Ladies and gentlemen, thank you for standing by. And welcome to Global Payments' Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Later, we will open the lines for questions-and-answers. [Operator Instructions]

At this time, I would like to turn the conference over to your host, Senior Vice President, Investor Relations, Winnie Smith. Please go ahead.

Winnie Smith - Senior Vice President, Investor Relations

Good morning, and welcome to Global Payments' third 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 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 speaks 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 measure in accordance with SEC regulation, 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.globalpayments.com.

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.

Jeff Sloan - Chief Executive Officer

Thanks, Winnie. We delivered record third quarter results, despite the incremental challenges that emerged during the period from COVID-19. Highlighting the resiliency of our business model and our ongoing track record of execution across market cycles. We also surpassed $2 billion of quarterly adjusted net revenue for the first time in our history with record margins and produced all-time high quarterly adjusted earnings per share and adjusted free cash flow.

As we detailed at our investor conference just a short time ago on September 8th. The trend toward accelerated digitization coming out of the pandemic has benefited our business by reinforcing that mode of competition, and this quarter provided further proof points of the wisdom of our approach to drive differentiated growth across the four pillars of our strategy. First, we extended long-standing relationships with both CITI and CIBC, as a reflection of our promise as a top quartile software-as-a-service or SaaS technology company with unmatched worldwide payments expertise. Our durable partnerships with some of the most sophisticated and complex institutions globally speak to our competitiveness, well into the remainder of this decade.

Starting with CITI, we are delighted to have furthered our relationship with one of our largest commercial card customers for another eight years. This agreement highlights a key element of what is already today a successful B2B business at scale. More on this new pillars to our strategy in a moment. We're also pleased to have renewed our issuer relationship with CIBC a top 10 customer in North America that spans both its consumer credit and debit portfolios for an extended term.

As we discussed in September, we also continue to build our pipelines with AWS to include additional fintechs, neobanks and embedded finance players spanning multiple geographies. We now have 25 active prospects in our issuer pipeline with AWS, up from 20 last quarter and four at the end of 2020. We also currently have 10 letters of intent with institutions worldwide, six of which are competitive takeaways; two of our recent LOI's have gone to contract. We're also excited to announce that together with AWS, we signed an agreement with London based 10x to integrate its cloud native, core banking platform with TSYS is payments as service capabilities. Allowing us to collaborate on modern core banking and issuing solutions for neobank and traditional financial institution customers.

As we announced at our Investor Conference, we now have a terrific partner in Virgin Money for our first use case combining issuing and acquiring capabilities to offer transaction stream optimization solutions. It's worth noting that Virgin Money is also a significant competitive takeaway for us. Simply put, we're winning in our Issuer Solutions business, because we are selling more market-leading technologies to more distinctive and defensible distribution channels in more markets than we ever have previously.

And our vertical markets businesses where we lead with SaaS at top of the funnel, we were delighted to announce our new partnership with Mercedes-Benz Stadium in September. As we highlighted, we believe that we were successful, because of our ability to seamlessly and uniquely combine software, hardware and payments across in-person mobile and online channels. We expect to facilitate a best-in-class fan experience through market leading commerce enablement solutions. We're now in pilot with Mercedes-Benz Stadium and we expect to be fully live early in 2022. We're gratified that after combating the payments landscape an extensive RFP, including with a full spectrum of new markets entrance. This sophisticated institution terminated their existing relationships and chose us for our software and payment technologies with a commitment well into the back half of this decade.

Further across our merchant technology enabled businesses, our POS software solutions generated revenue growth of nearly 70%, compared to 2019 in the third quarter. And our central education business in Australia grew over 50% versus 2019, despite lockdowns in that market. In addition to the key win at Mercedes-Benz Stadium, our GO [Phonetic] business delivered record bookings in the third quarter and also had notable successes with Subway, Whataburger, Bojangles, RBI and Wendy's. Spanning software, hardware payments and data and analytics. These results highlight the benefits we're seeing from the accelerated digitization in our markets.

Our e-commerce and omnichannel businesses drove growth in excess of 20% again this quarter. This business is another example of pandemic induced accelerate digitization benefiting us with current growth rates one-third faster than pre-COVID-19 levels. A few examples of durable success here this quarter: we broadened our relationship with Uber and Uber Eats into an additional market in Asia Pacific beyond Taiwan. We expanded our long-standing relationship with the Swatch Group to now include e-commerce alongside the solutions we provide in-store today across North America and Asia Pacific.

And we went live with Google as a merchant in multiple markets in Asia Pacific exactly as we said we would. We remain on track to launch Google run and grow my business this quarter. And we're already working on the launch of the next phase to help our merchants grow faster by connecting additional Google services, including online ordering, retail inventory and reservation to our digital platform. These solutions will over time drive more consumers to our merchants and dramatically expand our value proposition with one of the leading technology players worldwide.

We are also very pleased to announce today that we have extended and expanded the scope of our relationship with PayPal, one of the most sophisticated payments companies globally. This multi-year partnership leverages our unparalleled e-commerce technology footprint across cross-border in North America, Europe and Asia Pacific. And it will dramatically expand our target addressable markets over its term. We've added new geographies additional verticals and support crypto currencies for the first time. Together with CITI, Mercedes-Benz Stadium, Virgin Money and CIBC, what better testament to our current and future competitiveness.

As we said in September, we continue to benefit from ongoing innovation in our ecosystem, including Buy Now Pay Later or BNPL Technologies. We expect to enable more than 1.5 billion BNPL transactions this year alone and we anticipate issuing more than 15 million virtual cards with more than $23 billion in volume. It's a market we know well, because it's a market that we've been serving for decades globally. As BNPL continues to grow, we believe we're well positioned given our presence worldwide and our unique offerings the benefit.

