Q3 2025 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by, and welcome to Global Payments' Third Quarter 2025 Earnings Conference Call. [Operator Instructions] And as a reminder, today's conference will be recorded. At this time, I would like to turn the conference over to your host, Head of Investor Relations, Nate Rozof. Please go ahead.

Good morning. Welcome to Global Payments Third Quarter 2025 Conference Call. My name is Nate Rozof, and I'm Head of Investor Relations. Joining me on today's call is our CEO, Cameron Bready; our President and COO, Bob Cortopassi; and our CFO, Josh Whipple.

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. I'd like to remind you that some of the comments made during today's conference call will contain forward-looking statements, including expected operating and financial results, among other matters. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press release and filings with the SEC.

We caution you not to place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. We will be referring to several non-GAAP financial measures, which we believe are more reflective of our ongoing performance. For a whole reconciliation of the non-GAAP financial measures discussed on this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this morning and other supplemental materials available on the Investor Relations section of our website.

With that, I'll turn the call over to our CEO, Cameron Bready. Cameron?

Thanks, Nate, and good morning, everyone. We are pleased to deliver third quarter adjusted results that accelerated sequentially across our key financial metrics. Our team continues to execute at a high level, driving growth and efficiency across the business as we advance our transformation program. Importantly, our year-to-date performance positions us well to deliver on our expectations for the full year, and we are building positive momentum as we prepare for the closing of the Worldpay acquisition.

To that end, we recently received approval for our acquisition of Worldpay from the Competition and Markets Authority in the U.K., which is a critical regulatory milestone. Given the strong progress we have made with the regulatory approval process, we now expect to close our acquisition of Worldpay and divestiture of Issuer Solutions in the first quarter of 2026. Naturally, our teams are eager to complete the Worldpay transaction and begin unlocking the compelling opportunities it presents, including accelerating our strategy to transform Global Payments into a pure-play merchant solutions provider with sustainable growth, leading scale, focused investments and meaningful value creation.

We are also pleased to have closed the divestiture of our payroll business in September, further simplifying our business and allowing us to return an incremental $500 million of capital to shareholders during the third quarter through an accelerated share repurchase program. Lastly, before turning to the quarter, I'm happy to announce that we partnered with Google to enable Agentic Commerce using the Agent Payments Protocol. It will enable us to provide secure, reliable and interoperable agent commerce for our customers and partners. We are helping our customers and partners to successfully enter this emerging commerce channel by building bridges between protocols to enable our merchants to accept all Agentic payment types.

With this and other Agentic AI frameworks, we are also developing the authentication layer that is necessary to verify that AI agents are legitimate to maximize authorization rates and thus maximize revenue for our customers. For the quarter, we reported 6% constant currency adjusted net revenue growth, excluding dispositions, 110 basis points of margin expansion and 11% constant currency adjusted EPS growth compared to the same period last year. We also produced adjusted free cash flow of $784 million in the quarter, allowing us to end the quarter at 2.9x adjusted net leverage, below the 3x target we had committed to and earlier than the year-end date we had previously anticipated.

Our merchant business exhibited ongoing momentum with adjusted net revenue growth accelerating to 6% constant currency, excluding dispositions as we continue to execute across the 3 pillars of our strategy. First, in POS and software, our strategic priority remains on the development and rollout of Genius. Consistent with our focus on front book opportunities, currently more than 90% of Genius sales are to new customers. In the markets where we have launched Genius, sales to new locations increased by more than 20% year-over-year during the third quarter, with new sales ramping nicely throughout the quarter.

In fact, monthly recurring revenue from new sales increased 75% from June to September, and the average deal size more than doubled. This rapid uplift in new sales demonstrates how well Genius is resonating in the market. Genius is an incredibly robust business software platform that is architected to be highly modular, configurable, scalable and extensible. As we talk about Genius today and in the future, you will hear us highlight our support across multiple form factors for mobile phone applications to specialized handheld devices, all the way up to our unique countertop, kiosk, digital menu board and kitchen management devices.

We will also discuss vertically targeted configurations supporting retail, restaurants, campuses, field services, professional services, age-restricted and more. We may also comment on go-to-market bundles of specific feature functionality to assist customers with diverse needs at multiple price points designed to allow us to specifically tailor our offerings to meet customers how and where they want to be met. With all the impact we are driving across the world with Genius, it is important to understand that this is still one Genius platform. We are unlocking capabilities, geographies, configurations and pricing bundles.

We are not launching new discrete products. To that end, having successfully introduced Genius for the restaurant and retail verticals during the second quarter, which are primarily targeted at SMBs, I'm happy to share that we expanded Genius' feature set to support enterprise businesses in September and higher education institutions in October. Genius' enterprise offering provide a unified modern and modular commerce enablement solution designed to meet the complex needs of multi-location quick-serve and fast casual restaurants, sports and entertainment venues and food service management environments for our enterprise customers.

On the heels of this launch, we were pleased to be selected by Harris Blitzer Sports and Entertainment to be the official payment technology provider for the Prudential Center and the New Jersey Devils. We will integrate Genius across all food and beverage locations for the Prudential Center, helping to optimize how fans place, pay for and receive their orders across the venue while optimizing back-end operations. While it's still very early for Genius in the enterprise space, we have also already been selected by franchisees of several leading QSR brands to deploy Genius across more than 400 locations.

Our expansion of Genius functionality for higher education is ideally suited for a range of campus use cases, including on-campus merchants, dining halls, recreational facilities, departments and clubs, stadiums and more. Many universities do not have the necessary digital payments infrastructure to support their move away from cash and check. Genius enablement solutions, including campus-wide payment acceptance capabilities and reconciliation. It drives commerce and simplifies back-end processes by centralizing transaction visibility, while maximizing revenue streams, minimizing staff time and streamlining compliance.

