Q1 2021 Global Payments Inc Earnings Call
And as far and a listen only mode.
Later, we will open the lines for questions and answers if you should require assistance. During this call. Please press Star then zero 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. When he Smith. Please go ahead.
Good morning, and welcome to the global payments the.
First quarter 2021 conference call.
Before we begin I would like to remind you of some of the comments made by management. During today's conference call contains forward looking statements about expected operating and financial results.
These statements are subject to risks and 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 and filings with the SEC, including our most recent 10-K and subsequent filings we caution you not to place undue reliance on the statements.
Looking statements during this 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 and accordance with the 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 and the Investor relations area of our website.
Www dot global payments Dot 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.
Thanks Lynn.
We delivered our best performance since the end of 2019 because of our focus on technology enablement, coupled with the excellence of execution.
Our results demonstrated strong sequential momentum from the fourth quarter of 2020 and improved monthly throughout the first quarter of 2021.
We are encouraged by the overall run rates, we're seeing and the business.
We exited the first quarter and a better position than we entered it.
We are delighted with the return to growth and the first quarter of 2021.
We were able to deliver revenue margin and earnings per share growth, despite facing difficult year over year comparisons as the pandemic did not begin to impact our business until mid March 2020.
None of this would have been possible without the dedication of our exceptional team members and we thank them for their commitment to our customers our communities and each other.
And we continue to expand our competitive moat.
We are pleased today to announce two strategic acquisitions for approximately $1 billion and total debt further our software driven technology enabled strategy and deepen our presence and the most attractive markets globally.
We expect to continue to gain market share and extend our lead.
And in combination with the roughly $1 billion and share repurchases, we've affected since returning to our capital allocation strategy at the end of last year, we continue to balance appropriately reinvestment and the future growth of our business with efficient return of capital.
First with our agreement to acquire Zico, we enter one of the largest and most attractive vertical markets worldwide.
Real estate is the quintessence of the type of market that we see.
Sizable global in scope fragmented and bright for further software digital commerce and payments penetration.
And COVID-19 has accelerated the underlying changes that make this $6 5 billion Todd.
Target addressable market so attractive.
Zero is a leading software and payments technology company with significant scale delivering a comprehensive real estate technology platform to 7300 customers representing more than 11 million residential units and the United States.
Zika or the digital Omnichannel solutions and support property managers and residents throughout the real estate lifecycle from leasing and Onboarding to work orders utility management resident communications renewables off boarding and of course payments.
Through its integrated payments offering legal processes, approximately $30 billion and payments annually and the market with the volume opportunity that exceeds one trillion.
The company delivers its full value stack through cloud native SaaS platform to enable seamless digital property management and best in class resident engagement and Omnichannel experiences.
It is the highly scalable and predictable flywheel with compelling recurring revenue strong retention rates bookings trends and lifetime customer value of returns with double digit organic revenue growth.
Importantly, we have significant opportunities to accelerate growth.
We intend to leverage global payments scale and digital expertise to further payments penetration into <unk> base.
Generate incremental property and software partner referrals to our more than 3500 sales and sales support professionals.
Expanded footprint outside the United States.
And generate meaningful cross selling opportunities intuit's vertical market.
Including innovative products, we already deliver into our merchant business like payroll data and analytics and reputation management.
We could not be more excited about further capitalizing on the convergence of software and payments and we look forward to welcoming the <unk> team members to global payments.
Second we are excited to have reached an agreement to our <unk> the joint venture to purchase World line pay one business and Austria, consisting of roughly 8000, primarily SMB merchant customers interest of the bank's home market.
We entered Austria through organic market expansion of our continental European joint venture roughly 18 months ago.
This pending acquisition enables us to bring our distinctive distribution and market, leading technology to add scale to yet another attractive market.
In addition to the strategic accomplishments and early 2021, we also produced a solid first quarter results across our existing businesses.
First and our merchant segment, we delivered significant sequential improvement fueled borrowing of technology enabled focus and the conversion of last year's share and bookings gains into revenue.
And we generated these results, while absorbing ongoing lockdowns, and Canada, and renewed restrictions and selected markets and Europe and Asia Pacific.
Some highlights and the first quarter of 2021 include.
Our record new sales and our global payments integrated business in March and and our U S relationship led business for the quarter.
Record revenue growth of GPI for the quarter well in excess of pre pandemic levels.
<unk> bookings and Xenial for a cloud based restaurant, Pos software and solutions and continued sequential acceleration and our omnichannel businesses.
It is worth highlighting that volume accelerated throughout the quarter of trend and has continued into April.
Key customer wins include subway CK, the restaurants, ASW foods and bojangles'.
It's also notable that several of these businesses that were most impacted by COVID-19 saw substantial sequential growth and revenue and bookings and the first quarter as our home market and a recovery.
For example, active and gaming achieved significant improvement is better macro trends strong execution and solid bookings over the course of 2020 benefited performance and 2021.
In fact, we've continued to see positive booking trends across our software portfolio and the ability to deliver a full value stack is increasingly becoming table stakes and the markets we serve.
We also made considerable progress on the partnership with Google that we announced in February.
We expect to board of Google as a merchant customer and select Asia markets in the third quarter with North America to follow shortly thereafter.
We have initiated our <unk> program and are beginning to see referrals from Google on a number of their enterprise cloud clients.
We anticipate launching our one and grow my business product that integrates Google solutions with our innovative capabilities and our digital portal environment and the fourth quarter of this year.
And we have launched our co innovation efforts to develop new commerce enablement tools for our merchant customers.
