Global Payments Inc (GPN) — Q2 2016 Earnings Call Transcript

Thank you. Good afternoon, and welcome to Global Payments' conference call to discuss our acquisition of Heartland Payment Systems. We will also discuss our second quarter financial results and provide updated guidance for fiscal 2016. Accompanying slides are available via our webcast. Following the filing of our transcript of today's call with the SEC, a webcast replay will also be available on Global Payments' Investor Relations website. This call is scheduled for 1 hour, and joining us today on the call are Jeff Sloan, our Chief Executive Officer; Bob Carr, Chairman and Chief Executive Officer of Heartland Payment; David Mangum, our President and CEO; and Cameron Bready, our EVP and CFO. Before we begin, I'd like to remind you that some of the comments made by management during the conference call contain forward-looking statements and actual results could differ materially from these statements. Factors that could cause actual results to differ are discussed in our note about forward-looking statements in the press release we issued today and our and Heartland's SEC filings. In addition, some of the comments made on this call may refer to non-GAAP financial measures. Reconciliations to GAAP results are included in the press release we issued today, which are available on our website at investors.globalpaymentsinc.com. Now I'd like to introduce Jeff Sloan. Jeff?

Thank you, Jane, and thanks, everyone, for joining us this afternoon on short notice. We are delighted to announce that Global Payments has today entered into a definitive agreement to acquire Heartland Payments in a landmark transaction for the payments industry. I am pleased to be here with Bob, and together, we will discuss the strategic rationale for this combination. Cameron will then review the financial details of the transaction and also discuss our second quarter earnings and our now raised guidance for fiscal 2016. This partnership will be a major milestone for Global Payments, transforming us into the leading provider of integrated payments technology solutions worldwide. Importantly, the transaction also positions our company as a leading provider of payment solutions for small to medium-sized enterprises in the United States. The merger combines two of the fastest organic revenue growers in payments and offers the opportunity to further accelerate revenue growth, margin expansion, and cash earnings per share growth. We believe that we can accelerate revenue growth by 100 to 200 basis points annually over time through substantial revenue enhancements. We also plan to realize the benefits of the best of both of our companies, which we expect to generate cost synergies of at least $50 million in our fiscal year 2017 and approximately $125 million annually thereafter. At our recent investor conference, we reviewed the progress against our strategic scorecard as well as the opportunities to accelerate transformative growth across our markets. We believe this transaction meaningfully enhances both of those objectives. First, the partnership adds more than 1,400 sales professionals and 300,000 direct merchants, allowing us to further grow and control distribution in the United States, our largest market. Second, we believe we can leverage Heartland's products and services globally. For example, Heartland's Campus Solutions business has a growing presence in the higher education market overseas, as do we. By combining our global sales capabilities with the Campus Solutions platform, we expect to grow far faster together than we can separately. Finally, we believe we can accelerate growth in integrated payment solutions by combining OpenEdge's unique partner integration, marketing and distribution capabilities with Heartland's deep technology and expertise in hospitality point-of-sale solutions. Many of these point-of-sale solutions have overseas capabilities as well, which we can pair with our acquiring presence in 29 countries to drive additional growth. These solutions will be integrated with our existing investments in globalizing OpenEdge, as we discussed extensively during our investor conference. Before I turn the call over to Bob, I want to highlight the importance of our common culture and the critical role of our employees in the success of this transaction. Each of us shares the view that our people come first and that neither of our businesses would have achieved the successes that it has enjoyed without our dedicated employee bases. To that end, we plan to retain the Heartland name, Merchant Bill of Rights and Sales Professional Bill of Rights after the transaction. Finally, it's worth a moment to reflect on the amazing job Bob and his team have done, building a Fortune 1000 company in the payments industry. I personally know Bob for 15 years and have watched him build this innovative high-growth company that we look forward to welcoming into the Global Payments family. I will now turn the call over to Bob for his thoughts.

