GPN
#Thanks, <UNK>.
Yes, <UNK>, it's <UNK>.
I'll lead off.
There's really two things.
First of all, in Q3 it was 15% on a constant currency growth basis, and that included inorganic growth from Realex, which we didn't have this quarter, as Realex annualized in the fourth quarter.
So that's a big chunk of the difference as a starting point.
I would say, the second element that impacted Europe in Q4 is I mentioned earlier in my comments, we've started to begin to annualize some of the early benefits from interchange reductions in the UK in particular.
Last year, MasterCard in the fourth quarter of 2015 lowered credit interchange from on average roughly 100 bps to 80.
And Visa changed debit interchange from the 8p a transaction to 20 basis points plus 1p.
So those early benefits from the SEPA regulation that didn't actually become effective until December, we began to annualize in Q4 of this year, which created a little bit of headwind.
Europe still grew high single-digits on a constant currency basis.
That's in line with our overall expectation for Europe.
So I would say it was a quarter, Europe-wise, that was very much consistent with our overall expectations.
Yes, that's a good question, <UNK>.
So we do expect Europe to grow next year in the high single-digits on an organic basis.
And then, of course, the Erste joint venture is adding inorganic growth to top line revenue expectations for Europe in FY17.
So those would be the component pieces next year.
Hi, <UNK>, it's <UNK>.
I think you'd also see Spain finally start to annualize, the annualization of the original benefits starting on September 1.
So as I mentioned in our prepared remarks, that Spain [hit] yet another double-digit volume and transaction growth quarter, I think their fifth consecutive in the quarter in a market that's probably going half that.
And you're finally going to see that accelerate into the beginning of our second fiscal quarter in 2017.
And that's in the high single-digit growth expectation organically for Europe for the full year.
We'll annualize (multiple speakers) the benefit of the UK interchange reductions as you know in December.
Thanks, <UNK>.
Appreciate it.
No, I think you've got it right.
Obviously, currency had a fairly significant impact on margins, particularly in Europe.
The other item I mentioned in my prepared remarks again, relates to investments we're making in our e-com omni-channel solutions business in Europe.
We're continuing to invest in that platform.
We are preparing to launch a bundled solution in Spain, similar to what we launched in the UK earlier in the fall.
That's coming in the next few months.
So we did make investments to prepare for that market rollout, which we think will obviously be helpful to accelerating growth in Spain.
So those investments were a little bit of a drag on margin in Q4.
But in the grand scheme of things, we really try to target margin expansion for the total Company.
Which once again, we achieved this quarter and we're very pleased with the level of margin expansion that we achieved in the fourth quarter of 2016.
Europe being nearly 50% margin, our goal is to largely sustain, or close to sustain that level of margin, and really looking to drive total Company margin expansion through North America primarily.
Hey, <UNK>, hi, it's <UNK>.
I'll start on that.
As I said in our commentary, we anticipated that this might happen, even though it wasn't our preferred option.
As a result, immediately after the referendum, we took a number of steps by way of contingency, to prepare the business in the event that the macro environment in the UK deteriorated further.
Those were along the lines of a bit of deferral on some investment we were going to make, <UNK>, by way of headcount, and product in the UK, and in Ireland.
We also had plans, in the event that things change further, we also have plans to make additional decisions around our European businesses, if that's what's needed.
I would say though, if you back up, that hasn't happened today.
So as we said in our commentary, that post Heartland, our UK business is single-digits, as a matter of revenue of our businesses.
I think we've shown, with what we've done in Asia over the last year, that to the extent that there are emerging headwinds, that we'll get ahead of those, as we did in the fall of 2015 in Asia.
So I think sitting here today, we're as well-positioned as could be and obviously, we're here to manage proactively if things change.
But that's not the case today.
Sure, <UNK>.
It's <UNK>.
As always, we start with what's available for sale.
We're really looking for things that are in our wheelhouse from a strategic point of view, and have the right partnership and culture to really drive the business forward, relative to our other alternatives for our capital.
I would say sitting here today, a number of those opportunities are really in the Asia-Pacific region.
