Ladies and gentlemen, thank you for standing by, and welcome to Global Payments First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will open the lines for questions and answers. And 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' 1st Quarter 2021 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 that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our Businesses are set forth in filings with the SEC, including our most recent 10 ks 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 Joining me on the call are Jeff Sloan, CEO, Cameron Brady, President and COO and Paul Todd, Senior Executive Vice President and CFO. Now, I'll turn the call over to Jeff.
Thanks, Winnie. We delivered our best performance since the end of 2019 Because of our focus on technology enablement, coupled with excellence and execution, our results demonstrated strong sequential momentum from the Q4 of 2020 and improved monthly throughout the Q1 of 2021. We are encouraged by the overall run rates We exited the Q1 in a better position than we entered. We are delighted to return to growth In the Q1 of 2021, we were able to deliver revenue, margin and earnings per share growth despite facing difficult year over year comparisons The pandemic did not begin to impact our business until mid March 2020. None of this would have been possible without the dedication of our exceptional team members And we thank them for their commitment to our customers, our communities and each other.
And we continue to expand our competitive mode. We are pleased today to announce 2 strategic acquisitions for approximately $1,000,000,000 in total that further our software driven, Technology enabled strategy and deepen our presence in the most attractive markets globally. We expect to continue to gain market share and extend our lead. In combination with the roughly $1,000,000,000 in share repurchases we've affected Since returning to our capital allocation strategy at the end of last year, we continue to balance appropriately reinvestment in the future growth of our business with efficient return of capital. First, with our agreement to acquire ZIGO, we enter one of the largest and most attractive vertical markets worldwide.
Real estate is the quintessence of the type of market that we see. Sizable, global in scope, fragmented and rank for further software, digital commerce and payments penetration. And COVID-nineteen has accelerated Zego is a leading software and payment technology company with significant scale delivering a comprehensive real estate technology platform to 7,300 customers, representing more than 11,000,000 residential units in the United States. Zeego's digital omnichannel solutions support property managers and residents Throughout the real estate lifecycle from leasing and onboarding to work orders, utility management, resident communications, renewals, off boarding And of course payments. Through its integrated payments offering, Xeo processes approximately $30,000,000,000 in payments annually In a market with a volume opportunity that exceeds $1,000,000,000,000 the company delivers its full value stack through a cloud native platform to enable seamless digital property management and best in class resident engagement and omni channel experiences.
It is a highly scalable and predictable flywheel with compelling recurring revenue, strong retention rates, booking trends and lifetime customer value returns with double digit organic revenue growth. Importantly, We have significant opportunities to accelerate Zego's growth. We intend to leverage Global Payments' scale and digital expertise To further payments penetration into Xego's base, generate incremental property and software partner referrals To our more than 3,500 sales and sales support professionals, expand its footprint outside the United States and generate meaningful cross selling opportunities into its vertical market, including innovative products we already deliver into our merchant business like payroll, data and analytics and reputation management. We could not be more excited about further capitalizing on the convergence of And we look forward to welcoming Xego team members to Global Payments. 2nd, we are excited to have reached an agreement to our Erste joint venture to purchase Worldline's Payone business in Austria, consisting of roughly 8,000 primarily SMB merchant customers In Ursa Bank's home market, we entered Austria through organic market expansion of our Continental European joint venture roughly 18 months ago.
This pending acquisition enables us to bring our distinctive distribution and market leading technology to at scale to yet another attractive market. In addition to these strategic accomplishments in early 2021, we also produced a solid first quarter results across our existing businesses. First, in our merchant segment, we delivered significant sequential improvement fueled by our technology enabled focus the conversion of last year's share and bookings gains into revenue. And we generated these results while absorbing ongoing lockdowns in Canada and renewed restrictions in selected markets in Europe and Asia Pacific. Some highlights in the Q1 of 2021 include Record new sales in our Global Payments integrated business in March and in our U.
S. Relationship led business for the quarter. Record revenue growth at GPI for the quarter well in excess of pre pandemic levels. Record bookings at Xenial for our cloud based restaurant POS software and solutions and continued sequential acceleration in our omni channel business. It is worth highlighting that volumes accelerated throughout the quarter, a trend that has continued into April.
Key customer wins include Subway, CKD Restaurants, A&W Foods and Bojangles. It's also notable that several of these businesses that were most impacted by COVID-nineteen saw substantial sequential growth in revenue and bookings in the first quarter as our home market entered recovery. For example, active and gaming achieved significant improvement As better macro trends, strong execution and solid bookings over the course of 2020 benefited performance in 2021. In fact, we have continued to see positive booking trends across our software portfolio as the ability to deliver a full value stack is increasingly becoming table stakes in the markets we serve. We also made considerable progress on the partnership with Google that we announced in February.
We expect to board Google as a merchant customer in select Asian markets in the Q3 with North America to follow shortly thereafter. We have initiated our co sell program and are beginning to see referrals from Google on a number of their enterprise cloud clients. We anticipate launching our 1 and Grow My Business product that integrates Google solutions with our innovative capabilities in our digital portal environment in the Q4 of this year. And we have launched our co innovation efforts to develop new commerce enablement tools for our merchant customers. 2nd, our issuer business continues to benefit from strong relationships with market leaders and we are excited to announce today that we have entered into a multi year renewal with Barclays Consumer Bank in the United States.
