Thank you again for joining. We're gonna kick it off. Thank you for being here. Again, I'm Darrin Peller. I head the fintech equity research side here at Wolfe Research, and, you know, we're really happy to have the Global Payments team with us. Cameron, you know, we're happy to have you as Cameron, the CEO. We have Josh, who's the CFO. We have Winnie in IR. It's been, I mean, you've been at the company for many years now.
Mm-hmm.
but in the CEO role for I think it's been about eight, nine months now.
Yeah.
Right? So maybe just take a minute and tell us where you're spending most of your time or what your priorities are now, and we'll go from there.
Yeah, sure. First of all, thank you so much for having us. We're delighted to be here, and thanks, everybody, for joining us today. Look, I would say, you know, I took over in June. Back half of 2023, I was largely focused on ensuring it was a smooth and orderly transition. Anytime you have a CEO transition in an S&P 500, Fortune 500 business, you wanna make sure that goes smoothly. And I think by and large, we, you know, accomplished that well. So as we head into 2024, and I talked about a little bit of this on our earnings call, you know, I've got a handful of priorities that I'm really starting to turn my attention to. You know, one is...
Look, I think our overarching strategy for the business is the right one, but as I've said, I think in a few settings, I do think there's areas where we can sharpen our focus against that strategy. I think we have the opportunity to probably see the investments we're making in the business be a little more impactful in terms of where we're trying to drive the business over the next three to five years. And inevitably, we're a large business, we've expanded so dramatically, you know, since I've been at the company over the-
Yep
... last decade.
Yep.
There's probably things we're doing today, markets that we're in today, that maybe, you know, we ought to rethink. So there's a little bit of, I would say, overarching, kind of sharpening the focus around the strategy that I'm spending a lot of time with our team on today. The second area that's really important to me is just making sure that we're making it as easy as possible for our clients to do business with us. I want our company to be known in the marketplace as easy to work with, easy to partner with, easy to consume our capabilities and resources around the globe, and our services. So making sure that we're instilling throughout the organization kind of an easy-to-do business mindset, and making sure that our actual capabilities, our products, our solutions, are easily consumable for our clients.
The third area is more internal, and it's really making it easier to get things done inside of Global Payments, and we've grown into a really big-
Right
... organization. When I started, we were probably 2,000 people, we're 27,000 people today, and we've done a tremendous amount of M&A over the last decade. We've grown organically, and we're now a massive business, and we're using this really as an opportunity to kind of step back and say, "Okay, if you woke up and walked into Global Payments, 27,000 people, 40 countries physically around the globe, all the different lines of business we're in, is this how you would organize yourself?
Yep.
Is this how you would operate? Is this how the workforce would be structured," et cetera. So we're doing some work internally, really geared towards, "Let's make sure we have the right operating structure and model that positions us for the next decade of growth," and that's a significant priority for me and our team. Next area is really around AI. I mean, I see you can all check your bingo card on AI, so I mentioned it. But we are doing a lot around AI, 'cause I think it's really important, and I think it's really impactful for a business like ours. It's a process-oriented business. There's huge opportunities, I think, on the commercial side of the business-
Yep
... in terms of how we think about generating revenue, and there's obviously huge opportunities on the efficiency side of the business, in terms of how can generative AI help us run our business more effectively, conduct our operations more efficiently, and drive benefits, obviously, for our business more broadly? And then lastly, and I'll stop, 'cause probably went on longer than you wanted me to, I'm very focused on culture, 'cause I'm a big culture guy, unabashedly, someone that really wants to emphasize culture in the organization. I think culture is critical to achieving the vision that we have for the organization, the mission that we're really working against day in and day out, and the strategies we're pursuing.
I think having the right culture around that is really critical to me, so I spend a lot of time and have put a lot of emphasis in taking over around just making sure we have the culture inside the organization that we want to have.
That's great. Certainly a full plate. Cameron, maybe we could just start with what you've saw, you know, characterizing what you saw exiting the year last year, and then maybe what you're seeing in the first couple of months this year in terms of trends, how the consumer is behaving?
Yeah
... and just go from there.
Well, look, I think by and large, if you step back and look at it from a macro perspective, I think the consumer's been remarkably resilient, and more so than I probably would've anticipated. I've been a little, you know, concerned, even going into 2023, about how the consumer would kinda hang in, and I think what we've seen is, you know, by and large, the consumer remains very stable.
