This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Global Payments Inc. (GPN: chart) on July 26, 2007.
Chairman, President and CEO: Paul R. Garcia
EVP and CFO: Joseph C. Hyde
Senior EVP and COO: James G. Kelly
VP, Investor Relations: Jane M. Elliott
Key Investors Issues
- The earnings per share fell marginally to 40 cents from 41 cents in last year.
- The quarterly sales grew 17% over the previous year to $280 million.
- For fiscal 2008, the firm projects revenue of $1.168 billion to $1.220 billion.
Fourth Quarter Fiscal 2007 Financial Highlights
For the fourth quarter, the revenue grew 17% over the prior year to $280 million.
The growth was driven by good performance in merchant services segment while money transfer segment met the firm’s near-term expectations.
The merchant services segment operating margin was 25.8% for the quarter and 27.9% for the year.
These results reflect declines compared to the prior year due to several factors, primarily the impact of high growth in lower margin ISO channel and the impact of lower margin Asia-Pacific acquisition. For the quarter, these two impacts were partially offset by the successful correction of a merchant card operating loss relating to a fraud situation, and the firm had fully reserved for during the second quarter of fiscal 2007.
The money transfer segment operating margin was 10.2% in the current quarter and 10.9% for fiscal 2007.
These results reflect declines compared to the prior year, primarily due to competitive domestic pricing environment combined with the branch phase, high fixed model.
Capital expenditures for the quarter were $12 million.
The capital expenditures this year are primarily related to technology spending including for the firm’s new G2 platform in the U.S. in addition to merchant terminals in Canada.
The firm continues to make progress on its next generation technology processing platform, which is referred to internally as G2 platform.
This G2 platform is planned to be a new front-end operating environment for the merchant processing in the U.S., Asia-Pacific and Canada and will replace several legacy platforms that have higher cost structures. Apart from cost advantages, there are many other benefits to this new platform such as increased speed to market of new product, ease of scalability, enhanced recording option, hardware environment flexibility and compliance with EMD and PCI standards.
In addition, G2 is being designed as a potential integration platform for future acquisition. It may help the firm to achieve higher acquisition synergies in the future. The current migration plan is to begin converting the first of several Asia-Pacific front-end platforms to G2 during the fourth quarter of fiscal 2008. During fiscal 2009, the firm expects to complete additional Asia-Pacific front-end conversion and intends to finish the Asia Pacific conversion during fiscal 2010. Also, during fiscal 2010, the company intends to complete the conversion of its two legacy front-end platforms in the U.S. on to its G2 platform. Lastly, in fiscal 2011, the firm intends to complete the conversion of its Canadian front-end platform.
As of its fiscal 2007 year end, the firm has spent approximately 70% of the total expected capital expenditures required to complete this project. In connection with these projects, the firm has already achieved savings related to technology vendor rate reductions for fiscal 2008. The firm expects to achieve additional savings in fiscal 2009, although the majority of total G2 cost savings are expected to occur in fiscal 2010 and fiscal 2011.
Performance Analysis of Segments
Merchant Services Segment
In the Merchant Services Segment, the ISOs continue to drive growth in domestic direct channel. The firm continues to have success in retaining its customers and in signing new ones, including three new ISOs signed in this quarter.
