Ladies and gentlemen, thank you for standing by, and Welcome to Global Payments' Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will open the lines for questions and answers. If you should require assistance during this call, please press star then 0. 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.
Good morning, and Welcome to Global Payments' Second Quarter 2020 conference call. 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 expected operating and financial results. These statements are subject to risks, uncertainties, and other factors, including the impact of COVID-19 and economic conditions on our future operations that could cause actual results to differ materially from our expectations.
Certain risk factors inherent in our business are set forth in filings with the SEC, including our most recent 10-K and subsequent filings. 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.
Some of the comments made refer to non-GAAP financial measures, such as adjusted net revenue, adjusted operating margin, and adjusted earnings per share, which we believe are more reflective of our ongoing performance. For a full reconciliation of these and other non-GAAP financial measures to the most comparable GAAP measures in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this morning and our trended financial highlights, both of which are available in the investor relations area of our website at www.globalpaymentsinc.com.
The press release and investor presentation on our collaboration with Amazon Web Services announced today are also available on our website. Joining me on the call are Jeff Sloan, CEO, Cameron Bready, President and COO, and Paul Todd, Senior Executive Vice President and CFO. Now, I'll turn the call over to Jeff.
Thanks, Winnie. We are pleased with the solid performance we delivered in the second quarter of 2020 despite the pandemic, driven by consistent execution and the outstanding dedication of our team members. We are grateful to all of our nearly 24,000 people worldwide for their exceptional service to our customers during this challenging time.
I think the best way to describe the second quarter is that it would have been difficult to imagine in early April that our businesses would perform as well as they did through June. As the markets we serve around the world have reopened, we are encouraged by the improving trends we have realized. Our customer base overall remains healthy. Our businesses generated sequential improvement in May over April and in June over May. Several of our businesses delivered absolute growth year-over-year in June, with a number achieving record new sales performance.
Our business is as strong today as it has ever been, and our mix enabled us to perform better than many of our peers as we had expected. We benefited by entering the crisis in extraordinary condition, and the timing and quantum of our actions taken early on enabled us to hold operating margins roughly flat to last year this quarter.
We also generated strong free cash flow in each month, including April, highlighting the durability and resiliency of our business model. We continue to make substantial progress on our technology-enabled, software-driven strategy this quarter, further validating our pure-play payments model and widening our competitive moat. We are delighted today to announce a new multi-year go-to-market collaboration with Amazon Web Services, or AWS, to provide an industry-leading cloud-based issuer processing platform for customers regardless of size, location, or processing preference.
With AWS as our preferred cloud provider for issuer services, we will deliver innovative payment solutions at scale globally in a secure cloud-based environment, enabling best-in-class experiences for our issuer clients and their cardholders. Together, we will leapfrog traditional analog means of distribution and redefine how issuer products and services are sold and consumed in the digital age.
Together, we are bringing technologies that generally have been available only to nimble startups to traditional institutions at scale, leveling the playing field for innovation with immense benefits to consumers globally. Our unparalleled legacy of reliability, performance, and experience, combined with AWS's cloud leadership, will future-proof our businesses to meet the increasing demands of a connected, frictionless digital world. Our transformative alliance will also substantially expand our pool of revenue opportunities. First, our collaboration broadens our geographic reach as AWS's worldwide footprint reaches nearly every corner of the globe.
No longer will we be limited to geographies where we have a TSYS physical data center location for issuer services. Delivering our capabilities via software-as-a-service, or SaaS, means that we can build, test, and scale in more markets more quickly than before. Second, we will meaningfully expand our prospective customer base to include financial institutions of all sizes, new market entrants, and retailers.
Historically, TSYS' issuer business was bifurcated into a large bank business in North America and Western Europe, primarily served through TS2, and an on-premise license business served through Prime everywhere else. Truth be told, our distribution resources were not proactively targeting small to mid-size banks in the U.S., new financial technology entrants, and embedded payment service providers. We have needed a fully end-to-end cloud-native solution set to be successful in many of those markets.
Now we have a unique opportunity with one of the largest technology companies to disrupt those markets on a differentiated basis. Beyond cloud availability zones that span the world, AWS has a global feet-on-the-street sales presence from Amsterdam to Zurich. AWS will work uniquely and closely with our sales team from lead generation and project scoping all the way through the commercialization and implementation of issuer solutions.
In sum, we believe that our target addressable market for issuer solutions will more than triple, providing ample additional opportunities to grow and build on our track record of capturing market share. Third, we will unbundle our services through the use of open APIs and deconstructive microservices, which will allow us to sell elements of our issuer SaaS solutions via a new business model on an à la carte basis.
In addition to dramatically expanding our target addressable market for institutions of all sizes, we will eliminate the need for time-consuming physical conversions and enable customers to quickly and efficiently implement the functionality and services they need and want while minimizing risk. Our collaboration will touch and support every element of the card lifecycle, from origination, provisioning, risk management, and servicing, to billing and ongoing delivery.
We will provide end-to-end digital solutions to delight our clients and their cardholders, delivering platforms that run entire issuing businesses at scale. Fourth, the new platform's cloud-based architecture allows us to capitalize on modern open banking initiatives, giving clients the ability to customize the services they need with greater speed to market and product flexibility. Resources can be scaled up and down in the cloud so customers can use just what they need.
This means making enhancements will be even more efficient and clients can get to market sooner. We can build, test, deploy, and scale specific capabilities quickly to continuously innovate and deliver tailored, frictionless, and fully digital experiences pretty much anywhere in the world. Cloud computing means near real-time redundancy with databases that are replicated across multiple availability zones without interruption.