In terms of new form factors, we recently launched our new handheld device for Genius. It features an advanced 6.5-inch high-definition touchscreen, seamless connectivity across WiFi, Bluetooth and 5G and an upgraded processor that speeds performance. Demonstrating the power of Genius' highly modular and configurable platform, I'm pleased to share that the University of Illinois selected Genius and we use our new mobile form factor across revenue centers campus-wide. As for geographic expansion, in addition to offering Genius across North America and the U.S., Canada and Mexico, we recently launched in the U.K. and Austria.

And our first enterprise win in the U.K. came within days of our launch with a restaurant change in Glasgow that has ambitious expansion plans. Before the end of the year, we still expect to introduce Genius in Germany. In early 2026, we will also bring it to Ireland and the Czech Republic, followed by Spain, Romania, Poland and Australia. Lastly, we are actively deploying Genius through all of our distribution channels to help drive penetration across the entirety of our front book.

In addition to our large direct sales force, we recently launched Genius in our dealer, VAR, financial institution and ISO channels. The feedback from our partners in these channels has been resoundingly positive. Our digital menu boards and new handheld devices particularly resonated with our dealers, and our loyalty solution is highly regarded across our partner channels. It is encouraging to see the ramping of new sales in all of our distribution partners invigorated by Genius.

In addition to our success with Genius, we have several notable wins across other software businesses, including Alterra Mountain Company, Oakwood University and Stillwater Public Schools. Turning to our Integrated and Embedded business. We had another outstanding quarter for partner signings with nearly 60 new partners added globally. To continue to drive partner wins, we are investing in our developer experience, including launching easy-to-use tools, modernized documentation and a unified API platform that makes it easier to integrate and deploy our services.

In addition, we are excited to have expanded our long-standing partnership with PayPal, continuing to leverage our technology footprint across North America, Europe, the U.K. and Asia Pacific. This multiyear partnership also expands our relationship into the U.S. market and paves the way for global expansion into new verticals, creating significant opportunity for volume growth with PayPal. As part of our transformation program and sales effectiveness initiative, we're expanding our distribution for this channel, which has historically been solely served by an inside sales rep team by adding a dedicated outside sales force and enabling integrated referrals to all of our direct sales teams.

With the addition of a field sales force targeted towards integrated opportunities, we expect to increase our win rate in complex verticals like automotive, health care, dental and veterinarian, where clients continue to prefer to have face-to-face interaction. We also expect this to be a point of differentiation as we compete for new partners going forward. As for our core payments business, we achieved several notable wins in high-growth geographies, including Maxi K convenience stores in Chile, Masovian Railways in Poland, Aegean Airlines in Greece and Le Méridien Kuala Lumpur in Malaysia. In North America, we renewed Verizon Wireless and the State of Illinois extended our relationship for a new 10-year term.

United Petroleum was a notable win in Canada, and we are expanding into nearly 200 Pizza Hut locations across Mexico. I'm also excited to share that we launched our new merchant dashboard that facilitates cross-selling of value-added services. We built and deploy a modular and open dashboard that allows for a common interface supporting multiple client personas to customize the experience of delivering critical data and KPIs, a generative AI data discovery interface, access to our robust client experience, engagement and loyalty components and the ability to purchase and interact with a rich suite of personalized commerce enablement services and embedded finance tools.

These modern and robust points of interaction deliver the capabilities and experiences that our clients and partners desire and expect. Turning to Issuer Solutions. We again saw accelerating sequential trends with revenue growth increasing to 5% on a constant currency basis this quarter. This was largely driven by continued growth in accounts on file and stable underlying transaction volume trends as well as strong project-related revenue.

We recently leading European digital bank and OLB, a leading bank in the German market. We also signed new agreement with Allianz Bankia and Brandeskard and continue to have a solid pipeline of new business that extends into 2027. Further, we remain on track with our cloud modernization program and moved 2 more products into production this quarter. We are on schedule with our modernized efforts and expect to make all customer-facing applications commercially available by year-end. As I noted in my opening comments, we continue to make great strides on our transformation journey as we streamline Global Payments into a single unified operating company worldwide.

At the core of this effort is investment in our technology strategy to unify our capabilities and expose them ubiquitously to customers around the globe. To facilitate this, we have architected a single-in, single-out customer and partner experience, leveraging modern API environments, complemented by AI assistance to integrate and consume our services. With the orchestration platform capabilities we have discussed in prior quarters, we're enabling the single-in, single-out experience across all of our platforms in all of our geographies on an omnichannel basis. This strategy and architecture allows us to deliver the modern customer experience that clients demand and insulate them from the complexity of our processing environments, while providing us with the ability to simplify our infrastructure by deprecating technologies at a more measured pace without material impact to our customers and partners.

For example, this approach has already facilitated our EVO integration by supporting all net new volume and enabling us to migrate clients away from EVO's 7 legacy gateways with minimal client impact. Notably, Worldpay is on a similar journey of using orchestration to enable technology and systems consolidation. Our strategy is to align our orchestration capabilities, which gives us confidence in our ability to integrate and consolidate our technology stacks, unlocking more value and growth more quickly than we could have in the past. In addition to enabling cost savings and margin expansion through infrastructure consolidation, our modern orchestration layer also enables us to distribute products more easily across multiple geographies.

This accelerates our pace of innovation, making us more nimble and improves our speed to market. With our API environment and the new dashboard I referenced earlier, this architecture works in harmony to deliver our holistic single-in, single-out vision. To further accelerate product development, we have also aligned our teams around a new product operating model, a foundational shift in how product and technology come together to solve customer challenges at Global Payments. We are already seeing tangible benefits, faster execution, tighter alignment to our priorities and meaningful reductions in churn and waste as well as accelerated delivery of new capabilities.

