Q3 2023 Global Payments Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to global payments third quarter 2023 earnings Conference call. At this time all participants are in 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 Winnie Smith. Please go ahead.

Good morning, and.

And welcome to global payments third quarter 2023 conference call.

Our earnings release and the slides that accompany this call can be found on the Investor Relations area of our website at Www Dot global payments dotcom.

Before we begin I'd like to remind you at some of the comments made by management. During today's conference call contains forward looking statements about among other matters expected operating and financial results.

Statements are subject to risks uncertainties and other factors, including the impact of economic conditions on our future operations that could cause actual results to differ materially from expectations.

Certain risk factors inherent in our business are set forth in filings with the SEC, including our most recent 10-K and subsequent filings.

We caution you not to place undue reliance on these statements.

Forward looking statements during this call speak only as of the date of this call and we undertake no obligation to update them.

We will also be referring to several non-GAAP financial measures, which we believe are more reflective of our ongoing performance.

For a full reconciliation of the.

non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations.

Please see our press release furnished as an exhibit to our form 8-K filed this morning, and our supplemental materials available on the Investor Relations section of our website.

Joining me on the call are Cameron Bready, President and CEO and Joshua Bell Senior Executive Vice President and CFO now I'll turn the call over to Cameron.

Yeah.

Thanks, Rodney and good morning, everyone. Thank you for joining us today.

We delivered strong third quarter results that were ahead of our expectation. Despite what continues to be an uncertain macroeconomic environment and a much stronger dollar than forecasted when we provided our outlook back in August I am very proud of this performance and our teams globally for their ongoing consistency of execution.

On a consolidated basis, we reported 9% adjusted net revenue growth and adjusted earnings per share growth of 11% for the quarter.

This includes a roughly 700 basis point headwind to adjusted earnings per share growth from the divestiture of <unk> consumer assets, which we completed last quarter.

We also expanded adjusted operating margins by 50 basis points.

Focusing first on our merchant solutions segment, we again delivered strong organic growth in the third quarter consistent with our second quarter performance driven by ongoing momentum in our technology enabled offerings, which collectively represented roughly 65% of our total merchant adjusted net revenues.

Our software centric businesses across our partnered owned M. Pos strategies continue to drive a meaningful share of growth in the business.

Starting with our integrated business, we achieved strong growth and record new bookings again this quarter, signing 16, new integrated partners, a 33% increase from the prior year.

These booking trends underscore our confidence in our ability to maintain consistent growth in this business going forward as our differentiated capabilities continue to resonate with the ISP market.

Our new progressive payment facilitation or Prophage model is a prime example of our leadership in this channel.

We signed six new <unk> partners in the third quarter and have more than 20 additional opportunities in the pipeline.

<unk> strong demand for this new offering.

Winnie Smith: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' third quarter, 2023 Earnings Conference call At this time, all participants are in 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, Winnie Smith, please go ahead Good morning, and welcome to Global Payments' third quarter, 2023 Conference Call Our Earnings release and the slides of the company this call can be found on the Investor Relations area of our website at www.globalpayments.com Before we begin, I'd like to remind you that some of the comments made by management during today's conference call contain forward-looking statements about, among other matters, expected operating and financial results. These statements are subject to risks, uncertainties, and other factors, including the impact of economic conditions on our future operations that could cause actual results to differ materially from expectations. Certain risk factors inherent in our business are set forth in filings with the FCC, including our most recent 10K and subsequent filings.

Winnie Smith: We caution you not to place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them.

We also saw strong double digit performance in booking trends this quarter across our own vertical market software businesses.

<unk> our newest edition to this business continues to see solid demand for it solutions with bookings growth of 15% in the quarter.

Notably <unk> also expanded the scope of existing partnerships to include additional payment solutions with global real estate management firm Harbor group and multifamily management company restaurants, while furthering its expansion in the student housing vertical by signing an additional partner domas student living.

And active network had one of its best booking quarter since the pandemic, including new partnerships with YMCA Vancouver, Alterra Mountain Company, The New York Triathlon, and the Sydney half Marathon.

Additionally, our University business touch net signed a new partnership with <unk> College in Vancouver, and extended our relationship with the Texas State University system.

As for our POS software business, we again delivered 20 plus percent growth in this channel as we continue to see strong demand for our solutions and benefit from releases of new product enhancements.

Collectively adjusted net revenue for our POS business is approaching $400 million annually and is one of the fastest growing channels of our business.

Today, we offer complete cloud based Pos software and commerce enablement platforms targeting three distinct segments of the market with solutions that are purpose built for key verticals, primarily restaurant and retail.

We focus on these verticals for several reasons one they are large addressable markets.

Winnie Smith: We will also be referring to several non-gap financial measures, which we believe are more reflective of our ongoing performance. For a full reconciliation of the non-gap financial measures discussed in this call to the most comparable gap measure, in accordance with SEC regulations, please see our press release furnished as an exhibit to our Formate K filed this morning and our supplemental materials available on the Investor Relations section of our website.

Do they are international in scope and three because more and more payments decisions are being made in connection with the point of sale in these markets.

Our Pos solutions are used by over 80000 merchant locations globally, enabling businesses of all sizes from SMB to enterprise customers to run and grow more effectively.

Our products easily scale from simple solutions for a single location to complex environments for large merchants with multi unit and multinational requirements.

Winnie Smith: Joining me on the call are Cameron Brady, President and CEO and Josh Whipple, Senior Executive Vice President and CFO.

Across our platforms, we seamlessly combined software hardware and payments for in person mobile and online environments, providing for great customer experiences.

Cameron Brady: Now I'll turn the call over to Cameron. Thanks, Wendy, and good morning, everyone. Thank you for joining us today. We delivered strong third-quarter results over ahead of our expectation, despite what continues to be an uncertain macroeconomic environment, and a much stronger dollar than forecasted when we provided our outlook back in August. I am very proud of this performance, and our teens globally for their ongoing consistency of execution. On a consolidated basis, we reported 9% adjusted net revenue growth and adjusted earnings per share growth of 11% for the quarter. This includes a roughly 700 basis point headwind to adjusted earnings per share growth from the divestiture of net spends consumer assets, which we completed last quarter. We also expanded adjusted operating margins by 50 basis points.

And we deliver all of this and customize configurations that specifically address the unique software and payment requirements of our customers.

Our solutions are designed to grow with a customers business, we leverage a common technology stack that enable customers to easily add functionality as they expand this allows us to serve the small end of the SMB market and scale with merchants increasing software revenue along the way.

Importantly, this differentiates us from many of our competitors, who attempt to address small and large and general and vertically specific use cases with the same single offering.

And we couple our complete commerce enablement solutions with distinctive distribution and full local service and support that is unrivaled in the market.

Our entry level product or general purpose cloud based point of sale solution is branded GP pause.

Cameron Brady: Focusing first on a merchant solution segment, we again delivered strong organic growth in the third quarter, consistent with our second quarter performance. During the ongoing momentum in our technology enabled offerings, which collectively represent roughly 65% of our total merchant adjusted net revenue. Our software-centric businesses across our partnered, owned, and POS strategies continue to drive a meaningful share of growth in the business. Starting with our integrated business, we achieved strong growth in record-new booking to get in this quarter, signing 16 new integrated partners, a 33% increase from the prior year.

This offering provides a highly competitive starter solution for SMB customers, who want a simple and intuitive system with a robust feature set.

J P pause delivers an expansive set of mobile Pos capabilities and commerce enablement tools.

These features can be tailored to the specific requirements of the merchant business on the vertical markets and geographies they serve.

Importantly, GP pause is essentially self service from beginning to end.

From Onboarding to full configuration of the functionality the merchant can easily enable our software and began accepting payments and less than 24 hours.

Cameron Brady: These booking trends underscore confidence and our ability to maintain consistent growth in this business going forward as our differentiated capabilities continue to resonate with the ISB market. Our new progressive payment facilitation or ProFAC model is a prime example of our leadership in this channel. We signed six new ProFAC partners in the third quarter and have more than 20 additional opportunities in the pipeline, reflecting strong demand for this new offering. We also saw strong double digit performance in booking trends this quarter across our own vertical market software businesses.

We offer GP pause globally through a variety of regional and wholesale distribution channels in the last year, we successfully launched our GP pause technology in numerous international markets, including Canada, The U K, Spain, and Central Europe, and expect to further expand to Poland, Germany, and Ireland over the next 12 months to 24 months.

We couple our innovative <unk> solution with local presence and support capabilities as well as our long standing partnerships in these markets.

Our full combination our competitors simply cannot replicate.

Cameron Brady: Zego, our newest addition to this business, continues to see solid demand for its solutions with bookings growth of 15% in the quarter. Notably, Zego also expanded the scope of existing partnerships to include additional payment solutions with global real estate management firm Harbor Group and multi-family management company ResProp, while furthering its expansion in the student housing vertical by signing an additional partner, Domas student living. An active network and one of its best booking quarters since the pandemic, including new partnerships with YMCA Vancouver, Altera Mountain company, the New York Triathlon in the Sydney half marathon.

In North America, we have distinct vertically specific restaurant and retail focused cloud based Pos solutions Heartland restaurant and Heartland retail.

We leverage our heartland direct channel to target SMB and mid market customers with the solutions.

Those serving two to 20 locations that can scale to customers with significantly more locations.

The vertically fluent capabilities, we offer customers include mobile Pos and pin on glass solutions guests and table management ordering kitchen management pricing matrices discounting functionality cash discount programs predictive analytics, a dry AI, driven marketing and loyalty programs and human capital management and payroll solutions.

Cameron Brady: Additionally, our university business touched net, sending new partnership with Lengara College and Vancouver and extended a relationship with the Texas State University system. After our POS software business, we again deliver 20 plus percent growth in this channel as we continue to see strong demand for our solutions and benefit from releases of new product enhancements. Collectively, adjusted net revenue for our POS businesses approaching $400 million annually and is one of the fastest growing channels of our business.

And we deliver this seamlessly as a cohesive commerce enablement platform all from the point of sale.

Our solutions also offer open architecture and have integrations with dozens of software partners, which allows our customers to enable various delivery services accounting applications inventory management software and other disruptive technologies.

All accessible at the point of sale.

We have two primary distribution channels for these solutions in North America. The first is our local dealer network, representing nearly every major metro market in the U S and Canada, where we have over 300 partners, who provide sales support and service.

Cameron Brady: Today we offer complete cloud-based POS software and commerce enablement platforms targeting three distinct segments of the market with solutions that are purpose-built for key verticals, primarily restaurant and retail. We focus on these verticals for several reasons. One, they are large addressable markets, two, they are international in scope, and three because more and more payment decisions are being made in action with the point of sale in these markets. Our POS solutions are used by over 80,000 merchant locations globally, enabling businesses of all sizes from SMBs to enterprise customers to run and grow more effectively.

The second is our local sales professionals across the U S and Canada through our solution oriented domain experts and servers relationship partners to our customers.

We have seen strong growth in our Heartland Pos software solutions and expect the momentum to continue on the heels of the launch of our next generation offerings in early 2024.

Which will deliver an improved user interface and more intuitive experiences across our iOS and Android based solutions.

Cameron Brady: Our products easily scale from simple solutions for a single location to complex environments for large merchants with multi-unit and multinational requirements. Across our POS platforms, we seamlessly combine software, hardware, and payments for in-person, mobile, and online environments, providing for great customer experiences. And we deliver all this and customize configurations that specifically address the unique software and payment requirements of our customers. Our solutions are designed to grow with the customers business. We leverage a common technology stack that enable customers to easily add functionality as they expand.

Our next Gen. Pos is also designed to be mobile first allowing for a best in class Omnichannel experiences.

