10-QPeriod: Q3 FY2014

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Aug 31, 2014

Filed October 2, 2014For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) reported strong performance for the three months ended August 31, 2014, demonstrating robust revenue growth and improved profitability. Total revenues increased by 11.9% to $704.9 million compared to the prior year, driven by solid performance in both its North America and International merchant services segments. The acquisition of PayPros in March 2014 is showing positive contributions, particularly to the North America segment. Net income attributable to Global Payments rose by 16.7% to $75.4 million, translating to a diluted EPS of $1.10, up from $0.87 in the prior year. This growth was supported by effective cost management, with sales, general, and administrative expenses increasing at a slower pace than revenue. The company also highlighted strategic expansion initiatives with announced acquisitions of Ezidebit in Australia/New Zealand and Certegy's gaming business, indicating a continued focus on inorganic growth to complement organic expansion. The company's liquidity remains strong, with $595.9 million in cash and cash equivalents. Despite increased short-term borrowings to fund settlement activities, Global Payments maintained compliance with its debt covenants and has significant available borrowing capacity. Management expressed confidence in the company's ability to meet its operational and growth objectives.

Financial Highlights

48 data points
Beta

Revenue

$704.89M

Net Income

$75.37M

10.7% Net Margin

EPS (Diluted)

$0.55

Total Assets

$4.34B

Cash & Equivalents

$595.88M

Free Cash Flow

-$63.47M

Financial Statements
Beta
Revenue$704.89M
SG&A Expenses$320.66M
Operating Expenses$580.50M
Operating Income$124.40M
Interest Expense$8.50M
Net Income$75.37M
EPS (Basic)$0.55
EPS (Diluted)$0.55
Shares Outstanding (Basic)136.29M
Shares Outstanding (Diluted)137.23M

Key Highlights

  • 1Total revenues grew 11.9% year-over-year to $704.9 million.
  • 2Net income attributable to Global Payments increased 16.7% to $75.4 million.
  • 3Diluted earnings per share (EPS) rose to $1.10 from $0.87 in the prior year.
  • 4North America merchant services revenue increased 11.9% to $504.0 million, boosted by the PayPros acquisition.
  • 5International merchant services revenue increased 12.1% to $200.9 million, driven by Europe and e-commerce growth.
  • 6The company announced two significant acquisition plans: Ezidebit in Australia/New Zealand and Certegy's gaming business in the US.
  • 7Cash and cash equivalents stood at $595.9 million, with $265.6 million considered available cash.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in both the North America and International merchant services segments. In North America, the acquisition of PayPros contributed significantly. In the International segment, growth was fueled by Europe, particularly Spain and the UK, and the e-commerce channel. Favorable exchange rates in Europe also positively impacted revenue.

The acquisition of PayPros, completed in March 2014, contributed to the revenue growth of the North America merchant services segment. While it also led to increased cost of service and administrative expenses, its impact on revenue was positive, and the company is focused on integrating the business to realize synergies.

Global Payments maintains a strong liquidity position with $595.9 million in cash and cash equivalents as of August 31, 2014, of which $265.6 million is considered available cash. The company has sufficient borrowing capacity and expects its operating cash flows, along with existing credit facilities, to meet its operational needs and strategic growth plans, including upcoming acquisitions.

Cost of service increased by 12.6%, slightly outpacing revenue growth, due in part to higher variable costs and amortization from the PayPros acquisition. Sales, general, and administrative expenses grew by 10.0%, which was less than revenue growth, leading to a decrease in SG&A as a percentage of revenue. Despite increased costs, overall operating income grew by 15.8% due to robust revenue expansion.