All right. Good morning, everybody. Glad to be kicking off the second day of the Morgan Stanley Fintech Conference here with Global Payments and newly appointed CEO, President and CEO, Cameron Bready. Before we get started on our conversation with Cameron, I do have a quick disclosure to read.
Please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep. Also, not on stage today, but we also have CFO Josh Whipple and Head of IR, Winnie Smith, in case we screw up too badly, so they can fix it for us.
Good to have protection.
Yeah, absolutely. Look, maybe I'll start, Cameron, with the first and broadest reaching question is that you're now CEO of Global Payments, obviously. How do you think you'll look to manage things at least a little differently, and maybe more importantly, that's always a hard question, but more importantly, what are the top two to three priorities in the first year of your new role, and what's your strategic focus long term?
Yeah, first of all, James, thanks very much for having us. We're delighted to be here this morning, and thanks, everyone, for joining. Maybe I'll start at the end of the question and kind of work my way back. As I like to tell people, I didn't just materialize overnight.
Right
inside of Global Payments. I've been there for almost a decade, and I'd like to think I had a bit of an integral part in developing the strategies that we're pursuing today. I would say, as it relates to the four-pillared strategy that we're pursuing, the one that we outlined back in September 2021 at our investor conference, you know, focused on software primacy, e-com, and omni capabilities worldwide, obviously exposure to faster growth markets, and the fourth pillar, the newest pillar, B2B, you know, that very much is going to remain our focus as a strategic matter as we move forward. And I'm very much behind that strategy. I think it's the right strategy for the business.
I think it's proven to be quite successful in terms of allowing us to grow at attractive rates, win share in the market, and position the business for long-term success. I want to couple that, obviously, with consistent strong execution. I do think one of the hallmarks of Global Payments over a long period of time is our relentless focus on execution and our ability to produce consistent results through cycles.
Look, there's a lot of great competitors in this space. There's a lot of good companies with good people, good assets, good strategies, but I think, obviously, end of the day, what separates one company from the next is really execution.
Right.
I spent my last four years as President and COO, really focused on execution internally, and we'll keep that kind of relentless focus as we move forward in time, coupled with, you know, a strategy that I think is appropriate for the business and one that differentiates us in the marketplace. As it relates to near-term priorities, clearly, you know, I'm focused on Q2.
Right.
You know, I wanna make sure we deliver a strong Q2, show that the transition inside of the company is going smoothly. You know, I wanna make sure that that transition is seamless, you know, both to our team members inside the company as well as to our constituents outside the company, our clients, our customers, and investors, of course. I would say, secondly, I'm very focused on making sure EVO goes smoothly.
Mm-hmm.
Obviously, it's a fairly sizable investment. We closed, you know, back in the first quarter, at the end of the first quarter, and ensuring that that integration goes very smoothly, we're able to realize the value that we saw inside of EVO and the value premised in the transaction is incredibly important to me as well. I'd say, lastly, look, I'm focused on addressing kind of where we are from a multiple matter.
Right.
You know, obviously, I think, obviously, the whole sector's been under a little bit of pressure for a period of time now. I think the disconnect between our multiple and our underlying performance and execution is maybe wider than others, and I'm very focused on, you know, what we can control in terms of tightening up our story, in addressing, you know, any concerns that may exist in the marketplace to really address kind of where we're trading and try to improve upon where the multiple is. 'Cause I don't think relative to the underlying performance of the business.
Right
... the execution we've delivered, and obviously, the financial outcomes we've been able to achieve, that the multiple really reflects that, so.
Right. Right.
Very focused on, you know, addressing that as much as I can in the short to near term.
No, that makes sense. You know, us being overweight rated on Global Payments, we tend to agree, and but it's also like a step-by-step process.
It is.
Right? You've kind of mentioned Q2 and getting through the June quarter here. You know, I guess we'd be remiss if we didn't kind of start there as, at least as that's one of your priorities for this year. You know, what we've generally seen from the consumer spending data overall has been that we were stable from March, April to May, at least based on what Visa talked about.
There seems to be this kind of shift to more non-discretionary spend and services from goods. Investors continue to be really concerned about potential weakening, and they seem to be quick to pull the trigger if they feel like something is changing. What is your latest read on consumer spend and the macro, and what metrics are you watching closely?
Yeah, it's a great question. Obviously, we look at the data that Visa produces like everybody else.