Barclays is one of our largest customers globally and we provide a range of processing and support technologies for both Barclays consumer and commercial credit card portfolios. We look forward to working with Barclays to enable a best in class customer experience With unparalleled levels of security and resiliency for its newest partner, the gap in its portfolio of accounts, yet another competitive takeaway. Partnering with issuers that are gaining share in the marketplace is a key element of our strategy. We were also pleased to have signed agreements with Mission Lane and UMB Financial, with the latter being a competitive takeaway in which with the prior processing relationship had spanned decades. In collaboration with AWS, UND will adopt our cloud based data and analytics platform, which we also successfully deployed during the quarter for a multi country customer in Latin America.
We continue to capitalize on the broad and deep pipeline We have the good fortune to have in our issuer business. Today, we have 12 letters of intent with financial institutions worldwide, 6 of which are competitive takeaways. Turning to AWS, we expect to go live with our 1st joint takeaway with a multinational financial institution in Asia by the end of the year. Our cloud prime instance is now up and running currently in that market in preparation for the launch. We have another dozen active customers in our pipeline AWS, up from 4 at the end of 2020.
3rd, our Business and Consumer segment delivered record revenue growth. I am very proud that NetSpend once again facilitated the rapid distribution of stimulus lines to customers most in need. Since late December 2020, we have processed more than 2,000,000 deposits accounting for over $3,500,000 in stimulus payments dispersed by the IRS to American consumers. And this was done days in advance of many of our traditional financial institution and financial technology peers. In combination with the 2020 stimulus payments, we have dispersed more than $5,000,000,000 in aid to customers through the Q1 of 2021.
The pandemic accelerated move toward cash flow solutions is also benefiting net spend. For example, We are seeing rapid adoption of our tips solution and we reached a new agreement with Flynn Restaurant Group for its Pizza Hut and Wendy's franchise locations, which will drive additional PayCard and potential tips opportunities across a combined footprint of more than 1,000 restaurants. We also launched our cashless stadium card linked to a digital wallet with the Phoenix Suns at the Phoenix Suns arena. These achievements serve as proof points of I could not be more pleased with all that we accomplished across our businesses this quarter. In March, we returned to year over year growth in each of our three segments And the underlying trajectories are tracking for our longer term goals just as we predicted they would despite the impact of ongoing restrictions and lockdowns in some of our markets outside the United States.
Paul?
Thanks, Jeff. We are pleased with our financial performance In the Q1 of 2021, which demonstrated meaningful sequential momentum and reflected our ongoing strong execution across the business. Specifically, we delivered adjusted net revenue of $1,810,000,000 representing 5% growth compared to the prior year And marking an 800 basis point improvement relative to the performance we reported in the Q4 of 2020. Adjusted operating margin for the Q1 was 40.6%, a 160 basis point improvement from the prior year that was achieved despite the return of certain costs we temporarily reduced at the onset of the pandemic. On a comparable basis, underlying margin trends would have improved approximately 300 basis points.
Adjusted earnings per share were 1 point due to COVID-nineteen. The pandemic did not begin to impact our business meaningfully until the second half of March of last year. And as a reminder, we delivered 18% adjusted earnings per share growth in the Q1 of 2020. Taking a closer look at our Performance by segment, merchant solutions achieved adjusted net revenue of $1,150,000,000 for the 1st quarter, A 4.4% improvement from the prior year, which marked a nearly 900 basis point improvement from the 4th quarter. We delivered an adjusted operating margin of 46.3 percent in this segment, an increase of 90 basis points from the same period in 2020 as we continue to benefit from our improving technology enabled business mix.
Global Payments Integrated produced a stellar quarter generating in excess of 20% adjusted net revenue improvement, which is ahead of the levels of growth this business was delivering pre pandemic. Additionally, our worldwide e commerce and omnichannel business Excluding T and E delivered roughly 20% growth as our value proposition that seamlessly spans both the physical and virtual worlds continues to resonate with customers. As for our own software portfolio, we are encouraged to see that several of our businesses most impacted by the pandemic And across our vertical markets portfolio, bookings continue to prove resilient in the Q1, providing us with a positive Tailwind for the balance of 2021. We are also pleased that our U. S.
Relationship led business generated high single digit adjusted net revenue growth for the Q1, which is consistent with our long term targeted growth rate for this channel Despite a difficult comparison to the Q1 of 2020 and notwithstanding a challenging environment in several of our international markets, Our portfolio of businesses across Europe and Asia improved significantly and delivered adjusted net revenue that was essentially flat with last year The quarter, importantly, because our international businesses are largely focused on domestic spending in the markets in which we operate, We are seeing improvement in these businesses well in advance of cross border commerce recovering. Moving to Issuer Solutions, we delivered $439,000,000 in adjusted net revenue for the Q1, which was roughly flat versus the prior year period and exceeded our Expectations given traditional 4th quarter to 1st quarter sequential trends. Excluding the commercial card business, Our Issuer segment grew in the low single digits for the quarter. And in the month of March, Issuer delivered growth in aggregate Despite continued commercial card headwinds, as we benefited from the ongoing recovery in transaction volumes across many of our markets. We also saw non volume based revenue increase mid single digits in the Q1.