Completing our suite of capabilities, we have solutions for specific vertical enterprise customers, which had the most complex requirements and operation and technical environments.

At this end of the market, we offer our Xenial cloud Pos enterprise solution offerings scalable secure and real time services were the worlds largest quick service restaurants, foodservice management companies and sports and entertainment venues.

The <unk> ecosystem provides an API first approach to in house and partner integrations for the most sophisticated enterprise customers.

Cameron Brady: This allows us to serve the small end of the SMB market and scale with merchants, increasing software 11U along the way. Importantly, this differentiates us from many of our competitors who attempt to address small and large and general and vertically specific use cases with the same single offering. And we couple our complete commerce enablement solutions with distinctive distribution and full local service and support that is unrivaled in the market. Our entry level product or general purpose cloud-based point of sale solution is branded GP Paws.

They are supporting a multilane drive through <unk> or a large sports arena.

<unk> provides the complete technology stack required to run these operations all fully integrated at the point of sale.

This includes dynamic digital menu boards kiosks, and mobile ordering solutions kitchen management solutions AI based drive through solutions and customer engagement to name a few.

And we are proud that <unk> is also leading the way in delivering the drive thru of the future technology for its enterprise <unk> customers.

Cameron Brady: This offering provides a highly competitive starter solution for SMD customers who want a simple and intuitive system with a robust feature set. GP Paws delivers an expansive set of mobile POS capabilities and commerce enablement tools. These features can be tailored to the specific requirements of the merchant business on the vertical market and geographies they serve. Importantly, GP Paws is essentially self-service from beginning to end. From onboarding to full configuration of the functionality, a merchant can easily enable our software and begin accepting payments in less than 24 hours.

We are proud of this <unk> 26 of the top 50, <unk> brands with our technology on a global basis.

With respect to entertainment venues Zinio operates a food and beverage suite and retail environments for some of the most complex stadiums in the world.

In these environments foodservice management providers rely on our technology to deliver best in class customer and fan experiences.

We currently serve almost 100 stadiums and event venues with our solutions globally.

We went in the market by solving complexity for our customers whether that is multi unit requirements are multinational expansion or the convergence of physical and virtual environments.

Cameron Brady: We offer GP Paws globally through a variety of regional and wholesale distribution channels. In the last year, we successfully launched our GP Paws technology and numerous international markets including Canada, the UK, Spain, and Central Europe. We expect a further expand to Poland, Germany, and Ireland over the next 12 to 24 months. We couple our innovative GP Paws solution with local presence and support capabilities as well as our longstanding FI partnerships in these markets.

From delivering core feature functionality required by small merchants by a mobile solution to providing greater levels of functionality in a simple register to a full featured software platform. We provide our customers with the idea of point of sale technology tailored to their specific needs.

And we couple our best in class Commerce enablement capabilities with more distinctive and diversified distribution streams and service at scale worldwide that are competitors really can't match.

Cameron Brady: A powerful combination our competitors simply cannot replicate. In North America, we have distinct vertically specific restaurant and retail focused cloud-based POS solutions, heartland restaurant and heartland retail. We leverage our heartland direct channel to target SMB and mid-market customers with these solutions, typically those serving 2 to 20 locations, but can scale to customers with significantly more locations. The vertically flowing capabilities we offer customers include mobile POS and pin-on-glass solutions, guests and table management, ordering kitchen management, pricing matrices, discounting functionality, cash discount programs, predictive analytics, AI-driven marketing and loyalty programs, and human capital management and payroll solutions.

As a result, we remain very enthusiastic about the growth prospects for our Pos business globally moving forward.

Speaking of our global reach it is worth noting that we achieved strong double digit growth in Spain and throughout central Europe in the quarter, while Poland, Greece, and Ireland, which we entered by our acquisition of Evo. We're also bright spots in Europe.

We're also excited to announce a new agreement with international parking group to support payments for its smart parking solutions on an omnichannel basis across the UK and Ireland.

As well as the U S and Canada.

In Asia Pacific, We are thrilled to have recently signed a new partnership with Marriott International and will begin offering seamless omnichannel solutions this quarter and select hotel locations across the region.

Turning to issuer, we achieved mid single digit growth consistent with our expectations and longer term targets. Once again this quarter transit.

Cameron Brady: And we deliver this seamlessly as a cohesive commerce enablement platform all from the point of sale. Our solutions also offer open architecture and have integrations with dozens of software partners, which allows our customers to enable various delivery services, accounting applications, inventory management software, and other disruptive technologies, again all accessible at the point of sale. We have two primary distribution channels for these solutions in North America. The first is our local dealer network representing nearly every major metro market in the US and Canada, where we have over 300 partners who provide sales support and service. The second is our local sales professional across the US and Canada, who are a solution-oriented domain experts and service relationship partners to our customers.

Transaction growth remained strong throughout the quarter led by our commercial business highlighting ongoing improvements in cross border corporate travel.

Traditional accounts on file increased by approximately $11 million sequentially as we continue to benefit from strong growth with our existing large financial institution clients and the ongoing execution of our conversion pipeline.

This quarter, we successfully completed conversions in two new portfolio is acquired by large existing Fi partners through M&A further supporting our strategy of aligning with market share winners.

Further we recently completed the migration of the first wave of accounts for a leading U S retailer for one of our largest partners as part of a cobranded relationship.

Cameron Brady: We have seen strong growth in our Harlem POS software solutions and expect a momentum to continue on the heels of the launch of our next generation offerings in early 2024, which will deliver an improved user interface and more intuitive experiences across our iOS and Android-based solutions. Our next-gen POS is also designed to be mobile first, allowing for a best-in-class on the channel experiences. Completing our suite of POS capabilities, we have solutions for specific vertical enterprise customers, which have the most complex requirements in operation and technical environments.

And early this month, we migrated CAD the credit card joint venture between Scotiabank in Chiles largest retailer sanctitude.

Representing our first issuer customer in the market.

We are also pleased to have reached a new issuer processing agreement with a leading U S Bank.

During the third quarter.

This is a long standing global payments merchant partner and the strength of our relationship provided the foundation for expansion of our partnership to include our leading issuer technology solutions.

Notably this partner will also leverage our Nextgen analytics platform via the AWS cloud as we continue to see great progress with clients, enabling our modernized services.

Cameron Brady: At this end of the market, we offer our response, food service management companies, and sports and entertainment venues. The Zennial POS ecosystem provides an API-first approach to enhance and partner integrations for the most sophisticated enterprise customers. Whether supporting a multi-lane drive through QSR or a large sports arena, Zennial provides the complete technology stack required to run these operations awfully integrated at the point of sale. This includes dynamic digital menu boards, kiosk and mobile ordering solutions, kitchen management solutions, AI-based drive-through solutions, and customer engagement to name a few.

We also signed a multi year extension with two large standing Fi partners during the third quarter.

Shifting to <unk>, we continue to drive strong growth with both corporates and financial institutions as we leverage our capabilities across software driven workflow automation solutions money in and money out funds flow capabilities and our broad suite of employer solutions.

Starting with workflow automation mineral <unk> subscription bookings for its AP automation software increase an impressive 86% year over year this quarter.

We're also pleased to have successfully integrated <unk> pay fabric software into our merchant business, which provides our new and existing U S customer greater automation capabilities.

Cameron Brady: And we are proud that Zennial is also leading the way in delivering the drive-through of the future technology for its enterprise QSR customers. We are proud to serve 26 of the top 50 QSR brands with our technology on a global basis. With respect to entertainment venues, Zennial operates the food, beverage, sweet and retail environments for some of the most complex stadiums in the world. In these environments, food service management providers rely on our technology to deliver best-in-class customer and fan experiences.

Regarding VW funds flows as we discussed last quarter virtual card adoption continues to expand contributing to the strong growth in commercial transactions.

We're also seeing an acceleration in virtual cards being <unk> and provisioned in mobile wallets, which is further catalyzing growth.

Additionally, our <unk> bookings in merchant solutions doubled in the third quarter relative to the prior year, while new merchant BTB payments volume increased by more than 50% from last year as we continue to progress the Evo integration and harmonize our go to market strategy.

Cameron Brady: We currently serve almost 100 stadium and event venues with our solutions globally. We win in the market by solving complexity for our customers, whether that is multi-unit requirements or multinational expansion, or the convergence of physical and virtual environments. From delivering four feature functionality required by small merchants by a mobile solution, to providing greater levels of functionality in a simple register to a full featured software platform, we provide our customers with the ideal point of sale technology tailored to their specific needs. And we couple our best-in-class commerce enablement capabilities with more distinctive and diversified distribution streams and service at scale worldwide that our competitors really can't match.

Moving to employer solutions, our pay card business signed a new partnership with hospitality staffing firm exclusive services and renewed its existing relationship with Flynn restaurant group the largest restaurant group in the U S.

We also achieved a new AWS partnership with KFC franchisee JRC restaurants.

Lastly, our software driven human capital management, and payroll solutions business delivered growth of more than 20% in the third quarter.

Yeah.

<unk> offers an attractive growth opportunity for our business and represents a core element of our strategy going forward as we continue to unify our offerings in this space and refine our strategy, we expect to continue to capture share and accelerate growth in <unk> over the long term.

Cameron Brady: As a result, we remain very enthusiastic about the growth prospects for our POS business globally moving forward. Speaking of our global reach, it is worth noting that we achieved strong double-digit growth in Spain and throughout central Europe in the quarter, while Poland, Greece and Ireland, which we entered via acquisition of EVO, were also bright spots in Europe. We were also excited to announce a new agreement with the International Parking Group to support payments for its smart parking solutions on an on-the-channel basis across the UK and Ireland, as well as the US and Canada. In Asia Pacific, we are thrilled to recently sign a new partnership with Merriott International and will begin offering seamless on-the-channel solutions this quarter and select hotel locations across the region.

With that I'll turn the call over to Josh.

Thanks, Kamran, we're pleased with the continued strong financial performance, we delivered in the third quarter and for the year to date period, which exceeded our expectations. Despite absorbing a roughly $10 million adjusted net revenue headwind from foreign currency exchange rates relative to our expectations. When we guided in early August.

Specifically, we delivered adjusted net revenue of $2 3 billion, an increase of 9% from the same period in the prior year excluding.

Excluding the impact of dispositions adjusted net revenue increased 17%.

Cameron Brady: Turning to issuer, we achieved mid-stingle digit growth consistent with our expectations and longer-term targets once again this quarter. Transaction growth remains strong throughout the quarter led by our commercial business, highlighting ongoing improvements in cross-quarter corporate travel. Traditional accounts on file increased by approximately $11 million sequentially as we continue to benefit from strong growth with our existing large financial institution clients in the ongoing execution of our conversion pipeline. This quarter we successfully completed conversions of few new portfolios acquired by large existing FI partners through M&A, further supporting our strategy of aligning with market share winners.

Adjusted operating margin for the quarter increased 50 basis points to 45, 7%, excluding the impact of our acquisition of Evo payments and dispositions adjusted operating margin increased 90 basis points, highlighting ongoing consistent execution across our businesses.

The net result was adjusted earnings per share of $2 75, and.

An increase of 11% compared to the same period in 2022 or 18% excluding the impact of dispositions. This includes a roughly one point headwind from adverse foreign currency exchange rates relative to when we updated guidance on our second quarter earnings Conference call.

Cameron Brady: Further, we recently completed the migration of the first wave of accounts for a leading US retailer for one of our largest partners as part of a co-branded relationship. In early this month, we migrated CAD, the credit card joint venture between Scotia Bank and Chile's largest retailer, Senkisu, representing our first issuer customer in the market. We are also pleased to have reached a new issuer processing agreement with a leading US bank during the third quarter.