Examples of our exposure include through network initiatives, traditional issuers, private label or charge card and program management, virtual card issuance, non-traditional issuers, including fintech, startups and neobanks, unique collaborations with AWS and Google, large existing scale players looking to expand BNPL globally into new markets and with added functionality. And of course the acceptance from our unmatched virtual and physical footprint with BNPL is just one of the many services at the point of sale in our commerce enablement ecosystem.

At the end of the day, the entity is cash and check and further digitization including BNPL is the mode of competition. Our ability throughout the pandemic to sustainably expand our rates of growth relative to our markets has been indicative of our technology leadership. This quarter was no exception with our global merchant acquiring businesses delivering 900 basis points of outperformance relative to the credit trends reported by the card networks last week. Our consistent track record of share gains during the pandemic is something we highlighted at our Investor Conference.

I'm also delayed to report that we have successfully closed our acquisition of MineralTree in October. After having announced our formal entry into the B2B market in September. As we highlighted, then we have many of the elements of a B2B offering post our merger with TSYS in 2019. And in addition at MineralTree's digitize payable solutions serves to enhance our B2B product suite and expands our opportunity set in one of the largest and most under penetrated markets in software and payments. We intend to further scale our business rapidly.

In addition to MineralTree and the extension of our commercial partnership with CITI, we had several other notable B2B achievements in the third quarter. These include a new relationship with WeatherTech in our Heartland business for B2B, as well as B2C acceptance. Near 50% payroll solutions growth in the third quarter, compared to 2019. And a 10-fold increase in the number of customer locations using our Tips solution from our business and consumer segment for disbursement, since the beginning of the pandemic.

We continue to have tremendous firepower to conduct strategic transactions with billions of available capacity. Of course this is on top of the $2.5 billion we have already invested over the last year. During the pandemic in acquisitions consistent with our strategic focus, including our emphasis on faster growth geographies. And it's in addition to the nearly $2 billion, we've returned to shareholders over the last year.

To that end, we are pleased to have now closed our acquisition of Bankia's merchant acquiring business together with our partners at CaixaBank last month, deepening our presence in one of the most attractive markets in Europe. And through our Erste joint venture, we also very recently closed the acquisition of Worldline's PayOne Austrian POS acquiring assets, enabling us to bring our distinctive distribution and market leading technologies at scale to get another attractive market. And our pipeline remains full, despite the investments we have already made over the last 12-months. The majority of which has been in software assets in furtherance of our long-standing technology enablement thesis. Todd?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Thanks, Jeff. Our financial performance in the third quarter of 2021 exceeded our expectations, despite incremental headwinds from COVID-19 and the delta variant during the period. Specifically, we delivered record quarterly adjusted net revenue of just over $2 billion representing 15% growth, compared to the prior year and 10% growth, compared to 2019.

Adjusted operating margin for the third quarter was a record 42.8%, a 170 basis point improvement from the prior year and a 420 basis point improvement relative to 2019. The net result was record quarterly adjusted earnings per share of $2.18, an increase of 28%, compared to the same period for both the prior year and 2019.

Taking a closer look at our performance by segment. Merchant Solutions achieved adjusted net revenue of $1.36 billion for the third quarter, a 21% improvement from the prior year and a 13% improvement, compared to 2019. We are also pleased that our acquiring business is globally generated 22% and 19% adjusted net revenue growth, compared to the third quarter of 2020 and 2019 respectively. This was led by continued strength in the US, while we also benefited from improving trends in international markets, including Spain, Central Europe and Greater China.

Focusing on our technology enabled portfolio, we continue to see consistent growth in our Global Payments Integrated business as we deliver a vertically fluent suite of commerce enablement solutions across dozens of vertical markets. As we highlighted at the Investor Conference, a number of our businesses, including our integrated business have grown right through COVID-19 and are now at levels that we would have otherwise expected them to achieve, absent the downturn. Our worldwide e-commerce and omnichannel solutions delivered growth in excess of 20% year-on-year, once again this quarter as we continue to benefit from our unique ability to seamlessly blend that difficult and virtual worlds and create frictionless experiences for our customers on a global basis.

As far, our own software businesses in the US, we are pleased that the overall portfolio delivered strong sequential improvement as the recovery begins to take root in some of the more impacted vertical markets. Given the positive booking trends we have seen throughout the pandemic, including this quarter we are confident that the business is most impacted by COVID-19 in this portfolio remain on a path to recovery. We delivered an adjusted operating margin of 49.3% in the Merchant Solutions segment, an increase of 200 basis points from the same period in 2020, as we continue to benefit from the underlying strength of our business mix and the realization of cost synergies related to the merger.

Moving to Issuer Solutions, we are pleased to have delivered $458 million in adjusted net revenue, a 6% improvement from the third quarter of 2020. This performance was driven by the continued recovery in transaction volumes, as well as growth in accounts on file, while non-volume based revenue increased mid single-digits during the period, including low double-digit growth in or out with services business again this quarter. Issuer adjusted operating margins of 43.4% were up slightly from the prior year. As you may recall Issuer Solutions achieved margin expansion of 500 basis points in the third quarter of 2020 over 2019, fueled by our focus on driving efficiencies in the business. We are also pleased that our Issuer team signed five long-term contract extensions during the quarter, and our strong pipeline, including the growing list of opportunities we have in collaboration with AWS continues to bode well for our future performance.

Finally our Business and Consumer Solutions segment delivered adjusted net revenue of $208 million, representing growth of 2% on a reported basis for the third quarter. Adjusting for the stimulus benefits and higher unemployment volumes last year, our adjusted net revenue growth was in line with our targeted growth range for the quarter. Adjusted operating margin for Business and Consumer Solutions was consistent with the prior year at 25.6% after expanding more than 700 basis points during the third quarter of 2020, as a direct result of our efforts to streamline costs and drive greater operational efficiencies at Netspend.