Notably, our issuer business achieved record 1st quarter adjusted operating income and adjusted segment operating margin expanded 3 70 basis points from the prior year, also reaching a new Q1 record of 43.2 percent as we continue to benefit from our efforts to drive efficiencies in the business. Additionally, our issuer team signed 3 long term contract extensions and 3 new contracts since the start of the year and our strong bodes well for future performance, consistent with our long term expectations. Finally, Our Business and Consumer Solutions segment delivered record adjusted net revenue of $244,000,000 representing growth of nearly 20% Trends within our DDA products were also very strong helped by the stimulus and we realized an acceleration And active account growth of more than 45% compared to the prior year. Excluding the impact of stimulus payments and tax, we believe that this Business achieved underlying growth in the roughly mid single digit range in line with our long term targets. Adjusted operating margin for this segment improved an impressive 7 50 basis points to a record 33.2% as benefits of the stimulus and long term cost initiatives post merger took effect.
The solid performance we delivered across our We are also pleased that our integration continues to progress well and we remain on track to achieve our increased goals from the TSYS merger Of annual run rate expense synergies of at least $400,000,000 and annual run rate revenue synergies of at least $150,000,000 within 3 years.
From a cash flow standpoint,
we generated adjusted 1st quarter free cash flow of roughly 5 $86,000,000 in capital expenditures. We expect adjusted free cash flow of more than $2,000,000,000 and capital expenditures to be in the $500,000,000 to $600,000,000 range for the full year. In mid February, We issued $1,100,000,000 in senior unsecured notes maturing in 2026 at an attractive interest rate of 1.2%. The transaction was credit neutral with the proceeds used to redeem $750,000,000 of notes outstanding with a rate of 3.8 percent due in April 2021. The balance of the proceeds were used to reduce our outstanding revolver.
We have no significant maturities until 2023. Our strong cash generation and healthy balance sheet have enabled We are pleased to have repurchased roughly $4,000,000 of our shares for approximately 7 $83,000,000 during the Q1, which includes the execution of the 500,000,000 Accelerated share repurchase program we announced last quarter. We ended the quarter with roughly $3,000,000,000 of liquidity and a leverage position of roughly 2.6 times on a net debt basis. And we are excited to announce that we have reached agreements to make additional investments in our technology enabled strategy and market expansion. As Jeff highlighted, we executed a definitive agreement to acquire quarter and the Worldline acquisition in the second half of 2021, both subject to regulatory approvals.
Upon completion of both transactions, Given our current cash balance and strong cash generation, we expect our leverage position will be relatively consistent with current levels leaving us with ample continuing firepower. Based on our current expectations For continued recovery from the COVID-nineteen pandemic worldwide, we have increased our guidance for adjusted net revenue to now be in a range of $7,550,000,000 to $7,625,000,000 reflecting growth of 12% to 13% over 20 We expect adjusted operating margin expansion of up to 2 50 basis points compared to 2020 levels. This outlook is consistent with an adjusted operating margin expansion of up to 4 50 basis points on a normalized basis, given the operating leverage in our business and expense synergy actions related to the TSYS merger. However, this is being partially offset Solutions segment to be in the high teens, which assumes the current pace of recovery continues worldwide. We expect underlying trends in our issuing business to be in the mid to high single digit range and above our mid single digit growth target.
It is worth noting that our issuer business generated high single digit growth on a normalized basis for the month of March as we began to lap the pandemic impact. As we discussed last quarter, issuer is being impacted by 2 relatively equal sized headwinds. First, we are not anticipating a recovery in our commercial card business as we 2nd, we are absorbing a portfolio sale by 1 of our customers, which will impact us for the remainder of the year. Taking these two items into account, we forecast our issuer business to deliver adjusted net revenue Last year, last year, the incremental March stimulus, We are now forecasting adjusted net revenue growth for our business and consumer segment to be in the mid to high single digits for the full year, consistent with our long term expectations for this business. This guidance takes into account lapping the benefits of the 2020 CARES Act, which will Regarding segment margins, we expect the up to 250 basis points of adjusted operating margin improvement for the total company to be driven largely by merchant solutions, while we expect Issuer and Business and Consumer To deliver normalized margin expansion consistent with the underlying profiles of these businesses, This follows the 500,000,000,000 respectively in 2020.
From a quarterly phasing perspective, having now lapped muted growth characteristics in the Q1 given the start of the pandemic in mid March 2020. We have a positive effect in the second quarter Before returning to more normalized rates of growth in the back half of While we expect to achieve our
share
The impact of the CARES Act stimulus last year. While we anticipate net spend to deliver modest Adjusted net revenue growth for the 2nd quarter, we expect adjusted operating margins to decline for that segment Year on year, as a result, on an absolute basis, we would expect business and consumer adjusted operating margins for the 2nd quarter to be consistent with the levels achieved in the Q4 of 2020, a period that also saw more limited benefits from Stimulus. Moving to non operating items. We continue to expect net interest expense to be slightly lower in 2021 Relative to 2020, while we anticipate our adjusted tax rate Putting it all together, we now have increased our expected adjusted earnings per share for the full year to a range of $7.87 to $8.07 reflecting growth of 23% to 26% over 2020. Our raised outlook presumes we remain on a path toward recovery worldwide over the balance of the year and it does not include any It is worth noting now that we need to have a discernible impact on And with that, I'll turn the call back over to Jeff.
