Ramsey El-Assal

Ramsey El-Assal asked for an overview of current consumer trends, credit trends, and overall economic health, including observations from the quarter-to-date.

Answer

Max Levchin, Founder and CEO of Affirm Holdings, stated that the consumer Affirm sees is quite healthy, able and willing to repay, and borrowing money. He reported no dramatic deviations in the current quarter compared to the previous one.

Ramsey El-Assal inquired about current consumer trends, credit health, overall economic conditions, and observations quarter-to-date.

Answer

Max Levchin, Founder and CEO, reported that Affirm's consumers are healthy, willing, and able to repay loans. He noted strong borrowing demand and no significant deviation in trends quarter-to-date.

Ramsey El-Assal of Barclays inquired about the new online partnership with Costco, asking about its potential impact and timing, and also asked if the Shopify renewal involved any economic concessions.

Answer

CEO Max Levchin expressed excitement about the Costco partnership but declined to provide a specific timeline or financial impact. Regarding the Shopify renewal, he confirmed there were no economic concessions, with the only change being an elongation of the amortization period for the warrants issued in the original agreement.

Ramsey El-Assal inquired about the strategy behind the noticeable increase in 0% APR loans and asked how Affirm plans to reinvest its excess Revenue Less Transaction Costs (RLTC) margin.

Answer

CEO Max Levchin explained that the 0% loan growth is a broad-based strategy involving both new and existing merchants, who use these promotions to drive growth without compromising price integrity. He highlighted the syndication of these offers across the Affirm network (app, card, wallets). CFO Robert O'Hare added that reinvesting excess RLTC involves leaning into and sometimes subsidizing these 0% programs, which can be slightly margin dilutive but beneficial for network growth and attracting a broader consumer base.

Ramsey El-Assal asked about the key factors influencing Revenue Less Transaction Costs (RLTC) for fiscal 2025, particularly after a strong Q4 performance that included a nonrecurring benefit.

Answer

CFO Michael Linford clarified that Q4's RLTC was boosted by a non-recurring securitization. For fiscal 2025, he identified the primary variables as the mix of business originated and execution in the capital markets. He noted the company is guiding for a 10 basis point expansion in RLTC as a percentage of GMV for the year, driven by improved access to attractive capital.

Ramsey El-Assal asked for details on the new Costco online partnership, including timing and potential impact, and inquired about any P&L effects from the recent Shopify partnership renewal.

Answer

CEO Max Levchin expressed excitement for the Costco partnership but did not provide a specific timeline or financial forecast, noting it will take time to scale. On the Shopify renewal, he confirmed there were no economic concessions. The only financial impact is a longer amortization period for the warrants previously issued to Shopify, which he characterized as a minor adjustment.

Ramsey El-Assal inquired about any potential tailwinds or impacts on WEX's Benefits segment from political or policy changes, such as the lapsing of Affordable Care Act coverage, and whether these were factored into the company's guidance.

Answer

Melissa Smith, Chair and CEO, WEX, indicated a positive environment for tax-deferred assets like HSAs due to ongoing legislative interest, which is likely a tailwind but not included in current guidance. She noted no significant impact from the 'big beautiful bill' yet, attributing it to the time needed for consumer education.

Ramsey El-Assal asked about the reasons behind the elevated credit losses expected in the first quarter compared to the rest of the year, seeking specific factors contributing to this trend.

Answer

Jagtar Narula (CFO, WEX) attributed the elevated Q1 credit losses primarily to the six-month lag for late payments to be written off, meaning higher-value receivables from when fuel prices were higher are now being written off against lower current fuel prices. A secondary, smaller reason was elevated credit losses from specific offers tested in the second half of last year, which have since been pulled. He reiterated confidence in the portfolio's credit quality due to AI and analytics investments.

Ramsey El-Assal inquired about credit quality, asking if the Mobility segment is better positioned for a downturn now versus prior cycles and how credit risk compares between the Mobility and Corporate Payments segments.

Answer

CEO Melissa Smith agreed that the company is much better positioned on credit risk than in the 2008 cycle, citing significant investments in proprietary credit and fraud tools. She explained that across the portfolio, including OTR and online travel customers who pay rapidly, the company has used these tools to balance risk, stating she wouldn't call out any single area as being significantly riskier than another.

Ramsey El-Assal requested more color on temporary volume reductions from two large customers and asked how M&A and potential divestitures fit into WEX's growth acceleration strategy.

Answer

CEO Melissa Smith clarified the volume shifts were temporary actions by customers to meet commitments with other providers and that one contract was recently renewed. She emphasized the integrated nature of WEX's technology platform, where scale from travel benefits other payment offerings, making divestitures strategically illogical.

Ramsey El-Assal asked if the delayed revenue in the Benefits segment, caused by later-than-expected client onboarding, would be recognized in future quarters. He also inquired about the impact of extra billing days on the quarter's results.

Answer

CEO Melissa Smith confirmed that the delayed revenue is expected to flow into future periods, as the issue is one of implementation timing, not lost bookings for the year. CFO Jagtar Narula clarified that the Mobility segment had approximately 3% more fueling days in Q3 year-over-year, whereas Q4 is expected to have a flat number of days compared to the prior year.

