Q3 2021 Global Payments Inc Earnings Call

Performing.

For a full reconciliation of these and other non-GAAP financial measures. 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 Dot global payments Dot com joining.

Joining me on the call are Jeff Sloan, CEO, Cameron Bready, President and CFO, and Paul Todd Senior Executive Vice President and CFO.

Now I'll turn the call over to Jeff.

Thanks Lee.

We delivered record third quarter results. Despite the incremental challenges that emerged during the period from COVID-19, highlighting.

Highlighting the resiliency of our business model and our ongoing track record of execution across market cycles.

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 eight the <unk>.

Trend toward accelerated digitization coming out of the pandemic has benefited our business by reinforcing that mode of competition in 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 city 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 city, we are delighted to have furthered our relationship with one of our largest commercial car customers for another eight years.

This agreement highlights a key element of what is already today, a successful <unk> 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 continued to build our pipelines with AWS to include additional fintech neo banks and embedded finance players spanning multiple geographies.

We now have 25 active prospects and 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 LOI have gone to contract.

We're also excited to announce that together with AWS, we signed an agreement with London based tenex to integrate its cloud native core banking platform with teachers as payment as a service capabilities.

Allowing us to collaborate on modern core banking initially solutions for Neo bank and traditional financial institution customers.

As we announced at our Investor Conference. We now have a terrific partner in Virgin money for a first use case, combining issuing and acquiring capabilities to offer transaction stream optimization solutions.

It's worth noting that Virgin money is also a significant competitive takeaway for us simply put we are 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.

And our vertical market 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.

As we highlighted we believe that we were successful because of our ability to seamlessly and uniquely combined 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, 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.

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

In our central 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 zeal business delivered record bookings in the third quarter and also had notable successes with subway whatever bojangles, RBI and wendy's spanning software hardware payments and data and analytics.

These results highlight the benefits, we're seeing from the 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-19 levels.

A few examples of global 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 through 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 are 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 and support a crypto currencies for the first time.

Together with city, 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 <unk> technologies.

We expect to enable more than one 5 billion. The NPL transactions. This year alone and we anticipate issuing more than $15 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 the NPL continues to grow we believe we are 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 Fintech startups of neo banks unique collaborations with AWS and Google.

Large existing scale players looking to expand the NPL globally into new markets and with added functionality.

And of course, the acceptance from our unmatched virtual and physical footprint with BNP is just one of the many services at the point of sale and our commerce enablement ecosystem.

At the end of the day, the enemy as cash and check and further digitization, including the NPL is the motive competition.

Our ability throughout the pandemic to sustainably expand our rates of growth relative to our markets has been indicative of our technology leadership.

This quarter was no exception with our global merchant acquiring businesses, delivering 900 basis points of outperformance relative to the credit trends reported by the card networks last week.

Our consistent track record of share gains during the pandemic is something we highlighted at our Investor Conference.

I'm also delighted to report that we successfully closed our acquisition of mineral trend in October after having announced our formal entry into the BB market in September.

As we highlighted then we had many of the elements of the <unk> offering post our merger with <unk> in 2019.

And the addition of mineral trees digitize payable solutions serves to enhance our <unk> product suite and expand our opportunity set and one of the largest and most underpenetrated markets and software and payments.

We intend to further scale our business rapidly.

In addition to mineral tree and the extension of our commercial partnership with city. We had several other notable <unk> achievements in the third quarter.

These include a new relationship with whether tech and our Heartland business for <unk> as well as BDC acceptance.

Nearly 50% payroll solutions growth in the third quarter compared to 2019.

A tenfold increase in the number of customer locations using our tips solution from our business and consumer segment for disbursement since the beginning of the pandemic.

We continue to have tremendous firepower to conduct strategic transactions with billions of available capacity.

Of course this is on top of the $2 $5 billion, we have already invested over the last year during a pandemic in acquisitions consistent with our strategic partners, including our emphasis on faster growth geographies.

And it's in addition to the nearly $2 billion, we've returned to shareholders over the last year.

To that end, we are pleased to have now closed our acquisition of <unk> merchant acquiring business together with our partners at <unk> last month.

Deepening our presence in one of the most attractive markets in Europe.

And through our <unk> joint venture. We also very recently closed our acquisition of <unk> pay one offering in Pos acquiring assets.

Enabling us to bring our distinctive distribution and market leading technologies at scale to get another attractive market.

And our pipeline remains full despite the investments we've already made over the last 12 months. The majority of which has been in software assets and further <unk> of our longstanding technology enablement thesis.

Paul.

Thanks, Jeff.

Our financial performance in the third quarter of 2021 exceeded our expectations, despite incremental headwinds from COVID-19, and the delta variance during the period.

Specifically, we delivered record quarterly adjusted net revenue of just over 2 billion, representing 15% growth compared to the prior year and 10% growth compared to 2019 adjusted.

Operating margin for the third quarter was a record 42, 8% a 170 basis point improvement from the prior year and a 420 basis point improvement relative to 2019.

