Global Payments Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' third quarter 2025 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 would like to turn the conference over to your host. Head of Investor Relations, Nate Rozov. Please go ahead.

Good morning. Welcome to Global Payments Third Quarter 2025 Conference Call. My name is Nate Rozov, and I'm Head of Investor Relations. Joining me on today's call is our CEO, Cameron Brady, our President and COO, Bob Cotopassi, and our CFO, Josh Whipple. 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. I'd like to remind you that some of the comments made during today's conference call will contain forward-looking statements, including expected operating and financial results, among other matters. These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our post-release and filings with the SEC. 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 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 on 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 other supplemental material available on the Investor Relations section of our website. With that, I'll turn the call over to our CEO, Cameron Brady. Cameron? Thank you, Nate, and good morning, everyone. We are pleased to deliver third quarter adjusted results that accelerated sequentially across our key financial metrics. Our team continues to execute at a high level, driving growth and efficiency across the business as we advance our transformation program. Importantly, our year-to-date performance positions us well to deliver on our expectations for the full year, and we are building positive momentum as we prepare for the closing of the WorldPay acquisition. To that end, we recently received approval for our acquisition competition and markets authority in the UK, which is a critical regulatory milestone. Given the strong progress we have made with the regulatory approval process, we now expect to close our acquisition of WorldPay and divestiture of issuer solutions in the first quarter of 2026. Naturally, our teams are eager to complete the WorldPay transaction and begin unlocking the compelling opportunities it presents. including accelerating our strategy to transform global payments into a pure-play merchant solutions provider with sustainable growth, leading scale, focused investments, and meaningful value creation. We were also pleased to have closed the divestiture of our payroll business in September, further simplifying our business and allowing us to return an incremental $500 million of capital to shareholders during the third quarter through an accelerated share repurchase program. Lastly, before turning to the quarter, I'm happy to announce that we partnered with Google to enable agentic commerce using the agent payments protocol. It will enable us to provide secure, reliable, and interoperable agent commerce for our customers and partners. We are helping our customers and partners to successfully enter this emerging commerce channel by building bridges between protocols to enable our merchants to accept all agentic payment types. With this and other agentic AI frameworks, we are also developing the authentication layer that is necessary to verify that AI agents are legitimate to maximize authorization rates and thus maximize revenue for our customers. For the quarter, we reported 6% constant currency adjusted net revenue growth, excluding dispositions, 110 basis points of margin expansion, and 11% constant currency adjusted EPS growth compared to the same period last year. We also produced adjusted free cash flow of $784 million in the quarter, allowing us to end the quarter at 2.9 times adjusted net leverage, below the three times target we had committed to and earlier than the year end date we had previously anticipated. Our merchant business exhibited ongoing momentum with adjusted net revenue growth accelerating to 6% constant currency excluding dispositions as we continue to execute across the three pillars of our strategy. First, in POS and software, our strategic priority remains on the development and rollout of Genius. Consistent with our focus on front-book opportunities, currently more than 90% of Genius sales are to new customers. In the markets where we have launched Genius, sales to new locations increased by more than 20% year-over-year during the third quarter, with new sales ramping nicely throughout the quarter. In fact, monthly recurring revenue from new sales increased 75% from June to September, and the average deal size more than doubled. This rapid uplift in new sales demonstrates how well Genius is resonating in the market. Genius is an incredibly robust business software platform that is architected to be highly modular, configurable, scalable, and extensible. As we talk about Genius today and in the future, you will hear us highlight our support across multiple form factors, from mobile phone applications to specialized handheld devices, all the way up to our unique countertop, kiosk, digital menu board, and kitchen management devices. We will also discuss vertically targeted configurations supporting retail, restaurants, campuses, field services, professional services, age-restricted, and more. We may also comment on go-to-market bundles of specific feature functionality to assist customers with diverse needs at multiple price points designed to allow us to