Global Payments Inc.

Good morning, and welcome to Global Payments' fourth quarter and full year 2021 conference call. Our earnings release and the slides that accompany this call can be found on the investor relations area of our website at www.globalpayments.com. 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. These statements are subject to risks, uncertainties, and other factors, including the impact of COVID-19 and economic conditions on our future operations that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in filings with the SEC, including our most recent 10-K and subsequent filings. We caution you not to place undue reliance on these statements. Forward-looking statements during this call speak only as the date of this call, and we undertake no obligation to update them. We will also be referring to several non-GAAP financial measures, which we believe are more reflective of our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this morning. and our supplemental materials. 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 delivered record fourth quarter and full year 2021 results that exceeded our expectations, highlighting the resilience of our business model. We achieved record transactions across the business in the fourth quarter, including a new peak during the holidays, despite the incremental impact of COVID-19 variants. And we expect another record year in 2022 based on today's guidance with strong revenue growth, margin enhancement, earnings-to-free cash flow conversion, and leverage capacity. We accomplished a great deal over the course of 2021 as we continued to advance our differentiated strategies for growth. This includes our partnership with Google to deliver innovative and seamless digital services to all manner of merchants worldwide. The expansion of our collaboration with AWS, our preferred issuer technology solutions partner for a unique distribution and cutting edge technologies. Our successful acquisitions of Zego and MineralTree to advance our software leadership position with unmatched worldwide payments expertise. A strategic alliance with Virgin Money our first use case post-merger combining issuing and acquiring capabilities and our partnership with mercedes-benz stadium to enable its multi-channel commerce ecosystem and we're carrying that momentum into 2022 as we successfully executed our goal to redefine the future of digital commerce extending our lead continuing to gain share and deepening our competitive moat Specifically, we are delighted to announce that we've been chosen by CaixaBank as the finalist company in their selection process for a technology partner for its European card issuing business comprising nearly 30 million cards. We expect to finalize contract negotiations over the coming weeks. Caixa is the largest domestic bank in Spain, serving tens of millions of households and a full range of business clients across multiple countries in Europe. This latest achievement is yet another example of the enhanced revenue opportunities derived from our merger with TSYS just over two years ago. When this goes live, as anticipated in the back half of next year, we expect this initiative to be among the first legacy direct to cloud transformations in card issuing technologies among major financial institutions. And it will be the first entry of TSYS into the highly attractive Iberian marketplace. Together with our recently announced partnership with Virgin Money, we believe global payments will then become a leading debit technology provider across Europe. We're also excited to announce that we're embarking on a multi-year partnership with MasterCard to modernize and accelerate card payments in the cloud across authorization, clearing, and settlement. We're on this journey to drive ecosystem change and to help our clients bring differentiated value to the market. This is yet another example of how we're progressing the payments landscape with leading technology partners and bringing the next generation of modernized AWS cloud-enabled payments to customers. Our durable relationships with some of the most complex and sophisticated institutions globally speak to our competitiveness well into the remainder of this decade. It's worth highlighting that our issuer business signed multi-year contract extensions with several of our largest customers over the last 12 months, including Citi, CIBC, Barclays, and Banco Carrefour. And our strategy of aligning with market share winners was also successful in 2021. Recent examples include Barclays' purchase of the Gap card portfolio, as well as Capital One's purchase at BJ's wholesale club, Cardbase. We have 34 active prospects in the pipeline with AWS, 11 of which are fintechs, neobanks, and startups. And we're pleased to announce