Global Payments Inc. is banking on a recent acquisition in the health care market and involvement in the Discover Financial Services and PayPal Inc. partnership to help eventually offset a 26% tumble in first quarter income for fiscal 2013
The Atlanta, Ga.-based payments processor reported $80.5 million in operating income for the quarter ended Aug. 31, 2012 compared to $108.6 million for the same period in 2011.
Indicating that remediation costs continue to plague the company, Global Payments reported costs related to “system intrusion” at $509 million for the first quarter, a 17% increase over $434 million for the same period the previous fiscal year.
“We are executing on our fiscal 2013 goals and initiatives while we make steady progress on the data intrusion remediation,” Global Payments chairman and chief executive Paul Garcia said during a Sept. 27 earnings conference call.
While it was not unexpected to learn that Global Payments continues the financial struggles of dealing with a security breach, the company executives spoke of positive trends for the coming year.
The company touted its agreement with Discover in which Global Payments will offer PayPal acceptance at all merchants on the company’s U.S. merchant base.
The agreement is a further signal that traditional payments companies, such as Global Payments, continue to look for partnerships that potentially expand revenue streams in the wake of third-party disruptors increasingly growing their mobile payment businesses.
In addition, Global Payments is banking on its $413 million acquisition last month of Accelerated Payment Technologies to bolster revenue
Executives feel hopeful for the coming year, considering the company enjoyed a revenue increase of 9% to $590.3 million compared to $542.8 million in the first quarter of 2012.
“We anticipate closing our two previously announced acquisitions—the remaining 44 percent ownership interest in our Asia-Pacific joint venture and the U.S. based Accelerated Payment Technologies business—in the second quarter,” Garcia said. “These transactions support our strategy of driving long-term growth and shareholder value.”
However, the financial sting of the security breach, which also resulted in Global Payments temporarily being knocked off Visa Inc.’s list of compliant processors,
Costs tied to the data breach of the company’s North American processing system would total $55 million to $65 million during fiscal 2013, including a pretax charge of $24 million in the fiscal first quarter, chief financial officer David Mangum said.
Global Payments has said it believes no more than 1.5 million card numbers were taken from its processing network, though the company supplied a larger number of card numbers to card-payments networks for monitoring.
Hackers accessed card numbers and other details that could help create counterfeit cards, but not cardholder names, addresses or Social Security numbers, Global Payments said.
When a processor endures a major security breach,
“It took Heartland about a year to overcome it, and the time frame will likely be similar for Global Payments because it takes time to scope the full liability and damage,” Luria says.
But, eventually, positive news from a company, such as Global’s deal with Discover and PayPal, helps investors put the previous bad news behind them, Luria adds.