Our Genius rollout is a prime example of this. Further, we're embracing artificial intelligence to improve the productivity of our engineering teams and the experiences of our customers. So far, our teams have used AI to generate nearly 1 million lines of code, saving tens of thousands of hours of manual coding time. AI-assisted coding is also reducing defects, which is accelerating testing and integration cycles.

Overall, the integration of AI is enhancing our end-to-end product development life cycle by enabling faster innovation and improved velocity across our technology portfolio. The power of AI is often dictated by the availability of data to train it. Once we combine with Worldpay, we will process nearly $4 trillion in annual volume across 100 billion transactions and serve millions of merchants and thousands of platforms and software partners. That scale of payments data will help us unlock AI-powered insights for our customers as their trusted partner.

For example, we will be able to provide our customers with access to fraud tools, predictive inventory analysis, dynamic pricing models, and churn risk analytics, all based on detailed transactional data and delivered in real time. In addition to the investment we're making in our product and technology environments, we're also investing meaningfully to transform our sales force, which is obviously our primary point of contact with many of our customers. As we previously discussed, during the first half of the year, we transitioned our sellers from our 94 compensation plan, which was 100% commission-based structure to a new compensation program that incorporates base pay plus commissions.

This change yields multiple benefits for us. First, it enables us to incentivize solution-based selling, which is critical when we are introducing new solutions like Genius. In a 100% commission-based plan, sellers will often take a wait-and-see approach to new products, preferring to take the past of loose resistance to closing a new sale. Under our new plan, we have targeted our strategic commerce enablement solutions in addition to overall sales quotas.

This model also makes it much easier for us to hire strong experienced sellers. As we continue to focus on selling more software and commerce enablement solutions, this structure is more consistent with the market for software sellers, allowing us to attract the right talent to sell our capabilities. With this new structure in place and the early proven results, we are expanding the size of our sales force to improve our engagement in the market. Today, we are actively recruiting for 500 additional field sellers in North America.

We have also deployed a consistent sales methodology across our sales force, which improves the portability of new leads across channels and the customer experience. This lead portability is facilitated by the last key pillar of our sales transformation, unifying the technology that enables it. We have mentioned in the past that we are consolidating our CRM systems, which is a critical enabler to passing leads between sales channels and harmonizes how we go to market. Now sales professionals from different channels can see the lead in its entire history through the same CRM system.

This also allows for greater ability to manage the overall inventory of leads we receive, recycle unsuccessful leads and ensure that no lead is left behind in our environment. We are also deploying sales intelligence tools to automate pipeline management as well as AI agents to summarize our sales call in real time and document any need to follow-up. While it is still early, our new sales methodology and compensation programs are increasing deal count and size. Overall, we are seeing double-digit increases in signed annual revenue per deal and mid-single-digit increases in deal count.

We're also seeing speed to first deal increase with our earliest adopting channel improving by almost 40%. Lastly, we've seen attrition in new hires in the first 90 days improve meaningfully. For example, the first sales group to move to this new plan has seen more than a 50% reduction of new hire attrition, since adoption. Our transformation will be catalyzed by the acquisition of Worldpay and simultaneous divestiture of our Issuer Solutions business, positioning Global Payments as a pure-play merchant solutions provider.

With the transactions expected to close during the first quarter of 2026, integration planning for Worldpay is well underway with all critical milestones established. Our disciplined approach will ensure alignment with our operating model and drive value creation. Our integration strategy focuses on accelerating growth, enhancing competitiveness, realizing synergies and investing in innovation, while unifying under a single brand and leveraging top talent from both organizations. Through our integration, we are striving to be a better version of the companies we have been until now, not just a larger one, one that maximizes scale and prioritizes growth to ensure lasting results for our customers, our shareholders and our team members.

And we will do this by leveraging our unmatched global scale, processing nearly $4 trillion annually across 100 billion transactions and a complementary set of capabilities that strengthen our value proposition. Together, we will expand distribution, enhance our product suite and scale innovation. Our North Star for integration is growth, growth that emanates from an unrelenting focus on the needs of our customers. This incremental growth will be driven by a number of actionable opportunities that leverage the strength of the combined business.

For example, we will immediately begin selling Genius and other software solutions into Worldpay's SMB base, while using their channels to broaden reach. Further, Worldpay's PayRig platform and PayFac capabilities will deepen our support for software partners and platforms. Their enterprise and e-commerce strength will also enhance our omnichannel offerings and diversify our client mix, while also providing capabilities we can cross-sell across the breadth of our combined merchant base. We will also extend Worldpay's digital capabilities to SMBs and pursue geographic expansion in the 40 markets, where we already operate.

As previously noted, we also have a significant opportunity to drive synergies by leveraging a unified orchestration layer to consolidate platforms and reduce technical debt. Further, our ability to deploy approximately $1 billion in annual capital investment to support a cohesive merchant-centric product road map will serve as a powerful catalyst. This strategic alignment is expected to create a flywheel effect, accelerating innovation, enhancing efficiency and further strengthening our offerings. In support of our execution of all of these opportunities, in September, we were pleased [indiscernible] to directors to our Board of Directors, who filled seats vacated by retiring Board members this past April.

Our new directors, there is Patty Watson and Archie Deskus bring a wealth of leadership skills, experience and financial technology expertise to our Boardroom. Their guidance will be helpful as we continue to execute on our strategic ambition to be the worldwide partner of choice for commerce solutions. The Board has also established a new ad hoc integration committee to oversee the integration of Worldpay following the close of the acquisition. This committee will represent a governance best practice for Global Payments going forward.