Further, we are pleased with the early progress we are making on our strategic partnership we announced last quarter with AWS in this business. While we also launched and began selling our earned wage access solution to existing B2B clients and into new vertical markets during the period. The outstanding performance we delivered across our businesses this quarter serves as a further proof point that we continue to gain share and that our four-pillared strategy positions us well to capitalize on the accelerating digital trend coming out of the pandemic.

From a cash flow standpoint, we generated roughly $850 million during the third quarter and remain on track with our target to convert roughly 100% of adjusted earnings to adjusted free cash flow. We invested approximately $132 million and capital expenditures during the quarter in line with our expectations. We have now successfully closed our acquisitions of MineralTree, Bankia's Merchant Services business and Worldline's PAYONE Austrian assets consistent with our expectations. We expect the contribution from these acquisitions to adjusted net revenue to be immaterial in the fourth quarter.

We are pleased to have also returned cash to our shareholders this quarter through the repurchase of approximately 4.2 million of our shares for approximately $741 million. We ended the period with roughly $2.5 billion of liquidity after repurchase activity and funding of the Bankia Acquisition. Our leverage position was roughly 2.6 times on a net debt basis, consistent with the prior quarter. We remain encouraged by the trends we are seeing in the business and we are raising the lower end of our guidance for adjusted net revenue to now be in a range of $7.71 billion to $7.73 billion, reflecting growth of 14% to 15% over 2020. We are adding $10 million to the bottom of the range despite anticipating an incremental headwind from foreign exchange rates, since our last report and absorbing the impact of the delta variant of COVID-19.

We also continue to expect adjusted operating margin expansion of up to 250 basis points, compared to 2020 levels, excluding the impact of our already announced and closed acquisitions. As previously discussed, we expect those transactions to result in a headwind to our margin performance and we now expect adjusted operating margin expansion of around 200 basis points for the year.

At the Segment level, we continue to expect Merchant Solutions adjusted net revenue growth to be around 20% for 2021. We also continue to expect our Issuer business to deliver growth in the low to mid single-digit range and for our business and consumer segment to be in the mid to high single-digit range for the full-year.

Moving to non-operating items, we still expect net interest expense to be slightly lower in 2021 relative to 2020, while we anticipate our adjusted tax rate will be relatively consistent with last year. Putting it all together, we now expect adjusted earnings per share for the full-year to be in a range of $8.10 to $8.20, reflecting growth of 27% to 28% over 2020, which is up from $8.07 to $8.20 previously. Our outlook presumes the macro environment remains stable worldwide over the balance of the year. And now includes an incremental headwind from currency.

Finally, we are pleased that our unique strategy that capitalize on the acceleration of digitization impairments, our ongoing technology enabled mix shift, our exposure to expanding TAMs [Phonetic] including now B2B and our track record of disruptive M&A provided us with the confidence to raise our cycle guidance at our September 8th Investor Conference. In particular, we continue to expect adjusted earnings per share growth in the 17% to 20% range over the next three to five years on a compounded basis.

And with that I'll turn the call back over to Jeff.

Jeff Sloan - Chief Executive Officer

Thanks, Paul. Our strategy has been centered on digitization, since we started running the company a little over eight years ago. By accelerating the underlying trends toward technology enablement, the pandemic has reaffirmed the wisdom of our approach, and we now target three quarters of our business from these channels over the next cycle as we said in September. Our formal entry into the B2B market reinforces the existing legs of our stool, including software primacy, a leading e-commerce franchise and an unmatched presence in many of the most attractive markets worldwide. These strategies are complementary and interrelated and provide us with substantial and incremental growth opportunities for years to come.

The record results for the third quarter that we reported today in our raised cycle guidance in September, our expressions of our confidence in our strategies and are the most recent examples and best evidence of their success. We just delivered a record quarter and any number of basis in the best year in our history during the midst of a once in a century pandemic. I think you can see why we view the glass as full. We exit the pandemic better off than we entered it, judge for yourself. Winnie?

Winnie Smith - Senior Vice President, Investor Relations

Before 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.

Question & Answers

Operator

Thank you, ladies and gentlemen, the floor is now opened for your questions. [Operator Instructions] Your first question comes from Tien-Tsin Huang of JPMorgan.

Tien-Tsin Huang - JPMorgan - Analyst

Hey, good morning everyone. Good to connect with you all. I wanted to ask, first on the issuing side. So you did announce a bunch of renewals and also looks like AWS pipeline is picking up here. I'm just curious, I mean, any change in pricing on the renewable front and what are the new prospects on the AWS look like, I mean more de novo, is it modern issuers, traditional issuers? Thank you.

Jeff Sloan - Chief Executive Officer

Hey, Tien-Tsin, it's Jeff and I'll ask Paul to comment. So we're really pleased with the performance this year in the issuing business in particular and we continue to make very good progress with AWS on two funds: first on the technology side and second on the distribution side. As it relates to the existing customers, there really has not been any change in the competitive landscape, I would say we continue to believe that we win, kind of, 80% of the jump balls that come up. I think we announced today that we've got 10 folks in the hopper on the issuing side, six of which are competitive takeaway as before the LOIs that we use recently signed. So we don't view that is - we really don't view that as changing.

I would also say that before it's a second part of your question, I'd also say that our partnership and collaboration with AWS really does sell in the marketplace. So in the last quarter we've met with a number of our large financial institution customers and I think the public cloud, first-centric approach that we've taken with AWS - sorry - here in a quarter ago really sells and resonates. I would say, as we said the Time Tangent [Phonetic] dramatically expands our target addressable market. I think we said was 3 times last August, but certainly with large FIs across the spectrum, really does - it really does resonate we think we're ahead there based on feedback from our customer base.