Taking a closer look at performance by segment merchant solutions achieved adjusted net revenue of $1 $73 billion for the third quarter and.

A 19% improvement from.

From the prior year or 9% growth, excluding the impact of Evo and dispositions.

As Cameron highlighted this performance was led by the ongoing strength of our technology enabled businesses. While we also benefited from double digit growth and faster growth markets, including Spain and Central Europe.

Cameron Brady: This FI is a longstanding global payments merchant partner and the strength of our relationship provided the foundation for expansion of our partnership to include our leading issuer technology solutions. Notably, this partner will also leverage our next gen analytics platform by the AWS cloud as we continue to see great progress with clients enabling our modernized services. We also find a multi-year extension with two large standing FI partners during the third quarter.

This was partially offset by ongoing macro softness in limited geographies, including the U K, where the economic environment remains challenging and in Canada, where GDP growth is hovering around zero.

We delivered an adjusted operating margin of 49, 1% in the segment consistent with our expectations. This represented a decline of 90 basis points due to the acquisition of Evo. However, excluding the impact of Evo and dispositions adjusted operating margin increased 40 basis points.

Cameron Brady: Shifting to B2B, we continue to strive strong growth with both corporates and financial institutions as we leverage our capabilities across software driven workflow automation solutions, money in and money out funds flow capabilities, and our broad suite of employer solutions. Starting with workflow automation, mineral tree subscription booking for a AP automation software increase an impressive 86% year every year this quarter. We are also pleased to have successfully integrated EVOs pay fabric software into our merchant business which provides our new and existing US customer greater AR automation capabilities.

Our issuer solutions produced adjusted net revenue of $520 million, reflecting 6% growth.

Our core issuer business also grew mid single digits this quarter driven by ongoing strength in volume based revenue.

As Cameron highlighted we added approximately 11 million traditional accounts on file sequentially.

This equates to an increase of more than 60 million accounts year over year as we continue to see healthy account growth with our large fi customers and benefit from the ongoing execution of our conversion pipeline.

Cameron Brady: Regarding B2B funds flows, as we discussed last quarter, virtual card adoption continues to expand contributing to the strong growth in commercial transactions. We are also seeing an acceleration in virtual cards being tokenized and provisioned in mobile wallets which is further catalyzed and growth. Additionally, our B2B bookings and merchant solutions doubled in the third quarter relative to the prior year, while new merchant B2B payments volume increased by more than 50% from last year.

Transactions grew high single digits compared to the third quarter of 2022 led by commercial card transactions, which increased to mid teens.

This was partially offset by slower growth in managed and output services as we continue to focus our issuer business on more technology enablement.

Cameron Brady: As we continue to progress the EVO integration and harmonize our good and market strategy. Moving to employer solutions, our pay card business signed a new partnership with hospitality staffing firm, exclusive services, and renewed its existing relationship with Glenn Restaurant Group, the largest restaurant group in the US. We also achieved a new EWA partnership with KSC franchise, the JRC restaurants. Lastly, our software driven human capital management and payroll solutions business delivered growth of more than 20% in the third quarter.

Our issuer team executed for conversion since the beginning of the third quarter and are successfully completed 11 conversions since the beginning of the year.

We have also signed two new contracts and completed 10 renewals year to date and currently have seven active LOI. In addition to nearly 20 mid to late stage opportunities in the pipeline.

Shifting to our issuer <unk> portfolio. These businesses delivered double digit growth this quarter led by mineral tree, which achieved 20% growth in its targeted mid market segment, while pay card accelerated nicely as the business is beginning to lap more difficult employment comparisons that were a drag on year over year perform.

Cameron Brady: B2B offers an attractive growth opportunity for our business and represents a core element of our strategy going forward. As we continue to unify our offerings in this space and refine our strategy, we expect to continue to capture share and accelerate growth in B2B over the long term.

Josh Whipple: With that, I'll turn the call over to Josh. Thanks, Cameron. We are pleased with the continued strong financial performance we delivered in the third quarter and for the year-to-date period, which exceeded our expectations despite absorbing a roughly 10 million dollar adjusted in that revenue headwind from foreign currency exchange rates relative to our expectations when we guided in early August. Specifically, we delivered a Justin Net revenue of $2.23 billion, an increase of 9% from the same period in the prior year, excluding the impact of dispositions, a Justin Net revenue increased 17%.

During the first half of 2023.

Finally, issuer solutions delivered adjusted operating margin of 47, 5% an increase of 110 basis points from the prior year fueled by solid top line growth.

And our continued focus on driving efficiencies in the business.

From a cash flow standpoint, we produced adjusted free cash flow for the quarter of $733 million, representing 102% conversion rate of adjusted net income to adjusted free cash flow. Despite a modest increase in capital spending this quarter.

We continue to target converting a roughly 100% of adjusted earnings to adjusted free cash flow for the full year, excluding roughly five point impact of the timing change to recognizing research and development tax credits.

We also continue to expect capital investment to be approximately $630 million in 2023.

Josh Whipple: The net result was adjusted earnings per share of $2.75, an increase of 11% compared to the same period in 2022, or 18% excluding the impact of dispositions. This includes a roughly one point headwind from adverse foreign currency exchange rates relative to when we updated guidance on our second quarter earnings conference call. Taking a closer look at performance by segment, merchant solutions achieved a Justin Net revenue of $1.73 billion for the third quarter, a 19% improvement from the prior year, or 9% growth, excluding the impact of evil and dispositions.

Consistent with our prior outlook.

Year to date, we have reduced outstanding debt by more than $1 1 billion and our leverage position was three five times at the end of the quarter consistent with our expectations.

We remain on track to return to a leverage level consistent with our long term targets in the low threes by year end.

Our balance sheet remains healthy and we have $3 billion of available liquidity further our total indebtedness is approximately 88% fixed with a weighted average cost of debt of $3 eight 5%.

Josh Whipple: As Cameron highlighted, this performance was led by the ongoing strength of our technology enabled businesses, while we also benefited from double digit growth in faster growth markets, including Spain and Central Europe. This was partially offset by ongoing macro softness in limited geographies, including the UK, where the economic environment remains challenging, and in Canada, where GDP growth is hovering around zero. We delivered an adjusted operating margin of 49.1% in the segment, consistent with our expectations.

We are pleased with how our business is positioned following our performance for the first nine months of 2023 weeks.

We continue to forecast adjusted net revenue for the full year to range from 860 billion to $8 73 5 billion.

Reflecting growth of 7% to 8% over 2022.

Given the roughly $40 million headwind to adjusted net revenue, we have seen from adverse foreign currency exchange rates relative to our prior guidance. We now expect to be in the lower half of this range absent an improvement in rates.

Josh Whipple: This represented a decline of 90 basis points due to the acquisition of evil. However, excluding the impact of evil and dispositions, adjusted operating margin increased 40 basis points. Our issuer solutions produced a Justin Net revenue of $520 million, reflecting 6% growth. The core issuer business also grew mid single digits this quarter, driven by ongoing strength and volume based revenue. As Cameron highlighted, we added approximately 11 million traditional accounts on file sequentially.

Moving to margins, we continue to forecast annual adjusted operating margin to expand by up to 120 basis points for 2023.

We remain on track to realize approximately $35 million in cost synergies from the <unk> acquisition this year.

To provide color at the segment level, we continue to anticipate our merchant segment to report adjusted net revenue growth of approximately 16% for the full year consistent with our prior forecast despite absorbing the aforementioned FX headwinds.

Josh Whipple: This equates to an increase of more than 60 million accounts year over year, as we continue to see healthy account growth with our large FI customers, and benefit from the ongoing execution of our conversion pipeline. Transactions grew high single digits compared to the third quarter of 2022, led by commercial car transactions, which increased mid teens. This was partially offset by slower growth and managed and output services, as we continue to focus our issuer business on more technology enablement.

We continue to expect a nominal decline in reported adjusted operating margin for the merchant business for the full year due to the Evo acquisition.

Moving to issuer solutions, we continue to expect issuer to grow in the 5% to 6% range on a constant currency basis.

However, if the recent U S dollar strengthening persists, we would expect to be closer to the low end of that range on a reported basis.

We anticipate adjusted operating margin for the issuer business to expand by more than 60 basis points for the year as we benefit from the natural operating leverage in the business.

Josh Whipple: Our issuer team executed four conversions since the beginning of the third quarter, and has successfully completed 11 conversions since the beginning of the year. We have also signed two new contracts and completed 10 renewals year to date, and currently have seven active yellow wise in addition to nearly 20 mid to late stage opportunities in the pipeline. Shifting to our issuer B2B portfolio, these businesses delivered double-digit growth this quarter, led by mineral tree which achieved 20% growth in its targeted mid-market segment, while pay-hard accelerated nicely as the businesses beginning to laugh more difficult employment comparisons that were a drag on your over-year performance during the first half of 2023.

Turning to a couple of non operating items, we expect net interest expense to be roughly $540 million and four our adjusted effective tax rate to be approximately 19%.

For modeling purposes, we continue to assume excess cash is used to pay down indebtedness during the fourth quarter.

Putting it altogether, we now expect adjusted earnings per share for the full year to be in the range of $10 39.

To $10 45.

Collecting growth of approximately 11% to 12% over 2022.

Josh Whipple: Finally, issuer solutions delivered adjusted operating margin of 47.5% in increase of 110 basis points from the prior year fueled by solid top-line growth and our continued focus on driving efficiencies in the business. From a cash flow standpoint, we produced adjusted free cash flow for the quarter of $733 million, representing 102% conversion rate of adjusted net income to adjusted free cash flow, despite a modest increase in capital spending this quarter. We continued to target converting a roughly 100% of adjusted earnings to adjusted free cash flow for the full year, excluding roughly five-point impact of the timing change to recognizing research and development tax credits.

Excluding dispositions adjusted earnings per share growth is expected to be roughly 17% for 2023.

This guidance includes almost a point of headwind to adjusted earnings per share given the significant strengthening of the U S. Dollar that was not reflected in our prior outlook.

Similar to what you've heard from others.

October trends were consistent with what we saw in the third quarter.

While our base case outlook today presumed spending trends and macroeconomic backdrop relatively consistent with what we're seeing currently.

Our guidance accommodates for a range of scenarios, including a more tempered economic environment given continued uncertainty.

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

Josh Whipple: We also continued to expect capital investment to be approximately $630 million in 2023, consistent with our prior outlook. Year-to-date, we have reduced outstanding debt by more than $1.1 billion, and our leverage position was 3.5 times at the end of the quarter, consistent with our expectations. We remain on track to return to a leverage level consistent with our long-term targets in the low threes by year end. Her balance sheet remains healthy, and we have $3 billion of available liquidity.

Thanks, Josh we continue to see strong momentum in our business and consumer spending has remained resilient over the course of the year.

Although labor trends remain quite strong we are monitoring the impact of rising rates, resulting from monetary policy decisions globally elevated inflation and of course geopolitical risk from the ongoing situation in Europe and recent events in the Middle East. We are confident we can build a better and more durable business model, which positions us well to manage through any environment.

If the current backdrop changes.

I am pleased with all that we've accomplished this quarter and for the first nine months of 2023, as we continued to advance our strategy and maintain strong execution throughout the business.

Josh Whipple: Further, our total indebtedness is approximately 88% fixed with a wage average cost of debt of 3.85%. We are pleased with how our business and position following our performance for the first nine months of 2023. We continue to forecast adjusted net revenue for the full year to range from $8.6 to $0 billion to $8.735 billion, reflecting growth of 7% to 8% over 2022. Given the roughly $40 million headwind to adjusted net revenue, we have seen from adverse foreign currency exchange rates relative to our prior guidance.

The very best team members, providing the very best experiences for our customers, but the very best technologies in the most attractive markets globally.