Ramsey El-Assal asked about the conversion timing of sales bookings to revenue, specifically whether it has changed with Corpay's shift towards more corporate payments. He also sought an update on stablecoin market demand and Corpay's capabilities being built to accommodate stablecoins.

Answer

CEO Ronald Clarke explained that conversion timing varies by business, with payables being slower and cross-border faster; overall, about one-third of bookings convert to revenue in the current year. He reported 'crickets' in terms of stablecoin demand from clients but confirmed Corpay is proactively serving crypto clients, piloting blockchain rails, and building companion stablecoin digital wallets.

Ramsey El-Assal inquired about how the conversion timing of sales bookings to revenue has changed with Corpay's shift towards more corporate payments, and he also asked for an update on stablecoin demand in the marketplace and Corpay's capabilities.

Answer

Ron Clarke, Chairman and CEO, explained that the conversion timing varies by business, with payables having a slower cycle and cross-border being much faster. He provided a general model where about one-third of bookings convert to revenue in the current year, with the remaining two-thirds ramping in the following year. Regarding stablecoins, Ron Clarke noted a lack of demand from merchants, deposit holders, or beneficiaries for companion stablecoin wallets. Despite this, Corpay is serving crypto clients, piloting blockchain rails for treasury, and building stablecoin digital wallets to offer clients the option to receive funds outside banking hours and toggle into fiat accounts.

Ramsey El-Assal asked about the drivers behind the strong retention rate in the quarter and whether the mix shift towards high-retention Corporate Payments could lead to a structural increase over time. He also requested an update on the progress of the Gift card business's tamper-proof packaging reissuance cycle.

Answer

President, Chairman & CEO Ronald Clarke attributed the improved retention to both the mix shift to Corporate Payments and, importantly, better retention in the U.S. Vehicle business due to acquiring larger clients. While acknowledging a structural lift is possible, he emphasized that new sales are the primary driver of overall growth. Regarding the Gift segment, he noted performance is the best in years, driven by the packaging upgrade and strong new sales, with good growth expected to continue in the second half.

Ramsey El-Assal asked about the drivers behind the strong retention rate in the quarter and whether the mix shift towards higher-retention Corporate Payments could structurally lift the overall company rate over time. He also requested an update on the progress of the gift card reissuance cycle.

Answer

President, Chairman & CEO, Ronald Clarke, attributed the improved retention to both the mix shift to Corporate Payments and, significantly, better retention in U.S. Vehicle due to acquiring larger clients. While acknowledging a structural lift is possible, he emphasized that new sales are the primary driver of overall growth. He noted the gift business is performing very well, expecting mid-teens growth for the year driven by both the tamper-proof packaging cycle and strong new sales.

Ramsey El-Assal inquired about PayPal's confidence in its modern online checkout strategy, specifically addressing the challenge of merchant engagement and implementation, and what actions (e.g., incentives, competition) PayPal can take to drive adoption.

Answer

Jamie Miller, Executive VP and CFO, explained that engaging merchants involves varied strategies, from driving integrations and combining biometrics/passkey to upstream Buy Now, Pay Later presentment and co-marketing. She noted a shift to dedicated teams for high-impact merchants, emphasizing that a combination of these elements drives significantly higher performance, as observed during the holiday season.

Ramsey El-Assal inquired about PayPal's confidence in its modern online checkout strategy and how the company plans to incentivize merchants to adopt and implement the offering, considering potential competitive factors.

Answer

Jamie Miller (Executive VP and CFO, PayPal) stated that engaging merchants involves varied strategies, from driving integrations and biometric adoption to upstream Buy Now, Pay Later presentment and co-marketing. She emphasized focusing on high-impact merchants with dedicated teams for aggressive upstream presentment and combined experience/biometric deployment, noting that this combination drives markedly higher performance.

Ramsey El-Assal from Barclays asked about the slight deceleration in branded online checkout TPV, questioning the specific impact from tariffs and whether that headwind was stabilizing.

Answer

President, CEO & Director Alex Chriss stated that without the tariff-related pressure from Asia-based platforms, branded checkout growth would have been 6%. COO & CFO Jamie Miller added that while underlying trends are consistent, they observed a slight deceleration in China-to-U.S. corridors but saw less pressure in July. She affirmed the company is on track for its full-year branded checkout growth target.

Ramsey El-Assal asked about the potential impact from the scheduled elimination of the de minimis tariff exemption for goods imported from China.

Answer

CFO and COO Jamie Miller stated that PayPal is well-positioned due to its global diversification across merchants and regions. She quantified the direct exposure by noting that Chinese merchants selling into the U.S. account for less than 2% of PayPal's branded checkout TPV, suggesting a manageable direct impact.

Ramsey El-Assal asked for an update on the strategy and timeline to reaccelerate unbranded (Braintree) volume growth following the intentional shift to prioritize profitability.

