The operator welcomes participants to Global Payments' First Quarter 2024 Earnings Conference Call and reminds them that the call is being recorded. The host, Winnie Smith, introduces the call and cautions listeners about forward-looking statements and non-GAAP financial measures. The full reconciliation of these measures can be found in the company's press release and supplemental material.

Cameron Bready, President and CEO of the company, is pleased with their first quarter results, which exceeded expectations despite the uncertain economic environment. They achieved 7% growth in adjusted net revenue and 8% growth in adjusted earnings per share. The merchant solutions business saw strong organic growth, particularly in their partner ISV channel where they doubled the number of new strategic integrated partners and added nearly two dozen new progressive payment facilitation partners. They are also experiencing strong demand for commerce enablement and value-added solutions from their partners' merchant base.

The company's unique value proposition and tailored operating models have helped them sustain growth and expand margins. They have seen strong retention rates and competitors are shifting their focus from price to profitability. The company has also achieved 20%+ growth in their point-of-sale software solutions and are gaining momentum in delivering additional commerce enablement solutions. The launch of their next-generation point-of-sale software has received positive feedback and is expected to contribute to their performance in the future. They offer distinctive distribution and full local service and support for their solutions.

The company's general purpose cloud-based point-of-sale software, GP POS, is contributing to their growth in international markets. They plan to bring GP POS to more markets in the next 18 months. The company also owns enterprise software solutions in seven vertical markets, which generate over $1 billion in revenue annually. They focus on these markets because they are large and have a strong connection between software and payments. All of their software assets are generating significant transaction volumes that did not exist before the company acquired them.

Global Payments looks for software companies in fragmented and underpenetrated markets that have international applicability. They have the ability to provide integrated payment solutions in fast-growing geographies and support their software businesses with development and capital. This allows for differentiation and strong execution in their vertical markets, with double-digit bookings growth in the first quarter.

In the first quarter, Zego, our property management software business, saw strong demand from new customers and successfully cross-sold products to existing partners. ACTIVE also gained nearly 300 customers in the communities and events vertical. Zego also expanded its QSR business with CosMc in Texas and extended its relationship with the Braves. TouchNet achieved new international partnerships in Canada and the UK, including a recent agreement with Sussex University. The UK is a prime example of our ability to bring our software solutions to global markets.

The company has seen positive growth in their international markets, particularly in Spain, Central Europe, Poland, and Greece. They have also signed new partnerships and expanded existing ones in Mexico, Asia-Pacific, and Germany. In their issuer solutions division, they have secured new contracts with a large FI customer in Europe and a leading global travel technology company. They have also successfully renewed contracts with eight customers during the quarter.

The company has extended its relationships with Virgin Money, Citizens, and Scotiabank, and completed four conversions in the first quarter. They have also made progress on their issuer modernization and expect to launch several cloud services for consumer and commercial portfolios in the next few months. In the B2B market, the company has achieved strong growth in software-driven workflow automation, money flow solutions, and employer solutions. MineralTree saw a 30% increase in new bookings, while B2B bookings in merchants increased over 100% due to the integration of EVO's PayFabric platform.

In the first quarter, the company saw positive trends in their employer solutions, particularly in the restaurant vertical. They signed new partnerships with the White Restaurant Group and Sunshine Restaurant Partners. The company achieved adjusted net revenue of $2.18 billion, a 7% increase from the previous year. Adjusted operating margin increased by 40 basis points to 43.5%. Merchant solutions achieved adjusted net revenue of $1.68 billion, with high-single-digit growth in the U.S. business and strength in their software and vertical markets portfolio.

The company has seen strong bookings in their partner ISV business and achieved double-digit growth in several regions. They have also performed well in LatAm, but have experienced weakness in the UK and parts of Asia-Pacific. The adjusted operating margin declined due to an acquisition, but the company remains optimistic about synergy opportunities. They have made progress in the EVO integration and expect to achieve $135 million in annual expense synergies within two years. The company is focused on maintaining momentum and cross-selling their solutions into EVO's customer base, with early success in bringing products to Europe and plans to expand into LatAm.