While we currently provide the Board with detailed updates on acquisition integration, the formation of a dedicated committee will allow for deeper engagement and more focused oversight. Leveraging the Board's diverse expertise and experience in this area will be invaluable as we execute on this critical initiative. With that, let me turn the call over to Josh.

Thanks, Cameron, and good morning. We're pleased to have reported another solid quarter, highlighted by accelerating revenue growth, healthy margin expansion and strong adjusted free cash flow generation. Importantly, the performance delivered is exactly consistent with the expectations we outlined at the beginning of the year as we continue to execute against our strategy and transformation agenda. Specifically, we delivered adjusted net revenue of $2.43 billion for the third quarter, an increase of 6% from the prior year on a constant currency basis, excluding dispositions.

Adjusted operating margins expanded 110 basis points to 45% or 80 basis points, excluding dispositions, resulting from strong execution and benefits from the transformation we began executing last year. The net result was adjusted earnings per share of $3.26, an increase of 12% on a reported basis and 11% on a constant currency basis. Year-to-date, we've generated $2.1 billion in adjusted free cash flow, representing a 96% conversion rate from adjusted net income. Taking a closer look at performance by business.

Merchant Solutions produced adjusted net revenue of $1.88 billion for the quarter, reflecting growth of approximately 6% on a constant currency basis, excluding dispositions. This represents a 50 basis point improvement sequentially, consistent with our outlook that we set at the beginning of the year, and the expectations outlined at our investor conference last year. Further, the macroeconomic backdrop remains consistent as we continue to see stable volumes supporting our view that the consumer spending remains resilient. Our POS and software business achieved high single-digit growth, excluding dispositions for the third quarter.

We're encouraged by the acceleration in new Genius locations sold having seen a 37% monthly increase since launching in June. We continue to build on this momentum in Q4, we hosted our Genius Dealer and VAR Conference in late September. The conference was well attended with over 200 dealers and key highlights including introducing new Genius handheld along with displaying our enterprise-grade capabilities like digital menu boards to SMBs. We're excited about the progress we've made in rolling out Genius as our singular point-of-sale technology platform across our business.

We'll have much more to share in the coming quarters as we build on these accomplishments. Turning to integrated embedded payments. This business also delivered high single-digit growth for the third quarter. We added nearly 60 new partners globally during the quarter, and notably, about half of these new ISV partners were outside North America, underscoring the distinct value we bring as a provider with unmatched global reach.

And the compounding power of those one-to-many ISV relationships continues to propel our top line as they ramp. For example, year-to-date, we have seen a 68% year-over-year revenue growth from the cohort of partners that we signed in 2023, while the ramp from new partners signed last year is nearly 15x their contribution in 2024. In core payments, we delivered mid-single-digit growth during the quarter. Our international markets demonstrated relative strength with high single-digit constant currency revenue growth across Central Europe and Asia Pacific as we continue to benefit from strong secular payment trends in these markets.

This reinforces our commitment to expand our foothold to meet strong demand and provide our best-in-class suite of capabilities across geographies. We delivered an adjusted operating margin of 51.1% in Merchant Solutions, an increase of 110 basis points over the prior year or 70 basis points, excluding dispositions, again highlighting the impact of our transformation. Moving to Issuer Solutions business, we generated adjusted net revenue of $562 million for the third quarter, reflecting growth of over 5% on a constant currency basis. This represents over 150 basis points of acceleration sequentially and also marks an improvement from our performance in the first half of the year as expected.

Revenue growth was primarily driven by new implementations and growth with existing customers as our strategy of aligning with market share winners continues to drive benefits. We also benefited from the recognition of project and fees for service revenue that we had previously expected in Q4. We added 16 million traditional accounts on file this quarter, bringing us to a record of 917 million traditional accounts in total. We completed 2 implementations in the quarter, and we continue to see sustained growth in transaction count. Insurer Solutions delivered an adjusted operating margin of 46.9%, which is a 150 basis point improvement from the prior year period.

As I mentioned, reported adjusted operating margins expanded by more than 100 basis points in both merchant and issuer. This reflects not only continued cost discipline, but also incremental benefits we've realized from our transformation efforts. In addition to beginning to unlock top line growth, as Cameron described a moment ago, our transformation has yielded significant cost efficiencies as we streamline our businesses and functions. From a cash flow standpoint, we produced strong adjusted free cash flow for the quarter of approximately $784 million, representing a conversion rate of adjusted net income to adjusted free cash flow of approximately 100%.

We invested approximately $170 million in capital expenditures during the quarter and expect capital expenditures to be roughly $700 million or approximately 8% of revenue for the full year, consistent with our previously stated target. We continued our commitment to returning capital to shareholders this quarter, repurchasing $500 million through an accelerated share repurchase in connection with the sale of our payroll business, bringing our total share repurchases to approximately $1.2 billion year-to-date. We continue to see buying back our shares as a compelling opportunity given our confidence in our strategy given our long-term growth profile.

We're pleased to report that we've reduced our leverage faster than anticipated. Our net leverage position was 2.9x at the end of the third quarter, down from 3.15x at the end of the second quarter and below our long-term target of 3x. Our continued strong free cash flow generation gives us confidence in our ability to delever back to 3x within 18 to 24 months of closing the Worldpay acquisition. Our balance sheet remains extremely healthy, and we ended the period with approximately $4.1 billion of available liquidity.

Outstanding indebtedness is almost entirely fixed rate with an attractive weighted average cost of debt of 3.4%. Moving to our outlook for the full year 2025. We continue to expect constant currency adjusted net revenue growth of 5% to 6% over 2024, excluding dispositions. We anticipate dispositions will impacted reported adjusted net revenue growth by approximately 400 basis points for the full year, which now reflects the sale of our payroll business in September. As we discussed the past 2 quarters, the foreign currency exchange rate environment has continued to evolve, since we established our initial 2025 guidance.