Mm-hmm.
The consumer remains pretty resilient. And I think that gives us, you know, obviously, a good amount of confidence around the guide that we provided for the year and the overall ability to achieve the expectations for the business for the year. And I don't think you have to look much further than, you know, where labor markets are.
Right.
Labor, you know-
Right
... obviously, unemployment remains low. You're starting to see wage growth outpace inflation, so I think the consumer backdrop is actually pretty good. I think our expectation going into the year is that the macro overall would be a little more tempered than-
Mm-hmm
... we saw in 2023 in totality, and look a lot like kind of where we exited the year. And I think by and large, as we're a couple of months into the year, that's what we've seen. I think obviously, retail sales in January were a little soft, and we heard that kind of across the board, and February looks like it's been a little bit better, but generally, I'd say in line with what our expectations are for the year.
And those macro trends are consistent with your trends, right?
Yeah, absolutely.
I see.
Yeah, yeah.
It makes sense.
And consistent with our expectations.
Right, okay.
Which is important.
If we take it a step back and start, keep it at a little higher level, 2023 had a lot of things happen in your business. You digested a lot as well.
Yeah.
Help us understand what were the biggest achievements last year that sets you up into the year ahead?
Yeah, so I would say for the business overall, there's a few things that I'd point out. First of all, it was a big transformative year, just as it relates to trying to simplify our business, as well as obviously the acquisition of EVO, which helps to drive-
Yep
-sort of growth and expansion in our business. So it was good to be able to get the Netspend consumer business closed and sold.
Yeah.
It was good to get our gaming business closed and sold. I think those transactions helped to further simplify our story, which is a big theme that's important to me. And I think EVO was a nice acquisition for us that sort of fits into a couple different areas. One, it provides expansion into new markets, geographic as well as B2B, while giving us additional scale in markets that we operate in today. So I think, look, that's a lot for any company to digest over a multi-year period.
Yeah, for sure.
To do all that in, you know, 2023, getting all those transactions closed, I think is a real testament to the strength of the teams we have and our ability to manage through really complex transactions. So that's a, I think, a huge win. The other thing I would really call out is just the consistency of execution that we saw across the board with our teams globally. You know, our ability to consistently produce the results we did over the course of the year, do that through a leadership transition as well-
Yeah
... which is never easy inside of an organization. I'm really proud of the work that our team members did kind of globally, and the success we were able to see, you know, in the business, you know, over the course of time, and the consistency of execution, again, that we were able to generate through the course of the year.
I mean, so you said it right. You know, with all the different moving parts that you executed on last year, the transactions, it sets you up for a cleaner year ahead.
Yeah.
Right? And so if we fast-forwarded and it was December 31st, 2024, what would it take for you to say, "I've accomplished what I wanted to accomplish this year?
Yeah, it's a great question, and most things with me start with execution. You know, the consistency of execution needs to continue. The relentless focus on execution needs to continue in the business, and I wanna make sure that we don't lose sight of that as we're continuing to move a lot of big boulders around-
Yep
... you know, that I highlighted in my opening kind of comments around my priorities for the year. But if I look at it a little more tactically, there's a few things that are really important to me as we think about, you know, progressing through the year. One is continuing to progress with the EVO integration and making sure we're marching towards the overall objectives we have for that transaction as it relates to both expense synergies and beginning to realize revenue synergies from the integration and from the transaction that I think are gonna be beneficial to us. So there's still a lot of work to do on that front. You know, we're not even a year into it quite yet.
Yep.
We're almost at a year. But there's still a lot of work to get done to make sure that EVO is integrated fully and we're realizing the value proposition that we saw in that transaction when we decided to execute it. Secondly, it's a big year for us on the product commercialization front. We put a lot of investment in our new point-of-sale platform, in our U.S. business. That's rolling out this year.
Mm-hmm.
We have ambitious plans to bring new product and capability to markets outside of the U.S., point-of-sale being at the heart of that as well.
Mm-hmm.