In 2024, EVO is investing in opportunities across its markets and expects them to fully scale in 2025. The issuer solutions business had a 5% growth in adjusted net revenue, driven by volume-based revenue. The core issuer business also grew mid-single-digits, but there was slower growth in managed and output services as the business focuses on technology enablement. EVO added 20 million traditional accounts and completed four conversions and eight renewals. Issuer transactions grew by 6% and commercial card transactions had a double-digit increase. MineralTree achieved record bookings and paycard saw improving trends. The issuer solutions business had an adjusted operating margin of 46.8% and strong adjusted free cash flow of approximately $509 million.

The company is targeting to convert 100% of adjusted earnings for the full year, with a similar trajectory as 2023 for adjusted free cash flow conversion. They expect to invest $670 million in capital expenditures and have repurchased $800 million in shares in the first quarter. They also issued $2 billion in convertible notes, which lowered their overall cost of capital and increased their leverage position. Their balance sheet remains healthy with $3.4 billion in available liquidity and they expect reported adjusted net revenue to range from $9.17 billion to $9.30 billion, reflecting growth of 6% to 7% over 2023.

The company's outlook has changed due to the strengthening of the dollar against foreign currencies, resulting in a $20 million foreign currency headwind in the second quarter. However, they still expect annual adjusted operating margin to increase by 50 basis points in 2024, driven by a shift towards technology and partially offset by the lower margin of EVO. The merchant business is expected to see growth of 9% or more, excluding the impact of recent acquisitions and dispositions. The issuer solutions business is expected to see growth of 5-6% and an expansion of up to 50 basis points in operating margin. Non-operating items include net interest expense of $500 million and an adjusted effective tax rate of 19%.

The company expects adjusted earnings per share for the full year to be in the range of $11.54 to $11.70, with continued growth in 2024. The CEO is proud of the first quarter results and is closely monitoring the uncertain macroeconomic environment. The company is making progress in sharpening its strategic focus and simplifying its business. The CEO remains committed to key priorities, including advancing their software centric strategy and maintaining a focus on operational excellence. A review of the company's operating model, organizational structure, and internal processes is underway to optimize for the company's current state and identify opportunities for greater efficiency and effectiveness.

The company is planning to implement various initiatives to increase productivity, speed up product development, improve partnerships with customers, and simplify the organization. These efforts are expected to generate additional capital for investment in growth. The company will also align its go-to-market activities and operating model, and provide updates on its progress at an upcoming investor conference. There may be potential divestitures as part of the simplification process, and the company may use the proceeds for stock buybacks or potential M&A opportunities.

The speaker states that they are constantly evaluating their business and looking for ways to improve their scale and focus on key strategies. They are open to potential opportunities to create more value for shareholders, but their main goal is to refocus on core elements of their strategy that will drive long-term success. They also mention being open to selling assets that may be more valuable to someone else. The speaker agrees that the use of proceeds is an important consideration.

The speaker refuses to comment on hypothetical situations regarding the use of proceeds. They state that they are focused on creating value for shareholders and will continue to deploy any proceeds in a way that will drive long-term value. The EVO business is growing in line with expectations and is contributing to the overall growth of the merchant business, which is around 8%. The volume growth is also in line with revenue growth, with the core business growing at the same rate. The speaker then asks for more information on the growthiest parts of the merchant business.

The speaker discusses the confidence they have in the sustainability of the 7-8% growth rate, citing several metrics such as increased merchant partners and business development activities. They also mention a focus on software-oriented aspects of the business and the positive impact on lead flow and conversion of new merchants. Overall, they remain pleased with their position in the market.

The speaker believes that the competitive landscape in the ISV space and partner model has become more balanced and rational, which will benefit their business. They are also investing in POS and have seen positive momentum in that channel. Additionally, their vertical market businesses have experienced healthy booking trends.

In the first quarter, the company saw double-digit growth in several vertical markets, driven by demand for their software solutions and ability to monetize payment flows. This supports their growth expectations for the rest of 2024, and they plan to continue investing in these areas. The company's general merchant margins were consistent with expectations and they have seen sequential improvement, with a 30 basis point decrease in Q1. They expect this trend to continue throughout the year.

The speaker comments on the shift towards technology in the merchant business and the potential for growth and higher margins. They also mention the demand for embedded payments globally and their strategies for investing in the business. They manage margins holistically and are confident in their outlook for the full year. A question is then asked by Tien-tsin Huang.