specifically tailor our offerings to meet customers how and where they want to be met. With all the impact we are driving across the world with Genius, it is important to understand that this is still one Genius platform. We are unlocking capabilities, geographies, configurations, and pricing bundles. We are not launching new discrete products or platforms. To that end, having successfully introduced Genius for the restaurant and retail verticals during the second quarter, which are primarily targeted at SMBs, I'm happy to share that we expanded Genius' feature set to support enterprise businesses in September and higher education institutions in October. Genius's enterprise offerings provide a unified, modern, and modular commerce enablement solution designed to meet the complex needs of multi-location, quick-serve, and fast-casual restaurants, sports and entertainment venues, and food service management environments for our enterprise customers. On the heels of this launch, we were pleased to be selected by Harris Blitzer Sports and Entertainment to be the official payment technology provider for the Prudential Center and the New Jersey Devils. We will integrate Genius across all food and beverage locations for the Prudential Center, helping to optimize how fans place, pay for, and receive their orders across the venue while optimizing back-end operations. While it is still very early for Genius in the enterprise space, we have also already been selected by franchisees of several leading QSR brands to deploy Genius across more than 400 locations. Our expansion of Genius functionality for higher education is ideally suited for a range of campus use cases, including on-campus merchants, dining halls, recreational facilities, departments and clubs, stadiums, and more. Many universities do not have the necessary digital payments infrastructure to support their move away from cash and check. Genius fills that gap with easy-to-use commerce enablement solutions, including campus-wide payment acceptance capabilities and reconciliation. It drives commerce and simplifies back-end processes by centralizing transaction visibility while maximizing revenue streams, minimizing staff time, and streamlining compliance. In terms of new form factors, we recently launched our new handheld device for Genius. It features an advanced 6.5-inch high-definition touchscreen, seamless connectivity across Wi-Fi, Bluetooth, and 5G, and an upgraded processor that speeds performance. Demonstrating the power of Genius's highly modular and configurable platform, I'm pleased to share that the University of Illinois selected Genius and will use our new mobile form factor across revenue centers campus-wide. As for geographic expansion, in addition to offering Genius across North America and the U.S., Canada, and Mexico, we recently launched in the U.K. and Austria. And our first enterprise win in the U.K. came within days of our launch with a restaurant change in Glasgow, that has ambitious expansion plans. Before the end of the year, we still expect to introduce Genius in Germany. In early 2026, we will also bring it to Ireland and the Czech Republic, followed by Spain, Romania, Poland, and Australia. Lastly, we are actively deploying Genius through all of our distribution channels to help drive penetration across the entirety of our front books. In addition to our large direct sales force, we recently launched Genius in our dealer, bar, financial institution, and ISO channels. The feedback from our partners in these channels has been resoundingly positive. Our digital menu boards and new handheld devices particularly resonated with our dealers, and our loyalty solution is highly regarded across our partner channels. It is encouraging to see the ramping of new sales in all of our distribution partners invigorated by Genius. In addition to our success with Genius, we have several notable wins across other software businesses, including Altera Mountain Company, Oakwood University, and Stillwater Public Schools. Turning to our integrated and embedded business, we had another outstanding quarter for partner signings, with nearly 60 new partners added globally. To continue to drive partner wins, we are investing in our developer experience, including launching easy-to-use tools, modernized documentation, and a unified API platform that makes it easier to integrate and deploy our services. In addition, we are excited to have expanded our long-standing partnership with PayPal, continuing to leverage our technology footprint across North America, Europe, the UK, and Asia-Pacific. This multi-year partnership also expands our relationship into the U.S. market and paves the way for global expansion into new verticals, creating significant opportunity for volume growth with PayPal. As part of our transformation program and sales effectiveness initiative, we're expanding our distribution for this channel, which has historically been solely served by an inside sales rep team by adding a dedicated outside sales force and enabling integrated referrals to all of our direct sales teams. With the addition of a field sales force targeted towards integrated opportunities, we expect to increase our win rate in complex verticals like automotive, healthcare, dental, and veterinarian, where clients continue to prefer to have face-to-face interaction. We also expect this to