Q2 2024 Global Payments Inc Earnings Call

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Operator: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will open the lines for question and answer. If you should require assistance during this call, please press star and 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.

Unknown Executive: Ladies and gentlemen, thank you for standing by and welcome to Global Payments' second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to Global Payments' second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will open the lines for questions and answers.

Unknown Executive: Later, we will be open the lines for question and answers. If you should require assistance during this call, please restart and then zero. And as a reminder, today's conference will be recorded.

Speaker Change: If you should require assistance during this call, please press star and then zero. And as a reminder, today's conference will be recorded.

Winnie Smith: At this time, I would like to turn the conference over to your host, Senior Vice President, Investor Relations, Winnie Smith. Please go ahead.

Speaker Change: At this time, I would like to turn the conference over to your host, Senior Vice President, Investor Relations, Winnie Smith. Please go ahead.

Cameron Bready: Good morning and welcome to Global Payment's second quarter 2024 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.globalpayments.com.

Winnie Smith: Good morning, and welcome to Global Payments' second quarter 2024 conference call. Our earnings release and the slides that accompany this call can be found in 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 things, 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.

Winnie Smith: Good morning and welcome to Global Payments second quarter 2024 conference call.

Speaker Change: Our earnings release and the slides that accompany 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.

Cameron Bready: 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 filing for the SEC, including our most recent 10-K and subsequent filing, because you not to place under reliance on these statements. For looking statements, during this call, speak only as of the date of this call, and we undertake no obligation to update them.

Winnie Smith: Certain risk factors inherent in our business are set forth in our filings with the SEC, including our most recent $10K and subsequent filings. We caution you not to place too much reliance on these statements, for 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.

Speaker Change: 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.

Speaker Change: Certain risk factors inherent in our business are set forth in filings with the SEC, including our most recent $10K and subsequent filings. We caution you not to place undue reliance on these statements.

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

Cameron Bready: We will be also 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 front release furnished as an exhibit to our Form 8-K files this morning and our supplemental material available on the Investor Relations section of our website.

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

Winnie Smith: 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 8K filed this morning and our supplemental material available on the investor relations section of our website. Joining me on the call is our CEO, Cameron Brady, and our CFO, Josh Whipple. Now, I'll turn the call over to Cameron.

Speaker Change: 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 8K filed this morning and our supplemental material available on the investor relations section of our website.

Cameron Bready: Joining me on the call is our CEO, Cameron Brady, and our CFO, Josh Whipple.

Speaker Change: Joining me on the call is our CEO Cameron Brady and our CFO Josh Whipple. Now I'll turn the call over to Cameron.

Cameron Bready: Now, I'll turn the call over to Cameron. Thanks, Wendy, and good morning, everyone. Thank you for joining us today. We're pleased with our performance for the second quarter, driven by consistent execution of our strategy focused on being the worldwide partner of choice for commerce solutions. Specifically, we take 6% adjusted net revenue growth, or 7% excluding the impact of the divestiture of net spends consumer assets, and delivered adjusted earnings per share growth of 12% in the quarter. We also expanded adjusted operating margins 40 basis points as we continue to drive efficiency in our business, leveraging the scale position we enjoy in our core markets and realize synergy benefits from the EVO acquisition.

Cameron Brady: Thanks, Winnie, and good morning, everyone. Thank you for joining us today. We are pleased with our performance for the second quarter, driven by consistent execution of our strategy focused on being the worldwide partner of choice for commerce solutions. Specifically, we achieved 6% adjusted net revenue growth, or 7% excluding the impact of the divestiture of net spends consumer assets, and delivered adjusted earnings per share growth of 12% in the quarter. We also expanded adjusted operating margins by 40 basis points as we continue to drive efficiency in our business, leveraging the scale position we enjoy in our core markets and realize synergy benefits from the EVO acquisition. There are a number of noteworthy highlights to cover this morning.

Cameron Brady: Thanks, Winnie, and good morning, everyone. Thank you for joining us today. We're pleased with our performance for the second quarter, driven by consistent execution of our strategy, focused on being the worldwide partner of choice for commerce solutions.

Speaker Change: Specifically, we achieved 6% adjusted net revenue growth, or 7% excluding the impact of the divestiture of net spend consumer assets, and delivered adjusted earnings per share growth of 12% in the quarter.

Speaker Change: We also expanded adjusted operating margins 40 basis points as we continue to drive efficiency in our business, leveraging the scale position we enjoy in our core markets, and realize synergy benefits from the EVO acquisition.

Cameron Bready: There are a number of noteworthy highlights to cover this morning. Starting with merchant solutions, we delivered high single-digit organic growth, largely driven by our differentiated capabilities across our integrated software and point-of-sale businesses. As market demand for embedded payments and commerce enablements solutions continues to accelerate. Our integrated business saw double-digit growth in the quarter, aided by continued strong booking trends in business development results. With new ISV partner signings, up 30% year-to-date. Our ongoing success in identifying and signing new ISVs in this channel is partly attributable to our progressive payment to dilutation solution or Pro-Fact which we launched mid last year.

Cameron Brady: Starting with Merchant Solutions, we delivered high single-digit organic growth, largely driven by our differentiated capabilities across our integrated software and point-of-sale businesses, as market demand for embedded payments and commerce enablement solutions continues to accelerate. Our integrated business saw double-digit growth in the quarter, aided by continued strong booking trends and business development results, with new ISV partner signings up 30% year-to-date. Our ongoing success in identifying and signing new ISVs in this channel is partly attributable to our Progressive Payment Facilitation Solution, or PROFAC, which we launched mid last year.

Speaker Change: There are a number of noteworthy highlights to cover this morning. Starting with Merchant Solutions, we delivered high single-digit organic growth, largely driven by our differentiating capabilities across our integrated software and point-of-sale businesses, as market demand for embedded payments and commerce enablement solutions continues to accelerate.

Speaker Change: Our integrated business saw double-digit growth in the quarter, aided by continued strong booking trends and business development results, with new ISV partner signings up 30% year-to-date.

Speaker Change: Our ongoing success in identifying and signing new ISVs in this channel is partly attributable to our Progressive Payment Facilitation Solution, or PROFAC, which we launched mid-last year.

Cameron Brady: Active merchants on this solution have increased 40%, and average merchant volumes have improved 60% since the end of 2023. We remain confident in our competitive positioning in this market and are investing in our capabilities to ensure we preserve our leadership position. We continue to focus on differentiating ourselves by, one, our ability to meet the specific needs of our partners by leveraging the breadth and depth of our solution, and two, the expansive additional embedded commerce capabilities we can attach to the underlying payments relationship.

Cameron Bready: Active merchants on this solution have increased 40% and average merchant volumes have improved 60% since the end of 2023. We remain confident in our competitive positioning in this market and are investing in our capabilities to ensure we preserve our leadership position. We continue to focus on differentiating ourselves by one, our ability to meet the specific needs of our partners by leveraging the breadth and depth of our solutions. And two, the expansive additional embedded commerce capabilities we can attach to the underlying payments relationship. With both new and existing integrated partners, we are seeing an improvement in the average annual revenue opportunity with new merchants as we focus on cross-selling commerce enablement solutions.

Speaker Change: Active merchants on this solution have increased 40% and average merchant volumes have improved 60% since the end of 2023.

Speaker Change: We remain confident in our competitive positioning in this market, and are investing in our capabilities to ensure we preserve our leadership position.

Speaker Change: We continue to focus on differentiating ourselves by, one, our ability to meet the specific needs of our partners by leveraging the breadth and depth of our solutions, and two, the expansive additional embedded commerce capabilities we can attach to the underlying payments relationship.

Cameron Brady: With both new and existing integrated partners, we are seeing an improvement in the average annual revenue opportunity with new merchants as we focus on cross-selling commerce enablement solutions, which include human capital management and payroll, loyalty and marketing, analytics, and customer engagement solutions, as well as B2B software. Speaking of B2B, it is worth noting that we continue to see increased demand for our B2B acceptance solutions as we further leverage the payfabric platform we acquired with Evo. Our proprietary integrations with some of the most widely used ERP environments in the market are critical to delivering the embedded frictionless automation necessary to improve process efficiencies for our customers.

Speaker Change: With both new and existing integrated partners, we are seeing an improvement in the average annual revenue opportunity with new merchants as we focus on cross-selling commerce enablement solutions.

Cameron Bready: This includes human capital management and payroll, loyalty in marketing, analytics and customer engagement solutions, as well as B2B software. Speaking of B2B, it is worth noting that we continue to see increased demand for our B2B acceptance solutions as we further leverage the pay fabric platform we acquired with EVO. Our proprietary integrations with some of the most widely used ERP environments in the market are critical, delivering the embedded, frictionless automation necessary to improve process efficiencies for our customers. We saw more than a 50% increase in new ISV partnerships leveraging our pay fabric capabilities in the second quarter as more B2B spend shifts to digital channels.

Speaker Change: This includes human capital management and payroll, loyalty and marketing, analytics and customer engagement solutions, as well as B2B software.

Speaker Change: Speaking of B2B, it is worth noting that we continue to see increased demand for our B2B acceptance solutions as we further leverage the payfabric platform we acquired with Evo.

Speaker Change: Our proprietary integrations with some of the most widely used ERP environments in the market are critical delivering the embedded, frictionless automation necessary to improve process efficiencies for our customers.

Cameron Brady: We saw more than a 50% increase in new ISV partnerships leveraging our pay fabric capabilities in the second quarter as more B2B spend shifts to digital channels. In our vertical markets businesses, we saw double-digit growth in software bookings this quarter, with particular strength in education, real estate, and healthcare. Notable wins include a new partnership with the Los Angeles Unified School District, the second largest district in the U.S., which will leverage our full suite of capabilities across point-of-sale, MySchoolBucks, cafeteria management, as well as our back-of-house solution. With this addition, we now have partnerships with the three largest school districts in the United States.

Speaker Change: We saw more than a 50% increase in new ISV partnerships leveraging our pay fabric capabilities in the second quarter as more B2B spend shifts to digital channels.

Cameron Bready: In our vertical market businesses, we saw double-digit growth in software bookings this quarter, with particular strength in education, real estate, and healthcare. Notable wins include a new partnership with the Los Angeles Unified School District, the second largest in the US, which will leverage our full suite of capabilities across Point of Sale, My School Bucks, cafeteria management, as well as our back-of-house solutions. With this addition, we now have partnerships with the three largest school districts in the United States. Our real estate business signed a new partnership with the S Communities, a leading provider of manufactured housing communities across the United States, and expanded existing relationships with community association solutions company Associated Asset Management and commercial and residential real estate service provider, Tobin Capital Group.

Speaker Change: In our vertical markets businesses, we saw double-digit growth in software bookings this quarter, with particular strength in education, real estate, and healthcare.

Speaker Change: Notable wins include a new partnership with the Los Angeles Unified School District, the second largest in the U.S., which will leverage our full suite of capabilities across Point of Sale, MySchoolBucks, Cafeteria Management, as well as our back-of-house solutions.

Speaker Change: With this addition, we now have partnerships with the three largest school districts in the United States.

Cameron Brady: Our real estate business signed a new partnership with Yes Communities, a leading provider of manufactured housing communities across the United States, and expanded existing relationships with community association solutions company Associated Asset Management and commercial and residential real estate service provider Tobin Capital Group. Also this quarter, we launched a new residential payouts product to streamline and automate the return of security deposits, which we are already successfully cross-selling to customers. We also saw strong growth in our point-of-sale software business this quarter, adding roughly 3,500 new locations.

Speaker Change: Our real estate business signed a new partnership with Yes Communities, a leading provider of manufactured housing communities across the United States.

Speaker Change: and expanded existing relationships with community association solutions company, Associated Asset Management, and commercial and residential real estate service provider, Tobin Capital Group.

Cameron Bready: Also this quarter, we launched a new residential pay-out product to streamline and automate the return of security deposits, which we are already successfully cross-selling to customers. We also saw strong growth in our Point of Sale software business this quarter, adding roughly 3,500 new locations. Demand for our Point of Sale and embedded commerce solutions remained strong across the segments of the restaurant and retail verticals we target. Our solutions are designed to grow with the customer's business, leveraging a common technology stack that enables customers to easily add functionality as they expand. This allows us to serve the small end of the SMB market and scale with merchants as they grow, while also addressing the more complex needs of quick service restaurants and sports entertainment.

Speaker Change: Also this quarter we launched a new residential payouts product to streamline and automate the return of security deposits, which we are already successfully cross-selling to customers.

Speaker Change: We also saw strong growth in our point-of-sale software business this quarter, adding roughly 3,500 new locations.

Cameron Brady: Demand for our point of sale and embedded commerce solutions remains strong across the segments of the restaurant and retail verticals we target. Our solutions are designed to grow with the customer's business, leveraging a common technology stack that enables customers to easily add functionality as they expand. This allows us to serve the small end of the SMB market and scale with merchants as they grow, while also addressing the more complex needs of quick-service restaurants and sports entertainment.

Speaker Change: Demand for our point-of-sale and embedded commerce solutions remain strong across the segments of the restaurant and retail verticals we target.

Speaker Change: Our solutions are designed to grow with the customer's business, leveraging a common technology stack that enables customers to easily add functionality as they expand.

Speaker Change: This allows us to serve the small end of the SMB market and scale with merchants as they grow, while also addressing the more complex needs of quick service restaurants and sports entertainment venues.

Cameron Bready: To that end, we are excited to announce a new partnership with Diamond Baseball Holdings to serve as the official commerce technology partner for its minor league baseball franchises in the United States and Canada. We are currently installed in 13 of these stadiums, and we expect to fully roll out our solutions at additional ball parks across Diamond's Club Portfolio before the 2025 season opens. We also sign new stadium partnerships with multiple UK football clubs, including Newcastle, Birmingham City, and Nottingham Forest during the quarter. And we are proud to have supported a major professional football championship across multiple stadiums, a Grand Slam tennis tournament, and a major golf tournament with our Point of Sale and Payment Solutions in Europe this summer.

Cameron Brady: To that end, we are excited to announce a new partnership with Diamond Baseball Holdings to serve as the official commerce technology partner for its minor league baseball franchises in the United States and Canada. We are currently installed in 13 of these stadiums, and we expect to fully roll out our solutions at additional ballparks across Diamond's club portfolio before the 2025 season opens.

Speaker Change: To that end, we are excited to announce a new partnership with Diamond Baseball Holdings to serve as the official commerce technology partner for its minor league baseball franchises in the United States and Canada.

Speaker Change: We are currently installed in 13 of these stadiums, and we expect to fully roll out our solutions at additional ballparks across Diamond's club portfolio before the 2025 season opens.

Cameron Brady: We also signed new stadium partnerships with multiple UK football clubs, including Newcastle, Birmingham City, and Nottingham Forest, during the quarter. And we are proud to have supported a major professional football championship across multiple stadiums, a Grand Slam tennis tournament, and a major golf tournament with our point-of-sale and payment solutions in Europe this summer. We also went live this quarter with a leading parks and entertainment company and are now providing food and beverage and retail point-of-sale solutions at its theme park locations in Florida.

Speaker Change: We also signed new stadium partnerships with multiple UK football clubs, including Newcastle, Birmingham City, and Nottingham Forest during the quarter.