As we look to bring our GP POS solution into markets in Europe and ultimately Mexico as well, that's all on the horizon for 2024, and I think the product commercialization activities that are ongoing, we need to land those well, and we need to execute well against those. The third is issuer modernization. You know, it's been a long journey, and we're still, still in the midst of the journey around issuer modernization. But 2024 is a big year for us because by the end of the year, we expect to have all the commercial-- excuse me, the client-facing applications that sit inside of our issuer platform today in cloud-native environments. We're running a number of pilots and proof of concepts this year with clients around those new modernized cloud-native capabilities.
Right.
We're gonna be able to demonstrate the enhanced enablement capabilities that our clients are gonna have, utilizing those applications going forward. So it's a big year from a development perspective because the development work is scheduled to be done at the end of the year, and obviously the issuer modernization program is critical to the future of the issuer business, and getting that done successfully and executed successfully is it's hugely important. And then lastly, I'd be remiss if I didn't just say, you know, meeting our financial goals. Like, you know, this is not a hobby, this business.
We have expectations that we have set around obviously our ability to generate growth in the business and value creation for our shareholders, and, you know, that's not ever far from our thoughts in terms of what's a priority for us and what we're focused on achieving as a business. But look, I think if we can do all that and do it well, I'm gonna feel good about, you know, 2024 overall.
Now coming back to March, your conviction in that guidance is as good as it was or different or?
No, I, I have a lot of conviction in the guide for the year. You know, I think... Look, there's always, things that we need to do as a business from an execution standpoint. There's always things that we need to focus on. We need some things to go right, but we don't expect everything to go right. But sitting here today, I got a lot of conviction around the guide.
Yeah.
Feel good about how we're set up for 2024, all assuming, of course, the macro remains relatively stable.
Right. Makes sense.
I think all signs are right now that, you know, it will, and this elusive soft landing that everyone's been hoping for appears, you know, hopefully more realistic.
Right. But we're gonna go into the segments now. I think before we do that, just maybe a sense of the various—just remind everybody in the audience, the various building blocks or revenue drivers for the merchant business to start with.
Yeah.
Fine.
Happy to. Obviously, merchant, 75% of the business. As the merchant business goes, kind of the whole company goes by and large.
Yeah.
So, as I step back and think about the merchant business, I think about it through a few different lenses. First of all, software. Software sits at the heart of our merchant strategy. Today, you know, our software businesses, which include our vertical market, enterprise software businesses, our point-of-sale software businesses, and our integrated partnership business, they drive about 40% of the total merchant revenue. They are the tip of the spear for growth. Those businesses collectively grow in the double digits. It's, you know, where we see, obviously, the most attractive opportunities for growth in the business, where we're investing the most, and the areas of the business I think we have the most ambition and enthusiasm around in terms of driving future growth for us.
So very focused on making sure those businesses continue to grow at the attractive pace they are, and making sure that obviously, those are performing at the level we expect for the business. So our strategy really starts with software. The second area that we're highly focused on is our ability to sort of blend the virtual and physical world. So in the world we operate in today, you know, we used to talk about kind of e-com and omni as a business. I don't really think about it as a business. I think about it as a capability we have to be able to deliver across all of our different vertical markets, all of our different channels, all of our different geographies. That is the expectation of clients now in the world we live in, particularly post-pandemic.
Our ability to blur the virtual and physical world, create those true omni-channel experiences, leading with technology solutions that deliver that for our clients, that's another big area of business for us and another big focus that drives growth as we continue to digitize more transactions, and want to create those more omni-channel-oriented experiences for our clients. Then next is really, and sort of today, so e-com volume for us is about 30% of our total volume across the business.
Okay.
I think we're kind of overweight a little bit e-com, you know, relative to the market more broadly.
Mm-hmm.
largely because of our ability to deliver these sort of omni-channel-
Right
... you know, these true omni-channel experiences. And then third is our exposure to faster growth markets. We're in a lot of markets globally, where the secular trends are more favorable, and, obviously, we expanded that position to some degree with EVO by entering Poland, Greece, Germany now. Really excited about the new partnership we have in Germany with Commerzbank, and that was really made possible by virtue of, you know, the foundation we have in Germany through the EVO acquisition. So those faster growth geographies with stronger secular tailwinds, obviously, those are important drivers of growth for the business as well.
Yep.
The remainder of the business is more traditional payments that, you know, over time, is moving towards more technology enablement, and we continue to shift more resources towards technology-enabled strategies-
Yep
... and technology-enabled distribution, away from more traditional distribution, managing through the natural evolution of the business, where over the course of time, more payments are going to be embedded in some sort of software environment, less so, you know, a business that sells kind of payments on a standalone basis.