be a point of differentiation as we compete for new partners going forward. As for our core payments business, we achieved several notable wins in high-growth geographies, including Maxi K Convenience Stores in Chile, Mazovia Railways in Poland, Aegean Airlines in Greece, and Le Meridien Kuala Lumpur in Malaysia. In North America, we renewed Verizon Wireless, and the state of Illinois extended our relationship for a new 10-year term. United Petroleum was a notable win in Canada, and we are expanding into nearly 200 Pizza Hut locations across Mexico. I'm also excited to share that we launched our new merchant dashboard that facilitates cross-selling of value-added services. We built and deploy a modular and open dashboard that allows for a common interface supporting multiple client personas to customize the experience of delivering critical data and KPIs, a generative AI data discovery interface, access to our robust client experience, engagement and loyalty components, and the ability to purchase and interact with a rich suite of personalized commerce enablement services and embedded finance tools. These modern and robust points of interaction deliver the capabilities and experiences that our clients and partners desire and expect. Turning to issuer solutions, we again saw accelerating sequential trends with revenue growth increasing to 5% on a constant currency basis this quarter. This was largely driven by continued growth in accounts on file and stable underlying transaction volume trends, as well as strong project-related revenue. We recently renewed our partnership with Advantia, a leading European digital bank, and OLB, a leading bank in the German market. We also signed new agreement with Alonzo's Bankia and Brandiscard, and continue to have a solid pipeline of new business that extends into 2027. Further, we remain on track with our cloud modernization program and move two more products into production this quarter. We are on schedule with our modernized efforts and expect to make all customer facing applications commercially available by year end. As I noted in my opening comments, we continue to make great strides on our transformation journey as we streamline global payments into a single unified operating company worldwide. At the core of this effort is investment in our technology strategy to unify our capabilities and expose them ubiquitously to customers around the globe. To facilitate this, we have architected a single-in, single-out customer and partner experience leveraging modern API environment, complemented by AI assistance to integrate and consume our services. With the orchestration platform capabilities we have discussed in prior quarters, we're enabling the single-in, single-out experience across all of our platforms in all of our geographies on an omni-channel basis. This strategy and architecture allows us to deliver the modern customer experience that clients demand and insulate them from the complexity of our processing environments, while providing us with the ability to simplify our infrastructure by deprecating technologies at a more measured pace without material impact to our customers and partners. For example, this approach has already facilitated our Evo integration by supporting all net new volume and enabling us to migrate clients away from Evo's seven legacy gateways with minimal client impact. Notably, WorldPay is on a similar journey of using orchestration to enable technology and systems consolidation. Our strategy is to align our orchestration capabilities, which gives us confidence in our ability to integrate and consolidate our technology stacks, unlocking more value and growth more quickly than we could have in the past. In addition to enabling cost savings and margin expansion through infrastructure consolidation, our modern orchestration layer also enables us to distribute products more easily across multiple geographies. This accelerates our pace of innovation, making us more nimble and improves our speed to market. With our API environment and the new dashboard I referenced earlier, this architecture works in harmony to deliver our holistic single-in, single-out vision. To further accelerate product development, we have also aligned our teams around a new product operating model, a foundational shift in how product and technology come together to solve customer challenges at global payments. We are already seeing tangible benefits, faster execution, tighter alignment to our priorities, and meaningful reductions in churn and waste, as well as accelerated delivery of new capabilities. Our genius rollout is a prime example of this. Further, we are embracing artificial intelligence to improve the productivity of our engineering teams and the experiences of our customers. So far, our teams have used AI to generate nearly 1 million lines of code, saving tens of thousands of hours of manual coding time. AI-assisted coding is also reducing defects, which is accelerating testing and integration cycles. Overall, the integration of AI is enhancing our end-to-end product development lifecycle by enabling faster innovation and improved velocity across our technology portfolio. The power of AI is often dictated by the availability of data to train it. Once we combine with WorldPay, we will process nearly $4 trillion in annual volume across 100 billion transactions and serve