Global Payments : Q2 2022 Transcript

Corrected Transcript

01-Aug-2022

Global Payments, Inc. (GPN)

Q2 2022 Earnings Call

	Total Pages: 23
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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2022 Earnings Call	01-Aug-2022

CORPORATE PARTICIPANTS

Winnie Smith	Cameron M. Bready
Senior Vice President-Investor Relations, Global Payments, Inc.	President & Chief Operating Officer, Global Payments, Inc.
Jeffrey S. Sloan	Joshua Whipple
Chief Executive Officer & Director, Global Payments, Inc.	Senior Executive Vice President & Chief Financial Officer, Global
	Payments, Inc.

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OTHER PARTICIPANTS

Darrin Peller	Ramsey El-Assal
Analyst, Wolfe Research LLC	Analyst, Barclays Capital, Inc.
Bryan C. Keane	Robert Napoli
Analyst, Deutsche Bank Securities, Inc.	Analyst, William Blair & Co. LLC
David John Koning	James E. Friedman
Analyst, Robert W. Baird & Co., Inc.	Analyst, Susquehanna Financial Group LLLP

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MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Global Payments Second 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 second 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 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 and statements about the proposed transaction between Global Payments and EVO Payments. 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 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 the date of this call and we undertake no obligation to update them.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2022 Earnings Call	01-Aug-2022

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 8-K filed this morning and our supplemental material available on the Investor Relations section of our website.

Joining me on the call are Jeff Sloan, CEO; Cameron Bready, President and COO; and Josh Whipple, 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 welcome Josh Whipple, our new CFO, to the call today. Josh has been a senior leader in our company for 7.5 years, guiding us through some of the most significant milestones in our history. He's a trusted partner who has played a key role in building the leading technology-enabled,software-driven payments business worldwide that Global Payments is today.

We also thank Paul Todd for his terrific partnership and the critical role he has played in the successful merger of TSYS and Global Payments over the past three years and his 27 years at TSYS. We wish Paul all the best in retirement.

We delivered second quarter adjusted results that were the best in our history across our key financial metrics despite the self-evident incremental headwinds. Both our Merchant and Issuer segments exceeded our expectations on a currency-neutral basis post the divestiture of our Russian business.

Importantly, our Issuer business generated 400 basis points of sequential revenue improvement on a comparable basis, exactly as we said it would, and our pipeline remains at record levels. And we achieved these results while executing multiple transactions to better align our businesses with our strategy, adding a key new partnership, extending our lead, and deepening our competitive moat.

First, we're delighted to announce that we've entered into a definitive agreement to acquire EVO Payments, significantly increasing our target addressable markets, enhancing our leadership in integrated payments worldwide, expanding our presence in new geographies, further scaling in existing faster growth markets, and augmenting our business-to-business, B2B, software and payment solutions.

Specifically, EVO provides us with a new presence in attractive geographies, such as Poland, Germany, Chile, and Greece, and enhances our scale in existing markets, including Mexico, Spain, and the UK, and of course, the US and Canada.

For B2B, EVO brings us key technology partners and integrations, including with many of the largest enterprise ERP solutions. And it adds leading accounts receivable software capabilities to complement our B2B and accounts payable offerings, which we significantly augmented with our successful acquisition of MineralTree last fall.

At our investor conference last September, we announced B2B as the fourth and newest pillar of our strategy, meaningfully expanding our target addressable markets to include a segment that remains substantially under- penetrated, providing tremendous opportunities for future growth.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2022 Earnings Call	01-Aug-2022

As we said then, we have the technology and distribution assets we need to compete effectively in B2B post our TSYS merger and already positioned as one of the largest B2B companies globally at scale. This includes technology centered on virtual card solutions, a vast commercial card footprint, massive distribution partnerships with the world's leading financial institutions, data and analytics, market-leading payroll technologies, and access globally to non-card based rails.

Our acquisition of MineralTree last October provided us with a leading cloud SaaS accounts payable business, which grew 30% in the second quarter and is now operating at EBITDA breakeven ahead of plan. We've been on the lookout for an accounts receivable business corollary to complete our B2B go-to-market offerings. We believe that EVO now provides that missing link.

Cameron will provide more details on the tremendous value creation opportunity in combining EVO with Global Payments, but let me start by expressing how delighted I am to welcome EVO team members to Global Payments. The transaction is expected to close no later than the first quarter of 2023, subject to regulatory and, of course, EVO shareholder approvals.