that we are live with our first joint takeaway together with AWS, a leading global financial institution in a single large market in Asia. And we expect to expand this prime instance to several additional markets over time. We also reached an agreement for our first legacy global payments issuer customer, KB Bank in the Czech Republic, to move to our Teesys Prime platform in the fourth quarter. Another revenue synergy from our merger. Finally, of the nine LOIs we have in our issuer solutions business today, five are competitive takeaways. In addition, we recently had another new customer win move from LOI into production. That was also a competitive takeaway. We've been successful in expanding our target addressable markets in 2021 beyond AWS as we diversify and broaden our distribution. We announced new strategic partnerships last year with PwC and 10X Banking. 10X Banking is a next generation cloud native platform designed to bring forward a new way of banking with faster product development and a lower cost to serve. We are proud to announce a new collaboration with Ecolitic to bring sustainability as a service to fintech startups, neobanks, and traditional institutions. This partnership provides consumers with a personalized view of their impact on the environment driven by their payment transaction activities. This technology enables corporate clients to align their digital banking strategies with consumers and supports ESG commitments by delivering sustainable product options and experiences. Further, we are delighted to announce a partnership with Xtend through our new distribution channels. We will provide B2B virtual commercial account services to banks and fintechs with Xtend, serving our instant virtual card issuance product. Through relationships like Ecolitic and Xtend, we are able to support a full spectrum of solutions across emerging use cases. And while we've been providing market-leading technologies for Buy Now, Pay Later, or BNPL, initiatives for decades, we continue to innovate and deliver installment payments products as BNPL demand grows. This includes expanding our combined installment solutions with Visa and signing a global referral agreement with MasterCard. And through our partnership with leading technology companies, private label branded retailers, and many of the world's largest issuers, we will be able to provide our customers with a complete ecosystem of BNPL capabilities on a regulated, compliant, and responsible basis. It's worth highlighting that in 2021 alone, TSYS enabled over 2 billion BNPL transactions and issued 55 million virtual cards with more than $31 billion in volume. Turning to our merchant business, we are pleased to report the release of the first phase of our Google Run and Grow My Business product that integrates Google solutions with our innovative capabilities in our digital portal environment during the fourth quarter as planned. We continue to expect to launch the next phase to help our merchants grow faster by connecting additional Google services, including online ordering, retail inventory, and reservations to our digital platform later this year. Google is also now a live merchant customer in Asia Pacific, and we expect to launch Google as a merchant customer in North America by the end of this quarter. We continue to deliver a full suite of vertically fluent solutions across dozens of markets worldwide. For example, our enterprise QSR business delivered bookings growth for its cloud POS services in excess of 50% in 2021 and went live with new marquee customers like Denny's, Long John Silver's, and A&W restaurants. We also continue to expand with existing brands including Bojangles, Whataburger, and CKE, which today leverage a combination of our innovative end-to-end solutions. We delivered more than 300 million omnichannel restaurant experiences in 2021, up 50% versus 2020, an indicative of share shift due to the pandemic and market share gains. By way of comparison, we enabled 19 million omnichannel orders in 2019 prior to COVID-19. Our AMD business generated revenue growth of over 30% in 2021, and an excess of 35% for the fourth quarter compared to 2019. And that momentum is poised to continue with Booking's growth of 40% in the fourth quarter and 26% for the full year over 2020. I am particularly proud that AMD's telemedicine solution enabled 2.5 million provider visits over the last year, marking an 85% increase from 2020. And to put it in perspective, That is up from the roughly 100,000 telemedicine visits facilitated annually prior to the pandemic. We were also delighted to have hit the ground running in one of the largest and most attractive verticals in 2021 in real estate. Xego delivered near 20% bookings growth for the full year, enabled by its continued