So you mentioned EVO obviously helping getting into new, some new markets. Poland is an exciting opportunity. But-
Yep
... just how is EVO going? I mean, it was about a year now since-
Yeah
... it's been since the announcement, or I guess it's been closed about a year ago, right?
Yeah, almost closed a year, coming on almost a year.
Just give us an update on it.
Yeah.
I know you mentioned at times that it's even more exciting now than you thought.
Yeah.
But I also know it takes some investment.
Yeah.
So, help us frame where it is.
Yeah, look, I think overall we're pleased with how the EVO transaction has performed, and what we've seen thus far from the acquisition. I'd say, first and foremost, the integration is progressing really, really well. You know, we are on track to kind of meet the overall synergy target that we have for the business as an expense matter. We've raised that from the initial $125 million that we said at the time of the acquisition to $135 million. All that work sort of continues as we sit here today, and we're targeting kind of around this time next year to be at that run rate, sort of $135 million dollar synergy number.
Okay.
So I always you know, that's the blocking and tackling we've got to get right with every acquisition, making sure that we're realizing the expense synergies, and I think we're well poised to be able to do that from the transaction. I think on the positive side, to your point, you know, I am more bullish kind of the revenue opportunities we see from the EVO business, and those really fall into three broad categories. The first is, EVO's been very successful in the markets that they operate in, you know, with very basic sort of payment offerings. Our ability, I think, to bring more product, more capability, point of sale is a good example of that. Our touch on mobile solutions are a good example of that, particularly in Europe and then LATAM as well.
I think the growth potential around that is pretty attractive-
Mm-hmm
... and probably better than I would've envisioned at the time we announced the transaction. There's a lot of demand in those markets for those capabilities. I think the solutions we have are really distinctive in those markets, and I think given the distribution that EVO has, the market position, I think there's a lot we can do on that front that I'm excited about. Second is, you know, the ability to serve some of EVO's larger multinational customers in more markets. We've always already seen benefits from that. We've been to tap into some of those larger relationships that they have. We've been able to expand those into new markets. So I think there's an element around more broadly serving these MNC customers, more ubiquitously around the globe. Nice tailwind, I think, as it relates to revenue opportunities from the EVO transaction. And then third is B2B.
You know, B2B continues to be a business inside of Global and maybe even more broadly, that's still in the very, very early innings-
Right
... of what I think its potential is long-term for us and for the market more broadly. So EVO adds to our B2B capabilities. I think our ability to integrate EVO's AR automation software into our merchant business, begin to think about how to distribute that in different ways, how to attach payments more effectively than perhaps EVO was when they were owning the business outright. We've got a lot of optimism around what we can do with that over a longer period of time, recognizing we're starting from a small base, but I do think the potential there is pretty significant, and we're excited about that.
Okay. So look, when incorporating EVO into the footprint of the business, I mean, and I think you alluded to this on your last earnings call, but how should we think about the overall growth for GPN when we think about 1, 3, or maybe even 5 years?
Yeah, and I'm, look, I'm not in a position today to probably formally talk about, you know, what we see as our midterm guidance for the business, and I said this on the call. But I think if you step back and look at the total company-
Yeah.
I made reference to this in the earnings call, in the commentary-
Yeah
... back in February. I think if you look at where the overall company is positioned kind of for 2024, on a normalized basis, you know, adjusting for the disposition in Netspend and the acquisition of EVO, we're kinda targeting 7%+ growth, you know, recognizing that we're forecasting a slightly more tempered macro environment than we saw last year. And we're forecasting kinda earnings per share growth normalized in that sort of, you know, low- to mid-teens-
Right
... kind of 14%-ish level, and, and with margin expansion kind of in that 50 basis-
That, that's without M&A, right?
And that's-
That's organic.
Yeah, that's a normalized-
Which I think is a big thing for you.
That's without M&A.
Right.
That's organic. That's... I think about that as kind of a normalized, "This is what the core business is really doing.
Right.
I think, you know, I look at it. That's... I think that's relatively reflective of ... you know, the business we're running.
Okay.