<UNK>, I think talked about the eWAY transaction that we consummated in the fourth quarter of 2016, driving additional omni-channel and e-commerce activity in Australia and New Zealand.
We're looking at a bunch of technology-related businesses in Asia primarily.
Obviously, we think we're relatively full-up here, post Heartland, in North America.
And as <UNK> mentioned, we just closed our Erste JV on June 1, and we think we have a fair amount of work ahead of us, to continue that integration over the next period of time.
So I think we look at opportunities.
Sitting here today, those are likely to be more weighted towards Asia.
But of course, we're flexible, and it depends on what comes available for sale.
Thank you.
Thanks, <UNK>.
Thanks, Georgios.
<UNK>, it's <UNK>.
I'll maybe start.
You can see from our FY17 guide, that we're forecasting anywhere, maybe $0.10 to $0.15 of currency headwind in FY17, as a result of ---+ primarily weakness in the pound stemming from the Brexit referendum in the UK.
So you can sort of extrapolate that further into calendar 2017.
But sitting here today on July 28, it's very difficult.
I think with any sort of accuracy to predict what currencies may do in calendar 2017.
Frankly, at some point, I hope to annualize these fairly significant headwinds.
I sort of view flat, as the new up, from a currency point of view.
So I think when you get to flat, you can kind of get a sense from the guide we've given for calendar 2017, as the earnings power of the business, that we're able to generate, notwithstanding the FX headwinds over the past couple years.
But if we can get a normal FX environment, obviously 20% cash earnings per share growth on a constant currency basis is fairly attractive and well ahead of our cycle guidance, and well ahead of what I think our peers and other industry participants are able to produce.
Let me start with the ISO comment, that's the easier question.
I'll give <UNK> the harder question around EMV.
On the ISO side, we're expecting essentially flat growth, or roughly no growth out of the ISO channel.
As we talked about historically, with the pivot we've made to direct distribution, particularly on the heels of the Heartland transaction, where we've essentially invested over $4 billion now in direct distribution in the US market, that is the focus of our business going forward.
It's obviously the driver of the growth.
We'll continue to serve our ISO partners well, but that is not a focus for our business, and we're certainly not expecting any tailwinds from the ISO channel.
We expect it to be relatively flat.
And then, <UNK>, on EMV plans, our focus to date has been on the transition for our customers, making it seamless, and really delivering to them security solutions bundles that really can drive maybe some nominal market share gains.
So I think the way to look at what <UNK> and <UNK> have been describing, is there is no assumption of economic benefit from EMV whatsoever, but that is something we're exploring.
As we get deeper into 2017, we're certainly going to have to think about where the risks are in the industry, where we've added value to our customers, where we may not be being compensated.
But it's nowhere in the expectations.
It's just something to think about as a marketing matter.
No, it hasn't.
And I guess, I appreciate you asking the question.
I know that there have been folks out talking about certifications, about backlogs, some folks talking about [acquirers] delayed in certifications.
I can tell you this, we have no backlog in our infrastructure anywhere, whether it's a direct channel or an integrated channel.
So whomever is talking about those types of things to you guys, whether it's an opinion, or it's some other delays, it's not Global Payments.
Thanks, <UNK>.
Yes.
<UNK>, this is <UNK>.
Our expectation is indeed that we can accelerate Canada with really a couple of things.
One is bringing in these new global initiatives like more e-com business, some of the fastest growing part of that market.
And certainly with OpenEdge, where we're up to 30 partners.
And we're just really beginning to build that sort of purpose-built ecosystem I've talked about before, partners, campaign management, and our sales teams to accelerate growth.
So early stages.
Hence, you've seen from <UNK> very traditional Canadian expectations for now for 2017, which I'm expecting our Canadian team to beat this year.
And then beyond that, it's the Heartland synergies.
So being able to take the products, whether it's education products, or the commerce point of sale cloud software across border to Canada.
And just being able to take the US-based customers and prospects that our Heartland sales force will close in the coming months and quarters, and take those and extend those to Canada as well.
So we think we've got lots of tools to accelerate Canada now, really for the first time in the last five years in Global Payments.
Yes, it's certainly something we want to go after.