Together, we are positioned to deliver strong operating and financial performance, while remaining at the forefront of innovation.

Winnie.

Thanks Kamran.

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.

Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Josh Whipple: We now expect to be in the lower half of this range absent in improvement and rates. Moving to margins, we continue to forecast annual adjusted operating margin to expand by up to 120 basis points for 2023. We remain on track to realize approximately $35 million in cost synergies from the EVO acquisition this year. To provide color at the segment level, we continue to anticipate our merchant segment to report adjusted net revenue growth of approximately 16% for the full year, consistent with our prior forecast despite absorbing the aforementioned FX headwinds.

Our first question comes from the line of Ramsey El <unk> with Barclays. Please proceed with your question.

Hi, Thank you so much for taking my question. This morning, and thanks for the deeper dive on your Pos in software solutions I thought that was very helpful. Okay could you give us your latest thoughts kind of with the inclusion of Evo about the split between discretionary and non discretionary volumes in your merchant business.

Are you seeing any changes there in terms of spending patterns.

Josh Whipple: We continue to expect a nominal decline and reported adjusted operating margin for the merchant business for the full year due to the EVO acquisition. We continue to expect issuer to grow in the five to six percent range on a constant currency basis. However, if the recent US dollar strengthening persists, we would expect to be closer to the low end of that range on a reported basis. We anticipate adjusted operating margin for the issuer business to expand by more than 60 basis points for the year as we benefit from the natural operating leverage in the business.

How should we kind of try to think through that.

Yes, Bryan it's Cameron good morning, and thanks for your comments I'll kick it off I'll ask Josh to add any color that he would like to so if you look across the portfolio today I would characterize the business mix, we have it's pretty well diversified across discretionary and non discretionary verticals without putting a specific.

A point estimate on each it's roughly split evenly between discretionary and non discretionary I think today, we're probably exposed over 70 different vertical markets and.

And we have good diversification again across the overall merchant business domestically here in the U S and in our international markets as well.

Josh Whipple: Turning to a couple of non-operating items, we expect net interest expense to be roughly $540 million and for our adjusted effective tax rate to be approximately 19%. For modeling purposes, we continue to assume excess cash is used to pay down indebtedness during the fourth quarter. Putting it all together, we now expect adjusted earnings per share for the full year to be in the range of $10.39 to $10.45. There's less growth of approximately 11% to 12% over 2022.

If you look at the overall economy today, we are seeing better trends in the non discretionary categories. I would say however, we are seeing vertical markets like restaurants continue to hold up well and certainly it is an experienced and driven economy as we sit here today. So certainly areas that are more focused on providing.

Experiences stupid consumer are trending better than what you see across broad based retail, but by and large I would say as we've said in our prepared remarks. The overall level of consumer spending I think remains pretty resilient across the board.

Got it and a quick follow up for me.

Josh Whipple: Excluding this position, adjusted earnings per share growth is expected to be roughly 17% for 2023. This guidance includes almost a point of headwind to adjusted earnings per share given the significant strengthening of the US dollar that was not reflected in our prior outlook. Similar to what you've heard from others, October trends were consistent with what we saw on the third quarter. While our base case outlook today presents spending trends and macroeconomic backdrop relatively consistent with what we are seeing currently, our guidance accommodates for a range of scenarios, including a more tempered economic environment given continued uncertainty.

Fed ends up lowering debit interchange would you guys benefit from that a bit at least in that part of your business, where you have a more blended pricing approach rather than a cost plus model.

Yes, I think my perspective on that Ramsey is anytime the cost of acceptance goes down for our customers. It's a good thing for our business. So certainly lowering the cost of interchange for our merchant customers is a positive for the business.

Generally much of our portfolio is pass through pricing, so interchange plus plus pricing, where those benefits would immediately get passed on to merchant customers and what we've generally seen over time is where its not the market will sort of compete away that benefit over a period of time. So there may be a short term sort of blip around it but generally what we see is that.

A benefit to interchange would ultimately get competed away in the market over some period of time.

Cameron Brady: And with that, I'll turn the call back over to Cameron. Thanks, Josh. We continue to see strong momentum in our business and consumer spending has remained resilient over the course of the year.

Got it thank you very much.

Thank you. Our next question comes from the line of Darrin Peller with Wolfe Research. Please proceed with your.

Cameron Brady: Although labor trends remain quite strong, we are monitoring the impact of rising rates resulting from monetary policy decisions globally, elevated inflation, and of course geopolitical risk from the ongoing situation in Europe and recent events in the Middle East. We are confident we have built a better and more durable business model, which positions us well to manage through any environment if the current backdrop changes. I am pleased with all that we have accomplished this quarter and for the first nine months of 2023, as we continue to advance our strategy and maintain strong execution throughout the business.

Okay.

Hey, guys. Thanks, it's great to see the consistency on the 9% growth in the merchant side.

If we could just dial in to that a little bit more and just give us a sense on what the best drivers of that consistent strengths have been and then Cameron just when we think about the <unk>.

Spread between volume and revenue growth once again, it's still very very narrow you guys I think putting aside the organic just to reported was only one point apart similar to last quarter's end. So again, it just reminds us of whether theres more opportunity for us.

Cameron Brady: We have the very best team members providing the very best experiences for our customers with the very best technologies and the most attractive markets globally. Together, we are positioned to deliver strong operating and financial performance while remaining at the forefront of innovation.

Pricing, we're on we could expect to see more of our value added service or anything else on that front.

Yeah, Darrin and good questions. Both so I would say the drivers continue to be what we've talked about throughout the course of the year. Our technology enabled businesses continue to perform really well. They are the tip of the spear for growth in the business I'll highlight our Pos channel, which obviously, we spend a lot of our time in our prepared remarks talking about today, we continue.

Winnie Smith: Winnie? Thanks, Cameron.

Winnie Smith: Before we begin our question and answer session, I'd like to ask everyone to limit their questions to one with one follow-up to accommodate everyone in the queue. Thank you.

Operator: Operator, we will now go to questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question. Thank you. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

To see very good momentum 20, plus percent growth in that channel again, this quarter and again, we're very enthusiastic about the future of that particularly as we begin to rollout <unk> of our restaurant and retail platforms through the Heartland channel as we get into 2024. So we're very bullish for the outlook for that business over a longer period of time integrated continues to be a very strong performer.

As well consistent growth this quarter as to what we saw in the Q2 timeframe and again, our vertical market businesses continue to grow in the low double digit pace.

Ramsey El: Our first question comes from the line of Ramsey, LSA, with Barclays. Please proceed with your question. Hi, thank you so much for taking my question this morning and thanks for the deeper dive on your POS and software solutions. I thought that was very helpful. Could you give us your latest thoughts, kind of with the inclusion of EVO about the split between discretionary and non-discretionary volumes in your merchant business. Are you seeing any changes there in terms of spending patterns? How should we kind of try to think through that?

As we continue to see good strong demand for our software solutions and continue to monetize payment flows around that pretty effectively. So I think if you step back and look at the business. The themes are very consistent kind of Q2 to Q3, and we expect that to be the same as we get into Q4.

I think as it relates to the second part of your question and I think much of what Youre seeing kind of flowing through right. Now is really the impact of EBIT to some degree because they really just sold payments. So their revenue is more directly tied obviously to just the level of payment volumes in the business as we bring more value added services to the business as we sell more software on our own global payments.

Cameron Brady: Yeah, Ramsey, it's Cameron. Good morning and thanks for your comments. I'll kick it off. I'll ask Josh that any color that he would like to. So if you look across the portfolio today, I would characterize the business mix we have is pretty well diversified across discretionary and non-discretionary verticals without putting a specific, you know, point estimate on each. It's roughly, you know, split evenly between, you know, discretionary and non-discretionary. I think today we're probably exposed over 70 different vertical markets and we have good diversification again across the overall merchant business domestically here in the US and in our international markets as well.

<unk>, obviously, we think theres opportunities for more elevated growth in revenue relative to the growth of volume that we see through the business over time. So I think that long term macro trend remains in effect, but certainly there are investments that we're going to need to make in the business to be able to deploy a lot of the value added services software capabilities, we have through the EBIT.

Channels, which will be a tailwind to kind of driving that revenue growth and maybe decoupling slightly from the overall level of volume growth that we've seen in the business, but I've said many times I want those two trends, obviously correlate very highway I think they should correlate highway our goal with software is to monetize payments. So as we're doing that we should see uplift in payment volume.

Cameron Brady: I think if you look at the overall economy today, we are seeing better trends in the non-discretionary categories. I would say, however, you know, we are seeing vertical markets like restaurants continue to hold up well. And certainly it's an experience driven economy as we see here today. So certainly areas that are more focused on providing experiences to the consumer or trending better than what you see across broad base retail. But by and large, I'd say, as we've said in our prepared remarks, the overall level of consumer spending I think remains pretty resilient across the board.

Even as we're selling more software in the business. So I wouldn't expect radical departures, but obviously to your point there is opportunity I think.

To drive more non volume based revenue growth in the business and you should see that play out over a period of time.

That's really great to hear and then just very quickly on the when you mentioned on the issuer side, obviously that comes on top of the.

Ramsey El: And a quick follow up from me, if the Fed ends up lowering debit interchange, would you guys benefit from that a bit, at least in that part of your business where you have a more blended pricing approach rather than a cost plus model. Yeah, I think my perspective on that, Ramsey, at any time the cost of acceptance goes down for our customers. It's a good thing for our business. So certainly lowering the cost of interchange for our merchant customers is a positive for the business.

A number of other adds we've had which has been great, but any more color on what really drove that you said that you talked about a partner in a large partner in the U S and EFI channel, but again, what's happening what's really driving that win.

Yes, I think look I think in the issuer business it really boils down to the feature rich capabilities that we bring to bear on that market that really are distinctive relative to what other competitors can provide and it also aligns with our strategy of picking market winners and trying to grow with market winners. There was a lot of business. We can do in the issuer space I would say historically.

Ramsey El: Generally, much of our portfolio is pastored pricing, so interchange plus plus pricing where those benefits would immediately get passed on to merchant customers. And what we've generally seen over time is where it's not the market will sort of compete away that benefit over a period of time. So there may be a short term sort of blip around it. But generally what we see is that benefit to interchange would ultimately get competed away in the market over some period of time. Got it. Thank you very much.

Ramsey El: Thank you.

We really tried to focus our efforts and lean into those relationships with partners that have good strategies in the market, where they are growing and winning so obviously as <unk> with their own business strategies, we obviously benefit from that as we look to grow and scale, our issuer business as well. So I think it's just a combination of having fantastic capabilities feature rich functionality and.

Good strategy of aligning ourselves with market winners that we'd see continued to play out in that business.

Darren Peller: Our next question comes in line of Darren Peller with Wolf Research. Please proceed. Hey guys, thanks. It's great to see the consistency on the 9% growth in the merchant side. If we could just dial into that a little bit more and just give us a sense on what the best drivers of that consistent strengths have been. And then Cameron, just when we think about the spread between Bellyman revenue growth once again, it's still very, very narrow.

And it's good to see the AWS partnership play out there too guys. Thanks, a lot and nice quarter.

Thanks, Dan.

Thank you. Our next question comes from the line of Ashwin <unk> with Citi. Please proceed with your question.

Hey.

Congratulations on the quarter.

And the consistency appreciate it.

I guess I wanted to ask.

Darren Peller: You guys think setting aside the organic just the reported was only one point apart similar to last quarters. And so, you know, again, it just reminds us of whether there's more opportunity if you need to be done pricing or we could expect to see more on value and it's service or anything else on that from Yeah, Darren, good questions. So I would say the drivers continue to be what we've talked about, you know, throughout the course of the year.

