Global Payments Inc. (NYSE:GPN) Q2 2023 Earnings Call Transcript

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Obviously in a payment facilitation model, we’re not doing nearly as much work, so obviously we don’t have as much cost supporting that part of the business, and certainly in a direct integration model we’re doing a lot more work for the partner, and the economics need to reflect that so we can maintain, obviously, the margins in the business that we’re trying to achieve. As long as it’s structured the right way with the right partner, as I said before, we’re somewhat ambivalent. We want to make sure that the model itself is appropriate to accomplish the objectives for the ISV partner.

Tien-tsin Huang: Yes, I’m sure you’re thoughtful about it and you have all your bases covered, so. Thank you.

Cameron Bready: Thanks Tien-tsin.

Operator: Thank you. Our next question is coming from Will Nance with Goldman Sachs. Please proceed with your question.

Will Nance: Hey guys, appreciate you taking the question. I figure I’d pile on off the last question on the integrated business. I was wondering if you could maybe talk about the trends in the mix between the payfac versus the traditional integrated model that you talked about. I think one of the longer term concerns from investors is that the yield delta is large and the trend is towards payfacs, so can you maybe talk about how that has trended over the past couple of years and what the actual growth between those two channels has looked like? Then maybe when you think about the new product, where do you expect the pricing on the profac model to land relative to those two models?

Cameron Bready: Yes, it’s a good question. I would say in our portfolio, we’ve seen generally consistent growth across direct integrated and payfac over the last couple of years, say. I, for one, don’t necessarily subscribe to the theory that, long term, all ISVs are going to become payfacs. Quite frankly, we have a number of ISVs in our portfolio that went the payfac route, determined it’s incredibly difficult to build the infrastructure to support a payments business, and have now come back towards either our profac model or even in some cases back to a just direct integrated model, abandoning the payfac approach entirely. My view long term is we’ll have a relatively balanced portfolio across those three channels.

As I said in response to Tien-tsin’s question, there’s plenty of times when payment facilitation is the right model – I’m not trying to suggest it’s not a good model and not an appropriate solution for some ISVs, but it’s not the silver bullet that’s going to work for every ISV, so I expect to continue to see good growth across the three different operating models that we have within our integrated channel. I think the profac model, as I mentioned before, has a lot of merit and is resonating very nicely in the market, because as I said before, it delivers the best of both worlds, and I think the economics around that are going to be somewhat in between and also the costs that we have to support the model is somewhat in between what we have for a direct integrated partner and what we have for payfac partner.

From my vantage point, again I’m somewhat ambivalent across where the growth is coming from in those channels. I think we’ve been able to execute on payfac relationships at margins that are still attractive for our business, so I have no qualms in continuing to grow the payfac side of the business. But I think you’ll see good growth across profac and direct integration as well over a longer period of time.

Will Nance: Got it, that’s helpful. Then maybe another number that really stuck out to me was the 20% growth in POS this quarter. I think that’s another area that investors commonly cite as being very competitive and maybe being at risk from vertical-specific ISVs. Where is the growth coming from, what do you think is driving that 20%, and maybe how that trended over the past couple of years?

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