It's obviously a growth pool in the United States, and it's one of the hidden benefits of the Heartland transaction, to be frank.
First off, we finally have a real substantial direct sales force in the US, a strategic distribution asset that we did not have before.
We also have OpenEdge, which is a fantastic business, and our vertical gaming and [greater giving] businesses, but we've not had a direct sales force like this.
And another hidden benefit of Heartland, they have a true e-commerce solution for the United States as well.
Great product folks, a great development team, and actual product in market, that's seeing success.
In fact, we actually signed a record number of e-commerce customers in Heartland during the June quarter as well.
So we're seeing increasing momentum that fuels our confidence, both about integration overall, and the type of accelerated growth the two companies can deliver that <UNK> described earlier.
I think it's tough to size on direct metrics.
Obviously, you have the two fastest organic growing acquirers in the industry combined.
We think we can accelerate that growth, so we're pretty confident, it's pretty fast-growing.
Good morning, <UNK>.
Yes, <UNK>, it's <UNK>.
I'll start with some of the integrated ISV talk.
Obviously, our industry is highly competitive, but I don't think there's a sea change at all in the competitive nature of what's going on around ISVs and integrated payments.
I think in particular if you think about the results we posted in 2016, our confidence in Heartland to date, and then the expectations for 2017, we're expecting another mid to high teens delivery from OpenEdge.
They continue to drive across into new verticals.
We don't see some of the larger competitors you're describing in our specific verticals in the OpenEdge business.
We continue to drive that growth in the dentist, the pharmas, the things we talked about.
Again, a highly competitive, every deal is competitive in this space, but we win more than our fair share with the integrated solution we drive.
On the Heartland side, you've got the education verticals, the two, the one for K through 12, the one for university, that combination is double-digits as well.
And the same thing, competitive deals, but we're driving and winning more than our share.
I think the final piece of this is really the commerce businesses, where we've got new assets where we're just beginning to pursue restaurant and hospitality.
There we're going to see more competition, but it's all going to be incremental to us.
So we're very excited about our growth opportunity on that side.
Okay, <UNK>, it's <UNK>.
On Visa PayPal, we're A very good partner of both Visa and of PayPal I think, anything that drives toward more adoption of card-based usage, whether it's relative to ACH, relative to cash and check, et cetera, is really nothing but good news for our businesses.
I would note, that in that partnership in particular, that's a US-only deal.
Visa PayPal is the way it's been described externally.
Most of our business with PayPal, as you probably know is outside of the United States, and in particular, mostly outside of North America, primarily in Europe and Asia.
So I don't think by itself, it's going to have really a direct impact, just because of the geography that's been described.
I think as a concept, to get to your other point, the idea that there's more volumes going through digital wallets, through two partners like Visa and a PayPal, is really nothing but good news for our business longer term.
Thanks, <UNK>.
Yes, <UNK>, it's <UNK>.
I'll maybe start with that one.
So if you think back to December when we originally announced the Heartland transaction, consensus for us for our FY17 was around $3.32.
And we guided to mid single-digit accretion which kind of gets you to [$3.47] or so.
If you think about where we are now, we just guided on a constant currency basis $3.50 to $3.60.
So a mid point of $3.55.
That kind of implies high single-digit accretion year one, which is pretty attractive from our point of view, and obviously, an acceleration from what we originally announced on the deal in the December time frame.
Obviously, we've seen a $0.10 of ---+ $0.10-plus maybe of incremental FX headwinds.
There's a little bit of noise around FX.
But on an apples-to-apples basis, we're kind of looking at FY17 being high single-digit accretion from Heartland, and that's pretty exciting.
Yes, <UNK>, <UNK> here.
We do plan to keep growing the sales force.
It's measured.
It's surgical.
As I said a little while ago, we've identified white spaces, where we want to accelerate growth and sales coverage as we speak.
So we will keep growing that sales force, measuring it against demand and opportunity.
But there's a lot of room for growth, in terms of just headcount adds, as well as in coverage that you'll see in the coming quarters.
On the interest expense side, I think we've provided a little bit of color around interest rate expectations back in the Q3 call.
