Corrected Transcript

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CORPORATE PARTICIPANTS

Winnie Smith

Paul Michael Todd

Senior Vice President-Investor Relations, Global Payments, Inc.

Chief Financial Officer & Senior Executive Vice President, Global

Payments, Inc.

Jeffrey S. Sloan

Cameron M. Bready

Chief Executive Officer & Director, Global Payments, Inc.

President & Chief Operating Officer, Global Payments, Inc.

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OTHER PARTICIPANTS

Darrin Peller

George Mihalos

Analyst, Wolfe Research LLC

Analyst, Cowen & Co. LLC

Ramsey El-Assal

Timothy Chiodo

Analyst, Barclays Capital, Inc.

Analyst, Credit Suisse Securities (USA) LLC

Jason Kupferberg

Trevor Williams

Analyst, Bank of America Merrill Lynch

Analyst, Jefferies LLC

David John Koning

Ashwin Vassant Shirvaikar

Analyst, Robert W. Baird & Co., Inc.

Analyst, Citigroup Global Markets, Inc.

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MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will open the lines for questions and answers. [Operator Instructions] 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.

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Winnie Smith

Senior Vice President-Investor Relations, Global Payments, Inc.

Good morning, and welcome to Global Payments' First Quarter 2022 Conference Call. Our earnings release and the slides that accompany this call can be found on the Investor Relations area of our website atwww.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 expected operating and financial results. These statements are subject to risks, uncertainties, and other factors, including the impact of COVID-19 and economic conditions, on our future operations that could cause actual results to differ materially from our 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 regulation, please see our press release furnished as an exhibit to our Form 8-K filed this morning and our supplemental material.

Joining me on the call are Jeff Sloan, CEO; Cameron Bready, President and COO; and Paul Todd, Senior Executive Vice President and CFO.

Now, I'll turn the call over to Jeff.

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Jeffrey S. Sloan

Chief Executive Officer & Director, Global Payments, Inc.

Thanks, Winnie. We are pleased to have delivered yet another quarter of strong results that exceeded our expectations heading into 2022 despite incremental macro headwinds throughout the period. Specifically, we achieved record first quarter revenue, margin, and earnings per share, with solid free cash flow and our performance again highlights our business resilience and track record of execution.

We are especially delighted with our Merchant Solutions performance, which exhibited ongoing momentum as our strategies for differentiated growth are winning in the marketplace. We continue to see favorable new sales trends across our businesses, providing further evidence that we are gaining share, and our results today reflect those gains.

The strong bookings we've been reporting in Global Payments integrated and US payments and payroll drove attractive growth for both businesses during the quarter. And early this year, we combined these two businesses to unlock additional market opportunities and accelerate growth by creating a more streamlined go-to-market strategy and capitalizing on the best of these two high-performing cultures.

We are in the early stages of leveraging our Heartland sales professionals to increase our penetration with GPI partnered customers, as well as harmonizing the cross-selling of our commerce-enablement solutions across these channels. We are also excited to have recently launched the co-selling [ph] facet (00:03:50) of our Google partnership and we expect our joint go-to-market efforts will drive significant referral and new customer acquisition opportunities for businesses of all sizes.

We also expanded our acquiring relationship with Google which utilizes our Unified Commerce Platform, or UCP to North America following the success of our initial launch in Asia-Pacific late last year. Further, we remain on track to launch the next phase of Google Run and Grow My Business to help our merchants grow faster by connecting additional Google services to our digital platform later this year.

Speaking of our leading omnichannel platform, Global Payments is excited to announce a new partnership with Brooks Sports to modernize its payment acceptance capabilities in the UK and across Europe. In addition, we are pleased to be expanding our partnerships in Asia-Pacific including with Hilton to incorporate new payment features and functionality as well as with The Swatch Group across multiple brands and regions. We are also increasing the scope of our agreement with ChargePoint, the world's largest network of EV charging stations in North America and Europe; beyond our existing card present relationship to now include e-commerce.

Our partnership with Citi via UCP that spans North America, the UK and Continental Europe, continues to gain traction, and we are currently targeting approximately 300 of Citi's largest Treasury and Trade Solutions customers. We also continue to add new geographies to our partnership, including recently launching in Italy, Spain, Ireland, The Netherlands and Germany. And we expect to be live together in a dozen European countries by year end and will launch seven additional countries in Europe by early 2023.

Across our merchant businesses, we are unique in our ability to combine software, hardware, and payments across in-person mobile and online channels. As one example, our POS software solutions generated revenue growth of nearly 50% in the first quarter, as we continue to see great traction with our verticalized solutions; particularly in restaurant and retail as well as across the Vital platform, which we plan to bring to key international markets including the UK, Spain, and Central Europe later this year.

Our vertical markets portfolio delivered strong double-digit growth with a 36% increase in bookings, and we expect these businesses will remain a tailwind for our merchant growth going forward. In our stadium and events vertical, we have now gone live with our Xenial cloud point-of-sale solutions in Mercedes-Benz Stadium as part of our partnership to enable its multichannel commerce ecosystem. And in enterprise QSR, we successfully completed the rollout of our POS solution with Dutch Bros, and will soon be expanding our relationship to include additional software offerings to support the brand's robust growth. We also remain on track to complete the rollout of our Xenial cloud POS solution to all Denny's and Long John Silver's restaurants prior to the end of calendar year 2022.