Kevin just given your comment any up top with regards to the.

To the.

That stack and software and such.

What is the appetite for tech heavy solutions across the globe.

Kind of know what the appetite is here.

In North America, but.

Darren Peller: Our technology enabled businesses continue to perform really well. They are the tip of the spear for growth in the business. All highlight our POS channel, which obviously we spent a lot of our time in our prepared remarks talking about today. We continue to see very good momentum, 20 plus percent growth in that channel again, this quarter. And again, we're very enthusiastic about the future of that particularly as we begin to roll out B2.

Finding.

Finding incremental interest in that higher penetration in parts of Europe.

Because I think that's the other part Jeff.

Of the European volume comments, Thank you had.

Appreciate any comment you have there.

Yes.

Cameron the comment I would make is as we've seen in the U S. Over the course of time, the motive competition around restaurant and retail for payments is really driven by the point of sale technology.

Darren Peller: Of our restaurant and retail platforms through the Heartland channel as we get into 2024. So we're very bullish. The outlook for that business over a longer period of time. Integrated continues to be a very strong performer as well. Consistent growth, this quarter as to what we saw in the Q2 time frame. And again, our vertical market businesses continue to grow in the low double digit pace. You know, as we continue to see good strong demand for our software solutions and continue to monetize payment flows around that pretty effectively.

And those trends are beginning to play out there certainly certainly in an earlier stage in markets outside of the U S. But they're clearly starting to play out outside of the U S. As well so as I mentioned in my prepared remarks based part of our pass strategy is leveraging the capabilities that we have here in the U S market and being able to extend those.

Darren Peller: So I think if you step back and look at the business, the themes are very consistent kind of Q2 to Q3 and we expect that to be the same as we get into Q4. I think as it relates to the second part of your question. And I think much of what you're seeing kind of flowing through right now is really the impact of Evo to some degree. Because they really just sold payments.

Into markets outside of the U S. We talked about bringing our GP Pas solution to Canada, we brought into the UK, Spain Central Europe, we're going to bring it to Poland, Ireland, Greece over the next 12 months to 24 months, obviously evo markets as well, we want to bring it into Mexico through our obviously, our recent acquisition of <unk> business in Mexico.

Darren Peller: So their revenue is more directly tied obviously to just the level of payment volumes in the business. As we bring more value added services to the business, as we sell more software on our own global payments channels. Obviously we think there's opportunities for more elevated growth in revenue relative to the growth of volume that we see through the business over time. So I think that long term macro trend remains in effect.

<unk>, we think there's great opportunities to grow and scale, our pls business there as well so as we see the strategy for the business. Obviously, there is fantastic opportunity here in the U S to continue to grow, but theres, even better and more attractive opportunities kind of outside the U S where the competitive landscape is different and obviously, we think we're well positioned through a combination of great distribution.

Darren Peller: But certainly there are investments that we're going to need to make in the business to be able to deploy a lot of the value added services software capabilities. We have to the Evo channels, which will be a tailwind to kind of driving that revenue growth. And maybe decoupling slightly from the overall level of volume growth that we see in the business. But I've said many times, you know, I want those two trends, obviously correlate very quickly.

<unk> local presence and support to be able to grow Pos businesses at a pretty healthy pace for a long period of time.

Understood and then I do have to sort of go back to the stock nine times earnings.

Use of capital.

Darren Peller: Highly, I think they should correlate highly our goal with software is to monetize payment. So as we're doing that, we should see uplift in payment volume, even as we're selling more software in the business. So I wouldn't expect radical departures. But obviously to your point, there is opportunity. I think to continue to drive more non volume based revenue growth in the business. And you should see that play out over a period of time.

At these levels does become.

Interesting question because.

I would imagine you'd need to have a.

Very high.

It turned bar on.

On an acquisition of any kind of M&A.

That two year to buying back your own stock. How are you thinking is heading into 2024, when you kind of hit your leverage targets and such.

Darren Peller: That's really great to hear. And then just very quickly on the when you mentioned on the issue, we're sorry, obviously that comes on top of a number of other ads you've had, which has been great, but any more color on what really drove that you said you talked about a partner in the large partner in the US for the FI channel. But again, what's adding what's really driving that went. Yeah, I think look, I think in the issue of business, it really boils down to the feature rich capabilities that we bring to bear on that market that really are distinctive relative to what other competitors can provide.

<unk>.

About capital return and use of capital.

Yes, Ashwin, it's Cameron I'll start and I'll ask Josh to chime in with his perspective as well. So obviously no. One is more frustrated with the multiple than I am I think the dislocation we've seen particularly around payments stocks as the play is rather unwarranted notwithstanding the uncertainties that exist in the overall macroeconomic environment.

That being said I think your point's exactly right, we're very value oriented and as we think about getting back to kind of more normal capital allocation heading into 2024, given our leverage ratio is going to be at our target by the end of the year. Obviously, we're very focused on driving value for our shareholders and obviously at this multiple I think M&A.

Darren Peller: And it also lines with our strategy of picking market winners and trying to grow with market winners. There's a lot of business we can do in the issue of space, I would say historically we've really tried to focus our efforts and lean into those relationships with partners that have good strategies in the market where they're growing and winning. So obviously as they succeed with their own business strategy, we obviously benefit from that as we look to grow and scale our issue of business as well.

Going to have to be pretty compelling from a return perspective to be able to compete with the risk adjusted returns of buying back our stock at these multiples. So obviously there is still a good amount of time between now and as we get into 2024, and we hope certainly the multiple landscape changes for the better over that period of time, but as I said at the outset, we're going to be very focused on driving rich.

Darren Peller: So I think it's just a combination of having fantastic capabilities feature rich functionality and a good strategy of aligning ourselves with market winners that we see continue to play out in that business. That's good to see the AWS for ownership play out there, too. Guys, thanks a lot, a nice quarter. Thanks, Aaron.

Cameron Brady: Thank you.

Turns for our shareholders and I think we've done a good job of that over the course of time with a balanced capital allocation strategy.

Darren Peller: Our next question comes from the line of Ashwin Shirvaikar with City. Please proceed with your question. Congratulations on the quarter and the consistency appreciated. I guess I wanted to ask, Cameron, just given your commentary up top with regards to the, to the, to the POS stack and software and such. What is the appetite for tech heavy solutions across the globe? We kind of know what the appetite is here in, in North America.

I would like to continue to have that going forward, but that presupposes, we can find M&A opportunities that really fit our criteria strategically culturally and obviously drive the kind of returns that we think our shareholders.

And certainly those are the competitive with buying back stock. So Josh I don't know if you've done anything.

So ashwin great question I think as you think about the balance of the year here, we're focused on paying.

Down debt, that's as Cameron mentioned I think as we go into 2024, we'll get back on our normal capital allocation strategy will work well.

Focus on balancing reinvestment in the business and returning capital to shareholders. What I would say is that from an overall excuse me from an overall M&A perspective, I would say our <unk>.

Darren Peller: But you find finding, finding incremental interest in that higher penetration in parts of Europe. Because I think that's the other part of the European volume comments that you had. So appreciate any comment you have there. Yeah, when it's it's Cameron, the comment I would make is as we've seen in the US over the course of time, the mode of competition around restaurant and retail for payments is really driven by the point of sale technology.

Pipeline is is very very full we're continuing to go ahead and build that pipeline, but there is a balance as it relates to return to balance between.

M&A and buying back our own stock. So that's something that we'll closely monitor and at these levels.

It's something that that we'll focus on.

Thank you.

Thanks Ashwin.

Thank you. Our next question comes from the line of Jason Kupferberg with Bank of America. Please proceed with your question.

Darren Peller: And those trends are beginning to play out. They're certainly certainly in an earlier stage in markets outside of the US, but they're clearly starting to play out outside of the US as well. So as mentioned in my prepared remarks, you know, a big part of our POS strategy is leveraging the capability that we have here in the US market and being able to extend those into markets outside of the US. We talked about bringing our GP POS solution to Canada.

Good morning, guys I wanted to start on the merchant side of things can you tell us what the organic volume growth in the quarter was.

Relative to the 9% revenue growth there and for Q4 are you thinking a similar organic revenue growth rate as the 9% you saw in Q3. Thanks.

Yes, good morning, Jason both both great questions. So the organic quote unquote volume growth same as last quarter that high single digit 9% kind of number again aligning with the overall rate of revenue growth. We saw in the global payments business ex vivo ex dispositions and I would tell you when we talk about consistency of X.

Darren Peller: We brought it to the UK, Spain, central Europe. We're going to bring it to Poland, Ireland, Greece over the next 12 to 24 months. Obviously, EVO markets as well. We want to bring it into Mexico through our obviously recent acquisition of EVO's business in Mexico. We think there's great opportunities to grow and scale up the US business there as well. So as we see the strategy for the business, obviously, there's fantastic opportunities here in the US to continue to grow.

<unk> I can't give you probably any better example between what we've seen in Q2 Q3, and what our expectations are for Q4. So we saw 9% growth kind of ex vivo ex dispositions in Q2 same thing in Q3 that is our forecast for Q4. The differences obviously between Q3 and Q4 are really the fact that we saw a more FX tailwind.

Darren Peller: But there's even better, more attractive opportunities kind of outside the US where the competitive landscape is different. And obviously, we think we're well positioned through a combination of great distribution, local presence and support to be able to grow POS businesses at a pretty healthy pace for a long period of time.

Ashwin Shirvaikar: Understood.

And even though it was less than we anticipated back in August we did have FX tailwind in the quarter and obviously seasonally EBIT contributes a little bit more revenue in Q3, just tracking with the overall seasonal profile of their business, which is consistent about a global payments merchant business as well. So in Q4, we're expecting a little bit less FX tailwind Thats a flight.

Cameron Brady: And then I do have to sort of go back to the stock nine times earnings. You know, use of capital at these levels does become a sort of interesting question because I would imagine you need to have a very high return bar on an acquisition or any kind of MNA to prefer that to buying back your own stock. How are you thinking is heading into 2024 and you're going to hit your leverage targets and such about about capital to turn and use of capital.

Tailwind very slight based on current expectations and Evo, obviously contributes a little bit less in Q3, just given the seasonal trends of the business, but when I talk about consistency of execution and that's exactly what I'm driving at which is that sort of consistency. We've seen from Q2 Q3, and what our expectations are now for Q4 as well.

Okay and on the issuer side I wanted to come back to that New U S. Client that you mentioned, having one that was already working with you on the merchant side of the business any color you can just give us in terms of accounts on file as just a needle mover for you and when do you expect to convert that that new win.

Cameron Brady: Yeah, Ashwin, it's Cameron. I'll start and I'll ask Josh to chime in with this perspective as well. So, you know, obviously no one's more frustrated with the multiple than I am. I think the dislocation we've seen particularly around payment stocks as a plate is rather unwarranted, notwithstanding the uncertainty that exists in the overall macro economic environment. That being said, I think your points exactly right. We're very value oriented. And as we think about getting back to kind of more normal capital allocation, heading into 2024, given our leverage ratio is going to be at our target by the end of the year.

It's a good account its not certainly a top five in the U S. But it is a good account I can't give you more specifics at this point around number of accounts on file et cetera, but.

So they are attractive win for us because I think it does demonstrate the strength of having issuer and acquiring capabilities under one roof. Obviously, we've seen many instances, where we've been able to leverage issuer customers into obviously, a global payments relationship Virgin money is a good example of that we've seen good instances, where we've been able to leverage global payments relationships.

Cameron Brady: You know, obviously we're very focused on driving value for our shareholders and obviously at this multiple, I think MNA, you know, it's going to have to be pretty compelling from a return perspective to be able to compete with the risk of just the returns of buying back our stock at these multiples. So obviously there's still a good amount of time between now and you know, as we get into 2024 and we hope certainly the multiple landscape changes for the better, you know, over that period of time.