Yeah.
What I would say on the merchant side of the business is we're seeing trends that are very consistent with what Visa has said. you know, as we started the year, like a lot of people, we had really good results in January.
Right
... and February, as it relates to volumes. Obviously, some of that was off of an easier, you know, 2022 Q1 Omicron comp. Obviously, as we got to the March timeframe, there was a little bit of decel around that. April was pretty consistent with March.
Mm-hmm
May's been pretty consistent with April. We're seeing good stability, I would say, from the consumer. I think the consumer tends to be or continues to be relatively strong, I would say, in light of everything kind of going on in the macro environment. I think by and large, we're somewhat facing unprecedented times.
You have stubborn inflation, you have a Fed that's obviously committed to combating that with rate actions over a period of time, employment is very strong. Employment trends continue to be very strong. I think as long as the employment market hangs in similarly to how it has been, I think the consumer is going to remain relatively stable and relatively healthy overall.
Right.
We have seen shifts, as you described. Obviously, through the pandemic, there was much of buying every single, you know, retail good you could find online.
Yeah, yeah. Right, right.
sitting at home. Post-pandemic, we're continuing to see this shift towards, you know, experiences, services, more non-discretionary items as I think people, to some degree, catch up on foregone spending over a long period of time through the pandemic. We're seeing that same mix shift in our business.
The nice thing about our merchant business is we are well diversified across discretionary, non-discretionary vertical markets. We're seeing good trends in the non-discretionary, but we're seeing very stable trends in the discretionary channels as well. I think the overall health of the portfolio is quite good, and we're happy with what we're seeing as a volume matter relative to the expectations we have.
Going back to my earlier comment, I think we're poised to deliver a very strong, you know, second quarter, when we report later next month, just given the trends we're seeing in the business thus far.
Got it, got it. When we think about the way that you formulated your full year guide and outlook, at the time, back at the beginning of this year, you chose not to incorporate any sort of macro softness in the full year.
That was different from some of your peers and kind of the assumption sets that they went through. Can you walk us through your thinking assumptions around that? And, you know, where you'd expect we'd land relative to your guide if we did see a spend soften a little bit or a soft landing scenario, if you will?
Yeah. I have a little different perspective on that as to whether or not we included macro softness-
Sure
... or potential weakness in the guide. The way I think about the guide is twofold. One is we're managing a complex business globally.
Right. Right.
We're in dozens of different markets, dozens of different verticals, different lines of business. There's a lot of complexity in the business, and we don't manage it for perfection is point number one.
Right. Right, right.
We obviously understand when you're managing a business like this, things go bump in the night. We have to account for that and accommodate that in whatever guidance we produce, that's the way we've run the business for a long period of time, is point number one. Point number two is, as I think about the range of outcomes that our guide encompasses, it also encompasses and accommodates a variety of different macro outcomes.
Right.
As I think about the guide, you know, we certainly have room in our guide to accommodate some softening or some weakness in the back half of the year, you know, that might suggest a shallow-ish sort of recession or certainly a softening.
Got it.
in the macro environment. Obviously, that would drift us towards the lower end of that guidance range. If things are better than people are expecting, you know, I think that would allow us to drift towards the higher end of the guidance range. I think the range itself, we left it purposely rather wide in the first quarter update, and the reason for that was there is uncertainty around the macro.
I think on the lower end, as I said before, we can accommodate some softening in the macro, and on the upper end, we have room, you know, for the macro to slightly improve. That's generally the philosophic approach we sort of took to the guide, with an eye towards being able to accommodate, again, a range of outcomes from a macro perspective.
Sure
... for the full year. Look, if the macro falls off a cliff, which certainly not expecting sitting here today.
Right, right.
... that could put some pressure on things, but I think that's true for everyone.
Yeah, yeah.
... quite frankly.
Yeah, that's right. That's right. You know, on that point, as you've, you know, you just said, and you've said previously, that you think you can withstand some softening and still achieve your targets. You know, what are the levers that you're able to pull to do that, and how do you rank order them, I guess, between pricing, expenses, and other levers you may have?
I think we have a good track record of being able to pull levers as we need to sort of achieve results within reason, of course.
Mm-hmm.
