10-QPeriod: Q1 FY2007

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 28, 2007

Filed April 6, 2007For Securities:GPN

Summary

Global Payments Inc. reported a strong financial performance for the nine months ended February 28, 2007, with consolidated revenue increasing by 17% to $781.4 million. This growth was primarily driven by robust performance in its domestic direct, Canada, and Asia-Pacific merchant services channels, alongside expansion in the money transfer segment. Net income saw a significant 20% increase to $109.8 million, translating to a diluted EPS of $1.34. The company is actively pursuing strategic growth through acquisitions, notably the HSBC merchant acquiring business in the Asia-Pacific region, and is investing in infrastructure to support future expansion. While the merchant services segment continues to be the primary revenue driver with stable operating margins, the money transfer segment experienced a decline in operating income and margins due to increased pricing competition and an expanded branch footprint. Global Payments Inc. also announced a $100 million share repurchase program and is managing its liquidity effectively through operating cash flows and a significant revolving credit facility.

Key Highlights

  • 1Consolidated revenue grew 17% to $781.4 million for the nine months ended February 28, 2007, driven by merchant services and money transfer segments.
  • 2Net income increased by 20% to $109.8 million for the nine-month period, with diluted EPS rising to $1.34 from $1.12 year-over-year.
  • 3Merchant services segment revenue increased 17% to $683.2 million, showing strong growth across domestic direct, Canada, and Asia-Pacific channels.
  • 4Money transfer segment revenue grew 14% to $98.2 million, supported by expansion in both domestic and European branches.
  • 5The company announced a $100 million share repurchase program, indicating a commitment to shareholder value.
  • 6Consolidated operating margin slightly decreased to 21.4% from 22.2% for the nine-month period, impacted by increased SG&A and a dilutive effect from the Asia-Pacific acquisition.
  • 7Global Payments Inc. maintains a strong liquidity position with $292.1 million in cash and cash equivalents and an undrawn $350 million U.S. revolving credit facility.

Frequently Asked Questions

Revenue growth is primarily driven by the company's domestic direct, Canada, and new Asia-Pacific merchant services channels, as well as growth in the money transfer segment. Specifically, the merchant services segment saw a 17% increase in revenue, while the money transfer segment grew by 14%.

Cost of service increased by 14% for the nine-month period, largely due to expenses related to the new Asia-Pacific channel. Sales, general, and administrative expenses rose by 23%. While overall revenue growth was strong, consolidated operating margin slightly decreased from 22.2% to 21.4% for the nine months ended February 28, 2007. The merchant services segment margin remained stable, but the money transfer segment experienced a decline in operating income and margin due to pricing competition.

For fiscal year 2007, Global Payments Inc. expects consolidated revenue to range from $1,050 million to $1,057 million, reflecting 16% growth. Preliminary expectations for fiscal 2008 suggest revenue growth in the high single digit to low double digit percentage range. Diluted EPS for fiscal 2007 is projected to be between $1.74 and $1.76, excluding restructuring charges.

The acquisition of a majority stake in HSBC's merchant acquiring business in the Asia-Pacific region, completed in July 2006, is a key growth initiative, contributing significantly to the company's Asia-Pacific merchant services revenue. While expected to drive revenue, management noted it has a dilutive effect on the merchant services operating margin in the short term.