Importantly, this infrastructure is software-driven, encrypted, and auditable. Institutions globally are not going to move backwards to legacy mainframe-based systems. The digitization of financial services will accelerate, catalyzed by the pandemic. Issuers will increasingly move toward newer cloud-native technologies over time that leverage the talent base prevalent in today's market, increasing resilience and compliance in light of the regulatory requirements in the marketplace now and in the future. For customers' cardholders, a cloud-based issuing environment will provide the user experience consumers now demand.
That means reliable, connected services across any channel available when, where, and how consumers choose. It means increased cardholder engagement, support for emerging payment options, and cloud-enabled resiliency to meet always-on expectations. Fifth and finally, we have a lengthy track record of forging industry-leading partnerships and cross-selling across all aspects of our business.
Together with Amazon, we will look to capitalize on opportunities for collaboration across all of our businesses that we expect to generate substantial revenue over time. We expect areas for exploration to include our unified commerce platform and transaction optimization across our merchant businesses, and digital consumer experiences with NetSpend. We also continue to make progress against our strategic objectives by agreeing in July to expand and extend our relationship with our partners at CaixaBank, one of the largest banks in Europe and Spain's leading financial group.
We have committed to meaningfully increase our ownership in our joint venture, Comercia Global Payments, from 51% to 80%. CaixaBank has also agreed to extend our partnership until at least 2040, 10 years beyond the existing maturity date. Our ability to invest further in our worldwide businesses during the pandemic highlights the underlying financial strength of our company and provides another proof point of the ongoing success of our differentiated strategies.
We are proud of the company that we keep, and we have no better partner than CaixaBank. We often say that our long-standing partners who see us operate day in and day out know us best. Their confidence in us further reinforces our competitive position as the partner of choice for the most sophisticated and complex financial institutions globally.
In addition to meaningfully advancing our strategies in the second quarter of 2020, we are also very pleased with the quality of our sales execution. We are excited to announce that we have signed a new multi-year issuer agreement with TD Bank in the U.S. and in Canada, one of TSYS' largest FI partners. TD is the sixth-largest bank in North America, serving over 26 million customers, and also ranks as one of the world's leading online financial services firms with more than 14 million active digital customers. This important renewal highlights the distinctive durability of our customer relationships globally and the trust that many of the largest institutions place in us.
We continue to see strong new sales trends in a number of our merchant businesses during the second quarter, despite the impact of the pandemic. We have seen record sales of our e-commerce and omni-channel solutions across our businesses globally as customers moved quickly to implement online ordering and virtual payment solutions in response to changing consumer preferences.
For example, in our Heartland business, new accounts for online payments increased 58% year-over-year in the second quarter with record sales performance for our e-commerce team in this channel. Heartland also delivered its best overall new sales month in the last two years in June. In our Global Payments Integrated business, new sales for the quarter were consistent with our original budget expectations despite COVID-19. New partner production is trending 30% above plan on a year-to-date basis, reflecting the strength of our differentiated capabilities in this channel. We also continue to see strong bookings performance in a number of our vertical market software businesses.
In the healthcare vertical market, for example, AdvancedMD's ability to deliver cloud-based technology solutions, including virtual telemedicine capabilities to physician practices throughout the United States, drove record bookings in the second quarter and record revenue for the month of June. We believe we've been able to capture further share as customers have increasingly looked towards safety in size and track record, and consumers continue to shift purchasing habits and prefer safer commerce.
As a reminder, our e-commerce and omni-channel businesses today already account for 20% of our total merchant revenue, consistent with the target we set in March 2018 for year-end 2020, so well ahead of schedule. Our issuer and business and consumer segments also have meaningful exposure to e-commerce trends, highlighting the diversity and breadth of our business mix post our TSYS partnership.
We have invested significantly in our unified commerce platform, which allows us to provide one payment solution worldwide through a single API, enabling higher acceptance rates and lower fees. We provide our leading omni-channel capabilities with the same ease of integration for our core SMB merchants, as well as for the most sophisticated MNC customers globally. We are unique in our ability to offer local sales and operation support physically in 38 countries and services cross-border into 60. That scale and reach, particularly in many of the harder-to-serve markets we operate in today, is a significant barrier to entry.
This quarter, we were pleased to have signed an e-commerce partnership with Louis Vuitton for acceptance services across 14 countries in Europe, where we deliver a uniform solution and seamless experience virtually. We also are pleased to have recently signed agreements with Dolce & Gabbana, Molton Brown, and PARK NOW.
Further, we went live with our Citi partnership in the second quarter. We are now pursuing customers jointly with Citi in the U.S. and the U.K., and will be adding Canada this quarter. It's worth providing some context around the size of our e-commerce-related businesses in our other segments. We estimate that roughly 40% of our issuer transactions and that nearly 30% of our NetSpend transactions come from card-not-present or e-com channels.
In combination with our acquiring businesses, we generate roughly a quarter of our total revenue from online efforts. We are also seeing increased demands for safe commerce solutions across our businesses. We believe Global Payments is the leading deployer of NFC technology worldwide, and we are rapidly enabling contactless acceptance for merchants as the pandemic alters consumer behavior.
Other solutions we have been implementing include social commerce, pay by link, mobile payments, tele solutions, virtual terminals, and digital wallets. For example, in the enterprise quick-service restaurant vertical market, our Xenial business launched its socially safe restaurant experience platform, which includes embedded features like guest lists and touchless payments. We are currently in discussions with several large QSR and fast casual chains about use cases for this technology.
Our gaming business launched two transformative solutions in the second quarter with its VIP Mobility and VIP Financial Center for touchless payments and no-contact funding at casinos. Our issuer business is also a leader in the evolution of contactless solutions, and we are excited to have recently partnered with Mastercard and digital wallet provider Extend to create new ways for cardholders to use virtual cards for everyday spend in a rapidly changing digital payments landscape globally.
While execution is always at a premium, that is especially true during a crisis. The TSYS merger significantly enhanced our business mix and scale and has been a source of strength. We continue to make great progress on integration this quarter, and we still anticipate delivering at least $125 million in annual run rate revenue synergies and at least $350 million in annual run rate expense synergies within three years of closing.
