10-QPeriod: Q1 FY2003

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 28, 2003

Filed April 4, 2003For Securities:GPN

Summary

Global Payments Inc. (GPN) reported solid revenue growth in its fiscal third quarter ended February 28, 2003, with total revenues increasing by 8% year-over-year to $124.6 million. This growth was primarily driven by its direct merchant services business, indicating successful market share gains and stable transaction metrics. The company also saw an improvement in operating income and margins, reflecting successful integration of recent acquisitions and cost-reduction initiatives. For the nine-month period, revenue grew by 12% to $381.8 million. While operating expenses, particularly sales, general, and administrative costs, saw an increase, the company managed to improve its operating income and margins compared to the prior year. Net income for the quarter rose by 18% to $12.1 million, translating to a diluted EPS of $0.32, up from $0.27 in the prior year. Investors should note the company's strategic focus on growing its domestic and Canadian presence, building its ISO sales channel, and pursuing profitable acquisition growth, all while managing the impact of declining indirect and funds transfer businesses.

Key Highlights

  • 1Revenue increased 8% year-over-year to $124.6 million for the three months ended February 28, 2003.
  • 2Revenue increased 12% year-over-year to $381.8 million for the nine months ended February 28, 2003.
  • 3Operating income grew to $21.8 million in Q3 2003, up from $18.0 million in Q3 2002, with operating margin improving to 17.5%.
  • 4Diluted earnings per share (EPS) for the three months ended February 28, 2003, was $0.32, an increase from $0.27 in the prior year.
  • 5Net income for the nine months ended February 28, 2003, before a cumulative accounting change, increased by 16% to $40.3 million.
  • 6Cash and cash equivalents increased to $29.4 million as of February 28, 2003, compared to $19.2 million at May 31, 2002.
  • 7The company expects full-year fiscal 2003 revenue guidance between $495 million and $514 million, representing 7% to 11% growth.

Frequently Asked Questions

The primary driver of Global Payments' revenue growth in the fiscal third quarter ended February 28, 2003, was the strong performance in its direct merchant services business, which indicates successful market share gains and stable transaction metrics.

The company saw a decrease in its cost of service expenses as a percentage of revenue, attributed to the integration of recent acquisitions and cost reduction initiatives. However, sales, general, and administrative expenses increased, partly due to higher sales infrastructure and increased commission payments to Independent Sales Organizations (ISOs).

Global Payments reaffirmed its full-year fiscal 2003 revenue guidance between $495 million and $514 million, representing 7% to 11% growth. They also project diluted EPS between $1.39 and $1.42, indicating 13% to 15% growth compared to normalized fiscal 2002 EPS.

In fiscal year 2002, Global Payments recorded a charge of $16.0 million (net of tax) as a cumulative effect of a change in accounting principle related to the write-off of an indefinite-life intangible asset, the MAPP trademark. This impact is reflected in prior periods' reported net income but is excluded from normalized earnings for comparison purposes in fiscal year 2003 guidance.