Global Payments Inc.

Later, we will open the lines for questions and answers. If you should require operator assistance during the 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 call over to your host, Senior Vice President, Investor Relations, Winnie Smith. Please go ahead.

Good morning, and welcome to Global Payments' fourth quarter and full year 2022 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, among other matters, expected operating and financial results and the proposed transaction between Global Payments and Evo Payments. These statements are subject to risks, uncertainties, and other factors, including the impact of economic conditions on our future operations that could cause actual results to differ materially from 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 of 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 available on the investor relations section of our website. Joining me on the call are Jeff Sloan, CEO, Cameron Brady, President and COO, and Josh Whipple, Senior Executive Vice President and CFO. Now, I'll turn the call over to Jeff.

Thanks, Wendy. We delivered strong results for the fourth quarter and calendar 2022. in what was an unprecedented year by nearly any measure, with heightened worldwide macroeconomic uncertainties caused by persistent inflation, dramatically rising interest rates, significant foreign exchange volatility, a war in Europe, and lingering impacts from the pandemic early in the period. Yet the consumer remained resilient throughout the year, and we enabled a record over 64 billion transactions, culminating in a successful holiday season with multiple all-time high peak days, we delivered record results for 2022. While it's early in the new year, internal metrics indicate more of the same. Where we have seen any discernible change, it is in some macro weakness and limited geographies like the United Kingdom and parts of Asia Pacific. Having said that, those items already are reflected in our fourth quarter results, and our guidance assumes no meaningful change in operating environments for 2023. We are pleased with our preliminary January results. For the fourth quarter, our merchant business delivered 9% adjusted net revenue growth, excluding dispositions, and our issuer segment achieved 5% adjusted net revenue growth, each on a foreign exchange neutral basis. Importantly, our core issuer business again generated sequential financial and operating improvement, consistent with our expectations, and the best performance since our merger with TSIS in 2019. For the full year, our performance was consistent with our September 2021 cycle guidance despite multiple black swan disruptions that emerged in 2022. Our merchant business delivered 13% adjusted net revenue growth excluding dispositions, and our issuer business generated 5% growth, each on a constant currency basis. For calendar 2022, we produced 10% total adjusted net revenue growth, again, excluding dispositions, expanded margins by 200 basis points, and generated 17% adjusted earnings per share growth on an FX neutral basis. All right line with our raised cycle guidance from 18 months ago, despite all the incremental challenges of the macroeconomic environment. At our investor conference, we outlined our four-pillar strategy and focus on a simpler model and more geared toward our corporate customers with enhanced growth and margin prospects. We detailed our capital allocation priorities that balance building the leading technology-enabled software-driven payments business worldwide with efficient return of capital. And we highlighted our commitment to advancing our strategic partnerships with leading global technology companies, investors, and share-gaining financial institutions to further expand our competitive mode. We anticipate closing the acquisition of EVO Payments no later than the end of this quarter. With EVO, we reinforce our position as a preeminent payments technology company with extensive scale and unmatched global reach. EVO enhances our target addressable markets, increases our leadership in integrated payments, expands our presence in new and provides further scale in existing geographies, and augments our B2B software and payments solutions. We look forward to welcoming EVO's value team members to the global payment family. We also remain on track to close the divestiture of NetSpend's consumer portfolio by the end of the current quarter, a key element of our strategic pivot. We believe that this transaction will best position NetSpend's consumer business for future success, and we wish its team members the best of luck in the future. Additionally, we have reached an agreement to sell our gaming solutions business to Parthenon Capital Partners for $415 million. This transaction, much like the sale of NetSpend B2C, is consistent with our efforts to refine our portfolio toward our core corporate customers and away from consumer-centric businesses. These three transactions further our strategic objectives, simplify our businesses and provide us with enhanced confidence in our growth and margin targets. We expect each of them to close by the end of March, providing us with core businesses from which to grow for many years to come. Our unique ability to provide differentiated vertical market software, payments and other technology solutions continues to resonate with customers. Our vertical market segment again delivered low double-digit growth in the fourth quarter with our QSR and school solutions businesses' notable standouts. We are delighted to announce today that both the Atlanta Hawks and the Atlanta Braves have chosen Global Payments to serve as their official commerce technology provider for State Farm Arena and Truist Park. The Hawks and the Braves ran comprehensive RFPs to select their partner for the future. And they chose Global Payments because of our ability to deliver distinctive cloud-based software and payment solutions to create enhanced frictionless experiences that increase fan engagement, drive loyalty, provide cloud-based data, and improve operational efficiency. We are proud to be the commerce technology partner for all of Georgia's major professional sports and entertainment venues. And our pipeline in this channel remains robust. In addition to the Hawks and the Braves