Chips internationally into issuer customers types is a good example of that it's nice now to have an example, here domestically and when we've been able to leverage a global payments relationship on the buy side into a new issuer opportunity as well. So it is a needle mover may be a bit strong but it is a nice win is one we're really proud of it as a great customer and a great partner.

Cameron Brady: But as I said at the outset, we're going to be very focused on driving returns for our shareholders. And I think we've done a good job of that over the course of time with a balanced capital allocation strategy. And I would like to continue to have that going forward, but that presupposes we can find MNA opportunities that really, you know, fit our criteria strategically that culturally and obviously drive the kind of returns that we think our shareholders expect and certainly those are competitive with buying back stock.

Obviously continues to add to that pipeline of new opportunities to support growth in the issuer business over a longer period of time.

Thanks Kamran.

Thanks, Jason.

Thank you. Our next question comes from the line of Dan Perlin with RBC capital markets. Please proceed with your question.

Cameron Brady: So Josh, I don't know if you want anything. I think as you think about the balance of the year here, we're focused on paying, you know, down debt that's, you know, as Cameron mentioned, I think as we go into 2024, we'll get back on a normal capital allocation strategy where we're focused on balancing reinvesting in the business and returning capital to shareholders. What I would say is that from an overall, excuse me, from an overall MNA perspective, I would say, you know, our pipeline is very, very full.

Thanks, Good morning.

I wanted to just touch base on the comment that you had in and around kind of tempered economic environment I'm wondering what.

Cameron Brady: We're continuing to go ahead and build that pipeline, but there is a balance as it relates to returns of balance between, you know, MNA and buying back our own stock. So, you know, that's something that we'll closely monitor and at these levels, you know, it's something that we'll focus on.

And what areas in particular Youre, most concerned about I know you called out UK and Canada, but I'm. Just wondering are there other areas that you have your eye on and we need to be focused on that.

Josh Whipple: Thank you.

Could could turn quickly.

Yes, good question, Dan and I'll start and ask Josh to chime in as well. So I think those comments were really with respect to obviously, our guide being able to accommodate a macroeconomic environment environment excuse me that is probably less constructive than what we've seen over the course of Q3 and what we've seen in October.

Ashwin Shirvaikar: Thanks, Ashwin.

Ashwin Shirvaikar: Thank you.

I called out in my prepared remarks are things that we're obviously focused on globally as it relates to the macroeconomic environment clearly.

Jason Kupferberg: Our next question comes in line of Jason Kupferberg with Bank of America. Please proceed with your question. Good morning, guys. I wanted to start on the merchant side of things. Can you tell us what the organic volume growth in the quarter was relative to the 9% revenue growth there? And for Q4, are you thinking a similar organic revenue growth rate as the 9% you saw on Q3? Thanks. Yeah, good morning, Jason.

The impact monetary policy decision increases in rates and how that manifests itself through the various economies. We operate in around the globe. It's something that we continue to monitor very closely inflation remained stubborn, although we had a pretty decent print in Europe. This morning.

Overall inflation still is trending kind of above expectations for most.

Federal banks around the globe and obviously, that's something that we continue to monitor obviously closely tied its monetary policy and what decisions may be made over the coming months and then certainly on the geopolitical front, we continue to monitor and watch the situation in Europe that is.

Jason Kupferberg: Both great questions. So the organic, what I'm quote, volume growth, same as last quarter, you know, that high single digit, 9% kind of number again, aligning with the overall rate of revenue growth we saw in the global payment business, ex-evo, ex-tispositions. And I would tell you, you know, when we talk about consistency of execution, I can't give you probably any better example between, you know, what we've seen in Q2, Q3 and what our expectations are for Q4.

That is extended now well over a year and obviously the recent events in the middle East which are horrific.

As it relates to the terrorist attacks Israel and then the resulting obviously war that is now developing in that region and those are things that we're monitoring very very closely.

Jason Kupferberg: So we thought 9% growth kind of ex-evo ex-tispositions in Q2, same thing in Q3. That is our forecast for Q4. The difference is obviously between Q3 and Q4 are really the fact that we saw more FX tailwinds, even though it was less than we anticipated back in August, we did have FX tailwinds in the quarter. And obviously, seasonally, evo contributes a little bit more revenue in Q3, just tracking with the overall seasonal profile of their business, which is consistent about a global payments merchant business as well.

Obviously as Josh said in his comments October trends looked just like Q3, which is a positive I think from our perspective, but.

There is uncertainty out there and part of our job is to monitor that uncertainty and make sure. We're positioning the business appropriately in light of what we see from a macroeconomic perspective, Josh I don't know if you'd add anything to that no.

Just reiterate that what we're seeing in October is very similar to what we saw in Q3 and Q2. So we feel pretty good about what we're seeing currently but as camera and highlighted that there are risks out there the geopolitical stress.

Jason Kupferberg: Shown Q4, we're expecting a little bit less FX tailwind. It's, you know, a flight tailwind, very slight based on current expectations. And evo obviously contributes a little bit less in Q3, just given the seasonal trends of the business. But when I talk about consistency of execution, that's exactly what I'm driving at, which is that sort of consistency we've seen from Q2, Q3, and what our expectations are now for Q4 as well.

The consumer loan repayment, that's obviously impacting things than there is inflation and tighter credit policy as well so.

Again.

Our tempered outlook I think is appropriate just given some of the macro macro backdrop that we're currently faced with.

No. That's helpful. Just a quick follow up.

Cameron Brady: Okay. And on the issue or so, I wanted to come back to that new US client that you mentioned having won, that was already working with you on the merchant side of the business. Any color you can just give us in terms of accounts on file, is this a needle mover for you, and when do you expect to convert that new one? It's a good account. It's not certainly a top five in the US, but it is a good account.

I don't know, maybe it's kind of a bigger picture question, but when you think about your ability to drive.

And non cyclical growth so to speak in an environment, where the consumer may weaken like how do you. How do you think about your ability to be able to manage that balance and non cyclical in this cases, but also be just like share gains or the new rollout of Pos or things of that nature I'm, just trying to kind of.

Engage the the ability for you to manage that thank you.

Cameron Brady: I can't give you more specifics at this point around, number of accounts on file, et cetera. But, you know, it's an attractive win for us because I think it does demonstrate the strength of having, if you're requiring capabilities under one roof. Obviously, we've seen many instances where we've been able to leverage issue or customers into, obviously, global payments relationship, version of money is a good example of that. We've seen good instances where we've been able to leverage global payments, relationships internationally, into issue or customers, ties as a good example of that.

Yeah.

I think as we've talked about for a long period of time I think we built a model that is fairly durable and resilient enabled to grow throughout different macroeconomic environments. So obviously I think as we think about the future and what the macro may hold I think we have a lot of confidence that there are growth drivers in this business that can sustain attractive levels of growth even at the <unk>.

Underlying GDP growth and consumer spending levels are lower than kind of what we've seen over the course of 2023.

Cameron Brady: It's nice now to have an example here domestically when we've been able to leverage a global payments relationship on the FIside into a new issue or opportunity as well. So, it is, you know, needle mover may be a bit strong, but it is a nice win. It's one we're really proud of. It's a great customer and a great partner, and obviously continues to add to that pipeline of new opportunities to support growth in the issue of business over a longer period of time.

Unless we find ourselves in a pandemic like situation, we saw in 2020 or.

Severe recessions laughs depression.

Jason Kupferberg: Thanks, Cameron.

Through most normal macroeconomic environment. This model was built to grow the.

Jason Kupferberg: Thanks, Shady.

Dan Perlin: Thank you.

The rates of growth may evolve over those different cycles, but by and large between share gains software new product capability that we're able to bring to market secular growth trends, we see in market, it's not tied to GDP growth, but tied the digital payment adoption continue to be tailwind for the business. Overall, so I think with that backdrop, we're pretty confident that obviously, we've got them.

Cameron Brady: Our next question comes from line of Dan Perlin with RBC Capital Markets. Thank you for your question. Thanks, good morning.

Model that will grow at attractive rates, notwithstanding what the macro may be.

Dan Perlin: I wanted to just touch based on the comments that you had in and around temperate economic environment. I'm wondering what kind of what areas in particular you're most concerned about. I know you called out UK and Canada, but I'm just wondering are there other areas that you have your eye on that we need to be focused on that, you know, could turn quickly. Yeah, good question, Dan. I'll start and ask Josh to chime in as well.

But that's obviously something we worked very hard to make sure. We've got a resilient business model that can ride ride through different cycles over a longer period of time.

The other thing I would add from a macro perspective, if you think about our business is incredibly diversified as Cameron mentioned earlier, we do business across 70 different verticals, we have a physical presence in 41 countries around the globe and do business in 170 different markets. So I think the diverse.

Dan Perlin: So I think those comments were really with respect to, you know, obviously our guide being able to accommodate the macroeconomic environment environment, excuse me, that is probably less constructed than what we've seen over the course of Q3 and what we've seen in October. I called out in my prepare remarks to things that were obviously focused on globally as relates to the macroeconomic environment, clearly, you know, the impact of monetary policy decision increases and rates and how that manifests itself through the various economies we operate in around the globe.

The diversification of our business really creates that durability and stability.

Seeing in it currently.

That's great. Thank you both.

Thanks, Dan.

Thank you. Our next question comes from the line of Trevor Williams with Jefferies. Please proceed with your question.

Thanks, a lot good morning.

I wanted to follow up on an issue where it's good to see the core growth acceleration there Cameron with the Onboarding as you called out some of the visibility into the conversion pipeline just how durable are you expecting the growth in that segment to be if there does end up being some softening.

Dan Perlin: It's something that we continue to monitor very closely inflation remains stubborn, although we had a pretty decent print in Europe this morning. Overall, you know, inflation still is trending kind of above expectations for most federal banks around the globe. And obviously that's something that we continue to monitor, obviously closely tied to monetary policy and what decisions may be made over the coming months. And then certainly on a geopolitical front, you know, we continue to monitor and watch the situation in Europe that is that is extended now well over a year.

More of the volume based revenue at some point.

Just a refresh on how you view the macro sensitivity of that segment would be helpful. Thanks.

Yes, it's a good question Trevor I think obviously as a sensitivity Mac matter. The issuer business is less macro sensitive in the merchant business kind of by definition and given the revenue construct of that business and how we go to market from a commercial standpoint. So I do think there is arguably greater durability.

Dan Perlin: And obviously the recent events and the release which are horrific as relates to the terrorist attack Israel and then the resulting obviously war that is now developing in that region. And those are things that were monitoring very, very closely. Obviously, as Josh said in his comment, October trans looked just like Q3, which is a positive, I think, from our perspective, but, you know, there is uncertainty out there and part of our job is to monitor that uncertainty and make sure we're positioning the business appropriately in light of what we see.

Obviously less upside of course, as we've seen through different cycles with the issuer business, but more downside protection more durability through a softer macro environments in the issuer business I would say look we target that mid single digit growth level in that business given where we are currently I think we feel good about the prospects of continuing to deliver on that level of growth in the business over the short term.

Medium term naturally the investments, we're making in that business are designed to drive higher levels of growth in the business over a longer period of time. So as we continue to execute on our monetization program. We continued to native is existing core feature functionality and capability in the AWS cloud environment, and we continue to obviously sell that and bring.

Dan Perlin: You know, from a macroeconomic perspective, Josh, I don't know if you had anything to that. No, I would just reiterate that, you know, what we're seeing in October is very similar to what we thought saw in Q3 and Q2, so we feel pretty good about what we're seeing currently. But as Cameron highlighted, there are risks out there that geopolitical stress, the consumer loan repayment, you know, that's obviously impacting things and then there's inflation and tighter credit policy as well. So again, it's, you know, our tempered outlook, I think, is appropriate, just given some of the macro macro backdrop that we're currently faced with. No, that's helpful. Just a quick follow up.

