Q3 2021 Transcript

Corrected Transcript

02-Nov-2021

Global Payments, Inc. (GPN)

Q3 2021 Earnings Call

	Total Pages: 24
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Global Payments, Inc. (GPN)	Corrected Transcript
Q3 2021 Earnings Call	02-Nov-2021

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

Tien-Tsin Huang	David John Koning
Analyst, JPMorgan Securities LLC	Analyst, Robert W. Baird & Co., Inc.
Bryan C. Keane	Trevor Williams
Analyst, Deutsche Bank Securities, Inc.	Analyst, Jefferies LLC
Ramsey El-Assal	Vasundhara Govil
Analyst, Barclays Capital, Inc.	Analyst, Keefe, Bruyette & Woods, Inc.
Jason Kupferberg	Ashwin Vassant Shirvaikar
Analyst, BofA Securities, Inc.	Analyst, Citigroup Global Markets, Inc.
Dominick Gabriele
Analyst, Oppenheimer & Co., Inc.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q3 2021 Earnings Call	02-Nov-2021

MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' Third 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] 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' third 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 the call speak only as of the date of this call, and we undertake no obligation to update them. 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 Form 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 record third quarter results, despite the incremental challenges that emerged during the period from COVID-19, highlighting the resiliency of our business model and our ongoing track record of execution, across market cycles.

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Global Payments, Inc. (GPN)	Corrected Transcript
Q3 2021 Earnings Call	02-Nov-2021

We also surpassed $2 billion of quarterly adjusted net revenue, for the first time in our history, with record margins and produced all-time high, quarterly adjusted earnings per share and adjusted free cash flow.

As we detailed at our Investor Conference just a short time ago on September 8, the trend toward accelerated digitization coming out of the pandemic has benefited our business by reinforcing that mode of competition.

And this quarter provided further proof points of the wisdom of our approach to drive differentiated growth across the four pillars of our strategy. First, we extended long-standing relationships with both, CITI and CIBC, as a reflection of our prowess as a top quartile Software-as-a-Service or SaaS technology company, with unmatched worldwide payments expertise.

Our durable partnerships with some of the most sophisticated and complex institutions globally speak to our competitiveness, well into the remainder of this decade. Starting with CITI, we are delighted to have furthered our relationship with one of our largest commercial card customers for another eight years.

This agreement highlights a key element of what is already today a successful B2B business at scale. More on this new pillar to our strategy in a moment. We're also pleased to have renewed our issuer relationship with CIBC, a top 10 customer in North America, that spans both its consumer credit and debit portfolios for an extended term.

As we discussed in September, we also continue to build our pipelines with AWS to include additional fintechs neobanks and embedded finance players spanning multiple geographies. We now have 25 active prospects in our issuer pipeline with AWS, up from 20 last quarter and four at the end of 2020. We also currently have 10 letters of intent with institutions worldwide, six of which are competitive takeaways. Two of our recent LOIs have gone to contract.

We're also exited to announce that together with AWS, we signed an agreement with London-based 10x to integrate its cloud native core banking platform with TSYS's payments-as-a-service capabilities allowing us to collaborate on modern core banking and issuing solutions for neobank and traditional financial institution customers.

As we announce at our Investor conference, we now have a terrific partner in Virgin Money for our first use case combining issuing and acquiring capabilities to offer transactions stream optimization solutions. It's worth noting that Virgin Money is also a significant competitive takeaway for us. Simply put, we're winning in our Issuer Solutions business because we are selling more market-leading technologies to more distinctive and defensible distribution channels in more markets than we ever have previously.

In our vertical markets businesses where we lead with SaaS at the top of the funnel, we were delighted to announce our new partnership with Mercedes-Benz Stadium in September. As we highlighted, we believe that we were successful because of our ability to seamlessly and uniquely combine software, hardware and payments across in-person, mobile and online channels.

We expect to facilitate a best-in-class fan experience through market-leading commerce enablement solutions. We're now in pilot with Mercedes-Benz Stadium, and we expect to be fully live early in 2022. We're gratified that after canvassing the payments landscape in an extensive RFP including with a full spectrum of new market entrants, this sophisticated institution terminated their existing relationships and chose us for our software and payment technologies with a commitment well into the back half of this decade. Further, across our merchant

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Global Payments, Inc. (GPN)	Corrected Transcript
Q3 2021 Earnings Call	02-Nov-2021

technology-enabled businesses, our POS software solutions generated revenue growth of nearly 70% compared to 2019 in the third quarter.

And our Sentral education business in Australia, grew over 50% versus 2019 despite lockdowns in that market. In addition to the key win at Mercedes-Benz Stadium, our Zego business delivered record bookings in the third quarter and also had notable successes with Subway, Whataburger, Bojangles, RBI and Wendy's, spanning software, hardware, payments, and data and analytics. These results highlight the benefits we're seeing from accelerated digitization in our markets.

Our e-commerce and omnichannel businesses drove growth in excess of 20% again this quarter. This business is another example of pandemic-induced accelerated digitization benefiting us with current growth rates one-third faster than pre-COVID levels. A few examples of notable success here this quarter. We broadened our relationship with Uber and Uber Eats into an additional market in Asia Pacific, beyond Taiwan. We expanded our long-standing relationship with the Swatch Group to now include e-commerce alongside the solutions we provide in store today, across North America and Asia Pacific.

And we went live with Google as a merchant in multiple markets in Asia Pacific, exactly as we said we would. We remain on track to launch Google Run and Grow My Business this quarter.

And we're already working on the launch of 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.

These solutions will, over time, drive more consumers to our merchants and dramatically expand our value proposition with one of the leading technology players, worldwide. We're also very pleased to announce today, that we have extended and expanded the scope of our relationship with PayPal, one of the most sophisticated payments companies globally.

This multiyear partnership leverages our unparalleled e-commerce technology footprint, across cross-border North America, Europe and Asia Pacific. And it will dramatically expand our target addressable markets over its term.

We've added new geographies additional verticals in support of cryptocurrencies for the first time, together with CITI, Mercedes-Benz Stadium, Virgin Money and CIBC what better testament to our current and future competitiveness.

As we said in September, we continue to benefit from ongoing innovation in our ecosystem, including Buy Now, Pay Later or BNPL technologies. We expect to enable more than 1.5 billion BNPL transactions this year alone. And we anticipate issuing more than 50 million virtual cards, with more than $23 billion in volume.

It's a market we know well, because it's a market that we've been serving for decades globally. As BNPL continues to grow, we believe we're well positioned, given our presence worldwide and our unique offerings to benefit.

Examples of our exposure include through network initiatives, traditional issuers, private label or charge card and program management, virtual card issuance, non-traditional issuers, including fintechs, start-ups and neobanks, unique collaborations with AWS and Google, large existing scale players looking to expand BNPL globally into new markets and with added functionality.

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