Global Payments Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Global Payments 2019 Third Quarter Earnings Conference Call. At this time, all participants are on a listen-only mode. Later, we'll open the lines for questions and answers. If you should require assistance during this call, please press star then zero. As a reminder, today's conference call will be recorded. At this time, I would like to turn the conference over to your host, Senior Vice President, Investor Relations, Winnie Smith. Please go ahead.

Good morning. Good morning. and welcome to Global Payments' third quarter 2019 conference call. Before we begin, I'd like to remind you that some of the comments made by management during today's conference call contain forward-looking statements about expected operating and financial results. Forward-looking statements are subject to risks and uncertainties discussed in our SEC filings, including our most recent 10-K and any subsequent filings. These risks and uncertainties could cause actual results to differ materially. We caution you not to place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. Some of the comments made refer to non-GAAP financial measures, such as adjusted net revenue, adjusted net revenue plus network fees, adjusted operating margin, and adjusted earnings per share, which we believe are more reflective of our ongoing performance. For a full reconciliation of these and other non-GAAP financial measures to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8K filed this morning and our Trended Financial Highlights, both of which are available in the Investor Relations area of our website at www.globalpaymentsinc.com. Joining me on the call are Jeff Sloan, CEO, Cameron Brady, President and COO, and Paul Todd, Senior Executive Vice President and CFO. Now I'll turn the call over to Jeff.

Thanks, Winnie. We are delighted to have completed our landmark merger with TSYS this quarter, bringing together two industry leaders and positioning the new global payments as the premier pure play payments technology company at scale globally. We successfully closed this transformative partnership on September 18th. Just three and a half months after we announced our agreement in late May and well ahead of our initial expectations. Our ability to execute on an accelerated timeline was made possible by the highly complimentary nature for our market-leading payments and software technology businesses, the strong alignment of our corporate cultures, and the unrivaled expertise of the 24,000 people across our combined organization. I could not be more excited about the future opportunities for all of our stakeholders. Our terrific third quarter results highlight the continued momentum in our business, which is being fueled by broad-based strength across our relationship-led and technology businesses and underpinned by consistent ongoing execution. In the midst of the largest integration we have undertaken to date, we again delivered double-digit revenue growth, expanded adjusted operating margin by 80 basis points, and produced adjusted earnings per share growth of 18%. We are very grateful for the hard work of our colleagues that has brought us to this point. And we also accomplished these results while simultaneously expanding our strategy to be the partner of choice for the most complex financial institutions worldwide. To that end, we are thrilled to announce we have signed new partnerships with Desjardins, Canada's leading financial cooperative group, and Citi, one of the largest money center banks globally. These new competitive wins with marquee partners across multiple geographies further validate the distinctiveness of our pure play payments model. Starting with Desjardins, we reached an agreement to purchase the Quebec-based bank's existing portfolio of approximately 40,000 merchants and have executed an exclusive referral partnership to provide acquiring solutions to its clients for the next decade. Desjardins selected global payments as a direct result of the breadth and depth of our technology payment solutions, local and global expertise, comprehensive distribution, modern architecture and infrastructure, and our unrivaled track record of execution over many decades. We expect this transaction to close by early 2020. We were also excited to have been selected by Citi to partner to offer payment acceptance services to its multinational banking clients on an omnichannel basis. Our ability to offer highly competitive payment solutions physically and virtually in more markets seamlessly than our peers differentiates global payments, and this partnership capitalizes on our local market expertise and industry-leading unified commerce platform, or UCP, to provide a true omnichannel experience. We expect to be in market with Citi by year-end 2019. We look forward to working with Desjardins and Citi to bring best-in-class solutions to their merchant customers around the globe. We are winning every day in the marketplace with the uniqueness of our strategy, and we are very proud of the company we keep. In addition to our new preliminary agreement with Citi, we recently signed several significant global omnichannel customers, including with UK-based online luxury retailer Matches Fashion and the rapidly expanding modern high-tech hotel chain Yotel. We also continue to expand UCP. We are now live in the United States, in addition to Canada and Asia Pacific, and we'll fully roll out UCP in the UK over the next few weeks. Turning to our integrated and vertical market businesses, OpenEdge once again delivered strong growth during the third quarter. Driven by our ability to provide a truly integrated ecosystem, across more vertical markets and more geographies than our peers. And we maintained our consistent track record of growth in our own software portfolio, as our strategy of delivering the full value stack in key vertical markets is creating deeper, richer, and more value-added relationships with our customers. Our