Q4 2004 Global Payments Inc. Earnings Conference Call - Part 1.

(From Fair Disclosure Wire)

OPERATOR: Thank you for standing by, and welcome to the Global Payments fourth quarter earnings release. At this time, all participants are in a listen-only mode. Later we will open up the lines for questions and answers. If you should require assistance during this call, please press star then zero. And as a reminder, today's conference will be recorded. At this time, I would like to turn the conference over to your host, Vice President of Investor Relations, Jane Forbes. Please go ahead. JANE FORBES, VP OF IR, GLOBAL PAYMENTS, INC.: Good morning, and welcome to Global Payments fiscal 2004 fourth quarter and year-end conference call. On today's call, we will discuss the quarterly and year-end financial results, and business highlights. Joining me on the call are Paul Garcia, Chairman, President, and CEO; and Jim Kelly, Senior EVP and CFO. I would like to remind you that some of the comments made by management during the conference call contains forward-looking statements that involve a number risks and uncertainties. For these statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. While these statements reflect their best kind of judgments they are subject to risks and uncertainties that could cause actual results to vary. These risks and uncertainties are discussed in our public releases included in our most recent 10-Q. In addition, some of the comments on this call may refer to normalized results, which exclude restructuring and other charges, and are not in accordance to the GAAP. The management believes that normalized results from us clearly reflect conservative operating performance. For full reconciliation of normalized to GAAP result in accordance with Regulation G, please see our press release filed as an exhibit to our Form 8-K dated July 21, 2004, which can be located under the Investor Relations area on our Web site www.globalpaymentsinc.com. Now, I would like to introduce Paul Garcia. Paul?

PAUL GARCIA, CHAIRMAN, PRESIDENT AND CEO, GLOBAL PAYMENTS, INC.: Thank you, Jane. Good morning everyone. The agenda for our call this morning is as follows: I will summarize our normalized fourth quarter and full year results and review recent trends and events, including an update on our recent acquisitions. Then Jim will discuss the financial results in detail. I will then discuss our fiscal 2005 outlook. And, lastly we will have a question and answer period. We've reported strong financial results for the fourth quarter ended May 31, 2004. Our revenue grew to 35%, to a $181.8m, primarily due to the impact of recent acquisitions and high-teen growth in our direct channel. Excluding the impact from our DolEx and MUZO acquisitions, fourth quarter revenue would have grown 13%. We also achieved a 120 basis points operating margin improvement to 18.8%, as a result of gaining greater economies of scale and continued cost containment programs. Our revenue growth and margin improvements resulted in a 30% net income increase to $18m, and a 28% diluted EPS increase to $0.46.

Now, for our full year results. I am very pleased to announce another year of solid financial results. For the year we've reported revenue of $629.3m, or 22% growth over prior year, and net income of $68.1m, or a 26% increase over prior year. These results include the impacts of our recent acquisitions with revenue of $52.7m; excluding this impact revenue growth would have been 12% over prior year. Additionally, diluted earnings per share grew 22% to a $1.75 over the prior year. These results reflect a solid year in our core processing business and continued success with our acquisition, integration, and strategy.

Now, for recent trends. Our domestic direct transactions grew in the high-teens for the quarter. In addition, our domestic average ticket remains stable for the quarter and we continue to experience an increase in our domestic spread. Our Canadian transactions for the quarter grew in the mid-single digits, which reflect our previously announced exit from higher risk ...