millions of merchants and thousands of platforms and software partners. That scale of payments data will help us unlock AI-powered insights for our customers as their trusted partner. For example, we will be able to provide our customers with access to prod tools, predictive inventory analysis, dynamic pricing models, and churn risk analytics, all based on detailed transactional data and delivered in real time. In addition to the investment we're making in our product and technology environments, we're also investing meaningfully to transform our Salesforce, which is obviously our primary point of contact with many of our customers. As we've previously discussed during the first half of the year, we transitioned our sellers from our 94 compensation plan, which was a hundred percent commission based structure to a new compensation program that incorporates base pay plus commissions. This change yields multiple benefits for us. First, it enables us to incentivize solution-based selling, which is critical when we're introducing new solutions like Genius. In a 100% commission-based plan, sellers will often take a latency approach to new products, preferring to take the path of least resistance to closing a new sale. Under our new plan, we have targeted our strategic commerce enablement solutions in addition to overall sales quotas. This model also makes it much easier for us to hire strong, experienced sellers. As we continue to focus on selling more software and commerce enablement solutions, this structure is more consistent with the market for software sellers, allowing us to attract the right talent to sell our capabilities. With this new structure in place and the early proven results, we are expanding the size of our sales force to improve our engagement in the market. Today, we are actively recruiting for 500 additional field sellers in North America. We've also deployed a consistent sales methodology across our Salesforce, which improves the portability of new leads across channels and the customer experience. This lead portability is facilitated by the last key pillar of our sales transformation, unifying the technology that enables it. We have mentioned in the past that we are consolidating our CRM systems, which is a critical enabler to passing leads between sales channels and harmonizes how we get a market. Now sales professionals from different channels can see the lead and its entire history through the same CRM system. This also allows for greater ability to manage the overall inventory of leads we receive, recycle unsuccessful leads, and ensure that no lead is left behind in our environment. We're also deploying sales intelligence tools to automate pipeline management, as well as AI agents to summarize our sales call in real time and document any need to follow up. While it is still early, our new sales methodology and compensation programs are increasing deal count and size. Overall, we are seeing double-digit increases in signed annual revenue per deal and mid-single-digit increases in deal count. We're also seeing speed to first deal increase, with our earliest adopting channel improving by almost 40%. Lastly, we've seen attrition in new hires in the first 90 days improve meaningfully. For example, the first sales group to move to this new plan has seen more than a 50% reduction of new hire attrition since adoption. Our transformation will be catalyzed by the acquisition of WorldPay and simultaneous divestiture of our Azure Solutions business, positioning global payments as a pure-play merchant solutions provider. With the transactions expected to close during the first quarter of 2026, integration planning for WorldPay is well underway, with all critical milestones established. Our disciplined approach will ensure alignment with our operating model and drive value creation. Our integration strategy focuses on accelerating growth, enhancing competitiveness, realizing synergies, and investing in innovation, while unifying under a single brand and leveraging top talent from both organizations. Through our integration, we are striving to be a better version of the companies we have been until now, not just a larger one. one that maximizes scale and prioritizes growth to ensure lasting results for our customers, our shareholders, and our team members. And we will do this by leveraging our unmasked global scale, processing nearly $4 trillion annually across 100 billion transactions, and a complementary set of capabilities that strengthen our value proposition. Together, we will expand distribution, enhance our product suite, and scale innovation. Our North Star for integration is growth. Growth that emanates from an unrelenting focus on the needs of our customers. This incremental growth will be driven by a number of actionable opportunities that leverage the strength of the combined business. For example, we will immediately begin selling Genius and other software solutions into WorldPay's SMB base while using their channels to broaden reach. Further, WorldPay's PayRate platform and PayPax capabilities will deepen our support for software partners and platforms. Their enterprise and e-commerce strength will also enhance our omnichannel offerings and diversify our client mix, while also providing capabilities we can cross-sell across the breadth of our combined merchant base. We will also extend WorldPay's