Dating back to the pandemic, I think we were able to take action very quickly to remove a significant amount of cost from our business relatively overnight. I think that positioned us well, notwithstanding all the challenges that the pandemic presented in 2020, to still grow earnings that year and produce record levels of free cash flow for the business at that time. That was post-merger of TSYS.
Right, right.
... the record a little bit easier to achieve. I think obviously entering the pandemic, there was a lot of uncertainty as to what the outcomes may be, and I think to grow earnings and produce strong free cash flow through that environment is really a testament to just how well and how aggressively we kind of managed the business from an expense perspective.
I think we have a long history of demonstrating we'll take the necessary actions to manage expense, to help obviously achieve outcomes if environments weaken or worsen relative to kind of expectations that we have for the business. I would say on the revenue side, I think we do have opportunities on the revenue side as well, particularly around pricing. You know, the pricing environment right now for our business is probably more favorable than it's been in quite some time...
Right
... just given actions that other competitors have taken. I do think there's opportunity, again, within reason, on the pricing side, to lean into that a little bit more if we needed to, if we were seeing trends that, you know, were certainly softer than what our expectations were for the balance of the year.
I wanna turn to pricing specifically. I think from our perspective, we've been encouraged to see, like, the volumes growth and in particular, how the volume growth has trended especially over the last 2 quarters now. The revenue growth hasn't quite matched that, but I think that a lot of that's pricing and mix and that kind of thing.
You know, when you say that there's little opportunity to move there, if, you know, within reason, like, what is both the near term, not only to manage through this year, but what's the long-term path there in terms of additional value capture on the volumes that you're able to do and grow?
Yeah. I will start with pricing in and of itself, and I kind of alluded to this in my last answer, but I think we are seeing a more constructive environment…
Mm-hmm
... than we've seen in some time.
Mm-hmm.
I would say, unlike some of our competitors, who maybe have been a little more aggressive in leaning into price...
Yeah
... kind of going into this year, for different reasons, they all have their own reasons for that. I think our approach has been more consistent over a longer period of time.
Okay.
We've had a philosophy around trying to ensure we're optimizing our pricing across our portfolios every single year over the course of time that I've been at the company. It's really focused on, again, making sure that we think we're getting paid fairly and appropriately for the level of value and service we're delivering to our customer.
Right, right.
That philosophy hasn't changed in 2023, and that's the approach we're taking. On the pricing front, we've probably been less aggressive than some of our peers, which gives me a little more optimism that we could lean into that a little bit more, you know, over time if we needed to.
If you look at the long-term trajectory, assuming we're out of this environment where capital's gonna be free and competitors have to be a little more rational around how they're balancing growth and performance from an EBITDA and free cash flow perspective in the business, and quite frankly, just have to be profitable, you'll continue to see a more rational, sort of competitive environment.
Right
particularly as it relates to pricing, which I think is really good for our business long term.
Yeah.
I think we can continue with our philosophy as we have over many years, but I think the landscape in which we're doing that is just gonna be a little more, a little more constructive, and that gives me a lot of optimism.
Of course, as we continue to pivot the business towards more technology enablement, you know, those take rates are gonna be higher, the spreads we're able to earn between software and payments are gonna be better, and we'll continue to see revenue growth, you know, pacing with volume growth and hopefully exceeding volume growth over a longer period.
Right now, the revenue versus volume growth difference, if you will, what's that largely attributable to? When you say over the long term, be able to better match that or even outpace it, like, what are the key to-dos that you have?
Yeah, I would say right now, revenue growth is right on top of volume.
Got it.
Which to me is important.
Yeah.
What I don't want to see is wide disconnects between, you know, certainly on the, you know, the side where volume is outpacing revenue growth meaningfully, or vice versa, revenue growth is outpacing volume growth meaningfully. End of day, volume is still a, an important metric in terms of the health of the underlying business that we're managing.
You know, obviously, to the extent we can drive more value into our customer relationships with products and services and capabilities that aren't necessarily tied to volume, we can continue to see revenue growth outpace volume growth over a period of time. I'm very happy with what I've seen trend-wise in the business, which revenue and volume are tracking closely, and they're.
Yeah. Yeah.
... highly correlated, and that's something that I'm gonna continue to work to achieve over the near to medium term.
On competition, I think this is something that we've been watching pretty closely, and to your point, is that there was this period of very cheap capital that resulted in a flood of investment coming into the space and trying to be competitive, et cetera. How did that, from your perspective in retrospect and looking back on that period, how did that level or that elevated competition manifest itself in both in terms of what you saw in the market behaviorally as well as the impact on your business?