[And,] of course, we announced last quarter that we undertook actions to generate an additional $400 million in annualized cost savings in response to COVID-19, and those remain on track as well. During the second quarter, we successfully brought Vital POS to Canada, as we said we would. Early sales trends for Vital in the Heartland channel are encouraging.
The migration of partner banks from TSYS to the Heartland brand is underway. We are building a new sales force to specifically support these historically underserved bank relationships around the U.S., extending our expansive distribution capabilities. Further, our Global Payments Integrated sales teams have been consolidated and are now operating under unified best practices, processes, and measurement. The majority of our recent new partner wins combine our leading OpenEdge ecosystem and the TSYS Genius platform.
We are also in discussions with multiple Global Payments bank partners outside of the U.S. regarding TSYS' issuer processing solutions. We expect the AWS collaboration to catalyze those opportunities and to provide more worldwide. Additionally, we have current in-depth discussions with multiple customers across several geographies regarding our ability to marry issuer processing with our acquiring capabilities globally to optimize transaction flows.
On the expense side, we are tracking ahead of our merger plan targets this year and see additional opportunities coming from the pandemic. As just one example, we now plan to close additional operating facilities globally and rationalize remaining physical space requirements following the success of work-from-home arrangements for nearly 95% of our team members.
Before I turn the call over to Paul, I would like to comment on two strongly held values at our company, people who make a difference and diverse perspectives. I want to share what those mean to us. These principles mean that we will stand against racism, intolerance, and injustice in all their forms. We respect, honor, and celebrate the diversity of our team members and the differences among us. Standing together as one company, we will continue to work to drive positive change for the communities in which we live and work and stamp out injustice. We are grateful and fortunate to be in a position to contribute our talents to do just that. Paul?
Thanks, Jeff. I want to reiterate how pleased we are with the solid financial performance we achieved this quarter, which was enabled by strong execution and the best-in-class service our team members delivered for our customers in a challenging environment. For the second quarter, total company adjusted net revenue was $1.52 billion, reflecting growth of 71% over 2019. On a combined basis, our adjusted net revenue declined 14% from the prior year with an approximate one-point headwind from adverse foreign currency exchange rates.
We believe this top-line result highlights the diversity and resiliency of our business mix. While our revenue was not immune from the global pandemic, our adjusted operating margin substantially exceeded our expectation, declining a modest 40 basis points to 37% as a result of the swift and significant action we took to address the COVID-19 impact, our continued strong execution, and the realization of expense synergies related to the merger, which continued to track ahead of plan.
The net result was adjusted earnings per share of $1.31 for the quarter, a decline of 13%, which also includes more than a 1 point of impact from adverse foreign currency exchange rate movements. From top to bottom, this performance was better than anticipated at the time of our last quarter call, and we are encouraged by the recovery across our businesses.
Starting with Merchant Solutions, adjusted net revenue decreased 21% on a combined basis to $906 million for the second quarter, which includes a 50-basis-point headwind from currency. Adjusted operating margin declined 430 basis points to 41% as our cost actions partially insulated us from the full marginal impacts of the pandemic.
Despite the impact of COVID-19 on payment volumes more broadly, our technology-enabled portfolio remained a bright spot for the quarter. In particular, we saw strength in our e-commerce and omni-channel solutions globally, delivering growth of 16% during the quarter, excluding T&E, as we moved quickly to assist customers in the shift to online fulfillment. Our unique omni-channel value proposition, including UCP, continues to resonate with customers and drive new wins, and we believe we are well-positioned to gain share as growth in this channel accelerates due to the pandemic.
Further, Global Payments Integrated also proved relatively resilient, thanks to the unmatched breadth of its more than 4,000 ISV partnerships across over 70 vertical markets, many of which are consumer non-discretionary-oriented. The decline in adjusted net revenue for Global Payments Integrated was meaningfully better than the overall merchant business for the quarter. Importantly, this business has recently returned to growth.
As for our own software portfolio, booking trends remain favorable, with record achievements in several of our businesses during the period. Customer retention also remains strong, and our leading SaaS solutions continue to support the operations of a diverse set of customers and organizations across their respective vertical markets. Turning to our relationship-led businesses.
In addition to the strong e-commerce result in the Heartland channel that Jeff mentioned, the business delivered record new sales for its restaurant POS solution this quarter, and saw the number of new users of its online ordering platform triple sequentially. Additionally, Heartland's payroll sales also set an all-time record this quarter.
In Europe, we saw solid improvement as we moved through the quarter as our largest markets started to reopen. We are also benefiting from continued expansion of social commerce in the U.K., Spain, and Central Europe. Finally, in APAC, while there have been some fits and starts due to moving in and out of restrictions, overall volumes have also continued to improve with each month. Moving to Issuer Solutions.
We delivered $414 million in adjusted net revenue for the second quarter, representing a 4% decline on a constant currency basis from the prior year period, as bundled pricing and services volumes are helping to mitigate the impact of transaction-level declines. Normalizing for the effect of the single product turndown by one client in the second quarter last year and our commercial card portfolio, which is being impacted by limited travel spending, issuer revenue would've been roughly flat for the quarter and positive for the month of June. We also ended June at an all-time high number of traditional accounts on file.
Our issuer business has a strong track record of innovation to the benefit of our customers, and we are excited about the opportunity we have to bring our leading technologies, products, and services to new markets and new customers on a cloud SaaS basis in collaboration with AWS in the future.
Adjusted segment operating margin for issuer expanded a very strong 640 basis points to 42.8% as our efforts to drive efficiencies in this business more than offset pressure from lower transaction volumes. Finally, our business and consumer solutions segment delivered adjusted net revenue of $217 million, representing growth of 11% from the prior year, its highest quarterly revenue growth in nearly three years. NetSpend benefited from strong trends in gross dollar volume, which increased 19% for the quarter, driven in part by our support of the disbursement of over $1.4 billion in stimulus funds under the CARES Act.