More customers into our issuer environment. Our hope is that we can obviously improve the outlook from a growth perspective in that business over a longer period of time, but sitting here today I think the execution that we've seen the pipeline that we have the underlying trends we're seeing in the business.

It gives us confidence around the ability to kind of sustain that mid single digit growth level heading into heading into the next couple of years.

Cameron Brady: I don't know, maybe it's kind of a bigger picture question, but when you think about your ability to drive a non cyclical growth, so to speak, in an environment where the consumer may weaken. Like, how do you think about your ability to be able to manage that and balance it and non cyclical in this case, but also be just like share gains or, you know, the new rollout of POS or things of that nature, I'm just trying to kind of gauge the ability for you to manage that.

That's great. Thanks, and then Josh for the fourth quarter could you help just put a finer point on margin.

Expectations by segment I think previously you had been saying merchants should be up slightly year over year on a reported basis issuer you were above the high 46% range you guys had alluded to for the back half so anything more specifically for how we should be thinking about margins at the segment level for Q4 would be helpful. Thanks.

Cameron Brady: Thank you. Yeah. Look, I think as we talked about for a long period of time, I think we built a model that is fairly durable and resilient and able to grow throughout different macroeconomic environments. So, obviously, I think as we think about the future and what the macro may hold, I think we have a lot of confidence that there are road drivers in this business that can sustain attractive levels of growth, even if the underlying GDP growth and consumer spending levels, you know, our lower than kind of what we've seen over the course of 2023.

Cameron Brady: You know, unless we find ourselves in a, you know, pandemic like situation we saw in 2020 or a severe recessions last depression, you know, I think through most normal macroeconomic environment, you know, this model was built to grow. You know, the rates of growth may evolve, you know, over those different cycles, but by and large between share gains, software, new product capability that we're able to bring to market sector growth trends, we see in markets, not tied to GDP growth, but tied to digital payment adoptions, continued retail wins for the business overall.

Yes, let me start with merchant so if you go back in Q2.

<unk>.

Margins were down about 170 basis points and then we saw some we saw improvement obviously going into Q3 or is down 90 basis points. As we go ahead and continue to ramp and our synergies and for Q4, we expect it to be.

Flat margins.

Merchant and as we said before we expect a modest decline for the full year and merchant issuer year to date, we've seen margins expand 170 basis points really a great trajectory. If you go back to Q1 80 basis points of expansion 300 basis points of expansion in Q2, and then 110 basis points of.

Expansion in Q3, and if you recall on the Q2 call I said that.

Issuer margins would be in the high 46% range and we delivered margins of 47, 5% in the issuer business and we expect those to be similar in Q4.

Cameron Brady: So, I think with that backdrop, we're pretty confident that obviously we've got a model that a grow at attractive rates, notwithstanding what the macro may be. But that's obviously something we work very hard to make sure we've got a resilient business model that can ride, you know, ride through different cycles over a longer period of time. And the only other thing I would ask from a macro perspective, you think about our business, it's incredibly diversifies.

And so I would say is where margins will be more than 60 basis points for the overall full year.

So that's how we're thinking about the overall margin profile of the business.

As we as I said in my prepared remarks.

Reiterated total company margins of up to 120 basis points for the full year.

Cameron Brady: Cameron mentioned earlier, you know, we do business across 70 different particles, we have a physical presence in 41 countries around the globe into business in 170 different markets. So, I think the diversification of our business really creates that durability and stability that we're seeing in the current one.

Got it thanks.

Yeah.

Thank you. Our next question comes from the line of Bryan Keane with Deutsche Bank. Please proceed with your question.

Cameron Brady: That's great. Thank you both. Thank you.

Hi, guys. Good morning wanted to ask inside of merchant.

Just thinking about retention how is retention trending and then bookings what the outlook is there do you think there is any.

Trevor Williams: Our next question comes from the line of Trevor Williams with Jeffries. Please proceed with your question. Thanks a lot.

Trevor Williams: Good morning. Yeah, I want to follow up on an issue where it's good to see the core growth acceleration there. Cameron, with the onboardings you called out, some of the visibility into the conversion pipeline, just how durable are you expecting the growth in that segment to be, if there does end up being some softening. In more of the volume based revenue, you know, at some point, just a refresh on how you view the macro sensitivity of that segment would be helpful.

I'm trying to think if there's any weakness potentially if we get into more of an economic decline or bookings kind of a separate issue versus the economy.

Yes, Bryan it's Cameron.

I'll kind of kick it off I would say maybe just to your latter 0.1st I do generally think about bookings a little bit separate from the overall macro environment largely because we're not focused on that small end of the market that's going to be more impacted I would say by the overall macro as it relates to small business.

Trevor Williams: Thanks. Yeah, it's a good question, Trevor. I think obviously as a as a sensitivity matter, the issue of business is less macro sensitive than the merchant business kind of by definition and given the revenue construct of that business. And how we get a market from a commercial standpoint. So I do think there's, you know, arguably greater durability. Obviously less upside, of course, as we've seen through different cycles with the issue of business, but more downside protection, more durability through softer macro environments in the issue of business.

The creation and new business development.

We're more focused on I would say the upper <unk> in the mid market opportunities, where those businesses by and large they're going to be less.

Impacted by the macro environment so to speak.

From a formation standpoint, so I think as it relates to the overall booking trends, we're seeing kind of across the business. We remain very pleased with the level of performance, we called out a couple of highlights on the call. This morning around the zika or booking trends that we've seen obviously, our Pos bookings remained very strong as well so overall across the merchant business bookings are in the double dip.

Trevor Williams: I would say, look, we target that mid single digit growth level in that business given where we are currently. I think we feel good about the prospects of continuing to deliver on that level of growth in the business over the short to medium term. Naturally, the investments we're making in that business are designed to drive, you know, higher levels of growth in the business over a longer period of time. So as we continue to execute on our monetization program, we continue to nativeize existing core feature functionality and capability in the AWS cloud environment.

Trevor Williams: And we continue to obviously sell that and bring more customers into our issue or environment, our hope is that we can obviously improve the outlook from a growth perspective in that business over a longer period of time. But here today, I think the execution that we've seen the pipeline that we have, the underlying trends, we're seeing in the business, you know, gives us confidence around the ability to kind of sustain that mid single digit growth level heading into heading into the next couple of years.

Digits, which gives us good visibility around new.

New business, that's going to be coming into obviously, our environments over the course of the coming months as we install those merchants are installed their software customers into the business. So I think the outlook as it relates to obviously new business remains very strong as we sit here today and retention levels remained very consistent with what.

We've seen very stable trends around retention kind of through the course of 2023.

Even as I think businesses have been come more attuned to the cost side of their business with inflationary pressures and whatnot, we've been able to sustain consistent levels of retention in the business, which obviously sets up for why we've been able to see such consistent level of revenue performance over the course of the year as well.

Josh Whipple: That's great. Thanks. And then Josh for the fourth quarter, could you help just put a finer point on margin expectations by segment? I think previously you've been saying merchant should be up slightly year over year on a reported basis, issuer, you were above the high 46% range you guys had alluded to for the back half. So anything more specifically for how we should be thinking about margins at the segment level for q4 would be helpful.

Got it that's helpful and maybe for Josh just trying to get the Evo revenue contribution for the quarter and maybe for the full year I know, there's some FX there, but thinking about that $4 90 $490 million number we were thinking about does that change due to due to some of the effects and thanks and congrats.

Josh Whipple: Thanks. Yeah, let me start with with merchant. So, you know, if you go back in Q2 merchant merchant margins were down about 170 basis points and then we saw some, you know, we saw improvement obviously going into Q3 or is down 90 basis points as we go ahead and continue to ramp and synergies. And for you know, Q4, we expected to be roughly flat margins, you know, for merchant. And as we said before, we expect a modest decline for the full year in merchant issuer your day, we've seen margins expand 170 basis points, really, you know, a greater directory.

Yeah, so so bryan for the quarter.

It was approximately $165 million, obviously, that's seasonally that's that's.

A higher quarter for Evo and we're still trending right around that $490 million of adjusted net revenue.

For the merchant business that we've talked about on the prior call.

Thank you and just to put a little yeah, just put a little finer point on that its $4 75 for Q2 through Q4, obviously, we had $15 million, we called out in Q1 that we add from revenue for me, though from closing just slightly before the quarter end in Q1 of this year. So for Q2 to Q4, it's still 475, we've been able to offset.

Josh Whipple: If you go back to Q1, 80 basis points of expansion through enter basis points of expansion in Q2 and then 110 basis points of, you know, expansion in Q3 and if you recall on the Q2 call, I said that, you know, issuer margins would be in the high 46% range and we delivered margins of, you know, 47 and a half percent in the issuer business. And we expect it to be similar in Q4.

Some of the FX headwinds, obviously in each of those business with with a little bit better business performance. So we're still forecasting overall, while contribution this year of 490.

That's great. Thanks, so much.

Thanks, Brian.

Thank you. Our next question comes from the line of will Nance with Goldman Sachs. Please proceed with your question.

Hey, guys I appreciate you taking the question.

Josh Whipple: And so, you know, I would say it's for margins will be, you know, more than 60 basis points, you know, for the overall full year. But that's not how we're, we're thinking about the overall, you know, margin profile, you know, the business and, you know, as we, you know, the set of micro pair of remarks, we reiterated total company margins of up to 120 basis points for the full year. Thank you.

I wanted to ask about some of the new clients you mentioned for the Prophage pipeline wondering if you could make some kind of high level statements about the profile of the customers that you are that you are seeing I guess what types of Isps.

<unk> been attracted to the product and are they currently monetizing payments in any way and maybe you could talk about their motivation for thinking about making a switch.

Yes, well it's Cameron.

It's a very good question and I think much of this sort of reflect back on the comments that I made in our Q2 call as to what attracts Isps to this particular model and as I described at that time. It has all the benefits really a payment facilitation without a level of pain I would say of being a payments company and I think the types of <unk> and partner.

Bryan Keane: Our next question comes from the line of Bryan Keane with Dr. Bang. Please proceed with your question. Hi guys, good morning. One ask inside of merchant, just thinking about retention house retention trending and then bookings what the Outlooker is there. Do you think there's any I'm trying to think if there's any weakness potential if we get into more of an economic decline or bookings kind of a separate issue versus the economy?

Or is that we'd see attracted to this particular model and this is spanning a number of different vertical markets. Most I used to leave today have monetize payments in some form or fashion, some better than others of course, but I think it's again, it's typically isps that have some specific boarding requirements and need more control over the boarding experience it.

Bryan Keane: Yeah, Bryan is Cameron. I'll kind of kick it off. I would say maybe just to your latter point first. I do generally think about bookings as a little bit separate from the overall macro environment, largely because we're not focused on that small end of the market that's going to be more impacted. I would say by the overall macro as relates to small business creation and new business development. We're more focused on I would say the upper S in the mid market opportunities where those businesses by and large are going to be less impacted by the macro environment so to speak as you know, from a formation standpoint.

Cell and have some specific funding requirements as well to kind of support the customer base that they targeted in the marketplace.

So these are <unk> that otherwise might be good candidates for payment facilitation, but in many cases kind of lack the scale lack the payments expertise to be able to become a true registered payment facilitation entity. So as we talked about it at the time, we think this pro fact motto kind of hits, a sweet spot in the market.