Thanks, Paul.
Our business is run rating at accelerated levels. The trends of digitization, commerce enablement, software differentiation and omni channel prevalence Driving our performance will serve to catalyze future growth. We said over the course of the last year that we would not stand still or wait for a better day Despite one of the most challenging periods any of us had seen, with terrific efforts, 2020 bookings The announcements today We'll provide further avenues for future growth. And all that is playing out against the backdrop of recovery, Further differentiation from technology and market conditions in the market, sustained share gains and returns of capital. We now look forward to continuing progress for
the remainder of 2021, 2022 and beyond. Winnie? Before we begin our question and answer session, I'd like to ask everyone to limit their questions to 1 with one Thank you. Operator, we will now go to questions.
Thank you. Trujeffrey of Truist Securities. Your line is open.
Good morning. Appreciate all the detail, Especially regarding the outlook. I wonder, Jeff, if you could talk a little bit about where you're seeing Particular strength in integrated and omni, both geo and vertical markets. It seems like that's that really more than offsetting some of the challenges you're seeing in Europe and APAC. Yes.
Thanks, Andrew. It's Jeff. And I'll start and maybe Ameren Paul will join me thereafter. It's hard to say with any certainty because we've had the integrated business now at Legacy Global Payments for probably 8.5 years, but I would say that our Global Payments integrated business just delivered its best quarter ever From a revenue point of view and that's especially noteworthy when we haven't lapped the majority in the Q1 of 2021, the majority of the grow over from the Q1 of 2020. So I think what you're really seeing in the integrated business It is the solid bookings growth, the new partner additions that we saw last year really flowing into revenue.
And I think we have the flywheel in that business Really just right. So we couldn't be more pleased with our team on integrated. I'd say on the omnichannel business, really pretty much the same thing. Our business accelerated sequentially in the Q1 of 2021 Relative to the Q4 of 2020 and grew absolutely at the rate of the pull, it grew up 20% from the pandemic pretty much from the first So, we feel really good about that performance as well. So, we couldn't Listen, our home market is the United States.
It's 70% to 75% Of the company, you really have to go on your point about the rest of geographies and the rest of the markets, you really have to go kind of country by Country to see what's happening. I would of course India and Philippines are more difficult as I'm sure everyone has been reading about the difficult, the terrible situation In India, Canada really at the end of the quarter and really post the quarter has enacted pretty strict lockdowns, That's probably about 3% or 4% of the company. Andrew, just to kind of quantify what the size of that market is. And in Europe, it's really a mixed bag. I would say our business This sustained domestically is growing at very high rates, notwithstanding the macro issues across The European Union, the UK has really started to recover, but there are other markets like in Continental Europe and our Czech Republic business, of course, being asked to deal with their day with Erste Bank, but That market also remains under substantial lockdown.
So listen, I think the good news for us is We're growing right through it. We did mention today that active and gaming in some of our markets here in the United States have recovered pretty They still present some headwinds relative to the rate of growth that we just announced today. But to be able to show 900 basis points of sequential Expansion from the 4th to the Q1 of 'twenty one in our merchant business, I think is one of the most of that.
I think that actually covers it pretty well. The only other point I would make just to top that off, Andrew, is that you highlighted in particular integrated and omni continue to be very, very strong. In our ecom business here in the U. S. Market, our ecom business year over year.
So clearly, demonstrating that the trends we've seen around consumer buying patterns as well as merchant adoption Continues to be quite strong even a year after obviously the onset of the pandemic. So we think that's a very positive sign as it relates like 120 percent kind of year over year. So again, we're seeing great momentum in the business continuing as We enter the Q2 as well. So as Jeff highlighted, I think the strong new bookings and new sales performance we saw last year clearly contributed to the Performance in Q1 and we it's nice to see that that strain that same execution has continued into 2021 as well.
Thanks. I appreciate that. Just as a follow-up on Zego, can you offer a little insight as to revenue mix there? How much of that is
Hi, Andrew, it's Cameron again. So the business is a mix of software and payments today. It really started as a payments business, but has The business are growing more rapidly and I would expect over time that they will flip and become the majority of the business long term. So It's about $30,000,000,000 of payment volume today. It's a very healthy portfolio from a payment standpoint.
The nice thing about the business is it's not that penetrated within its Our next question comes from the line of Chris. Your line is open. Hi, good morning, everyone. I'm going to take
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we're seeing that Thank you. Thanks, Andrew.
Your next question comes from David Togut of Evercore ISI. Your line is open. David, your line is open. You may be on mute.