digital capabilities to SMBs and pursue geographic expansion in the 40 markets where we already operate. As previously noted, we also have a significant opportunity to drive synergies by leveraging a unified orchestration layer Further, our ability to deploy approximately $1 billion in annual capital investments to support a cohesive, merchant-centric product roadmap will serve as a powerful catalyst. This strategic alignment is expected to create a flywheel effect, accelerating innovation, enhancing efficiency, and further strengthening our offerings. In support of our execution of all these opportunities, in September, we were pleased to announce the appointment of two new independent directors to our board of directors. who filled seats vacated by retiring board members this past April. Our new directors, Patty Watson and Archie Deskis, bring a wealth of leadership skills, experience, and financial technology expertise to our boardroom. Their guidance will be helpful as we continue to execute on our strategic ambition to be the worldwide partner of choice for Commerce Solutions. The board has also established a new ad hoc integration committee to oversee the integration of WorldPay following the close of the acquisition. This committee will represent a governance best practice for global payments going forward. While we currently provide the board with detailed updates on acquisition integration, the formation of a dedicated committee will allow for deeper engagement and more focused oversight. Leveraging the board's diverse expertise and experience in this area will be invaluable as we execute on this critical initiative. With that, let me turn the call over to Josh.

Thanks, Cameron, and good morning. We're pleased to have reported another solid quarter. highlighted by accelerating revenue growth, healthy margin expansion, and strong adjusted free cash flow generation. Importantly, the performance delivered is exactly consistent with the expectations we outlined at the beginning of the year as we continue to execute against our strategy and transformation agenda. Specifically, we delivered adjusted net revenue of $2.43 billion for the third quarter. an increase of 6% from the prior year on a constant currency basis, excluding dispositions. Adjusted operating margins expanded 110 basis points to 45%, or 80 basis points, excluding dispositions, resulting from strong execution and benefits from the transformation we began executing last year. The net result was adjusted earnings per share of $3.26, an increase of 12% on a reported basis and 11% on a constant currency basis. Year-to-date, we've generated $2.1 billion in adjusted free cash flow, representing a 96% conversion rate from adjusted net income. Taking a closer look at performance by business, Merchant Solutions produced adjusted net revenue of $1.88 billion for the quarter, reflecting growth of approximately 6% on a constant currency basis excluding dispositions this represents a 50 basis point improvement sequentially consistent with our outlook that we set at the beginning of the year and the expectation outlined at our investor conference last year further the macroeconomic backdrop remains consistent as we continue to see stable volumes supporting our view that the consumer spending remains resilient Our POS and software business achieved high single-digit growth, excluding dispositions, for the third quarter. We were encouraged by the acceleration in new Genius locations sold, having seen a 37% monthly increase since launching in June. To continue to build on this momentum in Q4, we hosted our Genius Dealer and Bar Conference in late September. The conference was well attended with over 200 dealers, and key highlights included introducing new Genius handhelds, along with displaying our enterprise grade capabilities like digital menu boards to SMBs. We're excited about the progress we've made in rolling out Genius as our singular point of sale technology platform across our business. We'll have much more to share in the coming quarters as we build on these accomplishments. Turning to integrated embedded payments, this business also delivered high single digit growth for the third quarter. We added nearly 60 new partners globally during the quarter, and notably, about half of these new ISV partners were outside North America, underscoring the distinct value we bring as a provider with unmatched global reach. And the compounding power of those one-to-many ISV relationships continues to propel our top line as they ramp. For example, year-to-date, we have seen a 68% year-over-year revenue growth from the cohort of partners that we signed in 2023, while the ramp from new partners signed last year is nearly 15 times their contribution in 2024. In core payments, we delivered mid-single-digit growth during the quarter. Our international markets demonstrated relative strength with high single-digit constant currency revenue growth across Central Europe and Asia Pacific as we continue to benefit from strong secular payment trends in these markets. This reinforces our commitment to expand our foothold to meet strong demand and provide our best-in-class suite of capabilities across geographies. We delivered an adjusted operating margin of 51.1% in merchant solutions. an increase of 110 basis points over the prior year or 70 basis points excluding dispositions