Global Payments Inc.

Ladies and gentlemen, thank you for standing by. And welcome to Global Payments' fourth quarter and full year 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 then zero. And as a reminder, today's conference will be recorded. At this time, I'd 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' fourth quarter and full year 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 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 measures in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8K file 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, our President and COO, Bob Cortopacci, 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 proud of all that we accomplished in 2024. It was a pivotal year for Global Payments as we launched our broad transformation agenda to set the future course for our business, while also delivering strong operational and financial performance. We started our transformation journey by reimagining our mission, vision, and values. to provide the organization with a clear view of our priorities and desired culture, setting the foundation for us to pursue our ambition to be the worldwide partner of choice for Commerce Solutions. We then refreshed our strategy to focus our efforts and investments in the area of the business that will drive the most attractive opportunities for growth and where we are best positioned to compete and win. From there, we undertook a holistic review of our business to determine how to best position the organization to execute against our refocus strategy and deliver sustainable performance. We use the first principles approach to examining growth drivers, market positioning, go-to-market capabilities, product portfolios, and the potential to optimize our assets. This review led to a realignment of our operating model and business structure, as well as the operational transformation program that we described at our investor conference in September. We are continuing to execute against a significant number of initiatives that will create meaningful benefits and provide us with incremental capacity for reinvestment to drive growth and quite simply run a better business. While executing on our transformation, we have continued to deliver strong financial performance. For the fourth quarter, we produced 6.5% constant currency growth, including dispositions, including over 7% in the merchant business and 3% in our issuer business, an acceleration sequentially from Q3 and consistent with the outlook we provided in October. And for the full year, we delivered 6% adjusted net revenue growth, record adjusted operating margins, and double-digit adjusted earnings per share growth, consistent with our initial outlook detailed at the beginning of 2024, despite the incremental FX headwinds absorbed. We also generated roughly $3 billion of adjusted free cash flow and returned $1.8 billion to shareholders, including proceeds from the recent divestiture of our advanced MD business. Our consistent performance throughout the year highlights the durability of our model and the benefits of our sharpened focus as we execute on our strategic priorities. In our merchant segment, our POS and software business continues to deliver strong results. Our POS solutions are robust and are winning in the restaurant and retail verticals, as evidenced by the high teams new locations growth we achieved in 2024. Our POS growth benefited from the strong performance of our direct channel in North America, where notably we saw a roughly 25% increase in the annual recurring revenue opportunity with new customers. And we could not be more excited about the significant opportunity ahead as we consolidate our products and platforms under the Genius brand and extend them globally. Notably, we expanded our relationship with one of the largest multinational QSRs in the fourth quarter to include drive-through solutions in addition to our existing kitchen management partnership that spends several thousand locations in North America. We also expanded our longstanding partnership as the primary technology partner for Whataburger, which now includes cloud POS, kiosks, and menu boards. Additionally, we continue to have success in the stadium and events vertical and are excited to have reached an agreement with Kai Kak Sports Park, Hong Kong's new state-of-the-art multi-purpose sports and entertainment venue. We also renewed and expanded our POS partnership with a multinational entertainment company to support its major events in the UK and Ireland over a multi-year period. Importantly, our relationship will now include our loyalty solutions, enabling reward offers and personalized experiences for event attendees. Other notable new stadium POS relationships achieved in 2024 include the Newcastle, Birmingham City, and Nottingham Forest football clubs, as well as an expanded partnership with Blackpool, which now includes pay link solutions, ticketing services, kiosks, and QR code ordering, in addition to POS and payments. And of course, we executed 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 earlier in 2024. We remain on track to be fully rolled out with our solutions in an additional 19 ballparks across Diamond Club's portfolio for a total of 32 before the 2025 season opens in April. In our education business, new sales with university customers increased more than 30% in 2024, including a number of new significant international wins across the UK and Ireland, as well as in Canada. We also added 113 UK through 12 school districts this year, a roughly 20% increase from 2023. And with the addition of the Los Angeles Unified School District, we now have relationships with the three largest school districts in the United States. In the real estate vertical, we sign more than 800 new property management customers during the year, while also expanding our partnerships with leading real estate software platform providers like MRI Software, Rent Manager, and AppFolio, which will