Answer

CEO Alex Chriss described how conversations with merchants are now more strategic, focusing on value-added services and leveraging PayPal's two-sided network. CFO Jamie Miller noted that while some volatility will persist, the revenue growth headwind from renegotiations is expected to be about 5 points in 2025, but will be over 1 point accretive to transaction margin dollars.

Ramsey El-Assal asked for an update on the monetization strategy for Fastlane, given the larger sample size of merchants, and how its take rate might compare to average unbranded volume.

Answer

CEO Alex Chriss stated that the current focus for Fastlane is driving adoption across merchants and processors, not immediate monetization. He emphasized that the priority is improving conversion for the 60% of e-commerce that is guest checkout. CFO Jamie Miller added that while pricing is built into contracts and partner arrangements, it will take time for Fastlane's economic impact to ramp and become visible in the financial results through 2025.

Ramsey El-Assal of Cantor Fitzgerald asked about Visa's stablecoin commentary, specifically the rapidly growing $4.6 billion settlement run rate. He questioned whether future growth in stablecoin flows would primarily relate to consumer retail payments or disbursements and money movement. He also sought clarification from Chris Suh on what 'mix' meant regarding pressure on cross-border revenues.

Answer

Ryan McInerney, Visa's Chief Executive Officer, clarified that the bigger opportunity lies in disbursements and money movement, particularly in countries with high currency volatility or limited USD access, and for cross-border remittances and B2B/B2C payments. He noted significant interest in stablecoin settlement on Visa's network for 7-day-a-week settlement and improved liquidity, but sees less product market fit for consumer retail payments in digitally developed markets like the U.S. Chris Suh, Visa's Chief Financial Officer, explained that 'mix' refers to the composition of yields across the business, where different clients, products, and regions have varying yields. He cited Visa Direct's faster growth in cross-border transactions, despite typically having a lower yield than carded transactions, as an example of a factor that can mix the overall yield down.

Ramsey El-Assal from Barclays asked about the demand for stablecoin settlements and payments, wondering if an inflection point is approaching and what feedback Visa is receiving from clients.

Answer

CEO Ryan McInerney described the stablecoin space as being in its early days but having real potential. While the $200 million settlement milestone is significant, it's a very small part of overall volume. He expressed optimism that clearer regulations could be a tipping point and noted that Visa is exploring a broader set of stablecoin products and partnerships beyond just settlement.

Ramsey El-Assal asked for an update on the competitive environment, specifically concerning the rise of 'pay by bank' solutions and whether recent developments make them a more significant factor.

Answer

CEO Ryan McInerney explained that account-to-account payments are not a new phenomenon and that Visa expects them to proliferate. He expressed confidence that Visa can add significant value to this space through its brand, security, and infrastructure, highlighting the launch of Visa A2A.

Ramsey El-Assal from Cantor Fitzgerald asked for Mastercard's perspective on the health of the consumer, current spending patterns, and any notable changes or interesting callouts, including the impact of tariff changes and spending across different income bands.

Answer

Michael Miebach, CEO of Mastercard, described consumers as savvy and intentional, consistently using digital tools and loyalty programs to optimize spending, a trend that continued throughout 2025. He noted no discernible impact from tariff changes on consumer spending and observed healthy spending across both higher and lower-income bands, supported by a strong job market and wealth effects.

Ramsey El-Assal requested Mastercard's perspective on the overall health of the consumer, inquiring about any changing patterns or interesting callouts despite mixed media and political signals.

Answer

Michael Miebach (CEO) characterized the consumer as 'savvy and intentional,' consistently spending despite fluctuating confidence data. He noted no discernible impact from tariff changes or significant shifts in spending patterns across different income bands, attributing sustained spending to a healthy job market and wealth effect. He confirmed that healthy consumer spending trends continued into January 2026.

Ramsey El-Assal asked for management's view on the potential impacts of the new political environment, including policy changes and how widespread tariffs might affect the business.

Answer

CEO Michael Miebach expressed confidence that payments will continue to grow due to the secular shift to digital, regardless of political changes. He noted a business-friendly U.S. administration is fundamentally positive. On tariffs, he stated the impact would be indirect, as Mastercard is not in the import/export industry, and would depend on how its customers are affected. He highlighted the ongoing importance of digital trade policy.

Ramsey El-Assal of Barclays asked for a reaction to the DOJ's antitrust lawsuit against Visa and whether it could create a market share opportunity for Mastercard.

Answer

Chief Executive Officer Michael Miebach declined to comment on the specific allegations but emphasized that Mastercard's strategy is to compete and win by offering superior products, solutions, and choice. He stated that the company sees tremendous opportunity for growth based on its own merits, independent of any legal situations involving competitors.

Ramsey El-Assal followed up on margin cadence, asking about management's confidence in achieving targets deeper in the year, especially given Q4 is typically a lower margin quarter, and if there are any underappreciated levers. He also asked about the current pricing environment and its expected contribution to the numbers.