Sure. I mean, I would say it's a couple of things. Obviously, it's always been a competitive business.
Right.
The fact that you had new competitors sort of come into the market during that period of time, that to me, is not as big of an impact, largely because, again, it's always been a very competitive business in every market, every vertical that we operate in, the competitive dynamics are very robust.
Mm-hmm.
It's hard to find a market around the globe that's not competitive. That's the first thing I would say. I wouldn't say the competitive dynamics are any more severe or less severe than they have been over a long period of time. It's just some different players approaching things different way.
I think the bigger point is the one that I referenced earlier, and you alluded to as well, which is you had some less than rational sort of behaviors in the marketplace. As some of these newer players were looking to gain share, obviously, they were doing it in that ways that were unnatural, I think.
Right.
... a longer period of time, as it relates to the desire to drive growth in the business at the expense of profitability. A lot of these players had no line of sight to profitability for a long period of time. When capital is free, everything's a good idea. When capital is no longer free, obviously, behavior gets more rational.
Yeah, yeah.
... we've seen more recently. I think ultimately, that's good for the competitive landscape. I've said a number of times, I think competitive landscape has tilted back more in our favor, probably more so than it's been for the last several years. You know, from my perspective, it's great to have good competitors. We want good competitors in the space.
Right. Right.
We want, you know, to see rational actors and rational behaviors in the space as well.
Since, you know, kind of cost of capital has risen over the last really year, maybe a little more, and we've seen at least externally, a falloff in that VC-driven and private-driven portion of investment in the space, have you seen the actors themselves, to your point, behave more rationally in the way that they're pricing or pursuing business? Or like, how quickly has that adjustment been made?
I mean, I think we talked about it earlier with respect to pricing and the pricing dynamics in the marketplace and some of the other, you know, sort of competitive behaviors we're seeing in the marketplace.
I do think, as I said before, it's the competitive landscape has tilted more back in our favor, and we're seeing more rational actors and more rational environment, you know, in which we can run and grow our business, which I think long term is, as I said, I think is gonna be very favorable for us. We're certainly seeing in this environment, where again, capital is no longer free, companies are having to make trade-offs between growth and profitability. They're having to find ways to be free cash flow positive.
They're having to think about their businesses differently, and they can't just continue to invest, invest-
Right.
... with no expectation of ever producing a return around that. I think with that backdrop, again, it really does, you know, create an environment where I'm more bullish, obviously, the overall competitive landscape, you know, than I've been in some time.
Got it. Got it. Yeah, and I would agree with that. I think one of the things that we tend to think about as dovetailing into that is, you know, how does that changing landscape also changed the opportunities for M&A, and.
Yeah.
you know, you guys have a great history of acquiring technologies and integrating them into your payments business, and doing so to expand TAM and increase exposure to the faster-growing parts of the payments market. EVO looks like it could be a great example of that. As you get further along on the EVO integration, what other areas of the market are you looking at and finding attractive? What's your willingness to keep pursuing those new areas with M&A right now?
Yeah, look, I think M&A has been a great tool for us over a number of years.
Right.
as we look to grow and expand our business. Obviously, we invest heavily organically to drive organic growth in the business, but we also invest heavily inorganically to do the things that you just described: increase the TAMs, gain access to new TAMs, obviously, get exposure to faster growth markets around the globe, et cetera. I think M&A is gonna continue to play, obviously, a role in the growth and success of Global Payments for many years to come. I think identifying, sourcing, executing, integrating M&A transactions is a, is a core competency of Global Payments.
Yep, yep.
I think it's a muscle that we've built very well over a number of years, and I think it has helped to build the business into, you know, the company that we are today. From my perspective, I'm very focused as a priority matter in terms of finding ways to grow and expand the business, and I think M&A is gonna be an important part of that strategy longer term.
Of course, that has to be obviously contrasted against what the alternative uses of that capital are, and I'm very return-focused as well. As we think about M&A, and we think about adding to our business and finding opportunities to augment our strategies through M&A, you know, we're gonna be very focused on the returns of those opportunities relative to the returns that we can generate from buying back our own stock.