On the second part of what you said, I would say the vast majority of those prospects and there was a page on this - engine in our Investor Conference. The vast majority of those prospects are neobanks, fintechs and startups. So we certainly have a number of prospects on the traditional FI side, particularly in light of the Amazon relationship. I would say the vast majority of what we're looking at there and the co-sell side with AWS and now also with 10x and PWC really centered around neobanks, fintechs and startups and that 25 number represents the vast majority.

And then Paul, do you want to add anything for this?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes, really, I mean, I would say, Tien-Tsin. I'd just reiterate how happy we were with the growth in the third quarter, you know, we had strong, kind of, transactional growth, strong account about growth. So our volume based revenue was growing right in that, kind of, long-term growth rate of that mid single-digit and so we expect that, kind of, put in the middle growth to continue. And certainly, as Jeff has said the environment that we're operating with, it's very similar to how we've been operating this business for years.

Tien-Tsin Huang - JPMorgan - Analyst

Okay. No, great, thanks for you, both. Just my quick follow-up - just on the - for next year given the incremental COVID and the FX headwinds. Do you still see 20% EPS growth in '22?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes, Tien-Tsin, you know, we talked about this at the Investor Day that target of the long-term cycle, kind of, guidance was consistent with how we're targeting for next year would be at that higher end of that 17% to 20% range. Obviously we've got work to do, as it relates to finalizing, kind of, all of our plans will come back and give the formal guide, you know, at the start of next year, and obviously we'll assess the environment at that time. But from a targeting matter that higher into that 17% to 20% EPS growth range is still our target.

Tien-Tsin Huang - JPMorgan - Analyst

Excellent. Very good, guys. Thank you.

Jeff Sloan - Chief Executive Officer

Thanks, Tien-Tsin.

Operator

Your next question comes from Bryan Keane of Deutsche Bank.

Bryan Keane - Deutsche Bank - Analyst

Hi guys, good morning. Jeff, when you talk about some of the incremental challenges from COVID-19, where did that show up? Is that mostly in Europe or in Asia, I'm sorry and is that - did that continue in October?

Cameron Bready - President and Chief Operating Officer

Hey, Bryan, it's Cameron, if you don't mind I'll jump in on that. I think most of it obviously shows up, not surprisingly in the Merchant business. I think we thought in a few places, first a little bit in the US, I think we saw very good trends in the US, notwithstanding COVID, but we certainly did see in certain verticals, some impacted from the Delta variant in the third quarter. I would say, more specifically, we saw it in Europe and Asia-Pacific and probably more predominantly in Asia-Pacific, markets like the UK, obviously we're struggling with the Delta variant, they've now started to kind of come back a little bit more in Asia-Pacific, Australia had a number of shutdowns during the quarter that we had to grapple with from a financial standpoint and from a revenue standpoint.

But I would say overall most of that was absorbed in the third quarter, and as we've gone through October, we're seeing October trends slightly better than what we saw in the third quarter and even coming out of September, which was a better month than we saw in August. So the trend continue to look favorable, October being slightly better than what we saw in the third quarter and I think much of the delta impact is really behind us and largely isolated to the third quarter.

Bryan Keane - Deutsche Bank - Analyst

Got it. Helpful. And then, how about some of the trends in the businesses that had been a little bit slower and thinking about education, active gaming. What is the rebound look like in those businesses?

Cameron Bready - President and Chief Operating Officer

Yes, I think if you look at the vertical market overall, we saw strong sequential improvement from Q2 to Q3, about 500 basis points relative to 2019 results for that business, but it is fair to say that we're still on the road to recovery in the vertical market business overall, largely because of the vertical markets that you highlighted active and K through 12 continue to be down relative to 2019 levels, we did see sequential improvement in both, and they're trending in the right direction, but there's still some time to go. I think before those markets get back to - certainly the levels and performance that we saw pre-pandemic.

If you look at the business overall, it was still down slightly relative to 2019 in the third quarter, but we are expecting it to turn positive versus 2019 in the fourth quarter, giving us good momentum, kind of, heading into 2022 as we continue again down the path of recovery with the vertical market business overall. I would highlight, we continue to see very strong trends across advanced MD, our enterprise QSR, food and beverage business and of course our higher education business, all of which have grown nicely throughout the course of the pandemic from a recurring revenue standpoint and all of which produced very strong results in the third quarter as well.

Bryan Keane - Deutsche Bank - Analyst

Great, thanks for taking the questions.

Jeff Sloan - Chief Executive Officer

Thanks, Bryan.

Cameron Bready - President and Chief Operating Officer

Thanks, Bryan.

Operator

Your next question comes from Ramsey El-Assal of Barclays.

Ramsey Clark El-Assal - Barclays Capital - Analyst

Hi, gentlemen. I wanted to ask Jeff you about capital allocation at this point in the balance between M&A and kind of given where the stock is trading from a valuation perspective, you know, potentially dialing up share repurchases? I guess the second part of that is, if M&A of the past, is it transformative large deals? Or is it maybe pivoting to sort of a many smaller deals type of the strategy. Any color on those topics would be helpful.

Jeff Sloan - Chief Executive Officer

Yes. Thanks, Ramsey. So on capital allocation, I think you should look at what we've done in the last 12 months is being a really good indicator, kind of, where we're focused. So in the last 12-months, as we said in our prepared remarks, we've invested $2.5 billion in M&A primarily, I think, 60% of which is around cloud SaaS-based technologies, so we did that while returning nearly $2 billion in capital to our shareholders also during the last 12-months. So I'd say from a capital allocation point of view and Paul I think described them out on the repurchases, you know, I don't really think that's - I don't really think that's changed. So I think balance between the two is essentially what we've been doing and I would expect that to continue.

