Bryan Keane

Bryan Keane asked for an explanation of the 300 basis point delta in PEO revenue growth excluding pass-throughs between Q1 (6%) and Q2 (3%), inquiring about the drivers. He also asked if, given the trends, ADP should be on the lower end of its 3-5% PEO revenue guidance (excluding pass-throughs) for the back half of the year.

Answer

Peter Hadley, CFO, ADP, attributed the differential to several factors: slightly softer worksite employee growth from bookings and moderation in pays per control, a challenging year-over-year comparable due to SUI revenue pull-forward in Q2 last year, and slightly less wage growth in the PEO in Q2. Despite the step-off from Q1, he reiterated confidence in the full-year outlook, maintaining the 3-5% guidance range. He noted that it's difficult to predict where within the range ADP will land, as the back half of the year, particularly prime selling season and Q4 retention, will be more definitive.

Bryan Keane asked for an understanding of the significant delta in PEO revenue excluding pass-throughs between Q1 (6% growth) and Q2 (3% growth), inquiring about drivers like softer bookings, SUI pull-forward, and wage growth. He also asked if the PEO guidance for 3-5% growth ex pass-throughs implies the lower end of the range for the back half.

Answer

Peter Hadley, CFO, explained the differential was due to slightly softer worksite employee growth (from solid but below-expectation bookings and moderation in pays per control), a challenging year-over-year comparable from SUI revenues pulled forward into Q2 last year, and slightly less wage growth in the PEO in Q2. He acknowledged the step-off from Q1 but reiterated confidence in the full-year guidance range of 3-5% PEO revenue growth ex pass-throughs, stating that all possibilities still exist and will depend on bookings, pays per control, and retention in the back half.

Bryan Keane asked for the percentage of bookings from international markets and questioned the long-term margin impact from the shift to Lyric and the Workforce Software acquisition.

Answer

CEO Maria Black stated that international bookings closely correlate with international revenue, which is about 12% of the total. CFO Don McGuire explained that the full 50 basis point margin drag from the Workforce Software deal will not be recovered in FY26, as costs like intangible amortization are recurring, though some one-time integration expenses will abate.

Bryan Keane sought clarification on the economics of the Fiserv partnership, asking if it involves a onetime or recurring fee structure. He also asked about the current pricing environment and the expected pricing yield during the key selling season.

Answer

CEO Maria Black clarified that the Fiserv partnership economics include both a referral component and a longer-term revenue share. CFO Don McGuire described the competitive pricing environment as stable and stated that ADP is targeting approximately 100 basis points of price increase for existing clients, which he views as attainable given high client retention rates.

Bryan Keane followed up on Paycor's growth trajectory, asking if it should be modeled as a low double-digit or 8%-9% grower for the fiscal year, and then questioned if the softer trends in managed services were macro-driven or due to competitive factors.

Answer

CEO John Gibson stated that Paycor's growth is expected to be high single-digit to low double-digit, acknowledging similar trends of lower attachment and average deal size. He emphasized that Paycor is now integrated into Paychex's enterprise segment, making precise standalone tracking difficult due to cross-selling and client platform movements. Gibson confirmed that the softer trends in managed services are entirely macro-driven, with clients being cost-conscious and choosing lower-tier bundles, rather than competitive pressures.

Bryan Keane followed up on Paycor's growth, asking if it should still be modeled as a low double-digit grower or closer to the 8-9% range. He also inquired whether the softness in Management Solutions (smaller deal sizes, less attachment, softer HR rates) was macro-driven or due to competitive factors.

Answer

CEO John Gibson stated that while Paycor's growth was impacted by similar trends of softer revenue per client and lower average deal size, he still expects it to be high single-digit to low double-digit growth moving forward. He emphasized the complexity of tracking Paycor's standalone growth due to integration, cross-selling, and client platform migrations. Regarding Management Solutions, Mr. Gibson confirmed that the trends were entirely macro-driven, with no competitive factors observed. He noted that clients across all segments are being cost-conscious, opting for lower-tier bundles or fewer add-ons, indicating a market of 'shoppers' focused on managing expenses.

