Global Payments Inc.’s North American merchant-services revenue grew 10.5% during the payment processor’s second quarter. ISOs largely drove the growth with their “strong performance ... as evidenced by U.S. transaction growth of 19%,” Paul Garcia, Global chairman and CEO, said during a conference call with analysts last week.
Atlanta-based Global posted $299.2 million in North America merchant-services revenue for the quarter ended Nov. 30, up from $270.8 million for the same period in 2008. Total revenue grew 11.8%, to $408.9 million, from $365.9 million. Net income grew 28.4%, to $62.8 million from $48.9 million.
ISOs and the “ruthlessly efficient sales channel” they operate on behalf of Global are key to continued growth in the U.S. market, David Mangum, Global executive vice president and chief financial officer, said during the conference call.
Global’s direct business with merchants is “performing nicely,” as is the processor’s small, indirect business, but the processor’s more than 100 ISOs drove the quarter’s growth, Mangum said.
ISOs “almost transcend the impact of economic trends in the marketplace,” Jim Kelly, Global president and chief operating officer, tells ISO&Agent Weekly. ISOs “powered their way through a difficult year last year. The major ones are doing well.”
Many ISOs either made adjustments to their business models last year or are doing that now, Kelly says. That has left them with a sense of cautious optimism. “They think 2010 will be better than last year,” he says.
In the U.S., average transaction amounts decreased 9% from the previous year but remained flat from the previous quarter, Garcia said. “This is actually encouraging, but it’s too early to determine whether this portends for a positive trend,” he said. Garcia did not reveal transaction totals.
Large retailers’ efforts to attract more business are hurting Global’s transaction fee revenue, as some of the processor’s biggest clients in Canada are slashing prices. The moves are boosting transaction volume at big retailers but driving down volume at Global’s smaller clients, which generally pay higher rates.
“Our Canadian business continues to be affected by overall macroeconomic conditions, driving large, national merchants to heavily discount merchandise and thus take a larger proportional share of transactions away from the small and midsize merchants that provide higher revenue,” Garcia said.
Mangum cautioned that this trend, which was somewhat offset by exchange rates, may be specific to Global’s client base. “The overall transaction growth, frankly, for Canada is about flat for the quarter on a year-over-year basis,” he said.
Garcia also announced that Global’s board has extended his employment agreement, committing him to a minimum of three-and-a-half more years with the company. This “reflects the board’s appreciation for our performance,” he said.
For the company’s 2010 fiscal year, it expects revenue to grow 8% to 10% to a figure of $1.58 billion to $1.615 billion. Its earnings per share are projected to grow 12% to 17% to a figure of $2.35 to $2.46 a share.
Thomas McCrohan, an analyst with Janney Montgomery Scott LLC’s Janney Capital Markets, wrote in a research note that Global’s executives are “being conservative in their 2010 guidance due to an uncertain economic environment and potential changing consumer behavior within the United States and Canada.”
The company’s earnings forecasts are based on “some harsh assumptions and [would] likely be very beatable,” McCrohan concluded.
American Banker reporter Daniel Wolfe contributed to this article.