Second, we are thrilled to announce Silver Lake, the global leader in technology investing, has committed a $1.5 billion strategic investment in Global Payments in the form of convertible unsecured senior notes. As an expression of their confidence in our long-term leadership role in digital payments and sustainability of our growth, this amount is by far the largest commitment in Silver Lake's long, distinguished history.

Silver Lake has outstanding track record of successful investments in technology-driven companies, and we are humbled by their confidence in us as the winner in the digital payments ecosystem over the cycle. This new partnership serves as further proof of the distinctiveness of our model, wisdom of our strategy, and position as a leading driver and beneficiary of innovation in payments. A senior partner from Silver Lake will join the Global Payments board of directors. We are very proud of the company that we keep.

Third, we reached definitive agreement to sell Netspend's consumer portfolio to Searchlight Capital and Rêv Worldwide for $1 billion to further align our businesses with our strategy, while simultaneously enhancing our organic growth and marketing characteristics.

As we said at the time we announced the strategic review in February, Netspend direct-to-consumer portfolio is an attractive set of solutions with a favorable profile, but there is limited overlap between its customer base and our traditional corporate clients. As expected, we will retain Netspend's B2B assets, which delivered strong mid- teens normalized growth in the second quarter and will be included in our Issuer Solutions segment beginning with our third quarter.

We're very proud of all that our valued team members and Netspend have accomplished as part of Global Payments, and we have every confidence this business is well-positioned for the future under new ownership. We expect this transaction to close by the end of the first quarter of 2023 subject to regulatory approvals.

The completion of these important transactions provides us with heightened confidence and the raised cycle guidance for revenue, margin, and earnings that we provided at our investor conference last September.

Post the acquisition of EVO and Netspend sale, Merchant Solutions will then represent approximately 75% of our adjusted net revenue, with Issuer Solutions, including Netspend's B2B assets, comprising roughly 25%. The future is indeed bright.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q2 2022 Earnings Call	01-Aug-2022

Cameron?

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Cameron M. Bready

President & Chief Operating Officer, Global Payments, Inc.

Thanks, Jeff, and good morning, everyone. Our acquisition of EVO aligns perfectly with our overarching strategy, reinforcing our position as the preeminent payments technology company with extensive scale and unmatched global reach.

EVO furthers our technology-enabled distribution strategy in integrated payments, while significantly enhancing our B2B software in payment solutions. The transaction also expands our exposure to additional faster growth geographies overseas and provides greater scale in North America and markets in Europe in which we already operate.

As a combined company, we are uniquely positioned to deliver an unmatched suite of distinctive software and payment solutions to our combined customer base of more than 4.5 million merchant locations and over 1,500 financial institutions globally.

Today, EVO has over 1,500 technology partners and integrations globally that complement our over 6,000 ISV partners across 70-plus vertical markets. We see significant opportunity to bring further value to EVO's relationships by leveraging our extensive distribution platforms and product portfolio, as well as our unique partner integration capabilities.

EVO also provides additional avenues for us to distribute our commerce enablement solutions and vertical market software offerings, including our leading point-of-sale software targeted at the restaurant and retail vertical markets. For example, we are already bringing our Vital POS solutions to key international markets where we overlap with EVO, including the UK, Spain, and Central Europe, later this year.

Additionally, we will be able to capitalize on the distinctive capabilities of our Unified Commerce Platform to provide EVO's enterprise customers with multinational e-commerce and omni-channel solutions, seamlessly blending their physical and virtual requirements across markets and geographies.

With our physical presence in over 40 countries globally and ability to transact in over 170 virtually, we are uniquely positioned to significantly expand EVO's value proposition to its existing multinational customers.

EVO's accounts receivable automation software and B2B payment solutions augment our existing accounts payable automation and other B2B capabilities, further rounding out our full suite of B2B offerings. Importantly, EVO brings us extensive proprietary integrations to some of the most widely used ERP environments in the market through its PayFabric platform, including SAP, Microsoft, Oracle, Acumatica, and Sage. These integrations are critical to delivering the frictionless automation necessary to improve process efficiency and cost for buyers and suppliers.

Together with EVO, we have an unparalleled array of products and solutions that address the business spend management needs of buyers, suppliers, and employers, better positioning us to gain share in the B2B market with a vast TAM in excess of $125 trillion annually.

Finally, EVO expands our presence in new and attractive geographies with strong, secular growth trends including Poland, Greece, and Chile, and increases our scale in a number of our existing markets, including the

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