On the M&A side. Look, I think we look at most things that fit our strategic thesis that's been consistent over the last year. So we look at things that are in the software space, we obviously now look at things are in the B2B space post the MineralTree announcement. As we said, time last month, we're actually in September MineralTree, it was probably one of our first dilutive deals and we're absorbing that, both in our annual numbers, as well as in our cycle guides, that's one is expanded to 10, you know, as to what we're looking at, looking at new geographies, e-com and the like. So I don't know you like exchange rates, Ramsey, I think we've got the full suite of opportunities as I said in my prepared remarks of our pipeline now we are seeing the fact that we announced the closure of a bunch of deals today. Our pipeline continues to remain full.

Ramsey Clark El-Assal - Barclays Capital - Analyst

Okay. A follow-up from me. Could you talk about the PayPal relationship, how it sort of evolved over time? And also maybe elaborate a little bit on the crypto piece. And if I can just bolt-on another one there. Could you just call out the US and global, kind of, two-year stack of a two-year CAGAR in your merchant business. I just want to make sure that I'm understanding that kind of sequential acceleration there correctly?

Jeff Sloan - Chief Executive Officer

Yes, okay. Want to repeat, I'll ask Cameron and Paul to comment on your last piece. So we're really pleased with that PayPal announcement today. This expansion as well as extensions for a multi-year term. So we're really pleased with that. I would say there's a few differences before I get to the crypto comment. The first thing I'd say is we're adding additional geographies as part of the relationship. The second, we're adding additional vertical markets, where we can go together jointly to market with PayPal, which also is an expansion.

And the third obviously is what you asked about our own crypto, that crypto is really two pieces, Ramsey, the first piece is if you're using a PayPal digital wallet and you're buying crypto in the wallet with Bancorp sources, particularly anywhere in the world, especially for these luxury purposes, North America and Europe that will be us helping to facilitate those purchases on behalf of PayPal. And the second part of the crypto stuff is PayPal means of acceptance that things like coin base to the extent that you are going online, buying crypto at something like a coin base and use PayPal as a pay button to procure that purchase. They said that it's bank card related that also is something that we expect to have a hand in, so those are new things for us. Those things are hard to do on the acceptance side, especially on a worldwide basis. So we're pleased to be in a position to do that. And I would say if you back up, heard you say, okay, what does it mean? Our view of our relationship with PayPal that this expansion and extension really doubled the size of our addressable market with PayPal, who were obviously very pleased to be partnering with. Cameron and Paul, you guys let talk about the last piece as well.

Cameron Bready - President and Chief Operating Officer

Yes. Hey, Ramsey, it's Cameron, I'll jump in there. I think your question was, what were the growth rate versus 2019 for the merchant business globally as well as for the US merchant business. So again merchant globally excluding our vertical market channel was up 19% versus 2019 levels in the quarter and the US number was I think 22%, 23% something in that range for the third quarter, pretty consistent with what we saw in the second quarter.

Ramsey Clark El-Assal - Barclays Capital - Analyst

Perfect. Thanks so much. Appreciate it.

Jeff Sloan - Chief Executive Officer

Thanks, Ramsey.

Operator

Thank you. [Operator Instructions] Your next question comes from Jason Kupferberg of Bank of America.

Jason Kupferberg - Bank of America Merrill Lynch - Analyst

Hey, thanks guys, good morning. Just wanted to drill in a little bit more on the owned software, the vertical markets business. What were the growth rates there year-over-year and versus 2019? And just any color you'd want to offer in terms of some of the specific verticals? And what you saw there with respect to new sales and pipeline build, etc?

Cameron Bready - President and Chief Operating Officer

Yes, Jason, it's Cameron, I'll jump in, I'll ask Jeff and Paul to add any color that they would like to. Maybe I'll just start with, sort of, baseline and things, as I mentioned earlier, the overall vertical market business it was up roughly 16%, 17% versus Q3 of 2020, it's still down slightly versus 2019 levels, call it mid single-digits. As I mentioned earlier, we do expect it to turn positive versus 2019 as we get to the fourth quarter.

So I'll start with maybe some of the more positive vertical trends that we see AdvancedMD, TouchNet and again our QSR business all reported very strong growth as they consistently have throughout the pandemic in the third quarter. TouchNet, AdvancedMD both are mid-teens in the quarter. Our QSR business was up probably mid-30s versus 2020 levels. Again, as we've seen a nice rebound in that business.

And then relative to 2019, TouchNet is up 20%-plus, AdvancedMD's up almost 30% and our QSR business is up almost 10% all the way to 10% somewhere in that ballpark versus 2019 level. So very pleased with where those obviously vertical markets are trending, how they performed throughout the pandemic, we continue to have excellent momentum in those as we head to 2022. Obviously, we've had seen more impact that we talked about earlier in our K through 12 school business and ACTIVE, and in our gaming business over the course of the pandemic. School and ACTIVE continue to be below 2019 levels, we are seeing improvement sequentially, but the road to recovery for those businesses is obviously going to be a little more long tail than what we're seeing in other vertical markets.

Gaming in this quarter was flat versus 2019, so it has come back quite well. It was up meaningfully over 2020 levels, almost 30% in the quarter and it got to flat versus 2019. And again, we expect that to turn positive in the fourth quarter. So I would say overall, the business is trending in the right direction. The verticals that have been more heavily impacted are going to have a little longer road to recovery, the sequential trends are good and we expect to see that continuing heading into 2022.

So I'll pause there and maybe just turn my attention to bookings trends, because that continues to be a very good story for the vertical market businesses. We saw excellent new booking trends in the quarter. Our recurring revenues in that business bookings were up 35% year-over-year, advancedMD recorded a bookings record, up nearly 50% year-over-year. Our Xenial SaaS Solutions were up almost 50% year-over-year and TouchNet was up almost 35% year-over-year. In ACTIVE and schools, continue to see good booking trends, despite obviously the overall macro continuing to weigh on those businesses, ACTIVE bookings were up in the mid-teens year-over-year and our school business had positive booking trends in the quarter as well.