Speaker Change: And we are proud to have supported a major professional football championship across multiple stadiums, a Grand Slam tennis tournament, and a major golf tournament with our point of sale and payment solutions in Europe this summer.

Cameron Bready: We also went live this quarter with a leading parks and entertainment company and are now providing the food and beverage in retail Point of Sale solutions at its theme park locations in Florida. And we continue to see great momentum in food service management, where we are the partner of choice to the three largest players in the space, which serve a 20% improvement in related bookings this quarter. In the restaurant and retail verticals in North America, where our POS software is targeted towards SMB and mid-market customers. In addition to strong rooftop growth, we achieved the greater than 70% attach rate of our embedded commerce solutions with new customers.

Speaker Change: We also went live this quarter with a leading parks and entertainment company and are now providing the food and beverage in retail point-of-sale solutions at its theme park locations in Florida.

Cameron Brady: And we continue to see great momentum in food service management, where we are the partner of choice to the three largest players in the space, which drove a 20% improvement in related bookings this quarter. In the restaurant and retail verticals in North America, where our POS software is targeted toward SMB and mid-market customers. In addition to strong rooftop growth, we achieved a greater than 70% attach rate for our embedded commerce solutions with new customers.

Speaker Change: And we continue to see great momentum in food service management, where we are the partner of choice to the three largest players in the space, which drove a 20% improvement in related bookings this quarter.

Speaker Change: In the restaurant and retail verticals in North America, where our POS software is targeted towards SMB and mid-market customers, in addition to strong rooftop growth, we achieved a greater than 70% attach rate of our embedded commerce solutions with new customers.

Cameron Bready: As just one example, we are seeing significant demand for loyalty and marketing tools, with locations leveraging our customer engagement software increasing over 100% this quarter compared to the prior year. Additionally, we are pleased with the market reception of our recently released next generation Point of Sale software, including the improved user interface, our intuitive experience across iOS and Android-based devices, and the mobile-first design that drives best-in-class on-the-channel experiences for our merchants and their consumers. While still early days, these new offerings are benefiting our performance, and we expect a more meaningful contribution to revenue in 2025 as we gain scale.

Cameron Brady: As just one example, we are seeing significant demand for loyalty and marketing tools with locations leveraging our customer engagement software increasing over 100% this quarter compared to the prior year. Additionally, we are pleased with the market reception of our recently released next-generation point-of-sale software, including the improved user interface, our intuitive experience across iOS and Android-based devices, and the mobile-first design that drives best-in-class omni-channel experiences for our merchants and their consumers.

Speaker Change: As just one example, we are seeing significant demand for loyalty and marketing tools with locations leveraging our customer engagement software, increasing over 100 percent this quarter compared to the prior year.

Speaker Change: Additionally, we are pleased with the market reception of our recently released next-generation point-of-sale software.

Speaker Change: including the improved user interface, our intuitive experience across iOS and Android based devices, and the mobile first design that drives best-in-class omni-channel experiences for our merchants and their consumers.

Cameron Brady: While still early days, these new offerings are benefiting our performance, and we expect a more meaningful contribution to revenue in 2025 as we gain scale. We also continue to see good momentum expanding our point of sale offerings into markets outside of the U.S. It's worth highlighting that we have begun piloting our point of sale offering in Germany and anticipate a full commercial launch next month. We also remain on track to bring our point of sale software to key additional international markets, including Mexico, Ireland, Poland, Austria, and Romania over the next 12 to 15 months. In Germany, our Commerce Bank joint venture, Commerce Global Pay, went live this quarter, and we were off to a fantastic start.

Speaker Change: While still early days, these new offerings are benefiting our performance and we expect a more meaningful contribution to revenue in 2025 as we gain scale.

Cameron Bready: We also continue to see good momentum expanding our Point of Sale offerings into markets outside of the US. It's worth highlighting that we have begun highlighting our Point of Sale offering in Germany and anticipate a full commercial launch next month. We also remain on track to bring our Point of Sale software to key additional international markets, including Mexico, Ireland, Poland, Austria, and Romania over the next 12 to 15 months. In Germany, our Commerce Bank joint venture, Commerce Global Pay, went live this quarter, and we were off to a fantastic start. While we are just beginning to leverage Commerce Bank's relationships with roughly 26,000 corporate clients and almost 11 million private and small business customers.

Speaker Change: We also continue to see good momentum expanding our point-of-sale offerings into markets outside of the U.S.

Speaker Change: It's worth highlighting that we have begun piloting our point-of-sale offering in Germany and anticipate a full commercial launch next month.

Speaker Change: We also remain on track to bring our point-of-sale software to key additional international markets, including Mexico, Ireland, Poland, Austria, and Romania, over the next 12 to 15 months.

Speaker Change: In Germany, our Commerce Bank joint venture, Commerce Global Pay, went live this quarter, and we were off to a fantastic start.

Cameron Brady: Well, we are just beginning to leverage Commerce Bank's relationships with its roughly 26,000 corporate clients and almost 11 million private and small business customers. We are already seeing strong lead generation and substantial opportunities to further digitize the payment experience, while also allowing us to build a scale business in this attractive market. Lastly, we are continuing to see strong demand for our pan-European solution. Notably, we are realizing attractive growth in the EV charging sector and recently signed a partnership with a major European energy provider to support the expansion of public charging solutions throughout Central Europe.

Speaker Change: Well, we are just beginning to leverage Commerce Bank's relationships with its roughly 26,000 corporate clients and almost 11 million private and small business customers. We are already seeing strong lead generation and substantial opportunities to further digitize the payment experience.

Cameron Bready: We are already seeing strong lead generation and substantial opportunities to further digitize the payment experience, while also allowing us to build a scale business in this attractive market.

Speaker Change: while also allowing us to build a scale business in this attractive market.

Cameron Bready: Lastly, we are continuing to see strong demand for our pan-European solutions. Notably, we are realizing attractive growth in the EV charging sector and recently signed a partnership with a major European energy provider to support the expansion of public charging solutions throughout Central Europe.

Speaker Change: Lastly, we continue to see strong demand for our pan-European solutions.

Speaker Change: Notably, we are realizing attractive growth in the EV charging sector and recently signed a partnership with a major European energy provider to support the expansion of public charging solutions throughout Central Europe .

Cameron Bready: We also made two small tucking acquisitions in Europe this quarter to continue to improve our strategic positioning. The first was the acquisition of Take Payments, a small provider of payment solutions to SMB merchants in the UK. Take Payments serves the meaningfully diversified expand our direct distribution capability and demand generation solutions at the UK market continues to evolve beyond traditional bank-based referral channels. It also provides attractive opportunities for us to cross-sell our commerce enablement solutions into its customer base. This investment allows us to reorient our distribution approach in the UK market with leading demand and capabilities and represents opportunity timing as we are starting to see some signs of stability in the UK market more broadly.

Cameron Brady: We also made two small tuck-in acquisitions in Europe this quarter to continue to improve our strategic positioning. The first was the acquisition of Take Payments, a small provider of payment solutions to SMB merchants in the UK. Take Payments serves to meaningfully diversify and expand our direct distribution capability and demand generation solutions as the UK market continues to evolve beyond traditional bank-based referral channels.

Speaker Change: We also made two small tuck-in acquisitions in Europe this quarter to continue to improve our strategic positioning.

Speaker Change: The first was the acquisition of TakePayments, a small provider of payment solutions to SMB merchants in the UK.

Speaker Change: TakePayments serves to meaningfully diversify and expand our direct distribution capability and demand generation solutions as the UK market continues to evolve beyond traditional bank-based referral channels.

Cameron Brady: It also provides attractive opportunities for us to cross-sell our commerce enablement solutions to its customer base. This investment allows us to reorient our distribution approach in the UK market with leading demand generation capabilities and represents opportune timing as we are starting to see some signs of stability in the UK market more broadly. We have a strong pipeline of new business here, with the hospitality and unattended verticals being notable bright spots, including our recent win of Bergin's Hotel Business in the UK.

Speaker Change: It also provides attractive opportunities for us to cross-sell our commerce enablement solutions into its customer base.

Speaker Change: This investment allows us to reorient our distribution approach in the UK market with leading demand zone capabilities and represents opportune timing as we are starting to see some signs of stability in the UK market more broadly.

Cameron Bready: We have a strong type-on of new business here with the hospitality and unintended vertical notable bright spots, including our recent win of Virgin's hotel business in the UK. The second acquisition at the end of the quarter was at an early stage technology development company that we were previously partnering with in Europe to drive our terminal on mobile offerings. Given the strong demand we have seen for our terminal on mobile offerings and the expected long-term importance they will play to our point of sale plans, it was strategically important for us to bring this technology in-house to unify our offerings globally and to control the entire value stack, enabling our solutions.

Speaker Change: We have a strong pipeline of new business here, with the hospitality and unattended verticals notable bright spots, including our recent win of Bergin's Hotel Business in the UK.

Cameron Brady: The second acquisition at the end of the quarter was an early-stage technology development company that we were previously partnering with in Europe to drive our terminal-on-mobile offer, given the strong demand we have seen for our terminal-on-mobile offerings and the expected long-term importance they will play in our point of sale plan. It was strategically important for us to bring this technology in-house, to unify our offerings globally, and to control the entire value stack, enabling our solution.

Speaker Change: The second acquisition at the end of the quarter was at an early stage technology development company that we were previously partnering with in Europe to drive our terminal on mobile offerings.

Speaker Change: Given the strong demand we have seen for our terminal on mobile offerings and the expected long-term importance they will play to our point of sale plans, it was strategically important for us to bring this technology in-house to unify our offerings globally and to control the entire value stack enabling our solutions.

Cameron Bready: Moving to issuer solutions, we continue to see strong execution across our business. We completed two large conversions this quarter, which in combination with existing customer growth, to have a healthy increase in accounts on file sequentially. We also have a near record implementation pipeline of more than 65 million accounts and seven active L.O.I. Further, we are having ongoing success in cross-selling our value-added service solutions and completed 30 product implementations for existing clients this quarter across our fraud, virtual card, and communications platforms. From a macro perspective, and similar to what you heard from our FI partners and the networks, we saw modest deceleration in transaction volumes this quarter, which was largely driven by commercial card activity.

Cameron Brady: Moving to issuer solutions, we continue to see strong execution across our business. We completed two large conversions this quarter, which in combination with existing customer growth drove a healthy increase in accounts on file sequentially. From a macro perspective, and similar to what you heard from our FI partners and the networks, we saw a modest deceleration in transaction volumes this quarter, which was largely driven by commercial card activity.

Speaker Change: Moving to issuer solutions, we continue to see strong execution across our business.

Speaker Change: We completed two large conversions this quarter, which in combination with existing customer growth, drove a healthy increase in accounts on file sequentially.

Speaker Change: We also have a near record implementation pipeline of more than 65 million accounts and seven active LOIs.

Speaker Change: Further, we're having ongoing success in cross-selling our value-added service solutions and completed 30 product implementations for existing clients this quarter across our fraud, virtual card, and communications platforms.

Speaker Change: From a macro perspective and similar to what you heard from our FII partners and the networks, we saw a modest deceleration in transaction volumes this quarter, which was largely driven by commercial card activity.

Cameron Bready: We recently renewed our multi-decade issuer relationship with NatWest, spanning both its consumer and commercial portfolios, cementing our position with one of the largest and most active clients in Europe. NAT West recently announced its acquisition of Sainsbury Bank, further highlighting the importance of our strategy to line ourselves with market share winners. We look forward to opportunities to continue to expand our partnership with them in the future. Additionally, we have now launched our partnership with Outpace, a leading global travel technology company owned by Amadeus, providing issuer solutions technology for its platforms across Europe. Outpace is our first in-tech customer operating in our AWS cloud environment in Europe with many other clients in the pipeline.

Speaker Change: We recently renewed our multi-decade issuer relationship with NatWest, spanning both its consumer and commercial portfolios, cementing our position with one of the largest and most active clients in Europe .

Speaker Change: NatWest recently announced its acquisition of Sainsbury Bank, further highlighting the importance of our strategy to align ourselves with market share winners.

Cameron Brady: We look forward to opportunities to continue to expand our partnership with them in the future, providing issuer solutions technology for its platforms across Europe. Most importantly, we also continue to make progress on our issue modernization program and remain on track to complete the development of our client-facing applications this year. We also renewed partnerships with AMC Theaters and Cracker Barrel. Bob is a proven growth-oriented leader and operator, as well as a trusted colleague with an exceptional track record of managing key businesses across our organization during his 12 year tenure with the company. Most recently, Bob served as our Senior Executive Vice President and President of International and Vertical Markets for our Merchant Solutions business and previously led our integrated business for nearly ten years.

Speaker Change: We look forward to opportunities to continue to expand our partnership with them in the future.

Speaker Change: Additionally, we have now launched our partnership with OutPace, a leading global travel technology company owned by Amadeus, providing issuer solutions technology for its platforms across Europe .

Speaker Change: Outpace is our first FinTech customer operating in our AWS cloud environment in Europe with many other clients in the pipeline.

Cameron Bready: Most importantly, we also continue to make progress on our issue of modernization program and remain on track to complete the development of our client-facing applications this year. We have already initiated customer pilots and continue to expect commercial wants next. last year. Through modernization, we meaningfully increase our addressable market by broadening our opportunity set to include mid-market and smaller banks, in addition to new geographies. Our investments also drive greater enabling capabilities for our clients and allow our leading applications and solutions to be more easily consumable by FinTechs who are developing new use cases around cards. Fifting to B2B, we are seeing good trends in new bookings for our AP Automation Software in our core mid-market segment, while virtual cards spend continues to ramp.

Speaker Change: Most importantly, we also continue to make progress on our issue of modernization program and remain on track to complete the development of our client facing applications this year.

Speaker Change: We have already initiated customer pilots and continue to expect commercial launch next year.

Speaker Change: Through modernization, we meaningfully increase our addressable market by broadening our opportunity set to include mid-market and smaller banks, in addition to new geographies.

Speaker Change: Our investments also drive greater enablement capabilities for our clients and allow our leading applications and solutions to be more easily consumable by fintechs who are developing new use cases around cards.

Speaker Change: Shifting to B2B, we are seeing good trends and new bookings for our AP automation software in our core mid-market segment, while virtual card spend continues to ramp.

Cameron Bready: Additionally, we signed several notable new customers for our employer solutions, including relationships with Tara Staffing Group and Rainbow Pizza, which operates nearly 50 Domino's locations throughout Texas. We also renewed partnerships with ANC Theaters and Cracker Rail.

Speaker Change: Additionally, we signed several notable new customers for our employer solutions, including relationships with Terra Staffing Group and Rainbow Pizza, which operates nearly 50 Domino's locations throughout Texas.

Speaker Change: We also renewed partnerships with AMC Theatres and Cracker Barrel.

Cameron Bready: Before I turn the call over to Josh, I would like to highlight the appointment of Bob Portopassi as the President and Chief Operating Officer of Global Payments. Bob is a proven growth-oriented leader and operator, as well as a trusted colleague with an exceptional crack record of managing key businesses across our organization during his 12-year tenure with the company. Most recently, Bob served as our Senior Executive Vice President and President of International and Vertical Markets for our merchant solutions business, and previously led our integrated business for nearly a decade. I would forward the partnering with Bob and am confident in the role he will play in our company's continued future success.

