Following its purchase of a 51% stake in HSBC Holdings PLC's U.K. merchant acquiring business, Global Payments Inc. has a "strong" appetite for acquisitions, according to Paul R. Garcia, its chairman, president, and chief executive.
"We have an expectation of announcing some more transactions, and I think that's probably a near-term expectation," Mr. Garcia said on a conference call last week to discuss his Atlanta company's results for its fiscal fourth quarter, which ended May 31. "What we're interested in doing is expanding our footprint internationally."
Strong international business helped boost the transaction processor's revenue growth during the quarter and helped offset weakness in the United States.
Global Payments bought the stake in the unit, now a joint venture known as HSBC Merchant Services, for $439 million on June 30. Mr. Garcia said the purchase "shows our ongoing commitment to expanding our international presence, which we expect will provide longtime opportunities for future growth."
Joe Hyde, Global Payments' chief financial officer, said on the call that it was still too early to quantify the purchase's long-term revenue potential. "We anticipate that the joint venture will be highly profitable," he said, but "we expect to have a better sense for its financial impact after we have managed the joint venture over the coming quarters."
Mr. Garcia said Global Payments would work with HSBC and other potential partners to expand in Europe.
The processor's revenue increased 23% from a year earlier, to $343.8 million. Profits rose 23%, to $40.8 million, or 50 cents a share. Card transactions handled by Global Payments increased 21%, and revenue from that business increased 18%. Mr. Garcia credited "solid performance in our merchant services" for the increase in profits, and he cited improvement in the money transfer business, "largely due to recent favorable pricing."
Global Payments Asia-Pacific Ltd., another joint venture with HSBC, had "strong revenue growth of 41% for the quarter," according to Mr. Garcia. In Canada, though credit and debit transactions increased only 3%, revenue rose 36% on "a favorable Canadian currency exchange and a … pricing initiatives relating to changes in the Canadian market interchange structure."
In the United States, he said, the company closed "a number of unprofitable domestic branches" during the quarter.
Global Payments forecast that its revenue would jump 27% to 31% this fiscal year, to $1.62 billion to $1.675 billion, and that earnings per share would rise 11% to 16%, to $2.20 to $2.30.
Mr. Garcia said the forecast took reduced U.S. consumer spending into account. "Nobody is immune from a bad economy," he said. "If volumes soften significantly, it's very difficult to get rid of enough cost to make up for that in a high-fixed-cost, low-variable-cost business."
Sanjay Sakhrani, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., wrote in a note to investors Thursday that Global Payments' "results were better than expected … with international compensating" for a weaker-than-anticipated U.S. performance.
He praised the "relatively stronger results" from the money transfer business, "which has been a thorn at the company's side in recent quarters."
Thomas C. McCrohan of Janney Montgomery Scott LLC called the forecast "disappointing" and criticized its new format in a note to investors Friday. "The company's decision to abandon segment-level margin guidance will shift attention to weakening trends within the core domestic channel."
At midafternoon Friday, Global Payments shares were off about 6%.