Thank you, Jeff. It's a privilege for me to be here with Jeff Sloan and the leaders of his management team. I'm excited because this merger meets so many of my personal goals for the future and the succession of the leadership of Heartland. First and foremost, it was important for us to find the best possible home for Heartland's 4,588 employees, including our world-class sales organization, our best in the industry IT team members and the most outstanding customer service organization in the industry. We have learned and grown a lot over the years at Heartland and we have much to be proud of. The deal clincher for us was when Jeff and David Mangum and Cameron Bready agreed to operate our business in the U.S. under the existing Heartland brand, the most respected brand of all U.S. processors. We will continue to operate with our fair dealing culture with the foundation provided by the Merchant Bill of Rights and the Sales Professional Bill of Rights. We will perpetuate the best commission sales compensation model on the planet with signing bonuses and residuals and portfolio equity. This will allow our employees to continue to be treated with the same level of respect they have been treated with for the past 19 years. Our customers will be in great hands because we will be using the innovative tools and industry-best facilities that we operate our businesses in today. What I find very exciting is that we will no longer be restricted to doing business in the 50 states. We will finally be able to sell into Canada, the U.K., and other countries, where we have ISV customers but no ability to process their payments today. This will be a powerful advantage for us for many of our customers and sales professionals. And our investors will profit immensely from this transaction. We started out with the stock price of $0.60 back in 1997. We went public in 2005 with the price of $18, and that climbed to $33 in less than two years. And then, of course, we hit the double whammy of the economic collapse and our breach. Our stocks fell to $3.45 in March of '09. I think our investors are going to be very pleased with this transaction at $100 per share. But just as importantly, is the incredible opportunity this combination provides our employees to become a part of what I believe will become the most valuable payments company in the world. The combined power of Global and Heartland is going to surprise a lot of the industry watchers. Upon closing, we will continue with not only our name but our traditions and history of providing unmatched customer service, having the most innovative products. And our employees will continue to say, 'This is a great place to work.' I am so very proud of all we have done and where we are going. The future is indeed bright. Now, back to Jeff.

Thanks, Bob. Together, we'll become the leading global provider of integrated payment technology solutions, a key area of emphasis at our investor conference, with approximately $650 million of annual net revenue. Our integrated businesses are quite complementary. For example, Heartland Commerce has a market leadership position in the restaurant and hospitality verticals, not an area of significant historical presence for our OpenEdge business. Also, Heartland's School and Campus Solutions are expected to enhance our presence in several universities in the United States and globally, while also providing us with a leading position in the K-12 market. Heartland's ability to deliver Software-as-a-Service also opens additional avenues for business model enhancement over time. We believe that the combined company will have one of the highest rates of organic growth in our industry with technology-enabled distribution net revenue of $1.1 billion annually. In addition, the transaction will meaningfully shift the mix of our revenue toward the United States, our largest market and one of the most dynamic payments markets worldwide. Of course, the combination will further accelerate the trend toward direct distribution, which we have been emphasizing over the last several years. Now I'd like to hand the call to Cameron.