So as we think about the business overall, the booking trends we've seen in this quarter and frankly, what we've seen throughout the course of 2021 give us a lot of confidence that from a momentum perspective, we're obviously building a nice backlog of business. And as the macro in the more heavily impacted verticals improves, we obviously have a lot of tailwinds for the vertical market channel heading into 2022 and 2023.

Jason Kupferberg - Bank of America Merrill Lynch - Analyst

That's great. That's great. Really helpful. On the Consumer segment, I was curious how that growth is just under the 2% growth there in the quarter. How did that compare to your expectations? I know it reflected some deceleration often easier comp, but we did see stimulus start to run off and I know, Paul, you made a brief comment about that, so just wanted to hear a little bit more about how you're thinking about, sort of, the normalized effects of the stimulus expiring and you talked about the full-year growth target being intact there, kind of, mid to high single-digits, but with one quarter left in the year. I'm wondering, if we can hone in a little bit more on where you think Q4 may land based on everything, you know, today?

Cameron Bready - President and Chief Operating Officer

Yes. So, yes, it's a good question and you're exactly right. What really impacted us in 3Q was that unemployment insurance, kind of, additional piece that we were picking up. If you took that out we grew this business in the third quarter at kind of that longer-term mid to high single-digit target for the third quarter. And as we look to next quarter, as we've said, we are expecting this to be in that kind of mid to high single-digit for the year, we're expecting that business to roughly generate at roughly that level in the fourth quarter to that, kind of, longer-term target. So yes, we get past [Technical Issues] comparison benefits for some year at a time related to stimulus and unemployment, but as it relates to the third quarter that was the biggest dynamic that was playing through - that resulted in that roughly 2% growth rate.

Jason Kupferberg - Bank of America Merrill Lynch - Analyst

Okay. Thanks for the comment, Todd.

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes.

Jeff Sloan - Chief Executive Officer

Thanks, Jason.

Operator

Your next question comes from Dominick Gabriele with Oppenheimer.

Dominick Gabriele - Oppenheimer - Analyst

Hey, great, thanks so much for taking my questions. I was actually just wondering, if you could talk about the recovery in the vertical markets and how that - I thank you for all the color already, but how that plays into your 2022 EPS guidance? What kind of levels of recovery in revenue versus either '19 or '20? Are you assuming there? And then I just have a follow-up. Thank you very much.

Jeff Sloan - Chief Executive Officer

Yes. So I guess, I would start off by, kind of, adding on what Cameron said is that starting in the fourth quarter this turns into a growth headwind for us and we talked for several quarters now of this vertical markets here, because of the components of the business being somewhere about 300 to 400 basis points headwind to our segment margin over the last several quarters. And starting in the fourth quarter with the kind of sequential quarter growth we're seeing this turns into a tailwind.

And I think as Cameron said with all the booking success that kind of we've had, we're expecting that essentially 300 to 400 basis point headwinds, kind of turn in to, kind of, a commensurate, kind of, tailwind as we move into 2022. Obviously, we're in that planning process right now and we're kind of get more, kind of, discrete levels of inside as we talk about the 2022 guide. But the key point is exactly what, kind of, Cameron said is, kind of, a headwind turning into a tailwind as we move to the next year. And just in general, as we look to the 2022 guide and you kind of, once again, kind of, go back to what we said at our Investor Day around our cycle guidance as it relates to, you know, revenue growth. Those are the levels that we're targeting at or even slightly better at the levels that we're targeting at for next year, as a revenue growth matter.

Dominick Gabriele - Oppenheimer - Analyst

Excellent really great color on all this. And then if you think about the distribution of your margin expansion as we look ahead and kind of what it's implied for the Merchant Solutions segment in the fourth quarter? How should we think about the distribution of margin expansion across your segments, given all the opportunities you see in the growth path that you're focused on? Thank you very much guys.

Jeff Sloan - Chief Executive Officer

Yes, so - you know, if there's talk about this year specifically and that kind of margin distribution, I mean, it's very consistent, kind of, it's year we focus on the third quarter, which is Merchant is the biggest margin, kind of, driver for us as a company this year coming off of the big margin gains that we saw in our issuing business in our Business and Consumer Solutions last year and so you know, as we moved into next year things become more balanced in that regard is kind of margin kind of deliverance across the segments get into a, kind of, more normalized, kind of, range. And obviously, at our Investor Day, we kind of talked about on ex-synergy kind of what we expect, kind of, cycle guidance margin expansion to be, but obviously for this year and for the remaining for the fourth quarter the merchant margin expansion is the biggest driver.

Dominick Gabriele - Oppenheimer - Analyst

Thank you.

Operator

Your next question comes from the line of David Koning of Baird.

David Koning - Baird - Analyst

Yes. Hey, guys. Thank you. The - you gave good disclosure about the processing our revenue percent of '19 being about 119%. We had decent Mastercard global volumes, I think, Visa 121% and Mastercard at 128%. So you're really close to that, I know it's a hot-button issue for why it's a little bit below, I don't think it's losing share. I think it's just some of the verticals in the SMB exposure, but maybe you can kind of confirm that and B, is that kind of, catch back up as SMB keeps gaining share relative to like big box, like how do you just see those patterns playing out?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes, Dave, that's the wrong numbers. So it's up 19% and the Visa Mastercard worldwide credit volume numbers that they reported last week, were up 8% and 13% respectively. The average of those two, Dave is about 10% or 11% and we just reported 19%. So if you go back, Dave and look at our Investor Conference in September, we actually have a chart on this, we chose how the duty calculation what we compare to. And as I said in my prepared remarks, Dave, we exceeded the average of Visa Mastercard by 900 basis points again this quarter relative to 2019, so that's the right comparison from our point of view.