You know, obviously we'll have more to say around how we think about the midterm guide and the expectation-
Yeah, well, I'm sure the building blocks-
Financial model
... and everything will come up in our Investor Day.
The building blocks, yeah, when we get to our Investor Day. But as I think about the business, I think, you know, at $9 billion+ of revenue, you know, growing at that sort of top-line pace, expanding margins, which by the way are already in the mid-40s in that 50 basis point range, and generating with our capital allocation, kinda, you know, mid-teens, low- to mid-teens growth. I mean, that's a pretty attractive financial model, and one that, that I think we should be proud of to the extent that we can deliver on that.
Yeah. Let's go back into the weeds again on the business then. So then that was very helpful, Cameron. But when we think about the merchant business, we think about it as obviously the own software business and the verticals you have.
Yeah.
The partnered software business, both of which have grown well, actually.
Yeah
... right? Double digits.
Yeah.
And then you have your direct businesses, obviously. When we think about the software side, the partnered software side for a moment, I think you had 7,000 partners, if I'm not mistaken.
Yeah.
And you added a lot. I remember-
Yeah
... you calling out on the earnings call, pretty big numbers in terms of growing those partners-
Mm-hmm
... once again, which I think speaks to something you're doing right for these ISVs, right?
Yeah.
I guess number one, if you could talk a bit about, you know, how that number has grown, the 7,000, where it's from, and-
Yeah
... a little more on what you're doing with them that's, that's resonating so much.
Yeah, it's a great question, and we're really proud of our integrated business. That's a business we've been in since 2012. We acquired APT. I think they had 700 partners at that time.
Yeah.
So we've grown it kind of tenfold-
Yeah
... at least as a partner matter, and certainly more than tenfold, I think, as a revenue matter over that period of time. Now, there's been some acquisitions that have aided that, and it's not all organic, but a lot of it really has been organic, just given the underlying trends in the business. There's a few things I think we do really well in that business that are distinctive, you know, to Global Payments. One is, I think our white glove approach to partner integration is really different. We're not exposing an API that people can just consume, and that's what you get.
We do a white glove, deep integration with our ISV partners that I think is really valued and appreciated, and allows us to tailor the integration to really meet the specific needs of those partners, which I think creates a deeper level of partnership than you might otherwise get, and what other people might describe as an integrated business, is probably point number one. Point number two is, we bring more from a capability perspective to the party than I think a lot of our competitors do in that space. So this often comes up in the context of, where do you see revenue share going in the market, and are they under pressure, et cetera?
Sure.
And I would say, yeah, on the pure payment side, rev shares have drifted up over time as competition has increased and ISVs have gotten smarter about monetization of payments, et cetera. But we've been able to combat that by really bringing more capability to the conversation, being able to grow the revenue pie with our partners while maintaining more reasonable revenue shares, and it gives us also flexibility on how we want to address partner needs. So some partners want, "Look, I want the highest possible revenue share on payments." I'm like, "Great, you can have that. We're taking 100% of everything else we sell." And others may say, "No, no, no, I like the idea of, you know, what you can bring from an additional capability perspective. I wanna participate in all of that with you," and that's great, but that rev share is gonna be something lower.
Right.
And, you know, I'm always focused on trying to produce outcomes that grow the revenue pie for both of us, and allow us to share in those economics in a way that obviously works for us and works for our partner, and I think that's allowed us to be very successful, even in an environment where competition continues to increase. And then I'd say, lastly, and look, this is one of the benefits of scale that we don't emphasize enough, and we haven't done a good enough job talking about. Look, service differentiation matters. Like, as much as we all wanna say, "Technology never breaks, it's flawless, and it's foolproof," it's not.
Right.
There's always something, and our ability to drive, I think, a level of service differentiation because of the scale we bring, really is distinctive. It's distinctive at the partner level, and then I think it's distinctive at the merchant level, and our ability to really create differentiation in our offerings around the service delivery, has been very beneficial to that business.
Yeah.
I think our partners like working with us. They like what we bring to them from a partner management perspective, from a client management perspective, and I think that has been a big part of our underlying success.
So, I mean, that's a hot topic, right? Because we've obviously gotten a lot of questions around that. So just, I mean, kind of to set the record straight, like, you're adding a lot of partners.
Mm-hmm.
The business has grown double digits.
Yeah.
Are you seeing any change in the trend line there, whether it's on the top line or even on the margin side?