That result was record quarterly adjusted earnings per share of $2 18.

An increase of 28% compared to the same period for both the prior year and 2019.

Taking a closer look at our performance by segment merchant solutions achieved adjusted net revenue of $1 36 billion for the third quarter, a 21% improvement from the prior year and a 13% improvement compared to 2019.

We are also pleased that our acquired businesses globally generated 22% and 19% adjusted net revenue growth compared to the third quarter of 2020 and 2019, respectively.

This was led by continued strength in the U S. While we also benefited from improving trends in international markets, including Spain, Central Europe, and greater China.

Focusing on our technology enabled portfolio, we continued to see consistent growth in our global payments integrated business as we deliver a vertically fluent suite of commerce enablement solutions across dozens of vertical markets.

As we highlighted at the Investor Conference a number of our businesses, including our integrated business have grown right through COVID-19, and are now at levels that we would've otherwise expected them to achieve absent the downturn.

Our worldwide E Commerce, and Omnichannel solutions delivered growth in excess of 20% year on year. Once again this quarter as we continued to benefit from our unique ability to seamlessly blend the physical and virtual worlds and create frictionless experiences for our customers on a global basis.

Okay.

As far our own software businesses in the U S. We are pleased that the overall portfolio delivered strong sequential improvement as the recovery begins to take route in some of the more impacted vertical markets.

Given the positive booking trends, we have seen throughout the pandemic, including this quarter, we're confident that the businesses most impacted by COVID-19, and this portfolio remain on a path to recovery.

We delivered an adjusted operating margin of 49, 3% in the merchant solutions segment, an increase of 200 basis points from the same period in 2020, as we continue to benefit from the underlying strength of our business mix and the realization of cost synergies related to the merger.

Moving to issuer solutions. We are pleased to have delivered 458 million and adjusted net revenue a 6% improvement from the third quarter of 2020.

This performance was driven by the continued recovery in transaction volumes as well as growth in accounts on file file non volume based revenue increased mid single digits during the period, including low double digit growth in our output services business again this quarter.

Issuer adjusted operating margins of 43, 4% were up slightly from the prior year.

As you May recall issuer solutions achieved margin expansion of 500 basis points in the third quarter of 2020 over 2019 fueled by our focus on driving efficiencies in the business.

We're also pleased that our issuer.

<unk> five long term contract extensions during the quarter and our strong pipeline, including the growing list of opportunities. We have in collaboration with AWS continues to bode well for our future performance.

Finally, our.

Our business and consumer solutions segment delivered adjusted net revenue of $208 million representing growth of 2% on a reported basis for the third quarter.

Adjusting for the stimulus benefits and higher unemployment volumes last year, our adjusted net revenue growth was in line with our targeted growth range for the quarter.

Adjusted operating margin for business and consumer solutions was consistent with the prior year at 25, 6% after expanding more than 700 basis points. During the third quarter of 2020 as a direct result of our efforts to streamline costs and drive greater operational efficiencies with net.

Further we are pleased with the early progress we are making on our strategic partnership we announced last quarter with AWS in this business. While we also launched and began selling our earned wage access solution to existing <unk> clients and into new vertical markets during the period.

The outstanding performance, we delivered across our businesses. This quarter serves as a further proof point that we continue to gain share and that our four pillared strategy positions us well to capitalize on the accelerating digital trends coming out of the pandemic.

From a cash flow standpoint, we generated roughly 850 million during the third quarter and remain on track with our target to convert roughly 100% of adjusted earnings to adjusted free cash flow.

We invested approximately 132 million in capital expenditures during the quarter in line with our expectations.

We have now successfully closed our acquisitions of mineral tree been key as merchant services business and we're alliance cable on Austria assets consistent with our expectations.

We expect the contribution from these acquisitions to adjusted net revenue to be immaterial in the fourth quarter.

We are pleased to have also returned cash to our shareholders. This quarter through the repurchase of approximately $4 2 million of our shares for approximately $741 million.

We ended the period with roughly $2 5 billion of liquidity after repurchase activity and funding of the bank via acquisition.

Our leverage position was roughly two six times on a net debt basis consistent with the prior quarter.

We remain encouraged by the trends we are seeing in the business and we are raising the lower end of our guidance for adjusted net revenue to now be in the range of 771 billion to $7 73 billion, reflecting growth of 14% to 15% over 2020.

Yeah.

We are adding $10 million to the bottom of the range. Despite anticipating an incremental headwind from foreign exchange rates since our last report and absorbing the impact of the delta bearing of COVID-19.

We also continue to expect adjusted operating margin expansion of up to 250 basis points compared to 2020 levels, excluding the impact of our already announced and closed acquisitions. As previously discussed we expect those transactions to result in a headwind to our margin perf.

Formats, and we now expect adjusted operating margin expansion of around 200 basis points for the year.

At the segment level, we continue to expect merchant solutions adjusted net revenue growth to be around 20% for 2021.