David Koning - Baird - Analyst

Okay, got it. I just was looking at credit and debit combined. I was just looking at the total market instead of…

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes, Dave, we got to look at - we look primarily at credit worldwide, because our business is mostly a credit business. So again, if you look back at our Investor Conference in September, Dave. On the left hand side of that page, you will see how we do the calculation, and we're pretty clear about how we do it. And the 900 basis points today compares very favorably, and I think, it's the second highest number of that paid relative to the start the pandemic. So from our point of view, that's the comparison, we really don't have a very debit-centric business.

David Koning - Baird - Analyst

Got it. Thanks, you know, that's really helpful. And I guess, the second one just how big was Zego in Q3. Just so we can get organic constant currency?

Jeff Sloan - Chief Executive Officer

Yes, so, you know, Dave, we had talked at the time of Zego being about a $100 million on an annualized basis of revenue impact. And so in the half year, it's $50 million, I mean in a quarterly basis [Technical Issues] about it roughly $25 million.

David Koning - Baird - Analyst

Got it. Great, thanks guys. Nice job.

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Thanks, Dave.

Operator

Your next question comes from Trevor Williams of Jefferies.

Trevor Williams - Jefferies - Analyst

Hey guys, good morning, thanks for taking the question. I was wondering just two-parts for me, and I'll ask upfront. Would you be able to just parse out the FX impact in this quarter from both Merchant and Issuer? And then in 4Q just trying to back into what's implied in Merchant to get to the 20% for the full-year. It doesn't look like there's any real embedded improvement versus 2019 levels at least from Q3? So just trying to better understand the puts and takes there. It sounds like vertical markets are little bit better sequentially, FX a bit tougher and then it may be just kind of holding October trends, kind of, flat through the rest of the year. So just any kind of help there on the puts and takes relative to 3Q? What you have embedded for Merchant? Thanks.

Jeff Sloan - Chief Executive Officer

Yes, so roughly about 100 basis point is the way you think about the currency impact to us at a kind of total company level and that's in the kind of the rough settlement as it relates to Merchant as well and there - I wouldn't call out anything, much more dramatic on that, on the issuer side. And if you look at 4Q with just kind of our FX commentary before relative to our expectations. If you look at 4Q, we're expecting about half of that, kind of, benefit in 4Q relative to 3Q. So an incremental headwind in the fourth quarter relative to our expectations of what we were expecting to see and saw in the third quarter versus what we're expecting to see in the fourth quarter given where rates are, which is primarily driven by, kind of, euro and the pound and what's happened there and in the last quarter since the end of last quarter, where kind of where we are right now.

Trevor Williams - Jefferies - Analyst

Okay.

Cameron Bready - President and Chief Operating Officer

And then I would say on the second part of your question in terms of the Merchant implied guide for revenue growth. I mean, the fourth quarter versus '19, that's an acceleration of that versus '19. So it's not correct to say it's stable, it's actually improving, Paul, do you want to comment?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes. So yes, versus '19 you were expecting over 100 basis points of - kind of acceleration in the fourth quarter versus '19 that what we saw in the third quarter. So we - if as we said during the fourth quarter, we're expecting, kind of, roughly to be at kind of an overall compared to '20 where we expect to land for the year for Merchant. But if you compare that to '19, we're actually seeing north of 100 basis points of third quarter to fourth quarter acceleration on the Merchant segment.

Trevor Williams - Jefferies - Analyst

Okay, great. And if I could just sneak in a quick follow-up, any comment just on how trends into October looked in Merchant relative to September just any color there would be great? Thank you.

Jeff Sloan - Chief Executive Officer

Yes, and I think, Cameron maybe referenced just a little bit earlier is we're seeing like we're improving trends and you know in October versus September. So we're very pleased with what we've seen so far starting this quarter and obviously the environment remains dynamic, but we're very pleased with what we've seen so far.

Cameron Bready - President and Chief Operating Officer

Yes, and Trevor, it's Cameron, I would just add, it's pretty consistent with what you saw from the networks that reported last week. As far as a sequential improvement in October versus what we saw in Q3 and September in particular.

Trevor Williams - Jefferies - Analyst

Got it. Okay, perfect. Thanks guys.

Cameron Bready - President and Chief Operating Officer

Thank you.

Operator

Your next question comes from Vasu Govil of KBW.

Vasundhara Govil - KBW - Analyst

Hi, thanks for taking my question. Just I wanted to ask about the Issuer business, I know the commercial piece of the business with a headwind this year, sort of, how are you thinking about the recovery in that piece of the business? And any leading indicators you are seeing at this point to support the case or recovery into next year?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes. So, we have begun to see recovery on the commercial side this year. And so things have been slightly better than what we were expecting and given those, kind of trends, we are expecting to see kind of further acceleration of commercial into next year, as Jeff commented and we are very pleased to have announced the CITI renewal, which was obviously a very important renewal for us on the commercial side. So yes, both as third quarter manner, the growth that we saw there. Obviously, we're still looking to kind of get back to where the pre-COVID levels would be in that business and we're trending in that direction and. And so, yes, that will turn into a continued tailwind for us on a go-forward basis.

Vasundhara Govil - KBW - Analyst

Got it. Thank you. And if you could remind us quickly the timing of some of the new wins that you are expecting coming into the numbers next year? And also if I may, if you could quantify the impact, I know you guys have said MineralTree is dilutive upfront. It - does it, sort of, round up to a cent [Phonetic] in dilution or is it completely immaterial for the fourth quarter? Thank you.