No.
In terms of the aggregate margin in the partnered ISV businesses.
No. I mean, we've been able to maintain good margin expansion in that business. We've been able to manage, obviously, attractive top-line growth, and the growth algorithm for the business is relatively straightforward. I mean, it starts with, how effective are we at signing new partners?
Sure.
Certainly, not all partners are created equal. I've got really large partners that, you know, aren't great at monetizing payments, and I got really small guys who are really good at it.
Right.
And I got everything in between.
And you keep adding-
But keeping-
... into the funnel
... that pipeline flowing-
Yeah
... is really important. Continue to add new ISVs. And then how good of a job are you doing monetizing the existing base?... How effective are you at attaching payments for on every net new sale your partner makes? And how good are you at monetizing the back book of clients that they have in their ecosystem, and how effectively can you do that? And then that's all offset, you know, obviously, we try to optimize price across all of our portfolios, as any business would-
Sure.
To make sure we're getting paid fairly and appropriately for the level of service we're delivering. And you have same-store sales growth, which is gonna differ dramatically by vertical, you know, offset by attrition that naturally exists in any business, recognizing attrition rates.
Right.
and integrated because of the value of integration are far lower than what you would see in traditional payments. All that leads to a growth algorithm, again, that we have a lot of confidence being in that double-digit pace, you know, as we move forward.
When we consider, 'cause your other side of the business on terms of software is where you own it, right?
Yeah.
You're in the vertical, and you own and invest in the software.
Yeah.
If you had a choice, does it just depend on the vertical? I mean, if you had a choice to buy your own software or partner, how, how do you allocate capital?
You know, it's a great question, and it's one I get regularly. I, to say I'm ambivalent is probably a little strong but honestly, there are vertical markets where I'm perfectly happy to partner, and I actually think partnership is the right model for that vertical market. And there's other vertical markets where, all else being equal, I'd probably like to own. And the way I think about markets where I really wanna own, or we wanna own, is it all starts with the underlying TAM. You know, to spend a lot of time owning software in really niche-y verticals doesn't make a ton of sense to us.
Right.
We want large addressable spend markets, first and foremost. There obviously needs to be a strong nexus between software and payments as well, so they need to be vertical markets that have a consumer interface, where you're seeing a lot of consumer payment flow. 'Cause monetization and payments is obviously core to that thesis. Third, we like highly fragmented markets from a software perspective. You know, if you've got a vertical market dominated by one or two players, I'm probably better partnering with one of those guys than I am trying to buy one and beat my head against the wall to gain more share. I like highly fragmented and ideally under-penetrated markets. And then lastly, I like vertical markets where there's some international applicability.
Sure
... where we can export our own capabilities to markets outside the US. We can drive more integrated payment offerings in those markets as a way to differentiate and distinguish ourselves relative to competition. So where we can take those solutions outside of the US, that's pretty attractive to me as well. And then lastly, you know, and this is one that we probably haven't amplified enough in the past, I like vertical markets where if I have to invest in underlying software, there's broader benefits that can impact Global Payments more broadly. If I have to make a lot of discrete investments in a vertical market that don't benefit the company more broadly, that are really isolated, then that's not quite as appealing to me.
Cameron, another area that stands out is, shifting a little bit, is the growth of, I think it was 20% growth in POS-
Mm-hmm. Yeah
... each quarter in the last couple of quarters, and so it's been strong, obviously.
Mm-hmm.
I mean, and I think it also allows you, the direct side, to have more services sold-
Yeah
... and more vast.
Yeah.
So what's going well there? What is the opportunity there? And, you know, we've seen across the industry, actually, a bit of a spread between volume and revenue for some companies-
Yeah
... meaning revenue outperforming volume in many cases, as they provide more services-
Yeah
... or software. Can you just expand on that?
Yeah, I'd be happy to. So point-of-sale software is an area we've invested quite a bit in over the course of the last few years, and one that I'm particularly excited about. I talked about earlier, commercializing some of our solutions more broadly as we get into 2024 and beyond. But look, if you step back and look at this from a macro standpoint, the mode of competition in restaurant and retail is at the point of sale. You know, selling payments into restaurant and retail environments as a standalone offering, you know, certainly that that's on its sort of downward trend.