Bryan Keane sought details on the source of the additional cost synergies from the Paycor acquisition and the potential magnitude of the accretion for fiscal year 2026.

Answer

CEO John Gibson explained that synergies come from redundancies between the two public companies, including vendor spend, leveraging scale, and adopting best practices from each other. Executive Robert Schrader reiterated that while they are now more confident the deal will be accretive to adjusted EPS next year, up from neutral to slightly accretive, they are not ready to size the opportunity and will provide an update in Q4.

Bryan Keane asked about trends in new business starts and the specific factors driving strong sales activity in the mid-market HCM business.

Answer

CEO John Gibson reported that new business starts are down year-over-year but remain above pre-pandemic levels, with access to capital and labor as the main constraints. He attributed mid-market HCM strength to a combination of product investments like Paychex Flex Engage, a resonating HR outsourcing value proposition, and capitalizing on competitive disruption in the market.

Speaking for Bryan Keane, Nick Svenson asked about the company's confidence in achieving significant back-half margin expansion given the Q2 guidance, and inquired about traction from the updated go-to-market strategy.

Answer

Executive Robert Schrader explained that the apparent margin ramp is due to easing year-over-year comparisons as the ERTC headwind subsides, noting that underlying margin expansion is consistent. CEO John Gibson expressed pleasure with the results from the go-to-market transformation, citing a new tech stack and refined segmentation. He stated that given the success of these pilots, the company is accelerating sales hiring into the selling season.

Bryan Keane inquired about the outlook for discretionary spending, client conversations regarding its return, and whether there's hope for a rebound in the calendar year. He also asked if the 60% fixed-price work, which increased by 10 points in three years, could reach 70-80% with AI, and how pricing works with productivity to pass on savings while retaining some for Accenture.

Answer

Julie Sweet, Chair and Chief Executive Officer, stated that Accenture is not waiting for discretionary spending to return, as the market hasn't changed, and no catalyst is foreseen. She emphasized that clients are resolute in delivering results despite the market, focusing on large transformational deals. Regarding fixed-price work, Ms. Sweet highlighted it as a competitive advantage, reflecting client confidence in outcomes. She noted that commercial models will continue to evolve, with a growing focus on outcome-based approaches, and that the industry's business model has long involved using technology for productivity gains.

Bryan Keane from Citi inquired about Accenture's outlook for discretionary client spending in the upcoming year and the nature of client conversations regarding this. He also asked about the potential for fixed-price work to increase to 70-80% with AI adoption and how productivity savings are managed with pricing.

Answer

Julie Sweet, Chair and CEO, stated that Accenture is not anticipating a change in discretionary spending, as market conditions and client confidence remain consistent. She emphasized that clients are resolute in delivering results despite the market, focusing on large transformational deals. Sweet also explained that fixed-price deals are a competitive advantage, reflecting client confidence in outcome delivery, and that the commercial model involves using technology for productivity, a long-standing industry practice.

Bryan Keane asked for color on how client budget conversations changed from early 2025 to March and questioned the drivers behind the implied Q4 revenue outlook.

Answer

CEO Julie T. Sweet stated that calendar year budgets showed 'more of the same' with discretionary spending still constrained. CFO Angie Park confirmed the Q4 outlook implies a wider range due to elevated uncertainty and a lower inorganic contribution in the second half, leading to an expected 2-4% organic growth for the full year. Park also noted the high end of guidance does not assume an improvement in discretionary spend.

Bryan Keane questioned the potential for growth deceleration, noting that the full-year revenue guidance of 4-7% is slightly below the 8% growth achieved in Q1. He also asked for an update on the Financial Services industry group, citing mixed signals in the market, particularly around Banking & Capital Markets.

Answer

CFO Angie Park explained the full-year guidance reflects a strong start but also considers the unchanged macro environment and the cadence of inorganic contributions, which are expected to be higher in H1 (around 4%) than H2 (around 2%). CEO Julie T. Sweet addressed Financial Services, noting a mixed picture by region, with the U.S. market being slightly better than EMEA. She stated that while interest in AI is high, uncertainty around interest rates is causing a mixed outlook. Park added that Financial Services grew 4% globally in Q1, an improvement from a 2% decline in Q4.