Further, it's worth highlighting that we signed a new agreement with Focus Brands to deploy Xenial's digital menu board solution across Auntie Anne's, Carvel, Cinnabon, Jamba Juice, McAlister's Deli, Moe's Southwest Grill, and Schlotzsky's Deli franchises.

Our AMD business delivered another quarter of strong bookings growth of nearly 35% and eclipsed a significant milestone with the number of active physicians and providers utilizing the platform surpassing 50,000 for the first time. And TouchNet delivered the best new sales quarter in its history which includes the signing of the University of British Columbia, its largest single international deal ever. Early success in our newest vertical market, real estate, also continued in the first quarter with Zego delivering record new bookings for the period.

As we discussed at our September investor conference, we continue to benefit from ongoing innovation in our ecosystem, including buy now, pay later, or BNPL, technologies. We launched our BNPL as a service, marketplace in the first quarter to augment our 140-plus alternative payment methods portfolio exactly as we said we would. Our marketplace allows merchants to provide solutions across multiple BNPL providers in their target markets through a single integration point, expanding our alternative payments offerings on a regulated, compliant, and responsible basis while supporting merchant enablement and consumer choice.

In combination with our BNPL initiatives to our market-leading issuing business that targets financial institutions and retailers, we expect to drive significant growth beyond the 2 billion transactions that we already enable through BNPL annually.

Late last year, we announced that we reached an agreement to extend and expand the scope of our long-standing relationship with PayPal, which leverages our unparalleled e-commerce technology footprint across

North America, Europe, and Asia-Pacific for a multiyear period. And I'm happy to report that we expect to be live with PayPal this quarter in new geographies and additional verticals and will support their cryptocurrencies for the first time, expanding our target addressable markets.

Additionally, we are pleased to announce a strategic alliance with Bakkt, a trusted digital asset platform that enables consumers to buy, sell, and hold a range of digital assets. We will be supporting a range of use cases, starting with enabling cryptocurrency redemption in customer loyalty programs offered by our bank card clients, expanding our banking-as-a-service offerings to include cryptocurrency, and ultimately leveraging issuing technologies for linking virtual debit, credit, and prepaid solutions. We're also excited to announce a broad collaboration with Bakkt in multinational payments acceptance.

Moving to Issuer Solutions, we are thrilled to announce that Caixabank recently signed a letter of intent to memorialize its selection of Global Payments as its technology partner for its card issuing businesses. This is the largest potential new customer signing for our issuer business since 2013 and would double our implementation pipeline to its highest level in our history, providing opportunities for accelerated growth over the next several years.

In conjunction with our announced partnership with Virgin Money and other recent wins, our relationship with Caixabank complements our debit strategy and positions Global Payments as a leading debit technology provider across Europe. Virgin Money is a significant competitive takeaway and we successfully completed the migration of the Virgin Money credit portfolio to our platform in February. And it is our first use case combining issuing and acquiring capabilities to offer transaction stream optimization solutions which we expect to go live in the next 12 months.

We're also proud to have successfully achieved significant multiyear renewal agreements with UK-based Metro Bank as well as with Ireland-based permanent TSB, which are two other long-standing TSYS issuer customers where our partnership spans both debit and credit portfolios. Further, we continue to benefit from our strategy of aligning with market share winners. We expect to add another significant portfolio to our record conversion pipeline upon the closing of a sizable acquisition by one of our largest North American-based clients that is expanding in the United States.

Simply put, we are winning in our Issuer Solutions business because we are selling more market-leading technologies to scale leaders through more distinctive and defensible distribution channels in more markets than we ever have previously.

Our unique collaboration with AWS is tracking as planned with 10 modernized services now built and available in the cloud. We've already successfully executed over 100 client migrations to our modernized issuer platform and recently announced a partnership with Mastercard to include authorizations, clearing and settlement in the cloud.

And we anticipate Caixabank to be among the first large financial institutions to go directly to the cloud with us by the end of 2023.

Together with AWS, our preferred cloud provider for issuer business, we now have 39 active prospects in the pipeline, 11 of which are neobanks, fintechs, and start-ups. We also currently have eight letters of intent with institutions worldwide, four of which are competitive takeaways. We are currently participating in several active 100% cloud RFPs with large institutions and retailers globally. Our fully-functional modern issuing payment stack operating globally at scale differentiates us in the market. Simply put, the public cloud sells.

As we look to further capitalize on our ability to combine accounts payable SaaS technologies with our best-in-class capabilities and to market-leading B2B solutions, we're now managing MineralTree as a part of our Issuer Solutions business. As we discussed at our investor conference last September, we believe that we already possess one of the largest B2B businesses at scale globally and that our commercial card and virtual card efforts

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Global Payments Inc. published this content on 03 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 May 2022 03:12:06 UTC.