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes. So a couple of things. Maybe I'll take that, kind of, the MineralTree and really all of the acquisitions and we kind of commented on those as it relates to the overall margin impact in the prepared remarks is we've got call it a roughly 50 basis point, kind of, headwind to the margin in the fourth quarter related to all of the acquisitions. Obviously MineralTree is the most impactful there, because, as Jeff said it was dilutive, so that's kind of the way to kind of think about as it relates to the dilution that we're expecting to see in the fourth quarter, particularly on the margin side. And go back to the first part of the question, the first [Speech Overlap]

Yes, on issuer side, yes, the primarily given our conversion pipeline, we're looking more at a late 2022, early 2023 for most of the, kind of, wins that we're talking about there. There is a little bit of impact that comes in later in the next year, but that's primarily 2023 and beyond.

Vasundhara Govil - KBW - Analyst

Got it. Thank you very much.

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes. Thank you.

Operator

Your next question comes from Ashwin Shirvaikar of Citi.

Ashwin Shirvaikar - Citi - Analyst

Hi, guys Jeff, Paul, Cameron, Winnie, good morning.

Jeff Sloan - Chief Executive Officer

Good morning.

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Good morning, Ashwin.

Ashwin Shirvaikar - Citi - Analyst

So one of the questions I had was between the acquisitions that you made last 12 months in the steadily higher tech enabled piece that we've seen lower toward the years. Are you beginning to see changed seasonality in your business as you kind of think of the various corporates. I'm just thinking of setup as we head into next year?

Paul Todd - Senior Executive Vice President and Chief Financial Officer

No, actually, I wouldn't call anything kind of unique there. I mean, typically if you kind of go by segment, typically as it relates to our Merchant segment, our third quarter from a seasonality standpoint, is our strongest quarter from that business and nothing is dramatically changed on that. From a - kind of Issuer perspective, typically, the fourth quarter that we have holiday spend in the way that business is constructed that typically is - it's just from record, I would say that in general that has become lesser of a seasonal outlier in the fourth quarter, just the way that business is, and where we have certain pricing bundled, but now at that lesser of an impact there.

And then obviously in our business and consumer there's obviously kind of just kind of moving parts. Now with all the stimulus, kind of, comparison typically tax reason, and you know, the first quarter and depending on how that plays out into the second quarter has been kind of the seasonal call out as it relates to that business. So, yes, as a - at a consolidated level, I wouldn't call out anything unique that's changed on the seasonality side that visible, kind of, ways to think about it at the segment level.

Ashwin Shirvaikar - Citi - Analyst

Got it, got it. And then as we sort of think of again sticking to the tech-enabled side as the percent of both owned software and software partners, sort of, goes up. Can you talk maybe about the attach rates for cross-sold incremental work, whether with prepayments or add-on value add services time and attendance, HR, we have different types of things that you guys still. Can you talk about the attach rates and maybe some examples of progress?

Cameron Bready - President and Chief Operating Officer

Yes, Ashwin, it's Cameron, I'll jump in on that. Now, I'll just remind you, I've got a lot of time on this, on the Investor Conference speaking about this very topic. If you think about our strategy it's really centered around commerce enablement and whether we're working with a software partner or we're working obviously with our own technology stack from a software standpoint, where we go to market in verticals with our own capabilities. The objective is to continue to bring more merchants into our ecosystem, leveraging technology and once we're in our ecosystem, obviously finding new ways to provide solutions to them and help them run their businesses more effectively and obviously help them drive more top of funnel opportunities for their business.

So our partnership with Google is clearly at the center of that strategy in terms of how we deliver more value-added services and more capabilities to our customers across, again both our owned software portfolio, our traditional merchant acquiring businesses and then of course our own - our partnered software portfolio as well. So obviously there's a lot of opportunities in front of us as we continue to execute against that strategy. We are launching run and grow my business this quarter, we expect that to ramp next year and we're launching Phase II of that as Jeff highlighted, hopefully in the middle part of next year as we bring in online ordering, inventory and reservations into that ecosystem from a - you raised time and attendance, it's a great example of where we can take a solution for one market into another, we're selling time and attendance now across a few of our vertical market businesses that came out of our payroll solutions and looking to bring that to a number of our integrated partners as well as a way to which we can again attach more opportunities to those partnership relationships.

On the integrated front, I'd also note that, that strategy is also key to winning new ISV partners, because one of the ways we're able to differentiate ourselves versus just offering - revenue shares is to offer a larger pie from a revenue standpoint that we ultimately end up splitting with those ISVs, because we can bring more solutions to the table. It makes the ISVs offering more attractive, it gives us more opportunity to grow in scale with the ISV. And as always like to say we'd rather be focused on how to divide up a larger pie versus more finely slicing in existing pie that's not growing.

So I think as it relates to the overall Merchant strategy highlighted what's really key, which is driving more commerce enablement by attaching more of our offerings to merchant relations have to come through and whatever distribution channel we're selling through into the market.

Paul Todd - Senior Executive Vice President and Chief Financial Officer

Yes, I'll just add, Ashwin what Cameron said that we also talk in the Investor Conference, our ability to add data and analytics, which is business that we took, there is supply in this too, a business that we took from essentially zero revenues, a number of years ago to $130 million. So that's part of the value-added services that you asked about. And then Cameron tied it to, and I think all that stuff is working and I think if you look at our results in the third quarter [Indecipherable] was up 13% in the third quarter, volumes were up 20% versus 2019. So it's the commerce enablement that Cameron is describing response to your question, which is to say the virtuous circle of software at the top of funnel the cross sells the data analytics, the new partnerships, all that stuff is resulting in clearly above market growth on the stats, I just gave and what we put in the press release.

Ashwin Shirvaikar - Citi - Analyst

Got it. Thanks again.

Jeff Sloan - Chief Executive Officer

Thank you very much. Well behalf of Global Payments. Thank you all for joining us this morning.

Operator

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GLOBAL PAYMENTS INC

Q3 2021

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