Bryan Keane asked about the cadence of GenAI bookings and sought clarification on the fiscal 2025 guidance, questioning why the low end implies flat organic growth despite recent momentum.

Answer

CEO Julie T. Sweet stated that GenAI bookings reached $3 billion for the year and she expects another healthy increase in fiscal 2025 as clients move from proofs-of-concept to larger implementations. Regarding guidance, Sweet explained that the low end of the range is designed to accommodate a potential deterioration in the discretionary spending environment, while the high end reflects a continuation of current trends.

Bryan Keane asked about the pipeline for new business and ramping contracts, and how the outsized growth in areas like Buy Now, Pay Later impacts guidance and the company's normalized growth rate. He also inquired about TransactPay's role in developing the European market, particularly for existing customer expansion, and its potential impact.

Answer

CEO and CFO Michael Milotich clarified that new business includes new programs from both existing and new customers, with new cohort programs launched since 2024 expected to contribute over $40 million in revenue in 2025. He acknowledged the complexity of forecasting due to the significant ramp in Buy Now, Pay Later, especially in Q4, but expressed confidence in their projection ability. Regarding TransactPay, Michael Milotich explained it simplifies transatlantic expansion for customers by offering comparable program management services to North America. It also enables Marqeta to compete for larger enterprise customers seeking a single partner for processing, program management, and EMI licenses, a market segment previously inaccessible.

Bryan Keane asked for Global Payments' perspective on a peer's reduced guidance, which cited unsustainable short-term revenues, inquiring if such practices are common, about Global Payments' yields versus volume, and potential competitive takeaways.

Answer

CEO Cameron Bready declined to comment extensively on a competitor's specific issues, stating his focus is on Global Payments' execution and that the peer's challenges appeared idiosyncratic to a specific international market. He expressed strong satisfaction with Global Payments' transformation, Genius momentum, sales effectiveness, and technology strategy. He emphasized the Worldpay acquisition as a catalyst to become a pure-play merchant solutions provider with unmatched global scale, driving sustainable growth, innovation, and significant cash flow.

Bryan Keane asked about a peer's reduced guidance, specifically regarding 'unsustainable short-term revenues,' whether this is common industry practice, Global Payments' yields versus volume, and potential competitive takeaways.

Answer

Cameron Bready (CEO, Global Payments) declined to comment on competitors, emphasizing Global Payments' strong transformation progress, Genius success, sales effectiveness, and technology strategy. He highlighted the WorldPay acquisition as a catalyst for sustainable growth, unmatched global scale, and significant cash flow generation.

Bryan Keane asked about the revenue growth rate of the divested AdvancedMD business and whether other software assets might be sold. He also questioned what factors would cause the Core Payments business to slow from mid-single-digit to low-single-digit growth next year.

Answer

CEO Cameron Bready stated AdvancedMD was growing in the high single-digit range and confirmed more divestitures are planned to meet the company's strategic goals. For the Core Payments slowdown, Bready cited the macro environment, the planned exit of certain non-strategic activities, and distribution realignments, such as changes to sales compensation programs, as key factors.

Bryan Keane asked how Mastercard plans to gain market share in agentic commerce, detailing its differentiation against competitors, who it expects to take share from, and requested quantification of the Capital One debit migration impact for 2025, 2026, and 2027.

Answer

CEO Michael Miebach explained that Mastercard's differentiated proposition and partnerships position it well to compete against local payment networks, driving up its switching ratio. He sees agentic commerce as an opportunity to increase transaction multiplicity and apply a broader range of services for safety and security. CFO Sachin Mehra clarified that the Capital One debit migration is expected to be complete in 2026, with associated net revenue loss in 2026 and a further adverse impact in 2027 as contractual offsets expire. He did not provide specific quantification but confirmed the headwind.

