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Friday, October 5, 2012

A window into Global Payments

A September 2012 conference call to discuss Global Payments Inc.'s first quarter 2013 earnings offered insight into the company's future and that of its ISOs and merchants. Global's first fiscal quarter ended Aug. 31, 2012.

The discussion, which covered new partnerships, recent acquisitions and industry challenges, was led by Global's Chairman and Chief Operating Officer Paul R. Garcia. He announced his company's partnership with Discover Financial Services to bring PayPal Inc. services to merchant POS terminals. He also discussed how Global's acquisition of Advanced Payment Technologies LLC will affect ISOs. Finally, he praised Square Inc.'s entry into the payments market.

Earnings and revenues up

Global's earnings report indicates its first quarter income fell 26 percent. The decrease is due in part to continuing fallout from the security breach Global discovered in March 2012. Remediation related to the data theft reportedly cost the company $509 million in its first quarter. Global stated revenue grew to $590.3 million, which is 9 percent over the same quarter in its fiscal 2012.

New business relationships

Garcia said the deal with Discover to provide PayPal services to merchants is in keeping with Global's strategy of providing comprehensive payment options to its customers. "This is another way to make it easy for our merchants to accept any form of payment a consumer chooses to utilize," he said. "This is about providing products and services to our customers. PayPal has been a good customer of ours."

APT provides software payment solutions to small to midsize merchants through its network of value-added resellers covering 30 vertical markets. Garcia said Global anticipates closing the $413 million acquisition of APT in October 2012.

Garcia was questioned about the impact of the APT purchase on the processor's ISO partners and the rumors that Global wants to acquire more ISOs. In response, Garcia said he is doubtful his company will be looking at more ISO acquisitions.

"The APT deal was unique," Garcia said. "There are not a lot of companies we are familiar with that fit that profile. The reaction from our ISO customers has been, I think, the correct one. That is, this has no impact on their relationship with us. This has no impact with their relationship with existing or potential customers.

"There is no way our ISOs will be disadvantaged at all. It is possible they will pick up some more services and offerings out of this deal as we understand more of what we can do with this asset."

Square is welcome competition

Garcia was also asked how he viewed Square's entry into payments. He said it would be disingenuous to suggest Square is not having an impact, but the reality is there is more to merchant acquisition than pricing.

He said one of Global's ISOs signs "thousands and thousands of Square-like merchants" every month. "The main difference between what they are doing and what Square is doing is, I think, their business is pretty profitable," he said. "I think Square has different objectives other than profit because, at these levels on these merchants, they can't be making a whole bunch."

Garcia described Square as somewhat comparable to an ISO and praised its "impressive" innovation and advertising. But he said the Square market is "not a business we're in. … The reason none of us have chased that business is that it is not terribly attractive. There are more benefits to having Square as a competitor than there are negatives." end of article

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