Global Payments Inc. (GPN)

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Global Payments (GPN)

Q4 2011 Earnings Call

July 21, 2011 5:00 pm ET

Executives

David Mangum - Chief Financial Officer and Executive Vice President

Paul Garcia - Chairman and Chief Executive Officer

Jane Forbes - Vice President of Investor Relations

Jeffrey Sloan - President

Analysts

Brett Huff - Stephens Inc.

Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.

Thomas McCrohan - Janney Montgomery Scott LLC

Julio Quinteros - Goldman Sachs Group Inc.

David Koning - Robert W. Baird & Co. Incorporated

Glenn Fodor - UBS

Jason Kupferberg - Jefferies & Company, Inc.

Tien-Tsin Huang - JP Morgan Chase & Co

Darrin Peller - Barclays Capital

Timothy Willi - Wells Fargo Securities, LLC

James Kissane - BofA Merrill Lynch

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Global Payments Fourth Quarter Fiscal 2011 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 Investor Relations, Jane Elliot. Please go ahead.

Jane Forbes

Good afternoon, and welcome to Global Payments Fiscal 2011 Fourth Quarter and Year-End Conference Call. Our call today is scheduled for 1 hour. 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 the 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 normalized and cash earnings, which are not in accordance with GAAP. Management believes these results more clearly reflect comparative operating performance. For a full reconciliation of normalized and 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 July 21, 2011, which may be located under the Investor Relations area in our website at www.globalpaymentsinc.com.

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

Paul Garcia

Thank you, Jane, and thanks, everyone for joining us this afternoon. I am pleased to report that we delivered fiscal 2011 revenue growth of 13% to $1.860 billion, and normalized diluted earnings per share from continuing operations of $2.77 or 9% growth compared to last year. These results reflect the top end of the range of expectations we previously provided.

For our fourth quarter, we delivered exceptional financial performance, with revenue growth of 22% to $520 million, and normalized diluted EPS from continuing operations of $0.76 or 31% growth. This translates to a total company operating margin of 17.8% compared to 17.4% for the same quarter last year.

Now for the highlights of the quarter, I continue to be pleased with our joint venture in Spain, which delivered better-than-expected revenue for the fourth quarter. We have begun investing in sales strategies like those we successfully employ in the U.K., and we have added over 50 salespeople. We believe these sales investments, combined with "la Caixa's" powerful brand and 5,000 plus brands footprint will drive considerable market expansion and long-term growth.

North America delivered revenue growth of 14% in the quarter, primarily driven by a performance in our U.S. ISO channel, substantial growth from our Gaming business and seasonal strength in Greater Giving. Canada also delivered favorable results as we anticipated.

Our International segment produced another quarter of excellent results, with revenue growth of 49%, fueled by all regions. These results include the addition of Spain, benefits from our successful February platform migration in the U.K. and continued strong growth in Asia. Russia continues to deliver solid growth, and Central Europe performed well in the quarter as well.

Finally, I'm pleased with the progress we made expanding our global footprint, and improving our economies of scale across the company. As a result, I am delighted to report that our current financial outlook for fiscal 2012 includes the expectation that we will expand total company operating margins by as much as 30 basis points. Please note that this does not include any impact from Durbin activity, but does include the negative impact of our growing investment in Brazil. David will describe this in more detail in just a moment.

I will now turn the call over to David. David?

David Mangum

Thank you, Paul. I plan to briefly review 2011 results, and then detail our fiscal 2012 expectations. During the fourth quarter, on a year-over-year basis, currency changes benefited revenue and normalized earnings by $12 million and $0.04 per share, respectively. North America Merchant Services revenue grew 14% for the quarter, with U.S. revenue growth of 16% and U.S. transaction growth of 17%. Canada delivered local currency revenue growth of 2% for the quarter, with transaction growth of 1%. North America normalized operating income or EBIT dollars were up 7% for the quarter over prior year.

International revenue increased 49% for the quarter compared to last year, and operating margin increased to 27.6% compared to 25%. The elevated revenue growth was fueled by our Spain acquisition, while margin improvement reflects the successful U.K. migration and continued growth in Asia and Russia.

For fiscal 2011, we reported $3.08 of cash earnings per share compared to $2.80 for a growth of 10% over prior year. Cash earnings exclude the impact of acquisition-related amortization, special and non-recurring charges, and their related tax effects.

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