combination with TSYS significantly accelerates our technology-enabled, software-driven mission establishing global payments as the leading provider of integrated payment solutions, own software in both merchant and issuing, and omni-channel capabilities in the most attractive markets globally. On a standalone basis, T-SYS produced consistent results for the third quarter. Performance at T-SYS' merchant business improved, resulting in meaningful revenue acceleration. These results were achieved while making significant progress on integration, contributing substantially to an increase in our expected revenue and cost savings expectations just a few weeks post-close. Our strategy for the combined merchant businesses remains focused on cross-sells of complementary products, further penetration of adjacent distribution channels, and rollout of UCP to the TSIS customer base. In addition, TSIS's issuer solutions business recently completed new long-term agreements with the Central Trust Bank in North America and leading retailer Riachuelo in Brazil. These were competitive takeaways, providing further validation of our combined pure play payments focus. And we also expanded existing contracts with Virgin Money, Nationwide Building Society, and Metrobank Most notably, we expect growth to accelerate in this business as the issuer solutions team successfully converted the Walmart portfolio on behalf of Capital One earlier this month. This market-leading business has a full pipeline today, and the expanded breadth of our combined 1,300 FI partnerships provide significant untapped opportunities for new issuer and merchant referral relationships. our strategy to accelerate growth in issuer solutions involves modernizing its platforms, cross-selling existing relationships globally, and extending the product suite. As customers move to cloud-based solutions, we believe that global payments can enhance the development of next-generation products and services. Turning to the consumer solutions business, earlier this month, we announced a partnership with Samsung, to integrate the NetSpend digital MasterCard into Samsung's mobile wallet and provide a variety of payment solutions, including P2P. Branded Samsung PayCash, this solution allows smartphone users to establish a reloadable balance and hold funds for use, including spending and budgeting, opening a significant pool of new customers for this business. Our differentiated strategy at Netspend consists of product extensions into P2P and B2B segments, as well as select international expansion. In addition to the recently announced P2P solutions like Samsung, we are building product offerings currently to dramatically enhance the scale and scope of Netspend's B2B offerings. Domestically, we expect Netspend's pay card products to help expand Heartland's payroll offering. We also see additional use cases for pay card in restaurants, one of our largest vertical markets, as well as in our gaming business, which is among the largest in North America. Finally, we believe we can bring net spend into new markets based on global payments existing acquiring partnerships outside the United States in short order. The substantial progress we have made in just a few short weeks since we finalized our partnership provides us with the confidence to now raise our expectations for both revenue and expense synergies. Importantly, we expect the integration actions we have already initiated to generate in excess of $100 million of expense benefits on an annualized basis, meaning that we believe we can achieve our 2020 accretion goals announced in May, even if we were not to undertake any additional actions next year. And, of course, we intend to do more in 2020. Cameron will provide you with the specific details on our updated targets in a moment, but let me highlight a few of the revenue synergy opportunities already planned that give us a clear line of sight toward achieving our goals. First, our efforts to align our merchant organizations and go-to-market strategy in the U.S. are well underway, and we expect to start cross-selling products including Vital POS, Genius, and Propay, as well as subscription-based engagement and analytics and vertical software solutions in 2020. Specifically, we expect the capabilities of Propay to provide value-added products like multiple disbursement capabilities and web-based self-select at Heartland. We are also laying the groundwork so we can begin to deliver products like Vital POS, Genius, and Propay to additional geographies internationally, and enable T-SYS's legacy customers outside of the United States. Second, we are already engaged in preliminary discussions with our existing global bank partners across three continents on issuer processing opportunities for T-SYS. We have just returned from Europe, and we believe that the market is ready for on-off processing capabilities domestically and cross-border in geographies like the United Kingdom, Central Europe, Spain, Ireland, and, closer to home, Canada. By marrying issuer processing with our acquiring capabilities, we can emulate many of the aspects of a virtual closed loop, as well as provide strong customer authentication internally, which is now the law of the land across Europe. These opportunities are in addition to core merchant referral relationship possibilities from existing TSIS FIs and private label retailers to global payments. Third, Netspend is actively working on new B2B, B2C, and P2P capabilities and opportunities, including for our restaurant and gaming customers, as well as in new geographies. Netspend has already proved fertile ground for new merchant referral relationships among its larger distribution partners. We have found a true partner with Teasys and could not be more excited about the future opportunities to drive significant value creation for our employees, customers, partners, and shareholders. We are fortunate and grateful to be in the position we are in today. With that, I'll turn the call over to Kevin.