Bryan Keane asked how Mastercard can gain share in agentic commerce, its differentiation versus competition, who it would take share from, and sought clarification on the Capital One debit migration's quantification for 2025, 2026, and 2027.

Answer

CEO Michael Miebach stated that Mastercard's differentiated proposition and ability to compete against local payment networks in agentic commerce offer a share-driving opportunity, highlighting potential for increased transaction multiplicity and enhanced services. CFO Sachin Mehra clarified that the Capital One debit migration's conversion is expected to complete in 2026, with an adverse net revenue impact in 2026 (partially offset by contractual obligations) and a further adverse impact in 2027 as those obligations cease.

Bryan Keane from Deutsche Bank questioned why net revenue growth accelerated to 17% in Q1 from 16% in Q4, despite a volume slowdown, and asked if the drivers of this strength would persist into Q2.

Answer

CFO Sachin Mehra attributed the Q1 outperformance to two main factors: higher-than-expected FX volatility and lower-than-anticipated rebates and incentives, which he views as a timing issue. For Q2, he cautioned that the company faces headwinds from lapping prior-year wins and pricing actions, and noted the unpredictability of FX volatility, all of which are factored into the provided guidance.

Bryan Keane from Deutsche Bank questioned the current competitive landscape, asking if rebates and incentives are on the rise.

Answer

Chief Financial Officer Sachin Mehra and CEO Michael Miebach both stated that while the market remains competitive, the environment is not vastly different from recent years. They emphasized that incentives are a necessary tool for winning volume, but their focus remains on financial discipline and optimizing the net revenue yield, meaning they do not pursue every deal.

Bryan Keane asked about Visa's expectations for holiday sales growth this year compared to last, and the differentiated trends in cross-border growth between e-commerce and travel.

Answer

Chris Suh, Visa's Chief Financial Officer, anticipated a strong Q1 (the holiday quarter) driven by resilient consumer spending and a stable macro environment. For cross-border, he noted stable overall growth at 11%, with e-commerce growing faster at 13% compared to travel, and e-commerce now constituting a larger portion (40%) of total cross-border volume than pre-COVID levels.

Bryan Keane asked about Visa's expectations for holiday sales growth in the upcoming fiscal Q1 compared to the previous year, and for insights into the differentiation and trend lines of cross-border growth, specifically between e-commerce and travel, throughout the fiscal year.

Answer

CFO Chris Suh anticipated a strong fiscal Q1 (holiday quarter) driven by current momentum, stable underlying drivers, and pricing benefits. He noted stable cross-border growth, with e-commerce consistently strong at 13% and now representing 40% of total cross-border volume, growing faster than travel and remaining above pre-COVID trends.

Bryan Keane of Deutsche Bank asked for details on the observed weakness in entertainment spending, its specific areas, and its relation to trends among different affluent consumer groups.

Answer

CFO Chris Suh clarified that while there were some puts and takes within categories, such as travel and entertainment, overall discretionary and non-discretionary spending remains strong and healthy. He noted that while higher-spending consumer bands are growing faster, the quarter-over-quarter performance across all bands has remained stable and consistent.

Bryan Keane asked about the new partnership with X Money, inquiring about the implementation timeline, the potential for volume ramp-up, and the economic model, which he assumed was based on Visa Direct.

Answer

Ryan McInerney, Chief Executive Officer, confirmed the partnership is built on the Visa Direct platform. It will enable X users to fund their wallets and transfer money to their bank accounts, and allow creators on the platform to receive payouts. He positioned it as another key win with a major technology platform but did not provide specific details on implementation timing or volume projections.

Bryan Keane asked about the drivers behind the pickup in October volume growth, particularly in debit, and the reason for the change in timing for pricing initiatives in fiscal 2025.

Answer

CFO Chris Suh attributed the strong October start to favorable days mix and lapping the initial Reg II impact. CEO Ryan McInerney explained that the pricing cadence is more back-half weighted in FY25 because it is tied to the delivery of new products and services, which are scheduled for later in the year.

Bryan Keane asked about the delta between the 12% transaction growth and 6% revenue growth in the digital business, seeking clarification on why revenue growth didn't accelerate with transactions. He also followed up on the expectation for slight improvement in retail in Q4, asking if it's macro-driven or due to specific company actions.