Answer

Peter Hadley, CFO, expressed confidence in the reiterated margin expansion range, citing strong underlying margin contribution from revenue growth and diligent cost management. He acknowledged the short portfolio dynamic impacting Q3's year-over-year comparison but emphasized that underlying margin expansion continues. Regarding pricing, he stated the environment is consistent, with thoughtful pricing generally well-received, and expects approximately 100 basis points of contribution from price in fiscal 2026, slightly lower than fiscal 2025 but higher than pre-pandemic levels.

Ramsey El-Assal asked about ADP's confidence in achieving its margin expansion targets in the second half of the year, given several moving parts and Q4 typically being a lower margin quarter. He also inquired about the current pricing environment, ADP's ability to deploy pricing, and its expected contribution to the numbers.

Answer

Peter Hadley, CFO, ADP, expressed confidence in the reiterated margin expansion range, noting strong underlying margin contribution expected in Q3 and Q4. He acknowledged the dynamic of a 75 basis point reduction in the short portfolio yield in Q3 compared to last year, but emphasized continued underlying margin expansion from revenue growth and diligent cost management. Regarding pricing, Peter Hadley stated the environment is consistent, and ADP feels confident in its ability to price. He reiterated an expectation of approximately 100 basis points of contribution from pricing in fiscal 2026, which is slightly lower than fiscal 2025 but higher than pre-pandemic levels.

Ramsey El-Assal inquired about the expected pricing contribution for fiscal 2026 and the primary drivers behind the better-than-anticipated client retention results in the fourth quarter.

Answer

CFO Peter Hadley stated that the fiscal 2026 pricing assumption is more consistent with the recent elevated environment of around 100 basis points, rather than historical norms. He added that the strong retention performance was broad-based and noted that the feared increase in small business out-of-business levels did not materialize.

Ramsey El-Assal inquired about the specific drivers behind the softer international bookings and asked about the growth opportunity for the embedded payroll offering, particularly the Fiserv partnership.

Answer

CEO Maria Black explained that the international softness is tied to macroeconomic uncertainty, noting that these large deals are often lumpy but that pipelines remain strong. Regarding embedded payroll, she expressed excitement for the Fiserv partnership, highlighting the future integration of Run into Clover as a key growth driver and the potential to expand the offering to other markets and partners.

Ramsey El-Assal asked for further details on the drivers behind the implied slowdown in PEO revenue growth for the second half of the year. He also questioned if ADP's M&A appetite has changed in light of recent industry consolidation.

Answer

CFO Don McGuire attributed the PEO revenue deceleration to a pull-forward of SUI revenue into Q2, the timing of annual renewals, and the expectation that PEO pays per control will grow slower than in the ES segment. On M&A, he stated that ADP's strategy remains unchanged, viewing the market as fragmented and not seeing the regulatory environment as an impediment to pursuing complementary tuck-in acquisitions.

Ramsey El-Assal asked for an update on retention drivers and the rate for the quarter, and also inquired about the drivers of PEO margin outperformance and the outlook for workers' comp reserves.

Answer

CEO Maria Black attributed strong retention to investments in service and product, noting that while retention declined slightly, it was better than expected as small business out-of-business rates held up. CFO Don McGuire explained that PEO margins were better than anticipated due to stronger revenue from worksite employee growth and wage rates. He confirmed a small $4 million workers' comp reserve release but stated they are not anticipating significant releases for the rest of the year.

Ramsey El-Assal questioned the market demand for stablecoins, asking whether Remitly is responding to existing customer needs, such as for inflation hedging, or proactively building capabilities for future market adoption.

Answer

Co-Founder and CEO Matt Oppenheimer stated the initiative solves two key customer problems: the need in emerging markets to hold less volatile currencies and the desire for more payout options, including stablecoin wallets. He acknowledged that while current usage is modest, Remitly is investing ahead of the curve to lead future adoption and is also using stablecoins internally to improve treasury efficiency.

Ramsey El-Assal from Barclays inquired about the specific strategies Remitly is using to attract high-dollar senders and micro-business customers.

Answer

CEO Matt Oppenheimer explained that attracting high-dollar senders involves targeted marketing and product enhancements like sophisticated sending limits. For micro-businesses, he noted there is existing organic demand, so the focus is on tailoring the product with features like automated KYB (Know Your Business) to serve them more effectively. CFO Vikas Mehta added these are built on the existing platform, making them cost-efficient.

Ramsey El-Assal questioned the source of operating leverage in the quarter, focusing on the better-than-expected marketing efficiency and whether these favorable trends would persist.

Answer

CEO Matt Oppenheimer attributed marketing efficiency to the strength of the product, which drives high retention and word-of-mouth referrals. He noted this allows marketing spend to potentially moderate over time. CFO Vikas Mehta added that product improvements, such as the seafarer initiative, are driving organic customer acquisition, with 70% of new seafarers coming from unpaid channels.

Ramsey El-Assal asked for a ranking of the drivers behind the significant increase in adjusted EBITDA margin guidance and questioned if an improving regulatory environment for bank partners contributed to the upside.