Thank you. You've underscored very strong trends atecom, And I'm curious as the year evolves,
how would you expect
consumer behavior to change? Do you
think we will see continued Or do you think the consumer will return more to the physical point of sale and start to use credit cards more? And related to that, how would you see that Flowing through your tech enabled solutions businesses and some of the key verticals that make those up. Yes, Dave. It's Jeff. I'll start and I'll ask Cameron to join in.
So let me just start by saying by kind of not answering the question, but I do want to call out our relationship led So they also had a very good quarter. So we produced high single digit growth in our relationship led businesses compared to the Q1 20 for which 85 percent of the Q1 of 2020 had no pandemic. So I want to call that out. As we also said in our prepared remarks, we had record new sales In our relationship led businesses in the Q1 of 2021, again coming out of pandemics, I don't want to lose sight of that before we address your question more 2nd, as it relates to your question, look, I don't think consumers are going to go backward. I don't think people are going to say, I want to spend more time in We're identifying the ATM to get more cash.
There is no bull market for cash. I think what we've seen the pandemic do is accelerate 3 to 5 years of behavioral change on the consumer side. Cameron just went through a minute ago in response to Andrew's question, the bookings growth in our e comm omni businesses, which is really just Extraordinary, again not lapping the pandemic for the Q1 of 2020. So listen, I think at the end of the day, my opinion, the answer to Your question is, I just don't see the trends of safer commerce, consequence commerce, omnichannel acceptance can accelerate the underlying trends That you've seen over time. I'd also say relative to kind of credit, debit mix, I don't see that changing either.
The only time that we've really seen a debit cannibalize So all that is left out is debit. We really haven't seen that here. I do think you'll see alternative means of payment, of course, in Europe, where I know you're focused in particularly, we've got Asset account to account transactions, we've got real time payments, that kind of thing. Of course, we've got afterpay and those types of Installment payment plans, which I think we're a market leader in, both in our issuing business and our acquiring really throughout the pandemic. And I don't see people kind of going backwards on convenience of use.
Thanks for that. Just as a quick follow-up, You've had a lot of success in Europe with bank JVs like HSBC, La Caixa or Worldline Payone in Austria sync up with your Erste JV. Is that Are those 2 operating independently entirely? Or do you see some synergy?
No, David, it's Cameron. I'll jump in on that.
So this is actually a great opportunity to extend our joint venture with Erste. We're actually purchasing that business Through the joint venture with our partners at Ersha and Caixa excuse me, Caixa as well. So this is an extension of our existing partnership with First, they were very excited about the opportunity to grow and expand our business in their home. And I think we mentioned in our prepared
remarks, We initiated a business in the
quarter with significant success building essentially a greenfield acquiring business With our partners and this adds significant scale and obviously an opportunity to grow and expand that business more rapidly going So this is very much a part of the joint venture that we have with Erste in Central Europe today.
Understood. Thank you very much. Thanks, David. Thanks, David.
Your next question comes from Tien tsin Huang of JPMorgan. Your line is open.
Thank you. Good morning. Really like the property management acquisition. I'm curious if it's if we were to compare it to the EHR space, Easier, harder to monetize than that? Just trying to get a sense of how the timeline of potential payment penetration and did you give the revenue run rate And growth before synergies?
Thanks.
So Tien Tsin, it's Cameron. Good morning. So I would say on balance, I would think it's Probably easier to monetize the payment opportunity in the real estate space. There's obviously secular trends there that we think are very around the digitization of the payment stream within real estate, whether it's recurring monthly rental payments, HOA fees or other one off fees that The opportunity to drive better penetration from a payment standpoint in that market is going to be easier than some of the other vertical vertical market where you have the intersection of software and drain payments where that nexus is very strong and obviously creates a significant opportunity for us to drive meaningful growth and Growth and share gains and obviously margin expansion over a period of time. We expect the business to your second question to generate roughly $100,000,000 of revenue in 2021.
It's growing double digits nicely. It sort of fits the rule of 40 for a software business very nicely today. And obviously, we think we can do a variety of things to accelerate that rate of revenue growth over time and scale the business more By leveraging the broader Global Payments ecosystem.
Wonderful. No, I like it. I think it's great. If you don't mind, maybe a quick one just on the merchant revenue growth. Building on Dave's clue, just from a benchmarking standpoint, It sounds like SMB's band is coming back, relationships doing great.
Anything to add?
Yes. So Tien Tsin, this is Paul. And Cameron, we certainly are on the positive side And so, yes, we continue to kind of see that Positive decoupling continue and we would expect that to continue for the same reasons we had outlined before when we said that Once things got to a much more kind of normalized basis, the only other thing I would highlight is as you look at that overall revenue growth number, you recall We have probably 300 basis points of headwind related to those 3 vertical market businesses that are still, while They've improved from the depth of the pandemic and we highlighted gaming as being now an absolute grower. We're still seeing some meaningful headwind related to the Active the school business and the gaming business that if you kind of looked at it ex those, you kind of add 300 basis points to the overall Growth rate and then if you do that, you can see really some on a volume to volume basis, some very positive decoupling. Cameron, I don't know if you have anything to add to that.
No, The only other thing I would say just on top of that is the international markets continue to be a bit of a drag as well. So if you really look at U. S. Payments and our growth in US payments, it was probably high single digits, maybe almost 10%, pure payments in the US market in the Q1. So even more And I think that's what highlights represent.