Thank you, Jeff and Bob. And good afternoon, everyone. We very much appreciate you joining us to discuss this significant transaction for Global Payments. As Jeff noted, we entered into a definitive agreement to acquire Heartland for $4.3 billion, including the assumption of approximately $500 million of Heartland net debt. Consideration for the transaction will consist of 0.6687 shares of Global Payments stock and $53.28 for each share of Heartland stock at closing, subject to the terms of the merger agreement. Existing Global Payments shareholders will own approximately 84% of the combined entity. The cash portion of the consideration will be funded with fully committed debt financing. Upon closing, the pro forma business will have approximately 157 million shares outstanding and approximately $4.4 billion of debt. Pro forma leverage for the combined company at closing is expected to be approximately 4.4x on a debt-to-EBITDA basis. Importantly, given the strong cash flow generation profile of the pro forma business, we expect to return to our target leverage ratio within approximately 18 months. In the intervening period, we will retain ample capacity to continue our balanced capital allocation strategy. We anticipate mid-single digit accretion on a percentage basis from the transaction in fiscal 2017 and double-digit accretion thereafter. Our expectations for accretion assume the cost synergy estimates that we have highlighted but do not reflect anticipated revenue synergies that we have described. We're particularly excited about the growth characteristics of the combined company and the implications to our cycle guidance. As you will recall, at the beginning of this fiscal year, we raised our cycle guidance for the next 3 to 5-year period. At that time, we indicated that we expect to drive mid- to high single-digit organic net revenue growth, expand margins by up to 50 basis points annually and grow cash earnings per share in the low double-digit to mid-teen range over the cycle. As a result of this transaction, on a pro forma basis, we now expect adjusted net revenue to grow in the high single-digit range on an organic basis as we are combining two of the fastest organic revenue growth companies in the industry. Further, while operating margins will be reset to a slightly lower base in the near term as we comport Heartland's presentation to our convention, we expect to be able to accelerate operating margin expansion up to 75 basis points annually. Importantly, we remain committed to our longer-term goal of operating margins in the low 30% range. Lastly, we now expect to be able to grow cash earnings per share annually at a mid-teen pace over the cycle. The combination of Global Payments and Heartland presents a tremendous value creation opportunity through the realization of both substantial revenue and cost synergies. Jeff and Bob already addressed the expected revenue synergies from merging these two businesses, so I will not repeat those. I will, however, note that we expect these revenues and synergies to add 1% to 2% to the pro forma company's annual growth rate over time and that these opportunities are not reflected in the accretion estimates that we have provided for the transaction. In addition to the opportunity we see to accelerate organic rates of growth, we also anticipate that the merger will allow for the realization of significant cost savings. We expect to leverage Global Payments' leading worldwide, scalable platform and combine the best of each company's technology and operating environments to drive cost synergies. Consistent with our current strategy, we will also look to combine our workforces under our unified operating model. This integration will optimize our cost structure and position the company for strong growth while continuing to provide best-in-class customer service worldwide. We currently estimate that we will generate at least $50 million of cost synergies in fiscal 2017, building to approximately $125 million annually over time. Before turning the call back to Jeff, I would like to briefly comment on Global Payments' fiscal 2016 second quarter results and our raised outlook for fiscal 2016. We are delighted to report another solid quarter despite the continued impact of strong foreign currency translation headwinds across a number of our markets. For the quarter, net revenue growth was 5% or 12% on a constant currency basis and reporting cash operating margins were 29.6%. On a constant currency basis, operating margins expanded 60 basis points year-over-year. Cash earnings per share increased to $0.76, reflecting growth of 15% over fiscal 2015 or 29% on our constant currency basis. It is worth noting that we absorbed an additional $0.01 to $0.02 of negative foreign currency impacts into cash earnings per share and roughly $5 million into revenue in the second quarter relative to our expectations as of our last call in October. Turning now to guidance. We are again raising our fiscal 2016 outlook, notwithstanding our expectation that we will face incremental negative foreign currency translation impacts relative to our previous outlook. We continue to expect our fiscal '16 net revenue to grow 6% to 8% from fiscal '15 and range from $2.06 billion to $2.10 billion. But for the impact of currency, we would have expected to trend towards the higher end of our guidance range. It is worth noting that this revenue growth rate is 10% to 12% on a constant currency basis. We are again increasing our cash earnings per share and operating margin expectations for the full year. Cash earnings per share are now expected to grow 15% to 19% over fiscal 2015 and range from $2.90 to $3.00. We also now believe cash operating margins will expand by as much as 60 basis points in fiscal 2016 on a constant currency basis. Naturally, this fiscal 2016 guidance does not reflect any impact from the acquisition of Heartland. I will now turn the call back over to Jeff.

Thanks, Cameron, and thanks, Bob. Global Payments has demonstrated through our strategic investments that we have been able to create substantial value for our employees, customers, partners, and shareholders. We view the combination with Heartland Payments as the next logical extension of our model to accelerate transformative growth as we create the leading payment technology company globally. We look forward to closing the deal in the fourth quarter of our fiscal 2016. Bob, Cameron, and David and I are all happy to take your questions. Jane?

Thank you. We will now go to questions.

