Global Payment Inc.’s joint venture in Spain delivered better-than-expected results and helped increase fiscal fourth-quarter revenues 22.3% over the same period last year, the merchant processor’s top executive told analysts during a conference call to discuss the quarter’s earnings.
Revenue totaled $519.8 million for the quarter, up 22.3% from $425.1 million a year earlier. Net income increased 71.3%, to $58.6 million from $34.2 million.
U.S. revenue rose 15.9%, to $281.5 million from $242.9 million, while revenue from Canada grew 7.9%, to $87.1 million from $80.7 million. Bolstered by the company’s entrance into Spain in December, revenue in Europe totaled $115.3 million, up 59.5% from $72.3 million. Asia-Pacific revenue totaled $35.7 million, up 22.2% from $29.2 million.
Global Payments formed the venture in Spain last year with La Caixa, Spain’s third-largest bank with a network of 5,500 branches and more than 8,000 ATMs.
“I continue to be pleased with our joint venture in Spain,” Global Payments Chairman and CEO Paul Garcia told analysts. “We have begun investing in sales strategies, like those we successfully employ in the [United Kingdom], and we have added over 50 salespeople.”
Global Payments executives chose not to speculate on the effect the Federal Reserve Board’s decision to cap debit card interchange fees that takes effect Oct. 1 might have on the company’s bottom line. The Fed approved the final rule on interchange fees, as directed by the so-called Durbin amendment to the Dodd Frank Act, late last month.
“All (current) expectations, of course, exclude the impact of the Durbin amendment,” Garcia said, noting the impact of the rate reduction has not been felt. “Although we clearly have our own internal strategy, until all of the pieces play out with all of those players, we can’t fully comment. I think it is safe to say it is positive, period.”
Merchant acquirers pay card issuers interchange when their cards are used to make purchases. Acquirers then pass along the expense to their merchant customers as part of the discount rate. Nothing in the Durbin amendment stipulates that acquirers, or merchant processors, must pass along all the reduction in debit interchange, though analysts believe market pressures will encourage them to do so, especially over time.
The company is continuing to use the strategy of increasing revenue from ISOs, a point Jeffrey S. Sloan, Global Payments president, made earlier this year when citing future opportunities.
The quarter’s increase in U.S. revenue represents continued acceleration from a 15% year-over-year increase in the third quarter, analyst David Koning of Robert W. Baird & Co. noted in a report.
Koning reports that Global’s strong year-over-year growth in the United States was fueled by revenue growth from ISOs, which Global Payments management expects to continue at a double-digit pace, along with similar growth in the gaming industry.
The situation for Global in Canada continues to stabilize after the company faced initial difficulties related to raising prices there in 2010, Koning said. Revenue in Canada during the quarter increased 8%, to $87 million, according to the fourth-quarter report.
“While the company is still feeling pressure from the shift to larger, less-profitable merchants, the region is showing signs of stabilization,” Koning noted of Global Payments’ performance in Canada.