Answer

Interim CEO & CFO Mike Milotich stated that strong top-line TPV growth was the primary driver of profitability, followed by favorable business mix. He explained that lower expenses were roughly half due to temporary investment timing and half from sustainable efficiencies, such as better organizational design and higher software capitalization. He noted the regulatory environment was 'business as usual' and not a source of the upside.

Ramsey El-Assal questioned whether recent deregulation in financial services has changed the behavior of Marqeta's bank partners, potentially speeding up onboarding. He also asked for more color on the European sales pipeline following the successful Bitpanda card launch.

Answer

Mike Milotich, Interim CEO and CFO, responded that they have not yet seen a material change in bank partner operational speed, as regulatory changes are slow to filter through the ecosystem. He noted the European pipeline is strong, bolstered by the pending TransactPay acquisition, and highlighted the Bitpanda launch as a key proof point of Marqeta's ability to execute complex, multi-country migrations quickly.

Ramsey El-Assal from Barclays asked for clarity on Marqeta's visibility into the end of regulatory-driven challenges, the risk of customer cancellations due to extended implementation times, and the reasons for underperformance in newly launched programs.

Answer

CEO Simon Khalaf asserted that Marqeta has visibility and has 'bottomed out' as the issues are procedural, not fundamental rule changes. He expressed confidence that invested customers will not cancel. CFO Michael Milotich provided data on launch delays, noting the average time increased from 150 days to over 200, but most delayed programs are now scheduled for Q4 2024 and Q1 2025. He attributed the underperformance of new programs to a lack of diversification in the launch cohort due to the smaller sample size caused by the delays.

Ramsey El-Assal of Barclays asked for a more precise timeline on transitioning new product loans off the balance sheet and questioned the drivers behind the quarterly decline in the mix of super-prime loans.

Answer

CFO Sanjay Datta estimated a timeline of "roughly between now and the end of the year" to move new product originations to third-party capital. CEO Dave Girouard explained that the super-prime mix fluctuates as the company is still building funding depth in that segment and sees significant growth opportunities across all products.

Ramsey El-Assal inquired about the timeline for transitioning new product loans off the balance sheet and asked for the reason behind the quarter-over-quarter decline in the mix of super-prime loans.

Answer

CFO Sanjay Datta projected a "couple of quarter timeline" for reducing balance sheet holdings as third-party funding for new products is secured, a process expected to occur between now and year-end. CEO Dave Girouard explained the super-prime mix fluctuation is not significant, as the company is still building funding depth in that segment while growing rapidly in its core business.

Ramsey El-Assal of Barclays PLC asked about the potential ceiling for fully automated loans, which reached 91%, and inquired about the hypothetical evolution of the loan mix across personal, auto, and HELOC products in the coming years.

Answer

CFO Sanjay Datta indicated that while 100% automation is unlikely, there is still room for the 91% figure to grow, with significant automation opportunities remaining in newer products like auto and HELOCs. CEO David Girouard noted that while the core personal loan business is growing fast, the larger auto and home lending markets offer huge headroom, making the future product mix difficult to predict.

Ramsey El-Assal questioned the visibility into political headwinds affecting the U.S.-Mexico corridor and asked whether the demand for stablecoins is organic or a 'build it and they will come' scenario.

Answer

CEO Devin McGranahan described the impact from political headwinds as volatile and difficult to predict, noting that increased enforcement activity negatively correlates with transaction volumes. On stablecoins, McGranahan and CFO Matt Cagwin explained the demand is twofold: from infrastructure platforms needing WU's off-ramp capabilities, and more strategically, from internal B2B use cases to make WU's own treasury operations more efficient than the correspondent banking system, which is where they are actively investing.

Ramsey El-Assal asked about the progress of applying the successful European playbook—focused on agent productivity, distribution, and pricing—to North America. He also requested clarification on how to model the Euro Change acquisition, given it was an existing agent.

Answer

CEO Devin McGranahan detailed the European strategy, which involves a distribution pyramid, tactical local pricing, and brand revitalization. He stated that Europe is in the 'seventh or eighth inning' of this transformation, while North America is only in the 'third or fourth inning,' implying significant upside potential. CFO Matt Cagwin clarified that the 1% revenue growth from Euro Change is a net figure, as the acquisition allows Western Union to implement a more aggressive and profitable strategy in those locations. The majority of the benefit will be reflected in the Consumer Services segment.

Ramsey El-Assal of Barclays noted the tightening spread between branded digital transaction and revenue growth and asked about the outlook for this dynamic in 2025. He also inquired about the M&A strategy and any inorganic revenue contributions in the quarter.

Answer

CFO Matt Hagan explained that while the company expects the spread to narrow over time as pricing changes are lapped, the rapid 30% growth in the lower-RPT account payout business creates some offsetting pressure. CEO Devin McGranahan clarified that the previously announced acquisitions of DASH and a Mexico digital wallet have not yet closed, resulting in no inorganic revenue contribution for the quarter. He affirmed the company's interest in cost-effective, strategic M&A that can accelerate its strategy.

Ramsey El-Assal asked for expectations on Iraq's revenue contribution in Q4 and inquired about the gating factors for a broader rollout of the successful owned-store strategy.