NetSpend is also facilitating the distribution of unemployment and other government support to both existing and new customers during this challenging time. Additionally, we continue to be pleased by the performance of our DDA products with account growth of over 30% from the prior year despite a difficult economic backdrop. Adjusted operating margin for this segment improved 770 basis points to 32.3%.
This marked our best quarter for both absolute adjusted operating income and adjusted operating margin in 10 years, highlighting the great progress we have made in this business during the last year. In addition to the solid financial outcome we produced across our businesses for the full quarter, it is notable that our performance improved in each month during the period.
We were also pleased with our adjusted free cash flow generation of $382 million for the quarter, consistent with the first quarter, and we exited Q2 with approximately $640 million in available cash in excess of our operating needs. We reinvested approximately $104 million of CapEx back into the business during the quarter, also consistent with our first quarter levels, and in line with our revised guidance for capital spending to be in the $400 million-$500 million range for the year.
We continue to prioritize new product and technology investments to enhance our leading portfolio of pure play payment solutions and extend our competitive advantages. In early May, we successfully issued $1 billion in senior unsecured notes maturing in 2030 at an interest rate of 2.9%. The transaction was credit neutral with the full proceeds used to pay down our outstanding revolver and serves as an opportunistic refinancing of our $750 million of notes outstanding that are due in April 2021 at a rate of 3.8%.
As a result, our next significant maturity is not until 2023. We ended the quarter with a leverage position of roughly 2.5 x on a net debt basis or roughly 2.8 x on a gross basis. In sum, we could not be better positioned with our investment-grade balance sheet, strong cash flows, and solid liquidity, which provide us significant financial flexibility to continue to pursue strategic priorities opportunistically as markets stabilize. Our pipeline remains strong, and we are actively assessing opportunities for us to enhance our scale and capabilities across our payments, technology, and software businesses.
To that end, our financial strength enabled our agreement with CaixaBank to increase our ownership in our joint venture to 80% and extend our partnership through 2040. As we look ahead, while we are not providing guidance at this time, given trends remain dynamic and difficult to predict, I think it's worth providing some additional color on how our businesses are performing currently.
Starting with our merchant businesses, our performance continues to track very similarly to what you're seeing coming out of the networks in terms of credit trends. In addition to the accelerating demand for our differentiated omni-channel solutions, we are now seeing domestic volume growth return to several of our international markets. In issuing, we have a similar dynamic as our volumes are in line with the networks. In fact, excluding our commercial card portfolio, this business has returned to growth.
Finally, business and consumer solutions is currently performing well, and we are encouraged by the continuing growth in active accounts. As I described on our last call in May, several of our businesses are relatively more resilient in this environment, and our results prove that to be the case. Indeed, our diverse business mix and outstanding execution have allowed us to outperform many of our peers. We are grateful for our market leadership and global scale in payments, which drove these results and positions us to be the beneficiary of the proliferation of technology and software in our industry well into the future. With that, I'll turn the call back over to Jeff.
Thanks, Paul. The results of the second quarter highlight the wisdom of our pure-play payment strategy and the strength of our business model at scale. Today's announcement of our new collaboration with AWS and the expansion and extension of our joint venture with CaixaBank further deepen our competitive moat for years to come. We are operating as well as we could possibly be in the current environment. When this crisis ends, as all crises inevitably do, we will emerge stronger than ever with sustained share gains. We look forward to delivering the future of payments. Winnie?
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 will now go to questions.
At this time, if you'd like to ask a question, please press star one on your telephone keypad. Our first question will come from the line of John Davis with Raymond James.
Hey, good morning, guys. First thing I wanted to touch on was the improvement in July. Maybe just help frame the magnitude in which businesses you've seen the greatest improvement. Then second, AWS, and if you expect the partnership to accelerate product introduction, and if it includes more focus on debit, considering it expands market to include smaller banks. Thanks, guys.
John, this is Paul. I'll take the first question and maybe the second one Jeff and Cameron may want to comment on. So far in July, we saw very similar trends to what we saw in June from a business line standpoint. If we look at the Merchant Segment, our integrated was kind of the highlight there as far as returning to growth.
If we move to kind of Issuing, we talked about in June, if you kind of took out the comparison year-over-year from commercial card, we actually had essentially growth in June, and we're expecting that same thing to play through in July. We're also in Business and Consumer, the same kind of trend from kind of a positive picture in Business and Consumer.
The trends that essentially happened in June, which were an improvement from May, are playing their way through July, and we're expecting some of that to continue throughout the quarter. Obviously, the recovery will impact that. Cameron, I don't know if you have anything else to add on the merchant side.
Yeah, John, the only thing I would add is our trends continue to look very much similar to what you're seeing in the networks, particularly as it relates to their credit trends. July showed an improvement over June. That pace of improvement has slowed, but again, you're seeing that coming out of the networks as well, as essentially everything is really open at this point.
I would say one encouraging highlight from July, certainly from my standpoint, is even though you saw a few outbreaks and a little bit of retrenchment in some markets and some new restrictions being put back in place, I think trends continued to be stable throughout the month, and obviously even slightly improving over what we saw in June as well. I think that's encouraging as markets continue to open.
These are very U.S.-centric, I would say. If you look at the rest of the world, Europe continues to reopen, and we're seeing the benefits of that as we work through July. Asia is a little bit of a story of mixed signals coming out of different markets as some markets remain closed or maybe are reclosing while others are starting to reopen. The overall trend, I'd say, in Asia remains fairly positive as it relates to volume recoveries as well. I think we're encouraged by what we've seen. Obviously, there remains a fair amount of uncertainty for the balance of the year, but the trends continue to be reasonably encouraging and very much in line with what you're seeing coming out of the networks as well.
