Global Payments Inc.

At this time, all participants are in a listen-only mode. Later, we will open the lines for your questions and answers. If you should require operator 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, Senior Vice President in Best Relations, Winnie Smith. Please go ahead.

Good morning. and welcome to Global Payments' fourth quarter and full year 2023 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. 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 filing. 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 be also 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 Cameron Brady, President and CEO, and Josh Whipple, Senior Executive Vice President and CFO. Now, I'll turn the call over to Cameron.

Thanks, Linnian. Good morning, everyone. We are pleased with our fourth quarter and full year 2023 results, which exceeded our initial expectations outlined last February. I am extremely proud of our teams around the world for their outstanding execution. Together, we accomplished a great deal in 2023. Starting with our financial performance, for the full year, we achieved high single-digit adjusted net revenue growth and increased adjusted earnings per share 12%. This includes a more than 400 basis point headwind from the divestiture of our net spend consumer business, which we completed early in the second quarter. We also expanded adjusted operating margins 90 basis points, including the impact of EVO payments, which had a lower margin profile than global payments at the time of the acquisition. Importantly, we delivered this performance consistently throughout the year despite ongoing headwinds, including macroeconomic uncertainty, persistent inflation, FX volatility, and geopolitical unrest, highlighting the durability of our model. Strategically, we also made significant progress during the year, executing on a number of key initiatives. First, we successfully closed the acquisition of EVO payments in March, which complements our strategy by providing further penetration into integrated payments, enhancing our B2B capabilities, and expanding our exposure to stronger secular growth markets globally. Our integration has progressed quite well, and we remain on track to deliver on our revised target of $135 million in annual run rate expense synergies within two years. And while revenue synergies generally take longer to materialize, we are more excited today than when we announced the transaction about opportunities we have to cross sell our products and capabilities into EVO's existing customer base. We are continuing to invest in these opportunities in 2024 and expect them to scale more fully in 2025. Further, we completed the divestitures of our Netfin consumer assets and our gaming solutions business in April. These three transactions represent important milestones as we seek to advance our strategy and operate a simpler business model centered on our core corporate and financial institution customer base. In our merchant business, that strategy is spearheaded by a software-centric approach leveraging our strengths across our vertical markets, integrated, and point-of-sale businesses. And we seek to drive distinction in our offerings by providing omnichannel capabilities and value-added commerce enablement solutions across our markets, including those that benefit from stronger payment digitization and secular growth trends. We continue to see good momentum in our merchant solutions as we execute against these strategies. Starting with our vertical markets businesses, we had a number of notable achievements in 2023 across the portfolio. These include Xenial's new partnerships to be the official commerce technology provider for both the Atlanta Braves and Atlanta Hawks as a look to further expand our market presence in the stadium and event venue vertical. In the United Kingdom, we renewed our relationship with Principality Stadium, home of Welsh rugby and football, and expanded our services with Wembley Stadium in London. We were also selected by leading food service management company Sodexo to be its preferred point of sale and kiosk partner and are now the partner of choice for the three largest players in the food service management space. Our education solutions business delivered many new marquee customer additions across our K through 12 and our university businesses and continue to expand to international markets with school solutions launching My School Bucks in Australia, and TouchNet achieving new wins in Canada, Australia, and the United Kingdom. Interactive network business had a record bookings year, setting 839 new logos, including its largest ever win in the community vertical with the city of Toronto. Moving to partner software solutions, we achieved record bookings in 2023, with new partners increasing 23% from the prior year. This was in part driven by the strong momentum we have seen with our new progressive payment facilitation or Profact model that we launched mid year. This hybrid option provides many of the benefits of being a payment facilitator while minimizing the heavy burden that comes with it. Profact is unique to global payments and we are delighted to have signed 16 Profact partners to date who already had thousands of merchant customers using our payment solutions. Some notable new partners in our integrated business include 402 Ventures, a leading provider of auction software in the heavy equipment and machinery vertical, Autosoft, which provides a software management platform for auto dealerships, Blackknife, a leading provider of mortgages and loan origination software, and Inovalon, a leading data analytics ISB in the healthcare vertical. These trends, including the momentum we are seeing with Profact, underscore our confidence in our ability to maintain consistent growth going forward as our differentiated capabilities continue to resonate with the ISV market. As for the third leg of our software strategy, our point-of-sale software business delivered strong growth for the full year as we continue to see solid demand for our solutions and benefit from the releases of new product enhancement. Notably, our average revenue per unit continues to expand of 9% year over year as more merchants are using payments and other add-on capabilities in our evolving POS platform. And of course, this is prior to the full launch of our complete next-generation restaurant and retail point-of-sale software platforms, which we continue to expect this quarter. Lastly, our exposure to some of the most attractive secular markets globally remains a core element of our strategy. both in terms of contributing to our overall rates of growth and providing us the global footprint we need to support complex multinational corporations. We continue to see good trends across our businesses in Spain and Central Europe, each of which delivered high teams growth. And key new European markets entered with EVO, including Poland and Greece, also achieved double-digit growth. Further, we are seeing favorable secular trends in LATAM, where we meaningfully increase our footprint with EVO. This includes new implementations in Mexico with large customers like Dlocal, DHL, and Petro7 as we leverage our partnership with Citi Banamax. Turning to issuer solutions where we have longstanding relationships with some of the most complex and sophisticated