We now expect a modest tailwind of approximately 50 basis points from foreign currency exchange rates in Q4. And for the full 2025, we expect foreign currency exchange rates to be broadly neutral to reported revenue and EPS growth. And we expect full-year adjusted operating margin to expand more than 50 basis points, excluding dispositions, which is consistent with the guidance that we provided last quarter. We expect Q4 performance to be generally in line with our year-to-date trends and similar to Q3. At the segment level, we still anticipate our merchant business to deliver adjusted net revenue growth of roughly 6% on a constant currency basis, excluding dispositions for the full year, and we continue to expect adjusted operating margin expansion for merchants to be greater than 50 basis points, excluding dispositions for the full year.

For Issuer Solutions, we continue to expect adjusted net revenue growth of approximately 4% on a constant currency basis for the full year. This implies Q4 growth of roughly 4% due to the pull forward that I mentioned a moment ago. We expect adjusted operating margin expansion for the issuer business to be greater than 50 basis points for the full year. We continue to anticipate adjusted free cash flow conversion to be greater than 90% for the full year and we expect to end the year at or below our 3x net leverage target.

Altogether, for the year, we remain confident in the trajectory of the business, and we continue to expect adjusted earnings per share growth to be at the high end of the 10% to 11% range on a constant currency basis. In sum, we delivered another quarter consistent with expectations and we remain on track to achieve our outlook for the full year for revenue, margins, EPS and free cash flow. And with that, let me turn the call back over to Cameron.

Thanks, Josh. I could not be more proud of our team and the positive impact we are seeing in our business from our transformation. The anticipated closing of the Worldpay acquisition and the concurrent divestiture of Issuer Solutions business early next year represent a pivotal moment in our company's evolution. Far from a departure from our strategy, these actions are a natural extension of it, providing unique opportunities to accelerate our transformation.

Together, they will crystallize Global Payments position as a pure-play merchant solution provider and a leading provider of commerce enablement solutions with unmatched global scale in an industry, where scale matters more than ever. We remain intensely focused on driving sustainable growth through a combination of expanded and more effective distribution, a more comprehensive suite of products and solutions and our ability to invest in innovation at scale. With approximately $1 billion in annual capital investment dedicated exclusively to merchant and commerce enablement solutions, we are uniquely positioned to accelerate our product road map and deliver differentiated value to our customers.

These transactions also reinforce our transformational objectives to enhance operational efficiency and maximize cash flow. Leveraging our increased scale and realizing meaningful synergies, we expect to generate significantly more levered free cash flow than what would have been achievable absent these strategic actions. And our commitment to disciplined capital allocation remains unchanged. In addition to the $1.2 billion we have already returned from the disposition of assets, we remain on track to return $7.5 billion to shareholders between '25 and '27, while simultaneously delevering to 3x within 18 to 24 months of closing the Worldpay transaction.

By 2028, we expect to generate approximately $5 billion in annual levered free cash flow, which is 50% more than it otherwise would have been. This level of cash flow generation will provide us with significant flexibility to continue returning capital to shareholders on a sustained basis, while simultaneously investing in innovation to drive sustainable long-term revenue growth and operating leverage. With that, I'll turn it back to the operator to open the line for questions.

[Operator Instructions] And our first question will come from Dan Dolev with Mizuho.

Cameron, Josh, Nate great results here. It looks like everything is on track and better than expected. I wanted to touch on your comments, Cameron, on free cash flow. I mean the generation is very impressive, and you're pushing probably $9 billion of return right now.

So as we get closer to this 2028, how do you think about capital returns given the massive amount of free cash flow that GPN is throwing?

Yes. Dan. Thanks for the kind comments. I would say our philosophy remains very consistent.

As you highlighted over the course of the '25 to '27 time frame, we expect to return close to $9 billion. That's $1.2 billion from dispositions that we've made and obviously utilized the proceeds from those to return capital, and we're still targeting $7.5 billion from just cash flow that we're generating in the business is capital returns over that same time frame. As I just commented, we expect to have free cash flow in the neighborhood of $5 billion by the time we get to 2028. And I would say, given where we are today, our priority would remain returning that capital to shareholders. Obviously, we want to be able to continue to invest in the business to drive growth and make sure that we're innovating at the pace that we want to and maintaining our competitiveness in the market, but recognize that our free cash flow expectation is already built in a $1 billion plus of new investment in innovation annually.

So we think we have ample free cash flow in 2028 to return a significant amount of capital to shareholders, while still positioning us to be able to invest in the business the way we need to, to drive sustainable long-term growth.

The only thing I would add, Dan, is look, you saw in the quarter, we continue to generate really, really strong free cash flow. Year-to-date, we generated over $2 billion of free cash flow, we converted at 96%. And you also saw that we delevered down to 2.9x. And just given the cash flow profile of this business, we feel very confident that we'll delever back to 3x within 18 to 24 months of closing the Worldpay acquisition.

So we feel really good about that.

Our next question comes from Jason Kupferberg with Wells Fargo.

I wanted to ask on merchant, a 2-part question. The first part is on Genius. I wanted to get a sense of what the complexion of some of these initial wins look like? Are you mostly winning restaurants and retailers that are moving to Genius from a non-cloud solution?

Are you getting competitive takeaways from the other cloud providers? And then the second part of the question is just on pricing and the environment there. Last week, one of your competitors talked about rolling back some fees in parts of its SMB merchant base. So I wanted to get your take there.

Just on the overall pricing backdrop, are you seeing any more price aggression in the market since last quarter?