Second our issuer business continues to benefit from strong relationships with market leaders and we are excited to announce today that we have entered into a multi year renewal with Barclays consumer bank in the United States.
Barclays is one of our largest customers globally, and we provide a range of processing and support technologies for both Barclays consumer and commercial credit card portfolios.
We look forward to working with Barclays to enable a best in class customer experience with unparalleled levels of security and resiliency for its newest partner the GAAP and its portfolio of accounts yet another of competitive takeaway.
Partnering with issuers that are gaining share and the marketplace is a key element of our strategy.
We were also pleased to have signed agreements with mission Lane and <unk> financial with the latter of being a competitive takeaway and much of the prior processing relationship had spanned decades and.
And collaboration with AWS <unk> will adopt our cloud based data and analytics platform.
Which we also successfully deployed during the quarter for a multi country customer in Latin America.
We continue to capitalize on the broad and deep pipeline, we of the good fortune of half and our issuer business today.
Today, we have 12 letters of intent with financial institutions worldwide six of which are competitive takeaways.
Turning to AWS, we expect to go line with our first joined takeaway with a multinational and financial institution and Asia by the end of the year.
Our cloud Prime instance is now up and running currently in that market and preparation for the launch.
We have another dozen active customers and our pipeline of AWS up from four at the end of 2020.
Third our business and consumer segment delivered record revenue growth.
And im very proud of the net spend once again facilitated the rapid distribution of stimulus funds the customers most in need.
Since late December 'twenty.
2020, we of processed more than 2 million deposits accounting for over $3 5 billion and stimulus payments disbursed by the IRS to American consumers.
And this was done days in advance of many of our traditional financial institutions and financial and technology peers.
And combination with the 2020 stimulus payments, we have disbursed more than $5 billion and aid to customers through the first quarter of 2021.
The pandemic accelerated move towards cashless solutions is also benefiting net debt.
For example, we are seeing rapid adoption of our <unk> solution and we reached a new agreement with Flynn restaurant group for its pizza hut and win these franchise locations, which will drive additional pay card and potential tips opportunities across the combined footprint of more than <unk>.
At the Phoenix tons of arena.
These achievements serve as proof points of our differentiated strategy that includes product extensions into the PDP <unk> and <unk> segments.
I could not be more pleased.
He is with all of that we accomplished across our businesses this quarter.
In March we returned to year over year growth and each of our three segments and the underlying trajectories are tracking toward our longer term goals just as we predicted they would despite the impact of ongoing restrictions and lockdowns and some of our markets outside the United States.
Paul.
Thanks, Jeff.
We're pleased with our financial performance and the the first quarter of 2021, which demonstrated meaningful sequential momentum and reflected our ongoing strong execution across the business. Specifically, we delivered adjusted net revenue of 1.81 billion, representing 5% growth compared to the prior year.
And <unk> and marking and the AVP of 100 basis point improvement relative to the performance, we reported and the fourth quarter of 2020.
Adjusted operating margin for the first quarter was 46% a 160 basis point improvement from the prior year that was achieved despite of the return of certain costs, we temporarily reduced at the onset of the pandemic.
On a comparable basis underlying margin trends would have been improved approximately 300 basis points and.
Adjusted earnings per share were $1 82 for the quarter and increase of 15% compared to the prior year period and was especially impressive in light of the difficult year on year comparison due to COVID-19.
The pandemic did not begin to impact our business meaningfully until the second half of March of last year and as a reminder, we delivered 18% adjusted earnings per share growth and the first quarter of 2020.
Revenue of 1.15 billion for the first quarter and four 4% improvement from the prior year, which mark the nearly 900 basis point improvement from the fourth quarter.
And <unk>.
We delivered an adjusted operating margin of 46, 3% and this segment and increase of 90 basis points from the same period in 2020, as we continue to benefit from our improving technology enabled business mix.
Global payments integrated produced a stellar quarter generating in excess of 20% adjusted net revenue improvement.
And which is ahead of the levels of growth. This business was delivering pre pandemic. Additionally.
Additionally, our worldwide e-commerce, and Omnichannel businesses, excluding <unk> delivered roughly 20% growth as our value proposition that seamlessly spans both the physical and virtual worlds continues to resonate with customers as for our own software portfolio. We are encouraged to see that several of our <unk>.
This is most impacted by the pandemic improved meaningfully sequentially as Jeff mentioned and it is worth highlighting that our gaming business returned to growth this quarter and across our vertical markets portfolio bookings continued to prove resilient and the first quarter, providing us with a positive tailwind for the balance of 2020.
One we.
We are also pleased that our U S relationship led business generated high single digit adjusted net revenue growth for the first quarter, which is consistent with our long term targeted growth rate for this channel. Despite the difficult comparison to the first quarter of 2020.
And notwithstanding a challenging environment and several of our international markets, our portfolio of businesses across Europe, and Asia improved significantly and delivered adjusted net revenue that was essentially flat with last year for the quarter.
<unk> because of our international businesses are largely focused on domestic spending and the markets and which we operate we are seeing improvement and these businesses well and advance of cross border Commerce recovering.
Moving to issuer solutions, we delivered $439 million and adjusted net revenue for the first quarter, which was roughly flat versus the prior year period and exceeded our expectations given traditional fourth quarter to first quarter sequential trends.
Excluding the commercial card business, our issuer segment grew and the low single digits for the quarter and and the month of March issuer delivered growth and aggregate. Despite continued commercial card headwinds as we benefited from the ongoing recovery and transaction volumes across many of our markets. We also saw a non volume based <unk>.
Revenue increased mid single digits and the first quarter.