takeaways, Xenial produced record revenue in the fourth quarter of 2022. Recent wins also include A&W restaurants, Jack in the Box, and Panda Express. What do these new customers all have in common such that they chose us in recent competitive takeaways? In short, consumer expectations for the sports and entertainment and QSR channels are high, and the pace of technological change in those markets plays uniquely to our competitive strengths. Our technologies are winning every day in the marketplace, with more than 51,000 restaurants in over 65 countries choosing our purpose-built ecosystems to deliver positive experiences back to their customers. Other standouts in our merchant business for the fourth quarter include our integrated and worldwide e-commerce and omnichannel businesses, which both again delivered mid-teens growth in the period. We are excited to combine the best of these businesses with Evo as our integration activities commence in the near term. In addition, we're now live with our acquiring relationship with Google across North America on the heels of the success of our initial launch in Asia Pacific in 2021. Turning to our issuer business, we produced the best performance we have experienced since the TSIS merger in 2019 in the fourth quarter of 2022. We ended last year with a record 816 million traditional accounts on file, an increase of 15 million AOS sequentially, driven by double-digit account growth with industry-leading customers as our strategy of aligning with market share winners shows gains. Our commercial card business continued to perform well, with transactions growing 20% in the fourth quarter as cross-border and domestic corporate travel continued its recovery trajectory. We lead in the issuer market with cutting edge technologies, worldwide scale, terrific customer service, and a partnership mentality. While the issuing business has always been and we expect will always remain highly competitive, those partners seeking to compete digitally know where they need to invest to be competitive in the marketplace. Much like in the merchant business, issuing businesses in growth challenge markets without the wherewithal to make cloud-centric technology investments for the digital future will be increasingly challenged to compete. Thankfully, that's not our target market. We are very pleased to announce that TSYS signed a multi-year extension with Bank of America, one of our largest customers in a relationship that spans consumer and commercial car portfolios in North America and the United Kingdom. We also extended our successful partnership with Deutsche Bank, our largest client in the DACH region, into the next decade as TSYS remains their partner of choice for scheme-branded car portfolios across international brands, including Deutsche Bank and PostBank. Also good timing in light of our pending entry into the acquiring business in Germany through Evo. Other recent multi-year extensions with long-standing customers include PNC for its commercial business. Our durable relationships with some of the most complex and sophisticated institutions globally speak to our competitiveness well into the remainder of this decade. We currently have nine letters of intent with institutions worldwide, nearly all of which were achieved through a competitive RFP process. This includes a recent LOI for new business with TSIS in Mexico, well-timed in relation to Evo, and a competitive takeaway conducted via RFP. Another 12 of our recent LOIs, including five competitive takeaways, have gone to contract since the beginning of 2022, providing further future growth opportunities. We recently entered the Swedish market through a contract we executed with Intercard during the quarter, spanning both its consumer and commercial portfolios. And we've got a contract with Scotia Chile Portfolio, which is being added to our agreement with Scotia Bank, a partnership that spans multiple markets across the Americas. This marks our second win in Chile, following the long-term agreement we reached with market-leading retailer Sencosud, signed earlier this year. Our issuer conversion pipeline stands at a record post merger of over 75 million accounts, providing further confidence of our growth trajectory well into the future. We are pleased to report that we have now reached business agreement on ahead of terms with CaixaBank, one of the largest issuing institutions across Europe. Post implementation, we expect to become one of the largest debit technology providers in Europe. We are the beneficiaries of technological innovation, continued share shift, and market share gains. As just one example, while we've been providing market-leading technologies for buy-now-pay-later initiatives for decades, we continue to innovate and deliver installment products as BNPL demand grows. This includes launching a successful BNPL program with one of our long-standing partners, NatWest, to aid customers with long-term purchases and special events. This product was designed to enable payments to be easily tracked and incorporates the robust fraud protections provided by FCA-regulated purchases. Other issuer highlights include a new partnership with MasterCard, leveraging Ethica consumer clarity to improve the dispute resolution process and digital experiences for more than 25 million car homeowners in the U.S. and the U.K. We also are collaborating with fintech software as a service platform, Mamboo, to provide next-generation capabilities for financial services customers across a number of strategic use cases, including credit cards, BNPL, prepaid cards, and a range of deposits and lending solutions. Finally, we've now combined the TSIS commercial card business, MineralTree, and NetSpend's B2B assets into a single unified B2B organization within the issuer solutions business as we focus on driving cross-selling opportunities. Across MineralTree and our Cortesis virtual card capabilities, total spend grew more than 50% in 2022 over the prior year, as we remain focused on bringing the industry's best virtual card capabilities to our FIs, enabling B2B transactions, mobile wallet provisioning, and online travel capabilities. MineralTree had a terrific fourth quarter of 2022 with growth in excess of 30%, and it is well positioned for gains heading into 2023. Josh?