10-QPeriod: Q3 FY2013

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Nov 30, 2013

Filed January 8, 2014For Securities:GPN

Summary

Global Payments Inc. (GPN) reported a solid performance for the six months ended November 30, 2013, with a 7.2% increase in total revenues to $1.26 billion, driven by growth across all markets. Net income attributable to Global Payments rose by 18.6% to $138.5 million, leading to a significant improvement in diluted earnings per share to $1.88. The company's operating income also saw a healthy increase of 11.3% to $219.3 million. Both the North America and International merchant services segments contributed to this growth, with International showing a particularly strong revenue increase of 10.6% and an improved operating margin. The balance sheet reflects a substantial increase in cash and cash equivalents, reaching $1.1 billion, bolstered by strong operating cash flows which provided $411.7 million. This financial strength allows the company to fund operations, pursue acquisitions, and return capital to shareholders. While the company experienced a one-time credit related to a prior processing system intrusion, this was managed effectively, with no material loss of revenue directly attributed to the incident, though potential future impacts are noted. Overall, GPN demonstrated robust top-line growth and improved profitability, supported by strong operational execution and a healthy cash position.

Key Highlights

  • 1Total revenues increased by 7.2% to $1.26 billion for the six months ended November 30, 2013, compared to the prior year period.
  • 2Net income attributable to Global Payments increased by 18.6% to $138.5 million, with diluted EPS rising to $1.88.
  • 3Consolidated operating income grew by 11.3% to $219.3 million.
  • 4North America merchant services revenue grew 5.9% to $897.5 million, while International merchant services revenue increased 10.6% to $366.3 million.
  • 5Cash and cash equivalents significantly increased to $1.1 billion by November 30, 2013.
  • 6Operating cash flow provided $411.7 million for the six months ended November 30, 2013, a substantial increase from the prior year.
  • 7The company recorded a $7.0 million credit in the current period related to insurance recoveries from a prior processing system intrusion incident.

Frequently Asked Questions

Revenue growth was primarily driven by increases in transaction volumes and service fees across most of Global Payments' markets, including North America, Europe, and the Asia-Pacific region. Specific contributions came from growth in United States integrated solutions and direct sales channels, as well as expansion in Canada and European markets.

The company's cash and cash equivalents increased significantly to $1.1 billion as of November 30, 2013. Operating activities provided strong cash flow of $411.7 million for the first six months of fiscal 2014. Management believes that its current cash, borrowing capacity, and future operating cash flows are sufficient to meet its operational needs and planned requirements.

For the three and six months ended November 30, 2013, the company recorded a credit of $7.0 million related to insurance recoveries for the 2012 processing system intrusion. In contrast, the three months ended November 30, 2012, saw a credit of $14.5 million, and the six months ended November 30, 2012, recorded an expense of $9.5 million related to this incident. While the company has not experienced a material loss of revenue directly confirmed to be related to the incident, potential future impacts are noted, and legal and governmental investigations are ongoing.

Total debt increased to $1.44 billion as of November 30, 2013, up from $1.15 billion at May 31, 2013. This increase is primarily due to higher utilization of short-term lines of credit, which are largely used to fund settlement operations. The Corporate Credit Facility also saw an increase in its long-term balance. The company used $413.0 million to acquire Accelerated Payment Technologies (APT) in October 2012, funded by a term loan. They are actively managing their debt and credit facilities to support operations and strategic growth.