Notably our issuer business achieved record first quarter adjusted operating income and adjusted segment operating margin expanded 370 basis points from the prior year also reaching a new first quarter record of 43, 2% as we continued to benefit from our efforts to drive efficiencies.
And the business. Additionally.
Additionally, our issuer team signed three long term contract extensions and three new contracts since the start of the year and our strong pipeline bodes well for future performance consistent with our long term expectations.
And finally, our business and consumer solutions segment delivered record adjusted net revenue of 244 million representing growth of nearly 20% from the prior year.
Gross dollar volume increased 26% or $2 5 billion as we benefited from the stimulus we disbursed to our customers' trends within our PVA products were also very strong helped by the stimulus and we realized and acceleration and active account growth of more than 45% compared to the prior year.
Excluding the impact of stimulus payments and tax we believe that this business achieved underlying growth and the roughly mid single digit range in line with our long term targets adjusted.
Adjusted operating margin for this segment improved an impressive 750 basis points to a record 33, 2% as the benefits of the stimulus and long term cost initiatives post merger took effect the.
The solid performance, we delivered across our segments highlights the resiliency of our technology enabled portfolio consistency of our execution and the strong tailwind and our business coming out of the pandemic. We are also pleased that our integration continues to progress well and we remain on track to achieve our increased goal.
And from the <unk> merger of annual run rate expense synergies of at least 400 million and annual run rate revenue synergies of at least the $150 million within three years.
From a cash flow standpoint, we generated adjusted first quarter free cash flow of roughly 583 million after reinvesting $86 million and capital expenditures, we expect adjusted free cash flow of more than $2 billion and capital expenditures to be and the $500 million to $600 million range.
And for the full year.
And mid February we successfully issued $1 1 billion and senior unsecured notes maturing in 2026, and an attractive interest rate of one 2% the <unk>.
Transaction was credit neutral with the proceeds used to redeem $750 million of notes outstanding with the rate of three 8% due in April 2021.
The balance of the proceeds were used to reduce our outstanding revolver, we have no significant maturities until 2023.
Our strong cash generation and healthy balance sheet have enabled us to create significant value through our capital allocation strategy to the benefit of our shareholders. We are pleased to have repurchased roughly $4 million of our shares for approximately $783 million during the first quarter, which includes the.
Fusion of the 500 million accelerated share repurchase program, we announced last quarter.
We ended the quarter with roughly 3 billion of liquidity and a leverage position of roughly two six times on a net debt basis.
And we are excited to announce that we have reached agreements to make additional investments and our technology enabled strategy and market expansion.
And as Jeff highlighted we executed a definitive agreement to acquire Zippo and we're aligned pay one business and Austria for an aggregate of approximately $1 billion. We expect the finance these transactions using cash on hand, and our existing credit facility, we're targeting closing the zico transaction by the.
And of the second quarter and the World line acquisition and the second half of 2021, both subject to regulatory approvals.
Upon completion of both transactions given our current cash balance and strong cash generation, we expect our leverage position will be relatively consistent with current levels, leaving us with ample continuing firepower.
Based on our current expectations for continued recovery from the COVID-19 pandemic worldwide. We have increased our guidance for adjusted net revenue to now be and a range of 755 billion to $7 625 billion, reflecting growth of 12% to 13% over 2000.
20.
We expect adjusted operating margin expansion of up to 250 basis points compared to 2020 levels.
And this outlook is consistent with and adjusted operating margin expansion of up to 450 basis points on a normalized basis, given the operating leverage and our business and expect the synergy actions related to the <unk> merger.
However, this is being partially offset by the reinstatement of certain expenses and 2021 that were temporarily reduced at the onset of COVID-19 for most of 2020.
At the segment level, we have increased our expectations for adjusted net revenue growth for our merchant solutions segment to be and the high teens, which assumes the current pace of recovery continues worldwide.
We expect underlying trends and our issuing business to be in the mid to high single digit range and above our mid single digit growth target.
It is worth noting that our issuer business generated high single digit growth on a normalized basis for the month of March as we began to lap the pandemic impact.
As we discussed last quarter issuer is being impacted by two distinct and relatively equal sized headwinds first we are not anticipating a recovery and our commercial card business as we expect corporate travel to remain depressed throughout 2021.
Second we are absorbing a portfolio sale by one of our customers, which will impact us for the remainder of the year, taking these two items into account, we forecast our issuer business to deliver adjusted net revenue growth and the low single digit range for the year.
Lastly, incorporating the benefits of the incremental March stimulus. We are now forecasting adjusted net revenue growth for our business and consumer segment to be in the mid to high single digits for the full year consistent with our long term expectations for this business the.
This guidance takes into account lapping the benefits of the 2020 cares Act, which will provide for a more difficult comparison and the second quarter of 2021.
Regarding segment margins, we expect the up to 250 basis points of adjusted operating margin improvement for the total company to be driven largely by merchant solutions, while we expect issuer and business and consumer to deliver normalized margin expansion consistent with the underlying profiles of these businesses.
And this follows the 500 400 basis points of adjusted operating margin expansion delivered by issuer and business and consumer respectively and 2020.
From a quarterly phasing perspective, having now lapped muted growth characteristics and the first quarter given the start of the pandemic and mid March 2020, we will experience the opposite effect and the second quarter before returning to more normalized rates of growth and the back half of the year.
The highlights that while we expect to achieve our strongest adjusted revenue growth adjusted margin expansion and adjusted earnings per share growth for the total company and the second quarter, our business and consumer segment will be lapping the impact of the cares Act stimulus last year.