I think obviously, where we're trading today, I think buying Global Payments is a pretty compelling value creation opportunity at this multiple. By the time we're at a point we're putting capital to work, I hope that situation will be different.
Right, right.
Certainly, as we think about any M&A opportunity, it's got to be obviously contrasted against the alternative use of capital, which for us is really buying back in our shares.
Right
we'll make those decisions accordingly at the time. For the balance of this year, we're very focused on getting our leverage back to our targeted leverage ratio, as we've said publicly already, on the heels of completing the EVO transaction. We're also very focused on ensuring that EVO goes well. I'm a big believer in making sure you do well the things you've already committed to do before.
Right, right.
... take on the next new thing. I think the timing for that will actually work out reasonably well. By the time we get to a point where we think we're back in the capital allocation game, so to speak, I think EVO integration will be in a very healthy place, and we'll be able to think about what's next for the business.
I think there are a couple of things that that I want to follow up on. First, on EVO and the integration, can you give us a progress update on where you are and, you know, basically, how you're coming along on the revenue and EBITDA synergies you've outlined and where they're going to be realized first, versus what's further down the line?
It's a great question. I'll just start by saying we're delighted with the progress we're making with EVO.
Okay.
It's a fantastic transaction for us. I would characterize EVO as really center of the fairway. I mean, it's, this is something that we do very well.
Okay, got it.
... from an acquisition and integration perspective, and frankly, you know, from my vantage point, there's not a ton of risk, you know, in that integration from our perspective. I think it's something we know how to do really well. Our teams are executing very well, and I'm delighted with the progress that we've made already with EVO. As you can imagine, our first priority with any integration is making sure that we get our go-to-market motion right.
Right, right.
We don't disrupt the underlying momentum in the business. We make sure the business produces performance consistent with the expectations that we have for that, and we try to obviously dovetail our integration activities into that to make sure that we don't create disruption in the underlying business.
Yep, yep.
You know, I can only take that cost out once, but if I obviously break the machine in the process, we're gonna have other issues that we have to grapple with. Striking the right balance around that, I think, is incredibly important, and it's also, again, something that I think we do well and have done well over a long period of time. Our near-term focus on EVO is integration, of course, and realizing the expense synergy targets that we've established. We said we would achieve $125 million of run rate expense synergies within 2 years post-closing.
Okay
transaction. Those targets are very much on track today. I think we'll realize somewhere in the $30 million-$35 million of expense synergies this year. All of the plans to achieve those levels of synergies over the next couple of years have been established, and we're now executing against those.
I think we have very good line of sight to achieving the expense synergy targets, which really drive kind of the near-term EBITDA benefits that we expect from the EVO transaction. I'd say longer term, we put in motion plans on the revenue side as well. Those take a little bit more time to germinate inside of the business. In some cases, they take more investment to realize.
I think I'm probably, on balance, more bullish today, the revenue synergies and the opportunity to enhance revenue inside of the EVO business than I was even when we announced the transaction last August, and certainly when we closed a couple of months ago. The more time we spend with the business, the more opportunities we uncover to drive incremental revenue growth in the business.
We have plans, of course, to bring, I think, the breadth and depth of product capability that sits inside of Global today to EVO markets, where they really don't have that product today. EVO was largely just a payments company.
Right.
I don't mean that to be pejorative, but they didn't have, I think, the breadth and depth of value-added services and other product and solution that we can bring to enhance their competitive positioning in those markets.
Obviously, EVO has a lot of large multinational customers that they really couldn't serve on a multinational basis. I think we're having great dialogue with them already about expanding our relationship in different markets where Global Payments can serve them. Of course, we're really excited about the B2B capabilities.
For sure.
-that EVO adds into our existing B2B positioning, and I think long term, the assets that they bring will be foundational as we look to continue to build out that B2B strategy more fulsomely.
Got it. I want to talk about, you mentioned like, hey, you want to integrate, reduce the leverage associated with that acquisition, and then always being mindful of kind of where your own valuation is versus that of, you know, potential acquisition targets and as we look forward.
How are you feeling about where valuations are now, et cetera, in the potential acquisition market? I mean, if I look at things and kind of the refrain that we've heard consistently is that seems like they've been slower to move in the private markets, but there is movement. Like, what's your sense, and are you feeling okay taking your time and letting things continue to settle out?
Yeah, I'm okay taking our time letting things settle out.
Okay.