And the other thing I would say is over time, I expect that decoupling continue Partially because our international businesses are more exposed to domestic trends in those markets. So as those markets reopen, we're not as reliant upon the cross border volume to drive revenue growth in those businesses. As domestic markets reopen internationally, we'll obviously see a nice tailwind as a result of that.
Great. That makes the answers. Great content.
Thanks, A. J.
Your next question comes from Buffet.
Hi, thanks for taking my question this morning. I wanted to ask about kind of a higher level question about Whether the pandemic will have any lasting effect on your sales process, particularly in merchant, given the increasing importance of e commerce and omni and digital, Have you had to change your kind of go to market or sales approach or do you contemplate having to do so? And then if you could also just comment on bookings trends more generally as we head into Q2? That'd be great.
Yes, sure. I'll start, it's Cameron, and then I'll ask Paul maybe to jump in with a little bit more color as well. So I would say, Maybe to start, even well before the pandemic, we've been equipping our sales professionals around the globe with the best technology, the best capabilities to be able to sell. And obviously, we think that paid meaningful dividends through the course of the pandemic and our ability to continue to sell at very strong levels, notwithstanding obviously the impact of the pandemic. And I think partly a credit to our sales teams in particular, they found new and innovative ways to continue to sell in a difficult environment.
In particular, our relationship led sales professionals here in the U. S. Market that really operate under a commission only model, they were very motivated, incentivized I'd like to find creative ways to be able to sell into the marketplace. So the use of technology and deploying more technology towards the sales process itself As well as the ingenuity, I would say, of our sales professionals, I don't expect that to change post pandemic. And I think a lot of the lessons we've learned through this process will allow us to continue to be And very productive from a new sales point of view as a go forward matter.
I'll call out a few particular highlights on the 1st quarter bookings performance and I'll ask Paul maybe to jump in. If I start with our U. S. Relationship led business, We had a record sales quarter as Jeff And Paul highlighted in the prepared remarks, it was about 5% higher than our old record and up about 20 7% year over year, which I think is a really important metric as well, given that again, 10 of the 12 weeks of the Q1 of 2020 We're really not impacted by the pandemic. So very strong performance from a new sales point, again, with pay, text by pay solutions within our relationship led We also had great new booking performance in our payroll business as well.
We had record sales in that business, up again 42% year over year. So very Strong performance in our U. S. Relationship led payments and payroll business in the Q1. Integrated, as I mentioned previously, they were above Plan and well above last year's new sales performance and bookings performance in the Q1 as well.
Within our vertical market business, we saw very strong, I I'd say booking trends across the business. TouchNet had record 1st quarter bookings performance, which I think is a very good sign as it relates to the university environment heading into the We actually started to see some thawing of new sales in our schools business, our lower school K-twelve. We had 3 upon kids getting back into K through 12 environment for that business to recover fully. But obviously, it was encouraging to see new sales begin to thaw in that business in the Q1 as well. And we also had record bookings in our Enterprise has QSR business in the Q1 as well.
So again, good trends across the board, I would say, in our vertical market business. If we look internationally, again, despite the mix of sort of aggregating a bunch of different markets there, it was above plan for the Q1, above last year. Risk candidates for example was up 40% year over year. So again, the trend in new booking performance being very strong continued well into the Q1 and thus far in the The only thing I would add, Ramsey, is that we've been talking about the sales Figures for the last two quarters, and I think you're seeing it in the performance today that, that sales production is producing An environment that's still not normalized and the same thing as Jeff just mentioned about our relationship led business to be growing in the high single digits, I think kind of speaks to the fact that The sales success we're having is leading to kind of additive performance in the environment that we're operating in.
That's terrific. Sounds like things are really trending in the right direction. So I appreciate your answers. I'll hop back in the queue. Thanks.
Thanks, Randy.
Your next question comes from George Mihalos of Cowen. Your line is open.
Great. Good morning, guys, and thank you for taking my questions. Wanted to start off on the issuer side of the business. Again, it sounds like you're seeing some real Momentum, if we look at it on sort of a normalized basis, up high single digits. So Paul, just wanted to ask, the 20% that is commercial, Was that down again sort of another 30% in the Q1?
And now how are you thinking about that as I understand It's not going to recover, but the comparison should start to ease sort of going forward.
Yes, that's right. So yes, we were down north of 30 The remaining three quarters, but just kind of headwind relative to our back to our kind of more normalized growth rate, that's still providing Roughly about half of that headwind that we called out in the prepared remarks.
Okay. That's helpful. And then specifically looking at the acceleration in merchant, which again seems to be really be sort of taking hold Across the board in the outlook for sort of the high teens rate of growth, again, should we be sort of thinking for modeling purposes that we're talking about a growth rate In the Q2 that's sort of in that 30% plus range for the merchant business?
Yes, George. I mean, yes, you're thinking about that right. That's exactly kind of the right range to be thinking about.
Your next question comes from Darrin Peller of Wolfe Research. Your line is open.
