Global Payments : Q2 2021 Transcript

Corrected Transcript

02-Aug-2021

Global Payments, Inc. (GPN)

Q2 2021 Earnings Call

	Total Pages: 22
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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2021 Earnings Call	02-Aug-2021

CORPORATE PARTICIPANTS

Winnie Smith	Paul Michael Todd
Senior Vice President-Investor Relations, Global Payments, Inc.	Senior Executive Vice President & Chief Financial Officer, Global
Jeffrey Steven Sloan	Payments, Inc.
Cameron M. Bready
Chief Executive Officer & Director, Global Payments, Inc.
	President & Chief Operating Officer, Global Payments, Inc.

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OTHER PARTICIPANTS

Vasundhara Govil	David John Koning
Analyst, Keefe, Bruyette & Woods, Inc.	Analyst, Robert W. Baird & Co., Inc.
Ashwin Vassant Shirvaikar	James E. Faucette
Analyst, Citigroup Global Markets, Inc.	Analyst, Morgan Stanley & Co. LLC
David Mark Togut	Tien-Tsin Huang
Analyst, Evercore ISI	Analyst, JPMorgan Securities LLC

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MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Global Payments Second Quarter 2021 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' second quarter 2021 conference call.

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.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2021 Earnings Call	02-Aug-2021

Some of the comments made refer to non-GAAP financial measures, such as adjusted net revenue, adjusted operating margin and adjusted earnings per share, which we believe are more reflective of our ongoing performance. For a full reconciliation of these and other non-GAAP financial measures to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our 8-K filed this morning and our trended financial highlights. Both of which are available in the Investor Relations area of our website at www.globalpayments.com.

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 Steven Sloan

Chief Executive Officer & Director, Global Payments, Inc.

Thanks, Winnie. We delivered a terrific second quarter, with each of adjusted net revenue, adjusted operating margin and adjusted earnings per share outperforming our targets. We are most pleased by the compounded rates of growth that we realized in the quarter, and are now forecasting for the full-year compared to pre- pandemic 2019 levels.

While we've not called back all of the impact of COVID-19 relative to our pre-pandemic expectations, we have made substantial progress and are far down that path. As we have throughout the pandemic, we continue to expand our competitive moat through leading strategic partnerships.

First, we are excited to have agreed with our partners at CaixaBank to acquire Bankia's payments businesses in Spain. Specifically, we will enhance our position in one of the most attractive acquiring markets in Europe, with the addition of Bankia's merchant business, consisting of roughly 100,000 customers in the region. This pending acquisition further enhances our distinctive distribution and will allow us to delight Bankia's customers with our market-leading technologies, providing us with significant cross-selling opportunities and deepening our presence with one of the leading institutions in Europe.

This agreement follows our purchase of an additional 29% stake in our Comercia joint venture last October, which increased Global Payments ownership to 80%. Additionally, our MoneyToPay joint venture has agreed to purchase Bankia's prepaid business, as we continue to execute on our strategy to expand and diversify our Netspend business into international markets. We expect both of these transactions to close in the fourth quarter.

Second, we are delighted to announce that we've entered into a new collaboration with Amazon Web Services, AWS, for a unique distribution and cutting-edge technologies at NetSpend to substantially increase our target addressable markets and accelerate our strategy across our three pillars of digitization, internationalization and B2B expansion. Much as that we have done with our Issuer business, we plan to leverage the AWS partner network and dedicated partner development specialists to bring NetSpend's B2C and B2B digital payment solutions, including program management, to reward a base of neobanks, fintech start-ups and other e-commerce players, as well as to new geographies.

This partnership will also provide an industry-leadingcloud-based processing platform for Netspend's customers to access cutting-edge technologies with greater speed to market, security and flexibility. We are thrilled to deepen our go-to-market collaboration with one of the world's largest technology companies to continue our disruption of these markets.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2021 Earnings Call	02-Aug-2021

Third, we are pleased to have closed our acquisition of Zego in June, further capitalizing on the convergence of software and payments in one of the largest and most attractive vertical markets worldwide. As I highlighted last quarter, real estate is the quintessence of the type of market that we seek; sizable, global in scope, fragmented, and ripe for further software, digital commerce and payment penetration. And COVID-19 has accelerated the underlying trends that make this $6.5 billion target addressable market so attractive, as we continue to expand our software-driven footprint. It is my great pleasure to welcome Zego team members to Global Payments.

In addition to these strategic accomplishments, we produced yet another outstanding quarter of results. Since we began running the company in 2013, our main focus has been on two areas: enabling diverse, distinctive and defensible distribution; and developing market-leading technologies. We could not be more pleased with momentum across our businesses, evident in our second quarter results and reflected in our increased guidance for 2021.

