Global Payments(GPN) - 2023 Q4 - Earnings Call Transcript

Financial Performance - For the full year 2023, the company achieved high single-digit adjusted net revenue growth and increased adjusted earnings per share by 12%, despite a more than 400 basis point headwind from the divestiture of the Netspend consumer business [5][39] - Adjusted net revenue for Q4 2023 was $2.19 billion, an increase of 8% from the same period in the prior year, with adjusted operating margin increasing by 30 basis points to 44.8% [26][39] - Adjusted earnings per share for Q4 2023 was$ 2.65, reflecting a 10% increase compared to the same period in 2022 [26] Business Segment Performance - The merchant segment achieved adjusted net revenue of $1.67 billion for Q4 2023, reflecting growth of 19% or approximately 8% excluding the impact of EVO and dispositions [66] - The issuer solutions business produced adjusted net revenue of$ 531 million, reflecting growth of 6% or 5% on a constant currency basis, with issuer transactions growing high single digits compared to Q4 2022 [41][68] - The education solutions business expanded internationally, launching MySchoolBucks in Australia and achieving new wins in Canada, Australia, and the UK [17] Market Performance - The company saw double-digit growth in Spain and central Europe, as well as in Poland and Greece, with favorable trends in Latin America [40][19] - The North American market remains a focus, with plans to launch next-generation offerings in the restaurant and retail sectors [36] Company Strategy and Industry Competition - The company is focused on a software-centric approach to drive growth, particularly in integrated payments and B2B capabilities [6][16] - The acquisition of EVO Payments is expected to enhance the company's market position and drive revenue synergies, with a target of $135 million in annual run rate expense synergies within two years [6][67] - The competitive landscape in the U.S. is viewed positively, with pricing rationalization and a focus on profitability among competitors [60] Management Commentary on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer spending trends in 2024, acknowledging potential risks to the global economy [24][46] - The company plans to return to a balanced capital allocation approach in 2024, prioritizing share buybacks while reducing debt [45][124] - The outlook for 2024 includes expected adjusted net revenue growth of 6% to 7% and adjusted earnings per share growth of 11% to 12% [72][118] Other Important Information - The company achieved approximately 100% conversion rate of adjusted net income to adjusted free cash flow for the full year 2023 [28] - The company has approximately$ 3.5 billion of available liquidity and has reduced outstanding debt by more than $1.4 billion since closing the EVO acquisition [42] Q&A Session Summary Question: Guidance for 2024 on top line growth - Management indicated a cautious approach, expecting organic growth of 7% to 8% for the merchant segment, contingent on consumer behavior [53][82] Question: Potential portfolio pruning and M&A activity - Management acknowledged the possibility of portfolio pruning in 2024 but emphasized that any M&A activity must align strategically and be competitive in terms of returns [57][84] Question: Competitive environment assessment - Management feels positive about the competitive landscape, noting rationalized pricing and strong growth in commercial transactions due to the adoption of virtual cards [60][61] Question: Margin guidance and capital allocation - Management expects adjusted operating margin expansion of up to 50 basis points in 2024, balancing margin growth with reinvestment in the business [70][121]