GLOBAL PAYMENTS INC Q4 FY2024 earnings call

• Transformation Journey: Global Payments launched a broad transformation agenda, reimagined its mission/vision/values, refreshed its strategy, realigned its operating model and business structure, and executed an operational transformation program.
• Financial Performance: The company delivered strong financial results, with 6.5% constant currency growth in the fourth quarter and 6% adjusted net revenue growth for the full year, along with record operating margins and double-digit EPS growth.
• Segment-Specific Highlights: In the Merchant segment, POS and software had strong results, the education business grew, and the real estate vertical added new customers. The integrated and embedded channel saw increased ISV partner signings. The Core payments segment made progress with partners, and the Issuer Solutions segment had strong implementations and renewals.
• Transformation Initiatives: The company has been streamlining and simplifying its business by exiting small markets and acquiring stakes, unlocking growth potential by reorienting its business and launching the Genius platform, and leveraging technology leadership for greater agility and efficiency.

For the fourth quarter, Global Payments achieved 6.5% constant currency growth excluding dispositions. The Merchant business saw over 7% growth, while the Issuer business had 3% growth. For the full year, it delivered 6% adjusted net revenue growth, record adjusted operating margins, and double-digit adjusted earnings per share growth. In the Merchant Solutions segment: The fourth quarter adjusted net revenue was $1.76 billion, with growth over 7% on a constant currency basis excluding dispositions. The POS and software segment experienced a roughly 35% increase in new POS rooftops in the fourth quarter. The integrated embedded channel added 76 new ISV partners in the fourth quarter. The Core payments segment saw mid-single-digit growth on a constant currency basis, with Central Europe, Poland, Greece, and LatAm achieving double-digit growth. The Issuer Solutions segment had fourth quarter adjusted net revenue of $542 million, with 3% growth on a constant currency basis. It added 26 million traditional accounts on file and had a strong implementation pipeline and renewals.

• 2025 Outlook: Global Payments expects constant currency adjusted net revenue growth of 5% to 6% excluding dispositions, with dispositions impacting reported adjusted net revenue by over 300 basis points. It anticipates annual adjusted operating margin to expand by approximately 50 basis points excluding dispositions. The Merchant business is expected to have 6% constant currency growth, and the Issuer Solutions segment is anticipated to have ~4% constant currency growth. Quarterly phasing shows modestly higher growth in the second half. Net interest expense is expected to be ~$500 million, the adjusted effective tax rate ~19%, and capital expenditures ~$780 million. The company expects to return ~$2 billion to shareholders, including an accelerated share repurchase plan. Adjusted EPS growth is projected to be in the 10% to 11% range on a constant currency basis, with FX acting as a ~175 basis point headwind to adjusted net revenue and EPS. Starting from Q1 2025, share-based compensation expense will be included in adjusted results.

• Economic Conditions: Impact on future operations.
• Portfolio Review and Divestitures: Uncertainty regarding the success of divestitures and exits.
• Macro Environment: Uncertainty in U.S. post-election economic policies.
• Competition: Pressure from competitors in various segments.

Q: Start off with early evidence of progress on initiatives and cadence of merchant growth rate.

A: Cameron Bready noted early evidence of collaboration across the organization and harmonization of the operating model in the Merchant business. For the merchant growth rate, the early half of 2025 has some disruption from transformation changes, but the back half of 2025 is expected to see benefits materialize.

Q: Follow up on Merchant 6% guide, acquisition front, and EPS guide.

A: Joshua Whipple stated that takepayments contributes 50 basis points, ZMS acquisition had minimal contribution. Stock-based comp of ~$170 million will be factored into EPS models, and FX will be a 175 basis point headwind to EPS.

Q: Macro backdrop and impact of winding down enterprise customer contracts.

A: Cameron Bready said the macro backdrop is fairly stable. Winding down enterprise customer contracts has started, with impacts reflected in the guide, including exiting some wholesale and multinational cross-border commerce business.

Q: Update on operational transformation and Issuer segment.

A: Joshua Whipple said operational transformation $100 million increase changes the timing of savings recognitions, with majority benefits in 2026 and beyond. For the Issuer segment, it expects continuation of softer trends in commercial card and Paycard, with growth from 70 million accounts in backlog.

Q: Update on ISV channel, POS replatforming, and incremental asset sales.

A: Cameron Bready and Robert Cortopassi said the ISV channel has healthy partner growth, POS replatforming has early positive feedback and natural upgrade paths, and incremental asset sales include exiting subscale APAC businesses with more potential in subscale geographic trimming.

Q: Revenue growth cadence and impact of organization homogeneity on forecasting.

A: Cameron Bready said 2025 revenue growth is in the 5% to 6% range with the back half likely stronger. Organization homogeneity increases conviction in forecasting as early results of transformation work are seen and visibility around outcomes improves.