Speaker Change: Before I turn the call over to Josh, I would like to highlight the appointment of Bob Portopossi as the President and Chief Operating Officer of Global Payments.

Speaker Change: Bob is a proven growth-oriented leader and operator, as well as a trusted colleague with an exceptional track record of managing key businesses across our organization during his 12-year tenure with the company.

Speaker Change: Most recently, Bob served as our Senior Executive Vice President and President of International and Vertical Markets for our Merchant Solutions business, and previously led our integrated business for nearly a decade.

Speaker Change: I look forward to partnering with Bob and am confident in the role he will play in our company's continued future success.

Joshua Whipple: Josh? Thanks, Cameron. Our sole financial performance for the second quarter was consistent with our expectations and reflects continued strong execution across our business, despite ongoing macroeconomic uncertainty. We delivered a just in that revenue of $2.32 billion for the quarter, an increase of 6% from the prior year, or 7% excluding the impact of the net spend of the investiture. A reported just in that revenue includes a roughly 50 basis point headwind from adverse foreign currency exchange rates relative to the second quarter of 2023. Adjusted operating margin increased 40 basis points to 45.2%. And we reported adjusted earnings per share of $2.93, an increase of 12% compared to the same period in 2023.

Speaker Change: Ciao.

Cameron Brady: Thanks, Cameron.

Speaker Change: Our sole financial performance for the second quarter was consistent with our expectations and reflects continued strong execution across our business, despite ongoing macroeconomic uncertainty.

Speaker Change: We delivered adjusted net revenue of $2.32 billion for the quarter, an increase of 6% from the prior year, or 7% excluding the impact of the net spend divestiture.

Josh Whipple: The reported adjusted net revenue includes a roughly 50 basis point headwind from adverse foreign currency exchange rates relative to the second quarter of 2023. Adjusted operating margin increased 40 basis points to 45.2%, and we reported adjusted earnings per share of $2.93.

Speaker Change: A reported adjusted net revenue includes a roughly 50 basis point headwind from adverse foreign currency exchange rates relative to the second quarter of 2023. Adjusted operating margin increased 40 basis points to 45.2%, and we reported adjusted earnings per share of $2.93.

Joshua Whipple: Making a closer look at performance by segment, Merchant Solutions achieved adjusted net revenue of $1.8 billion for the second quarter, reflecting growth of 8%. This includes a less than a point of contribution from the acquisition of take payments, which offset the roughly 50 basis point impact for months, unfavorable foreign currency exchange rates during the period. Our US business delivered high single digit growth in the quarter, as we continue to benefit from our software centric strategy, with both our integrated payments and point of sale businesses delivering double digit growth for the period. We also saw strength in our vertical markets portfolio, with our real estate, higher education, and healthcare solutions being notable bright spots.

Josh Whipple: Taking a closer look at performance by segment, Merchant Solutions achieved adjusted net revenue of $1.8 billion for the second quarter, reflecting growth of 8%. This includes less than a point of contribution from the acquisition of take payments, which offset the roughly 50 basis point impact from unfavorable foreign currency exchange rates during the period. Our U.S. business delivered high single-digit growth in the quarter as we continue to benefit from our software-centric strategy, with both our integrated payments and point-of-sale businesses delivering double-digit growth for the period.

Speaker Change: an increase of 12% compared to the same period in 2023.

Speaker Change: Taking a closer look at performance by segment, Merchant Solutions achieved adjusted net revenue of $1.8 billion for the second quarter, reflecting growth of 8%.

Speaker Change: This includes less than a point of contribution from the acquisition of take payments, which offset the roughly 50 basis point impact from unfavorable foreign currency exchange rates during the period.

Speaker Change: Our U.S. business delivered high single-digit growth in the quarter, as we continue to benefit from our software-centric strategy.

Speaker Change: with both our integrated payments and point-of-sale businesses delivering double-digit growth for the period. We also saw strength in our vertical markets portfolio with our real estate, higher education, and healthcare solutions being notable bright spots.

Josh Whipple: We also saw strength in our vertical markets portfolio, with our real estate, higher education, and healthcare solutions being notable bright spots. Outside of the U.S., we achieved mid-single-digit organic growth in Europe, with notable strength across our faster-growing geographies, including Poland and Greece. We were also pleased to see trends start to stabilize in the United Kingdom. Meanwhile, separately, our LATAM business realized double-digit growth as we continue to benefit from the strong secular payment trends in Mexico. This performance was partially offset by ongoing weakness in the macroeconomic environment in Asia Pacific.

Joshua Whipple: Outside of the US, we achieved mid-single-digit organic growth in Europe, with notable strength across our faster growth geographies, including Poland and Greece.

Speaker Change: Outside of the U.S., we achieved mid-single-digit organic growth in Europe with notable strength across our faster-growth geographies, including Poland and Greece.

Joshua Whipple: We were also pleased to see trends start stabilized in the United Kingdom. Group. Separately, our LADAM business realized double-digit growth as we continue to benefit from the strong secular payment trends in Mexico.

Speaker Change: We're also pleased to see trends start to stabilize in the United Kingdom.

Speaker Change: Separately, our LATAM business realized double-digit growth as we continue to benefit from the strong secular payment trends in Mexico.

Joshua Whipple: This performance was partially offset by ongoing weakness in the macroeconomic environment in Asia Pacific. We delivered a just at operating margin of 48.8% in the merchant segment, an increase of 30 basis points, reflecting ongoing sequential improvements since completing the acquisition of Evil Payments last year as expected. We were executing against our synergy plans related to the evil transaction and remain on track to achieve $135 million in one rate expense synergies within two years. And integration expenses are continuing to trend lower, as we have seen over the last several quarters. History of solutions produced adjusted net revenue of $527 million, reflecting growth of over 4%.

Speaker Change: This performance was partially offset by ongoing weakness in the macroeconomic environment in Asia-Pacific.

Josh Whipple: We delivered an adjusted operating margin of 48.8% in the merchant segment, an increase of 30 basis points, reflecting ongoing sequential improvements since completing the acquisition of EVO payments last year, as expected. We're executing against our synergy plans related to the EVO transaction and remain on track to achieve $135 million in run rate expense synergies within two years. And integration expenses are continuing to trend lower, as we have seen over the last several quarters, reflecting growth of over 4%. This includes a roughly 50 basis point impact from unfavorable foreign currency exchange rates during the period.

Speaker Change: We delivered an adjusted operating margin of 48.8% in the merchant segment, an increase of 30 basis points, reflecting ongoing sequential improvements since completing the acquisition of EVO payments last year, as expected.

Speaker Change: We are executing against our synergy plans related to the Evo transaction and remain on track to achieve $135 million in run rate expense synergies within two years.

Speaker Change: And integration expenses are continuing to trend lower, as we have seen over the last several quarters.

Speaker Change: Issuer Solutions produced adjusted net revenue of $527 million.

Joshua Whipple: This includes a roughly 50 basis point impact from unfavorable foreign currency exchange rates during the period. This quarter, we added 8 million traditional accounts on file sequentially or nearly 50 million accounts year over year as we continue to benefit from ongoing execution of our conversion pipeline in addition to account growth with our existing FI customers. We've had an especially busy year with new client implementations. Year today, we have completed nine implementations with over 8 million accounts. I'm especially proud of our team who has delivered these on time and without standing quality. We have six more implementations to complete for the remainder of the year.

Speaker Change: reflecting growth of over four percent. This includes a roughly 50 basis point impact from unfavorable foreign currency exchange rates during the period.

Josh Whipple: This quarter, we added 8 million traditional accounts on file sequentially, or nearly 50 million accounts year-over-year, as we continue to benefit from ongoing execution of our conversion pipeline, in addition to account growth with our existing FI customers. We've had an especially busy year with new client implementation. Here today, we have completed nine implementations with over eight million accounts. I'm especially proud of our team who have delivered these on time and with outstanding quality.

Speaker Change: This quarter we added 8 million traditional accounts on file sequentially, or nearly 50 million accounts year-over-year, as we continue to benefit from ongoing execution of our conversion pipeline, in addition to account growth with our existing FI customers.

Speaker Change: We've had an especially busy year with new client implementations.

Speaker Change: Here today, we have completed 9 implementations with over 8 million accounts.

Speaker Change: I'm especially proud of our team who has delivered these on time and with outstanding quality.

Josh Whipple: We have six more implementations to complete for the remainder of the year. Issuer transactions increased mid-single digits compared to the second quarter of 2023, which was a modest deceleration from the prior quarter. This was achieved despite facing a difficult comparison.

Joshua Whipple: Issuer transactions increased mid-single digits compared to the second quarter of 2023, which was a modest deceleration from the prior quarter. This was largely driven by software commercial volumes as businesses taking a more cautious approach to spending given the overall level of macroeconomic uncertainty. We also saw a slightly acceleration in consumer transaction growth sequentially, similar to what was reported by the networks and RFI partners. Focusing on our issue of B2B portfolio, our AP automation software continued to see healthy growth in the core mid-market segment on a normalized basis in the second quarter. And while our pay card solution is seeing some headwinds from software employment trends due to the macro environment, we are encouraged by the active new sales pipeline we have in the business.

Speaker Change: We have six more implementations to complete for the remainder of the year.

Speaker Change: Issuer transactions increased mid-single digits compared to the second quarter of 2023, which was a modest deceleration from the prior quarter.

Speaker Change: This was largely driven by softer commercial volumes as businesses take a more cautious approach to spending given the overall level of macroeconomic uncertainty.

Speaker Change: We also saw a slight acceleration in consumer transaction growth sequentially, similar to what was reported by the networks and RFI partners.

Speaker Change: Focusing on our issuer B2B portfolio.

Speaker Change: Our AP automation software continued to see healthy growth in the core mid-market segment on a normalized basis in the second quarter. And while our paycard solution is seeing some headwinds from softer employment trends due to the macro environment, we are encouraged by the active new sales pipeline we have in the business.

Joshua Whipple: Issuer solutions delivered adjusted operating margin of 46.8%, an increase of 10 basis points compared to the prior year as we continue to drive efficiencies in the business. This was achieved despite facing a difficult comparison. As you may recall, the issue of margins extended 300 basis points during the second quarter of 2023 as we pivoted the business to more technology enablement and away from lower margin managed services offerings. We've now lapped those related margin benefits. From a cash flow standpoint, we produced strong and just a free cash flow for the quarter of approximately $600 and $80 million, which is 25% higher than the prior year period.

Speaker Change: Issuer Solutions delivered adjusted operating margin of 46.8%.

Speaker Change: An increase of 10 basis points compared to the prior year as we continue to drive efficiencies in the business.

Speaker Change: This was achieved despite facing a difficult comparison.

Josh Whipple: From a cash flow standpoint, we produced strong and just free cash flow for the quarter of approximately $680 million, which is 25% higher than the prior year period. This also represents a roughly 91% conversion rate of adjusted net income to adjusted free cash flow. With the third quarter ending on a weekday, we expect the larger impacts from the settlement pre-funding we saw in the back half of last year to reverse. We invested $179 million in capital expenditures during the quarter and continue to expect capital spending to be around $670 million, or roughly 7% of revenue in 2024, consistent with our long-term target.

Speaker Change: We've now lapped those related margin benefits.

Speaker Change: From a cash flow standpoint, we produce strong, adjusted free cash flow for the quarter of approximately $680 million, which is 25% higher than the prior year period.

Joshua Whipple: This also represents a roughly 91% conversion rate of adjusted net income to adjusted free cash flow. Up from approximately 80% last year. There's work noting that adjusted free cash flow this quarter included a relatively small positive adjustment related to settlement timing for the period, as the second quarter began again ended on a weekend, as it has for the prior three quarters. With the third quarter ending on a weekday, we expect the larger impacts from the settlement pre-funding we saw in the back half of last year to reverse. We invested $179 million in capital expenditures during the quarter.

Speaker Change: This also represents a roughly 91% conversion rate of adjusted net income to adjusted free cash flow, up from approximately 80% last year.

Speaker Change: as it has for the prior three quarters. With the third quarter ending on a weekday, we expect the larger impacts from the settlement pre-funding we saw in the back half of last year to reverse.

Joshua Whipple: And continued to expect capital spending to be around $670 million, or roughly 7% of revenue in 2024, consistent with our long-term targets. Further, we repurchased approximately one million shares for roughly $100 million in the quarter. Our leverage position was just under three and a half times at the end of the second quarter. And we remain on track for our leverage level to be in the low threes by year end, consistent with our long-term targets. A balance sheet remains healthy, and we have approximately $3.6 billion of available liquidity. Our total indebtedness is approximately 97% fixed with a weighted average cost of debt of 3.37%.

Speaker Change: We invested $179 million in capital expenditures during the quarter and continue to expect capital spending to be around $670 million, or roughly 7% of revenue in 2024, consistent with our long-term targets.

Speaker Change: Further, we repurchased approximately 1 million shares for roughly $100 million in the quarter.

Josh Whipple: And we remain on track for our leverage level to be in the low threes by year-end, consistent with our long-term target. Our total indebtedness is approximately 97% fixed, with a weighted average cost of debt of 3.37%. Putting it all together, we continue to expect adjusted earnings per share for the full year to be in the range of $11.54 to $11.70, reflecting growth of 11% to 12% over 2023

Speaker Change: Our total indebtedness is approximately 97% fixed with a weighted average cost of debt of 3.37%.

Joshua Whipple: According to the outlook, we are pleased with how our business is positioned as we begin the second half of the year. We continued to expect reported adjusted net revenue to range from $9.17 billion to $9.30 billion, reflecting growth of 6% to 7% over 2023. This now includes an expectation for foreign currency exchange rates to be a headwind of about 75 basis points in the second half of the year. We still expect annual adjusted operating margin to expand up to 50 basis points for 2024, driven by the benefits to our business mix from our ongoing shift towards technology enablement, partially offset by the lower margin profile of Evo prior to full synergy realization.

Speaker Change: According to the Outlook, we are pleased with how our business is positioned as we begin the second half of the year.

Speaker Change: We continue to expect reported adjusted net revenue to range from $9.17 billion.

Joshua Whipple: To provide color at the segment level, we continued to expect our merchant business to report adjusted net revenue growth of 9% plus percent for the full year. This remains consistent with our prior outlook, despite our expectation that unfavorable foreign currency exchange rates will now be a headwind in the back half of the year. We expect these headwinds to be offset by the inclusion of the acquisition of Take Payments that camera discussed, which we expect to contribute roughly a point of growth for the second half of the year. We also continued to expect up to three basis points of adjusted operating margin expansion for the merchant business in 2024, with expansion improving in the back half compared to the first half performance as Evo synergy realization ramps.

Speaker Change: to provide color at the segment level.

Speaker Change: We continue to expect our merchant business to report adjusted net revenue growth.

Speaker Change: of nine plus percent for the full year. This remains consistent with our prior outlook, despite our expectation that unfavorable foreign currency exchange rates will now be a headwind in the back half of the year.

Speaker Change: which we expect to contribute roughly a point of growth for the second half of the year.

Speaker Change: We also continue to expect up to 30 basis points of adjusted operating margin expansion for the merchant business in 2024, with expansion improving in the back half compared to the first half performance as Evo Synergy Realization ramps.