Answer

CFO Matt Cagwin indicated that Iraq's revenue is volatile but is currently expected to be at the lower end of the $10M-$30M quarterly range for Q4. Regarding owned stores, CEO Devin McGranahan stressed that success requires extreme discipline in site selection and achieving network critical mass in a given market to manage fixed costs. He confirmed they are expanding methodically in select countries but that it is a measured, patient process.

Ramsey El-Assal of Barclays asked about the federal business's impact on bookings in Q3 and whether the Q4 headwinds were from cancellations or reduced procurement. He also inquired about client demand for blockchain technology.

Answer

CEO Julie Sweet clarified that the federal business had an immaterial impact in Q3 and the anticipated Q4 headwind is a mix of slower procurement and cancellations. On blockchain, she described it as an important enabling technology in specific sectors like financial services but not a primary, enterprise-wide growth driver like AI.

Ramsey El-Assal asked about the impact of federal contracting issues on Q3 bookings and the drivers of the Q4 headwind, and also inquired about any renewed client demand for blockchain technology.

Answer

CEO Julie Sweet stated the federal business had an immaterial impact on Q3 results and that the anticipated Q4 headwind is a mix of slower procurements and cancellations. Regarding blockchain, she explained that while it remains an important enabling technology in specific areas like financial services, it is not seen as a major independent growth driver like AI, which affects the entire enterprise.

Ramsey El-Assal from Barclays asked for an update on the Consumer Services segment, specifically inquiring about the timeline for a potential return to active account growth. He also sought clarity on the macroeconomic assumptions embedded in the company's updated annual guidance.

Answer

Executive Jess Unruh stated that while declines in Consumer active accounts are moderating, thanks to the PLS partnership, a return to growth is not anticipated in 2025. Executive Chris Ruppel added that future platform modernization could enable product innovations to improve consumer appeal. Regarding the macro outlook, CEO William Jacobs clarified that the current guidance is based on the economic environment as it stands today, and any significant changes would require a re-evaluation.

Inquired about the timeline and key drivers for a return to growth in Consumer Services active accounts and asked about the macroeconomic assumptions underlying the company's annual guidance.

Answer

Executives stated that while declines in consumer accounts are moderating due to partnerships like PLS, a return to positive growth is not expected in 2025. Future growth will depend on new business development, the Walmart renewal, and product innovation from platform modernization. The current guidance is based on the existing macroeconomic environment, and any significant changes would require a re-evaluation.

Ramsey El-Assal inquired about the expected trend for free cash flow throughout the year and whether the pickup in organic demand could enable pricing power.

Answer

CFO Jason Peterson stated that while Q1 cash flow is seasonally low, he expects 80-90% cash flow conversion for the full year, though DSO may remain slightly elevated due to more fixed-fee contracts. CEO Arkadiy Dobkin commented that it is too early to expect significant pricing power, as the demand improvement is still relatively small and a lag exists before it impacts rates.

Ramsey El-Assal of Barclays followed up on the Poland R&D incentive, asking if it's a recurring benefit and if similar incentives are being pursued in other jurisdictions. He also inquired about the company's M&A strategy, including the expected level of activity and the types of assets being targeted.

Answer

CFO Jason Peterson confirmed the company is evaluating incentives in other geographies and expects a similar level of benefit from Poland next year, but reiterated that profitability will still be pressured by the wage/price disconnect. CEO Arkadiy Dobkin stated that while the company's M&A approach hasn't changed, he does not expect future acquisitions to be of the same size as the recent ones, with a continued focus on smaller, capability-focused deals.

Ryan, on behalf of Ramsey El-Assal, asked how Global Payments, as a pure-play merchant business post-divestiture, is positioned to handle potential recessionary pressures compared to its past structure.

Answer

CEO Cameron Bready explained that both the current and pro forma merchant businesses are well-positioned to handle macroeconomic shifts due to high diversification across geographies and a healthy mix of discretionary and non-discretionary verticals. He noted the pro forma business with Worldpay would be even more resilient, with added exposure to defensive categories like big box retail and grocery, enhancing its ability to navigate any economic environment.

Ramsey El-Assal of Barclays asked about the macroeconomic assumptions underlying the 2025 guidance and questioned the status and potential impact of winding down certain enterprise customer contracts mentioned at the Investor Day.

Answer

CEO Cameron Bready stated the guidance assumes a stable macro environment, similar to late 2024, with January trends confirming this. He also confirmed that the process of exiting less profitable wholesale and multinational enterprise contracts has begun and is already factored into the 2025 guidance, with some exits having occurred in Q4 2024 and more expected in 2025.

Ramsey El-Assal inquired about the slowdown in client decision-making observed in April, asking for specifics on which segments or clients were most affected and why management believes the impact is isolated to Q2. He also asked about Belcan's exposure to potential government contract terminations.

Answer

CFO Jatin Dalal clarified that the slowdown is most pronounced in the Products and Resources segment, which is more directly affected by tariff policy uncertainty. He noted some caution in Health Sciences but highlighted that Financial Services remains strong and Communications, Media & Technology demand is stable. CEO Ravi Kumar S addressed the Belcan question, stating its work is primarily in commercial aerospace and future-focused engineering, not enabling technology, with very little direct government exposure. As a result, they have not seen any material impact.

