10-QPeriod: Q1 FY2012

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 29, 2012

Filed April 2, 2012For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported a strong first quarter for fiscal year 2012, demonstrating robust revenue and operating income growth compared to the prior year. Total revenues for the three months ended February 29, 2012, increased by 17% to $533.5 million, driven by significant contributions from both its North America and International Merchant Services segments. The International segment, in particular, showed exceptional growth of 23%, bolstered by strategic acquisitions and favorable market conditions in Europe. Profitability also saw a substantial improvement, with operating income rising 18% to $92.3 million. This growth reflects effective cost management and the positive impact of acquisitions, alongside operational efficiencies. The company's diluted earnings per share attributable to Global Payments reached $0.73, up from $0.59 in the prior year's comparable period. The balance sheet remains solid, with total assets of $2.6 billion, though cash and cash equivalents saw a notable decrease, largely due to changes in settlement processing assets and obligations, and a significant share repurchase program. While the company experienced strong financial performance, a significant event subsequent to the quarter's end was the announcement of an unauthorized access to its processing system in North America. This incident, which may have involved the theft of Track 2 card data for less than 1.5 million card numbers, is under investigation and has led to the removal from Visa's PCI-DSS compliant list. The full financial impact of this security breach is currently unknown but could be material.

Financial Highlights

46 data points
Beta

Revenue

$533.54M

Net Income

$57.92M

10.9% Net Margin

EPS (Diluted)

$0.36

Total Assets

$2.62B

Cash & Equivalents

$735.73M

Free Cash Flow

-$226.85M

Financial Statements
Beta
Revenue$533.54M
SG&A Expenses$246.97M
Operating Expenses$441.19M
Operating Income$92.35M
Net Income$57.92M
EPS (Basic)$0.37
EPS (Diluted)$0.36
Shares Outstanding (Basic)156.84M
Shares Outstanding (Diluted)158.13M

Key Highlights

  • 1Revenues for the three months ended February 29, 2012, increased 17% to $533.5 million compared to the prior year.
  • 2Operating income for the three months ended February 29, 2012, increased 18% to $92.3 million compared to the prior year.
  • 3Net income attributable to Global Payments increased by 21.3% to $57.9 million for the three months ended February 29, 2012.
  • 4Diluted earnings per share attributable to Global Payments increased to $0.73 for the three months ended February 29, 2012, from $0.59 in the prior year.
  • 5International Merchant Services segment revenue grew by 23% to $154.8 million for the three months ended February 29, 2012.
  • 6The company completed three acquisitions in the first quarter of fiscal year 2012, totaling approximately $44 million, expanding its international and e-commerce presence.
  • 7A significant security breach was disclosed subsequent to the quarter-end, involving unauthorized access to its North American processing system, potentially impacting up to 1.5 million card numbers.

Frequently Asked Questions

Global Payments reported a strong financial performance for the quarter ended February 29, 2012, with a 17% increase in revenues to $533.5 million and an 18% increase in operating income to $92.3 million compared to the same period last year. Net income attributable to Global Payments grew by 21.3% to $57.9 million, resulting in a diluted EPS of $0.73.

Both North America and International Merchant Services segments showed growth. The International Merchant Services segment was particularly strong, with a 23% increase in revenue to $154.8 million, driven by acquisitions and performance in Europe. North America Merchant Services revenue increased by 15% to $378.8 million.

Investors should be aware of a significant security breach announced subsequent to the quarter's end. Unauthorized access to their North American processing system may have compromised card data for up to 1.5 million individuals. The company is investigating, but the full financial and reputational impact is not yet quantifiable. Additionally, the Durbin amendment impacting debit interchange fees continues to influence revenue and margins, particularly in the U.S. ISO channel.

As of February 29, 2012, Global Payments had $735.7 million in cash and cash equivalents. Total debt stood at $476.1 million, a decrease from the previous year, reflecting ongoing debt repayments and management of credit facilities. While operating cash flow was negative for the nine-month period due to settlement timing, the company believes its liquidity and borrowing capacity are sufficient for its needs.