Global Payments Inc. (GPN)

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Global Payments Inc (GPN)

Q4 2013 Earnings Call

July 25, 2013 5:00 pm ET

Executives

Jane Elliott

Paul R. Garcia - Chairman and Chief Executive Officer

David E. Mangum - Chief Financial officer and Senior Executive Vice President

Jeffrey S. Sloan - President

Analysts

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Roman Leal - Goldman Sachs Group Inc., Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Jason Kupferberg - Jefferies LLC, Research Division

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Craig J. Maurer - Credit Agricole Securities (USA) Inc., Research Division

Brett Huff - Stephens Inc., Research Division

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

Georgios Mihalos - Crédit Suisse AG, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Global Payments' Fourth Quarter and Year-end Fiscal 2013 Earnings Conference Call. [Operator Instructions] And as a reminder, today's conference will be recorded. At this time, I would like to turn the conference over to your host, Senior Vice President of Strategic Planning and Investor Relations, Jane Elliott. Please go ahead.

Jane Elliott

Good afternoon and welcome to Global Payments' Fiscal 2013 Fourth Quarter and Year-end Conference Call. Our call today is scheduled for 1 hour. And joining me on the call are Paul Garcia, Chairman and CEO; Jeff Sloan, President; and David Mangum, Senior Executive Vice President and CFO.

Before we begin, I'd like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary, which are discussed in our public releases, including our most recent 10-K. We caution you not to put undue reliance on forward-looking statements. Forward-looking statements made during this call speak only as of the date of this call.

In addition, some of the comments made on this call may refer to certain measures such as cash earnings, which are not in accordance with GAAP. Management believes these results more clearly reflect comparative operating performance.

For a full reconciliation of cash earnings to GAAP results in accordance with Regulation G, please see our press release furnished as an exhibit to our Form 8-K dated today, July 25, 2013, which may be located under the Investor Relations area on our website at www.globalpaymentsinc.com.

Now I'd like to introduce Paul Garcia. Paul?

Paul R. Garcia

Thank you, Jane, and thanks everyone for joining us this afternoon. For fiscal 2013, we delivered revenue of $2.4 billion and cash earnings per share of $3.65. Fourth quarter cash earnings per share of $0.98 was towards the lower end of our expectations, primarily due to lower-than-expected volumes in Asia.

As you know, we focused a significant portion of our efforts in fiscal 2013 on remediating security processes and regaining our PCI certification. As part of these initiatives, we accelerated planned investments in technology during 2013 to provide improved scalability for years to come, including new technology infrastructure, data centers and enhanced security capabilities. A key element of our planned 2014 growth is through the expansion of new and existing distribution channels, which we call our partner of choice strategy. We are successfully partnering with financial institutions, value-added resellers and other payment service providers offering merchants high-quality payment services around the world.

Our business in the United States has benefited from differentiated distribution through the strategic acquisition of APT, which has performed above our expectations. And we anticipate it to continue to perform well in the coming year. I'm also happy to announce that we recently signed a multiyear contract extension with our largest and fastest growing U.S. third-party sales partner.

Canada reported solid operating metrics and flat revenue growth in local currency in the fourth quarter. Very importantly, May delivered the revenue growth we expected. This performance sets Canada up for a much improved 2014.

We are also delighted to announce a significant expansion of our relationship with CaixaBank. Given the success of our joint venture in Spain, we will now partner in Brazil, with the opportunity to further expand our partnership into other markets in Latin America over time. CaixaBank will take a 50% share in Global Payments Brazil, and will bring additional global customers, leading-edge products, and their acknowledged expertise into the Brazilian market. We plan to rename the company Comercia Global Payments Brazil. This investment underscores the strength of the relationship we have developed with CaixaBank.

In our International segment, Europe's strong revenue growth of 7% for the year was driven by solid performance in all geographies. As payments evolve around the world, we continue to look for innovative partnership opportunities to provide cutting-edge solutions for our merchants. As such, I'm happy to announce that we recently initiated a new partnership in the U.K. with PayPal Here, a mobile POS product, which we expect to launch in late summer. We posted flat revenue performance in Asia for fiscal 2013. However, we expect to increase our market penetration and drive revenue growth in 2014. In fact, we are making progress in Asia, signing additional distribution partnerships as we speak.

Finally, we are committed to completing additional strategic acquisitions and to continued share buybacks as evidenced by the newly announced $250 million authorization. Now I'll turn the call over to David. David?

David E. Mangum

Thank you, Paul. Fourth quarter cash earnings came in toward the lower end of our range of expectations, primarily due to performance in Asia and Canada. On a year-over-year basis, currency changes negatively affected total company revenues and cash earnings for the fourth quarter by about $6 million and $0.02 per share, respectively.

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