10-QPeriod: Q1 FY2006

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 28, 2006

Filed April 7, 2006For Securities:GPN

Summary

Global Payments Inc. reported solid revenue growth for the nine months ended February 28, 2006, with a 16% increase to $669.3 million, driven primarily by its North American direct merchant services and consumer-to-consumer money transfer offerings. Net income also saw a significant rise of 32% to $91.5 million, leading to diluted earnings per share of $1.12. The company achieved improved operating margins due to economies of scale and cost containment efforts, with operating income up 23% to $148.7 million. Financially, the company demonstrated strong operating cash flow, increasing by 21% to $228.1 million for the period, supporting its liquidity. The balance sheet shows substantial growth in cash and cash equivalents, up to $213.1 million from $49.0 million at the prior fiscal year-end. The company is strategically positioning for future growth, including a significant joint venture in the Asia-Pacific region and continued investment in its processing platforms, while managing potential risks, such as a recent merchant-related contingency with an estimated potential uncollateralized loss exposure, though the company believes a material loss is not probable.

Key Highlights

  • 1Revenue increased 16% to $669.3 million for the nine months ended February 28, 2006, compared to the prior year.
  • 2Net income grew 32% to $91.5 million for the nine months ended February 28, 2006, with diluted EPS reaching $1.12.
  • 3Operating margin improved to 22.2% for the nine months, driven by economies of scale and cost controls.
  • 4Net cash provided by operating activities increased 21% to $228.1 million for the nine-month period.
  • 5Cash and cash equivalents significantly increased to $213.1 million as of February 28, 2006.
  • 6The company announced an agreement to form a joint venture in the Asia-Pacific region with HSBC.
  • 7A potential merchant-related contingency was disclosed, with an estimated potential uncollateralized loss exposure, though management believes a material loss is not probable.

Frequently Asked Questions

The primary drivers of revenue growth for Global Payments Inc. are its North American direct merchant services and consumer-to-consumer money transfer offerings. These segments have shown significant increases in transaction volumes and revenue.

The company has seen improved profitability, with net income increasing by 32% and diluted earnings per share reaching $1.12 for the nine months ended February 28, 2006. This is supported by increased operating income and a higher operating margin, attributed to economies of scale and cost containment initiatives.

Global Payments Inc. maintains a strong liquidity position, with cash and cash equivalents significantly increasing to $213.1 million as of February 28, 2006. Operating cash flow also saw a substantial increase of 21% for the nine-month period, providing ample resources for operations and strategic investments.

Yes, the company disclosed a contingency related to a merchant customer that processed $86.0 million in gross credit card sales volume. While the company has accumulated significant cash reserves and believes a material loss is not probable, there is a potential uncollateralized loss exposure of approximately $39.7 million. Management is actively managing this situation and pursuing recovery from involved parties.