success with existing enterprise customers like ACC and Thalheimer, and by expanding with new partners like Managed America and equity lifestyles, one of its largest new customers to date. Zico's payments penetration into its base also reached an all-time high last year under our stewardship. As we discussed at our 2021 investor conference, we are the beneficiaries of technological innovation, continued share shift, and market share gains, including QR codes, digital wallets, safer commerce, and of course, BNPL. Speaking of BNPL, in addition to the agreements we already have in place with leading solutions providers, including Affirm and Tua in the United States and Atome in Asia Pacific, we are launching our BNPL as a service marketplace this quarter to augment our 140 plus alternate payment methods portfolio. Further, our new partnership with Virgin Money highlights our ability to deliver non-bank card account to account transfers through our digital solutions. capitalizing on our market-leading merchant ecosystem, which already provides one of the largest NFC acceptance networks globally. In September, we highlighted that we win by leading with technology and innovative solutions across our merchant portfolio. And the fourth quarter provides further evidence of our differentiated strategies. We delivered record bookings in the fourth quarter of 21, for global payments integrated and U.S. payments and payroll businesses, each of which grew 20% year over year. Our e-commerce and omnichannel business grew on an accelerated basis in 2021. Our ability to seamlessly provide the full spectrum of payment solutions drove new wins this quarter, with large multinational Mary Kay across six countries in Europe and Asia, and with ESW, or eShop World, a leader in direct-to-consumer global commerce in the United States with further global expansion on the horizon. And over the course of 2021, we also reached new partnerships with Google, Uber Eats and Uber Rides, Foot Locker, Hunter Douglas, and the Swatch Group, while extending and expanding the scope of our long-standing relationship with PayPal. Finally, we added B2B as the newest pillar of our strategy in 2021. We are already making significant strides with MineralTree since the closing in mid-October. This includes doubling virtual card spend in the fourth quarter and completing nine new deals in the healthcare vertical, including with NoHo Dental and Biometrics. This quarter, MineralTree also renewed its agreement with NI, or National Instruments, successfully executed an implementation with Mexico-based food services company Grupo Bimbo and launched its Supplier Central portal, which allows for seamless payments acceptance for suppliers to support greater digital adoption. We are pleased to have successfully invested $2.5 billion in M&A since early 2020, consistent with our four strategic pillars. We also have returned $3.7 billion of capital to shareholders since that time. and our record cash flow generation and solid balance sheet position us with ample firepower to continue to execute on our priorities. At the same time, we seek to refine our portfolio by simplifying the composition of our businesses and focusing on our core corporate customers, including merchants, financial institutions, software partners, and technology leaders. As part of that initiative, we have commenced a strategic review of our NetSpend consumer business to sharpen our focus on our B2B assets. While NetSpend's direct-to-consumer business is an attractive set of solutions with a favorable profile, there is limited overlap between that customer base and our traditional clients. Having largely completed our integration with TSYS corporately, made the pivot toward B2B, and incorporated NetSpend's B2B assets into our thinking, We believe now is the appropriate time to commence this review of NetSpend's consumer business. As we said at our investor conference in September, we have a full suite of B2B assets, including a market-leading commercial card offering, virtual card issuance at scale, payroll, pay card, earned wage access, and now accounts payable cloud SaaS with MineralTree. We complement these offerings with a unique collaboration with AWS. We are very proud of all that NetSpend and our value team members have accomplished under TSYS's ownership over the last eight plus years. We believe that we have created significant value since the close of our merger by expanding internationally, accelerating digitization, and driving significant operational efficiencies. We also provided much needed faster payments to millions of consumers during some of the most challenging periods of the pandemic. Revenue, margin, and contribution were all records at Nesbend in 2021. Simply put, we have achieved our goals. Paul?