We also continue to expect our issuer business to deliver growth in the low to mid single digit range and for our business and consumer segment to be in the mid to high single digit range for the full year.

Moving to non operating items, we still expect net interest expense to be slightly lower in 2021 relative to 2021.

While we anticipate our adjusted tax rate will be relatively consistent with last year.

Putting it all together, we now expect adjusted earnings per share for the full year to be in a range of $8 10.

The $8 20.

Reflecting growth of 27% to 28% over 2020, which is up from $8 seven to $8 20 previously.

Our outlook assumes the macro environment remains stable worldwide over the balance of the year and now includes an incremental headwind from currency.

Finally.

We are pleased that our unique strategies that capitalize on the acceleration of Digitization in payments are ongoing technology enabled mix shift.

Our exposure to expanding cans, including now b to B and our track record of disruptive M&A.

Provided us with the confidence to raise our cycle guidance at our September Investor Conference.

In particular, we continue to expect adjusted earnings per share growth in the 17% to 20% range over the next three to five years on a compounded basis.

And with that I'll turn the call back over to Jeff.

Thanks, Paul.

Our strategy has been centered on Digitization since we started the company a little over eight years ago.

By accelerating the underlying trends toward technology enablement.

<unk> has reaffirmed the wisdom of our approach and we now target three quarters of our business from these channels over the next cycle as we said in September.

Our formal entry into the BBB market reinforces the existing legs of our stool, including software primacy, a leading e-commerce franchise and an unmatched presence in many of the most attractive markets worldwide.

These strategies are a complementary and interrelated and provide us with substantial and incremental growth opportunities for years to come.

The record results for the third quarter that we reported today and our raised cycle guidance in September our expressions of our confidence in our strategies and are the most recent examples and best evidence of their success.

We just delivered a record quarter on any number of bases and the best year in our history during the midst of a once in a century pandemic I.

I think you can see why we view the glass as full.

We exit the pandemic better off than we entered it judge for yourself.

Before we begin our question and answer session I would like to ask everyone to limit their questions to one with one follow up to accommodate everyone in the queue. Thank you.

Operator, we will now go to questions.

Okay.

Thank you, ladies and gentlemen, Laurence and thank you for your question. Thank you I would like to ask a question at this time simply press star one on your telephone keypad.

Any point you would like to withdraw your yourself from the queue. Please press star one again.

Your first question comes from Tien Tsin Huang of Jpmorgan.

Hey, good morning, everyone. Good to connect with you all I wanted to ask first on the.

On the issuer side. So you did announce a bunch of renewals and also it looks like AWS pipeline is picking up here I'm just curious I mean.

Any change in pricing on the on the renewables front and the new prospects on the AWS side.

Looked like a bit more de novo as a modern issuers traditional issuers.

Thank you Tien tsin installed, it's Jeff and I'll ask Paul to Paul to comment. So we're really pleased with the performance. This year in the issuing business in particular, we continue to make very good progress AWS on coupons first on the technology side.

And second on the on the distribution side as it relates to the.

The existing customers it really has not been any change.

In the competitive landscape I would say we continue to believe that.

We win kind of 80%.

On balls that come up I think we announced today that we got 10 folks in the in the Hopper on the issuer side, which are competitive takeaway. It is before the <unk> that we use.

Recently signed so we don't view that as we really don't view that as as changing I'd also say that before we get to the second part of your question I would also say that our partnership and collaboration with AWS really does sell in the marketplace show in the last quarter, we've met with a number of our large financial institution customers and I think the public cloud.

Centric approach that we've taken with AWS, starting in Europe quarter ago.

Really sells and resonates I would say as we said the time Tien tsin dramatically expands our target addressable market. I think we said was three X last August, but certainly with larger <unk> and across the spectrum really does that really does resonate. We think we're ahead there based on feedback from our customer base on the second part of what you said I would say the vast majority.

<unk> of those prospects and there was a page on this engine in our Investor Conference. The vast majority of those prospects are Neil banks fin techs and startups. So we certainly have a number of prospects on the traditional side, particularly in light of the Amazon.

Relationship I would say the vast majority of what we're looking at there in the Codell side.

With AWS and now also with <unk>, and Pwc really center around <unk> and startups and.

That 25 number represents the vast majority of them Paul do you want to add.

I would say Tien tsin is that just reiterated how happy we were with the growth in the third quarter. We had strong transactional growth strong account on file growth. So our volume based revenue was growing right and that kind of long term growth rate of that mid single digits and so we expect that kind of fundamental growth to continue.

And certainly as Jeff, etc environment that we're operating with it.

Very similar to how we've been operating this business for years.

Okay, great. Thanks for you Bob just a quick follow up just on the for next year, given the incremental FX headwinds do you still see 20%.

Growth in 'twenty two.

Yeah, Jay we.

We talked about this at the Investor day that target.

Of.