allow us to cross sell additional products and services to their customers. Turning to integrated embedded, new ISV partner signings increased 34% across our integrated payments offerings in 2024 compared to the prior year. Notably, we also added 165 international ISV partnerships across the UK, Asia, Australia, and Latin as we seek to better align our activities and capabilities globally. We also recently expanded our relationship with PayPal to simplify and accelerate the checkout experience by integrating its Fastlane solution into our platform, furthering our efforts to deliver embedded commerce solutions. This collaboration extends the payment choices we can offer across the U.S., allowing our customers to enhance their digital experiences for their consumers. Moving to core payments, our focus on forming deeper relationships with commerce enablement and outstanding services driving significant opportunities with both new and existing partners globally. We continue to make strong progress with Commerce Bank in Germany and have already boarded over 2,000 merchants since the inception of our joint venture mid-year. Additionally, we saw double-digit growth in other key geographies, including Central Europe, Poland, and Greece in 2024, as well as in LATAM, where we benefit from strong secular payment trends in Mexico. Shifting to issuer solutions, we were pleased with our operational execution throughout the year. We successfully completed 17 customer implementations in 2024 and ended the year with record traditional accounts on file of 885 million. We continue to have a strong conversion pipeline of more than 70 million accounts that extends well into 2026, as well as an additional six letters of intent with institutions worldwide. In 2024, we completed 17 multi-year renewals in new customer partnerships. This includes contracts with KeyBank, Friend Financial, and Vancity executed in the fourth quarter, In addition to significant agreements with Navy Federal Credit Union, Virgin Money, Citizens, NatWest, and several other premier global clients that we announced earlier this year. And over the last few years, we've renewed 15 of our top 20 clients, reflecting the strength of our partnerships and providing us good visibility and stability going forward. We also continue to make substantial progress with our technology modernization program. Development of our client-facing applications was completed in the fourth quarter, consistent with our plan, and we remain on track for full commercial launch in 2025. We have more than a dozen pilots in progress with existing customers and are on track to have 33 client pilots in production this year. We recently achieved certification of our cloud authorization platform with Visa and MasterCard. By the end of 2025, we will be exclusively selling cloud capabilities, saving the way for widespread adoption of these modernized solutions. Across the business, our ambitious transformation agenda will enable us to deliver our rich portfolio of capabilities and solutions through all of our channels in a more frictionless way. While still early days, we are already making great progress across three primary focus areas. First, as we discussed at our investor conference, we have identified meaningful opportunities to streamline and simplify the business. In December, we successfully closed on the sale of advanced MD we announced last quarter. Further, we are in the process of exiting several small markets in Asia Pacific this quarter, where we are subscale and see limited opportunity for expansion. With these actions, we have exited a little more than $300 million of the $500 to $600 million of adjusted net revenue we targeted through our portfolio review. We are pleased with how these initiatives position us to better focus on where we are differentiated and have the right to win, and are continuing to advance other targeted divestitures and exits that will further streamline our business. We have also completed other initiatives designed to simplify our business structure. During the fourth quarter, we successfully acquired CaixaBank stake in our joint venture with Ersta Group. This business has achieved exceptional growth over the past decade, and we are excited about the opportunity to capture more of the economics going forward while simplifying our pan-European operations and governance. We also recently reached an agreement to purchase HSBC stake in our joint venture in Mexico. This creates the opportunity to combine our two existing businesses in Mexico, allowing us to harmonize our go-to-market strategy, drive better scale, amplify investments, and increase efficiencies. Second, we are working to fully unlock the growth potential of our best capabilities while leveraging all of our distribution networks across the globe. To accomplish this, we have reoriented our business under a single unified operating model and have successfully consolidated our technology teams under common leadership, centralized our operating functions, and have unified our merchant solutions business into a homogeneous worldwide organization. This better positions us to harmonize our best products and capabilities globally, including aligning our point-of-sale solutions under a common brand, Genius. We now have completed the full branding work for Genius and will launch our solutions for the restaurant and retail verticals in the U.S. beginning in the second quarter. Notably, we will go live with our Genius restaurant solutions for small to medium-sized customers this May in tandem with the National Restaurant Association Conference. Simultaneously, we will also launch our Genius retail solution for SMB businesses. In September, we will extend the retail offering to additional sub-verticals, and introduced the Genius Enterprise restaurant solution at the Food Service Technology Conference, which is attended by more than 100 of the leading QSR and restaurant chains. We will begin rolling out Genius to