10-QPeriod: Q3 FY2002

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Aug 31, 2002

Filed October 11, 2002For Securities:GPN

Summary

Global Payments Inc. reported a profitable quarter for the three months ended August 31, 2002, with net income of $14.6 million, a significant improvement from a net loss of $3.1 million in the same period of the prior year. This turnaround was largely driven by a substantial increase in revenue, up 15% to $127.7 million, and a one-time charge related to an accounting principle change in the prior year. The company's operational performance shows healthy growth in its core merchant services business, with revenue increasing by 17% year-over-year, partially boosted by the full quarter's results from the National Bank of Canada merchant portfolio acquisition. Despite a 33% increase in Sales, General & Administrative (SG&A) expenses, which outpaced revenue growth, operating income still saw a 12% increase. Management expects continued revenue growth and free cash flow generation in the upcoming fiscal year, signaling a positive outlook for investors.

Key Highlights

  • 1Reported a net income of $14.6 million for the three months ended August 31, 2002, compared to a net loss of $3.1 million in the prior year period.
  • 2Total revenue increased by 15% to $127.7 million, driven by a 17% rise in merchant services revenue.
  • 3Operating income grew by 12% to $25.3 million, demonstrating improved operational profitability.
  • 4Diluted earnings per share (EPS) improved to $0.39 from $(0.08) in the prior year, excluding the impact of the accounting change.
  • 5Net cash provided by operating activities increased by 22% to $19.6 million, indicating strong cash generation.
  • 6The company reduced its outstanding line of credit balance significantly, from $22 million to $8.5 million, demonstrating improved debt management.
  • 7Management reiterated full-year revenue guidance of $495 million to $514 million, projecting continued growth.

Frequently Asked Questions

The primary driver for the substantial improvement in net income was a significant increase in revenue and the absence of a large, one-time charge related to a change in accounting principle that negatively impacted the prior year's results. For the three months ended August 31, 2002, the company reported a net income of $14.6 million, a stark contrast to the net loss of $3.1 million in the same period of fiscal year 2001. This turnaround is also supported by a 15% increase in total revenues.

The merchant services business, which represents approximately 98% of the company's revenue, showed strong performance with a 17% year-over-year increase in revenue. This growth was supported by the full quarter's results from the National Bank of Canada merchant portfolio acquisition and organic growth in the direct merchant services segment. However, the indirect merchant services and funds transfer businesses saw declines.

Management provided a positive outlook for the upcoming fiscal year (FY 2003). They reaffirmed revenue guidance between $495 million and $514 million, representing 7% to 11% growth. Free cash flow is expected to be between $70 million and $75 million, and diluted EPS is projected to grow by 10% to 15% to a range of $1.35 to $1.41. This outlook suggests continued operational strength and profitability.

SG&A expenses increased by 33% year-over-year, outpacing revenue growth. This rise was attributed to higher investments in the sales infrastructure and personnel to drive revenue growth, the inclusion of costs from recent merchant acquiring portfolio acquisitions, and increased commission payments to Independent Sales Organizations (ISOs). Management is focused on managing these costs while pursuing growth initiatives.