We anticipate net has been to deliver modest adjusted net revenue growth for the second quarter. We expect adjusted operating margins to decline for that segment year on year as a result on an absolute basis, we would expect business and consumer adjusted operating margins for the second quarter to be consistent with the levels achieved and.
The fourth quarter of 2020 of period that also saw more limited benefits from stimulus.
Moving to non operating items, we continue to expect net interest expense to be slightly lower in 2021 relative to 2020, while we anticipate our adjusted tax rate will be relatively consistent with last year.
Putting it all together, we now have increased our expected adjusted earnings per share for the full year to a range of $7 87 to.
And the $8 seven.
Reflecting growth of 23% to 26% over 2020.
Our raised outlook presumes, we remain on a path toward recovery of worldwide over the balance of the year and it does not include any impact from the Zico and World line Austrian business acquisitions, we announced today.
We'll further update our guidance when these transactions close but it is worth noting now that we do not expect these transactions to have a discernible impact on adjusted earnings per share for 2021 and.
And with that I'll turn the call back over to Jeff.
Thanks, Paul.
And our businesses run rating and accelerated levels the trends of Digitization Commerce enablement software differentiation and Omnichannel prevalence driving our performance will serve to catalyze future growth.
We said over the course of the last year that we would not standstill of wafer and better day to continue to deepen our competitive mode. Despite one of the most challenging periods any of us and seen.
As a result of our team members terrific efforts 2020 bookings have begun the translated into 2020, one outsized revenue gains and the announcements today of our return and strategic investments will provide further avenues for future growth.
And all of that is playing out against the backdrop of markets sustained share gains and substantial and efficient returns of capital. We now look forward to continuing.
We begin our question and answer session.
I'd like to ask everyone to limit your questions to one with one follow up to accommodate everyone in the queue. Thanks.
Thank you.
Operator, we will now go to questions.
Thank you at this time I would like to remind the number one of the telephone keypad.
The first question comes from Andrew.
Your line is open.
Good morning, I appreciate all of the detail.
I Wonder, Jeff if you could talk a little bit about where you're seeing particular strength in integrated and omni.
Both geo and vertical.
The markets.
And it seems like that.
And it really more than offsetting some of the challenges you're seeing in Europe and APAC.
Yeah, Thanks, Andrew it's Jeff and I'll start and maybe Cameron and Paul will join the thereafter.
It's hard to say with any certainty because we've had the integrated business now and legacy global payments for probably eight five years, but I would say that our global payments integrated business just delivered its best quarter ever.
From a revenue point of view and that is especially noteworthy when we have and left the majority and the first quarter of 'twenty, one and the majority of the grow over from the first quarter of 'twenty. So I think what youre really seeing and the integrated business.
And the solid bookings growth.
The new partner additions that we saw last year really flowing into revenue and I think we of the player on that business really just.
Yes.
Okay.
On the Omnichannel debt.
This is really pretty much the same thing.
The business.
Celebrate sequentially and the first quarter of 'twenty, one relative to the fourth quarter of 'twenty and grew absolutely at the way the opponents were up 20% year over year again.
For the first quarter of 'twenty.
So we feel really good about the outperformance that performance as well so it couldn't be more and more pleased blitz and our home market as the United States at 70%.
75% of the.
Of the company you really have to go and you pointed out the rest of the geographies and the rest of the market you really have to go kind of country by country to see what's happening I would say we do see.
Areas of growth and Asia Pacific, but of course, India, and Philippines are more difficult with the charter and we've been leading on the about the difficult the terrible situation.
And India, Canada, and really at the end of the quarterly post the quarter.
And has enacted strength pretty strict lockdowns and thats, probably about three of 4% of the company Andrew just to kind of quantify what the size of that market is and in Europe, It's really a mixed bag and I would say our business and stay and domestically is growing and very high rates notwithstanding the border.
Macro issues across the the.
And the European Union and the U K is really starting to recover but the other markets like in Continental Europe, and our Czech Republic business and of course, we announced the other day with Ulster Bank and that market also remains under substantial lockdowns and so listen I think the good news for us is.
The growing right through it we did mention today that accurate and gaming and some of our market share of the United States.
And we'll cover a pretty substantially they still presents some headwinds relative to the rate of growth that we just announced today, but at the end of the show of 900 basis points of sequential expansion and the forward to the first quarter of 'twenty, one and our merchant business. I think is one of the most noteworthy things of today Cameron and Paul you guys when I add debt.
I think that actually covered that pretty well the only other point I would make just to the top that off Andrew and it's just as it relates to the new sales and both of those businesses that you highlighted in particular, the integrated and automated continue to be very very strong and.
Our E comm business here and the U S market our E com sales were up something like 330% year over year, So clearly demonstrating that the trends we've seen around consumer buying patterns as well as merchant adoption.
And the channel and e-commerce capabilities continues to be quite strong even a year. After obviously the onset of the pandemic. So we think thats a very positive sign as it relates to the future growth of <unk> in the business and then on the integrated front and again, our new sales and the quarter were 120% of our target up something like 120% and kind of year over year. So again were.
Seeing great momentum in the in the business continuing as we enter the second quarter as well so as Jeff highlighted I think the strong new bookings and new sales performance. We saw last year clearly contributed to the performance in Q1, and it's nice to see that that strength at that same execution has continued into into 2021 as well.
Thanks, I appreciate that and just as a follow up on <unk> can you offer a little insight as to revenue mix. There how much of that is payments merchant discount versus software and subscription of Andrew the Cameron again.
So the business is the mix of software and payments today. It really started as the payments business that has moved more into software over the quarter.