[Hey John, it's Jeff.] I'll touch on your second point around AWS. First, as it relates to distribution, you asked about smaller banks. As we said in the prepared marks, really the unique collaboration between us and AWS is designed to encompass every type of prospective customer. That's true not just by geography, as I mentioned, but also true by size of institution.
As I mentioned in what I said up front, historically, that was not the focus of TSYS' issuer business in the United States. Now jointly with AWS, it will be. One of the slides we put together talks about today the end-to-end customer life cycle and how we span the entirety of that. That starts with lead generation all the way through sales qualification, sales engineering, all the way through to billing. We'll be doing that jointly with AWS.
I would say there's really no type of institution, new entrant, neobank, small bank that we're not going to approach from a distribution point of view, and that is very different, given where TSYS was historically. As it relates to debit, which you also asked about, this also spans every type of product that we have, that we're capable of having, both today and in the future. Debit would also be an area that we're focused on coming out of it. We do have a significant debit business at TSYS, primarily outside of the U.S. As part of the transformation, we'll be bringing that business inside of the U.S. There's really no element of our ecosystem and issuer that's not transformed by this collaboration with AWS.
All right. Thanks, guys.
Thanks, John.
Your next question comes from the line of Ashwin Shirvaikar with Citi.
Thanks. Good morning. Hi, Jeff. Hi, Cameron, Paul. Good to hear from you. Congratulations on this performance in a tough environment. I think my first question is a planning question. It's sort of going back to your comment on the up and down recovery in volumes. How are you balancing that with when do you pull back on those in-year cost controls that you announced right away, and as well as your decisions as they relate to any longer-term investment? Can you talk a little bit about the balance of when some of those costs come back and so on?
Yeah, Ashwin, it's Jeff. I'll start. Well, I would say, in answer to your question, we reaffirmed today really all of our expense targets, including the COVID-19 specific cost control. As Paul mentioned in his prepared remarks, there's a fair amount of uncertainty for the remainder of the year, given the pandemic and the macroeconomic outlook globally. I think until we get some more certainty about where the world is heading, the duration of the pandemic, and the depth of it's very hard for us to do other than what we did this morning, which is reaffirm where we're headed. We do have the capability and the flexibility to pivot very quickly if that's something that we want to do.
Given our statement this morning, we're really not at a place to do that today. Rather, I think the prudent thing to do is to continue to operate, realizing it's going to be an up and down, as you say, kind of environment with gains one week and the like that may or may not persist. For the time being, I think we're in a really good place. Obviously, that's something as we do with our business is we reassess continually.
Ashwin Shirvaikar, it's Cameron Bready. The only thing I would add on the product side, since you raised that, is we continue to invest in products throughout the pandemic, and I think obviously working very hard to make sure the business is well-positioned for the recovery and what the world looks like post-recovery. As we announced in the call, we rolled out Vital to Canada this quarter. We launched the Heartland Retail solution this quarter as well. We are launching an omni-channel version of Vital that integrates our online ordering capabilities into the legacy Vital platform. That'll be rolled out in Q3. We've made obviously significant enhancements in our UCP platform.
That is the foundation for some of the success we highlighted on the call today as well, and we continue to invest in our social commerce solutions, particularly in Europe, as we've seen significant uptake in those in Spain and the U.K. in particular. From a product standpoint, I think we've really used this opportunity during the pandemic to double down on our product initiatives and really make great strides in continuing to differentiate ourselves from a product and solution capability in the market.
Got it. One of the key investor questions to come from the last month and a half, two months, has been small business health as well as the impact on that from this call it reopening versus stimulus and what's the relative impact of it. Can you talk a little bit about that in the context of your portfolio? How much does the next stage of getting stimulus passed matter?
Ashwin Shirvaikar, it's Jeff, and I'll have Cameron Bready jump in, too. The first thing I'd say, and we said this in our prepared remarks, is that our performance, given our mix in all of our businesses, but especially given our mix, was better than what you saw from the networks last week, hands down.
I mean, that's just a fact. I would say that indicates that there's been no differential SMB underperformance, just given the mix of businesses we have relative to the payment networks. We thought that was going to be the case. It's nice to see it confirmed with our actual performance through the period. As we said at the beginning of our commentary, our businesses really remained, and our customers really remained very healthy. Cameron Bready, you want to dive a little bit more into some of the details?
Sure, I'd be happy to. To Jeff's point, Ashwin, I think the overall health of the customer base that we have today is really quite good, notwithstanding the environment that we operate in today. From a performance standpoint, the merchant business performed pretty consistently with what you saw of the network, putting aside the overall company performance, as Jeff highlighted, which was clearly better as a revenue and net income and EPS matter.
I think as we look at the portfolio today, because we are SMB-focused, that has not disproportionately impacted us on the negative sense relative to what you're seeing coming out of the networks. Frankly, we were also very successful in supporting our customers throughout this difficult period with various concessions that we made, offerings of new product for free for a period of time.
We facilitated the distribution of nearly half a billion dollars of PPP loans to customers through our lending partner, to over 5,000 of our small to medium-sized business customers. I think we feel good about the efforts we've made to support them through what's been a difficult time, as well as their viability for the future as the recovery continues to take shape here in the U.S. in particular.
As for further stimulus, Ashwin Shirvaikar, to get to your question, who knows what ultimately will happen from a governmental point of view here in the U.S. I would just point out that a lot of our businesses were overseas. Not everybody, not every market had PPP or anything like it. There's plenty of examples. I think Cameron, Paul alludes to this in our commentary where we're net growing year-over-year in markets that didn't have anything like PPP or consumer disbursement.