Joshua Whipple: Moving to issuer solutions, we continue to anticipate adjusted net revenue growth in the 5% to 6% range for the full year compared to 2023. However, given the headwind, we now expect from foreign currency exchange rates and the modesty celebration we're seeing in commercial car transactions, we now expect to be at the low end of this range. We still anticipate adjusted operating margin for the issue of business to expand by up to 50 basis points. Moving to a couple of non-operating items, we expect net interest expense to be $500 million this year and for our adjusted effective tax rate to be approximately 19%, which is consistent with our prior outlook.

Speaker Change: Moving to issuer solutions, we continue to anticipate adjusted net revenue growth in the 5% to 6% range for the full year compared to 2023.

Joshua Whipple: Putting it all together, we can be in expect adjusted earnings per share for the full year to be in the range of $11.54 to $11.70 for reflecting growth of 11% to 12% over 2023. And finally, our outlook continues to reflect the potential for a slightly more tempered economic environment in the second half of 2024.

Speaker Change: Putting it all together, we continue to expect adjusted earnings per share for the full year to be in the range of $11.54 to $11.70, reflecting growth of 11% to 12% over 2023.

Speaker Change: And finally, our outlook continues to reflect the potential for a slightly more tempered economic environment in the second half of 2024.

Cameron Bready: Now from the call back over to Cameron. Thank you, Josh. Moving forward, we remain committed to sharpening our strategic focus and simplifying our business to position global payments as the partner of choice for commerce solutions in the markets that we believe have the highest potential. We're finalizing the review of our business and began earlier this year. That work has involved a thoughtful and mechanical assessment of our assets, which has helped us to identify meaningful opportunities to better align our organization to drive sustainable growth. Over the last two decades, we have built one of the leading global payments technology companies.

Cameron Brady: Now, I'll turn the call back over to Cameron.

Cameron Brady: Moving forward, we remain committed to sharpening our strategic focus and simplifying our business to position Global Payments as the partner of choice for commerce solutions in the markets that we believe have the highest potential. We're finalizing the review of our business that began earlier this year. That work involved a thoughtful and methodical assessment of our assets, which has helped us to identify meaningful opportunities to better align our organization to drive sustainable growth.

Speaker Change: Now I'll turn the call back over to Cameron.

Cameron Brady: Thank you, Charles.

Cameron Brady: Moving forward, we remain committed to sharpening our strategic focus and simplifying our business to position Global Payments as the partner of choice for commerce solutions in the markets that we believe have the highest potential.

Speaker Change: We're finalizing the review of our business that began earlier this year. That work has involved a thoughtful and methodical assessment of our assets, which has helped us to identify meaningful opportunities to better align our organization to drive sustainable growth.

Cameron Brady: Over the last two decades, we have built one of the leading global payments technology companies. We look forward to providing you with more details on the changes we're making at our investor conference to be held on Tuesday, September 24, in New York City.

Cameron Bready: As we move into the next phase of growth, we're simplifying our portfolio and streamlining our operations to deliver product-led, customer-centric solutions while continuing to emphasize service as the key differentiator for our business. Ultimately, we expect executing on these initiatives while I was to gain share, free up capital to invest in innovation, and deliver sustainable performance to the cycle.

Speaker Change: Over the last two decades, we have built one of the leading global payments technology companies. As we move into the next phase of growth, we're simplifying our portfolio and streamlining our operations to deliver product-led, customer-centric solutions while continuing to emphasize service as a key differentiator for our business.

Speaker Change: Ultimately, we expect executing on these initiatives will allow us to gain share, free up capital to invest in innovation, and deliver sustainable performance through the cycle.

Winnie Smith: We're looking forward to providing you with more details on the changes we're making out our investor conference to be held on Tuesday, September 24, in New York City.

Speaker Change: We look forward to providing you with more details on the changes we're making at our investor conference to be held on Tuesday, September 24th in New York City.

Winnie Smith: Winnie? Thanks, Cameron.

Winnie Smith: Winnie?

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.

Speaker Change: Whitney?

Whitney: Thanks, Cameron. 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, we'll now go to questions.

Unknown Executive: Operator, we'll now go to questions. If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question.

Whitney: five, eight.

Speaker Change: If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced.

Ramsey El: And your first question comes line of Ramsey LSL from Buckley. Your line is open. Thanks for taking my question. Given this sort of unstable macro environment, could you give us your latest thoughts with the inclusion of EVO and everything you've got going on in your business about the split between discretionary and non-discretionary volumes and merchant? How much of the portfolio is exposed to credit versus debit and things like that?

Winnie Smith: And your first question comes from Ramsey LSL from Barclays. Your line is open.

Speaker Change: That is star one if you wish to ask a question.

Speaker Change: And your first question comes from Ramsey LSL from Barclays. Your line is open.

Ramsey LSL: Thanks for taking my question.

Speaker Change: Given this sort of unstable macro environment, could you give us your latest thoughts with the inclusion of Evo and everything else you've got going on in your business about the split between discretionary and non- discretionary volumes and merchant, you know, how much of the portfolio is exposed to credit versus debit and things like that?

Cameron Bready: Hey, Ramsey, good morning. It's Cameron. I'll maybe comment on that.

Cameron Brady: Hey Ramsey, good morning.

Cameron Brady: It's Cameron. I'll maybe comment on that later. Look, my own perspective on the discretionary-non-discretionary split is it's a bit arbitrary these days. I think, you know, what's discretionary to one person may be non-discretionary to another and vice versa. I think we've always looked at our portfolio as being very well diversified across what have been traditionally considered discretionary and non-discretionary verticals. And I think even post Evo, you know, we're still in a position where, as I look at the mix of business we have today, I think we're very well diversified.

Cameron Bready: My own perspective on the discretionary and non discretionary split is it's a bit arbitrary these days. I think what's discretionary to one person, maybe non-discretionary to another and vice versa. I think we've always looked at our portfolio as being very well diversified across what have been traditionally considered discretionary and non-discretionary verticals. And I think even post EVO, we're still in a position where, as I look at the mix of business we have today, I think we're very well diversified. We're very well diversified geographically; I think around the globe. We're very well diversified across vertical markets.

Speaker Change: Hey Ramsey, good morning. It's Cameron. I'll maybe comment on that. Look, my own perspective on the discretionary non-discretionary split is it's a bit arbitrary these days. I think, you know, what's discretionary to one person may be non-discretionary to another and vice versa.

Speaker Change: I think we've always looked at our portfolio as being very well-diversified across what have been traditionally considered discretionary and non-discretionary verticals, and I think even post-EVO.

Cameron Brady: We're very well diversified geographically, I think around the globe. We're also very well diversified across vertical markets. We're very well diversified across revenue streams as well. So, as I think about the overall mix of the business, particularly against the backdrop of, again, a somewhat uncertain macro environment, I remain very confident in the resilience and durability of the model that we've built. You know, largely on the back of a business that's pretty well diversified, again, across different types of payments businesses with our merchant and issuer mix, as well as different verticals, different geographies, et cetera. So, I think the mix of businesses we have is good, and it positions us well for whatever macro environment we may face as we continue to move forward.

Speaker Change: You know, we're still in a position where, as I look at the mix of business we have today, I think we're very well diversified. We're very well diversified geographically, I think around the globe.

Cameron Bready: We're very well diversified kind of across revenue streams as well. So as I think about the overall mix of the business, you know, particularly against the backdrop of again a somewhat uncertain macro environment, you know, I remain very confident in the resilience and durability of the model that we built. You know, largely on the back of a business that's pretty well diversified again across different types of payments, businesses with our merchant and issuer mix as well as different verticals, different geographies, etc. So I think the mix of business we have is good and it positions us well for whatever macro environment we may face as we continue to move forward.

Speaker Change: We're very well diversified across vertical markets.

Speaker Change: We're very well diversified kind of across revenue streams as well. So, as I think about the overall mix of the business,

Speaker Change: You know, particularly against the backdrop of, again, a somewhat uncertain macro environment, you know, I remain very confident in the resilience and durability of the model that we built.

Speaker Change: You know, largely on the back of a business that's pretty well diversified, again, across different types of payments businesses with our merchant and issuer mix, as well as different verticals, different geographies, etc. So,

Speaker Change: I think the mix of business we have is good and it positions us well for whatever macro environment we may face as we continue to move forward.

Ramsey El: Thanks, and follow up from me. You called out ProFAC as being an important driver of new ISV signings. Can you comment a little more on how ProFAC increases this sort of ISV cam for you guys? What types of clients are you now signing with ProFAC that you weren't before? Is it just merchant, you know, sort of client size, or is there some other axes to look at it on?

Speaker Change: Thanks and a follow-up from me. You called out ProFac as being an important driver of new ISV signings.

Cameron Brady: Can you comment a little more on how ProFac increases this sort of ISV TAM for you guys? What types of clients are you now signing with ProFac that you weren't before? Is it just a merchant, you know, sort of client size? Or are there some other axes to look at?

Speaker Change: Can you comment a little more on how ProFac increases this sort of ISV TAM for you guys? What types of clients are you now signing with ProFac that you weren't before? Is it just merchant, you know, sort of client size or is there some other axes to look at it on?

Cameron Bready: Yeah, it's a good question, Ramsey. The way I think about the ProFAC business is it largely fills a need in the market for clients who need some payment facilitation capabilities, largely around the onboarding experience that that delivers to merchants, and some of the funding flexibility that comes through payment facilitation capabilities, but they are not scaled enough to be able to take on all the responsibilities of being a payment facility, particularly as it relates to underwriting, risk management, etc. So it fills a nice niche in the market for, you know, I would say on average, probably smaller ISVs that need some payment facilitation capabilities, but really aren't in a position to take on all the burdens of that themselves.

Speaker Change: Yeah, it's a good question, Ramsey. The way I think about the Profac business is it largely fills a need in the market for clients who need

Speaker Change: Some payment facilitation capabilities, largely around the onboarding experience that that delivers to merchants and some of the funding flexibility that comes through payment facilitation capabilities.

Speaker Change: But they are not scaled enough to be able to take on all the responsibilities of being a payment facility, particularly as it relates to underwriting, risk management, etc.

Speaker Change: So it fills a nice niche in the market for, you know, I would say on average, probably smaller ISVs that need some payment facilitation capabilities, but really aren't in a position to take on all the burdens of that themselves. And I think that sort of middle of the ground solution.

Cameron Bready: And I think that's sort of middle-of-the-ground solution that we've been able to offer has been very well received by the market.

Cameron Bready: And it does kind of open up a new area where I think before, you know, we had not been as successful in signing kind of ISV partners. So I think what I'm most pleased about as relates to the integrated business is obviously the ongoing sort of consistent growth that we're seeing in that channel, but the continued investment in capabilities to make sure that we sustain our leadership position in that market and our ability to sort of tailor our offerings to meet specific needs of ISV customers in the marketplace to compete very effectively against other solution providers.

Speaker Change: that we've been able to offer has been very well received by the market and it does kind of open up a new area where

Speaker Change: I think before, you know, we had not been as successful in signing kind of ISB partners. So I think what

Speaker Change: I'm most pleased about as relates to the integrated business is obviously the ongoing sort of consistent growth that we're seeing in that channel, but the continued investment in capabilities to make sure that we sustain our leadership position in that market and our ability to sort of tailor our offerings to meet

Speaker Change: Specific needs of ISB customers in the marketplace that compete very effectively against other solution providers.

Ramsey El: Perfect.

Unknown Executive: Thanks.

Jason Kupferberg: Thank you very much. Your next question comes from a line of Jason Kupstead of Bank of America. Your line is open. Thank you, guys. Good morning. I wanted to ask about merchant volume growth to start. So I came at at 6%. I think organically that was maybe a tick down of a couple of points, if I'm not mistaken.

Speaker Change: Perfect, thanks.

Speaker Change: Thanks for having me.

Winnie Smith: Thank you, guys. Good morning.

Speaker Change: Your next question comes to the line of Jason Kupferberg of Bank of America. Your line is open.

Josh Whipple: I wanted to ask about merchant volume growth to start, and so it came in at 6%. I think organically that was maybe a tick down of a couple of points, if I'm not mistaken. Can you talk a little bit about what maybe drove that decline? I'm guessing, you know, leap year was probably worth a point but also looked like there was a little bit of decoupling of the volume versus the revenue growth. They had kind of been on top of each other for a period of time. So I don't know if that was mixed related. Appreciate any thoughts on that.

Jason Kupferberg: Thank you guys. Good morning. I wanted to ask about merchant volume growth to start. So I came in at 6%. I think organically, that was maybe a tick down of a couple of points, if I'm not mistaken.

Jason Kupferberg: Can you talk a little bit about what maybe drove that diesel? I'm guessing, you know, leap year was probably worth a point, but also looked like there was a little bit of decoupling of the volume versus the revenue growth. They had kind of been on top of each other for a period of time. So I don't know if that was mixed related. Appreciate any thoughts on that.

Joshua Whipple: Yeah, I'll make a couple comments. I would say it would decline sequentially about a point. If you look at our sort of revenue, X-Tag payment, it was up roughly kind of seven and a half organically year over year. Volumes up six last quarter. It was, I think, eight and seven.

Josh Whipple: Yeah, I'll make a couple of comments. I would say it was declined sequentially by about a point. If you look at our sort of revenue, x tag payment, it was up roughly kind of seven and a half organically, year over year, volumes up six. The last quarter, it was, I think, eight and seven. So generally, I would say a pretty consistent trend that we've seen sequentially, Q1, Q2. I think to your point, leap year probably had a little bit of an impact on the macro, obviously, other networks and competitors have reported and generally seen the same trends as it relates to the overall volume environment and macro environment more broadly.

Speaker Change: If you look at our sort of revenue, XTAG payment, it was up roughly kind of seven and a half organically.

Joshua Whipple: So generally, I would say a pretty consistent trend that we've seen sequentially Q one, two. I think your point leap year probably had a little bit of impact. The macro, obviously, other networks and competitors have reported and generally seen the same trends as relates to the overall volume environment and macro environment more probably.

Speaker Change: year over year, volumes up six, the last quarter it was I think eight and seven. So generally I would say a pretty consistent trend that we've seen sequentially Q1, Q2. I think to your point leap year probably had a little bit of impact, the macro obviously other networks and competitors have reported and generally seen the same trends as it relates to the overall volume environment and macro environment more broadly. So

Joshua Whipple: I don't think that's really unique to us. Take payments, delivers, you know, on the balance, you know, slightly more revenue than it does volume contribution. So I think that net were sort of still within a point of each other as it relates to organic revenue growth and volume that we saw in the business.

Josh Whipple: So I don't think that's really unique to us. Take payments, for example, delivers, you know, on the balance, slightly more revenue than it does volume contribution. So I think, net net, we're sort of still within a point of each other as it relates to organic revenue growth and volume that we see in the business.

Jason Kupferberg: Okay, that's helpful. And then on merchant margins, up 30 bips in the quarter, that was a bit better.

Speaker Change: Okay, that's helpful. And then on merchant margins, up 30 BIPs in the quarter, that was a bit better. I think in the guide, the guide was for flat, so wondering what drove that and maybe if you can just speak to kind of your confidence level in the full year guide. I know we're still talking about up to 30 BIPs, but do we feel like the probability of getting all the way to 30 is higher based on where we are in the year and, you know, what you see in front of you in terms of the incremental cost synergies from EVA?

