10-QPeriod: Q3 FY2003

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Aug 31, 2003

Filed October 10, 2003For Securities:GPN

Summary

Global Payments Inc. reported solid revenue growth of 7% to $136.5 million for the quarter ended August 31, 2003, compared to the same period last year. This growth was driven by strong performance in its domestic direct merchant channel and ISO sales channels, despite a decline in the indirect channel. Net income saw an increase of 8% to $15.8 million, translating to diluted earnings per share of $0.41, up from $0.39 in the prior year. The company's operating income also grew by 7%. Significant operational improvements were noted, including a 7% decrease in the cost of services as a percentage of revenue, largely due to acquisition integration and cost-reduction initiatives. However, Sales, General, and Administrative (SG&A) expenses increased by 28% as a percentage of revenue, primarily due to higher commission payments to ISOs and investments in direct sales channels. The company also provided guidance for fiscal year 2004, anticipating revenue growth of 5% to 9% and diluted EPS growth of 10% to 15%. A major development is the pending acquisition of Latin America Money Services, LLC (DolEx), expected to close by year-end 2003, which will expand the company's funds transfer business.

Key Highlights

  • 1Revenue increased by 7% year-over-year to $136.5 million for the quarter ended August 31, 2003.
  • 2Net income rose by 8% to $15.8 million, with diluted EPS growing to $0.41 from $0.39 in the prior year.
  • 3Cost of services decreased as a percentage of revenue to 46% from 52% due to integration and cost-saving measures.
  • 4SG&A expenses increased as a percentage of revenue to 33% from 28%, driven by commissions and sales investments.
  • 5The company is pursuing the acquisition of Latin America Money Services, LLC (DolEx) for $190 million, expanding its funds transfer capabilities.
  • 6Global Payments provided a positive outlook for fiscal year 2004, projecting revenue growth of 5-9% and diluted EPS growth of 10-15%.
  • 7Operating income showed a 7% increase, reflecting improved revenue and cost management, though impacted by restructuring charges.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in the domestic direct merchant channel and continued momentum in the ISO sales channels. Price adjustments resulting from the MasterCard and VISA lawsuit settlement also contributed.

The acquisition of DolEx Dollar Express, Inc. is a strategic move to significantly expand Global Payments' presence in the consumer-to-consumer electronic money transfer market, particularly targeting the Latino community in the U.S. and their families abroad. This acquisition will enhance the company's funds transfer offering.

The company successfully reduced its cost of services as a percentage of revenue through acquisition integration and cost reduction initiatives. However, Sales, General, and Administrative (SG&A) expenses increased as a percentage of revenue due to higher commission payouts to ISOs and investments in its direct sales force. Restructuring charges of $1.6 million were also incurred related to facility consolidations.

Global Payments has projected revenue growth of 5% to 9% for fiscal year 2004, expecting revenues between $542 million and $562 million. Diluted earnings per share are forecast to grow between 10% and 15%, to a range of $1.57 to $1.64. The company anticipates achieving an operating margin of 19% to 19.5% in fiscal 2004, excluding restructuring charges.