That's great, Andrew. It's Jeff. I'll start and I'll ask Bob and David to comment as well. I would say, as I said in our prepared remarks, I view this as a very natural extension of what we've been doing with APT and PayPros and, of course, OpenEdge. I would say as we look at the business as I described in the remarks, we've thought about Heartland Commerce. We've thought about their Software-as-a-Service business in the case of the school and educational market as very complementary to markets that we're not in directly but we think are very much adjacent to what we're doing today. I would also say as we have broadened the nature of the business, and you know Andrew, we haven't really focused on direct distribution, as we discussed in our investor conference. It's hard, in my opinion, to find a better example of a well-run, go-to-market direct distribution than what Heartland has done over many years. So I think from our point of view, as we thought about where we have dealt with over the last number of years, where we'd like to be as a company, where we'd like to take our ability to control our interactions with our merchant base, for us, it was really not that much of a question that Heartland will be a great potential partner. And speaking for us, I think that's how we thought about the announcement. Bob, do you want to add?

Yes. Andrew, thank you for all your support over the last 15 years. You've been there every time, and I'll miss talking to you. I think there are several things going on here. Back in the beginning, we were an ISO, and I used to write for Paul Green's Green Sheet a lot. When Heartland Payments was formed, we were an ISO processor. We decided early on that we couldn't manage the people, the ISO folks because they didn't really know who was selling for them. But the ISO model became very dominant, and then with the integrated space going, the dealers became more and more part of the landscape. And most significantly, our business model began to work big time. When we broke through $10 million of installed margin for the first time a few months ago, that sort of was the deciding factor. This is the sustainable model in the industry for sales. And we've been able to incorporate the dealer communities with our ISV purchases and demonstrate that we not only have a direct sales force but we have these dealer partners around the country. Global's model, their model is virtually identical to that in terms of the dealers and the ISVs. So I think the industry has changed in such a way that you're getting the best of both worlds combined into one sales model right now.

Yes, I would agree from a go-to-market perspective, and this is David. We have noticed the lack of overlap between the two businesses in their distribution strategies. However, the cultural alignment and shared market strategies are significant. Both of us are focused on direct distribution and on technologies that facilitate payments and streamline operations for small to medium-sized businesses. It's important to emphasize that we are culturally very similar in our approach to integrating technology into payments. Moving forward, the segments of Heartland will continue to operate as they do today. Specifically, for the core agent sales team, which has been crucial for Heartland's growth, we definitely intend to preserve the elements that contributed to this unique sales culture and engine, including the brand, the Merchant Bill of Rights, the Sales Professional Bill of Rights, and the tools that Bob’s impressive sales team utilizes.

This is David again. Georg, that's a great question. Through our research and collaboration with Bob and his team, we haven't found any assets that we believe aren't ready for growth opportunities moving forward. If you take a moment to consider this, you mentioned the global aspect. We see global applicability and potential for all the technology assets that Heartland has acquired and developed over time. Specifically, at the investor conference for Global Payments, we discussed taking OpenEdge, our integrated payments business, international to boost growth as it targets its verticals worldwide. Heartland is strong in several verticals including hospitality, restaurants, quick service, fine dining, and education. Currently, OpenEdge doesn't focus on these verticals either in the U.S. or internationally. We believe we can quickly target fine dining, quick service, and hospitality in the U.S. by leveraging our dealers, ISVs, and our unique OpenEdge ecosystem, which includes marketing campaign management, lead management, and integration management. We'll aggressively pursue these verticals domestically and then allocate time to expand those other assets internationally. As we mentioned, we anticipate boosting growth by 1 to 2 percentage points over time, and I believe this will happen sooner than you might expect in your models, particularly regarding the international opportunities in higher education, Campus Solutions, School Solutions, and core point-of-sale software and hardware technology for hospitality.

Okay, that's helpful. And just as a quick follow-up, maybe a question here for Cameron. The $50 million in synergies for, I guess, fiscal '17 that you're talking about, will that be sort of average for the year or is that the level of synergies you expect to end the year at from a cost takeout standpoint?

That's a good question, Georg. Thanks for that. The way to think about it is that this is the level of expense we expect to eliminate in fiscal '17. It's not the end of fiscal '17 run rate number. We believe we will save $50 million in costs, removing them from the expense line in fiscal '17, and that number will grow to $125 million thereafter on a full run rate basis.