Of course, the dine in particular driving more resident of experience solutions through a software platform. So it's still the majority payments today, but the software elements of the business are growing more rapidly and I would expect over time that they will equip and begun the majority of the business long term. So it's about 30.
Billion of payment volume today is a very healthy portfolio from a payment standpoint, the nice thing about the business is its not that penetrated within its existing customer base from the payments perspective, and obviously the ability to cross sell software into that base of existing partners today as well as to take global payments software and sell into.
That environment with our own value added services drives a meaningful revenue tailwind as we think of the business and the future.
Thank you.
Thanks, Andrew.
Your next year.
David Your line is open and you may be asking.
Oh, thank you.
On the and integrated.
And I'm curious is as the year of volume.
How would you expect consumer behavior to change.
I think we will see continued strong E com.
Trends and debit funding or do you think the consumer will return more to the physical point of sale.
And start to use credit cards more unrelated to that how would you see that flowing through.
The tech enabled solutions businesses and some of the key verticals that make those up.
Hey, David Jeff ill start and ask Cameron to join in and so let me let me just start by saying by the kind of non answering the question, but I just wanted to call out of our relationship led businesses. So they also had a very good quarter, we produced high single digit growth and our relationship led businesses compared to the first quarter of 2004, which 85% of the first part of 'twenty and no pandemic. So I wanted to all of that.
And we also said and our prepared remarks prepared remarks, we had record new sales and our relationship led businesses and the first quarter of 'twenty, one again coming out of the pandemic I don't want to lose sight of that before we address your question more directly.
And as it relates to your question look I don't think consumers are going to go backwards and I don't think people are going to say I want to spend more time in line, where I kind of find the ATM and get more cash the reasonable market for cash I think what we've seen the pandemic do is accelerate three years to five years of behavioral change and the consumer side Cameron just went to a minute ago and respond to and.
Andrew <unk> question, the bookings growth and our E com on the businesses, which is really just extraordinary again not lapping the.
The pandemic.
The first quarter two.
<unk> 2020, so listen I think the other day in my opinion and the answer. The question is I just don't see the trends of safe of Commerce occupancy commerce.
Omnichannel acceptance.
And moving backwards I think it's and accelerate the underlying trends that you've seen over time I'd also say relative to kind of credit debt and mix I don't see that changing either the only time and we've really seen an eidetic catalyzed cannibalized credit the stack and the only nine recession and when credit was really the taps. So all of that is left of it.
David we really havent seen that here I do think youll see alternative means of payment and of course in Europe, and I know youre focused and particularly the got asset account to account transactions. We've got real time payments that kind of thing of course, we've got after pay and those types of installment payment plans, which I think we're a market leader in both of our issuing business and our.
The business. So I think there may be mix changes in terms of how people actually pay for things and I don't think we're going to see David Cannibalized credit like we saw in the of not seeing that really throughout the throughout the pandemic and I don't see people kind of going backwards on.
And convenient and set of use.
Thanks for that just as a quick follow up.
You've had a lot of success in Europe with bank Jv's like HSBC loci share of <unk>.
The acquisition of World line pay one.
And Austria, Thank God.
And with your Earth. The JV is that are those two operating independently and entirely or do you see some synergies potentially between the boat.
No David David It's Cameron I'll jump in on that so this is actually a great opportunity to extend our joint venture with <unk> were actually purchasing that business through the joint venture with our partners at our Asia and types of the excuse me cash as well. So this is an extension of our existing partnership with ours and they were very excited about the opportunity to grow and expand.
Our business in their home market of Australia, as Youll recall and I think we mentioned in our prepared remarks, we initiated a business in that market about 18 months ago of at very good success building essentially a greenfield acquiring business with our partners and this adds significant scale, and obviously and opportunity to grow and expand that business more rapidly going forward. So.
This is very much of part of the joint venture that we have with <unk> and central Europe today.
Understood. Thank you very much.
Your next question comes from Tien Tsin Huang of Jpmorgan.
Your line is open.
Thank you. Thank you and good morning, really like the the property management acquisition I'm curious if it's if we had of compare it to the EHR space easier or harder to monetize the.
And then just trying to get a sense of the.
And the time to time line of potential payment penetration and did you give the revenue run rate.
And growth before synergies.
So the Tien tsin its Cameron good morning.
So I would say on balance I would think it's probably easier to monetize the payment opportunity and the real estate space Theres, obviously secular trends there that we think are very powerful around the digitization of the payment stream within real estate, whether it's recurring monthly rental payments HOA fees or other one off fees that less.
<unk> need to pay.
For the other vertical markets, we have been and I think.
We view real estate really of the quintessential vertical market, where you had the intersection of software and payments.
Payments, where that Nexus is very strong and obviously creates a significant opportunity for us to drive meaningful growth and share gains.
We expect the business to your second question to generate a roughly $100 million of revenue and 2021, and it's growing double digits nicely it sort of fits the rule of 40.
Four of software business very nicely today, and obviously the accelerate that rate of revenue growth over time.
And scale of the business more effectively by leveraging the broader global payments ecosystem.
And I think that's good.
Great.
If you don't mind, maybe quick one just on the merchant revenue growth building on Dave's question and that did positively decoupled from visa Mastercard credit and <unk>.
So just from a benchmarking standpoint.
What do you expect going forward here it sounds like SMB span is coming back relationships doing great and.
Anything to add.
Yes, so Tien tsin and this is Paul and Cameron may want to add the <unk>.
<unk> been talking for several quarters now about this positive decoupling and obviously, we saw the more dramatic way certainly on the positive side of this last quarter and so yes, we continue to kind of see that positive decoupling continue and we expect that continued for the same reasons, we had outlined before when we said that we expected that positive fee.