Answer

CFO Matt Cagwin explained that the acceleration in digital transactions was largely due to new account-to-account partnerships in the Middle East, which typically have a lower revenue per transaction (RPT). CEO Devin McGranahan added that aggressive new customer pricing in the market also contributes to revenue degradation relative to transaction growth. For retail improvement, Matt Cagwin cited easier comps in LATA and recent agent wins, while Devin McGranahan highlighted the implementation of successful European go-to-market strategies in the U.S. and the anticipated integration with Intermex.

Bryan Keane asked why digital transaction growth (12%) outpaced revenue growth (6%) in the quarter and then followed up on whether the projected slight improvement in retail for Q4 is macro-driven or due to specific company actions.

Answer

Matt Cagwin (CFO) explained that the acceleration in digital transactions was largely due to Middle East partnerships focused on lower RPT account-to-account payouts. Devin McGranahan (CEO) added that new customer growth, often with promotional pricing, can cause a degradation in revenue relative to transaction growth. For retail, Matt Cagwin cited easier comps in LACA and agent wins, while Devin McGranahan mentioned implementing successful European go-to-market models in the U.S. and the anticipated acceleration from Intermex integration.

Bryan Keane asked about the potential impact of tariffs on the business and sought clarification on the comment that more operating expense savings would drop to the bottom line, questioning if this marked a change in philosophy from reinvestment.

Answer

CEO Devin McGranahan expressed confidence in customer resilience against potential tariff impacts, noting that the core need to send money home persists, similar to how customers weathered high inflation. CFO Matt Cagwin clarified that allowing more opex savings to flow to the bottom line is a tactical decision for 2025 to navigate a tougher revenue environment (partly due to Iraq headwinds) and meet EPS commitments. He stated it's not a long-term change in philosophy, as significant investments in new products have already been made.

Bryan Keane asked why the company did not narrow its full-year adjusted operating margin guidance range of 19% to 21%, given the year-to-date performance of 19.2%.

Answer

CFO Matt Cagwin responded that reaching the high end of the range is unlikely and that the company has not adjusted the 200-basis-point range since it was initially set. He stated that the primary focus remains on delivering the overall revenue and EPS targets and driving sustainable growth, rather than fine-tuning that specific guidance metric.

Bryan Keane asked CEO Ravi Kumar S about the sustainability of Cognizant's 'Winner Circle' status and the factors that would allow it to maintain top-tier growth. He also questioned CFO Jatin Dalal about the implied organic growth deceleration in Q2 and the widening gap between revenue growth and headcount.

Answer

CEO Ravi Kumar S responded that consistency is key to staying in the 'Winner's Circle' and expressed confidence that the company's broad-based portfolio—spanning four service pillars, multiple industries, and expanding geographies—provides the resilience to sustain performance. CFO Jatin Dalal confirmed the Q2 guidance reflects the April macro uncertainty. He explained the revenue-headcount gap by highlighting that Cognizant delivered 4% organic growth despite a net reduction of approximately 14,000 employees year-over-year (adjusted for Belcan), which was achieved through significant improvements in utilization and productivity.

Bryan Keane sought confirmation that Cognizant is using GenAI to price more competitively, displace incumbents, and pass on productivity gains. He also questioned the potential deflationary impact on the industry and asked for an estimate of the savings.

Answer

CEO Ravi Kumar S affirmed this strategy, calling the sharing of AI-led productivity a 'mainstream model' for winning large deals. He countered the deflationary argument by highlighting the elasticity of tech spend, where lower costs enable CIOs to clear backlogs and do more work. He declined to provide a specific savings percentage, stating it varies significantly based on the project, competitive environment, and client maturity.

Bryan Keane asked about the market dynamics driving the significant increase in new financial institution (FI) merchant referral partnerships, wondering why so many FIs are making this decision now.