We have about $2.8 billion of incremental debt associated with the Heartland transaction, actually we'll pay a little bit of that off the course of the year.
Our weighted average cost of debt somewhere around [$3.75] to [$4.00], so in that ballpark.
And then as a reminder, the legacy debt that we had, was repriced as well as part of the transaction.
So there's probably an incremental 100 basis points on that.
So it's going to be in the same, sort of probably $3.50 range for the historical debt.
So all-in, that gets you to an interest rate expense assumption that's going to be in the north of $160 million range for FY17.
Thanks, <UNK>.
Yes.
Hey, <UNK>, it's <UNK>.
Great question.
Revenue is essentially flat now.
So we have caught up, in the sense that we've gotten revenue to it's flat to slightly up.
As we get to September, and annualize the annualization of the interchange benefit ---+ I know it gets complicated ---+ we would expect revenue growth to trend back to the same level of transaction and volume growth that we're seeing in that market, which is double-digits to mid-teens.
So we're very bullish on our execution in Spain.
We, I think, are looking at our fifth consecutive quarter of growing transactions and volumes in the double-digits.
We're growing well above the rate of market growth, and couldn't be more delighted with our partnership with [Caixa], and we see nothing but really tailwinds in that market.
GDP has remained very solid in the market, and our execution has been terrific.
So as we get into FY17, and get past the first quarter, we expect Spain revenue growth to return to that double-digit level.
And it's obviously an important driver for overall expectations for European organic growth in FY17.
Yes, <UNK>, it is a tough thing to model, and we've had joint ventures that we've unwound.
We've added new joint ventures, and I recognize that's complicated.
So with the addition of Erste, I would expect it to be up year-over-year relative to FY16 in aggregate by roughly 50%, relative to what we just reported for FY16.
So that's kind of a rough guide.
And we can obviously provide a little more color on that, if we have an offline conversation.
Thanks, <UNK>.
Yes, <UNK>, it's <UNK>.
I tried to give a little bit of color on that in my prepared remarks, because we recognized a couple things.
One is, the quarterly distribution of earnings in FY17, because of the FX headwinds in particular, are likely to be sort of the inverse of what we saw in FY16.
So we expect 47% to 48% of the earnings to be distributed in the first two quarters combined, and the balance, 52% to 53% in the back two quarters, which to your point, will roll into the new calendar year.
For the full FY17 guide, obviously, we're going to see the most FX headwinds in Q1 and in Q2 in particular, but primarily Q1.
So still expect good growth in Q1 over FY16, and same for Q2.
But it will ramp in the back half of the year, as we hope currency headwinds will begin to abate, number one.
And number two, it's important to recognize that synergies ramp over the course of time as well.
So as we're executing on synergies, and taking expenses out of the business, the benefits of those actions ramp over the course of the fiscal year, as we roll into FY18 as well.
So those two things combined create an environment where, the back half will be a little bit stronger than the first half.
But the overall expectations for the year, I think are very attractive.
Yes, <UNK>, it's a really good question.
So what I would start with is, when we look at our FY17 expectation, there's a lot of activities that are in progress today.
We have dollar amounts tied to every one of those activities, but there's obviously execution that needs to be done to realize those synergies.
So as we sit here today, we expect to achieve synergies in excess of the original $50 million-ish guide that we provided when we originally announced a deal in fiscal ---+ at the end of, I'm sorry, December for FY17.
But more importantly, as I said in my comments earlier, we're well on track to meet the overall run rate synergy expectation, by the time we get into FY18 and beyond of $125 million a year.
As you know, with synergies, you have realized synergies in a particular period.
But then, you also measure the run rate of the actions you have taken, and how they're contributing to the overall run rate expectation that we have of $125 million.
So I think it's a little early to I think try to put more specific numbers around where we think we're going to end up from a synergy point of view.
But I would want to leave you with certainly our perspective which is we have a high degree of confidence on being able to accelerate synergies for FY17, relative to what we originally anticipated, and certainly feel very, very confident in our ability to deliver on the total run rate synergy, that we had premised in the original transaction economics.
Thanks, <UNK>.
Well, on behalf of Global Payments, thank you very much for joining our call this morning.