The long term cycle kind of guidance, what's consistent with how we are targeting for next year to be at that higher in about 17% to 20% range. Obviously, we've got work to do as it relates to finalize and kind of all of our plans will come back and give the formal guide.

At the start of next year, and obviously, we will assess the environment at that time, but from a targeting matter that higher end of that 17% to 20% EPS growth ranges.

Our target.

Excellent. Thank you guys. Thank you. Thanks.

Thanks, Tien tsin.

Your next question comes from Bryan Keane of Deutsche Bank.

Hi, guys good morning.

Jeff when you talk about some of the incremental challenges from COVID-19, where does that show up is it mostly in Europe or in Asia, I'm, sorry, and is that did that continue in October.

Hey, Bryan its Cameron if you don't mind I'll jump in on that I think most of it obviously shows up not surprisingly in the merchant business. So I think we saw it in a few places first a little bit in the U S.

We saw very good trends in the U S. Notwithstanding COVID-19, but we certainly did see in certain verticals some impacted from the Delta variant in the third quarter I would say more specifically we saw it in Europe, and Asia Pacific and probably more predominantly in Asia Pacific markets like the UK, obviously, we're struggling with the Delta variance Big naphtha.

To kind of come back a little bit more in Asia Pacific Australia had a number of shutdowns during the quarter that we had to grapple with from a from a financial standpoint and from a revenue standpoint, but I would say overall most of that was absorbed in the third quarter and as we've gone through October we're seeing October trends slightly better than what we saw in the.

In the third quarter, and even coming out of September which was a better month than we saw in August. So the trends continue to look favorable October being slightly better than what we saw in the third quarter and I think much of the Delta impact is really behind us and largely isolated to the third quarter.

Got it helpful and then how about some of the trends in the businesses that had been a little bit slower than thinking about education Act of gaming.

What is the rebound look like in those businesses.

Yes, I think if you look at the government market overall, we saw a strong sequential improvement from Q2 to Q3 about 500 basis points relative to 2019 results for that business, but it is fair to say that we're still on the road to recovery in the vertical market business overall, largely because of the vertical markets that you highlighted.

Active in K through 12 continue to be down relative to 2019 levels. We did see sequential improvement in both and they're trending in the right direction, but there's still some time to go I think before those markets get back to.

Certainly the levels of performance that we saw pre pandemic. If you look at the business overall, it was still down slightly relative to 2019 in the third quarter, but we are expecting it to turn positive versus 2019 in the fourth quarter, giving us good momentum heading into 2022 as we continue again down the path of recovery with the FERC.

Well market business overall I would highlight we continue to see very strong trends across advanced AMD, our enterprise <unk> food and beverage business and of course, our higher education business, all of which have grown nicely throughout the course of the pandemic from a recurring revenue standpoint.

All of which produced very strong results in the third quarter as well.

Great. Thanks for taking the questions.

Thanks, Brian Thanks, Brian.

Your next question comes from Ramsey El <unk> with Barclays.

Hi, gentlemen.

I wanted to ask Jeff you about capital allocation at this point and the balance between M&A and kind of given where the stock is trading from a valuation perspective.

Essentially dialing up share repurchases I guess, the second part to that is if M&A is the past is it transformative large deals or is it maybe pivoting to sort of many smaller deals type of a strategy any color on those topics would be helpful.

Yes, Thanks Ramsey so on capital allocation I think you should look at what we've done in the last 12 months as being a really good indicator of kind of where we're focused so in the last 12 months as we said in our prepared remarks, we've invested $2 $5 billion in M&A, primarily I think 60% of which is around the cloud SaaS based based technologies that we did that while returning nearly $2 billion in capital.

To our shareholders also during the last 12 months, so I'd say from a capital allocation point of view and <unk> described the math on the repurchases you I don't really think thats.

I don't really think Thats changed so I think balanced between the two is essentially what we've been what we've been doing and I would expect that to continue on the M&A side look I think we look at at most things that fit our strategic thesis that's been consistent.

Over the over the last year. So we look at things that are in the software space. We obviously now look at things that are in the <unk> space post the mineral tree.

Announcement, as we said at the time last month, Washington September military.

As with probably one of our first dilutive deals that we're absorbing that.

Bulk side at our annual numbers as well as an IRR cycle guys Thats really expanded the 10 as to what were.

Well, we're looking at looking at new geographies.

E Comm and alliance.

I think the exchange rates at Ramsey I think we've got the full suite of opportunities as I said in my prepared remarks of our pipeline notwithstanding the fact that we announced the closure of a bunch of deals today, our pipeline continues where they fall.

Okay.

A follow up from me could you talk about the Paypal relationship how it sort of evolved over time.

And also maybe elaborate a little bit on the crypto piece and if I can just bolt on another one there.

Could you just call out the U S and global kind of two year stack of a two year CAGR in your merchant business I, just want to make sure that I'm understanding the kind of sequential acceleration there correctly.

Yeah, Okay, well I'll start with Paypal and ask Cameron and Paul to comment on your <unk>.

