanding (Basic)155.53M
Shares Outstanding (Diluted)156.45M

Key Highlights

  • 1Revenue increased by 7.8% to $2,375.9 million in fiscal 2013, driven by U.S. ISO channels, direct sales, and European growth.
  • 2Net income attributable to Global Payments rose by 14.8% to $216.1 million, with diluted EPS improving to $2.76 from $2.37.
  • 3Completed three strategic acquisitions in fiscal 2013: Accelerated Payment Technologies (APT), HSBC Asia's interest in GPAP, and Banca Civica's merchant acquiring business in Spain.
  • 4North America merchant services revenue grew 8.8%, but operating income decreased slightly due to Canadian pricing compression.
  • 5International merchant services revenue increased 5.3%, with operating income and margins showing improvement.
  • 6Processing system intrusion costs decreased significantly to $36.8 million in fiscal 2013 from $84.4 million in fiscal 2012.
  • 7The company actively repurchased shares, spending $175.3 million under its share repurchase program during fiscal 2013.

Frequently Asked Questions

Revenue growth of 7.8% to $2,375.9 million was primarily driven by increased activity in the U.S. ISO channel, growth from direct sales channels and the gaming business, and expansion in Europe. This growth was partially offset by market-based pricing compression experienced in Canada.

The company incurred $36.8 million in expenses related to the processing system intrusion in fiscal 2013, a decrease from $84.4 million in the prior year. Remediation efforts are complete, and the primary operating entity has been returned to the PCI DSS compliant service provider list. While no material loss of revenue has been confirmed, the company noted that these efforts could potentially impact future revenues.

Global Payments completed three key acquisitions in fiscal 2013: Accelerated Payment Technologies (APT) in October 2012 for $413.0 million to expand U.S. distribution, HSBC Asia's 44% interest in Global Payments Asia-Pacific Limited (GPAP) in December 2012 for $242.0 million, and the merchant acquiring business of Banca Civica in Spain for approximately $22.9 million.

The North America segment saw revenue increase by 8.8% to $1,705.7 million, but operating income decreased to $258.9 million from $281.3 million, with operating margins declining from 17.9% to 15.2%. This was attributed to pricing compression in Canada and costs associated with startup operations in Brazil. The International segment reported a 5.3% revenue increase to $670.2 million, with operating income rising to $211.2 million and operating margins improving from 30.8% to 31.5%.