Ramsey El-Assal inquired about the headwinds observed in Clover's Canadian volumes, asking if these trends were specific to Canada or if they could indicate broader risks in other markets.

Answer

CFO Robert Hau stated that the headwinds were primarily in discretionary spending, specifically travel, and based on available data, the trend appears to be specific to Canada. He noted that while discretionary spending was softer more broadly, it was balanced by resilient growth in non-discretionary categories like groceries and QSRs, providing overall stability.

Ramsey El-Assal asked when CashFlow Central is expected to become a material contributor to the P&L and requested details on its economic model (e.g., fee-based, subscription).

Answer

Chairman and CEO Frank Bisignano stated that while CashFlow Central will begin generating revenue in the second half of 2025, he would consider its contribution 'meaningful' in 2026. He did not detail the specific pricing model but positioned the product as a long-term, durable growth driver that expands the company's total addressable market.

Ramsey El-Assal inquired about the typical time it takes for Clover to ramp up in a new international market to a peak run rate, and whether to expect a steady cadence of new country launches or pauses for consolidation.

Answer

Chairman, President and CEO Frank Bisignano stated he believes they will 'never' reach a peak run rate because they will continuously drive for more growth. Using Brazil as an example, he noted that while the launch in December will immediately capture more revenue, he views it as a multi-year build and ramp. He confirmed that growth from Brazil is factored into next year's numbers, but the full potential will be realized over several years.

Ramsey El-Assal asked about the company's pricing power in Management Solutions as a potential lever in a downturn and the remaining runway for margin benefits from AI and automation.

Answer

Executive Robert Schrader stated that Paychex has strong pricing power, which it has successfully used even in downturns, and noted Q3 benefited from strong price realization and lower discounting. CEO John Gibson added that AI has been used for nearly a decade for risk and discounting models, and the company is just beginning to realize the full potential of GenAI tools like the new HR Copilot to drive both productivity and value, with a long runway for further benefits.

Ramsey El-Assal asked about the impact of recent Fed rate cuts on guidance and sought an update on the company's growth algorithm, specifically the contribution from HCM products.

Answer

CEO John Gibson explained that the guidance already contemplated 125 basis points in cuts, so recent moves were expected and will not have a material impact. He and EVP Robert Schrader noted that increased product penetration drives at least half of the company's growth, and with pure payroll now less than 50% of the business, the growth story is centered on HR and technology.

Speaking for Ramsey El-Assal, an analyst asked if the focus in Management Solutions has shifted from new client wins to deeper penetration, and inquired about the impact of benefits utilization on costs.

Answer

CEO John Gibson affirmed that the growth formula remains unchanged: grow clients, increase product penetration, innovate, and maintain pricing power. Executive Robert Schrader clarified that higher costs in the PEO are driven by strong worksite employee growth and higher insurance attachment, not by unfavorable claims trends, reflecting the positive performance of the business.

Ramsey El-Assal inquired about the drivers of recent client attrition, asking if it signaled a new trend, and sought elaboration on the "pockets of consumer softness" mentioned by the company.

Answer

CEO John Morris clarified that the client losses were isolated incidents, with two resulting from acquisitions and one from a client taking processing in-house, not indicating a broader trend. CFO Tim Murphy explained that the consumer softness refers to ongoing challenges in the auto and Accounts Receivable Management (ARM) verticals, which is a continuation of previously discussed trends.

Ramsey El-Assal inquired about the specific headwinds affecting organic growth in the Consumer Payments segment, such as normalizing spending and a client loss, and asked for an outlook for Q4 and the exit rate into 2025. He also requested a similar breakdown for the Business Payments segment regarding corporate spending patterns.

Answer

CEO John Morris explained that consumer softness in the auto and credit union verticals was due to ongoing affordability pressures and tighter lending standards. CFO Tim Murphy added that after accounting for this softness, a client loss, and implementation delays, the Consumer Payments organic growth was in the mid- to high single-digit range. For Business Payments, John Morris acknowledged some corporate spending softness but highlighted strong reported growth driven by political media contributions and new enterprise wins like the University of Florida Health Systems, which are currently ramping.

Ramsey El-Assal inquired about the long-term, steady-state target for free cash flow conversion and sought commentary on the current health of the consumer, especially in the personal finance vertical.

Answer

CFO Tim Murphy explained that with sustained mid-to-high teens growth, free cash flow conversion could reach the mid-60s percent range by 2026, driven by EBITDA growth and lower CapEx. He also noted consumer trends are consistent, with some tightening in personal finance. CEO John Morris added that the consumer business focuses on non-discretionary spending, which supports consistency.

Ramsey El-Assal asked about recent business trends, specifically whether the Q4 exit rate was healthy and if anything quarter-to-date was causing incremental concern for the 2025 outlook.

