Global Payments : Q4 2021 Transcript

Corrected Transcript

10-Feb-2022

Global Payments, Inc. (GPN)

Q4 2021 Earnings Call

	Total Pages: 22
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Global Payments, Inc. (GPN)	Corrected Transcript
Q4 2021 Earnings Call	10-Feb-2022

CORPORATE PARTICIPANTS

Winnie Smith	Paul Michael Todd
Senior Vice President-Investor Relations, Global Payments, Inc.	Chief Financial Officer & Senior Executive Vice President, 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

Darrin Peller	James E. Faucette
Analyst, Wolfe Research LLC	Analyst, Morgan Stanley & Co. LLC
Bryan C. Keane	Jason Kupferberg
Analyst, Deutsche Bank Securities, Inc.	Analyst, BofA Securities, Inc.
Ashwin Vassant Shirvaikar	Vasundhara Govil
Analyst, Citigroup Global Markets, Inc.	Analyst, Keefe, Bruyette & Woods, Inc.

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MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' Fourth Quarter and Full Year 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 fourth quarter and full year 2021 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 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.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q4 2021 Earnings Call	10-Feb-2022

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 regulations, please see our press release furnished as an exhibit to our Form 8- K filed this morning and our supplemental materials.

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 record fourth quarter and full year 2021 results that exceeded our expectations, highlighting the resilience of our business model. We achieved record transactions across the business in the fourth quarter, including a new peak during the holidays, despite the incremental impact of COVID-19 variants. And we expect another record year in 2022 based on today's guidance with strong revenue growth, margin enhancement, earnings to free cash flow conversion and leverage capacity.

We accomplished a great deal over the course of 2021, as we continued to advance our differentiated strategies for growth. This includes our partnership with Google to deliver innovative and seamless digital services to all manner of merchants worldwide; the expansion of our collaboration with AWS; our preferred issuer technology solutions partner for an unique distribution and cutting-edge technologies; our successful acquisitions of Zego and MineralTree to advance our software leadership position with unmatched worldwide payments expertise; a strategic alliance with Virgin Money and our first use-casepost-merger combining issuing and acquiring capabilities; and our partnership with Mercedes-Benz Stadium to enable its multi-channel commerce ecosystem.

And we're carrying that momentum into 2022 as we successfully executed on our goal to redefine the future of digital commerce, extending our lead, continuing to gain share and deepening our competitive moat. Specifically, we are delighted to announce that we've been chosen by CaixaBank, as the finalist company in their selection process for a technology partner for its European card issuing business comprising nearly 30 million cards. We expect to finalize contract negotiations over the coming weeks.

Caixa is the largest domestic bank in Spain, serving tens of millions of households and a full range of business clients across multiple countries in Europe. This latest achievement is yet another example of the enhanced revenue opportunities derived from our merger with TSYS just over two years ago. When this goes live, as anticipated in the back half of next year, we expect this initiative to be among the first legacy direct-to-cloud transformations in card issuing technologies among major financial institutions, and it will be the first entry of TSYS into the highly attractive Iberian marketplace. Together with our recently announced partnership with Virgin Money, we believe Global Payments will then become a leading debit technology provider across Europe.

We're also excited to announce that we're embarking on a multiyear partnership with Mastercard, to modernize and accelerate card payments in the cloud across authorization, clearing and settlement. We're on this journey to drive ecosystem change and to help our clients bring differentiated value to the market. This is yet another example of how we're progressing the payments landscape with leading technology partners and bringing the next generation of modernized AWS, cloud-enabled payments to customers.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q4 2021 Earnings Call	10-Feb-2022

Our durable relationships with some of the most complex and sophisticated institutions globally speak to our competitiveness well into the remainder of this decade. It's worth highlighting that our Issuer business signed multiyear contract extensions with several of our largest customers over the last 12 months, including Citi, CIBC, Barclays and Banco Carrefour.

And our strategy of aligning with market share winners was also successful in 2021. Recent examples include Barclays' purchase of the Gap card portfolio as well as Capital One's purchase at BJ's Wholesale Club card base. We have 34 active prospects in the pipeline with AWS, 11 of which are fintechs neobanks and start-ups, and we are pleased to announce that we are live with our first joint takeaway together with AWS, a leading global financial institution in a single large market in Asia, and we expect to expand this PRIME instance to several additional markets over time.

We also reached an agreement for our first legacy Global Payments issuer customer, KB bank in the Czech Republic to move to our TSYS PRIME platform in the fourth quarter, another revenue synergy from our merger. Finally, of the nine LOIs we have in our Issuer Solutions business today, five are competitive takeaways. In addition, we recently had another new customer win move from LOI into production that was also a competitive takeaway. We've been successful in expanding our target addressable markets in 2021 beyond AWS, as we diversify and broaden our distribution. We announced new strategic partnerships last year with PwC and 10x Banking. 10x Banking is a next-generationcloud-native platform designed to bring forward a new way of banking with faster product development and a lower cost to serve.