You know, the mode of competition is point of sale, and those are two of the largest sort of consumer spend verticals out there, so I think it's really imperative that you have competitive point-of-sale offerings to be successful, particularly in SMB, you know, restaurant and retail environments.
Sure
... which is why we've invested so heavily in our businesses over a long period of time. It is the mode of competition. I think we have really strong capabilities there. I'm particularly excited about the next generation of our restaurant retail platform here in the U.S., that we're rolling out this year as well, as well as expanding GP POS globally. But all that sets up for us to be able to compete effectively, grow our business attractively in point-of-sale software, obviously attach payments, and to your point, be able to sort of expand our offerings more easily with our clients over a long period of time, driving higher ARPU across, you know, both the restaurant and retail verticals, which are really important to our business more broadly.
We've seen some good underlying trends in terms of our ability to drive higher ARPU, you know, when we're able to integrate through the point-of-sale software environment.
Okay.
Obviously, I think that sets up well for how we want to drive the business in the future. It's, it's harder to probably expand that ARPU if you're leading with payments. But you're leading with software, and you become embedded into the ecosystem that's running that restaurant or retail environment, it's much easier to think about ways and have the right conversations around expanding ARPU with those customers over time.
And then on the issuer side, your guidance is 5%-6%, if I'm not mistaken?
Correct. Yep.
You have a ton of pipeline that's-
We do
... rolling in now, right?
Yep.
And so, you know, is there any conservatism in that outlook? I mean, either way, that's a pretty steady-
Yeah
... usually it's a steady mid-single-digit grower, right?
Yeah. Look, I'm happy with the growth rate that we see in the business right now, and I feel good about kinda how the business is positioned, and we do have a good pipeline. I got a lot of confidence around the ability to deliver on that in the short term. I would say, longer term, the opportunity to sort of to create more growth opportunities in that business is really tied to the modernization program. Because at its heart, it obviously modernizes the technology, brings it into more, you know, twenty-first century language, cloud-native environments-
Yeah
... et cetera, breaks it into microservices, but what that also does is it opens up a lot more TAM. You know, the TAM for our issuer business is too limited. It's large FI in mature markets that we operate in today. That's too narrow of a TAM.
Mm-hmm.
Certainly, one of the main objectives of the modernization program is dramatically increasing the TAM. So giving us access to smaller, you know, mid-market to community bank sort of opportunities and markets that we already serve, particularly the U.S., allowing us to more easily enter new geographic markets around the globe-
Cool.
where historically, that might have involved standing up a new data center, so that'd be bringing a copy of the code.
That's great.
Getting that platform operating, we can now do that through cloud. Obviously, environment's much more easily opening up a vast new TAM for the business. And then third, the modernization program makes our applications and capabilities, which are really best in class, particularly from a credit perspective, make them more easily consumable by fintechs who are developing new use cases around cards and issuing-
Right.
that I think, you know, we want to be able to tap into and have been limited because we have this sort of monolithic platform today, which has great capability, but a little harder to consume ... harder to consume and more flexible.
This should be ready by the end of the year, you said, right? The AWS-
Well, the customer-facing applications.
Right.
Yeah. So a lot of the things that-
Okay
... you know, a client would look to that gives them greater enablement capability and allows them to more easily consume some of the core aspects of the issuer platform, those are available, you know, as we exit 2024, heading into 2025.
Just quickly, the Capital One-Discover merger-
Yeah.
Is that an opportunity for you, or is it a risk? How do you see it?
I see it as an opportunity, no, no doubt. I think, first of all, we have a nearly two-decade relationship with Capital One. They're one of our premier partners on the issuing side of the business, and we just renewed our contract with them-
Right
... on a multi-year basis, so that's the first point I'd make. The second is, look, we did that in January, and they announced the deal in February.
They knew about it.
They clearly knew, you know-
Yeah
... where they were heading directionally at the time we did our contract. We have a long history of growing with Capital One through their M&A. Now, admittedly, Discover's a little different than M&A they've done in the past, but every bit of M&A they've done in the past has benefited Global Payments more broadly through TSYS, of course, and I don't think this is gonna be any different.
You can't help but wonder-
I'm pretty excited about what they're gonna be able to do with that business, to the extent they're successful in getting it closed.
Yeah, I was gonna say, you can't help but wonder if it's more efficient for them to use you guys, where they've been successful-
Yeah
... on issuer processing, rather than working on a Discover platform of some sort.