Yes, that's a great question, Steven. This is Cameron speaking. On a pro forma basis, at the close, our leverage stands at approximately 4.4 times. As I stated earlier, we anticipate returning to our target leverage ratio, which we have historically indicated to be in the range of 2.5 to 3.5 times, within an 18-month period. The pro forma business is projected to generate over $550 million in annual free cash flow. Therefore, the deleveraging profile of this business is one of the most appealing aspects of the structure we have implemented to support its future growth. Additionally, the way we have organized it allows us to pursue our strategic capital allocation plans efficiently, while simultaneously reducing debt in a relatively short timeframe.

Does this deal prevent you from pursuing other deals in the future due to the high leverage ratio?

Steven, it's Cameron again. No, I would say the short answer is it does not. We've maintained ample capacity to continue our capital allocation strategy that we talked about before. Naturally, this is a large transaction. It's the largest we've done in our history. We'll be very focused on executing well integration, realizing the revenue and expense synergies that we have highlighted today. But certainly, as we continue to grow and expand our business globally, we'll look to pursue those opportunities, expansion opportunities, M&A opportunities that we think have the capability of augmenting our strategy and helping us to grow the business.

Steven, it's Jeff. I would just say that we continue to be very active in our discussions in Europe and Asia. Of course, I think Bob has us covered here from the time being in the United States. But as it relates to Europe and Asia, I would expect us to continue the same playbook that we've been working off of over the last number of years.

Sure, I can give you a high level sort of, I think, preview and we'll obviously provide more detail as the time progresses in terms of where we expect to realize synergies from and how we expect to realize synergies. But if you think about the two businesses, and we talked about this in our prepared comments, these businesses are obviously heavily dependent upon technology and operating environments to continue to grow and expand the business and deliver the type of service we both collectively want to be able to provide our customers here in the U.S. and around the world. So as we look to the two businesses, we clearly see opportunities to create synergies in the area of technologies and operations as we combine the best of both companies and really look to drive a highly leveraged, both highly scalable technological and operating environment going forward. And naturally, in any public company transactions of this nature, there's a lot of overlap in third-party expenses and external costs associated with being public companies that we'll be able to eliminate as well. So in the area of general and administrative expenses, naturally you would assume in a company with a transaction of this nature that we'll be able to realize synergies there as well. But we're focused on obviously creating value through realizing revenue and expense synergies, but it's more about combining the best aspects of each of our two companies in a manner that's going to create a preeminent payment company worldwide going forward.

Got it. And then, only one question. But can you just help us with the tax rate of the combined entity?

Sure. I'll give you a little bit of a guide, and we'll obviously be able to provide a little more color on that going forward. Given that Heartland Payments is a purely U.S. business at this stage, their effective tax rate is a little bit higher than ours, so it's roughly 38%, 39%. So on a pro forma basis, I would expect the combined entity to have an effective tax rate of around 30, 29 to 30 in that ballpark. Naturally, we'll continue to look to strive to find ways to minimize the effective tax rate for the pro forma business, and we're in the process of already thinking through strategies that would allow us to do that. But given the nature of the business that we're acquiring, it will raise the overall effective tax rate for the pro forma business. But naturally, that's all reflected in the economics we provided today.

It's a good question. Paul, it's Cameron. I'll jump in again. Again, our expectation is we'll realize $50 million of those synergies in fiscal '17 and we expect by the time we get to fiscal 2018, we'll be at the $125 million run rate number. The way I would characterize this estimate, obviously, we spent a lot of time with Bob and his team. I think we have a good handle as to where the opportunities are as we look again to combine the best of both companies, and we're highly focused on delivering on a number that we're providing you today. I think we have a good track record as a management team in delivering on the commitment that we make to stakeholders.

Paul, it's Jeff. I will just add to that, that if you look at Bob's company and our company more generally, one of the other things that I think is very attractive about this partnership is that both companies are operating very well and are coming out of this at a position of strength. So we really feel this is the right time to combine two of the fastest organic revenue growth rate companies, both of which are really, on their own, firing on all cylinders. And we said in our prepared remarks, we think we can do a lot more together than we can do separately.