Yes, Jason, it's Cameron. Thanks for the question. I'll start and maybe ask Bob to provide a little more color on specifically what we're seeing with Genius. But to maybe answer your question very quickly, I think it's a little bit of all of the above.

We're delighted with the progress that we're seeing with Genius. We called out some stats, obviously, in our prepared remarks, but certainly, the momentum we're building around Genius is palpable. I think the reception of the market is highly constructive as it relates to the product, the capabilities, the form factors, in all the feature functionality that we're able to bring to bear through the platform. So as we commented, we're already live in a number of markets internationally.

We have plans to bring it to more markets. 90% of our new sales are to new customers, which is really encouraging, and it aligns with our focus, as we've described before, on front book opportunities. We saw new locations increase kind of 20% quarter-over-quarter and a 37% increase, since we launched in June and new ARR, importantly, not only are we selling more locations, but the value of those locations is increasing as well as new ARR is up almost 75%, since we launched in June with an average deal size, it's greater than 50% what it was prior to launching Genius. So I think as it relates to the early sort of proof points around how Genius is resonating with the market, we feel very enthusiastic about the reception we've received and obviously, the momentum we're building.

I'll let Bob talk a little bit more about specifically kind of what we're seeing on the wind front.

Yes. Thanks, Cameron. Jason, the way that we think about -- the way that I think about the front book opportunities that we're winning is that the motive competition really varies by geography. And that's less about the intensity of competition or what the product market fit is, and it's more about the maturity of the market sort of inherently.

So as you think about where we've got Genius rolled out so far over the last few months, it's primarily North America-based although I think we mentioned that we're live in the U.K. now as well. And across North America, the U.S. is a very different market than Mexico in terms of the penetration of POS technology systems as opposed to kind of legacy payment methods themselves. And that's the primary driver of the source of the wins. When we go head to head in a market like the U.S. that's fairly mature, deep competitive landscape, a lot of established software providers there.

We feel very confident about how our software and capabilities stack up against them, and we're winning a lot of those head-to-head battles as well as competitive takeaways. We're also winning in markets where software adoption is less than it is in the United States. And some of those wins are coming from head-to-head and competitive takeaways. Some of those are coming from people, who are leaning into a full POS software stack to manage their business for the first time.

But regardless of geography of distribution method, whether that's dealers or direct and regardless of kind of who the competition is, today, I wouldn't say that there's 1 spot we're winning in a spot that we're concerned, we feel really strongly about our opportunity to win when we get in deals. You didn't ask this, and I probably shouldn't volunteer it, but if you ask like, where are you struggling? Where do you have challenges today? It's not about product, and it's not about customer demographic, it's frankly about mind share.

Some of what we're doing is new to our clients and new to our prospective clients and we're competing against people who've got some established mind share. So we're being very aggressive about how we think about the marketing opportunities to get the Genius name and the Global Payments brand in front of our prospective customer base. We're thinking a lot about how to leverage our existing distribution and maximizing the performance of that channel. An example of the thing that we've done this quarter has come alongside some of our FI or other indirect distribution partners, not only offering Genius to them, but offering sales assistance with Genius.

So we've got a number of, for example, FI partners who are really excited about the opportunity to service their customers with more technology solutions, but they don't always feel like they've got the sales expertise inside of the bank to go and sell software as software. And so we're coming alongside them and offering to partner them up either with our direct sales team or in some cases, with regional dealers, where they can go to market jointly.

And Jason, I want to circle back on the second part of your sneaky 2-part question there. So on the pricing environment, what I would say is it remains fairly constructive. And our philosophy, I think, from a pricing standpoint, really hasn't changed. We want to price our services and solutions given the level of value and capability we're bringing to our clients.

We don't strive to be the low-cost provider in the market, and we want to be paid fairly and appropriately for the level of value and service that we think we can deliver. So we're not leading with price. But obviously, we must be price competitive and we are price competitive for our solutions. I think the reference that you made was really as it relates to more of a back book pricing sort of action as opposed to front book opportunities.

And as I said, we're always price competitive as we think about sort of new front book opportunities in the business. The last thing I would just leave you with is with the Worldpay, obviously, acquisition and the significant scale that we will bring to the competitive landscape as we move forward, I don't worry about being price competitive really with anybody. We want to make sure we're differentiating our capabilities based on the future functionality and level of service that we bring. And we'll always be price competitive, but we think we bring something distinctive from a functionality and service standpoint, and we want to be paid fairly and appropriately for that.

Our next question will come from Adam Frisch with Evercore ISI.

Cameron, I'm going to have a very unsneaky 2-parter here for you. If you could just provide some color on the primary components of the organic growth number and specifically call out some pricing increases to the back book, which are channel checks have suggested some pretty significant ones in recent months. And then the second one on the sales force expansion, super interesting. What kind of companies are you sourcing from the most and where do you see the most opportunity?

Yes, Adam, I'll take the first part and I may ask Bob to jump in on the second part just in terms of where we're sourcing kind of new sales professionals and the success we've seen on that front. I would say there's nothing sort of out of the ordinary in terms of organic growth for the business in this quarter. We're continuing to see much of that driven from new sales productivity. And actually, as we've called out, we're seeing better productivity from a new sales standpoint and better results from a new sales standpoint in the quarter, which obviously is a little bit of a tailwind to the overall growth in the business.

And then secondly, obviously, we're seeing fairly stable same-store sales trends across the business as well, which are the 2 biggest drivers, obviously, our organic growth and the performance we're seeing in the business. As it relates to pricing, we're continuing to exercise the same philosophy that we've had over a long period of time, as I mentioned in my answer to the earlier question, we focus on pricing our services and solutions based on the value of the services and capabilities that we're bringing to our client base. What we have been doing through our transformation is looking to harmonize all of our pricing sort of structures across all the different portfolios that we've acquired over a long period of time.