Coupling to occur once things got to a much more of kind of normalized basis. The only the thing I would highlight is as you look at that overall revenue growth number and recall that we have probably 300 basis points of headwind related to those three vertical market businesses that are still.
While <unk> been through from the depths of the pandemic and we highlighted gaming is being now and absolute growth, we're still seeing some meaningful headwind related to the active the school business and the gaming business.
And if you kind of looked at and Exco and if you kind of add 300 basis points to the overall growth rate and then if you do that you can see really some on a on a volume the volume basis and very positive decoupling of Cameron I don't know if you have anything to add to that and the only other thing I would say just on top of that as the international markets continue to be a bit of a drag as well. So if you.
Look at U S payments, and our growth and U S payments and it was probably high single digits, maybe almost 10% pure payments and the U S market and the first quarter, so even more decoupling and I think the sort of highlights represent and.
And the other thing I would say is over time and I expect that decoupling continue partially because of our internet.
The trends in those markets. So as those markets reopen we're not of the reliance upon the cross border volume to drive revenue growth and those businesses as domestic markets reopened internationally and we'll obviously see a nice tailwind as a result of that.
Great. Thanks for the answers great content.
Yes, Andrew.
Your next question comes from Ramsey El <unk> of Barclays. Your line is open.
Hi, Thanks for taking my question. This morning, I wanted to ask about.
A kind of a high level question about whether the pandemic will have any lasting effect on your sales process, particularly and merchant given the increasing importance of e-commerce and omni and digital have you had to change your kind of go to market or sales approach would you contemplate having to do so and then if you could also just comment on bookings trends more generally as we.
Head into Q2 that would be great.
Yes, sure I'll start at the Cameron and then I'll ask Paul maybe to jump in with a little bit more color as well, so I would say maybe to.
And to start even well before the pandemic, we've been equipping our sales professionals around the globe with the best technology, the best capabilities to be able to sell and obviously, we think that pay meaningful dividends through the course of the pandemic and our ability to continue to sell at very strong levels. Notwithstanding obviously the impacts of the pandemic and I think partly.
A credit to our sales teams in particular, they found new and innovative ways to continue to show and a difficult environment and particularly of our relationship led sales professionals here in the U S market that really operate under a commission only model and they were very motivated and incentivized to go out and find creative ways to be able to sell into the marketplace. So the use of <unk>.
<unk> and deploying more technology towards the sales process itself as well as the ingenuity I would say of our sales professionals and I don't expect that the change post pandemic and I think of lot of the lessons. We've learned through this process will allow us to continue to be very effective and very productive from a new sales point of view as it go forward matter.
Ill call out of few particular highlights on the first quarter bookings performance and I'll ask Paul and maybe to jump in.
Start with our U S relationship led business, we had a record sales quarter as Jeff and Paul highlighted in the prepared remarks.
Was about 5% higher than our old.
Record and up about 27% year over year, which I think is the really important metric as well given that again kind of of the 12 weeks of the first quarter of 2020, we're really not impacted by the pandemic. So very strong performance from the new sales point again, with particular strength and our ecommerce bill pay tax.
By pay solutions within our relationship led channel. We also had great new bookings performance and our payroll business as well.
We had record sales and that business up again, 42% year over year, So very strong performance and our U S relationship led payments and payroll business and the first quarter integrated as I mentioned previously they were above plan and well above last year's new sales performance and bookings performance in the first quarter as well.
Within our vertical market business, we saw very strong I would say booking trends across the business touch net had record first quarter bookings performance, which I think of a very good sign as it relates to the university environment heading into the fall.
And we actually started to see some volume of new sales and our schools business are lower school K through 12, we had three significant new wins and the quarter from a new sales point of view, obviously, we're still waiting and relying upon and kids getting back and through K through 12 environment for that business to recover fully but obviously it was encouraging.
And Thats, a new sales begin to thaw and that business and the first quarter as well and we also had record bookings and our enterprise <unk> business in the first quarter as well. So again good trends across the board I would say and our vertical market business and we will.
Internationally again, despite the macro environment being challenging and some of the markets that we operate in and I would characterize new sales performance across the board internationally and.
Sort of aggregating a bunch of different markets. There. It was above plan for the first quarter above last year's candidates. For example was up 40% year over year. So again, the trend of new booking performance being very strong continued well into the first quarter, and thus far and and the second quarter as well upon and if you'd add any day.
Yes, the only thing I would add Ramsey of usage that we've been talking about the sales.
Figures for the last two quarters, and I think you're seeing it and the performance today that that sales production is producing kind of outsized results for us to be able to grow our integrated business at better than kind of the long term target rate and an environment that is still not normalized and the same thing as Jeff just mentioned about our relationship led business.
To be growing and the high single digits I think kind of speaks to the fact that the sales success. We're having is leading to kind of additive performance in the environment that we're operating in.
That's true and it sounds like things are really trending in the right directions and I appreciate your answers and ill hop back in the queue. Thanks.
Thanks Randy.
Your next question comes from George <unk> of Cowen.
Your line is open.
Great. Good morning, guys and thank you for taking my question.
Wanted to start off on the issue of side of the business again, it sounds like you're seeing some real momentum if we look at it and sort of a normalized basis up high single digits.
The Paul just wanted to ask the 20% that is commercial.
Was that down again sort of another 30% and the first quarter and now how are you thinking about that as I understand it it's not going to recover but the comparison should start to ease.
Sort of going forward, yes.
Yes, that's right. So yes, we were down north of 30% and the quarter as it relates to the overall environment. There and yes, you are right in the sense that the comparisons.