Jason Kupferberg: I think the guy in the guide, the guide was for flat. So wondering what drove that. And maybe if you can just speak to kind of your confidence level in the full year guide, I know we're still talking about up to 30 bips, but we feel like the probability of getting all the way to 30 is higher based on where we are in the year. And you know what you see in front of you in terms of the incremental cost synergies from Eva.

Joshua Whipple: Yeah, Jason, it's a good question.

Cameron Brady: Yeah, Jason, it's a good question. Maybe I'll start, and I'll ask Josh to jump in.

Cameron Bready: Maybe I'll start on the last chance to jump in. I would just say overall, you know, we're very pleased with the margin expansion we saw in the merchant business. And I would just note that despite absorbing take payments, that comes in a roughly half of our margin today. So yeah, we did, you know, perform a little bit better than we expected in the second quarter from a margin expansion perspective in the merchant business. I think it largely reflects kind of continued strong execution. And obviously, some of the growth trends we're seeing in aspects of the business that have a very attractive margin profiles for us.

Josh Whipple: I would just say overall, you know, we're very pleased with the margin expansion we saw in the merchant business. And I would just note that, despite absorbing take payments, it comes in at roughly half of our margin today. So yeah, we did, you know, perform a little bit better than we expected in the second quarter from a margin expansion perspective in the merchant business. I think it largely reflects kind of continued strong execution and obviously some of the growth trends we're seeing in aspects of the business that have attractive margin profiles for us.

Speaker Change: Kind of continued strong execution and obviously some of the growth trends we're seeing in aspects of the business that have attractive margin profiles for us.

Joshua Whipple: So I think, you know, overall, really, really pleased with the outcome there, as I said, and we grew it, you know, 30 basis points to find absorbing, you know, take payments that comes in it again about half of that margin. The last point I would make is, you know, we're still targeting 30 basis points for the year. Our language is up to 30, but just to be very clear, we're targeting 30 for the year.

Josh Whipple: So I think, you know, overall, really, really pleased with the outcome there, as I said, and we grew it by 30 basis points, despite absorbing, you know, take payments, it comes in at again, about half of that margin. But the last point I would make is, you know, we're still targeting 30 basis points for the year. Our language is up to 30. But just to be very clear, we're targeting 30 for the year, and I'll let Josh maybe comment a little bit about what we see in the back half.

Joshua Whipple: And I'll let Josh maybe comment a little bit about what we see in the back half. Yeah, Jason. So, you know, as we think about merchant margins, what I would say is that, you know, with the, you know, Evo integration, we continue to see, you know, synergies, you know, flow and, you know, as I mentioned, I think last quarter in 23, we realized 25% of the $135 million. In this year, we expect to go ahead and realize, you know, 50%. And you know, as related to the back half of the year, you know, we expect, you know, merchant margins to be, you know, approximately, you know, expand 50 basis points.

Joshua Whipple: So, you know, we're pretty pleased with, you know, how healthy, you know, that the margin expansion looks like, you know, for the overall merchant business.

Speaker Change: And that gets you down to the up, you know, 30 basis points for the full year. So, you know, we're pretty pleased with, you know, how healthy, you know, the margin expansion looks like, you know, for the overall merchant business.

Jason Kupferberg: Okay, I'm assuming that would skew a little bit towards Q4 versus Q3, just as we think about cadence. Is that fair? Just as synergies build? Yeah, that's fair.

Operator: That's fair. That's right.

James Friedman: Next. Your next question comes to Lana James for set for Morgan Stanley. Your line is open. Great. Thank you very much.

Operator: Your next question comes from the line of James Faucette from Morgan Stanley. Your line is open.

Speaker Change: Your next question comes to the line from James Faucette from Morgan Stanley . Your line is open.

James Friedman: I wanted to touch on the ISV channel. It seemed like you'd made some good progress, and that kind of thing. I'm wondering if you can talk a little bit about how we should be thinking about the growth potential there, and what dynamics in that segment may be different than what you see in the market. And the rest of your merchant business generally.

James Faucette: I wanted to touch on the ISV channel. It seemed like you'd made some good progress and that kind of thing.

James Faucette: I'm wondering if you can talk a little bit about how we should be thinking about the growth potential there, and what dynamics in that segment may be different than what you see in the rest of your merchant business generally.

Cameron Bready: Yeah, I think it's a fair question. I'll just start by saying, look, that's where the market is going. You know, we've talked for many years about the intersection of software and payments, and obviously we've worked very hard to position our business at that intersection. Because more and more we see merchant clients, particularly in the SMB space that we serve, making payments decisions largely based on sort of the underlying software technology that they're using to run their business. Obviously, that is true in restaurant and retail, where point of sale is now kind of the mode of competition for payment acceptance in those key vertical markets from a consumer standpoint, spend standpoint, excuse me, start to get that out.

Speaker Change: Yeah, I think it's a fair question. And I'll just start by saying, look, that's where the market is going. You know, we've talked for many years about the intersection of software and payments. And obviously, we've worked very hard to position our business at that intersection.

Speaker Change: Because more and more we see merchant clients, particularly in the SMB space that we serve, making payments decisions largely based on sort of the underlying software technology that they're using to run their business. And obviously that is true in restaurant and retail.

Speaker Change: in those key vertical markets from a consumer spend standpoint. Excuse me, I'm struggling to get that out.

Cameron Bready: But we also see it across other vertical markets as well, which is why obviously we've been leaning into our integrated strategy over the course of many years. We've leaned into our vertical market software strategy over the course of many years. And obviously, we're investing more in point of sale capabilities because that's where the market is going.

Speaker Change: And obviously, we're investing more in point-of-sale capabilities.

James Friedman: So we think about long-term trends; obviously, particularly within SMB, as I mentioned before, it's all geared around payment decisions being made through the software that these businesses are using to kind of run their business day in and day out and making sure we're well positioned either with our ISV partners or through our own software to continue to benefit from those trends as a core part of how we think about our strategy and the merchant business going forward. I appreciate that. And then, you know, in the press release, you talked about looking for efficiencies in the like, and clearly that's something you're probably always doing.

Winnie Smith: I appreciate that. And then, you know, in the press release, you talked about looking for efficiencies and the like, and clearly, that's something you're probably always doing. But is there anything incremental that you're looking at in the second half of the year? And how much are you thinking about that, if at all, to contribute to the margin targets and margin improvement targets you have for this year? And how should we think about, you know, any spillover into 2025?

Speaker Change: Got it. Appreciate that.

Winnie Smith: Thanks a lot.

James Friedman: But is there anything incremental that you're looking at in the second half of the year, and how much are you thinking about that, if at all, to contribute to the margin and margin improvement targets you have for this year? And how should we think about, you know, any spillover into 25? Thanks a lot.

Cameron Bready: Yeah, it's a really good question. Let me start just by saying, you know, obviously we have our investor conference coming up in September, which we're very much looking forward to.

Cameron Bready: And we're going to lay all this out, I think, in what some might describe as excruciating detail at that point in time. But as I step back and think about it, you know, we see pretty meaningful opportunities to streamline and simplify our business internally. And we think that those opportunities are going to unlock a fair amount of value that we're going to be able to redeploy in our business to continue to invest in growth-oriented initiatives, as well as continue to improve returns in our business, you know, and certainly returns on invested capital in our business.

Speaker Change: But as I step back and think about it, you know, we see pretty meaningful opportunities to streamline and simplify our business internally. And we think that those opportunities are going to unlock a fair amount of value.

Cameron Bready: So, you know, these are meaningful enough opportunities that we certainly think they're worth pursuing, and we intend to lay all that out, you know, for you in the September Investor Conference. As it relates to 24, none of that's really reflected in our 24 outlook. I would say the back half of the year, the margin expansion targets are largely geared towards what's happening in the business today. And most of the expectations, as it relates to sort of the opportunity, as we see the streamline simplify and unlock value, those are sort of 25 and beyond kind of benefits that we would expect to be able to realize.

Speaker Change: these are meaningful enough opportunities that we certainly think they're worth pursuing. And we intend to lay all of that out for you in the September Investor Conference. As it relates to 24, none of that's really reflected in our 24 outlook. I would say the back half of the year, the margin expansion targets are largely geared towards what's happening in the business today. And most of the expectations as it relates to sort of the opportunities we see to streamline, simplify and unlock value, those are sort of 25 and beyond kind of benefits that we would expect to be able to realize.

Cameron Bready: And again, we'll share more of those details as we get to our Investor conference.

Speaker Change: And again, we'll share more of those details as we get to our investor conference.

Darrin Peller: Your next question comes to lighted Darren Pella from Wolf Research. Your line is open. Thanks, guys. Nice job on the quarter.

Winnie Smith: Your next question comes live from Darrin Peller from Wolf Research. Your line is open.

Speaker Change: Your next question comes live to Darrin Peller from Wolf Research. Your line is open.

Cameron Bready: I want to touch on the underlying driver of the merchant business, because, so Karen, if you could just maybe revisit and break it down by obviously the ISV business, the verticals, the software business you have, and maybe just the businesses in terms of the growth and the margin profile that's contributing. Just noticing that, you know, margins obviously outperformed in the merchant side of the quarter, even despite what you said, which is paid payments coming on as I think the alluded margin. You were able to offset that and outperform on margins. So I guess we'd love to hear more about what's driving the strength on the merchant side of the business to sustain.

Cameron Brady: The business in terms of growth and the margin profile is contributing, just noticing that, you know, margins obviously outperformed in the merchant side of the quarter, even despite what you said, which is payments coming on as a diluted margin, you were able to offset that and outperform on margins. So I guess we'd love to hear more about what's driving the strength on the merchant side of the business to survive.

Darrin Peller: You were able to offset that and outperform on margins. So I guess we'd love to hear more about what's driving the strength on the merchant side of the business to sustain.

Cameron Bready: And the margin profile of each of those businesses that's allowing you to be.

Cameron Bready: Yeah, maybe all, maybe I'll start in the last chance to share a few perspectives as well. And, you know, I'll maybe head my comments, put a bit there and just by saying a lot of this is, you know, good butter for our conversation as we get into September and we sort of frame up the business the way we think about it as a go forward matter, but clearly you laid out a few key sort of things that probably are worth spending a little time on this morning. So, as we think about the business today, obviously, you know, we, as I mentioned before, are very focused on the merchant business positioning as relates to the intersection of software and payments.

Cameron Brady: Yeah, maybe I'll start, and I'll ask Josh to share a few perspectives as well. And, you know, I'll maybe limit my comments a little bit, Darrin, just by saying a lot of this is, you know, good fodder for our conversation as we get into September and we sort of frame up the business the way we think about it as a go forward matter. But clearly, you laid out a few key things that probably are worth spending a little time on this morning.

Cameron Brady: So as we think about the business today, obviously, you know, we, as I mentioned before, are very focused on the merchant business positioning as it relates to the intersection of software and payment. You know, we continue to think that is the future of the SMB space and the markets that are core to us today, most specifically the U.S., and that's going to continue to be the trend of evolution in markets outside of the U.S. over a longer period of time.

Cameron Bready: You know, we continue to think that is the future of the SMB space and the markets that are for to us today, you know, most specifically the US and that can continue to be the trends of evolution and markets outside of the US over a longer period of time. So our ISB strategy, our own software strategy, and it may be most particularly just given the relevance of retail and restaurant. From a consumer spend perspective to our business, our point of sale software strategies are really core to where we want to drive the business over a longer period of time. Those are healthy technology-led businesses.

Cameron Brady: So our ISV strategy, our own software strategy, and maybe most particularly given the relevance of retail and restaurants from a consumer spend perspective to our business, our point of sale software strategies are really core to where we want to drive the business over a longer period of time. Those are healthy technology-led businesses. They are continuing to grow, and they're continuing to scale, and they're continuing to contribute, you know, to the overall margin expansion we're seeing in the business.

Speaker Change: From a consumer spend perspective to our business, our point-of-sale software strategies.

Speaker Change: are really core to where we want to drive the business over a longer period of time. Those are healthy technology-led businesses.

Cameron Bready: They are continuing to grow, and they're continuing to scale, and they're continuing to contribute, you know, to the overall margin expansion we're seeing in the business. Business. So I think that's as we step back and think about, you know, sort of where are we going? It's largely driven by our investments in those areas, our ability to continue to differentiate through technology, and obviously generate margins and scale those businesses in a way that contribute to the overall rate of margin expansion for our business. As we think about more traditional payments markets, you know, they may not grow at the same pace as our technology enabled or software oriented businesses, but they generally have, you know, stable growth rates and they have, you know, higher margins. Those margins may not drive the same sort of margin expansion for our business overall, but they contribute a lot of cash that obviously allows us to invest in the more growth orienting oriented and margin expanding sort of elements of the business so that we can get to that overall mix of margins that we're targeting and margin expansion that we're targeting for the business.

Cameron Brady: As we think about more traditional payments markets, you know, they may not grow at the same pace as our technology-enabled or software-oriented businesses. But they generally have, you know, stable growth rates, and they have, you know, higher margins.

Speaker Change: oriented and margin expanding sort of elements of the business so that we can get to that overall mix of margins that we're targeting and margin expansion that we're targeting for the business.

Cameron Bready: And then, of course, there are markets, you know, internationally that we're growing nicely as well. We're continuing to scale our businesses as well, and that is contributing to sort of margin expansion in our overall kind of merchant business. And then lastly, I would just say we benefit, you know, from being a large scale player. Obviously, we are able to spread those fixed costs across the large global, you know, scaled merchant acquiring businesses. And as we think about, you know, the business going forward, and I talked about this before. We're very focused on ensuring that we're sort of leaning into markets where we are a scale player today or have a clear line of sight to becoming a scale player.

Speaker Change: And then lastly, I would just say we benefit, you know, from being a large-scale player. Obviously, we are able to spread those fixed costs.

Speaker Change: across the large global, you know, scaled merchant acquiring businesses. And as we think about...

Speaker Change: You know, the business going forward, and I've talked about this before, we're very focused on ensuring that we're

Cameron Bready: You know, in markets that we're not a scale player today and we don't have clear line of sight to becoming a scale player over time.

Cameron Bready: I think we need to think hard about, you know, whether we should be in those markets, and that's been a big part of what we've been looking at as part of our strategic review. So, more to come on that in September, but I think hopefully that gives you some sense of how we think about it at a macro perspective.

Josh Whipple: That's really helpful. Can I just ask one quick follow-up on the financials for a minute? The free cash did come in strong again, you know, better than we had hoped. I think you had about 81 or 80 to 81% conversion of gap versus what looks like 90 plus percent adjusted conversion. And I know a lot of it is timing dynamics on working capital. So just revisit that for a minute and just maybe reiterate if you still feel good about the timing of working capital dynamics helping improve as we keep going through the year and even better from these levels.

Darrin Peller: That's really helpful.

Darrin Peller: Can I just ask one quick follow-up on financials for a minute? The free cash flow did come in strong again, you know, better than we had hoped. I think you had about 81 or 80 81% conversion of gap versus what looks like 90 plus percentage us did conversion. And I know a lot of it is timing dynamics on working capital. So just revisit that for a minute and just maybe reiterate if you still feel good about the timing, working capital dynamics, helping improve as we keep going through the year and even better from these levels.