While 70% of our business, of course, is right here in the U.S., in the merchant side, a healthy 30% of it, or $1.5 billion, does not. In that commentary, really nobody else has something exactly comparable to the PPP. Time will tell, and relief has taken various forms. In those markets, as we said, in domestic Spain and continental Europe, we've returned to net growth year-over-year without those kinds of things.
Got it. Thank you.
Thanks, Ashwin.
Your next question comes from the line of Tien-Tsin Huang with JP Morgan.
Hey, thanks so much. I know a lot of hard work goes into these results, so well done. I wanted to ask on the AWS side, just the question of, is this offensive or a defensive move from Global Payments? Is this more about winning new modern card issuing contracts or about migrating existing? Maybe if you could share the cost to stand up the technology. I'm just guessing here, are you going to run an instance of TS2 inside AWS in parallel with your existing solution for some time? Just trying to better understand it, if you don't mind. Thanks.
Yeah, Tien-Tsin, it's Jeff. I'll start. Paul's going to provide some of the financial commentary. Listen, I think it's offensive. I think at the end of the day, the way we look at the world is this is based on overwhelming feedback from our partners and customers today in financial services about what they would like to see from us over the next number of years.
We're listening to what our customers want us to do. We're looking at where the state of technology needs to be a number of years down the road. It is going to take us a few years to put this technology into effect, but it's not going to be a big bang. There will be gradual improvement throughout. We'll have the ability to release various API and microservices modules over the next period of time.
We view this based on customer feedback we've gotten and our view as to where the world is going as the right next step. In all fairness, TSYS was doing this for quite some time prior to the merger with Global Payments in September of 2019. This is another step along the journey that TSYS has been on for a considerable amount of time. That's kind of point 1 on technology side.
Point 2, I would not overlook the impact of the distribution side. As I said in our prepared remarks, today and historically, TSYS is very much confined to environments where TSYS can build a physical data center to host the information that needs to be hosted with card issuers, particularly for larger card issuers.
That's no longer going to be constrained in the context of AWS, given their physical but also, of course, their virtual size. The second thing is, historically, you'd really needed a cloud-native and an environment to pitch kind of neobanks. The neobanks and new entrants into the financial services space. This will get us there.
Third, as I mentioned before, from a collaboration point of view, it's really unique to AWS and to us, being we're supporting the entire life cycle of pitching and selling all the way through to billing. Dramatically expand the sales resources that we would always have at the fingertips of TSYS and Global Payments. From that point of view, I think pretty clearly offensive. Paul, do you want to comment anything on the financial?
Sure. Yeah, Tien-Tsin, on your question around the cost, no, this will be managed in our overall cost base of the Issuer Solution Segment. As Jeff mentioned, obviously, we've been doing some of this for several years now, we do not see an uptick in cost or really from a CapEx standpoint. This will be managed in our overall CapEx budget at the kind of normalized level. No tweak there on the cost side. In fact, over time, obviously, we'll get some efficiencies, you'll see us soften our physical footprint cost on data centers and some other things. It's blended into the cost base.
Got you. No, I'm glad to hear you're going all in on cloud. It's very important. Just quick follow-up, just on the relationship side. It sounds like good bookings, especially in restaurant. Just overall, given what you said about pipeline, your ability to deliver against it virtually, any issues there, or it sounds like it's going as planned, I know we're bumping up onto the holidays pretty soon. I was just curious if that's still an issue or not.
Hey, could you ask that question again, the second question? We kind of lost what you said.
Yeah, you were breaking up a little bit.
On the line.
Yeah, I'm sorry. I'll try to ask it a little clearer. Just the ability to implement new projects, especially on the merchant side, virtually. I know we're getting to the holidays and hopefully getting some sign-ups coming up here. Just curious if there's still any holdback there in your ability to deliver the work virtually.
Yeah. It's a really good question, Tien-Tsin. It's something that we've worked on very hard, as you can imagine, throughout the course of the pandemic, with the vast majority of our resources around the globe and our team members working from home or in a remote environment. I would say thus far, we're delighted with our ability to deliver new product, new capability, and execute in what has been a challenging environment. Obviously, people are used to working side by side with each other. The collaboration and effectiveness that comes from that, it's hard to replicate that in a remote environment. Our teams have performed admirably.
The thing that I'm struck by every time I get on a call with one of our product teams, with the business, is the level of collaboration and how quickly the TSYS and Global Payments teams have come together, and how effective we've been in introducing new product and new capability in a very short period of time.
As I said, we've met every milestone that we had, frankly, put in place prior to the pandemic around new product rollouts for 2020 and remain on track to hit our remaining milestones for the balance of the year. I feel good about how we're executing in this environment. It's not without a lot of effort, as you can imagine, and I appreciate you highlighting that. Thus far, I would say the teams have performed extraordinarily well, and we're very excited about the new product and innovation we've been able to bring to the market, and will continue to do through the balance of this year and heading into 2021 as well.
Great. Thanks so much for the time. Appreciate it.
Thanks, Tien-Tsin.
Your next question comes from the line of David Togut with Evercore ISI.
Thank you. Good morning, Jeff, Cameron, and Paul. Would be curious for your perspectives on the rollout of QR codes by a number of the pure-play online payment companies. How does this interact with GPN, where you have the relationship at the physical point of sale? Is there just a sharing of economics or is there an incremental sort of economic fee where a QR code is being used?
Yeah, David, it's Jeff. What I would say is we probably have as much experience as anybody at QR code acceptance. We enable more, as we said in our remarks, we enable more NFC acceptance and we enable in more markets than really anybody else. We have extensive partnerships with Alipay, WeChat Pay. Those have obviously moved outside Asia into North America and into Europe.
I would say relative to QR codes, we welcome more of those in more of our markets because of our record of doing that across Asia, North America, and Europe. The second thing I would say is if you go back to the issuer side of the equation with AWS, this is going to enable us, as it will many things, this will enable us to move even more quickly on new means of adoption for payments.