We are proud to announce a new collaboration with ecolytiq to bring sustainability as a service to fintechs, startups, neobanks and traditional institutions. This partnership provides consumers with a personalized view of their impact on the environment, driven by their payment transaction activities. This technology enables corporate clients to align their digital banking strategies with consumers and supports ESG commitments by delivering sustainable product options and experiences. Further, we are delighted to announce a partnership with Extend through our new distribution channels. We will provide B2B virtual commercial account services to banks and fintechs with Extend, serving our instant virtual card issuance product. Through relationships like ecolytiq and Extend, we are able to support a full spectrum of solutions across emerging use cases.

And while we've been providing market-leading technologies for buy now, pay later, or BNPL, initiatives for decades, we continue to innovate and deliver installment payments products as BNPL demand grows. This includes expanding our combined installment solutions with Visa and signing a global referral agreement with Mastercard. And through our partnership with leading technology companies, private label branded retailers, and many of the world's largest issuers, we will be able to provide our customers with a complete ecosystem of BNPL capabilities on a regulated, compliant and responsible basis. It's worth highlighting that in 2021 alone, TSYS enabled over 2 billion BNPL transactions and issued 55 million virtual cards with more than $31 billion in volume.

Turning to our Merchant business, we are pleased to report the release of the first phase of our Google [ph] Run and Grow My Business (09:43) product that integrates Google's solutions with our innovative capabilities in our digital portal environment during the fourth quarter as planned. We continue to expect to launch the next phase to help our merchants grow faster by connecting additional Google services, including online ordering, retail inventory, and reservations to our digital platform later this year. Google is also now a live merchant customer in Asia-Pacific, and we expect to launch Google as a merchant customer in North America by the end of this quarter.

We continue to deliver a full suite of vertically fluent solutions across dozens of markets worldwide. For example, our enterprise QSR business delivered bookings growth for its cloud POS services in excess of 50% in 2021 and

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Global Payments, Inc. (GPN)	Corrected Transcript
Q4 2021 Earnings Call	10-Feb-2022

went live with new marquee customers like Denny's, Long John Silver's, and A&W Restaurants. We also continue to expand with existing brands, including Bojangles, Whataburger, and CKE, which today leverage a combination of our innovative end-to-end solutions. We delivered more than 300 million omnichannel restaurant experiences in 2021, up 50% versus 2020, an indicative of share shift due to the pandemic and market share gains. By way of comparison, we enabled 19 million omnichannel orders in 2019 prior to COVID-19.

Our AMD business generated revenue growth of over 30% in 2021 and in excess of 35% for the fourth quarter compared to 2019. And that momentum is poised to continue with bookings growth of 40% in the fourth quarter and 26% for the full year over 2020. I am particularly proud that AMD's telemedicine solution enabled 2.5 million provider visits over the last year, marking an 85% increase from 2020. And to put it in perspective, that is up from the roughly 100,000 telemedicine visits facilitated annually prior to the pandemic.

We're also delighted to have hit the ground running in one of the largest and most attractive verticals in 2021 in real estate. Zego delivered near 20% bookings growth for the full year, enabled by its continued success with existing enterprise customers like ACC and Thalhimer and by expanding with new partners like Managed America and Equity Lifestyles, one of its largest new customers to date. Zego's payments penetration into its base also reached an all-time high last year under our stewardship.

As we discussed at our 2021 Investor Conference, we are the beneficiaries of technological innovation, continued share shift and market share gains, including QR codes, digital wallets, safer commerce and, of course, BNPL. Speaking of BNPL, in addition to the agreements we already have in place with leading solutions providers, including Affirm and Tua in the United States and Atome in Asia Pacific, we are launching our BNPL-as-a-service marketplace this quarter to augment our 140-plus alternate payment methods portfolio. Further, our new partnership with Virgin Money highlights our ability to deliver non-bank card, account-to-account transfers through our digital solutions, capitalizing on our market-leading merchant ecosystem, which already provides one of the largest NFC acceptance networks globally.

In September, we highlighted that we win by leading with technology and innovative solutions across our merchant portfolio. And the fourth quarter provides further evidence of our differentiated strategies. We delivered record bookings in the fourth quarter 2021 for Global Payments Integrated and US payments and payroll businesses, each of which grew 20% year-over-year. Our e-commerce and omnichannel business grew on an accelerated basis in 2021.

Our ability to seamlessly provide the full spectrum of payment solutions drove new wins this quarter, with large multinational Mary Kay across six countries in Europe and Asia; and with ESW, or eShopWorld, a leader in direct- to-consumer global commerce in the United States with further global expansion on the horizon. And over the course of 2021, we also reached new partnerships with Google, Uber Eats and Uber rides, Foot Locker, Hunter Douglas and The Swatch Group, while extending and expanding the scope of our long-standing relationship with PayPal.

Finally, we added B2B as the newest pillar of our strategy in 2021. We are already making significant strides with MineralTree since the closing in mid-October. This includes doubling virtual card spend in the fourth quarter and completing nine new deals in the health care vertical, including with NoHo Dental and BIOMETRIX. This quarter, MineralTree also renewed its agreement with NI, or National Instruments, successfully executed an implementation with Mexico-based food services company, Grupo Bimbo, and launched its "Supplier Central" portal, which allows for seamless payments acceptance for suppliers to support greater digital adoption.

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