international markets in the second half of the year, including in Canada, Mexico, the UK, Germany, Austria, and the Czech Republic. In early 2026, we will bring Genius to additional markets, including Ireland and Spain, followed by Romania, Poland, and Australia shortly thereafter. We're also making progress converging our technology capabilities across our POS platforms. And by the end of the year, solutions such as online ordering and delivery, accounting applications, marketing and loyalty, service vertical functionality, and third-party integrations will be ubiquitously available from a common platform across our Genius offerings. Additionally, we're already driving synergies by leveraging a number of common capabilities. This includes aligning our hardware platforms, streamlining invoicing, consolidating support functions, and reducing skews. As we converge our platforms over time, we have set the roadmap to migrate customers using legacy platforms to Genius, with defined upgrade paths that will provide for a seamless transition to a best-of-breed cloud solution that will delight merchants and their customers, while also providing us with significant cross-sell and up-sell opportunities. We also intend to fully leverage our distribution channels to extend our Genius PLS solutions globally. Our sales teams, dealers, and FI and wholesale partners have already had extensive opportunities to preview Genius, and the reception has been overwhelmingly positive with significant excitement about the upcoming launch. Another important initiative we are pursuing is our Salesforce of the Future program, which started with our direct sales teams in the U.S. and will extend to international regions later this year. This includes upscaling and retooling our sales organization, aligning incentives to accelerate cross-selling, reimagining our marketing and lead generation efforts, enhancing underwriting and onboarding processes, and improving our approach to provisioning and activating new merchants. As part of this, we have already rolled out a modernized and revamped compensation plan in our FI partner channel and to our POS sales organization. We are extending this plan to additional U.S. sales teams over the course of the year. Our strategic focus on delivering a full suite of differentiated software and commerce enablement solutions extends across our business. As one example, in issuer solutions, we launched several key strategic partnerships in the fourth quarter, including with Engaged People, Blackhawk Network, and one of the largest global technology companies that will serve to advance our loyalty platform capabilities to enhance distribution and extended point accumulation and redemption options. And third, we will leverage our technology leadership to be a more nimble and agile business while increasing our efficiency and effectiveness. As I previously noted, we have consolidated all of our technology organizations and teams under common leadership. Our technology development and operations were fragmented, resulting in duplication of effort and investments, a lack of standardized tools and practices, and a somewhat inefficient operating environment. With this change, we're becoming a more nimble and agile organization with a customer and product-centric mindset focused on speed and quality of product development. To support these efforts, we recently completed a small transaction to acquire a modern real-time processing and orchestration platform. This technology allows us to leverage and distribute products more easily across multiple platforms and geographies seamlessly, increasing our speed to market and accelerating progress towards our target architectural model. It also allows us to eliminate certain third-party providers and streamline our technology operating environments globally. We are already leveraging the platform in Central Europe and Germany and will extend this technology architecture across all of our European markets over the next 6 to 12 months. Across the company, we are also focused on improving cycle times for new product development and enhancing productivity. This evolution includes modernizing developer tools, including GenAI-supported software development, as well as standardizing tooling and implementing processes changes to better identify customer needs and accelerate product launches. Early results have already shown double-digit productivity improvements in developers leveraging our GenAI code assist tool and a nearly 10% reduction in code deployment time utilizing our modernized tool sets. We anticipate beginning to realize the benefits of these efforts in the second half of the year with the majority of process and technology enhancements in place by year end to support our identified priorities. Further, we are continuing to invest in driving differentiation through service. We have multiple programs underway that leverage GenAI to enhance support offerings for customers. This includes an initiative to replace our global support center software solution to modernize call flows, expand omnichannel and digital engagements, increase intelligent routing, and incorporate AI-powered knowledge management. This will allow our support center teams to improve response times and enhance customer experience by better leveraging automation. We expect to have the new platform fully implemented by the fourth quarter of 2025. Given the early milestones we've achieved and our ongoing progress, we are now expecting our operational transformation initiatives to unlock more than $600 million of annual run rate operating income benefit by the first half of 2027. This is an increase from our initial outlook of more than $500 million. I could not be more pleased with the performance of our team members, whose passion, ingenuity, and relentless pursuit of excellence enabled our success over the last 12 months. As we begin 2020, to unlock value and position our business for sustainable growth and success. Josh?