Global Payments Inc.

Ladies and gentlemen, thank you for standing by and welcome to Global Payments second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will open the lines for questions and answers. If you should require assistance during this call, please press star and 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, Investor Relations, Winnie Smith. Please go ahead.

Good morning, and welcome to Global Payments' second quarter 2024 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 risk 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 of 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 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 8K filed this morning and our supplemental material available on the investor relations section of our website. Joining me on the call is our CEO, Cameron Brady, and our CFO, Josh Whipple. Now, I'll turn the call over to Cameron.

Thanks, Winnie, and good morning, everyone. Thank you for joining us today. We are pleased with our performance for the second quarter, driven by consistent execution of our strategy focused on being the worldwide partner of choice for commerce solutions. Specifically, we achieved 6% adjusted net revenue growth, or 7% excluding the impact of the divestiture of NetSpend's consumer assets. and delivered adjusted earnings per share growth of 12% in the quarter. We also expanded adjusted operating margins 40 basis points as we continue to drive efficiency in our business, leveraging the scale position we enjoy in our core markets, and realized synergy benefits from the EVO acquisition. There are a number of noteworthy highlights to cover this morning. Starting with merchant solutions, we delivered high single-digit organic growth, largely driven by our differentiated capabilities across our integrated software and point-of-sale businesses, as market demand for embedded payments and commerce enablement solutions continues to accelerate. Our integrated business saw double-digit growth in the quarter, aided by continued strong booking trends and business development results, with new ISV partner signings up 30% year-to-date. Our ongoing success in identifying and signing new ISVs in this channel is partly attributable to our Progressive Payment Facilitation Solution, or PROFAC, which we launched mid-last year. Active merchants on this solution have increased 40% and average merchant volumes have improved 60% since the end of 2023. We remain confident in our competitive positioning in this market and are investing in our capabilities to ensure we preserve our leadership position. We continue to focus on differentiating ourselves by, one, our ability to meet the specific needs of our partners by leveraging the breadth and depth of our solutions, and two, the expansive additional embedded commerce capabilities we can attach to the underlying payments relationship. With both new and existing integrated partners, we are seeing an improvement in the average annual revenue opportunity with new merchants as we focus on cross-selling commerce enablement solutions. This includes human capital management and payroll, loyalty and marketing, analytics and customer engagement solutions, as well as B2B software. Speaking of B2B, it is worth noting that we continue to see increased demand for our B2B acceptance solutions as we further leverage the PayFabric platform we acquired with Evo. Our proprietary integrations with some of the most widely used ERP environments in the market are critical delivering the embedded, frictionless automation necessary to improve process efficiencies for our customers. We saw more than a 50% increase in new ISV partnerships leveraging our pay-fabric capabilities in the second quarter as more B2B spend shifts to digital channels. In our vertical markets businesses, we saw double-digit growth in software bookings this quarter with particular strength in education, real estate, and healthcare. Notable wins include a new partnership with the Los Angeles Unified School District, the second largest in the U.S., which will leverage our full suite of capabilities across point-of-sale, mySchoolBucks, cafeteria management, as well as our back-of-house solutions. With this addition, we now have partnerships with the three largest school districts in the United States. Our real estate business signed a new partnership with Yes Communities, a leading provider of manufactured housing communities across the United States. and expanded existing relationships with community association solutions company associated asset management and commercial and residential real estate service provider Tobin Capital Group. Also this quarter, we launched a new residential payouts product to streamline and automate the return of security deposits, which we are already successfully cross-selling to customers. We also saw strong growth in our point of sale software business this quarter, adding roughly 3,500 new locations. Demand for our point of sale and embedded commerce solutions remain strong across the segments of the restaurant and retail verticals we target. Our solutions are designed to grow with the customer's business, leveraging a common technology stack that enables customers to easily add functionality as they expand. This allows us to serve the small end of the SMB market and scale with merchants as they grow, while also addressing the more complex needs of quick service restaurants and sports entertainment venues. To that end, we are excited to announce a new partnership with Diamond Baseball Holdings to serve as the official commerce technology partner for its minor league baseball franchises in the United States and Canada. We are currently installed in 13 of these stadiums, and we expect to fully roll out our solutions at additional ballparks across Diamond's club portfolio before the 2025 season opens. We also signed new stadium partnerships with multiple UK football clubs, including Newcastle, Birmingham City, and Nottingham Forest during the quarter. And we are proud to have supported a major professional football championship across multiple stadiums, a Grand Slam tennis tournament, and a major golf tournament with our point of sale and payment solutions in Europe this summer. We also went live this quarter with a leading parks and entertainment company and are now providing the food and beverage and retail point-of-sale solutions at its theme park locations in Florida. And we continue to see great momentum in food service management where we are the partner of choice to the three largest players in the space, which drove a 20% improvement in related bookings this quarter. In the restaurant and retail verticals in North America, where our POS software is targeted towards SMB and mid-market customers, In addition to strong rooftop growth, we achieved a greater than 70% attach rate of our