Speaker Change: That's really helpful. Can I just ask one quick follow-up on financials for a minute? The free cash did come in strong again, you know, better as we had hoped. I think you had about 81 or 80 to 81% conversion of GAAP versus what looks like 90-plus percent adjusted conversion.

Speaker Change: And I know a lot of it is timing dynamics on working capital. So just revisit that for a minute and just maybe reiterate if you still feel good about the timing, working capital dynamics helping improve as we keep going through the year and even better from these levels.

Josh Whipple: Yeah, Darren, we fully expect to go ahead and convert out of 100% this year, less obviously the R&D tax credit, which is about five points. But I think that the big change that you saw on a year-over-year basis is the growth in the business and operating income, lower interest expense, and a change in working capital. But again, this is something that we continue to go ahead with and manage very, very closely. And we feel confident with regard to our initial guidance of 100% conversion, excluding the R&D tax credit for the full year.

Joshua Whipple: Yeah, Darren, we fully expect to go ahead and convert out of 100%. You know, this year, you know, less obviously the R&D tax credit, which is about, you know, five points. But I think that the big change that you saw on a year-over-year basis is, you know, that the growth in the business and operating income, you know, lower interest expense, and a change in working capital. But again, this is something that we continue to go ahead and manage very, very closely, and we feel, you know, confident with regard to our initial guide of 100% conversion, you know, excluding the R&D tax credit for the full year.

Speaker Change: Yeah, Darrin, you know, we fully expect to go ahead and convert out of the 100%, you know, this year, you know, less, obviously, the R&D tax credit, which is about, you know, five points.

Speaker Change: But I think that the big change that you saw on a year-over-year basis is, you know, the growth in the business and operating income, you know, lower interest expense, and a change in working capital. But again, this is something that we continue to go ahead and manage very, very closely, and we feel, you know, confident with regard to our initial guide of...

Speaker Change: 100% conversion, you know, excluding the R&D tax credit, you know, for the full year.

Joshua Whipple: And Darren and Cameron, I'll just add a couple of things. We provided a little more sort of granularity around our reporting of adjusted pre cash flow that we think will be helpful. We've broken out customer deposits, and we provided a little bit of historical data as it relates to taxes that we paid around gains from the dispositions of NetSpend and our gaming business, which I think is just helpful for historical context. But, you know, as we think about the go forward, we're highly focused on pre cash flow. And obviously, our conversion rates in the business and improving our quality of earnings and our quality of adjusted pre cash flow.

Speaker Change: And Darrin and Cameron, I'll just add a couple things. We provided a little more sort of granularity around our reporting of adjusted pre-tax flow that we think will be helpful. We've broken out customer deposits and we provided a little bit of historical data as it relates to taxes that we paid around gains.

Cameron Brady: From the dispositions of net spend and our gaming business, which I think is just helpful for historical context, but you know, as we think about the future, we're highly focused on free cash flow and, obviously, our conversion rates in the business and improving our quality of earnings and our quality of adjusted free cash flow. And I think you start to see that, you know, play out in Q2. And we were really pleased with the overall result.

Speaker Change: from the dispositions of Netspend and our gaming business, which I think is just helpful for historical context. But, you know, as we think about the go forward, we're highly focused on free cash flow.

Speaker Change: And obviously our conversion rates in the business and improving our quality of earnings and our quality of adjusted free cash flow. And I think you start to see that, you know, play out in Q2. And we were really pleased with the overall result.

Darrin Peller: And I think you start to see that, you know, play out in Q2, and we were really pleased with the overall results. It's really helpful, Cameron. Thanks, guys. Thanks, Ash.

Winnie Smith: It's really helpful, Cameron. Thanks, guys. Thanks, guys.

Andrew Schmidt: Your next question comes from Ron of Andrew Schmidt from City. Hey, Cameron. Hey, Josh. Good results here. Thanks for taking my questions.

Operator: Your next question comes from the line of Andrew Schmidt from City. Your line is open.

Speaker Change: Your next question comes from the line of Andrew Schmidt from City. Your line is open.

Andrew Schmidt: You know, just speaking of the legacy parts of the business, could you just talk about the Direct Sales Channel? You know, where that's target today, sales efficiency, you know, in the strategy there in terms of just the Direct Sales efforts. Thanks a lot, guys.

Andrew Schmidt: You know, just...

Andrew Schmidt: Speaking of the the legacy parts of the business. Could you just talk about the direct sales channel? You know where that's target today sales efficiency You know in the strategy there in terms of just the direct sales efforts. Thanks a lot guys

Cameron Bready: Yeah.

Cameron Brady: Yeah. Good morning.

Cameron Bready: Good morning, and maybe I'll just start by saying, you know, the thermal legacy sort of makes the hairs on the back of my neck stand up a little bit. We don't think about the business in that context. We have what we would characterize as sort of more traditional go-to-market strategies, you know, in our business. And you called out specifically our direct distribution; you know, here in the US market, you know, we've been working for some time. And I think we're accelerating our investments and plans to really start to reorient, you know, that distribution as much as possible toward selling more technology-enabled technology-enabled solutions.

Cameron Brady: And maybe I'll just start by saying, you know, the term legacy sort of makes the hairs on the back of my neck stand up a little bit. We don't think about the business in that context. We have what we would characterize as sort of more traditional go-to-market strategies, you know, in our business. And you called out specifically our direct distribution, you know, here in the U.S. market. You know, we've been working for some time, and I think we're accelerating our investments and plans to really start to reorient that distribution as much as possible towards selling more technology-enabled solutions.

Speaker Change: Good morning, and maybe I'll just start by saying, you know, the term legacy sort of makes the hairs on the back of my neck stand up a little bit. We don't think about the business in that context. We have...

Speaker Change: to really start to reorient, you know, that distribution as much as possible towards selling more technology enabled technology enabled solutions.

Cameron Bready: So we have opened up, you know, our integrated business more and allowed our direct distribution channels to begin to sell integrated, and we're leaning into that. We are building by really reorienting a portion of our direct distribution channel today to developing a point of sale software sales team, you know, that is focused on selling point of sale software solutions directly into the market. But as it relates to, you know, the overall direct distribution channel, it remains a very productive channel. They continue to drive year-over-year growth in new bookings. They continue to be very effective in terms of selling traditional payment capabilities into the market.

Cameron Brady: So we have opened up our integrated business more and allowed our direct distribution channels to begin to sell integrated, and we're leaning into that. We are building by really reorienting a portion of our direct distribution channel today to developing a point-of-sale software sales team that is focused on selling point-of-sale software solutions directly into the market. But as it relates to the overall direct distribution channel, it remains a very productive channel. They continue to drive year-over-year growth in new bookings, and they continue to be very effective in terms of selling traditional payment capabilities into the market.

Speaker Change: So we have opened up, you know, our integrated business more and allowed our direct distribution channels to begin to sell integrated and we're leaning into that.

Speaker Change: but as it relates to, you know, the overall direct distribution channel, it remains a very productive channel.

Cameron Brady: You know, more of what they're selling today obviously are omni-channel solutions and have some more complexity associated with them versus, you know, selling traditional bricks on a counter, which was the way the business was kind of back in the mid to late teens. But, you know, as time progresses, we are very focused on continuing to reorient distribution around where we see the best growth opportunities in the business, and that's clearly around our technology-enabled strategies, but the ISV channel and directly selling our software capabilities, where we think we can, you know, build direct distribution teams around that. So that's really the future of the business, and we'll continue to invest in reorienting distribution in that manner over a longer period of time.

Cameron Bready: You know, more of what they're selling today, obviously, are on the channel solutions and have some more complexity associated with them versus, you know, selling traditional bricks on a counter, which is way the business was kind of back in the mid to late teens. But you know, as time progresses, we are very focused on continuing to reorient distribution around where we see the best growth opportunities in the business. And that's clearly around our technology enabled strategies, but the ISB channel and directly selling our software capabilities where we think we can, you know, build direct distribution teams around that.

Speaker Change: You know, more of what they're selling today, obviously, are omni-channel solutions and have some more complexity associated with them versus, you know, selling traditional bricks-on-a-counter, which is the way the business was kind of back in the mid-to-late teens.

Winnie Smith: Got it. Thank you, Cameron. I hear you on the word legacy.

Speaker Change: But, you know, as time progresses, we are very focused on continuing to reorient distribution around where we see the best growth opportunities in the business and that's clearly around our technology-enabled strategies, but the ISB channel and

Cameron Bready: So that's really the future of the business, and we'll continue to invest against reorienting distribution in that manner over a longer period of time.

Andrew Schmidt: Got it. Thank you, Cameron. I hear you're on the word legacy. That makes a lot of sense.

Speaker Change: Got it. Thank you, Cameron. I hear you on the word legacy. That makes a lot of sense. Just on the outlook for the merchant segment, obviously layering take payments, it sounds like a little bit more of a moderate macro assumption in there. Is there anything else? Is it just moderate macro, or are there any other puts and takes to consider in the outlook? Thanks a lot, guys.

Joshua Whipple: Just on the outlook for the merchant segment, obviously later in take payment, it sounds like a little bit more of a moderate macro, you know, assumption in there. Is there anything else? Is it just moderate macro, or are there any other puts and takes consider in the outlook? Thanks a lot, guys. I'd say the main take is just that facts, you know, we kind of went into the year expecting effects to be a little bit better in the back half of the year than we're currently forecasting. It's obviously very volatile, you know, and as I've said many times, if I predict what effects rates are going to be, I probably wouldn't be sitting in the seat.

Cameron Brady: That makes a lot of sense. Just on the outlook for the merchant segment, obviously, later payment, it sounds like a little bit more of a moderated macro assumption in there. Is there anything else? Is it just a moderated macro assumption? Are there any other puts and takes to consider in the outlook? Thank you.

Josh Whipple: I'd say the main take is just FX. We kind of went into the year expecting FX to be a little bit better in the back half of the year than we're currently forecasting. It's obviously very volatile, you know, and as I've said many times, if I could predict what FX rates were going to be, I probably wouldn't be sitting in this seat; I'd be doing more leisurely things, but be that as it may, we currently expect FX in the back half of the year to largely offset the contribution from TAG payments.

Speaker Change: I'd say that the main take is just FX. You know, we kind of went into the year expecting FX to be a little bit better in the back half of the year than we're currently forecasting. It's obviously very volatile.

Joshua Whipple: I'd be doing more leisurely things, but be that as it may, you know, we currently expect, you know, effects in the back half of the year to largely offset, you know, the contribution from take payment. So hopefully we're wrong on that assumption that I think that's approved an assumption for the time being, and that's kind of what we baked into the outlook. So I think beyond that, the rest of the puts and takes are relatively small and on the margin.

Speaker Change: You know, and as I've said many times, if I could predict what FX rates are going to be, I probably wouldn't be sitting in this seat. I'd be doing more leisurely things.

Josh Whipple: But be that as it may, you know, we currently expect, you know, FX in the back half of the year to largely offset, you know, the contribution for intake payments. So hopefully we're wrong on that assumption. But I think that's a prudent assumption for the time being. And that's kind of what we baked into the outlook. So I think beyond that, the rest of the puts and takes are relatively small and on the margin. So, you know, obviously confident in reiterating and reaffirming the guide today. And I'll just let Josh provide a little bit more context as well. Yeah, so I think as you think about the second half of the year, it's, you know, we still expect, you know, margin growth in the seven to eight percent range. And, you know, as, you know, Cameron, you mentioned this includes roughly a point of contribution from intake payments, which will largely offset FX. And then for the full year, we still expect.

Josh Whipple: So hopefully, we're wrong on that assumption, but I think that's a prudent assumption for the time being, and that's kind of what we baked into the outlook. So I think beyond that, the rest of the puts and takes are relatively small and on the margin, so, you know, obviously confident in reiterating and reaffirming the guide today, and I'll just let Josh provide a little bit more context as well. Yeah, so as you think about the second half of the year, it's, you know, we still expect margin growth in the 7 to 8% range, and, you know, as Cameron mentioned, this includes roughly a point of contribution from TAG payments, which will largely offset FX, and then for the full year, we still expect merchant revenue to be in the 9 plus percent range. So we feel pretty good about that.

Joshua Whipple: So, you know, obviously confident in reiterating and reaffirming the guide today, and I'll just let Josh provide a little bit more context as well. Yeah, so I think as you think about the second half of the year, it's, you know, we still expect the margin growth in the seven to eight percent range. And, you know, as, you know, Cameron, you imagine the single roughly appointing contribution from take payments, which will largely offset effects. And then for the full year, we still expect, you know, merchant revenue to be in the nine-plus percent range. So we feel pretty good about that.

Joshua Whipple: You got it.

Unknown Executive: Thank you guys very much. Thank you, thank you.

Vasundhara Govil: Your next question comes to Ron Vasugovil from KBW. Your line is open. Hi, thanks for taking my question. I guess, Cameron, you talked about the good momentum. You were seeing a new partner signings in the ISB channel. I was just curious.

Speaker Change: Got it. Thank you guys very much.

Operator: Your next question comes to the line, Vasundhara Govil, from KBW. Your line is open.

Speaker Change: Thank you.

Cameron Brady: Hi, thanks for taking my question. I guess, Cameron, you talked about the good momentum you were seeing in new partners.

Speaker Change: Your next question comes to the line, Vasyl Gavril, from KBW. Your line is open.

Vasyl Gavril: Hi, thanks for taking my question. I guess, Cameron, you talked about the good momentum you are seeing in new partner signings in the ISB channel. I was just curious if revenue share agreements or economics related to those new partners, how they have evolved over historical trends? Just any color on that would be helpful.

Cameron Bready: If revenue share agreement for economics related to those new partners, how they have evolved over historical trends, just any color on that would be helpful. Yeah, I've said, and good morning. I've said over the last couple of years, we've obviously seen rev shares sort of drift up over the course of time. Have you seen more competition in the integrated space? But I'd say over the last year to 18 months, we've seen probably a more constructive competitive environment than we had seen the previous 12 to 24 months. Just as caught the capital has come up and sort of competitors need to be a little bit more rational with their own economics, and how they approach these relationships.

Cameron Brady: Yeah, I mean, I said, and good morning. I said over the last couple of years, we've obviously seen rev shares sort of drift up over the course of time as you've seen more competition in the integrated space. But I'd say over the last, you know, year to 18 months, we've seen probably a more constructive, you know, competitive environment than we had seen in the previous, you know, 12 to 24 months, just as the cost of capital has come up, and competitors need to be a little bit more rational with their own economics and how they approach these relationships.

Cameron Brady: Yeah, I mean, I've said, and good morning, I've said over, you know, the last couple years, we've obviously seen rev shares sort of drift up over the course of time, as you've seen more competition in the integrated space. But I'd say over the last, you know, year to 18 months, we've seen probably a more constructive, you know, competitive environment than we had seen the previous.

Cameron Brady: you know, 12 to 24 months, just as coffee capital has come up and sort of competitors need to be a little bit more rational with their own economics and how they approach these relationships.

Cameron Brady: I think the competitive environment from a rev share perspective has been fairly constructive, you know, certainly for the last year or so. And our expectation is that it will remain fairly constructive for a longer period of time.