It's worth noting that we have delivered the greatest value creation in our history over the last eight years despite numerous new market entrants during the entirety of that period, public and private. And we have generated consistent financial and operating outperformance through a variety of macroeconomic cycles, including most recently the financial impact of the first worldwide pandemic in over 100 years. The results are self-evident.

We have record performance in the second quarter in our Merchant segment on several bases: absolute, sequential and year-over-year; while also producing strong growth versus pre-pandemic levels. Simply put, our payments businesses continue to significantly outperform and gain share, fueled by our long-held technology- enabled focus and solid ongoing execution.

On a more granular basis, we saw strong double-digit growth in new sales, in both Global Payments Integrated and our vertical market businesses in the quarter. And our US relationship-led business again achieved record new sales. This marks the third quarter out of the last four in which we have achieved such a high level of performance.

Rather than impede our strategy, the pandemic [ph] has put further share gains and channelized (00:07:38) the digital strategies we have had in place since 2013. Our omnichannel businesses accelerated yet again in the second quarter, with growth in excess of 20%, despite lapping the enhanced shift toward e-commerce globally that began with the start of the pandemic in early 2020.

New customer signings this quarter include Foot Locker as a key customer in Europe that will leverage our Unified Commerce Platform, or UCP, to modernize its payment acceptance capabilities.

We are pleased to have also signed new global UCP partnerships with [ph] Hunter Douglas (00:08:16) and Euronet Worldwide subsidiary, XE.com. Our ability to deliver a single API solution virtually around the world has been a key driver of our success. And our unique multinational footprint in both the virtual and the physical world has proven to be a differentiator versus both legacy and new market entrants.

Within our vertical market businesses, we had a number of new key customer wins for a quick service restaurant business, including Frisch's Big Boy, [indiscernible] (00:08:50), while AMD and TouchNet continue to deliver record revenue performance, as they have, throughout the pandemic. Notably, TouchNet continues to add new marquee colleges and universities domestically and internationally, including the Arkansas State University System and Sheridan College in Canada this quarter.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2021 Earnings Call	02-Aug-2021

We're also making great progress in our partnership with Google and remain on track to board Google as a merchant customer this quarter and expect to launch our Run and Grow My Business product that integrates Google solutions in our digital portal environment in the fourth quarter.

Our Issuer business delivered growth beyond the high end of our targeted long-term range. We are pleased to have signed a new multi-year partnership with Banco Carrefour in Brazil, the financial services arm of the country's leading supercenter retail chain, to provide a range of technologies for its credit card and digital accounts as well as to [indiscernible] (00:09:49) transactions. Recall that transaction optimization is one of our key post-merger initiatives, more to come on that at our investor conference.

We also signed a letter of intent with a large global financial institution and longstanding partner in a new market in LatAm that will mark another significant milestone for us in our continued expansion into the region. Further, we executed a multi-year extension with the UK's largest retailer, Tesco, enabled by our shared digital modernization vision for the future.

Finally, we are pleased to have extended our relationship with Mercury Financial for a range of digital technologies. This relationship serves as further proof that our industry-leading platform offers the agility to support leading-edge fintech companies. TSYS recently launched a strategic go-to-market partnership with PricewaterhouseCoopers or PwC.

As part of the TSYS partner program, we expect that our collaboration with PwC will diversify and expand our distribution and allow us to jointly offer innovative solutions, expertise and execution capabilities to clients of all sizes, across the full spectrum of neobanks, fintech, start-ups and program managers. Again, diversification of distribution has been one of our key objectives since 2013, and we are using the same playbook with TSYS that we have successfully deployed in the past.

We continue to capitalize on the broad and deep pipeline we have a good fortune to have in our Issuer business. Today, we have 15 letters of intent with institutions worldwide, six of which are competitive takeaways.

Turning to our unique collaboration, we now have 20 active prospects in our pipeline with AWS, up from a dozen last quarter and four at the end of 2020. These include a mix of new financial technology entrants and other non- traditional issuers in addition to large financial institutions. As growth accelerates in this market, we believe that we are the ones doing the disrupting.

While buying out [indiscernible] (00:12:03) may seem novel to some, we have, in fact, been providing leading technologies to that segment of the market for decades in both our Issuer and Merchant segments. And we continue to deliver innovative installment payments products for customers.

We are currently enabling our merchant customers in Canada, in partnership with Desjardins with the Visa installments solution. CIBC will also launch a combined TSYS Visa installment solution in early 2022. And we signed a global referral agreement with Mastercard, supporting installment payments in June.

Finally, in our Business and Consumer segment, we expect a unique co-sale arrangement with AWS to expand our distribution capabilities, again, much like we've been doing since 2013.

And together with our Issuer business, we intend to further disrupt the program management segment in the near future. This is yet another example of application of our strategies to legacy TSYS businesses. And we expect the same successes here as we have generated in other contexts. Paul?

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