There's no doubt in my mind, and the interesting thing about Capital One is, they built their entire ecosystem around our issuing capabilities.
Right.
I think they view the partnership as incredibly strong.
Okay.
I think they view what we bring to their business as incredibly powerful, so I have every expectation that they're gonna want to find ways to work with us. The value proposition they see in Discover is really around the network, which doesn't necessarily affect where issuer processing is done, and, and obviously, the deposit base, et cetera, that, that Discover's going to bring them.
Yeah. I wanna squeeze in two more.
Yeah.
One, on the margin side.
Sure.
We've obviously... You know, we had some questions after earnings over the 50, the up to 50 basis-
Yeah
... points of margin expansion, and obviously, you're a bigger company with already relatively high margins, but-
Yeah
... help us understand the components there, if there's any conservatism in that, and how you think about it?
Well, I mean, obviously, anytime we set expectations for the year, our goal is to hopefully at least meet or exceed them, so I'll just start the conversation with that. But look, I, as I step back and think about the business, you know, our margins collectively are in the mid-40s, you know, on, you know, $9+ billion of revenue. You know, those are very healthy margins, and expanding margins 50 basis points with that kind of sort of absolute quantum of margin starting point, I don't think is anything to be embarrassed about as a business. So look, we're always balancing, reinvesting in the business, continuing to invest in areas that we think are gonna sustain the rates of top-line growth that we're seeing in the business, while allowing some of that benefit to flow through to margins and ultimately to earnings.
Our job is to try to get that calculus as right as we can, to the extent there is a right answer. We think we have the right balance struck. You know, I'm pretty... you know, won't apologize for extending margins 50 basis points on a mid-40% margin.
Sure
... profile business. In merchant, excluding EVO, we're targeting up 50 basis points. Again, merchant margins are in the high 40s.
Right.
So look, I think the overall margin expansion target is prudent. I think it's the right way to position the business in terms of balancing that want, the ability to reinvest and desire to reinvest, while again, allowing it to flow through, some of that margin benefit to flow through to the bottom line, to-
Yeah, and at the end of the day-
... the current
... you are saying, I think you said 7-ish% and low-to-mid-teens type profile in terms of EPS, is about how we could think about-
Yeah
... your medium-term opportunity, and so, you know, it all comes through the algorithm.
Yeah.
Last one for me is just on the capital allocation side.
Sure.
If you could, help us understand your balance and how you approach M&A versus debt pay down and buybacks, obviously?
Yeah, I mean, obviously, you know, it starts with making sure that the balance sheet's in a healthy place, and we are certainly on good course as we think about exiting 2024, to make sure the balance sheet's at our targeted leverage ratio. And, well, I think we're in a pretty healthy place from a, from an overall leverage standpoint. So then our attention kinda turns to what to do with the available capital we have in the business, and I've said a few things around that, and I'll, I'll repeat them. One is, you know, very focused on, as we always have been, making sure that any M&A we consider, you know, obviously fits the strategy, helps accomplish the objectives we have for the business-
Yep
... allows us to grow and expand in a healthy way. Then secondly, those M&A investments have to be competitive as a return matter relative to the alternative use of our capital, which is really buying back our stock. I'm very focused on making sure any M&A we do is a very competitive use of that capital relative to the alternative, particularly given where the multiple is today. Hopefully, the multiple won't always be there, but given where it is today-
Makes sense
... I think that is the right thing to do. The last thing I would say, in the environment that we're in right now, you know, we're very focused on doing what we can, within reason, you know, to, to simplify our business. You know, it's, it's a big, complex business. We've grown, you know, over the course of many years through M&A, organically, and, you know, we want to continue on a path of simplification of our business, where it makes sense for us to do that. So M&A, that's gonna add a lot of complexity to our operating environments, to our business, to our story, probably not high on my list right now. I think there's plenty of M&A that wouldn't do that.
That's very good.
... but certainly, things that are gonna add a lot of complexity aren't particularly desirable.
I think that's very good to hear. With that, thank you very much, Cameron.
Yeah.
Really appreciate it, guys.
Thanks for having me.
Thank you for joining. Next on stage is the executives from Payoneer. If they could start making their way up, and we'll start in about five minutes. Thanks.