Cameron Bready, a representative of a credit company, is asked about the recent settlement and its impact on surcharging and cash discounting. Bready believes that anything that lowers the cost of acceptance in the industry is good for them and the industry as a whole. He also mentions that cash discounting may be more common than surcharging and that it could potentially lead to more innovation at the point-of-sale. However, he does not think that either of these trends will have a significant impact on the industry.

The speaker states that all is going according to plan on the issuing side, with successful implementations and a good pipeline for the year. They are also seeing interest in their cloud-based platform and its capabilities, both from potential and existing clients. The platform is expected to provide additional enablement capabilities and an easier conversion process for existing clients.

The speaker is optimistic about the issuer business and believes there are more positive factors than negative ones in the near future. They are currently working on renewals and hope that their differentiation will lead to a more favorable renewal environment. When asked about the Capital One-Discover merger, the speaker mentions their long-standing relationship with Capital One and their positive track record with M&A. They believe the merger could be a good thing for them, but it is still in the early stages. Another analyst asks about the impact of the merger on their business, but the speaker cannot provide much information at this time.

In the paragraph, Cameron Bready, a representative from a company, discusses the upside surprise they experienced in the first quarter, particularly in the U.S. market. He attributes this to a more positive macro environment and the resilience of the consumer. Bready also mentions their successful execution of business strategies and the need to balance cost synergies with necessary investments.

The speaker is discussing the balance between investing in the business and achieving revenue growth targets. They mention the need to invest in the current period and how this will impact growth rates in 2025. The speaker also mentions the desire to see benefits from top-line growth flow through to margins and the potential for margins to continue to increase over time. They also mention plans to simplify the business and free up more investment capacity.

The speaker discusses the growth of the merchant business in the current quarter, with both organic volumes and revenue increasing at high-single digits. They mention various factors that contribute to this growth, such as mix, pricing, and new products, and state that they expect revenue to continue growing at a faster pace due to the implementation of software and value-added services. However, they clarify that revenue and volume should remain correlated, as they aim to monetize payment flows and drive incremental volume.

The company expects to see some opportunity for revenue growth as they pivot towards more software and commerce enablement, but it may not be significantly different from the underlying trends in volume. The mix of businesses and market dynamics may also affect revenue and volume growth. The company expects merchant margins to be approximately flat in Q2 and to improve in Q3 and Q4, ultimately reaching a 30 basis point improvement for the full year. The company has been deliberate in executing synergies from the EVO transaction, resulting in a clear trajectory of margin improvement.

The speaker discusses the company's margin improvement in recent quarters and mentions the impact of the EVO acquisition on margins. They also mention reinvesting in EVO's technology and expect to see higher flow through in the second half of the year. The CEO adds that there are certain markets EVO operated in that the company did not before the acquisition.

The company has made investments in their technology platforms to improve availability, reliability, and stability. These investments have been balanced with synergy realization and have resulted in better performance and improved reliability metrics. The company has absorbed these investments while also executing on synergies and expanding margins. April trends in merchant revenue have been consistent with Q1.

The speaker is discussing the 30% increase in U.S. merchant partners and clarifying that these are new relationships that generate additional volume and opportunities for the company's merchant business. They also mention that there are a variety of different partners in the business and that this growth rate does not solely come from the integrated business or EVO.

The company's partner strategy is an important part of their overall growth strategy, along with their direct distribution assets. They have seen good growth in their integrated space, with strategic partners being the most successful. They have also seen growth in their payroll and other U.S. merchant business channels. The company has added around 170 new partners in the first quarter. They are also starting to see progress in the rollout of revenue synergies in the EVO footprint.

The company is focused on expanding their EVO platform to new markets and bringing new products and capabilities to customers. This requires investments in equipping the platforms, integrating new products, and training sales professionals. They are already seeing good demand for these new offerings in markets such as Poland.

The speaker discusses how the company is investing in their business to bring in more revenue from the EVO transaction. They mention leveraging their global capabilities to support EVO's multinational customers and expanding relationships with existing EVO partners. They also mention integrating EVO's B2B platform into their merchant capabilities, resulting in a 100% increase in B2B acceptance bookings. The speaker expresses enthusiasm for the revenue synergy potential from the EVO transaction and thanks listeners for their support.

The conference call has ended and participants are now able to disconnect their lines. The speaker thanks everyone for their participation.

This summary was generated with AI and may contain some inaccuracies.