Sure. I'll start and Cameron can comment on financial metrics, Bryan. Well, first, I think we've got good poker faces, maybe that's one way to answer your first question. But no, look, I've known Bob for 15 years, at least 15 years. I would say that I called Bob a couple of months ago to talk about whether this may make sense. But it's really born of a long relationship that we've had with Bob and Heartland, and a lot of respect for the company. And I think I would probably leave it at that. Cameron, you want to talk about the second question?

Sure, I'll be happy to. Bryan, I would say, this deal is no different than any other deal that we look at. I think we've been very clear in our history in terms of how we think about valuing and value creation associated with our M&A activities. This transaction, we looked at, certainly, from a cash earnings per share accretion point of view, and we analyzed it largely from an IRR point of view to determine, is this the best use of our capital relative to the alternative uses of that capital. And needless to say, I think when we ran the math and we looked at the economics and the value creation and more importantly, strategically, what we can do together as a business, I think we're very confident that there are meaningful value-creation opportunities here. The IRR from this transaction is very powerful relative to the alternative uses of capital, and the multiples are, I think, attractive, all-in, particularly in light of the synergies that we expect to be able to realize both from a revenue and expense point of view.

Okay. And just a quick follow-up. Is there a base number, EPS number, that we should use to get to the accretion against? Because it's a little bit difficult, with the moving pieces to get to the mid-single-digit accretion in the first year given the higher move in the tax rate. I just want to make sure I got my numbers correct.

Bryan, I would guide you to stakeholder consensus numbers for now. I don't think that's a poor estimate to start with. I think we're fairly transparent in terms of the sizable guidance that we had outstanding and what we think we can achieve as a business, so I think stakeholder consensus estimates are a good place to start.

So I would just say, Jason, that as I mentioned to Bryan, I reached out to Bob and I'll leave it at that for now. Regarding the multiples, as Cameron indicated, we believe this was done on a multiple basis that aligns with both APT and PayPros. In terms of revenue and EBITDA, both before and after accounting for the synergies, it looks very favorable, as Cameron noted, given the size of the opportunity in relation to Heartland's EBITDA. Overall, we feel confident about how this compares competitively with the deals we've executed and those in the marketplace.

Okay. And then just in terms of the respective sales force. I know you talked about keeping the compensation model intact for Heartland. What else is being done to make sure that you retain, especially the best Heartland salespeople, and then will there be any change in the comp structure for Global's direct sales force in the U.S.?

Yes. Jason, David here. Again, I would point you back to the opening comments when Jeff, Bob and I were talking about the go-to-market and the cultures. The beauty of the transaction from our perspective, and it became increasingly apparent the more work we did, was the lack of overlap across these channels. If you look around our channels in the United States, we obviously have our OpenEdge business, we discussed that earlier, that's our integrated payments business with no overlap really whatsoever in terms of the verticals pursued by the technology enabled businesses that Heartland has. More specifically, just to be really clear about that one, less than 5% of our OpenEdge volume comes from the combined verticals that Heartland serves so well, hospitality, quick service restaurant, fine dining, dining, education. So really, terrific opportunity, actually, to add and make one plus one equals three between those technology enabled businesses. When you look at the agent sales force, we want to retain that culture, the unique nature of it. We're absolutely convinced that that's what drives the growth you see so impressively in Heartland's results, particularly in the last 2, 3 years, it's been amazing progress that Bob has talked about in our call and at the last call he had at Heartland Payment. If you look around the rest of our United States channels, we don't intend to fundamentally change anything. We have ISO partners, where we're still a core part of one of our channels. They are not obviously our sole strategy going forward, as you've known and watched us execute the last three years or so. But for our ISO partners, the competitive dynamic of this industry doesn't change at all. So I think solid news for them. And the more tools we absorb from the combined companies, for example, boarding from Heartland Payment, those tools will be made available to our ISO partners. When you look at our direct sales channels in the United States, there, we have sales folks who work with the discrete bank partners. We tend to operate a little upmarket of the core Heartland market, and so those folks are in very good shape going forward as well. Again, more tools and products for those folks to sell, just as we'll provide more tools and products to the Heartland sales professionals to be able to sell from the combined companies. So to use the phrase Cameron used earlier, when we combine the best of both of these businesses, we have real opportunities in every channel we serve in the United States without creating messy channel conflict that you might be worried about on that question.