Last last piece. So we're really pleased with that Paypal announcement today. This.

Expansion as well as extension is for a multi year multi year term. So we're really pleased with that I would say, there's a few differences before I get to the Pepto comment. The first thing I'd say is we're adding additional geographies as part of the part of the relationship the second we're adding additional vertical markets.

Where we can go together jointly to market with that with Paypal, which also is an expansion in the third obviously is what you asked about around crypto that crypto is really two pieces Ramsey. The first piece is if youre using a paypal digital wallet and youre buying crypto in the wallet at banquets Bankcard sources.

Particularly anywhere in the world, but especially for these.

Luxury purposes, North America, and Europe that will be us helping to facilitate those purchases on behalf of Paypal and the second part of the crypto stuff is Paypal if it needs an acceptance at things like coinbase to the extent that youre going online buying crypto at something like a coinbase and use Paypal that pay button to.

Procure that purchase they said that its bankcard related that also is something that we expect to have a hand in so those are new things for us those things are hard.

To do on the acceptance side, especially on a worldwide.

So we're pleased to place to be in a position to do that I would say if you backup early and say, okay. What does it mean, our view of our relationship with Paypal that this expansion and extension really doubled the size of our addressable market with Paypal who were.

Obviously very pleased to be partnered with Cameron and Paul you guys, Let's talk about the last piece of the question, Yes, Hey, Ramsey, It's Cameron I'll jump in there I think your question was what were the growth rates versus 2019 for the merchant business globally as well as for the U S merchant business. So again merchant globally, excluding our vertical market channel was up 19% versus two.

19 levels in the quarter in the U S. Number was I think 'twenty two 'twenty three something in that in that range for the third quarter pretty consistent with what we saw in the second quarter.

Perfect. Thanks, so much I appreciate it.

Thanks Randy.

Thank you. Please stay online for your next question.

Your next question comes from Jason Kupferberg of Bank of America.

Hey, Thanks, guys. Good morning, just wanted to drill in a little bit more on the owned software the vertical markets business.

The growth rates, there year over year and versus 2019, and just any color you'd want to offer in terms of some of the specific vertical and what you saw there with respect to new sales and pipeline build et cetera.

Yes, Jason it's Cameron I'll jump in and I'll ask Jeff and Paul to add any color that they would like to maybe I'll just start with sort of baseline of things as I mentioned earlier, the overall vertical market business. It was up roughly 16%, 17% versus Q3 of 2020, it's still down slightly versus 2019 levels.

Call. It mid single digits as I mentioned earlier, we do expect it to turn positive versus 2019, as we get to the fourth quarter. So I'll start with maybe some of the more positive vertical transit, we see advanced AMD touch net and again, our <unk> business all reported very strong growth as a consistently.

Half throughout the pandemic in the third quarter touch net advanced AMD, both up mid teens in the quarter. Our <unk> business was up probably mid thirties versus 2020 levels again as we've seen a nice rebound in that business and then relative to 2019 <unk>. That's up 20 plus percent advanced MTS up almost <unk>.

30% in our <unk> business is up almost 10% holiday to 10 somewhere in that ballpark versus 2019 levels. So very pleased with where those obviously vertical markets are trending how they performed throughout the pandemic. We continue to have excellent momentum in those as we head to 2022, obviously, we have seen.

More impact as we talked about earlier in our CAGR 12 school business inactive and in our gaming business over the course of the pandemic school enacted continued to be below 2019 levels.

We are seeing improvement sequentially, but the road to recovery for those businesses is obviously going to be a little more long tailed and what we're seeing in other vertical markets gaming in this quarter was flat versus 2019. So it has come back quite well it was up meaningfully over 2020 levels almost 30% in the quarter and it got to flat.

In 2019, and again, we expect that to turn positive in the fourth quarter.

Overall, the business is trending in the right direction. The verticals that have been more heavily impacted are going to have a little longer road to recovery. The sequential trends are good and we would expect to see that continuing heading into 2022, So I'll pause there and maybe just turn my attention to bookings trends because that continues to be a very good story for the vertical market businesses.

We saw excellent new booking trends in the quarter, our recurring revenues in that business bookings were up 35% year over year advanced MD recorded a bookings record up nearly 50% year over year, our <unk> SaaS solutions were up almost 50% year over year, and <unk> was up almost 35% year over year.

And active and schools continue to see good booking trends. Despite obviously the overall macro continued to weigh on those businesses active bookings were up.

In the mid teens year over year, and our school business had positive booking trends in the quarter as well so as we think about the business overall the bookings trends we've seen in this quarter and frankly, what we've seen throughout the course of 2021 gives us a lot of confidence that from a momentum perspective, we're obviously building a nice backlog of business and as the macro.

ROE in the more heavily impacted verticals improves we obviously have a lot of tailwind for the vertical market channel heading into 2022 and 2023.

That's great that's great.