All right. Thanks, guys. When we look at the guidance and the increase, it's obviously nice to see beat the Q1 and then buybacks are also helping. Can you just touch on what's implied or what's embedded in the guide outlook in terms of macro assumptions from here on out? Just looks like the trends in the current trajectory should allow for potentially more upside than what you even raised so far.
So just really where are you keeping some elements of conservatism and the outlook versus including some
banks? Yes, Darren. So this is Paul, and I'll ask Cameron may want to add as well, particularly as it relates to merchant. But I think our outlook is consistent with, to some degree, what we outlined the last time, which is that the trajectory that We were on going into the year and the trajectory that we kind of continue on is, as we've kind of said before, kind of a slow grind higher. And we continue to while we're very optimistic about the future and very pleased with the results, We also want to kind of see how things play out, as it relates to particularly around the world where we have different Kind of dynamics playing around the different geographies.
But we've said before, and it's still true, the top end of the range is not perfection. It does not Any type of just kind of some massive kind of kickback to normal, but instead a grind back to normal with the 3rd Q4 kind of being a much more Normal kind of our more normal environment. I would say as it relates to just March, We were very pleased with the kind of overall growth rates that we saw in March and those were sequentially better on a monthly basis. And then obviously what we saw in February January and particularly some kind of more normalized kind of growth rate there. But That's the way I would frame it from an overall standpoint.
Cameron, do you have anything to add on that? I mean, I think that covers it well. I would just highlight to Paul's point earlier, I don't think we have to see perfection to get to the high end of that range. I guess the guidance doesn't assume that. We assume that The trends that we're seeing in the business continue to flow through the balance of the year.
We're encouraged by the performance in the Q1 and the underlying trends. Obviously, we remain very mindful of the fact that some markets around the globe are slower to recover or appear to be slower to recover From the pandemic than others and those are markets that we have reasonably sizable businesses in. But I think as we sit here today, the trends in the business are quite favorable and We're very optimistic about how we're positioned to perform through the balance of the year.
Yes, Darrin, Jeff, I would just say to follow-up on Paul and Cameron to really Paul's commentary. So In March, revenue for the business, which did not really lap at least for half the month of pandemic, aggregate revenue was up in the 20% plus range and earnings were up near 30 So, per share. So, just to give you a sense as to kind of what we saw in March, obviously, time will tell, but that's kind of the run rate.
All right. That's really helpful. Guys, a follow-up is on the tech enabled businesses. When you think about the mix now with XeGo and it's again great to see more software acquisitions. You combine that with what you have.
First of all, Jeff, I mean, where do you feel the company is positioned now in terms of its software presence versus your long term strategy? Do you need to do more? Do you want to do near term or long term? And then Cameron as well on the AWS or the Google relationships On the cloud, I mean, something we focused on, it sounds like you're winning good business there. If you could just give us a little more color on how that's been trending, just in the context of all the tech enabled opportunities?
Thanks again.
Yes, Darren, it's Jeff. I'll start. So you're stealing our thunder from the Investor Day that we're going to have in September. I would say that and we'll set out a new target for what percentage of the business is coming from tech enabled the next few years then. But I would just say generally, we crossed that Percent threshold last summer, 6 months earlier than we thought.
These deals lay out a point or 2 to that number. But obviously, we're targeting Well north of 70% to 85% of the company, you think about just directionally up from 60% last summer where we'd like to be longer term and that's Percentage of revenue, which means the vast majority of the growth by definition is coming from those areas. So we're really pleased. Our pipeline is full and that includes a whole array of things post Z Go, post Payone. Our pipeline remains full.
It includes more software assets in it. So time will tell if we get those over the finish line, but I think you're directionally right in where you're going. I'll start with AWS and then Ken can comment on Google. We couldn't be more pleased with our relationship with AWS. We're absolutely on track for all the things that we outlined last August when we announced the relationship In the first place, that stuff sells.
We talked today about UNB competitive takeaway, client somebody else for 3 decades. They're going to be our first instance in data and analytics in the cloud jointly with AWS, the Asian bank We've referred to now that testing environment wise will go live in a year and another competitive takeaway. And I think what we said in our prepared remarks is we've tripled The number of LOIs joining with Amazon, they're in mid to late stages today versus where we were at year end of 2020. So I think you're right to say that We're firing in all cylinders there. We really couldn't be more pleased with the transition made there to cloud native environments.
Kevin, you want to comment on Google?
Well, I think the comment for Google is very much the same as Jeff highlighted Fraser. Yes, we couldn't be more pleased and delighted with the partnership we have with Google and how they have performed Heretofore, recognizing we are obviously early in that relationship and really building momentum as we sit here today. So Everything that we outlined on our year end call back in February as it relates to the partnership is very much on As it relates to the go to market strategies, we're obviously in market with them already. We're already in the midst Having conversations with a variety of medium to enterprise size customers who are leveraging Google Cloud Services today and Very optimistic about the future of that technology enabled distribution strategy and how it will augment obviously our existing go to market strategies in the merchant space.
Okay.
That's really helpful. Thanks guys.
Thanks, Aaron.
Your next question comes from Jason Kupferberg with Bank of America. Your line is open.