Cameron Bready: I think the competitive environment from a rev share perspective has been fairly constructive, certainly for the last year or so. And our expectation is it will remain fairly constructive over a period of time. In our experiences, if you have the right solutions, the right capabilities, you can partner with ISBs in the right way. You need to be competitive from a rev share perspective, but you don't necessarily have to be at the high watermark of rev shares. And we still see competitors offering fairly aggressive rev shares in some circumstances, but that's typically where they don't have a lot to offer, you know, the ISB outside of that sort of peer payments relationship.

Winnie Smith: In our experience, if you have the right solutions, the right capabilities, and you can partner with ISVs in the right way, you need to be competitive from a rev share perspective, but you don't necessarily have to be at the high watermark of rev shares. And we still see competitors offering fairly aggressive rev shares in some circumstances, but that's typically where they don't have a lot to offer the ISV outside of that sort of peer payments relationship.

Cameron Brady: But that's typically where they don't have a lot to offer.

Cameron Bready: And one of the ways we've been able to differentiate ourselves is obviously the breadth and depth of capabilities that we think we bring across traditional integrated payment facilitation and the middle of the road sort of pro-fac model that we have, but also the breadth and depth of commerce enablement embedded commerce solutions that we can deliver, which enriches the experience for us and the ISB, broadens the base of revenue that we're able to share, you know, on a rev share basis. And I think makes you overall partnership and relationship more constructive for them, and obviously more constructive for us.

Winnie Smith: And one of the ways we've been able to differentiate ourselves is obviously the breadth and depth of capabilities that we think we bring to traditional integrated payment facilitation and the middle of the road sort of pro-fac model that we have, but also the breadth and depth of commerce enablement and better commerce solutions that we can deliver, which enriches the experience for us and the ISV. Broadens the base of revenue that we're able to share, you know, on a revenue share basis, and I think it makes the overall partnership and relationship more constructive for them and, obviously, more constructive for us.

Cameron Brady: you know the ISV outside of that sort of peer payments relationship. And one of the ways we've been able to differentiate ourselves is obviously the breadth and depth of capabilities that we think we bring across traditional integrated payment facilitation and the middle of the road sort of PROFAC model that we have.

Winnie Smith: And that's a big part of why we've been able to remain, you know, I think fairly well positioned competitively from a rev share perspective without always again having to meet the high watermark that may be out there around a pure rev share on payments alone. That's helpful. And we're obviously all very looking forward to investor day, sort of any preview into what type of, you know, additional disclosure or new KPIs, perhaps that we could. Your next question comes from the line of Bryan Bergin from TD Cohen. Your line is open.

Cameron Bready: And that's a big part of why we've been able to remain, you know, I think fairly well positioned competitively from a rev share perspective, you know, without always, again, having to meet the high watermark that may be out there around a peer rev share on payment alone.

Cameron Brady: That's a big part of why we've been able to remain, you know, I think, fairly well positioned competitively from a red share perspective, you know, without always, again, having to meet the high watermark that may be out there around a pure red share on payments alone.

Vasundhara Govil: That's helpful.

Cameron Bready: And we're obviously all very looking forward to the investor day, sort of any preview into what type of, you know, additional disclosure or new KPIs perhaps that we could expect at the investor day. Yeah, it's a fair question, and I've been pretty transparent. I think, you know, last quarter and obviously this quarter, I'll just reiterate, we're obviously very focused on providing a full sort of update on, you know, where we see the business going into strategic matter going forward.

Speaker Change: Good expert.

Speaker Change: Yeah, I've been pretty, it's a fair question, and I've been pretty transparent, I think, you know, last quarter, and obviously this quarter, I'll just reiterate, we're obviously very focused on...

Cameron Bready: Where we're going to focus our attention, our efforts, and our investment, and a big part, I think, of any strategy is also what does that mean you're not going to do. And so we look forward to giving a pretty, you know, false amount date around our strategy and where we see the business going forward, how we are going to frame up the business kind of around that strategy. The critical initiatives that we are pursuing to continue to advance that strategy and execute against it, and then, of course, the KPIs and metrics that we're looking at to judge our own performance as to how we are gaining ground against, you know, the key initiatives that we think are important to achieving the strategy that we have.

Speaker Change: and where we see the business going forward.

Speaker Change: to judge our own performance as to how we are gaining ground against, you know, the key initiatives that we think are important to achieving the strategy that we have. So all that.

Cameron Bready: So all that we would expect to be able to frame up for you at our investor conference.

Cameron Bready: And then that will be coupled with a conversation around our efforts to continue to streamline and simplify our business and how we are organizing ourselves internally, some of the moves we are making to ensure we have a, the most nimble agile business we can that we remain very customer centric in our product approach. We continue to build differentiated product and capabilities that we think compete favorably in the market. And then we're able to then couple that with further differentiation around the service experience that our clients are able to enjoy from us. And so we look forward to being able to share more around that streamlining and simplifying effort and what we think then that will unlock from a value creation standpoint and how we deploy that in some areas that we want to invest in the business, but also how that will flow through to drive better returns as we look forward in time.

Speaker Change: We would expect to be able to frame up for you at our investor conference and then that will be coupled with a conversation around our efforts to

Speaker Change: continue to streamline and simplify our business and how we are organizing ourselves internally some of the

Speaker Change: moves we are making to ensure we have the most nimble, agile business we can, that we remain very customer centric in our product approach. We continue to build differentiated product and capabilities that we think compete favorably in the market.

Speaker Change: And then we're able to then couple that with further differentiation around the service experience that our clients are able to enjoy from us.

Cameron Bready: All against the backdrop of, you know, our efforts to, I think again, simplify our business, improve our quality of earnings, be very focused on pre cash loads generation, and driving better return on capital in our business as we move forward.

Speaker Change: All against the backdrop of, you know, our efforts to, I think, again, simplify our business, improve our quality of earnings, be very focused on free cash flow generation, and thriving better return on capital in our business as we move forward.

Unknown Executive: Thank you very much.

Bryan Bergin: Your next question comes to line up Bryan Bergin from TD Cohen. Your line is open. Hi, good morning. Thank you. I wanted to ask on the embedded commerce success. It really sounds like that's clicked here, specifically calling out to 70% plus a patch of those solutions with new customers.

Speaker Change: Thank you very much.

Speaker Change: Your next question comes from the line of Bryan Bergin from TD Cohen. Your line is open.

Brian Birkin: Hi, good morning, thank you. I wanted to ask on the embedded commerce success, it really sounds like that's clicked here, specifically calling out the 70% plus attach of those solutions with new customers. Can you just dig in a bit more on the drivers of that success? Are there aspects of the selling strategy that have evolved to really drive this?

Cameron Bready: You've just dig in a bit more on the drivers of that success or their aspects of the selling strategy that have evolved early drive this. Yeah, it's a really good question. I think what we've generally seen is we've done a better job of finding ways and encouraging our tail professionals to find opportunities to attach other value item services to the pure payment experience with our pockets. As I mentioned in my response to the integrated question, clearly that has been attracted to our integrated partners. A lot of the commerce enablement or embedded commerce solutions we can deliver really resonate with them.

Cameron Brady: Yeah, it's a really good question. I think what we've generally seen is we've done a better job of finding ways and encouraging, you know, our sales professionals to find opportunities to attach other value-added services to the pure payment experience with our clients. As I mentioned in my response to the integrated question, clearly, that has been attracted to our integrated partners. A lot of the commerce enablement or embedded commerce solutions we can deliver really resonate with them. It makes their own software, you know, more competitive in the marketplace. It gives them another channel, I think, to help differentiate their solutions.

Cameron Bready: It makes their own software more competitive in the marketplace. It gives them another channel, I think, to help differentiate their solutions. And obviously, it improves kind of the rev shares and revenue opportunity that they see through the partnership with us. So a lot of our ISV partners are very focused on continuing to lean into our embedded commerce solutions and finding ways to distribute those through their channels in partnership with us.

Speaker Change: A lot of the commerce enablement or embedded commerce solutions we can deliver really resonate with them.

Cameron Brady: And obviously, it improves the revenue shares and revenue opportunity that they see through the partnership with us. So a lot of our ISV partners are very focused on continuing to lean into our embedded commerce solutions and finding ways to distribute those through their channels, you know, in partnership with us. And on the direct side, again, we're seeing much the same.

Speaker Change: So a lot of our ISV partners are very focused on continuing to lean into our embedded commerce solutions and finding ways to distribute those through their channels, you know, in partnership with us.

Cameron Bready: And on the direct side, again, we're seeing much the same. I called out specifically around point of sale. What we're seeing, you know, very strong, you know, attach rates for customer loyalty, particularly for our card link loyalty solutions around our point of sale businesses. We're also seeing, again, good strong attach rates around across selling efforts for human capital management and payroll.

Cameron Brady: I called out specifically around point of sale, what we're seeing, you know, very strong attach rates for customer loyalty, particularly for our card link loyalty solutions around our point of sale businesses. But we're also seeing, again, good, strong attach rates around our cross-selling efforts for human capital management and payroll. So I would say across the board, a strategy that we really set out to pursue a few years ago around finding more ways to wrap value around the payment experience, which is really where we started, has continued to evolve into more of this embedded commerce strategy and our ability to attach more commerce enablement solutions around the payment capabilities we're delivering to clients.

Speaker Change: around our point-of-sale businesses. We're also seeing, again, good strong attach rates around our cross-selling efforts for human capital management and payroll.

Cameron Bready: So I would say, across the board, a strategy that we really set out to pursue a few years ago around finding more ways to wrap value around the payment experience, which is really where we started. As continue to evolve in more of this embedded commerce strategy and our ability to attach more commerce enablements solutions around your payment capabilities, we're delivering to clients. And it's just further enriching the relationships that we have with our clients. It's making us more relevant to them. It's allowing us to differentiate better in the marketplace.

Speaker Change: So, I would say across the board, a strategy that we really set out to pursue a few years ago around finding more ways to wrap value around the payment experience, which is really where we started.

Speaker Change: has continued to evolve in more of this embedded commerce strategy and our ability to attach more commerce enablement solutions around your payment.

Cameron Brady: And it's just further, you know, enriching the relationships that we have with our clients. It's making us more relevant to them. It's allowing us to differentiate better in the marketplace. And I think, again, it will be a core part of how we think about driving our strategy as we move forward in time. And I think, obviously, a big focus for us is, you know, where are the areas that we want to invest from a commerce enablement or embedded commerce solution to continue to drive that richer experience and more differentiated offering, you know, relative to where our competitors are. Okay, that's helpful. And then

Speaker Change: capabilities we're delivering to clients and it's just further, you know, enriching the relationships that we have with our clients. It's making us more relevant to them. It's allowing us to differentiate better in the marketplace.

Cameron Bready: And I think again, it will be a core part of how we think about driving our strategies. We move forward in time. And I think obviously a big focus for us is, you know, where are the areas that we want to invest from a commerce enablement or embedded commerce solution to continue to drive that with your experience and more differentiated offering, you know, relative to where our competitors are. Okay, that's helpful.

Joshua Whipple: And then good improvement on free cash flow here in the quarter. It's following what you've earmarked for debt reduction.

Speaker Change: Okay, that's helpful. And then, good improvement on the free cash flow here in the quarter. I guess following what you've earmarked for debt reduction as you consider use of the cash, do you expect to maintain this kind of level of repo in the second half? Are you balancing that against anything else in your term M&A pipeline that might be attractive?

Joshua Whipple: As you consider uses of cash, do you expect to maintain this kind of level of repo in the second half, rebalancing that against anything else in your term, M&A pipeline that might be attractive? No, look, you know, we're very close. I'm getting back to our three times targeted leverage point in the back half, you know, the year we expect to go ahead and pay down, you know, close to, you know, outgoing and debt just from free cash flow. So we'll continue to go ahead and be lever to the balance of the year, and we expect to get right back down to that low three mark that we talked about previously.

Josh Whipple: No, look, you know, we're very focused on getting back to our, you know, three times targeted leverage point in the back half of the year. We expect to pay down close to, you know, a billion in debt just from free cash flow. So we'll continue to delever for the balance of the year. And we expect to get right back down to that low three mark that we talked about previously.

Speaker Change: No, look, you know, we're very focused on getting back to our, you know, three times targeted leverage point in the back half, you know, the year we expect to go ahead and pay down, you know, close to, you know, a billion in debt.

Speaker Change: just for the pre-cash flow. So we'll continue to go ahead and de-lever to the balance of the year and we expect to get right back down to that low three mark that we talked about previously.

Joshua Whipple: All right, thanks.

Unknown Executive: Thank you. Your next question comes from a day of coding from bed. Your line is open. Yeah, hey guys, thank you. A nice job.

Operator: Your next question comes from Dave Koning from BED. Your line is open.

Winnie Smith: Hey guys, thank you. Nice job.

Speaker Change: Your next question comes from David Koning from BAD. Your line is open.

Darrin Peller: One other way to ask, yeah, yeah, in one way to ask the margin question, for many quarters until evil, you were generating kind of 50 to 65% incremental margin on revenue growth. And then it stepped down to like the 40s, which made sense. And now this quarter, it stepped back into the range with one of the best incrementals in many quarters. Is that 50 to 65% the right way to kind of think about it longer? I think that's probably a fair way to continue to think about it. You know, we talked over the course of, you know, the last few quarters just around the acquisition of EVO, and obviously that rebased margins lower, and we had a fair amount of work to do.

Cameron Brady: One other way to ask the margin question: for many quarters until Evo, you were generating kind of 50 to 65% incremental margin on revenue growth, and then it stepped down to like the 40s, which made sense. And now this quarter, it's stepped back into the range of one of the best incrementals in many quarters. Is that 50 to 65% the right way to think about it longer term?

Cameron Brady: Yeah, I think that's probably a fair way to continue to think about it. You know, we talked over the course of the last few quarters just around the acquisition of Evo. And obviously, that rebased margins lower, and we had a fair amount of work to do, I would think, to shore up the Evo environment to make sure that it was operating at our standards, particularly in markets that we didn't overlap with Evo, where we were having to rely on their technology.

David Koning: Yeah, I think that's probably a fair way to continue to think about it. You know, we talked over the course of, you know, the last few quarters just around the acquisition of Evo and obviously...

Cameron Bready: I would think to sure up the EVO environment to make sure that it was operating at our standards, particularly in markets that we didn't overlap with EVO where we're having to rely on their technology. And that was somewhat offsetting, you know, this energy benefits that we were realizing over that period as well. But as we move forward, I think, you know, Q2 is really representative, by and large, of kind of where we see the business as we move forward. We still have some more synergies to realize around EVO, and we're still investing obviously in the business as well.

David Koning: That rebased margins lower, and we had a fair amount of work to do, I would think, to sure up the EVO environment to make sure that it was operating at our standards, particularly in markets that we didn't overlap with EVO, where we're having to rely on their technology.

Cameron Brady: And that was somewhat offsetting, you know, the synergy benefits that we were realizing over that period as well. But as we move forward, I think, you know, Q2 is really representative, by and large, of kind of where we see the business. As we move forward, we still have some more synergies to realize around Evo, and we're still investing, obviously, in the business as well. But what we were pleased with that 30 basis points, a margin expansion, you know, in the second quarter. We're targeting 30 basis points for the full year. As we talked about before, as Jeff, and Josh mentioned, that reflects a little bit of an uptick in the back half, just getting the overall to 30 basis points for the full year.

David Koning: That was somewhat offsetting, you know, the synergy benefits that we were realizing over that period as well.