Round, obviously demand for payment facilitation capabilities and tools, but obviously theres only a subset of Isps that I think really have the scale and capability to become registered payment facilitation entities over a period of time and to do that very successfully and monetize payments at a very high level. So as we called out on the <unk>.

Bryan Keane: So I think as it relates to the overall booking trends, we're seeing kind of across the business, you know, we remain very pleased with the level of performance. We call that a couple of highlights, you know, on the call this morning around the Ziga booking trends that we've seen. Obviously our POS bookings remain very strong as well. So it gives us good visibility around new business that's going to be coming into obviously our environments over the course of the coming months as we install those merchants or install those software customers into the business.

<unk> remarks, obviously six wins in the quarter for that new solution. We've got over 20 in the pipeline now that are very attractive opportunities for us Isps of all different sizes, all different vertical markets. The commonality is really around that boarding experience that they're looking for as well as specific funding requirements. They may have in and understanding that it's dip.

Gulf of software companies that become payments companies.

Bryan Keane: So I think the outlook as it relates to obviously new business remains very strong as we sit here today and retention levels remain very consistent. We've seen very stable trends around retention kind of through the course of 2023. You know, even as I think businesses have been come more attuned to the cost side of their business with inflationary pressures and whatnot, we've been able to sustain, you know, consistent levels of retention in the business, which obviously sets up for why we've been able to see such consistent level of revenue performance over the course of the year as well.

And obviously the <unk> model tries to solve for that and I think it does it very well.

Got it appreciate that and then just maybe a follow up question on some of the October trends. It sounds like you guys are pointing to relatively consistent consumer spending trends I think for four for four of large cap payments companies, making similar comments and I think particularly the networks are still put out numbers now calling out a deceleration from from September.

October.

And I think there are some aspects around why that's happening, but just maybe you could kind of talk to your perspective of what do you think is kind of causing that disconnect.

Bryan Keane: Got it, that's helpful. And maybe for Josh, just trying to get the Evo revenue contribution for the quarter and maybe for the full year, I know there's some effects there, but thinking about that 490, 490 million number, we were thinking about does that change due to some of the effects and thanks in congrats. Yeah, so Brian for the quarter Evo is approximately 165 million. There's obviously that seasonally that's that's higher quarter for Evo, and we're still trending right around that 490 million of just in that revenue for their merchant business that we talked about on the fire call.

Should that should be more focused on the slight tick down or are they relatively consistent commentary heading into the remainder of the year.

Yes, it's a good question one we tried to call out over a long period of time, there's all there's never going to be sort of exact correlation between any particular acquirers sort of mix of business and what the networks represent the networks represent the market more broadly at least as it relates to the brands that they serve in the marketplace. So there is always going to be differences between their fundamental.

Performance and what we're seeing in our business I think as it relates to our volume we've seen consistent trends kind of Q3 through October.

Bryan Keane: Thank you, just to put a little, yeah, just put a little finer point on that it's 475 for Q2 through Q4. Obviously, we had 15 million, we called out in Q1 that we add from revenue from Evo, from closing just slightly before the quarter and in Q1 of this year. So for Q2 to Q4, it's still 475. We've been able to offset some of the effects, headwinds, obviously in Evo's business with with a little bit better business performance. So we're still forecasting overall contribution is here 490. That's great. Thanks so much.

As we called out in our prepared remarks today, there's reasons that the networks may be saying something different in their business they've got Trevor.

Josh Whipple: Thank you Bryan. Thank you.

Travel comps and we may have in our business with.

Generally they may have fuel looks more fuel exposure in their business and we have in our business I think that's one thing that they called out as a reason for volumes slightly ticking down in October relative to Q3 performance in there in their underlying businesses. So theres always going to be some degree of difference between what we're seeing in underlying trends in what the networks may be seeing as well.

<unk>.

Very helpful and encouraging thanks for that thanks for taking the questions of Nashville today.

Will Nance: Our next question comes from Line of Will Nance with Goldman Tax. Please proceed with your question. Hey guys, I appreciate you taking the question. I wanted to ask about some of the new clients you mentioned for the ProFact pipeline. What if you can make some kind of high-level statements about the profile of the customers that you are seeing? I guess what types of ISVs have been attracted to the product and are they currently monetizing payments in any way and maybe you can talk about their motivations for thinking about making a switch.

Thanks, a lot.

Thank you. Our final question. This morning comes from the line of Tien Tsin Huang with Jpmorgan. Please proceed with your question.

Hi, Thanks, I'll keep it quick I appreciate the time just on the on the point of sale software front I. Appreciate all the disclosures. There can you just remind us how big the sales force is do you have the geographic coverage that you want I know its complementary to your dealer network and then also just I'm assuming that the sales force is trained and compensated to sell these.

Will Nance: Thanks. Yeah, well, it's Cameron. It's a good, it's a very good question and I think much of this sort of reflects back on the comments that I made in our Q2 call as to what attracts ISV to this particular model and as described at that time. It's all the benefits, really, of payment facilitation without all the pain, I would say, of being a payments company. And I think the types of ISVs and partners that we see attracted to this particular model and this is spanning a number of different vertical markets.

Value added services like payroll at this point, there and a good productive place that's all I had thank you.

Yes, really really good question Tien tsin, so as we called out in our prepared remarks earlier and in the U S market. We go to market through a dealer channel, which is about 300 dealers that cover most of the major markets across the U S and Canada as well and then we have somewhere in the neighborhood of call. It 1700 sales professionals, who either can.

Will Nance: Most ISVs today have monetized payments in some form or fashion, some better than others, of course. But I think it's, again, it's typically ISVs that have some specific boarding requirements in need, more control over the boarding experience itself and have some specific funding requirements as well to kind of support the customer base that they target in the marketplace. And so these are ISVs that otherwise might be good candidates for payment facilitation, but in many cases kind of lack the scale, lack the payments expertise to be able to become a true registered payment facilitation entity.

So pos directly or refer Pos sales into a specialist who can sell that so we've tried different combinations as go to market from a sales and distribution matter around selling more software. We typically have gone to what I would call. It somewhat of a hybrid model, where we do certify certain rms to be able to.

<unk> Pos capabilities.

They have to be certified to sell those into the marketplace, but we allow all of our sales professionals and we compensate them of course as well to refer business into those specialists as well so that relationship I think whether it's payroll or whether it's point of sale I think that distribution model has served us well and I think generally is a good model for.

Will Nance: So as we talked about at the time, we think this pro-fac model kind of hits a sweet spot in the market around obviously demand for payment facilitation capabilities and tools. But obviously, you know, there's only a subset of ISVs that I think really have the scale and capability to become registered payment facilitation entities over a period of time and to do that very successfully and monetize payments at a very high level.

To continue to leverage as we move forward, which means we have lots of distribution, obviously to be able to push product grew in North America in markets outside of the U S. I would say the point of sale system that we talked about GP pause is a little simpler solution, it's easier to sell it's less complex. So generally we can push that through the various distribution channels that we have.

Will Nance: So as we called out on the prepared remarks, obviously six wins in the quarter for that new solution, we've got over 20 in the pipeline now that are very attractive opportunities for us. ISVs of all different sizes, all different vertical markets, the commonality is really around that boarding experience that they're looking for as well specific funding requirements they may have and understanding that, you know, it's difficult for software companies to become payments companies. And obviously the pro-fac model tries to solve for that and I think it does it very well. Got it. Appreciate that.

As well as through FY partner distribution as well in international markets in which we operate so they are really good distribution I think capability for us being able to sell our point of sale capabilities over time.

Obviously, a more sophisticated sale is going to require a more specific specialist who focuses exclusively on Pos sales were at the smaller end of the market. Most of our sales professional who is going to be able to sell our GP Pos solution.

Cameron Brady: And then just maybe a follow-up question on some of the October trends. It sounds like you guys are pointing to relatively consistent consumer spending trends. I think we're four-for-four of large-cap payments companies making similar comments. And I think, you know, particularly the networks have still put out numbers, you know, calling out a deceleration from September to October. And I think there's some aspects around why that's happening, but just maybe you could kind of talk to your perspective of, you know, what do you think is kind of causing that disconnect and, you know, should a best should be more focused on the slight tick-down or the relatively consistent commentary heading into the remainder of the year.

That's perfect. Thank you I appreciate it.

Thanks, David.

And that concludes our call for this morning, I wanted to take a moment just to thank you for your interest in global payments and thank you for joining US today hope everyone has a happy Halloween take care.

Thank you. This concludes today's conference call you May now disconnect your lines at this time.

And have a wonderful day.

Cameron Brady: Thanks. Yeah, it's a good question, well, and we've tried to call out over a long period of time. There's never going to be sort of exact correlation between any particular acquirer's sort of mix of business and what the networks represent. The networks represent the market more probably, at least as it relates to the brands that they serve in the marketplace. So there's always going to be differences between their fundamental performance and, you know, what we're seeing in our business.

Cameron Brady: I think it relates to our volume, you know, we've seen consistent trends kind of Q3 through October, as we called out in our prepared remarks today. There's reasons that the networks may be saying something different in their business. They've got proper travel comps and we may have in our business, you know, would generally, you know, they may have fewer, fewer fuel exposure in their business and we have in our business. I think that's one thing that they called out at the reason for volume slightly ticking down in October relative to Q3 performance in their in their underlying businesses. So there's always going to be some degree of difference between what we're seeing in underlying trends and what the networks may be seeing as well. Very helpful and encouraging.

Will Nance: Thanks for taking the questions and nice results today.

Will Nance: Thank you.

Cameron Brady: Our final question this morning comes from the line of Tenjin Gleng with JP Morgan. Please proceed with your question. Hi, thanks. I'll keep it quick. Appreciate the time. Just on the point of sale software front, appreciate all the disclosures there. Can you just remind us how big the sales force is? Do you have a geographic coverage that you want and those complimentary to your dealer network? And then also just, I'm assuming that the sales force is trained and compensated to sell these value added services like payroll at this point. They're in a good productive place.

Cameron Brady: That's all I had. Thank you. Yeah, really, really good question, Tenjin. So as we called out and I prepared remarks earlier in the US market, we go to market through a dealer channel, which is about 300 dealers that cover most of the major markets across the US and Canada as well. And then we have somewhere in the neighborhood of college 1700 sales professionals who either can sell POS directly or refer POS sales into a specialist who can sell that.

Cameron Brady: So we've tried different combinations as go to market from a sales and distribution matter around selling more software. We typically have done to what I would call somewhat of a hybrid model where we do certify certain RMS to be able to sell POS capabilities. They have to be certified to sell those into the marketplace, but we allow all of our sale professionals and we compensate them of course as well to refer business into those specialists as well.

Cameron Brady: So that relationship, I think whether it's payroll or whether it's point of sale, I think that distribution model has served us well. And I think generally, you know, it was a good model for us to continue to leverage as we move forward, which means we have lots of distribution obviously to be able to push product grew in North America and markets outside of the US. I would say the point of sale system that we talked about GP POS is a little simpler solution.

Cameron Brady: It's easier to sell. It's less complex. So generally we can push that through the various distribution channels that we have as well as through FI partner distribution as well in international markets in which we operate. So there's really good distribution. I think capability for us being able to sell our point of sale capabilities over time. Obviously a more sophisticated sale is going to require a more specific specialist who focuses exclusively on POS sales. We're at the smaller end of the market. You know, most of our sales professionals are going to be able to sell our GP POS solution.

Cameron Brady: That's perfect. Thank you. Thanks, engine.

Winnie Smith: And that concludes our call for this morning.

Cameron Brady: I want to take a moment just to thank you for your interest in global payments. And thank you for joining us today.

Cameron Brady: Hope everyone has a happy Halloween.

Operator: Take care. Thank you.

Operator: This concludes this conference call. You may now disconnect your lines at this time and have a wonderful day.