Answer

CFO Robert Hau explained that banks are increasingly focused on serving their small business customers, and Fiserv's product suite, particularly Clover, helps them achieve this goal. He highlighted integrated solutions like CashFlow Central, which solves a critical AP/AR need for SMBs, as a key differentiator that makes Fiserv an attractive partner. He also noted that the pipeline for new bank partners remains very strong.

Bryan Keane sought clarification on the 2025 outlook, asking for the implied volume growth rate excluding political revenue and the expected trajectory for the payment revenue take rate as a percentage of TPV.

Answer

CFO Joel Wilhite explained that the 2025 guidance implies around 8% growth at the midpoint after excluding political and float revenue. He noted that both total transaction yield and TPV yield have been moving in the right direction. He expressed confidence in the ability to expand monetization through 2025, driven by the shift to e-payments and the scaling of Payment Accelerator, building on an already industry-leading TPV yield of around 32 bps.

Bryan Keane asked for clarification on the implied 2025 volume growth excluding political revenue and the impact of macro headwinds. He also inquired about the expected trajectory for the payment revenue take rate as a percentage of TPV, excluding float.

Answer

CFO Joel Wilhite clarified that the guidance implies around 8% growth at the midpoint, excluding political and float revenue. He noted that both total transaction yield and TPV yield have been trending positively, and the company is confident in its ability to continue expanding monetization in 2025 through pricing strategies and a favorable shift to e-payments.

Bryan Keane questioned the implied Q4 revenue growth guidance of 9-11%, which is a deceleration from the 14%+ growth reported in Q3, and asked for the contributing factors.

Answer

CFO Joel Wilhite explained that the revised full-year guidance primarily reflects the carry-through of the Q3 outperformance, excluding political and float revenue. He attributed the sequential slowdown from Q3 to Q4 to typical seasonality, stating that the pattern is consistent with the trends observed in 2022 and 2023.

Bryan Keane asked if AvidXchange has levers to accelerate transaction growth or if growth is entirely dependent on the macroeconomic environment.

Answer

CEO Michael Praeger explained that while influencing existing customer spend is difficult in the short term, the company can drive new transaction growth. He highlighted the launch and ramp-up of new strategic partnerships, such as those with AppFolio and M3, as key strategies being deployed to add new transaction volumes to the platform.

Bryan Keane asked about the significant increase in the 2025 adjusted EBITDA margin expansion guidance compared to comments made late in Q4, and also inquired about the ongoing impact of the September 2024 pricing changes.

Answer

CFO Elena Gomez explained that the initial commentary was made before the 2025 planning process was complete, and the final guidance reflects better visibility. She reiterated that the pricing strategy is one of small, ongoing, gradual adjustments across both SaaS and fintech, which is factored into the guide, rather than a large one-time benefit that will create a significant lap.

Bryan Keane questioned why the Q3 core revenue growth guidance of 13-15% implies a deceleration from Q2's 16% despite expected monetization improvements, and why the full-year guidance was slightly reduced at the high end.

Answer

CFO John Rettig clarified that the company was effectively reaffirming the midpoint of its full-year core revenue guidance. The sequential change reflects a rebalancing of growth expectations between Q3 and Q4, with Q4 now anticipated to be stronger. He explained that the tightening of the full-year range is a normal adjustment as the fiscal year progresses.

Bryan Keane inquired about the expected cadence for the transaction take rate for the remainder of the fiscal year and the drivers for the anticipated pickup in the second half. He also asked about expectations for new client growth.

Answer

President and CFO John Rettig stated that transaction monetization should be stable in Q2, with a modest increase expected in the second half of the year as ad valorem payment volumes grow. He pointed out that transaction revenue per transaction for AP/AR was already up 5% year-over-year. Chairman, CEO and Founder René Lacerte addressed client growth, emphasizing a strong focus across direct, accountant, and partner channels and noting the significant opportunity given that BILL has only penetrated 4% of its target SMB market.

Bryan Keane questioned the source of management's confidence in an improved payment penetration rate in the second half of the year, specifically asking if virtual card and cross-border payments would rebound. He also asked if the FY26 20% core revenue growth target assumes a return to "normal" take rate expansion.