again highlighting the impact of our transformation moving to assure solutions business we generated adjusted net revenue of 562 million dollars for the third quarter reflecting growth of over five percent on a constant currency basis this represents over 150 basis points of acceleration sequentially and also marks an improvement from our performance in the first half of the year as expected. Revenue growth was primarily driven by new implementations and growth with existing customers as our strategy of aligning with market share winners continues to drive benefits. We also benefited from the recognition of project and fees for service revenue that we had previously expected in Q4. We added 16 million traditional accounts on file this quarter, bringing us to a record of 917 million traditional accounts in total. We completed two implementations in the quarter, and we continue to see sustained growth in transaction count. Issuer Solutions delivered an adjusted operating margin of 46.9%, which is a 150 basis point improvement from the prior year period. As I mentioned, reported adjusted operating margins expanded by more than 100 basis points in both merchant and issuer. This reflects not only continued cost discipline, but also incremental benefits we've realized from our transformation efforts. In addition to beginning to unlock top line growth, as Tamara described a moment ago, our transformation has yielded significant cost efficiencies as we streamline our businesses and functions. From a cash flow standpoint, we produced strong adjusted free cash flow for the quarter of approximately $784 million, representing a conversion rate of adjusted net income to adjusted free cash flow of approximately 100%. We invested approximately $170 million in capital expenditures during the quarter and expect capital expenditures to be roughly $700 million, or approximately 8% of revenue for the full year. consistent with our previously stated target. We continued our commitment to returning capital to shareholders this quarter, repurchasing $500 million through an accelerated share repurchase in connection with the sale of our payroll business, bringing our total share repurchases to approximately $1.2 billion a year today. We continue to see buying back our shares as a compelling opportunity given our confidence in our strategy and long-term growth profile. We're pleased to report that we've reduced our leverage faster than anticipated. Our net leverage position was 2.9 times at the end of the third quarter, down from 3.15 times at the end of the second quarter, and below our long-term target of three times. Our continued strong free cash flow generation gives us confidence in our ability to de-lever back to three times within 18 to 24 months of closing the WorldPay acquisition. Our balance sheet remains extremely healthy, and we ended the period with approximately $4.1 billion of available liquidity. Our outstanding indebtedness is almost entirely fixed rate, with an attractive weighted average cost of debt of 3.4%. Moving to our outlook for the full year 2025, we continue to expect constant currency adjusted net revenue growth of 5% to 6% over 2024, excluding dispositions. We anticipate dispositions will impact reported adjusted net revenue growth by approximately 400 basis points for the full year, which now reflects the sale of our payroll business in September. As we've discussed the past two quarters, the foreign currency exchange rate environment has continued to evolve since we established our initial 2025 guidance. We now expect a modest tailwind of approximately 50 basis points from foreign currency exchange rates in Q4. And for the full 2025, we expect foreign currency exchange rates to be broadly neutral to reported revenue and EPS growth. And we expect full-year adjusted operating margin to stand more than 50 basis points, excluding dispositions, which is consistent with the guidance that we provided last quarter. We expect Q4 performance to be generally in line with our year-to-date trends and similar to Q3. At the segment level, we still anticipate our merchant business to deliver adjusted net revenue growth of roughly 6% on a constant currency basis, excluding dispositions for the full year. And we continue to expect adjusted operating margin expansion for merchant to be greater than 50 basis points, excluding dispositions for the full year. For issuer solutions, we continue to expect adjusted net revenue growth of approximately 4% on a constant currency basis for the full year. This implies Q4 growth of roughly 4% due to the pull forward that I mentioned a moment ago. We expect adjusted operating margin expansion for the issuer business to be greater than 50 basis points for the full year. We continue to anticipate adjusted free cash flow conversion to be greater than 90% for the full year, and we expect to end the year at or below our three times net leverage target. Altogether, for the year, we remain confident in the trajectory of the business and we continue to expect adjusted earnings per share growth to be at the high end of the 10 to 11% range on a constant currency basis. In sum, we delivered another quarter consistent with expectations and remain on track to achieve our outlook for the full year for revenue, margins, EPS, and free cash flow. And with that, let me turn the call back over to Cameron.