Cameron Bready: But what we were pleased with was that 30 basis points, a margin expansion, you know, in the second quarter. We're targeting 30 basis points for the full year. As we talked about before, as Jeff, as Josh mentioned, that reflects a little bit of uptick in the back half just get the overall the 30 basis points for the full year. And I think then that gives us kind of a good jumping-off point heading into 2025 and kind of really reflects, you know, where the business is going. I'd also know Dave, and I know you appreciate this.

Cameron Brady: And I think that gives us kind of a good jumping off point heading into 2025 and kind of really reflects, you know, where the business is going. I'd also say, Dave, and I know you appreciate this, we've had that conversation directly, our margin profile is now close to 50% in merchants. So it is, on average, a little easier to expand margins 50 to 70 basis points a year when you're in the low 40s than it is, you know, when you're in the high 40s.

Josh Whipple: As we talked about before, as Josh mentioned, that reflects a little bit of uptick in the back half just to get the overall to 30 basis points for the full year.

Josh Whipple: I think then that gives us kind of a good jumping off point heading into 2025 and kind of really reflects, you know, where the business is going.

Cameron Bready: We've had that conversation directly; you know, our margin profile is now close to 50% in merchants. So it is on average a little easier to expand margins 50 to 70 basis points a year when you're in the low 40s, and it is, you know, when you're in the high 40s. So, you know, that math is not lost on you. I know, but, you know, as we think about the business, we're very, very focused on continuing to drive margin expansion and the merchant segment. And I think we're well positioned to do that. And I think you two just sort of gives you a demonstration of, you know, our ability to do that.

Dave: I'd also note, Dave, and I know you appreciate this, we've had that conversation directly, you know, our margin profile is now close to 50% in merchant, so it is on average a little easier to expand margins 50 to 70 basis points a year when you're in the low 40s than it is, you know, when you're in the high 40s.

Cameron Brady: So, you know, that math's not lost on you, I know, but, you know, as we think about the business, we're very, very focused on continuing to drive margin expansion in the merchant segment. And I think we're well positioned to do that. And I think Q2 just sort of gives you a demonstration of, you know, our ability to do that. But more importantly, it's reflecting what we said was going to happen over the last several quarters.

Dave: So, you know, that math's not lost on you, I know, but, you know, as we think about the business, we're very, very focused on continuing to drive margin expansion in the merchant segment, and I think we're well-positioned to do that, and I think Q2 just sort of gives you a demonstration of, you know, our ability to do that.

Joshua Whipple: But more importantly, it's reflecting what we said was going to happen over the last several quarters as we continue to execute against synergies, as we've made the investments we need to make to show up technology environments. You know, we're getting the business sequentially, continually back to sort of par post-evo. And now we're seeing expansion. And, you know, obviously we're pleased with that outcome. Yeah, great. Thanks.

Cameron Brady: As we continue to execute against synergies, as we've made the investments we need to make to shore up the technology environments, you know, we're getting the business sequentially, continually back to sort of par post Devo. And now we're seeing expansion. And, you know, obviously, we're pleased with that outcome.

Josh Whipple: Great. Thanks. And maybe just one follow-up. Quality of earnings, you highlighted several times. Merger and integration costs were around the lowest in five years this quarter.

Joshua Whipple: And maybe just one fall of quality of earnings you highlighted several times. Merger and integration costs around the lowest in five years, this quarter.

Joshua Whipple: Does that continue to go down, and maybe when are we going to be at a point of just, you know, no more addbacks? Yeah, you know, look, so, you know, I think we've shown a real positive trend as it relates to integration expenses over the last three to four quarters, and they've continued to go ahead and trend large. As we said, they, they would. And if you think about it, you know, we're now about a year and a half, you know, into the integration. We said that of evil and we said that we would, you know, complete that.

Josh Whipple: Yeah, you know, Dave, so, you know, I think we've shown a real positive trend as it relates to integration expenses over the last three to four quarters, and they've continued to go ahead and trend lower, just as we said they would. And if you think about it, you know, we're now about a year and a half into the integration. We said that of Evo, and we said that we would, you know, complete that, you know, two years out, which would be in the March of 2025 time frame where we'd expect to go ahead and achieve $135 million in run rate synergies.

Dave: Yeah, you know, look, Dave, so, you know, I think we've shown a real positive trend as it relates to integration expenses over the last three to four quarters, and they've continued to go ahead and trend lower. So, as we said, they would. And if you think about it,

Dave: We're now about a year and a half into the integration, we said that of Evo, and we said that we would complete that.

Joshua Whipple: You know, two years out, which would be in the March of 2025 time frame where we'd expect to go ahead and achieve 135 million and run rates energies. So again, you know, I would, I think you can fully expect the integration expenses to continue to go ahead and trend lower through the balance of the year as we get closer to that time period that we called out when we initially announced the transaction. And I also would say, you know, if you look at our quality of earnings, they have, you know, continued to go ahead and improve and again, you know, our gap relative to adjusted is over 50% on this quarter and we would continue to expect that to a great higher.

Josh Whipple: So again, you know, I would, I think you can fully expect the integration expenses to continue to go ahead and trend lower through the balance of the year as we get closer to that time period that we called out when we initially announced the transaction. And I also would say, you know, Dave, if you look at our quality of earnings.

Dave: And I also would say, you know, Dave, if you look at our quality of earnings, they have, you know, continued to go ahead and improve and again, you know, our, you know, gap relative to adjusted is over 50% on this quarter and we would continue to expect that to accrete higher.

Joshua Whipple: Great.

Unknown Executive: Thank you. Thanks, Dave.

Tin Ting Huang: Our last question comes to the line of Tin Ting Huang from JP Morgan. Your line is out there. Hey, good morning. It's really encouraging to see the merchant volume spread; here, stay positive. Things a couple points.

Speaker Change: Our last question comes from the line of Tianxing Huang from JP Morgan. Your line is open.

Winnie Smith: Hey, good morning. It's really encouraging to see the merchant volume spread here stay positive. I think it's a couple points. So anything unusual there? And do you expect that favorable spread to continue in the second half? It sounds like the software side and integrated side are growing double digits. So my guess is yes, but I wanted to hear from you.

Tianxing Huang: Hey, good morning. It's really encouraging to see the merchant volume spread here stay positive. I think it's a couple points, so anything unusual there and do you expect that favorable spread to continue in the second half? It sounds like the software side and integrated side is growing double digits, so my guess is yes, but I wanted to hear from you.

Cameron Bready: So, anything unusual there? Do you expect that favorable spread to continue the second half? It looks like the software side may integrate a size growing double digits. So my guess is yes, but one to hear from you. Yeah, I think we do. And thanks for the question. Obviously, we've talked a lot about point of sale. We're seeing good momentum in point of sale. Point of sale drives a different revenue stream for us, versus just the pure payment experience. And obviously that's somewhat contributing to what we're seeing on the revenue side versus what we're seeing on the volume side.

Cameron Brady: Yeah, I think we do, Dinjan, and thanks for the question. Obviously, you know, we've talked a lot about point of sale. We're seeing good momentum in point of sale. You know, point of sale drives a different revenue stream for us, you know, versus just the pure payment experience. And obviously, that's somewhat contributing to, you know, what we're seeing on the revenue side versus what we're seeing kind of on the volume side.

Tianxing Huang: Yeah, I think we do, and thanks for the question. Obviously, you know, we've talked a lot about point of sale. We're seeing good momentum in point of sale. You know, point of sale drives a different revenue stream.

Cameron Bready: I think our goal is we continue to move forward in time as I always want those two things to be correlated. You know, but obviously, as we continue to invest in point of sale, we continue to invest in embedded commerce solutions. We continue to invest in areas to further differentiate ourselves beyond the pure payment economics. You know, many of those revenue streams aren't purely tied to volume. So we're hopeful we continue to see, you know, sort of continued growth in revenue that may outpace volume. But I don't want those two trends to become uncorrelated over time because when we're selling those capabilities, it is generally driving, you know, a payment experience as well.

Cameron Brady: I think our goal as we continue to move forward in time is always to want those two things to be correlated. You know, but obviously, as we continue to invest in point of sale, we continue to invest in embedded commerce solutions, we continue to invest in areas to further differentiate ourselves beyond the pure payment economics, many of those revenue streams aren't purely tied to volume. So we're hopeful we will continue to see, you know, sort of continued growth in revenue that may, you know, outpace volume.

Tianxing Huang: You know, but obviously, as we continue to invest in point of sale, we continue to invest in embedded commerce solutions, we continue to invest in areas to further differentiate ourselves beyond the pure payment economics, you know, many of those revenue streams aren't purely tied to volume.

Tianxing Huang: So we're hopeful we continue to see, you know, sort of continued growth in revenue that may, you know, outpace volume.

Cameron Brady: But I don't want those two trends to become uncorrelated over time because when we're selling those capabilities, it's generally driving, you know, a payment experience as well. And we hope to see volume continue to drive forward from that point also.

Tianxing Huang: But I don't want those two trends to become uncorrelated over time because when we're selling those capabilities, it's generally driving, you know, a payment experience as well. And we hope to see volume continue to drive forward from that point also.

Cameron Bready: And we obviously volume continued to drive forward. Drive forward from that point also.

Cameron Brady: Perfect. Thank you for that. Cameron, I'm just curious on the pipeline front, there's a lot going on with... You know, the litigation being pushed out, and I know Visa's announced a few new things like flex credentials. I'm just curious if you're seeing any demand change or activity with respect to, you know, issuers, either conversions or de novo activity.

Tin Ting Huang: Perfect. Thank you for that.

Cameron Bready: Now show me the issuing side camera. I'm just curious on the pipeline front. There's a lot going on with, you know, the litigation being pushed out, and I know Visa's announced a few new things like flex credentials. I'm just curious if you're seeing any demand change or activity with respect to, you know, issuer, other conversions or the noble activity. I would say change it certainly in the short to medium term, we feel good about how we're positioned, you know, with that business. We're executing really well; you know, the things we can control on that business are generally, you know, progressing very nicely.

Tianxing Huang: Perfect. Thank you for that. Just on the issuing side, Cameron, I'm just curious on the pipeline front. There's a lot going on with...

Cameron Brady: I would say, certainly in the short to medium term, we feel good about how we're positioned with that business. We're executing really well.

Cameron Brady: The things we can control in that business are generally progressing very nicely. We've got 65 million accounts on file in our conversion pipeline. We've got seven LOIs that we're working to convert to full contracts right now.

Cameron Bready: We've got 65 million kinds of accounts on file in our conversion pipeline. We've got seven L. O. I's that we're working to convert the full contracts right now. We are seeing new opportunities emerge. We called out, you know, Amadeus, this quarter, as it relates to being the first kind of customer first in tech customer in Europe leveraging our cloud-based, you know, in AWS capabilities. So we feel good about the further expansion of that product set as we move forward as well. So we are seeing, you know, I would say good momentum on the commercial and sales side of the business.

Cameron Brady: You know, the things we can control in that business are generally, you know, progressing very nicely. We've got 65 million kind of accounts on file in our conversion pipeline. We've got seven LOIs that we're working to convert to full contracts right now.

Cameron Brady: We are seeing new opportunities emerge. We called out Amadeus this quarter as it relates to being the first Fintech customer in Europe leveraging our cloud-based AWS capabilities. We feel good about the further expansion of that product set as we move forward as well. We are seeing, I would say, good momentum on the commercial and sales side of the business. We've got good metrics to demonstrate that in the short to medium term, we're well positioned to continue to grow that business at a very stable level.

Cameron Brady: We are seeing new opportunities emerge. We called out, you know, Amadeus this quarter.

Cameron Brady: as it relates to being the first Fintech customer in Europe leveraging our cloud-based AWS capabilities.

Cameron Bready: We've got good metrics to demonstrate that, you know, in the short to medium term, you know, we're well positioned to continue to grow that business at a very stable level.

Cameron Bready: I think long term, you know, it's largely our ability to grow and accelerate growth in that business is tied to what we're doing around modernization. And as I called out in my script today, you know, we are very much tracking towards completing development at the customer-facing sort of applications by the end of this year. We're in pilot with a number of customers already. And obviously, I think that positions us to be in market with those solutions in 2025. And I think that clearly is important to kind of unlocking new opportunities for that business. Not only across sort of the segments of the FI channel that we can support and different geographies around the globe that we can attack.

Cameron Brady: I think long term, largely our ability to grow and accelerate growth in that business is tied to what we're doing around modernization. As I called out in my script today, we are very much tracking towards completing the development of a customer-facing sort of applications by the end of this year. We're in pilot with a number of customers already, and obviously, I think that positions us to be in the market with those solutions in 2025.

Cameron Brady: You know, we're well positioned to continue to grow that business at a very stable level. I think long term, you know, it's largely our ability to grow and accelerate growth in that business is tied to what we're doing around modernization.

Cameron Brady: And as I called out in my script today, you know, we are very much tracking towards completing development of a customer-facing...

Cameron Brady: sort of applications by the end of this year. We're in pilot with a number of customers already and obviously I think that positions us to be in market with those solutions in 2025 and I think that clearly is important to kind of unlocking new opportunities for that business.

Cameron Brady: I think that clearly is important to unlocking new opportunities for that business, not only across the segments of the FI channel that we can support and different geographies around the globe that we can attack, but I think more importantly, some of the more developing use cases that we're seeing around cards that I think require our capabilities to be consumed a little bit differently than they've been able to be consumed historically, that's something we're going to be able to deliver through our modernization investment. Better enablement capabilities for our clients, more consumability of our sort of, I think, market-leading solutions.

Cameron Bready: But I think more importantly, some of the more developing use cases that we're seeing around cards, you know, that I think require our capabilities to be consumed a little bit differently than they've been able to be consumed historically, you know, that's something we're going to be able to deliver through our modernization investment. And so better enablement capabilities for our clients, more consumability of our sort of, I think market leading solutions. I think that really will go a long way to kind of unlocking some of the use cases that I think you're alluding to in your question and work sided.

Cameron Brady: you know, that I think require our capabilities to be consumed a little bit differently than they've been able to be consumed historically.

Cameron Brady: I think that really will go a long way to kind of unlocking some of the use cases that I think you were alluding to in your question, and we're excited, obviously, to be able to start bringing that about as we get into 2025 and beyond. Got it. No, it's good.

Cameron Brady: I think that really will go a long way to kind of unlocking some of the use cases that I think you were alluding to in your question, and we're excited, obviously, to be able to start bringing that about as we get into 25 and beyond.

Cameron Bready: Obviously, to be able to start bringing that about as we get into 25 and beyond.

Winnie Smith: Got it. That's a good update. See you in September.

Cameron Bready: Thank you very much for joining us this morning. I hope everyone has a great day. I appreciate your interest in our company.

Speaker Change: Got it. That's a good update. See you in September .

Winnie Smith: Well, on behalf of Global Payments, thank you very much for joining us this morning. I hope everyone has a great day. I appreciate your interest in our company.

Dijon: Thanks, Dijon.

Speaker Change: Well, on behalf of Global Payments, thank you very much for joining us this morning. I hope everyone has a great day. I appreciate your interest in our company.

Unknown Executive: That doesn't feel a comfort for today. Thank you for participating.

Operator: That does conclude our conference for today. Thank you for participating.

Unknown Executive: Everyone else has left the call.