So as part of that, obviously, we are looking to harmonize kind of the pricing structures and capabilities that we're utilizing to make sure that we're getting paid fairly and appropriately for the level of value and service that we're delivering. But I would say on the pricing front, there was certainly nothing unusual in the quarter as it relates to how we think about pricing our solutions and actions that we may take from a back book perspective, as we're looking to harmonize those pricing structures kind of across our portfolios.

Yes. And in terms of where we're sourcing kind of sales talent and the pipeline for that, I would say, again, it's very broad. Obviously, we're targeting software salespeople, who've got experience doing that motion. Whether they're coming from fintech or whether they're coming from other types of kind of core business management software.

But I think the differentiating point here, as you think about kind of a legacy sales rep and a new sales rep, if you will, is that this is a much more consultative sale process than sort of commodity purchasing. Some people, particularly younger folks want to be able to interact digitally and acquire through that sort of methodology, but not everybody feels comfortable fully articulating their needs, understanding the complexities that may be associated with large-scale implementations and rollouts, and we find it very constructive to have consultative sales talent and sales engineers, certainly as the enterprise space to come alongside them and be able to deliver those capabilities at scale for both SMBs as well as enterprise clients.

Our next question will come from Dave Koning with Baird.

Nice job across the board. And I guess, my question, Genius, you talked a lot about new sales to new clients, but the back book, about 10%, it sounds like sales are coming through. I'm wondering what's the, I guess, experience so far with attrition in yield when you do move the back book? And if that's good, are you going to more aggressively kind of push into that?

Yes. Thanks, Dave. We talked about this a number of times, and I think our strategy is relatively consistent, and that is to be in front of our customers and leverage the relationships that we have, ensure that they're aware of the capabilities that Genius brings to bear and be prepared to help them migrate at a time that is comfortable and convenient for them to do so. As a reminder, Genius is not a new from the ground up brand new technology stack, much of Genius core capabilities comes from existing solutions that we already had in the market.

So as we think about customer migrations, in many cases, this isn't really a migration per se. This is simply unlocking the incremental capabilities that we've built over the past 18 months or so as we've been working to bring Genius to market across the globe. The second thing related to sort of yield and average revenue per customer, as Cameron mentioned, the overall deal size is increasing. A little bit of that has to do with the sorts of customers that we're able to target with Genius as a solution, but part of it is also about the breadth of capabilities we have to monetize.

We have to provide to deliver incremental value to those clients. So as we think about a migration experience, there is not any meaningful price compression associated with that. I would say it's neutral to slightly enhanced given the take rate on some of the incremental capabilities. As we think about the strategy against the back book, look, there's a time and a place for that.

But as I mentioned earlier on one of the responses about mind share, we're very focused on getting Genius in front of as many prospective clients as possible, and establishing a footprint so that all of you on this call, when you walk into anywhere you do business in your normal life, you begin to see more and more of the Genius brands. So we're very aggressively focused on front book opportunities. We're prepared and we're here for our back book clients as they migrate. And in most cases, as I mentioned, that's not a full-scale data conversion, migration that's simply unlocking incremental capabilities on the new unified platform.

Our next question comes from Bryan Keane with Citi.

Solid results here. Cameron, I just want to ask you a little bit more directly about that peer that we talked about that reduced the guidance. In particular, they talked about short-term revenues that were unsustainable and driving higher revenues and margins. Is that something that's common practice in the industry?

Can you maybe talk a little bit about the yields that you see versus volume? You guys have been pretty consistent on that. And then any kind of ability for you guys to competitively take away some business as a result of that?

Yes, Bryan, thanks for the question. Look, it's hard for me to comment too much on another company or another competitor. I certainly don't have perfect visibility into everything that's happening with their business. I'm really intensely focused on the things we're doing and how we're executing as a business.

I wouldn't say that the things that they called out were common in sort of practices. I mean, I think much of the commentary, particularly around merchant related to one specific international market and some idiosyncratic sort of issues there that were propping up kind of growth by virtue of FX rates and inflation, et cetera. So as I look at kind of the business more broadly, as I said before, I'm really focused on the things that we're doing, and I can't get too far down the path in terms of commenting on someone else. To that end, I would tell you, I'm really pleased with what we're seeing in our business and how effective our transformation is in terms of positioning us for a better sustainable growth and value-creation future as a business.

And I'm really pleased with the momentum we're building in the business. We've been at our transformation journey now for about 15 months, and I'm really pleased again with the little success that we've seen and the direction of travel as it relates to all the key initiatives that we have really been investing against over that period of time. We reoriented our operating model to make sure that we are well positioned for the growth future that I described before. We've had terrific success with Genius, which we spend a lot of time talking about today.

Our sales effectiveness initiatives are progressing really well, and we're seeing a lot of positive trends coming out of those. And the technology strategy that we outlined today, we think strikes the right balance between delivering client experiences that are modern and contemporary and aligned with what customers are looking for in the marketplace, while positioning us to be able to deprecate infrastructure and streamline and harmonized technology environments over a longer period of time that will drive additional cost savings and margin uplift in the business without creating a lot of customer distraction.

And of course, as we thought about our business and the market more broadly in the competitive landscape, we obviously put that into context as we thought about the transactions to acquire Worldpay and the best our Issuer Solutions business. We think these transactions further catalyze everything that we're doing from a transformation perspective and obviously, will position us going forward as a pure-play merchant solution provider really with unmatched global scale in an industry, as I said before, where scale matters more than ever. So as I look at the things that we're doing, we're incredibly enthusiastic about the progress that we're making.