Thanks, Jeff. Our financial performance for the full year 2021 exceeded our expectations despite incremental headwinds from COVID-19, including both the Delta and Omicron variants. Specifically, we delivered adjusted net revenue of $7.74 billion, an increase of 15% from the prior year and solidly ahead of our initial guidance for adjusted net revenue to be in a range of $7.5 to $7.6 billion. Importantly, our adjusted operating margin increased 210 basis points to 41.8% as we benefited from the natural operating leverage in the business and the continued realization of cost synergies related to the merger, which was partially offset by the return of certain costs that were temporarily reduced at the onset of the pandemic and the impact of our acquisitions during the year. This performance is also consistent with our guidance for adjusted operating margin expansion of around 200 basis points for the year, including the impact of acquisitions we closed during 2021. The net result was adjusted earnings per share of $8.16, an increase of 28% from the prior year and 31% over 2019. We believe we would have been at the high end of our recent guide rather than above the midpoint, but for the emergence of Omicron and incremental adverse foreign exchange rates during the fourth quarter. Moving to the fourth quarter, We delivered adjusted net revenue of $1.98 billion, representing 13.3% growth compared to the prior year and 10% growth compared to 2019. Adjusted operating margin for the fourth quarter was 42%, a 50 basis point improvement from the prior year, or a 110 basis point improvement, excluding the impact of acquisitions. Compared to 2019, Adjusted operating margins increased 370 basis points. The net result was adjusted earnings per share of $2.13, an increase of 18.3% compared to the prior year, and an increase of 32% compared to 2019. Taking a closer look at our performance by segment, Merchant Solutions achieved adjusted net revenue of $1.34 billion for the fourth quarter, a 21% improvement from the prior year, and a 15.4% improvement compared to 2019. This performance was led by continued strength in the U.S., while we also benefited from improving trends in international markets, including Spain, Central Europe, and Greater China. Notably, we delivered an adjusted operating margin of 48.2% in this segment, an increase of 70 basis points year-on-year, and 130 basis points excluding the impact of M&A. Adjusted operating margins improved 320 basis points over 2019 as we continue to benefit from the underlying strength of our business mix. Focusing on our technology-enabled portfolio, our integrated business produced another strong quarter, generating adjusted net revenue growth in the high 20% range compared to 2020. It is also worth highlighting that over the last two years, notwithstanding the pandemic, adjusted net revenue growth for this business has compounded at the mid-teens rate we target for GPI longer term. And our worldwide e-commerce and omnichannel businesses saw growth of roughly 20% year on year, as our value proposition, including our Unified Commerce Platform, or UCP, continues to resonate with customers. Our ability to serve customers across nearly 40 markets physically and over 170 virtually is core to our omnichannel strategy and supports our growth outlook for these businesses. Turning to own software, our POS software solutions delivered adjusted net revenue growth in excess of 50% in the fourth quarter, and our HCM and payroll businesses solutions grew 32%. As far vertical market solutions, we were pleased that the overall portfolio delivered growth roughly 20% compared to the prior year in the fourth quarter and low double digit growth for the full year consistent with our target, despite several of these businesses, having not yet fully recovered to pre pandemic levels. I would reiterate Jeff's comments regarding the positive bookings trends we are seeing across our vertical markets portfolio, and we continue to expect our own software businesses will become a tailwind for us in 2022 as the recovery progresses. Issuer Solutions delivered $463 million in adjusted net revenue, a 1.3% improvement from the fourth quarter of 2020. This performance was impacted by two items this quarter. First, our managed services adjusted net revenues decreased as we continued to pivot our issuer business to more tech enablement and less lower margin and outsourced call center business. We also had a grow over of non-recurring revenue that occurred last year. Normalizing for these two items, our adjusted net revenue growth was in the mid single digits consistent with our longer term target. Issuer adjusted operating margins of 43.4% declined 130 basis points from the prior year, but expanded 320 basis points over 2019 and in line with our expectation for the business. As you may recall, issuer solutions delivered adjusted operating margin expansion of 450 basis points in the fourth quarter of 2020 over 2019, fueled by our focus on driving efficiencies in the business as well as benefits from temporary cost reductions. Finally, our business and consumer solutions segment delivered adjusted net revenue growth of 2% for the fourth quarter