Hey, great. Thanks, guys. So appreciate that disclosure on the month of March there, Jeff, with regard to revenue and EPS growth. Could we get those numbers for the month of April as well and any breakdown by segment that you would give us on revenue growth by segment, again for the month of April?
Yes, Jason, we wouldn't have that to give on a call like this right now. So I think Generically speaking, as a volume matter, we are seeing sequential improvement on the volume side In the month of April, and so obviously and that's kind of what we expected and the trends we saw in March. So we're very pleased from an overall volume perspective, But as it relates to the financial results for April, we wouldn't have that.
Okay. Just as a follow-up kind of a bigger picture question, wondering what you're seeing in terms of merchant demand around the world to accept crypto and the General thoughts on longer term implications of the growth in the crypto ecosystem for Global Payments and the merchant acquiring industry more generally?
Yes, it's Cameron. I'll jump in on that. So I would say, certainly it may be a commentary on the merchants that make up our business and the merchants We're targeting there's really zero demand amongst our merchant base to accept crypto. Obviously, over time things can evolve. If If you have more central banks developing their own cryptocurrencies that really just become a digital form of their domestic currencies, then obviously that environment can change today.
But I think As it relates to utilizing cryptocurrency for the sake of effectuating commerce amongst merchants in our businesses around the globe, there's really no demand Today, crypto is really not a currency for commerce, it's a security. And as a result of that, we're really not seeing a significant
Our final question comes from Dan Furlan of RBC. Your line is open.
Thanks guys and I appreciate you squeezing me in at the end here. The question I have is really around In the embedded in the guidance, can you just kind of help us parse out really what stimulus is actually driving in terms of the increase that you've seen? And I think I recall that you guys said you had contemplated the 1st round embedded in the Q1, but maybe hadn't been thinking about 2nd and most recent rounds. And so now that those are contemplated, I'm trying to understand how much you think that actually is influencing the increase And how many quarters do you think it takes to kind of play out? Visa seems to imply a couple of quarters of benefits.
So I would just love to get your thoughts there.
Yes. So maybe we'll kind of answer that in kind of two respects. 1, what does Stimulus have as it relates Our business in consumer business and then the second as it relates to stimulus across really all three of our segments. As it relates And as it relates to our overall revenue outlook for that segment of moving to that kind of from mid single digits kind of mid to mid to high. So that's kind of you Want to try to kind of quantify the impact of additional stimulus net of the effect that stimulus has on other products, On yield, the overall tax season picture, so that gives you kind of a quantification of kind of that difference between kind of mid single digit growth For that business in that kind of more mid to high kind of single digit growth, as it relates to just a revenue matter, and we've obviously kind of talked about the margin impact.
You saw what we had From a marginal impact in the Q1 and then obviously that will play through in the second quarter, the other direction as we grow over the stimulus In 2Q of last year of roughly kind of from a margin standpoint of kind of a similar size. I would say As it relates to stimulus across our overall business, I think time will tell. Clearly, you're getting some Acting volume, volume stimulus, you're just seeing it kind of across the board. I think it gets a little bit harder to kind of piece part that Into the overall volume picture and say, well, how much is stimulus, how much is unemployment benefit, what all that kind of looks like. And so when we're looking at the overall volume landscape, And obviously, we're taking some of that versus what we saw last year and the impact of stimulus and kind of embedding that into our overall picture.
But Side of our business and consumer segment, it's very hard to kind of get discrete around what kind of revenue impact that's discretely having. Cameron, I don't know if you have anything to add to that. No, I think if you look at the merchant business more broadly, it's not driven that much by stimulus. If you think about it and we've talked about Before, we're more exposed to credit than we are debit in our merchant business and stimulus isn't really driving incremental credit spend. What we're really seeing in the merchant business, I think, obviously is the impact of the recovery as well as the fact that savings rates are at generational highs.
And there's a lot of pent up demand and obviously we expect that trend to continue obviously as we progress through the end of 2021 and probably well into 2020 Sitting here today. So certainly on the margin, putting more dollars in consumers pockets, it's going to be helpful to the merchant business, but I don't view sort of the expansion we saw Q4 to Q1 to really be driven predominantly by stimulus. I think it's more just the macro recovery in general and the fact that obviously Consumers are very well positioned to be able to spend in the current environment as the recovery progresses.
And that's great to hear. Just a quick follow-up on margins. I know you called out 250 basis points for the full year. I think you said normalized underlying basis is like a 450 basis point improvement. When we think about the cadence of that Throughout the year, I think we had originally thought maybe $50,000,000 per quarter of kind of reinstated costs.
Is there any reason to believe that that shouldn't be pretty ratable or There are going to be some higher cost as these rebounds really start to kick in into the second half? Thank you.
Yes. No, I wouldn't call out anything unique from a timing standpoint. I think the thing that we have highlighted is this dynamic that we're having obviously in 2Q as it relates to the margin. We're going to have outsized margin expansion in 2Q, particularly as it relates to not only just the incremental kind of cost add backs, but also just the comparison To 2Q of last year and then more normalized kind of margin expansion in that So yes, nothing I would call out unique from a timing standpoint other than that 2Q comp.
That's great. Thank you all.
Yes.
On behalf of Global Payments, thank you for your interest in us and joining us this morning.