Do ease as we move out now into the remaining three quarters, but just as the kind of and overall kind of.
Headwind relative to our back to our kind of more normalized growth rate, that's still providing roughly about half of that headwind that we called out in the prepared remarks.
Okay.
Helpful. And then specifically looking at the acceleration and merchant, which again seems to be really be sort of sort of taking hold.
Across the board and the outlook for sort of of high teens rate of growth.
Should we be sort of thinking for modeling purposes that we're talking about the growth rate.
In the second quarter that sort of and that 30% plus range for the merchant business.
Yes, George I mean, yes, youre thinking about that right that that's exactly kind of the right range to be thinking about.
Okay, great. Thanks debt okay.
Thanks Ross.
Your next question comes from Darrin Peller with Wolfe Research Your line is open.
Alright, thanks, guys.
When we look at the guidance and the inquiries and it's obviously nice to see the the first quarter and then buybacks are also helping.
Can you just touch on what implied or what's embedded in the guide outlook in terms of macro assumptions from here on out.
And so it looks like the trends and the current trajectory should allow for potentially more upside that we even raised so far so just really where are you keeping some elements of conservatism and the and the outlook versus including some thanks. Thanks.
Yeah Darrin this is Paul and I'll ask Cameron may want to add as well, particularly as it relates to merchant, but I think our outlook is <unk>.
And with to some degree of what we outlined the last time, which is that the trajectory that we were on the going into the year and the trajectory that we kind of continue on this is as we've kind of said before kind of of slow grind higher.
And we continue to while we're very optimistic about the.
And the future and I'm very pleased with the results. We also want to kind of see how things play out as it relates to particularly around the world, where we have different kind of dynamics playing around the different geographies, but we have said before and it's still true of the top end of the range does not perfection. It does not assume any.
The type of just kind of some massive kind of kicked back to normal, but instead, a grind back to normal with the third and fourth quarter kind of being a much more.
Normal kind of our more normal environment.
And as it relates to just March we were very pleased with the kind of overall growth rates that we saw in March and those were sequentially better on a monthly basis, then and now.
And obviously, what we saw in February and January and particularly some kind of more normalized kind of growth rate there but.
That's the way I would frame it from the.
And from an overall standpoint, and Cameron you got anything to add on that I mean, I think that covers the well I would just highlight the ball point earlier I don't think we have to see perfection to get to the high end of that range and they get the guidance doesn't assume that we assume that the trends that we're seeing and the business continued to flow through the balance of the year. We're encouraged by the performance and the first quarter.
And the underlying trends, obviously, we remain very mindful of the fact that some markets around the globe are slower to recover or appear to be slower to recover from the pandemic than others and those are markets that we have reasonably sizable business has been but I think as we sit here today the trend and the business are quite favorable and more berry.
Optimistic about how we're positioned to.
The form through the balance of the year, Yes, Darrin I would just say that follow up on Paul and Cameron and wipe all commentary so and March revenue for the business, which did not really lack of at least for half a month of and neck aggregate revenue was up and the 20% plus range and earnings welcome here.
So the per share so just to give you a sense as to kind of of what we saw and March obviously time will tell but that's kind of the run rate.
Alright, and Thats really helpful guys. A follow up is on the tech enabled businesses. When you think about the mix now with Vigo and downgrade and see more software acquisitions.
You combine that with what you have first of all Jeff I mean, where do you feel of the Companys position now in terms of its software presence versus your long term strategy do you need to do more do you want to do more near term of long term and then Cameron as well on the on the.
The AWS or the Google relationships on the cloud I mean, something we focused on it sounds like you are winning good business. There. If you could just give us a little more color on how that's been trending.
And the context of all of the tech enabled opportunities and again as Jeff I'll start. So you are stealing the thunder from the Investor day that in September.
September.
And I would say I would say that and most of that of new target for what percentage of the business is coming from tech enabled the next theaters and but I would say generally and of course that 60% threshold last summer of six months old and we thought of the yields lay out a point or two.
Add to that to that number, but obviously, we're targeting well north of 73 and 5% of the company think about Directionally up from 60 last summer, where we'd like to be longer term and for that.
Percentage of revenue, which means the vast majority of the growth by definition is coming from those coming from those areas. So we're really pleased our pipeline Paul and then it goes the whole array of things and post ego post paywall and our pipeline remains full and includes more software assets and it. So time will tell if we get those over the finish line, but I.
And if youre directionally, right and where your gallon also of the AWS and Kevin can comment on Google, but we could be.
And we're pleased with our relationship with David.
Lastly on track for all the things of the outlined last August and we announced the relationship and the first place the soft sales, we talked today about USD competitive takeaway clients somebody else for three decades.
And Theyre getting our first instance, and data and analytics and the cloud jointly with AWS. The Asia Bank, we've referred to now and testing environment wide with a lot of end of year another of competitive takeaway and I think what we said in our prepared remarks will be tripled.
The number of analyze Tony's and Amazon the readiness of late stages today versus where you were.
For year end of 2000, and so I think youre right to say that.
And we're firing on all cylinders, there and we really couldn't be more pleased with the transition. We've made there the cloud native environments kind of and want to comment on Google debt, well I think the comment.
GAAP of Google and how they have performed here before recognizing we are obviously early and that relationship and really building momentum as we sit here today so everything.
And we outlined on our year end call back in February as it relates to the price.
Partnership is very much on track.
As it relates to the go to market strategies, we're obviously and market with them already we're already in the midst of having conversations with a variety of of medium to enterprise sized customers, who are leveraging global cloud services today, and very optimistic about the future of that technology enabled distribution strategy and how it will augment the obviously.