Answer

CFO John Rettig expressed confidence based on upcoming product improvements and new offerings that will drive ad valorem adoption. For the FY26 target, he explained that while improved monetization is a factor, it's not the sole driver. Significant growth is also expected from the Spend & Expense product and the broader proliferation of card payments across the BILL ecosystem.

Bryan Keane asked for a reconciliation of DXC's Q3 organic growth outperformance with the weaker Q4 guidance, especially given strong bookings, and questioned the drivers of the sequential decline in adjusted EBIT margin.

Answer

CFO Rob Del Bene explained that the Q4 revenue guidance reflects a drag from weak bookings in the first half of the fiscal year, as the recent strong bookings take time to convert to revenue. For margins, he noted Q3 benefited from a one-time equity compensation reversal and that the Q4 decline is driven by lower sequential revenue and the full quarterly impact of employee merit increases.

Bryan Keane asked about the Q4 revenue contribution from recent acquisitions and which specific industry verticals are showing signs of recovery.

Answer

CFO Juan Urthiague identified Travel & Hospitality and Consumer Retail & Manufacturing as strong performers, with improvements in BFSI and a decent quarter for the previously struggling Technology and Professional Services verticals. He clarified that M&A is expected to contribute about 4 percentage points to the constant currency growth rate in Q4.

Bryan Keane asked for the percentage of revenue from Gen AI, an update on market pricing, and the expected revenue contribution from acquisitions for the quarter and full year.

Answer

CFO Mark Thurston stated that overall pricing remains stable and competitive. He explained that the company does not quantify AI revenue separately, as it is an embedded technology within broader client solutions. For acquisitions, he confirmed the contribution was 13% of revenue in Q1 and is expected to be the same in Q2, with the full-year M&A contribution outlook remaining unchanged.

Bryan Keane of Deutsche Bank inquired about the timeline for Generative AI to become a material revenue contributor and the key leading indicators to monitor. He also asked for an analysis of the broader payments market's softness and its anticipated impact in fiscal 2025.

Answer

CEO John Cotterell responded that the key lead indicator is the progression of their own sales pipeline. He explained that the engineering complexity of implementing GenAI, often requiring core modernization, results in large projects with long sales cycles, and he does not expect a return to 20%+ growth in FY25. Regarding payments, he noted Endava is now less exposed (19% of revenue), and the top clients are resilient. He attributed market softness to increased competition for payment processors, which pressures their margins and investment capacity.

Bryan Keane of Deutsche Bank asked about trends in revenue per head, the hiring outlook for Q4, and whether there was a pickup in European hiring. He also questioned the slightly weaker organic guidance for Q4 compared to Q3's performance, asking about contributing factors like seasonality or conservatism.

Answer

CFO Jason Peterson confirmed that headcount increased in Q3 and is expected to do so again in Q4, noting that hiring is now broadening globally beyond just India and Latin America to include Eastern Europe and Western Asia. Regarding Q4 guidance, Peterson attributed the sequential organic decline primarily to seasonality, including more holidays and vacation time, but highlighted that the standalone Q4 outlook is stronger than previously expected.

Bryan Keane asked how the 6% branded checkout growth rate compares to the broader e-commerce market and what growth rate the company believes is achievable with new initiatives like Fastlane and improved checkout.

Answer

CEO Alex Chriss stated that branded checkout has been very consistent and that PayPal maintains the largest share of branded checkout globally. He expressed confidence that innovations in the checkout experience, combined with initiatives like Fastlane and PayPal Everywhere that create a habituation flywheel, provide an opportunity to continue improving and taking share. He emphasized that while it won't happen overnight, the flywheel is turning.

Asked about the sustainability of their market share gains in acquiring TPV, especially with tougher comps ahead, and inquired about their M&A pipeline and what types of assets they might look to add.

Answer

The company believes its TPV growth is sustainable due to a strong, differentiated value proposition combining banking and acquiring, which they will continue to build upon with new products. On M&A, they are actively looking for opportunities, both for acquiring talent/products ('acquihire') and for financial accretion, but have nothing specific to announce.