10-QPeriod: Q3 FY2011

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Nov 30, 2011

Filed January 6, 2012For Securities:GPN

Summary

Global Payments Inc. (GPN) reported a solid third quarter for fiscal year 2012, demonstrating robust revenue and operating income growth. For the three months ended November 30, 2011, total revenues increased by 20% to $530.5 million compared to the prior year, driven by strong performance in both its North America and International Merchant Services segments. Operating income saw a significant rise of 16% to $96.6 million. The company's international segment, particularly in Europe, showed exceptional growth at 30%, boosted by the acquisition in Spain and favorable currency trends. North America also contributed positively, with a 16% revenue increase, supported by the US ISO channel and the impact of new debit interchange legislation. Profitability remained strong, with operating margins holding steady, reflecting effective cost management and strategic growth initiatives.

Key Highlights

  • 1Total revenues for the three months ended November 30, 2011, increased by 20% to $530.5 million, compared to $443.5 million in the prior year.
  • 2Operating income grew by 16% to $96.6 million for the three months ended November 30, 2011, compared to $83.1 million in the prior year.
  • 3International Merchant Services segment revenue increased by 30% to $151.6 million, with Europe showing a notable 44% growth.
  • 4North America Merchant Services segment revenue increased by 16% to $378.9 million.
  • 5The company reported diluted earnings per share of $0.78 for the three months ended November 30, 2011, an increase from $0.67 in the prior year.
  • 6Operating margins remained strong, with the overall operating margin at 18.2% for the quarter, slightly down from 18.7% in the prior year, primarily due to margin dilution in the US ISO channel.
  • 7The company completed a share repurchase program, buying back shares for $99.6 million in the first half of fiscal year 2012.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance across all regions, including the impact of the acquisition in Spain in December 2010, and favorable foreign currency trends. The North America segment saw growth from its US ISO channel and the effects of new debit interchange legislation, while the International segment benefited from acquisitions and improved performance in Europe.

Effective October 1, 2011, new debit interchange legislation capped interchange rates on domestic debit transactions. Since Global Payments recognizes revenue net of interchange fees, this reduction increased revenues by approximately $15 million and earnings per share by approximately $0.02. However, this revenue increase was primarily through the ISO channel, which is dilutive to operating margins.

The company's liquidity appears adequate, with cash and cash equivalents totaling $770.9 million at November 30, 2011, of which $238.3 million is considered available cash. Operating activities used $314.1 million in cash during the first six months of the fiscal year, primarily due to changes in settlement processing assets and obligations. The company believes its current cash and borrowing capacity are sufficient to meet its operational needs and planned requirements.

Yes, the acquisition of a 51% controlling financial interest in Comercia Global Payments Entidad de Pago, S.L. in Spain on December 20, 2010, had a significant impact, particularly on the International Merchant Services segment. Additionally, during the third fiscal quarter, the company's UCS subsidiary acquired Alfa-Bank's merchant acquiring business in Russia, and other acquisitions in Malta and a US e-commerce portfolio were made.