We feel very good about how we're building a sustainable growth-oriented engine here that's based on healthy growth fundamentals and obviously, positioning the business competitively. And with the Worldpay combination, obviously, we think we'll bring a level of scale to the industry that positions us extraordinarily well, continue to grow, continue to innovate and continue to generate significant cash flow, obviously, that allows us to invest for the future, while rewarding shareholders with significant capital returns.

Our next question will come from Andrew Schmidt with KeyBanc Capital Markets.

Good to see the consistent results here. Maybe we could ask just about Merchant Services or Merchant Solutions organic growth. It looks like the exit rate pretty consistent with what you guys had outlined previously, slightly above 6%. Maybe talk about just the progression into 2026. And whether any thinking has changed there, particularly in terms of drivers?

I know POS and software is obviously a big driver, Salesforce is a big driver and a number of things going on. But just -- maybe just if you think about just the progression into 2026 and some of the key drivers, that would be great.

Yes, I'll start. I'll maybe ask Josh to add a little bit of commentary as well. I think, look, 2026 is right around the quarter. So the drivers as we think about the business organically heading into 2026 are really centered around the things that you just described.

Obviously, Genius continues to be a very significant focal point for us in terms of driving growth in our business. We have incremental market expansion opportunities in 2026 that we're looking to deliver. Obviously, we continue to build momentum in the markets where we've already rolled it out, and we're seeing strong progress on that front. And then, of course, our initiatives around sales effectiveness, the incremental sales force professionals we're looking to hire and bring to bear on the market.

Their ability to be productive more quickly and obviously drive a level of productivity that's superior than what we've been able to see historically under our old sort of plans, I think, gives us a lot of optimism around the direction of travel, relates to organic growth heading into 2026. So I don't think the underlying theme as it relates to how the business is positioned heading into next year have really changed. And I would just note also that they're very consistent with what we called out at our investor conference a little over a year ago. Obviously, as we highlighted on the call today, we're poised to close the Worldpay transaction early in 2026. And I think as we look at the combination of the 2 business heading into next year, we're obviously comfortable with the direction of travel of the Global Payments business, and we're very comfortable with the direction of travel of the Worldpay business in terms of their organic growth as we look to wrap-up '25 and head into '26. And the outlook for the combined business next year, I would just ask you to reflect on what we shared in Q1 of this year around the medium-term outlook for the combined business, that remains kind of our outlook as we sit here today for the combined business as we get into 2026.

Yes, Andrew, the only thing I'd add is, I think if you go back to the beginning of the year, we're doing exactly what we said we were going to do. You go back in the first 3 quarters, the shaping of merchant is right in line with what we see acceleration in the back half, and that's primarily related to the transformation initiatives as Cameron and Bob called out around Genius and sales effectiveness. And then to Cameron's point, we gave our medium-term outlook for '26 and '27 for the pro forma business on our Q1 call. So I would point you back to that where you can see kind of what we're expecting for the business in 2026.

Our next question comes from Darrin Peller with Wolfe Research.

Look, when we see some of these data points like the sales revamp showing us increases on deal counts and even the Genius stats are obviously strong, looking at some of these with 90% sales to new customers, increases, et cetera. I guess our question would just be when we would start to see that play out in volume growth? I know it's early now in some of these initiatives, but your 5% growth rate, I would like to see that show some traction and acceleration. Do you expect acceleration in volume growth, specifically the KPI you've been disclosing in the same manner as we go into next year as a result of these initiatives?

And then sort of related, but a follow-up would be the Worldpay SMB segment, I know is an area that you should be able to really capitalize your Genius program with post close. And so just how are you thinking about integrating that, rationalizing the 2 SMB go-to-market organizations and the uplift potential that we can see in volume overall as a result of that as well.

Yes, Darrin, good question. So on the first question, we did see, obviously, volume uplift from Q2 to Q3. And obviously, that's reflected in the metrics and the disclosures we provided today. But I think the longer answer to your question is, of course, over time, as we continue to make progress with Genius, we expect to be able to drive incremental uplift in volume all else being equal across what's happening in the macro environment. As you can imagine, a lot of different factors sort of shape the ultimate sort of volume growth we see in the business.

But certainly, we are seeing new sales of Genius driving incremental volume to the business, which is obviously driving overall volume trajectory in the right direction. And obviously, as we continue to move forward and make progress against expanding our footprint with Genius to Bob's point, growing mind share around Genius and having more success with front book opportunities, we expect that to continue to drive margin opportunity -- excuse me, volume opportunity and growth in volume in the business over a period of time. I think as it relates to the Worldpay opportunity, certainly, we think the overlap and complementary nature of the distribution platforms in SMB is really attractive.

Today, Worldpay really lacks a product suite that we have that's really geared towards serving the SMB segment of the market. And we think that our ability to leverage that product suite across our existing distribution channels is going to be really powerful. The other thing I would say is their distribution platforms, again, are largely complementary to what we do today. Their FI channel is, again, incremental largely to what we do from a distribution standpoint.

Their wholesale relationships are largely complementary to the relationships that we have. They don't have a significant direct sales force in the U.S., they do in the U.K. But the FI channel and the wholesale channels in the U.S. are very much complementary to our distribution channel. So our ability to leverage those channels to get greater breadth and depth of product expansion into the marketplace across SMBs, I think, is a really powerful part of the proposition of putting Worldpay and Global Payments together, and we're excited to be able to bring those distribution channels to life as a combined business going forward.

Thank you. This does conclude the Q&A portion of today's program. So I'd like to turn the call back over to the speakers for any closing or additional remarks.

Well, on behalf of Global Payments, thank you very much for joining us today, and I wish everyone a very happy Tuesday. Thanks for your interest in our company.

Thank you, ladies and gentlemen. This does conclude today's program, and we appreciate your participation. You may disconnect at any time.