10-QPeriod: Q3 FY2011

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Aug 31, 2011

Filed October 11, 2011For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported strong financial performance for the three months ended August 31, 2011. Revenues surged by 23% to $542.8 million compared to the prior year, driven by robust growth across all regions and the impact of the Spanish acquisition. Operating income also saw a significant increase of 32% to $108.6 million, with operating margins improving to 20.0% from 18.7% in the same period last year. This improvement was largely attributable to strong international segment performance, favorable foreign currency trends, and a marketing fee true-up in Spain. The company's International Merchant Services segment was a key growth driver, with revenues increasing by 59%, significantly boosted by the acquisition in Spain and pricing benefits in the UK. While North America Merchant Services also showed solid growth, its operating margin experienced a slight decline due to the dilutive effect of the Independent Sales Organization (ISO) channel. Despite a substantial increase in operating expenses, particularly in cost of service, the company managed to improve overall profitability through efficient cost management and strategic revenue generation.

Financial Highlights

47 data points
Beta

Revenue

$542.77M

Net Income

$63.97M

11.8% Net Margin

EPS (Diluted)

$0.40

Total Assets

$2.72B

Cash & Equivalents

$723.95M

Free Cash Flow

-$605.88M

Financial Statements
Beta
Revenue$542.77M
SG&A Expenses$242.63M
Operating Expenses$434.16M
Operating Income$108.61M
Net Income$63.97M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)160.15M
Shares Outstanding (Diluted)161.66M

Key Highlights

  • 1Total revenues increased by 23% to $542.8 million for the three months ended August 31, 2011, compared to $440.1 million in the prior year.
  • 2Operating income rose by 32% to $108.6 million, with operating margins improving from 18.7% to 20.0%.
  • 3International Merchant Services segment revenue grew by 59% to $164.1 million, significantly boosted by the acquisition in Spain.
  • 4North America Merchant Services segment revenue increased by 12% to $378.6 million.
  • 5Cost of service increased by 27% to $191.5 million, and Sales, general and administrative expenses rose by 17% to $242.6 million.
  • 6Net income attributable to Global Payments increased by 29.6% to $64.0 million, with diluted EPS rising to $0.79 from $0.61.
  • 7The company repurchased $80.5 million of its common stock in the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance across all geographic regions, the impact of the acquisition in Spain (Comercia Global Payments Entidad de Pago, S.L.) completed in December 2010, and favorable foreign currency exchange rate trends. The International Merchant Services segment, in particular, saw significant growth.

Profitability improved significantly. Operating income increased by 32% to $108.6 million, and operating margins expanded to 20.0% from 18.7% in the prior year's comparable period. Net income attributable to Global Payments also increased by 29.6% to $63.97 million.

Favorable foreign currency trends positively impacted the company's results. For the three months ended August 31, 2011, currency exchange rate fluctuations increased revenues by $15.0 million and earnings by approximately $0.05 per diluted share.

The company had $724.0 million in cash and cash equivalents as of August 31, 2011. Total debt increased to $690.7 million from $624.8 million at May 31, 2011, primarily due to increased borrowings on lines of credit and the corporate credit facility. The company believes its current cash levels and borrowing capacity are sufficient to meet its operational needs and future growth plans.