Our existing go to market strategies and the merchant space.
Okay.
That's really helpful. Thanks, guys. Thanks Darren.
Hey, great. Thanks, guys.
Arch there Jeff with regard.
The revenue and EPS growth okay.
And we get those numbers for the month of April as well and and any breakdown by segment that you would give us some revenue growth by segment.
To give on the call like this right.
Now so I think generic.
And we speaking as a volume matter, we are seeing sequential.
Obviously, you and that's kind of what we see.
And that given the trends we saw in March.
And we used from an overall volume perspective, but as it relates to the financial results for April.
Wouldn't we wouldn't add that.
Okay. Okay, just as a follow up kind of a bigger picture question and wondering what youre seeing in terms of merchant demand.
Round the world to expect crypto and just general thoughts on longer term implications of that.
Growth and the crypto ecosystem for global payments and the merchant acquiring industry more generally.
Yes, it's Cameron I'll jump in on that so I would say.
Certainly and it may be the commentary on the merchants that makeup of our business and the margins. We're targeting there is really zero demand amongst our merchant base to accept presto.
Obviously over time and evolve if you have more central bank developing their own crypto currencies that really just become a digital form of their domestic currencies, and obviously that environment and change today, but I think.
As it relates to utilizing crypto currency for the sake of evacuate and commerce amongst merchant and our businesses around the globe, There's really no demand for that today and crypto is really not of currency for commerce and security.
And as the result of that we're really not seeing a significant demand or uptake of that and in our business at all.
Thanks, David.
Our final question comes from Dan Perlin of RBC Your line.
Line is open.
Thanks, guys and I appreciate you squeezing me and at the end here.
The question I have is really around.
In the instead of in the guidance can you just kind of help us parse out really what stimulus is actually driving in terms of the increase and <unk> seen.
I recall that.
You guys said you had contemplated the first round embedded in the first quarter.
But maybe hadn't been thinking about the second and most recent rounds and so now that those are contemplated I'm trying to understand how much you think that actually influence and the increase and guidance and how many quarters do you think it takes the kind of play out and visa seems to imply a couple of quarters of benefit. So I would just love to get your thoughts there yes.
Yes, so maybe what kind of answer that and kind of true respect automotive stimulus have as it relates to our business and consumer business and then and the second as it relates to the stimulus across really.
All three of our segments as it relates to spending and when it's in our business and consumer.
It is a piece and the driving piece around us as it relates to our overall revenue.
Outlook for that segment of moving to that cut from the mid single digit kind of a mid to mid to high so thats kind of where we wanted to try and kind of quantify the impact of additional stimulus net of the effects of that stimulus had on other products on yield. The overall tax season picture. So that gives you kind of the quantification.
Of kind of that difference between kind of mid single digit growth for that business and that kind of more mid to high single digit growth as it relates to just the revenue matter and it and we've obviously kind of talked about the margin impact you saw what we had from a marginal impact and the first quarter and then obviously that of play through and the second quarter. The other direction as we grow over the stimulus.
<unk> and <unk> of last year of of roughly kind of from a margin standpoint of kind of a similar size I would say as it relates to the stimulus across our overall business I think time will tell clearly you're getting some kind of across the board I think it gets a little bit harder to kind of peaks Paul.
Heart that.
And to the overall volume picture.
Good day, well, how much the stimulus how much does unemployment benefits and what all of that kind of looks like and so what we're looking at the overall.
Paul volume landscape, obviously were taking some of that versus what we saw last year and the impact of stimulus and kind of embedding that into Rosemary and hard to kind of get discrete around what kind of revenue impact.
That's discretely, having Cameron and I don't know if you have anything to add to that no I think if you look at the merchant.
Merchant business more broadly, it's not driven that much of a stimulus. If you think about and we've talked about this before we're more exposed to credit and we are debit and our merchant business and <unk>.
And this isn't really driving incremental credit spend.
But we're really seeing and the merchant business I think it obviously is the impact of the recovery as well as the fact that savings rates are at generational highs and.
And there was a lot of and up demand and.
Obviously, we expect that trend to continue.
And you obviously as we progress through the end of 2021, and probably well into 2022 sitting here today. So certainly on the margin putting more dollars and consumers' pockets and it's going to be helpful and the merchant business, but I don't view sort of the expansion and we saw Q4 to Q1 to really be driven predominantly.
And by stimulus I think it's more just the macro of recovery in general and the fact that obviously consumers are very well positioned.
To be able to spend and the <unk>.
Current environment as as the recovery progresses.
And Thats Great day here, just a quick follow up on margins I know you called out 250 basis points for the for the full year.
I think you said normalized underlying basis is like a 450 basis points.
The improvement when we think about the cadence of that.
Throughout the year I think we had originally thought maybe $50 million per quarter of kind of reinstated costs.
Is there any reason to believe that that shouldnt be pretty ratable or is there going to be some some higher cost is.
The rebounds really start to kick in into the second half.
Yes, no I wouldn't call out anything you need from a timing standpoint, I think the thing that we have highlighted is the dynamic that we're having the obviously and <unk> as it relates to the margins. So we're going to have outsized margin expansion and <unk>, particularly as it relates to not only just the incremental kind of cost add backs, but also just the comparison.
The <unk> of last of.
Last year, and then more normalized kind of margin expansion.
And that third and fourth quarter. So yeah, nothing I would call out unique from a timing standpoint other than that <unk> comp.
That's great. Thank you all.
On behalf on behalf of global payments. Thank you for your interest and us and joining us this morning.
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