I think it actually, you know, the timing works out reasonably well for us because I do think there's some more reality needs to set in a little bit more as it relates to seller expectations around valuation. Obviously, with what's happened in the public market, it takes a little bit of time for that to trickle through the entirety of the market, and sellers need to become more realistic over time, I think as it relates to the rate environment that we're going to be in, and obviously valuations in the sector and what people are going to be willing to pay for assets that they have. Look, I think through any cycle, that will happen. I think it's just a question of timing, and I think from our perspective, we have a very healthy pipeline of things that we're already looking at today.
As you know, it takes a lot of time to sort through, you know, transactions that are actionable.
Yeah.
assessing them from a diligence matter, obviously determining cultural fit and figuring out valuation and whatnot. I think as we get towards the back half of the year and we start to look towards 2024 and leverage gets back to the right place, you know, I do think there'll be opportunities that will probably fit, you know, certainly fit our strategy, that'll be actionable, you know, that are going to be good cultural fits inside of Global Payments. Then the question becomes, again, what do the returns look like from those transactions versus the alternative that we have for that capital?
Got it, got it. I've been monopolizing the questions. If anybody has a question, just raise your hand. I'll give you a microphone. I want to continue here. though, I want to talk to you about the issuer segment. you know, this is 25% of your business, and you've seen a great tailwind from the shift of deposits and accounts to your larger recipient money center customers.
Is this tailwind still ongoing, or has it abated some? look, I think you added roughly 20 million customer accounts last quarter. I'm curious what a normalized pace should be and what we should expect in coming quarters.
Yeah, obviously, I think the performance we saw out of our issuer business in Q1 was terrific.
Yeah.
We're really pleased with the progress we've made with that business over the last couple of years. We have a lot of initiatives in flight, most specifically our technology modernization project, which moves all of our existing technology platforms from their current on-prem environments to the cloud with AWS, the partnership we struck with them, and that activity continues very much on track, and we're delighted, you know, with the progress that we've made there. It's obviously critical to the future of that business.
Certainly in the interim, we're pleased with the financial performance we've been able to produce. As you mentioned, we added 20 million new accounts on file in the first quarter of this year, which was sort of above what I would characterize...
Yeah
as kind of a normal runway for that business.
Yeah, yeah.
I think typically we target mid-single digits, mid-single digit plus sort of account on file growth.
Right, right.
In any particular quarter, obviously we had a good backlog of conversions that we were able to pull into, you know, late 2022, early 2023, you know, that added pretty meaningfully to the AOF base, you know, for the first quarter. We've seen good underlying trends in the business, largely with a number of our SIFI customers, to your point, that benefited from some of what was happening in the regional bank sector, you know, during the first quarter and early part of the second quarter. I would say those flows, I don't think, haven't really continued the way that they materialized earlier in the year, the benefits of those flows, we still see.
Right
... kind of manifesting themselves in the metrics, just in terms of activity within those issuer customer client bases.
Right.
I think that has given that business kind of a nice tailwind, and we're seeing metrics in that business that are better, I would say, on balance, relative than what we've seen kind of coming out of Visa.
Right.
Kind of going back to our earlier conversation around those recent metrics. Look, that business, I think, is poised to have a good year. We increased the guidance for that business in the first quarter. It's, as I think you're aware, targeting growth this year, 5%-6%, you know, which was an increase from where we started the year. I think it's really on the strength of the underlying momentum that we have.
Got it. Here to wrap up, I did want to touch on B2B. You know, those are also included in your issuer segment, as you've stated a couple of times, at least indirectly this morning, it's an important part of your long-term growth strategy. Can you parse out what sort of services Global Payments is provides in the space how the economics compare to the merchant processing business the overall TAM and growth contribution you think?
Yeah, I think it's important. B2B is such a large TAM.
Yeah.
We measure it at roughly $125 trillion, and obviously people are going to have different measures of the size of the TAM, but needless to say, it's massive. It's multiples of what the consumer sector is, so that's part of the reason I think we're so bullish about the B2B opportunity long term. That, coupled with the fact it's a highly fragmented market.
Yeah, right.
There's no real dominant player. I think we're as well positioned as anyone to continue to grow and gain share in that space over a longer period of time. It's a business that we expect to grow by multiples, you know, over a longer period of time. The other challenge with the B2B market is it means different things to different people. I think.