Answer

CFO Joel Wilhite stated that January's volumes and transaction growth were in line with expectations and gave no incremental cause for concern. CEO Michael Praeger added that momentum from new channel partners is strong, with a significant backlog of deals pushed from Q4 into 2025, which is expected to boost new buyer logo counts.

Ramsey El-Assal inquired about recent business trends, asking if the healthy Q4 exit rate has continued and if any quarter-to-date activity has caused incremental concern for the 2025 outlook.

Answer

CFO Joel Wilhite responded that January's volumes and transaction growth were in line with the company's guidance expectations, with no new cause for concern. CEO Michael Praeger added that momentum with new channel partners is strong, as some activity was pushed from Q4 into 2025, leading to good engagement early in the year.

Ramsey El-Assal asked for preliminary thoughts on 2025, focusing on key growth drivers and potential headwinds such as political media revenue and interest income.

Answer

CFO Joel Wilhite stated that specific 2025 guidance would be provided in February. He noted that while the market opportunity remains large, key factors for 2025 will include the need to return to net transaction expansion (from its current sub-100% retention), the absence of political ad revenue, and expected headwinds to float revenue from potential interest rate cuts.

Ramsey El-Assal from Barclays asked for an update on revenue visibility and the degree of confidence that the current guidance is sufficiently risk-adjusted for various macroeconomic outcomes.

Answer

CFO Joel Wilhite stated that the guidance reflects what the company is currently observing. He emphasized that they employ a high-discipline forecasting process and have meaningfully consistent recurring visibility into total transactions, expressing confidence in the guidance provided.

Ramsey El-Assal asked if the pivot in sales strategy would create a noticeable 'air pocket' in results later this year and requested an update on the expected revenue contribution from the M3 and AppFolio partnerships.

Answer

CFO Joel Wilhite stated he does not anticipate an 'air pocket' and is confident in the customer acquisition plan for the year. CEO Michael Praeger added that while both partnerships are on track with internal plans, the AppFolio deal could ramp faster due to AvidXchange's established leadership in the real estate vertical, whereas M3 is in a newer vertical for the company.

Ramsey El-Assal questioned the confidence level in the 2025 banking guide, given its contingency on implementing a deal backlog, and asked about the levers to improve free cash flow conversion to the long-term target range.

Answer

CEO Stephanie Ferris expressed high confidence in the implementation schedule for the delayed deals, noting they are signed contracts with work already in motion. CFO James Kehoe outlined three levers for improving cash flow conversion: normalizing CapEx to 8% of revenue, extending accounts payable terms towards 90 days, and improving collections.

Ramsey El-Assal inquired about the underlying factors for the Capital Markets segment's implied Q4 growth guidance and asked for the expected financial contribution from the recent Dragonfly acquisition.

Answer

CFO James Kehoe explained that the previous full-year guide for Capital Markets was conservative and they now expect to hit the high end of the 6.5% to 7% range, implying strong Q4 growth against an easy prior-year comparison. Regarding Dragonfly, he stated its Q4 revenue contribution would be minimal (under $10 million) and initially dilutive to margins, but it is a highly strategic acquisition with significant revenue synergy potential.

On behalf of Ramsey El-Assal, Ryan from Barclays inquired about the high services attach rate on large infrastructure deals (22 of 28 this quarter), asking which specific solutions are driving this success and how it might progress.

Answer

CEO Amar Maletira attributed the high attach rate to the company's strategic pivot to a 'services-led' go-to-market motion initiated about 18 months ago. He explained this approach involves engaging C-level executives, which allows Rackspace to demonstrate holistic value, drive high-margin services, and protect margins on infrastructure resale, fundamentally transforming the Public Cloud business.

Ramsey El-Assal asked if the revenue headwinds from TELUS Digital's third-largest client were caused by that client using Generative AI to replace services.

Answer

President and CEO Jeffrey Puritt clarified that the issue was not related to AI replacing work. He explained the headwinds were historically due to the client, whose support is Europe-centric, reducing spend in that high-cost delivery region. Puritt noted that while the account is now showing signs of rebounding, the labor-intensive nature of the work is significantly pressuring margins, and the company is focused on diversifying its service offerings for this client.

Requested more information on the market opportunity created by the orders migration project and the sales strategy for the new capabilities.

Answer

Jack Dorsey stated the migration creates a more flexible and reliable platform, increasing development speed and unlocking key features like pre-auth. Amrita Ahuja added that it fundamentally shifts Square from a payment-centric to a sales-centric platform, enabling complex commerce scenarios like online ordering, deposits, and partial returns. This benefits all verticals and was crucial for the recent Kiosk product launch.

Asked about the potential size of the opportunity for integrating Afterpay with the Cash App Card, including customer eligibility and preliminary product details.

Answer

Jack Dorsey acknowledged past issues with the Afterpay integration but stated the team is now executing well on discovery and integrating Afterpay onto the Cash App Card. Amrita Ahuja added that the target is 24 million Cash App Card actives, and while they are starting small, early tests show strong attach rates. She also highlighted the success of Cash App Pay, which has grown to 4 million monthly actives, driven by the Afterpay enterprise sales team.