On the consumer segment I was curious how that growth just under 2% growth there in the quarter, how did that compare to your expectations I know reflected some deceleration off an easier comp, but we did see stimulus start to start to run off and I know Paul you made a brief comment about that you wanted to hear.

A little bit more about how youre thinking about sort of the normalized effects of the stimulus expiring in <unk>.

You talked about the full year growth target being intact, theyre kind of mid to high single digits, but with one quarter left in the year I'm wondering if we can hone in a little bit more on where you think Q4 may land based on everything you know today.

Yes, so yes, it's a good question and you're exactly right what really impacted us in <unk> was that unemployment insurance kind of additional piece that we were picking up. After you took that out we grew this business in the third quarter at kind of that longer term mid to high single digit target for the third quarter and.

As we look to next quarter.

Chad we're expecting this to be in that kind of mid to high single digit for the year, we're expecting that business to roughly generate at roughly that level in the fourth quarter to that kind of longer term targets. So yes, we get passed on the Scrappage comparison benefits for some period of time related to stimulus and unemployment, but as it relates to the.

Third quarter that was the biggest dynamic that was planned for that resulted in that roughly 2% growth rate.

Okay. Thanks for the comments guys.

Okay. Thanks, Jason.

Your next question comes from Dominic Gabriel with Oppenheimer.

Hey, great. Thanks, so much for taking my question I was actually just.

Wondering if you could talk about the recovery in the vertical markets and how that yes. Thank you for all the cover color already but how that plays into your 2022, EPS guidance, what kind of levels of recovery and revenue versus either 19 or 20.

Are you assuming there and then I just have a follow up thank you very much.

Yes, so I guess I would start off by kind of add Ron what Cameron said is that starting in the fourth quarter of this turns into a growth tailwind for us and we've talked for several quarters now of this vertical market there because of the <unk>.

Important to the business being somewhere about 3% to 400 basis point headwind to our segment margin over the last several quarters and starting in the fourth quarter with the kind of sequential quarter growth. We're seeing this turns into a tailwind and I think as Cameron said with all the bookings success kind of we've had we're expecting.

Being that essentially three to 400 basis point.

Headwinds to kind of turn into kind of a commensurate kind of tailwind as we move into 2022, obviously, we're in that planning process right now and we'll kind of get more.

Kind of discrete levels of <unk>.

Inside as well.

Talk about the 2020 to you guys, but the key point is exactly what kind of Cameron Chad is kind of a headwind turning into a tailwind as we move into next year.

Just in general as we look to the 2022 guidance.

Once again kind of go back to what we said at our Investor day around our cycle guidance as it relates to.

Revenue growth those are the levels that we're targeting at or even slightly better at the levels that we're targeting for next year as our revenue growth and higher.

Excellent really great color on all of this and then if you think about the distribution of your margin expansion as we look ahead and kind of what's implied for the merchant solutions segment in the fourth quarter, how should we think about the distribution of margin expansion across your segments given all the opportunities you see in the growth path.

That youre that Youre focused on thank you very much guys.

Yes, so thank you.

Talk about this year, specifically at that kind of margin distribution I mean, it's very consistent with what we saw in third quarter, which is merchandise the biggest margin kind of a driver for us as a company this year coming off the big margin gains that we saw in our issuer business in our business and consumer solutions.

Last year and so as we move into next year things become more balanced in that regard, it's kind of a margin kind of delivering across the segments gets into kind of more normalized kind of range and obviously at our Investor day, we kind of talked about on X synergy kind of what we expect kind of cycle guidance margin expansion to be.

But obviously for this year and for the remaining for the fourth quarter. The the merchant margin expansion is the biggest driver.

Thank you.

Your next question comes from the line of Dave Koning of Baird.

Oh, Yeah, Hey, guys. Thank you.

You get good disclosure about the processing revenue per cent of 19 being about 119%.

We had decent Mastercard global volumes I think you said $1 21 in Mastercard at 128. So you are really close to that I know, it's a hot button issue for why it's a little bit below I don't think it's losing share I think it's just some of the verticals in the SMB exposure, but maybe.

You can kind of confirm that and B E.

Is that going to catch back up as SMB keeps gaining share relative to like big box like how do you just see those patterns playing out.

Yes, David that's the wrong numbers, so it's up 19% and the visa Mastercard worldwide credit volume numbers that they reported last week were up 8% and 13% respectively. The average of those two days its about 10 or 11, and we just reported 19. So if you go back Dave and look at our Investor Conference.

In September we actually have a chart on this which shows how we do the calculation will be compare to.

And as I said in my prepared remarks, Dave.

The average at these at Mastercard by 900 basis points again, this quarter relative to 2019, so thats the right comparison smarter idea.

Okay got it I just was looking at credit and debit combined I was just looking at the total market. Instead of yes, Yes, you got to look at we look primarily at credit worldwide, because our business is mostly a credit business. So again, if you look back at our Investor Conference from September Dave on the left hand side of that page you will see how would you calculate.