I think by making our entire environment, from a transformative point of view, cloud-native and cloud-enabled, that's only going to facilitate the faster rollout as you've seen with us already in terms of contactless, in terms of our expanded announcement this morning with Mastercard for virtual cards. That'll only make us, I think, more helpful in terms of rolling out products like QR more directly.
The last thing I'd say in response to your question on economics is, when you think about QR codes, there's a variety of ways to load those. Depending on who you're talking about, if it's PayPal, it's generally via card, although it's obviously also debit and ACH. Although card is the majority, I believe of how PayPal loads occur today. If you look in Asia, what you'd see is ACH via bank loads through Alipay.
At the end of the day, the merchant wants to accept whatever payment scheme the cardholder and the consumer is presenting. They're generally not to the exclusion, meaning when you have QR codes in place, it doesn't mean that the merchant, at the end of the day, is going to say, "Don't give me some other card," or "I care about how you loaded cards in the first place." From that point of view, our economic opportunity really doesn't differ among the different types. I would tell you, at the end of the day, really the only enemy here is cash.
The more cash and check that we get out of the point of sale, the more we move towards safer commerce, which includes QR codes, the better for Global Payments at the end of the day. Innovation, pace of change, multinationalization of payment types, this is nothing but good news for our business.
Thank you. Appreciate that, Jeff. Just a quick follow-up. Just the go-to-market approach in Europe, both with the issuer solution side and merchant, plus layering in AWS now, how do you size the market opportunity in Europe? Historically, the big banks have been more in-house across a range of merchant and issuer solutions. Do you see that opportunity opening up now from a new business standpoint?
Well, David, I'm glad you asked that, and of course, I'm delighted to have you on today with the announcement of expanding and extending our partnership with Caixa because I know that you're rightly focused on the opportunities in Europe. Listen, I'd say a few things in response to what you asked.
First, on the issuer side, we have fantastic opportunities globally, including in Europe, with TSYS on the issuer side and Global Payments on the merchant side. We've made tremendous headway there in the nine months since we announced the closing of our merger, and I'm as optimistic today as I ever have been on completing a number of issuer deals with TSYS with global relationships worldwide, but including in particular in light of your comment in Europe. That, of course, was before AWS.
The way we talk about TSYS and Global Payments is that on a combined basis, we have 1,300 FI customers around the world. I would tell you financial services is a very big piece of AWS's footprint today, and obviously, it's a very large business. We've certainly thought about our ability to bring AWS into the fold as it relates to our conversations with our current customers. I believe that they're doing the same with us on the issuer side. That's only going to expand that pool of opportunities from the 1,300 that we have today at Legacy Global Payments and TSYS.
On the merchant side, I think you should look at the Caixa announcement as a harbinger of other things that may come. We've seen this with Erste in continental Europe with us a number of years ago. We've obviously seen the Caixa in 2010, but the expansion today. I think the reasons that drive financial institutions today to do that relate to the ECB's point of view on what impact COVID-19 and the pandemic may have on the macroeconomic environment and the balancing health.
Capital ratios of those companies. David, it's never a bad time to do something with us, but I would say this reminds me a lot of what we saw in 2009, 2010, and 2011, which is we'll go through a macroeconomic dislocation, and that provides a fantastic opportunity for us to do more than we've been able to do. I think stay tuned and more to come, and I'm pretty optimistic about the health of our business in Europe.
Thanks, Jeff. Greatly appreciated.
Thanks, David.
Your next question comes from the line of Darrin Peller with Wolfe Research.
All right. Thanks, guys. You clearly outperformed us on the merchant side quite a bit. Just curious if you could sub-segment the pieces, whether it's e-com or integrated or other parts of your direct business, what was surprising to you the most in the quarter and how it held up in this environment? Maybe if you can talk about structural market share, where you're seeing yourselves really pull ahead of the pack because of your technology in this environment. I just have one quick follow-up. Thanks, guys.
Yeah. Hey, Darrin, it's Cameron. I'll start off and ask Jeff and Paul to jump in if they have any additional comments. Look, I would say across the board in merchant, we've been pretty pleased with how the business has performed throughout the pandemic. Obviously, we called this out specifically in the script, and Jeff commented on it earlier, our integrated business performed extraordinarily well, I would say, throughout the pandemic.
A lot of that is due to the strength of our partnerships in that channel, our focus on consumer non-discretionary channels by and large. The overall performance in that business clearly led the pack as it relates to overall merchant business in the second quarter. Obviously, that has continued in July, and we expect to see that continue through the balance of the year as well.
I think our vertical market business was obviously a, by and large, good story as well. Obviously, software-as-a-service subscription-based revenue streams withstood the pandemic very well. We saw great performance in a number of those channels. Obviously, a couple of those businesses were more negatively impacted with schools being closed for much of the second quarter, as well as our gaming business being exposed to closures of physical brick-and-mortar casinos. Obviously, those businesses were more negatively impacted, but on balance, I would say our vertical market business performed well as a result of the focus on more recurring revenue streams, subscription-based revenues in those channels.
I would say lastly, our relationship business here in the U.S. performed quite well also. Notwithstanding its more focus on consumer discretionary verticals, as well as being more SMB-focused across the different businesses, it withstood, I think, the pandemic very well. A lot of that was due to our ability to continue to sell effectively in this environment, to offer new product and capability to our customers.
I think that's really the point that I would highlight as it relates to the second part of your question. I think from a product and innovation standpoint, we're really at the intersection of what our customers were demanding, and obviously the impacts of the pandemic. Our ability to roll out online ordering capabilities, safe commerce capabilities.
Right
in our different vertical market businesses. Our ability to deliver those quickly, ubiquitously, with ease, and to be able to integrate them with existing card-present capabilities as I think we're uniquely positioned to be able to do. I think that allowed us to really win in this environment, continue to gain share, and positions us well, I think, for a very bright future as we really have the products, the solutions, and the capabilities, and we have the distribution modes to be able to deliver them very quickly to customers in a difficult environment. I think that's one of the hallmarks of the second quarter that I would highlight.