Absolutely
it's really important to segment the market and focus on those areas that we, as Global Payments, are really trying to target as a business. I think that starts really with what I would call just funds flow, right?
Mm-hmm.
Focusing on money out solutions, customers looking to pay bills, whether check, ACH, or hopefully more virtual card.
Right.
Visa is one of the largest virtual card issuers in the world, and obviously, we have all the payment rails and capabilities to help customers make money out payments in their business, and then there's money flow coming the other way, which is businesses accepting payments from other businesses, again, whether it's check, ACH, or again, more and more card, in effectuating B2B acceptance on the acquiring side with Level 2, Level 3 processing, invoicing, as more and more of that spend shifts towards cards or at least away from checks, whether it's ACH or card.
Those are capabilities that we bring to bear on both the issuing side and the acquiring side of the market today. The money flow side of B2B is one of the most attractive opportunities, and it's one I think we're really poised to continue to grow in our business.
The second piece is really business efficiency, as I think about it.
Right.
That's where AP automation, AR automation, with integrations back into ERP environments, is really critical. Having now AR capabilities by virtue of the EVO transaction, being able to couple those with AP capabilities that we have through MineralTree, again, aligning the integrations that we have back into SAP, Oracle, Microsoft, Sage, et cetera, on the ERP side, is really valuable to attack sort of that business efficiency opportunity with software-
Yep.
you know, at the heart of our offering in the B2B space. The third channel for us is really what I would call employer solutions. That can be a broad category of offerings. It's clearly, you know, tip card, wage card, EWA, pay card solutions that were the old Netspend B2B assets that we've kept as part of that divestiture.
It's also payroll HCM solutions that we have within our Heartland business today. We have an array of what I would call employer solutions targeted towards businesses that help them obviously manage their resources and make payments to their employees as appropriate through the tools and capabilities that we can bring. Lastly, there's a whole data and analytics play around B2B.
Right.
I think being able to be on both sides of funds flow from an ARAP perspective, being able to bring AP automation and AR automation as a software and ERP integration matter, I think gives us rich data and analytics that we can utilize, again, to augment the B2B offerings that we can bring to largely that mid-market of the B2B space.
Yeah. Yeah.
That's really the target market for us.
Right
I think segmenting B2B that way is really important because you start talking B2B, it really does mean different things.
Yeah
to different people. That's how we think about sort of how we're wanting to play in the B2B space, and those are the channels that we're really focused on growing.
Yeah. We actually just published a big survey and of businesses, as well as taking a look at, like, kind of the efficiencies that are had to be gained, et cetera. We'd agree is that mid-market is probably where there's the most opportunity over the medium to long run.
Yep.
The question, you know, to your point, though, is like it's highly fragmented. There's a lot of different solutions and solution needs out there, you talked about a lot of the integration work you're doing. How should we think about like, where that is from a profitability standpoint versus the rest of the business, you know, even if just qualitatively, where would you like to see that get over the long run?
Yeah, clearly, margins in that space aren't quite where they are in the other parts of our business today. I also think the flip side is, as we continue to grow and scale those businesses, the margin profile will improve, and it'll be a nice tailwind to the overall margin growth and expansion that we're trying to achieve in our business. We talked about MineralTree. When we bought that business, it wasn't profitable.
Right.
You know, it is now break even plus, you know, for us, as we get into 2023, exactly in line with the expectations we have. As we continue to grow and scale the top line, we're obviously seeing more of that profitability flow through and margins improve in that business. The pay card assets are profitable.
Mm.
Probably at a margin, again, that's a little lower than where the issuer margin is overall.
Right.
You know, that's a margin, again, that's going to continue to grow and scale over time as well.
Got it.
Same thing on the acquiring side. Interestingly, B2B acceptance is just as profitable as consumer acceptance.
Right. Right, right.
Obviously, depending on mix, and as more and more of that shifts towards cards over time, I do think there's tailwinds to profitability and margins on the acceptance side as well. I think if you roll it all together, it's a margin profile today that's obviously lower than where the average business is, but it's one of the areas of the business that probably has the most potential for margin expansion over a long period.
Well, that's great. Cameron, everybody, that's all the time we have this morning. Thanks for joining us, and, look forward to seeing how you progress for sure.
Very good.
Thank you very much.
Thanks so much for having us.
Yeah.
Good to see you.
That was great. Thanks.