10-QPeriod: Q1 FY2008

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 29, 2008

Filed April 2, 2008For Securities:GPN

Summary

GLOBAL PAYMENTS INC (GPN) reported strong revenue growth in the third quarter and first nine months of fiscal year 2008, primarily driven by its merchant services segment. Total revenues increased by 19% year-over-year for both periods, reaching $310.6 million and $930.4 million, respectively. This growth was largely attributed to increases in domestic direct merchant services and expansion in the Asia-Pacific region, though the domestic indirect channel experienced a decline. While overall net income and diluted earnings per share also saw positive growth, the money transfer segment experienced a significant decline in operating income and margins due to increased price competition and operational costs. The company's financial position remains solid, with ample liquidity and a $350 million revolving credit facility available for strategic acquisitions and general corporate purposes. GPN also continued its share repurchase program, having bought back $87.0 million worth of stock in the first nine months of the fiscal year.

Key Highlights

  • 1Total revenues grew by 19% year-over-year for both the three and nine months ended February 29, 2008, reaching $310.6 million and $930.4 million, respectively.
  • 2The Merchant Services segment was the primary driver of revenue growth, with a 21% increase for both reporting periods.
  • 3Net income and diluted EPS increased by 17% and 19% respectively in the three-month period, and 11% and 13% respectively in the nine-month period, demonstrating overall profitability growth.
  • 4The Money Transfer segment experienced a significant operating income decrease of 49% for the quarter and 44% for the nine months, with operating margins shrinking considerably.
  • 5The company repurchased $87.0 million of its common stock under its $100 million share repurchase program during the first nine months of fiscal 2008.
  • 6Global Payments Inc. has a $350 million unsecured revolving credit facility, which remained undrawn as of February 29, 2008, indicating strong liquidity.
  • 7Foreign currency exchange rates had a favorable impact, contributing $28.3 million to revenue and $8.8 million to net income for the nine-month period.

Frequently Asked Questions

The primary driver of Global Payments' revenue growth is its Merchant Services segment, which saw a 21% increase in revenue for both the three-month and nine-month periods ending February 29, 2008. This growth is attributed to increases in domestic direct merchant services, particularly in the US and Asia-Pacific regions, and expansion through Independent Sales Organizations (ISOs).

The Money Transfer segment's operating income and margins have declined due to increased price competition, a potential decrease in immigration, and the company's use of a fixed-cost branch model. Additionally, costs associated with closing underperforming locations have impacted profitability.

Global Payments maintains a strong liquidity position with $388.5 million in cash and cash equivalents as of February 29, 2008. The company also has access to a $350 million unsecured revolving credit facility, which was undrawn. Capital is being managed through operating cash flows, a share repurchase program, and planned capital expenditures for technology and infrastructure.

Yes, the company reported restructuring charges of $1.3 million related to facility consolidations, which were completed in the second quarter of fiscal 2008. Additionally, there was a favorable impact from a non-recurring, non-cash operating tax item of $7.0 million recognized in the three and nine months ended February 29, 2008, related to the release of a contingent liability.