10-QPeriod: Q3 FY2008

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Nov 30, 2008

Filed January 8, 2009For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported a strong third quarter for fiscal year 2009, demonstrating robust revenue and net income growth. Total revenues increased by 30% to $401.1 million for the three months ended November 30, 2008, driven by solid performance in both the North America and International merchant services segments. The acquisition of a 51% majority interest in HSBC Merchant Services LLP in the UK significantly boosted the International segment's revenue and profitability. Despite macroeconomic headwinds impacting consumer spending, evident in a mid-single-digit decrease in the average credit card transaction value, the company managed to achieve substantial profit growth. Net income rose by 28% to $48.9 million, translating to a 25% increase in diluted earnings per share to $0.60. The company's strategic focus on expanding its international presence, particularly through the HSBC acquisition, and maintaining operational efficiencies contributed to an improved consolidated operating margin of 20.6%. Management expressed confidence in future growth, projecting fiscal 2009 revenues between $1,550 million and $1,580 million.

Key Highlights

  • 1Total revenues grew 30% to $401.1 million for the three months ended November 30, 2008, compared to the prior year, with a 30% increase to $806.8 million for the six-month period.
  • 2The acquisition of 51% of HSBC Merchant Services LLP in the UK significantly contributed to a 192% revenue increase in the International Merchant Services segment.
  • 3Net income increased by 28% to $48.9 million for the quarter, and diluted EPS grew by 25% to $0.60.
  • 4Consolidated operating income increased by 42% to $82.8 million, resulting in an improved operating margin of 20.6% for the quarter.
  • 5North America Merchant Services segment revenue grew 12% in the quarter, driven by transaction growth and continued expansion in diversified markets.
  • 6The company noted a mid-single-digit decrease in the average credit card transaction value in the US, attributing it partly to lower consumer spending due to the weakened economy and a shift towards smaller merchants.
  • 7Despite foreign currency fluctuations reducing revenues by $23.3 million for the quarter, the company maintains a positive outlook with projected fiscal 2009 revenues of $1,550 million to $1,580 million.

Frequently Asked Questions

Revenue growth was primarily driven by the acquisition of a 51% stake in HSBC Merchant Services LLP in the UK, which significantly boosted the International Merchant Services segment. Additionally, strong performance and expansion in the North America Merchant Services segment also contributed to the overall revenue increase.

The company acknowledged a mid-single-digit decrease in the average credit card transaction value in the US, which they attribute partly to lower consumer spending due to the weakened economy and a shift towards smaller merchants. Foreign currency fluctuations also negatively impacted revenues by $23.3 million for the quarter.

Management projects fiscal 2009 consolidated revenues to range between $1,550 million and $1,580 million, representing an expected growth of 22% to 24% over fiscal 2008. Diluted earnings per share are expected to range from $2.14 to $2.21.

The most significant recent investment was the acquisition of a 51% majority ownership interest in HSBC Merchant Services LLP in the United Kingdom on June 30, 2008, for $438.6 million. The company also announced an agreement to acquire ZAO United Card Service (UCS) in Russia for $109 million, pending regulatory approval.