Josh Whipple
Senior Executive Vice President and Chief Financial Officer at Global Payments
Thanks, Cameron. We are pleased with our strong financial performance in the first quarter, which exceeded our expectations despite ongoing macro concerns, highlighting the strength and durability of our business. Specifically, we delivered adjusted net revenue of $2.05 billion, an increase of 6.5% from the same period in the prior year on a constant currency basis. Excluding the impact of dispositions and roughly one week of contribution from EVO, adjusted net revenue increased 9% on a constant currency basis. Adjusted operating margin for the quarter increased 200 basis points to 43.1%. The net result was adjusted earnings per share of $2.40, an increase of 18% on a constant currency basis compared to the same period in 2022.
Taking a closer look at performance by segment. Merchant Solutions achieved adjusted net revenue of $1.46 billion for the first quarter with constant currency growth of 10%, excluding dispositions and the contribution from EVO. This performance was led by the ongoing strength of our technology-enabled businesses while we benefited from a recovery in Asia Pacific as COVID restrictions eased across greater China markets. We also saw consistent double-digit growth from our vertical market, POS and payroll businesses. This strength was partially offset by ongoing headwinds from adverse foreign currency exchange rates along with macro softness in limited geographies, including the UK. We delivered an adjusted operating margin of 47.3% in the segment, consistent with last year. Excluding the impact of EVO's close in March, adjusted operating margin expanded 25 basis points and was in line with our expectations.
We are pleased with the fundamental performance of our Issuer Solutions business in the first quarter, which produced adjusted net revenue of $490 million, reflecting growth of 7.2% on a constant currency basis. Notably, Core Issuer grew high single digits this quarter, excluding the impact of FX, which was over 300 basis point acceleration sequentially.
As Jeff highlighted, traditional accounts on file increased by approximately 20 million sequentially, driven by strong account growth from our major consumer portfolio customers as well as several portfolio conversions we successfully completed during the period. Transactions also grew double digits compared to the first quarter of 2022 with strong contributions coming from both commercial and consumer card transactions. Finally, we delivered adjusted operating margins of 43.9% and an increase of 80 basis points from the prior year fueled by our accelerated growth.
As for adjusted free cash flow, consistent with the prior period, we converted approximately 80% of adjusted earnings into adjusted free cash flow. We continue to target converting roughly 100% of adjusted earnings for the full year, excluding the impact of the timing change related to recognition of research and development tax credits. We expect our adjusted free cash flow conversion for the year to follow a similar trajectory as 2022. We invested $162 million in capital expenditures during the quarter and continue to expect capital spending to be around $630 million in 2023, consistent with our long-term targets. This quarter, we repurchased approximately 2.1 million of our shares for roughly $200 million, which was executed prior to the closing of our acquisition of EVO Payments on March 24.
To help fund the EVO transaction, in early March, we successfully priced an EUR800 million inaugural European debt offering at a fixed rate coupon of 4.875% due in 2031. With this transaction, we continue to evolve our capital structure to align with our global operations and gain access to a broader investor base and new sources of capital. Separately, in January, we established a $2 billion commercial paper program. The CP program is supported by our revolving credit agreement. At the end of the quarter, we had approximately $1 billion of commercial paper outstanding. We currently have in excess of $3 billion of available liquidity. Following the aforementioned capital markets transactions and drawing on the revolver to close EVO, our total indebtedness is approximately 90% fixed with a weighted average cost of debt of 3.8%.
We are also delighted to have closed both the divestiture of Netspend's consumer assets and the sale of the Gaming Solutions business in April. Following all of these transactions, our balance sheet remains healthy and our leverage position is roughly 3.8 times currently. We continue to expect to return to a similar leverage level to where we ended 2022 by year-end 2023 while maintaining existing investment-grade ratings. We are pleased with how our business is positioned following our first quarter performance, and we are raising our financial outlook for the year.
We now expect reported adjusted net revenue to range from $8.635 billion to $8.735 billion, reflecting growth of 7% to 8% over 2022, an increase from 6% to 7% previously. We continue to forecast annual adjusted operating margin to expand by up to 120 basis points for 2023. As a reminder, this is above our cycle guidance for margin expansion of 50 basis points to 75 basis points annually driven by benefits to our business mix from our ongoing shift towards technology enablement and the divestiture of Netspend, partially offset by the lower margin profile of EVO prior to full synergy realization.
To provide color at the segment level, we continue to anticipate our merchant segment to report adjusted net revenue growth of roughly 15% to 16% for the full year but now expect to be toward the higher end of that range. We continue to expect more than 100 basis points of adjusted operating margin expansion from the existing Global Payments merchant business excluding dispositions in 2023, which again is ahead of our cycle guide. We expect this expansion will be more than offset beginning in the second quarter with the absorption of the lower margin profile of EVO Payments. We anticipate this impact to be mitigated by synergy realization as the year progresses. As a result, we are forecasting margin contraction in the second and third quarters and then margin expansion in Q4 as synergies ramp for our merchant business. The net result will be a modest decline in our total merchant business reported adjusted operating margin for the year consistent with our prior guidance.
Moving to Issuer Solutions. We now expect to deliver adjusted net revenue growth in the 5% to 6% range, up from 4.5% to 5.5% previously for the full year compared to 2022. This outlook reflects our better-than-expected performance in the first quarter and the benefit we anticipate from our conversion pipeline.
Specifically, we now expect Core Issuer to grow about 5% and continue to expect MineralTree and Netspend's B2B businesses to grow low double digits. We anticipate adjusted operating margin for the issuer business to expand by up to 60 basis points, consistent with our prior outlook, as we benefit from the natural operating leverage in the business.
In terms of quarterly phasing, there are two continuing items to note: First, while we expect foreign exchange rates to be roughly neutral for the full year, we still anticipate a currency headwind to adjusted net revenue of up to 100 basis points in the second quarter. Second, we expect the successful closing of the sale of Netspend for the end of April to add roughly $25 million of incremental revenue to the second quarter versus our prior expectation with no change to our expected earnings per share dilution impact for the year.
Moving to a couple of non-operating items. We expect net interest expense to be roughly $550 million, a modest $10 million increase from our prior guide in light of yield curve movements and for our adjusted effective tax rate to be in the range of 19% to 19.5%, consistent with our prior guidance. For modeling purposes, we continue to assume excess cash is used to pay down indebtedness in 2023 until we return to our targeted leverage levels toward the end of the year with minimal share repurchases until then.
Putting it all together, we now expect adjusted earnings per share for the full year to be in the range of $10.32 to $10.44, reflecting growth of 11% to 12% over 2022, up from 10% to 11% previously. Excluding dispositions, adjusted earnings per share growth is expected to be 16% to 17% for 2023. This is consistent with our updated 2021 cycle guidance despite incremental adverse changes in the macro environment since then.
Our first quarter results represent roughly a $0.05 adjusted earnings per share beat relative to our internal forecast. Our raised guidance for calendar 2023 essentially rolls the beat plus a couple of cents for the year in light of the uncertainties of the current environment. Similar to what you've heard from others, we saw strength across our markets in January and February, which moderated somewhat in a number of our businesses in March. Our issuer business did not experience any discernible moderation as our large money center bank customers benefited from the regional banking crisis that developed in March. Trends in this business continue to remain resilient through April and similar to March levels of activity. Our updated outlook today presumes a worldwide macroeconomic backdrop that is consistent with the current environment throughout the remainder of calendar year 2023.
And with that, I'll turn the call back over to Jeff.