institutions globally. We are proud to have completed 11 customer conversions in 2023. In total, we added over 50 million accounts to our business. and ended the year with record traditional accounts on file of more than 800 million. We continue to have a strong pipeline of new business that extends into 2025, as well as eight letters of intent with institutions worldwide. In 2023, we achieved 13 multi-year renewals in new customer agreements. This includes a new contract with a leading U.S. bank that is a longstanding global payments merchant partner. a relationship that provided the foundation for the growth of our partnership to include issuer technology solutions. We also continue to expand into new and faster growth markets, including in LATAM through our partnership with CAT, the credit card joint venture between Scotiabank and Chile's largest retailer, Sencosud. The confidence that many of the largest and most sophisticated, complex financial institutions have with us is enhanced by our issuer platform modernization efforts. which positions us to provide our clients market-leading, cloud-native, real-time solutions at scale in more markets than we ever have previously. We've made substantial progress with our modernization, with two clients now in production leveraging products via our cloud solution. Further, we expect to complete the development of our client-facing applications this year and are planning to execute dozens of unique cloud-issuer platform pilots, explaining multiple services, products, and geographies as we prepare for the commercial launch of additional cloud-native capabilities. Moving to B2B, we continue to see solid demand for our leading capabilities across our three focus areas, software-driven workflow automation, money-in and money-out funds flow, and employer solutions. We have successfully integrated Evo's pay-fabric software into our merchant business, allowing us to go to market in B2B acceptance with a software-led approach. Further, our mineral tree business nearly doubled subscription bookings in its core mid-market, positioning the business well heading into 2024. As one of the largest virtual card issuers in the world, we are benefiting from accelerated adoption of virtual cards globally, which contributed to strong growth in commercial transactions this year. Additionally, our B2B bookings and merchant solutions increased over 20% in 2023, as more of this spend shifts towards digital channels. Our employer solutions are also seeing favorable trends, including our payroll business delivering mid-teens growth for the full year, and our pay card and EWA solutions achieving nearly 2,000 new partnerships last year. After an eventful and successful 2023, I'm pleased to report that we are carrying this momentum into the early part of 2024. In January, our merchant business announced a new joint venture with Commerzbank in Germany. This new entity, Commerce Global Pay, is expected to launch in the first half of 2024 and will deliver a comprehensive suite of innovative omnichannel payments and software offerings, including our GP point-of-sale software solutions and our GP touch-on mobile technology at scale, providing merchants the capabilities needed to run and grow their businesses more efficiently in the largest economy in Europe. We are delighted to be partnering with Commerce Bank, a premier financial institution with unmatched relationships with small and medium-sized merchants, to significantly enhance distribution in Germany, where there are substantial opportunities to further digitize the payment experience. This partnership was achieved with the global payments leadership in payments technology and commerce solutions, and extensive JV experience across European markets. while our acquisition of Evo helped provide a foundation with its existing physical presence and merchant portfolio in Germany. In North America, we remain on track to launch our next generation Heartland restaurant and Heartland retail offerings this quarter, which will provide best-in-class omnichannel experiences and further catalyze our success in point-of-sale software. Early feedback on our next generation restaurant point-of-sale solution has been overwhelmingly positive. including our new, updated, and enhanced features like online ordering, loyalty, mobile point of sale, and a simplified user interface on commercial-grade hardware. And our new retail POS solution will allow us to extend into additional retail verticals, which is the cornerstone of our broader strategy of subvertical expansion, allowing us to increase wallet share while also meeting the demands of a modern retail environment. that brings supply chain, e-commerce, customer engagement, and complex ERP functionality into a simplified and single ecosystem. This expansion not only aligned with our growth objectives, but also ensures we stay at the forefront of retail technology, providing our clients with the tools they need to thrive in a rapidly evolving market. Our POS momentum also continues in the enterprise QSR space. We were delighted to be selected to power Cosmix, a new concept from the McDonald's universe. Xenial's cloud point of sale drive-through digital menu boards Envision speed of service solutions are enabling an innovative new drive-through traffic management system that supports Cosmix multiple drive-through lanes and pickup windows, optimizing restaurant operations in a dynamic and flexible way. Cosmics is also using Xenial's back office suite to provide real-time reporting and management of inventory, sales, labor, projections, and scheduling. We're excited to have already launched with Cosmics at the initial Bolingbrook, Illinois restaurant concept in December and look forward to helping future-proof all new pilot locations with our cloud-based technology ecosystem as they open in additional markets in 2024. Our issuer business has also started the year well, having executed multi-year renewal agreements with two of our flagship clients, Capital One and Navy Federal Credit Union, both longstanding relationships spanning decades. Our renewal with Capital One includes both its consumer and commercial credit portfolios in North America. And for Navy Federal, a not-for-profit credit union serving the military, veterans, and their families, our relationship supports its consumer portfolio as well as an array of value-added services, including loyalty fraud and digital engagement solutions. The extension of these partnerships further validates our strategy of aligning our business with clear market winners. Looking ahead, we remain encouraged by the resiliency we have seen in consumer spending and expect fairly similar trends in 2024. However, we recognize there remain a number of risks to the global economy and consumer and are appropriately reflecting this in our expectations. Our outlook does incorporate a slightly more tempered expectation for the macro environment relative to what we experienced in 2023, but is roughly aligned with what we saw exiting the year. January trends were fairly consistent with what you heard from the networks and broadly in line with our expectations. We are confident we have built a better and more durable business model, which positions us well to manage through any environment if the current backdrop changes. With that, I'll turn the call over to Josh.