Global Payments(GPN) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted net revenue of $2.06 billion for Q3 2022, a 6$2.48, an 18% increase from the prior year on a constant currency basis [34] - Adjusted net revenue for the full year is expected to be in the range of $7.8 billion to$7.9 billion, with adjusted earnings per share projected between $9.32 and$9.55 [49][50] Business Line Data and Key Metrics Changes - Merchant Solutions achieved adjusted net revenue of $1.45 billion for Q3 2022, a 10$489 million in adjusted net revenue, a 6% improvement on a constant currency basis [39] - Transaction volumes grew double digits in Q3, led by commercial card transactions, which increased by 25% [18][40] Market Data and Key Metrics Changes - Outside the U.S., revenue improved in key faster-growth geographies, including Spain, Central Europe, and Southeast Asia, despite headwinds from foreign currency exchange rates and COVID-related restrictions [38] - The U.K. and Canada each represent about 5% of the merchant business, while Asia Pacific accounts for a smaller portion, approximately 1/3 of the size of the U.K. and Canada [82][83] Company Strategy and Development Direction - The company is focused on enhancing its B2B capabilities and has integrated NetSpend's B2B assets into its issuer business [19] - The acquisition of EVO Payments is expected to enhance growth and margin targets, with Merchant Solutions projected to represent approximately 75% of adjusted net revenue post-acquisition [55] - The company is expanding its e-commerce partnerships and technology solutions, including a recent agreement with Gucci and ongoing collaboration with Google [27][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying fundamentals of the business, noting no significant evidence of softness in trends despite macroeconomic concerns [53] - The company anticipates continued solid performance into Q4 2022, with expectations for core business growth remaining unchanged [48] - Management highlighted the importance of maintaining financial flexibility and the ability to accelerate synergies from acquisitions [87] Other Important Information - The company completed a $2.5 billion senior unsecured notes offering and a$1.5 billion strategic investment with Silver Lake, enhancing its capital structure [44][46] - Adjusted free cash flow for the quarter was $640 million, with capital expenditures expected to be around$600 million for the full year [42] Q&A Session Summary Question: What is driving the strength in the merchant business? - Management noted stability and strength across most sectors, with volume growth achieved without significant exposure to travel and entertainment [60][62] Question: Can you clarify the guidance regarding FX impacts? - Management reiterated that the core business growth expectations remain at 10% to 11% on a constant currency basis, with FX headwinds expected to impact adjusted net revenue growth by approximately 300 basis points [68][69] Question: What is the outlook for the EVO acquisition and its impact? - Management indicated that the EVO acquisition is expected to offset the lost earnings from NetSpend consumer, with both transactions being roughly neutral from an accretion dilution perspective [71][73] Question: What are the underlying drivers of margin expansion? - The expansion of margins is attributed to better transactional performance and a focus on profitable growth, with expectations for continued trends into Q4 [76][78] Question: How is the company positioned in the BNPL ecosystem? - Management highlighted significant progress in BNPL technologies and services, with a strong implementation pipeline and partnerships with financial institutions [100][102]