And we're pretty clear about how we do it and the 900 basis points. Today compares very favorably and I think it's the second highest number of that paid relative to the start.

So from our point of view that's the that's the comparison, we really don't have a very debit centric centric business.

Got you. Thanks, that's all.

Really helpful and I guess the second one just how big was the CEO in Q3, just so we can get organic constant currency yes.

So Dave we had talked at the time, but <unk> being about $100 million on an annualized basis of revenue impact.

And so in a half year, it's $50 million or a quarterly basis have added roughly $25 million.

Got you great. Thanks, guys nice job.

Thanks, Ed.

Yeah.

Your next question comes from Trevor Williams of Jefferies.

Hey, guys. Good morning, Thanks for taking the question.

I was wondering just two parts for me and I'll ask upfront, but would you be able to just parse out the FX impact in.

This quarter from both merchant and issuer.

Then in <unk>.

Just trying to back into what's implied.

In merchant to get to the 20% for the full year. It doesn't look like there's any real embedded improvement.

Versus 2019 levels at least from Q3, so just trying to better understand the puts and takes there it sounds like vertical markets, a little bit better sequentially FX a bit tougher and then maybe just kind of holding off.

October trends kind of flat through the rest of the year. So just any kind of help there on the puts and takes relative to <unk>, what you have embedded for merchant.

Yes, so roughly about 100 basis point, the way to think about the currency impact to us at a kind of a total company level.

And that's kind of the rough Jonathan as it relates to <unk>.

Merchant as well.

I wouldn't call out anything much more dramatic on that on the issuer side and if you look at <unk>, which is kind of our FX commentary before relative to our expectations. If you look at for Q4.

We're expecting about half that kind of benefit in <unk> relative to <unk>, so kind of incremental kind of headwind in the fourth quarter relative to our expectations.

We're expecting to see I saw in the third quarter versus what we're kind of expecting to see in the fourth quarter, given where rates are which is primarily driven by <unk>.

<unk> and the pound and what's happened there.

Last quarter since since the end of last quarter, where kind of where we are right now.

Okay.

And then I would say on the second part of your question in terms of the merchant implied guide for revenue growth in the fourth quarter versus 19, Thats actually acceleration versus 19. So it's not correct to say it's stable, it's actually improving Paul do you want to add.

Yes, firstly at a 19 year, we're expecting over a 100 basis points of kind of acceleration in the fourth quarter versus 19 to what we saw in the third quarter. So.

Sure.

As we said for the fourth quarter, we're expecting kind of roughly to be at kind of an overall compared to 20, where we expect to land for the year for merchant, but if you compare that to 19, we're actually seeing north of a 100 basis points of third quarter to fourth quarter acceleration on the merchant segment.

Okay, great and if I could just sneak in a quick follow up any comment just on how trends into October looked in merchant relative to September.

Just any color there would be great. Thank you yes.

And I think Cameron maybe referenced just a little bit earlier is we're seeing slightly improving trends.

In October versus September so, we're very pleased with.

What we've seen.

So far starting this quarter and obviously the environment remains dynamic, but we're very pleased with what we've seen so far.

Yes, Trevor its Cameron I would just add it's pretty consistent with what you saw from the networks that reported last week as far as a sequential improvement in October versus what we saw in Q3 in September in particular.

Got it okay perfect. Thanks, guys. Thank.

Thank you.

Your next question comes from Ben Zucker Ubw.

Hi, Thanks for taking my question just I wanted to ask about the issuer business I know the commercial piece of the business with a headwind the CR.

Sort of how you were thinking about the recovery in that piece of the business and any leading indicators you are seeing at this point to support a case, where a company in the next year.

Yes, so we havent forgotten to see recovery on the commercial side this year.

So things have been slightly better than what we were expecting and given those kind of trends. We are expecting to see kind of further acceleration of commercial into next year as Jeff commented our own very pleased to have announced the Citi renewal, which was obviously a very important renewal for us on the commercial.

Si so yes as third quarter matter the growth that we saw there obviously were still.

Looking to kind of get back to where the pre COVID-19 levels would be in that business and we're trending in that direction and.

And so yes that will turn into a continued tailwind for us on a go forward basis.

Got it. Thank you and if you could remind us quickly the timing of some of the new wins that you were expecting coming into the numbers next year and also if I may if you could quantify the impact I know you guys have said minimal C is the new adds upfront does.

Or does it sort of.

Rounding up to attend and dilution or is it completely immaterial for the fourth quarter. Thank you.

So a couple of things.

Maybe I'll take the kind of the mineral tree and really all of the acquisitions and we kind of commented on those as it relates to the overall margin impact.

In the prepared remarks is we've got call. It a roughly 50 basis point kind of headwind to the margin in the fourth quarter related to all of the acquisitions, obviously mineral tree is the most impactful there because as Jeff said it was dilutive so.

That's kind of a way to kind of think about as it relates to <unk>.

