10-QPeriod: Q3 FY2010

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Aug 31, 2010

Filed October 12, 2010For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported third-quarter results for the period ending August 31, 2010, showing a 7% increase in revenue to $440.1 million, primarily driven by an 11% growth in its North America Merchant Services segment. This growth was largely attributable to the United States market, where transaction volumes increased by 19%, although the average ticket size declined. Despite revenue growth, operating income saw a decrease of 8% to $82.1 million, with operating margins narrowing from 21.8% to 18.7%. This decline was primarily influenced by increased sales, general, and administrative expenses, which rose 15% due to employee termination and relocation benefits, and a new Global Service Center in Manila. The company also repurchased $14.9 million of its common stock during the quarter and maintained a strong liquidity position with $578.2 million in cash and cash equivalents.

Financial Highlights

49 data points
Beta

Revenue

$440.14M

Net Income

$49.37M

11.2% Net Margin

EPS (Diluted)

$0.30

Total Assets

$1.91B

Cash & Equivalents

$578.21M

Free Cash Flow

-$129.16M

Financial Statements
Beta
Revenue$440.14M
SG&A Expenses$206.99M
Operating Expenses$358.03M
Operating Income$82.11M
Net Income$49.37M
EPS (Basic)$0.31
EPS (Diluted)$0.30
Shares Outstanding (Basic)159.19M
Shares Outstanding (Diluted)160.68M

Key Highlights

  • 1Total revenues increased by 7% to $440.1 million for the three months ended August 31, 2010, compared to $409.9 million in the prior year.
  • 2North America Merchant Services segment revenue grew by 11% to $336.8 million, driven by a 19% increase in US transactions.
  • 3Operating income decreased by 8% to $82.1 million, with operating margins declining to 18.7% from 21.8% year-over-year.
  • 4Sales, general, and administrative expenses increased by 15% to $207.0 million, impacting profitability.
  • 5The company's discontinued operations segment (money transfer business) had a loss of $28 thousand for the period, compared to income of $2.19 million in the prior year.
  • 6Cash and cash equivalents stood at $578.2 million at the end of the period, a decrease from $769.9 million at the end of the prior quarter.
  • 7The company repurchased $14.9 million of its common stock during the quarter.

Frequently Asked Questions

The primary driver for the revenue increase was the North America Merchant Services segment, which saw an 11% rise in revenue, largely propelled by a 19% growth in credit and debit card processed transactions in the United States. This growth was achieved through the company's Independent Sales Organization (ISO) channel.

Operating income declined by 8% despite revenue growth primarily due to a significant increase in Sales, General, and Administrative (SG&A) expenses, which rose 15%. These increases were attributed to employee termination benefits, relocation costs, expenses for a new Global Service Center in Manila, and a proportional increase in commission payments to ISOs.

The company's cash and cash equivalents decreased from $769.9 million at May 31, 2010, to $578.2 million at August 31, 2010. This decrease was primarily due to a significant negative swing in cash flow from operating activities, largely impacted by changes in settlement processing assets and obligations, and also reflected cash used in investing and financing activities, including debt paydowns and stock repurchases.

The company completed the disposition of its money transfer businesses on May 26, 2010. For the three months ended August 31, 2010, this segment reported a net loss of $28 thousand, whereas in the prior year's comparable period, it had generated a net income of $2.19 million.