It's Cameron, Mike. I would say it's a little early, perhaps premature, to get out in front of the exact plans that we have for combining platforms and how, as I described, this has been mentioned a couple of times today, how we intend to get the best of both businesses and combine that into the combined business that we'll operate going forward. So I think as we looked at the synergy estimates that we provided, I think that gives you a good time frame and an overall sense as how we would expect to realize synergies over the course of time. Without getting more specific than that, I think that's probably the best overview we can give today.

So this is Bob. I believe the Heartland model will thrive under Global for several reasons. One reason is that we have many salespeople from different countries who can introduce a new perspective that is currently lacking in the industry. For years, people have expressed a desire to return to their home country and represent Heartland, but that has not yet happened. This presents a significant opportunity. Our equity model seems unique within the industry, and as long as we maintain it, I think our sales team will remain stable under the leadership of exceptional individuals. Tony Capucille started with us right out of college as a rep and now manages the entire organization of 1,400 people. He has Vince and Jason supporting him, both of whom have strong credibility with the regional and division managers. I believe we are reaching a strong point, and we will advance the existing Heartland organization, as we have not effectively reached all parts of the country. I'll let David address how this will impact your direct personnel.

Yes, I agree completely, thank you, Bob for that. I would echo what Bob said. We have a unique chance to expand our model internationally, especially in regions where we are still establishing our direct sales presence, such as Brazil. We aim to make a strong entry with this model. On a global scale, we will evaluate each channel and determine the best approach. However, I want to reiterate what I mentioned at the start of the call: we plan to manage the core agent channel similarly to how Tony and Bob have done. This distinctive culture is what fuels our growth. The key question is whether this can be effectively implemented in international markets, as Bob noted, where that equity strategy is applicable. It would be unwise not to learn from this and apply it wherever suitable across the globe or in our other markets or channels. Therefore, expect us to keep leveraging our strengths. What's particularly exciting about this deal is the minimal channel overlap across the United States, presenting a significant opportunity for traditional cross-selling of value-added products from Heartland to Global's existing direct channels. There exists a unique chance that, quite frankly, no other company has to globalize the product offerings in education and hospitality that Heartland provides and potentially to adapt the equity compensation structure where it is applicable in international markets.

Yes, this is David. Jim, interesting question. I think that as we've worked with the sales team, and Bob mentioned Tony leads the sales team, there are opportunities for broader geographic penetration, in some cases, different market penetration within that sales model. We do intend to pursue those strategies. I don't know that I'm going to talk about them in detail on this call tonight, but you do raise a very good point. Where there is white space, one of the things that was attractive to us in diligence is where there is white space, there is a plan to go attack the white space. We do intend to follow that strategy. And again, where applicable, take the model, and not just this model, the model for the point-of-sale, the model for the other business units, education, Cameron mentioned a moment ago, to accelerate their international growth where applicable in the 29 markets we serve directly around the world. Yes, I'd be happy to. I think there are 25 to OpenEdge and ultimately, we've discussed with you guys in the Investor Day in terms of greater penetrations in specific verticals. We are a leader in over 60 verticals by the OpenEdge business that is a business that's driving enormous amounts of growth for us in the United States. We can complement that with the hospitality verticals I described earlier, as well as the education verticals and we very much like the idea of going deeper into specific verticals, but we're not competing with our partners. Do more technology stacking to get closer to customers to help them run their businesses, that's what Heartland has done with education, and increasingly, their strategy around the point of sale is similar to ours, owning the software to drive the interaction with consumers at that point-of-sale is a great place to be when you're looking at payments that are going to expand your franchise and accelerate growth over time.

On behalf of Global Payments and Heartland Payment, thank you very much for joining us this evening.