and 7% on a full year basis, consistent with our guidance for this segment to grow in the mid to high single digit range in 2021. As Jeff discussed, we intend to focus our efforts going forward on enhancing our B2B businesses, which includes elements of net spend. To that end, we are pleased that Mineral Trees bookings grew 19% this year, positioning the business well heading into 2022. Adjusted operating margin for business and consumer solutions of 21.7% declined 240 basis points in the quarter from the prior year, largely due to lapping the benefits of stimulus volumes in Q4 for 2020. Quarterly margins expanded relative to Q4 of 2019. From a cash flow standpoint, we had roughly $609 million of adjusted free cash flow for the quarter and a record $2.5 billion for the year consistent with our target to convert roughly 100% of adjusted earnings to adjusted free cash flow annually. We invested $142 million in capital expenditures during the quarter and $493 million for the year in line with our expectations. Further, This quarter, we repurchased approximately 5.5 million of our shares for approximately 700 million. And for the full year, we are pleased to have repurchased 15.2 million shares for roughly 2.5 billion, or approximately 5% of our shares outstanding. Also, our Board of Directors has again approved an increase in our share repurchase authorization to 2 billion, as share repurchase remains a key capital allocation priority. Our balance sheet is extremely healthy, and we ended the period with roughly $2.4 billion of liquidity after repurchase activity and acquisition funding. In mid-November, we successfully issued $2 billion in senior unsecured notes at a blended interest rate of 2.27%. The transaction was credit neutral with the full proceeds used to pay down our outstanding revolver. Our leverage position was roughly three times on a net debt basis at quarter end. Looking ahead to 2022, we remain encouraged by the trends we are seeing in the business and currently expect adjusted net revenue to range from $8.42 billion to $8.5 billion, reflecting growth of 9 to 10% over 2021, or roughly 10 to 11% on a constant currency basis, with upwards of 1% of currency headwind expected throughout the year. This outlook is consistent with our long-term target for double-digit top-line growth and reflects the benefit we expect from a continued recovery throughout the year. We expect adjusted operating margin expansion of up to 100 basis points compared to 2021 levels or up to 150 basis points of expansion, excluding impacts from our recent acquisitions. This is above our cycle guidance for margin expansion of 50 to 75 basis points annually, driven by the benefits we expect from the ongoing recovery, continued mixed shift toward technology enablement across the business, and additional synergies we anticipate related to the thesis merger. To provide some color at the segment level, we expect adjusted net revenue growth for our merchant solution segment to be in the low double-digit range which assumes the recovery continues worldwide. We expect issuer solutions to deliver adjusted net revenue growth in the mid single digit growth range for the full year, consistent with our longer term targets. Lastly, in our business and consumer segment, we are expecting adjusted net revenue growth to be in the low single digits for this segment in 2022, given the lapping of the benefits from stimulus in both 2021 and 2020. Lastly, I would highlight that from a quarterly phasing perspective, we expect the recovery from the pandemic will continue throughout the year, allowing for a progressive growth picture as we move through 2021. Moving to a couple of non-operating items, we currently expect net interest expense to be roughly $375 million and for our adjusted effective tax rate to be approximately 20% for the full year. We also expect our capital expenditures to be around $600 million in 2022. Putting it all together, we expect adjusted earnings per share for the full year to be in the range of $9.45 to $9.67, reflecting growth of 16% to 19% over 2021. On a constant currency basis, this reflects annual growth of roughly 17% to 20% and is consistent with the raised September cycle guidance for adjusted earnings per share growth in the high teens to 20% range longer term. I would highlight that the discontinuance of stimulus and unemployment benefits in our business and consumer segment provides for a tough comparison in the first quarter. As a result, we expect adjusted earnings per share growth to be in the low double digits range in Q1. Finally, we will provide updates on the strategic review process for our NetSpend consumer business as the year progresses. In summary, the outstanding performance we delivered across our businesses in 2021 serves as a further proof point that we continue to gain share and that our technology-enabled strategy positions us well to capitalize on the accelerating digital trends coming out of the pandemic. We anticipate and assume an improving macroeconomic environment and waning pandemic impact as the year progresses. We could not be more pleased with our outlook entering 2022. And with that, I'll turn the call back over to Jeff.