embedded commerce solutions with new customers. It's just one example. We are seeing significant demand for loyalty and marketing tools with locations, leveraging our customer engagement software, increasing over a hundred percent this quarter compared to the prior year. Additionally, we are pleased with the market reception of our recently released next generation point of sale software. including the improved user interface, our intuitive experience across iOS and Android-based devices, and the mobile-first design that drives best-in-class omnichannel experiences for our merchants and their consumers. While still early days, these new offerings are benefiting our performance, and we expect a more meaningful contribution to revenue in 2025 as we gain scale. We also continue to see good momentum expanding our point-of-sale offerings into markets outside of the U.S., It's worth highlighting that we have begun highlighting our point of sale offering in Germany and anticipate a full commercial launch next month. We also remain on track to bring our point of sale software to key additional international markets, including Mexico, Ireland, Poland, Austria, and Romania, over the next 12 to 15 months. In Germany, our Commerce Bank joint venture, Commerce Global Pay, went live this quarter, and we were off to a fantastic start. While we are just beginning to leverage Commerce Bank's relationships with its roughly 26,000 corporate clients and almost 11 million private and small business customers, we are already seeing strong lead generation and substantial opportunities to further digitize the payment experience, while also allowing us to build a scale business in this attractive market. Lastly, we are continuing to see strong demand for our pan-European solutions. Notably, we are realizing attractive growth in the EV charging sector, and recently signed a partnership with a major European energy provider to support the expansion of public charging solutions throughout Central Europe. We also made two small tuck-in acquisitions in Europe this quarter to continue to improve our strategic positioning. The first was the acquisition of TAKE Payments, a small provider of payment solutions to SMB merchants in the UK. TAKE Payments serves to meaningfully diversify and expand our direct distribution capability and demand generation solutions as the UK market continues to evolve beyond traditional bank-based referral channels. It also provides attractive opportunities for us to cross-sell our commerce enablement solutions into its customer base. This investment allows us to reorient our distribution approach in the UK market with leading demand gen capabilities and represents opportune timing as we are starting to see some signs of stability in the UK market more broadly. We have a strong pipeline of new business here with the hospitality and unattended verticals notable bright spots, including our recent win of Virgin's Hotel Business in the UK. The second acquisition at the end of the quarter was of an early stage technology development company that we were previously partnering with in Europe to drive our terminal on mobile offerings. Given the strong demand we have seen for our terminal on mobile offerings and the expected long-term importance they will play to our point of sale plans, It was strategically important for us to bring this technology in-house to unify our offerings globally and to control the entire value stack, enabling our solutions. Moving to issuer solutions, we continue to see strong execution across our business. We completed two large conversions this quarter, which in combination with existing customer growth, drove a healthy increase in accounts on file sequentially. We also have a near-record implementation pipeline of more than 65 million accounts and seven active LOIs. Further, we're having ongoing success in cross-selling our value-added service solutions and completed 30 product implementations for existing clients this quarter across our fraud, virtual card, and communications platforms. From a macro perspective, and similar to what you heard from our FI partners and the networks, we saw a modest deceleration in transaction volumes this quarter, which was largely driven by commercial card activity. We recently renewed our multi-decade issuer relationship with NatWest, spanning both its consumer and commercial portfolios, cementing our position with one of the largest and most active clients in Europe. NatWest recently announced its acquisition of Sainsbury Bank, further highlighting the importance of our strategy to align ourselves with market share winners. We look forward to opportunities to continue to expand our partnership with them in the future. Additionally, we have now launched our partnership with Outpace, a leading global travel technology company owned by Amadeus, providing issuer solutions technology for its platforms across Europe. Outpace is our first FinTech customer operating in our AWS cloud environment in Europe with many other clients in the pipeline. Most importantly, we also continue to make progress on our issuer modernization program and remain on track to complete the development of our client-facing applications this year. We have already initiated customer pilots and continue to expect commercial launch next year. Through modernization, we meaningfully increase our addressable market by broadening our opportunity set to include mid-market and smaller banks, in addition to new geographies. Our investments also drive greater enablement capabilities for our clients and allow our leading applications and solutions to be more easily consumable by fintechs who are developing new use cases around cards. Shifting to B2B, we are seeing good trends in new bookings for our AP automation software in our core mid-market segment, while virtual card spend continues to ramp. Additionally, we signed several notable new customers for our employer solutions, including relationships with Terra Staffing Group and Rainbow Pizza, which operates nearly 50 Domino's locations throughout Texas. We also renewed partnerships with AMC Theaters and Cracker Barrel. Before I turn the call over to Josh, I would like to highlight the appointment of Bob Cordopassi as the President and Chief Operating Officer of Global Payments. Bob is a proven growth-oriented leader and operator, as well as a trusted colleague with an exceptional track record of managing key businesses across our organization during his 12-year tenure with the company. Most recently, Bob served as our Senior Executive Vice President and President of International and Vertical Markets for our Merchant Solutions business and previously led our integrated business for nearly a decade. I look forward to partnering with Bob and am confident in the role he will play in our company's continued future success. John?