Yeah, I think, Darrin, it's Jeff. I would just say this is a continuation of the theme that we've had for years here, which is a further movement toward technology enablement and differentiated distribution of what we've been doing. If you look at, as Paul and Cameron said, the businesses that have performed best, our integrated business, our e-com and omni business, elements of our Heartland business that are specific to omni-channel delivery, our exposure to emerging markets. Those are the same themes that we've had for a really long period of time. The ability to get 95% of our workforce working from home in relatively short order.
Yeah.
Those speak to, I think, and then obviously the culmination of today's announcement of AWS, really on the issuing side across the full life cycle of what we're selling globally in the issuing business. We wouldn't be in the position we're in today if we hadn't started the journey many years ago toward technology enablement.
I think as difficult as an environment as it is on the macro because of the terrible effects of that pandemic, nonetheless, I think this is the culmination of years of investment in differentiated distribution and technologies, and I think you're seeing it all. At the same time, I would say normalized for the macro, this might be the best quarter we've ever produced in a macro-neutral environment. I think that's the culmination of many quarters of investment.
Okay. All right. That's really helpful, guys. It's good to have those offerings now, especially. Jeff, just real quick follow-up on the M&A. Are we still in such an environment that you'd want to hold off, or would you say you'd be more willing and active now, and what areas would it be now? Would it be still software-focused or a little bit more on the operating leverage and scale side on acquiring or others? Thanks, guys.
Darrin, we just announced the deal this morning. Obviously, Robin is pretty active and not kind of waiting. It just so happens it was a good longstanding partner of ours, but nonetheless, a deal this morning. I would say our pipeline is, I think Paul said in his remarks, our pipeline is very full. Our balance sheet is at 2.5x in terms of leverage.
I think we're ready now. Obviously, every day brings more information about what's going on in the marketplace. We're certainly open for business. We're certainly looking. Ultimately, it depends on the facts at the time. Certainly, sitting here today, we felt very good about where we were with our partners over at CaixaBank, and good enough to make a significant increased investment back into that business.
I would say we're open for business, and we continue to look. In terms of what we're looking at, it's really across the board. We're looking at software deals. We're looking at competitive takeout deals. We're looking at deals in new geography. I don't think there's really any limit on what we can do in terms of what we're looking at.
Great. All right. Nice job, guys. Thanks.
Thanks, Darrin.
Thanks, Darrin.
Our final question will come from the line of George Mihalos with Cowen.
Great. Thanks for squeezing me in, guys, and congrats on a very robust quarter. Paul, just a question on the issuer segment, maybe a two-part question there. One, the margins were up something like 600 basis points year-over-year. I'm curious if there's anything one time there, if it just has to do with discretionary cost cuts. Related to the outlook for issuer, I think you said it's sort of tracking network metrics where I think their process transactions are now low single digit positive. Is that the right way to be thinking about how the business is performing in July, or do we need to take that number and discount it for what you're seeing in the commercial card business?
Yeah, George. Two things there. One, on the margin side, yeah, you're right. We were very pleased with the 640 basis points. You saw in the first quarter, we were at 450 basis points. It is better. There's nothing one time there that we'd call out. We're going to be tracking really strong on the margin front given all of the cost things that we're doing on that business. Nothing kind of one time or anything unusual to call out there other than just the robust cost management that we put into that business.
On the volume side for issuer, from an authorization and transaction volume standpoint, look just like the Visa credit numbers that you see out there. Nothing differential I would point out. It's just you're seeing kind of from an overall standpoint, the fact that only a portion of our revenue mix is transaction volume related. We're kind of growing through that pull down. Those numbers that you're seeing out of the networks on the volume side, given our market share, look very similar to what we're seeing both from a June and a July standpoint.
Okay, that's great. Good to hear. Jeff, congrats on the AWS partnership. Maybe just two quick questions there. I guess firstly, some of your digital peers, the Stripes of the world and obviously Adyen and the like, they have issuing platforms going after sort of digital marketplaces and servicing them. Is that an area that maybe Global will now look at? As it relates to servicing FIs, my sense would be that you're not interested in coupling a core processing solution with what you're doing on the issuing side. Is that fair to assume?
Your first question, George, what I would say is new entrants, neobanks, retailers, the Ubers of the world, the answer is they're all in scope. I think what we've been able to do here in this collaboration with AWS is more than triple our target addressable market for opportunities. I really don't think that there's any area of the marketplace, either by segment or geographically, that is any longer out of scope with AWS. That's kind of your first point. That's done on a differentiated basis with us.
On your second point, no, I don't believe it changes our view on core processing. In fact, quite the opposite. I think our perspective historically is that we were probably undersized in terms of distribution assets and legacy pieces issuer going after the size of the landscape that we wanted to go after.
I think what we've been able to show is notwithstanding that post the merger, our announcement with Truist in May, our announcement of the TD renewal today, and to be honest, our announcement of the collaboration with AWS means that we're going to leapfrog what I would call analog distribution, which is what I believe core processing is, and go directly into technology-enabled distribution with probably one of the largest or the second largest technology partner in the world, namely AWS.
I think what we've been able to do here with AWS is circumvent the traditional method perhaps of referral into the issuing side by collaborating and leading with technology, which is the exact same strategy we've had for a number of years, of course, in our merchant business. Rather than reopening whether core processing is important to that sales cycle, which I think we've shown it's not post the merger, I think we're going essentially from directly to cellular without stopping at landline core processing.
Great. Congrats, guys. Really nice results.
Yeah. Thanks a lot, George. Well, on behalf of Global Payments, thank you for your interest in our company, and thank you for joining us this morning.