The dilution that we're expecting to see in the fourth quarter, particularly on the margin side.

And go back to the first part of the question first I think it was 10.

That's right Joe on the issuer side, yes.

I'm barely given our conversion pipeline.

Looking more at a late 2022 early 2023 for most of the kind of wins that we're talking about there there is a little bit of impact that comes in later.

And next year, but thats, primarily 2023 and beyond.

Got it thank you very much thank.

Thank you.

Yes.

Your next your next question comes from Ashwin <unk> of Citi.

Yes.

Okay.

Hey, Jeff comment on many good money.

Good morning, good morning Ashwin.

So.

One of the questions I had was between the acquisitions that you made less fed funds and the steady high taking a neighborhood piece.

You've seen us slowly towards the years are you beginning to see changed seasonality.

In your business that you kind of think of debating this quarter, because I'm just thinking of.

The setup as we head into.

Into next year.

No ashwin.

We can call add anything kind of unique there I mean, typically if you kind of go by segments typically as it relates to our merchant second or third quarter from a seasonality standpoint is our strongest quarter.

From the from that business and nothing has dramatically changed on that from a kind of issuer perspective, typically the fourth quarter.

Holiday spend and the way that business is constructed that typically has a strong record I would say that in general that has become a lesser of a seasonal outlier in the fourth quarter. Just the way that business is we have certain pricing bundle to know, but that lesser of an impact there and then obviously in our business and consumer.

There's obviously kind of a different kind of moving parts now with all the stimulus kind of comparison to typically tax season.

The first quarter and depending on how that kind of plays out into the second quarter has been kind of the seasonal call out as it relates to that business. So yes.

At a consolidated level I wouldn't call out anything unique pitch changed on that on the seasonality side.

Kind of ways to think about it at the segment level.

Got it got it and then as we sort of think of again sticking to the tech enabled side.

As the percent of owned software.

Partners sort of goes up can you talk maybe about the.

Attach rates for cross selling.

Rental work.

Payments are.

Add on value added services time and attendance HR.

Lee it's different types of things that you guys do can you talk about the Apache tapes and maybe some examples of the program.

Yes, Glenn it's Cameron I'll jump in on that and I'll, just remind you ive spent a lot of time on this on the Investor Conference speaking about this very topic. So if you think about our strategy, it's really centered around commerce enablement and whether we're working with a software partner or we're working obviously with our own technology stack from a software standpoint, where we go to market and verticals.

With our own capabilities. The objective is to continue to bring more merchants into our ecosystem leveraging technology and once they are in our ecosystem, obviously, finding new ways to provide solutions to them to help them run their businesses more effectively and obviously help them drive more top of funnel opportunity for their business. So our partnership with Google is clearly at the.

The center of that strategy in terms of how we deliver more value added services and more capabilities to our customers across again, both our owned software portfolio, our traditional merchant acquiring businesses and then of course, our own our partnered software portfolio as well, so obviously theres a lot of opportunities.

None of us as we continue to execute against that strategy. We are launching run and grow my business. This quarter, we expect that to ramp next year and we're launching phase two of that as Jeff highlighted hopefully in the middle part of next year as we bring in online ordering inventory and reservations into that ecosystem from a right time and attendance is a great example of where.

We can take our solution from one market into another we're selling time and attendance now across a few of our vertical market businesses that came out of our payroll solutions and looking to bring that to a number of our integrated partners as well as a way to which we can again attach more opportunities to those partnership relationships on the integrated front.

I'd also note that that strategy is also key to winning new ISP partners because one of the ways, we're able to differentiate ourselves versus just offering a windows revenue shares is to offer a larger pie from a revenue standpoint that we ultimately end up splitting with those Isps because we can bring more solutions to the table. It makes the <unk> offering.

More attractive it gives us more opportunity to grow and scale with the IV and is always like to say, we'd rather be focused on how to divide up a larger pie versus more finely slicing and existing pie that's not growing so I think as it relates to the overall merchant strategy highlighted what's really key which is driving more commerce enablement by.

Attaching more of our offerings to merchant relations as it come through whatever distribution channel, we're selling through into the market. Yes, I would just add ashwin, what Cameron said that we also talk about in the Investor conference our ability to add data and analytics, which is a business that we took there was five minutes to a business that we took were essentially zero revenues number of yours.

<unk> got over $130 million say, that's part of the value added services that you asked about and the camera tied to Q and I think all that stuff is working and I think you'll look at our results in the third quarter <unk> was up 13% in the third quarter volumes or 20% versus 2019. So it's the commerce enablement that Cameron is describing in response to your question, which is to say the virtual.

Circle of software at the top of funnel the cross sells the data analytics, the new partnerships all of that stuff is resulting in clearly above market growth on the stats I just gave and what we put in the press release.

Yes.

Got it thanks again.

Thank you very much while behalf of global payments. Thank you all for joining us this morning.

Ladies and gentlemen. This concludes today's event. Thank you for your participation you may now disconnect.

Okay.

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