Fidelity National Information Services, Inc. (FIS) Earnings Call Transcript & Summary

Hello, everyone. I'm Jason Kupferberg, the payments and IT services analyst here at Bank of America. I want to thank you all for joining us for our Annual Electronic Payments Symposium, which obviously is being held virtually again this year. This is one of the longest running Wall Street payments conferences. We're very excited to bring you a total of 19 sessions here over the next 2 days, which will include a cross-section of premier public and private companies as well as other industry participants, who will be presenting in various formats, including fireside chats and panels. It's obviously been an extremely volatile period for the sector. So our aim during the symposium is to drive new insights into key industry dynamics, which can then be translated into alpha-generating investment decisions. [Operator Instructions] And so with that, we're going to dive into our first session of the symposium, which will be a fireside chat with FIS, including Chairman and CEO, Gary Norcross; as well as CFO, Woody Woodall; as well as Nate Rozof, who runs Investor Relations in addition to other corporate finance responsibility. So thank you, team. We appreciate you guys being here.

Thanks, Jason.

Thank you, Jason. I look forward to spending time with you.

Terrific. So the investment community is obviously valuing shares of FIS very differently now than just prior to the pandemic. Just curious, from your perspective, what do you think are some of the biggest misperceptions about FIS that have perhaps impacted the valuation multiple?

Yes. No, look, I think it's a great question. I think we've all seen the disruption in the equity markets. I think our current valuation appears to be -- underappreciate the resiliency and durability of our business model. We have premier assets in Banking, capital markets, eCommerce and enterprise, Merchants. Approximately 70% of revenue is generated from software and services to our clients through really deep relationships, long-term reoccurring contracts. The remaining 30% is generated by consumer spending. And so I think there's just a disproportionate value being placed on that. The amount of free cash flow that's generated on these businesses are obviously just tremendous. Those are going to continue to drive excess returns for our shareholders. So when you certainly look at the merchant industry specifically because we get a lot of questions around this, we've been aggressively positioning that business to win now and into the future. And so there's been a lot of change going on in the Merchant business over the years. 30 years ago, small merchants primarily contracted with their banks; 20 years ago, it was ISOs; 10 years ago, it was ISVs; and today, it's SaaS. And at each step in that journey, we've repositioned our Merchant business to go where we think the market is heading. So we've got the premier eCommerce asset and market. We focus on the enterprise a lot. Of course, we've recently done a small acquisition that allows us to bring some of our eCom capabilities down into SMB. But we're confident that Merchant business can grow faster than the TAM growth, which is upper single digits as an industry. And we think we can continue to outperform that based on what we're seeing. But the rest of the business is performing exceptionally well. And I think that's, as I said, more than 70% of the business, Jason, and I think that's being underappreciated currently.

Yes. No, that's fair. I mean we continue to get many questions on Merchant as well. And I'll start with a few there, and we'll move on to the other areas also. But I did want to ask just kind of the obligatory question around Merchant given what's going on in the world right now. I mean any kind of contagion effect from Russia-Ukraine in terms of discretionary consumer spending? I know you don't have a huge presence in Europe. But maybe you can just remind us kind of by segment, what percent of the revenues do come out of Europe because it's obviously a hot topic issue for investors. So curious if you're seeing any impact on any pieces of consumer spend.

Yes. Where we would see really any impact through Russia or Ukraine, assuming obviously, the conflict doesn't grow broader than that, which obviously we hope that, that doesn't happen. And everybody is alarmed by what's going on with the war in Ukraine. But when you look at the business, really the only place it could potentially hit us in some of our eCommerce segment. We're estimating no more than 1% for the quarter of a headwind at this point because we don't have exposure to Russia and Ukraine from an enterprise or an SMB standpoint. But there could be some eCommerce impact where we have large corporates that are using our eCommerce capabilities, and some of their customers perhaps are impacted that would traditionally transact. But at this point in time, we estimate it to be de minimis to the overall business.

To clarify, Jason, that 1% would be just the Merchant. It would be less than to consolidate it. The bank and the cap market business have even less exposure.

Yes. Yes. Woody, can you maybe, just this part, just remind us what percent of Merchant revenues are Europe? I mean I think U.K. is the biggest piece, right? But...

U.K. is the biggest piece. I would tell you, on a consolidated basis, maybe 15% of our revenues come out of the U.K. And then you maybe have a couple of points in broader Europe. And then rest of the world would be -- the vast majority in the United States, obviously, North America.

Okay. So just a few points of revenue exposure...

[ Yes. ]

Yes. Okay. Okay. That's helpful. I wanted to come back to the Payrix acquisition. Gary, you alluded to it on certainly a bigger push for FIS into the SMB eCommerce space. You guys have been pretty vocal about that in recent quarters. And I thought it would be helpful just to start on this topic. Can you give us a little historical perspective as to why FIS and, really, Worldpay wasn't really present in that market? And then just talk about how the acquisition will help with the SMB eCom strategy, and then we can kind of take it from there.

Yes. I think if you look back on historically, the Vantiv company before it acquired Worldpay, I mean, it went indirect to that SMB market. It went through its software partners and continued to serve at that direction. It pivoted its strategy with the Worldpay acquisition to go focus on eCommerce and more importantly, global eCommerce, which at the time that we looked at Worldpay, we felt was an excellent strategy. When you look at where the world is going, the TAM is growing a lot faster in global eCom. It's growing in the low teens -- low to mid-teens even today, and it continues to be a very, very important piece of our strategy. But so when you look at the SMB business, this was something that was always indirect and through partners. Over the years, a lot of changes have gone on into the SMB marketplace and even enabling our partners the need for auto underwriting, auto onboarding, self-service is a very important key. And so when you look at Payrix, it allows us to do those very things. We actually already run the back end for Payrix, so we see their volumes. We see what they're accomplishing, their ability to go direct to market through that platform and offer new services that allows us to bundle our global eCom business and pull it downmarket into the SMB to gain that card-not-present business. So it was a classic, Jason, build versus buy. Did we want to go build it and take some time or we saw -- we already had Payrix as a partner, we saw what they were doing, we saw the success of their platform, we saw the ability for us to bring additional services through that platform. And it just made sense to do that, what we would consider a fairly small tuck-in acquisition at the time in the quarter. So we're excited about it and excited about what it does in not only bringing, as I said, global eCommerce downmarket for those card-not-present functions within SMB, but also allow us to go self-serve for our SMB customers, to self-serve in our platforms.

The other related question, I guess becomes, from an investor's point of view, what should the expectations be in terms of how long does it take to start seeing some results? When might this kind of bear fruit in a noticeable way at the Merchant segment level?

Well, I think it's already a fast-growing group. It's a very small revenue producer in aggregate, obviously, as you think about a company our size. But we're going to see continued production of the Payrix model day 1 once we acquire it. Now if the question is when are we going to bring additional capabilities to that platform, we've got a number of new launches slated for Q3 this year. So the team is working about bringing some of the things like I talked about our global eCommerce capability. We're looking at some opportunities to bring some other embedded finance-type capabilities into that platform that doesn't exist today. So that will be net new products that will be utilized in the platform or in launching and taking what FIS has to offer.

Right. Right. And so given that if we think about SMB eCommerce overall, and it's arguably become more relevant in the scheme of the total Global Payments market since the pandemic, should we expect that perhaps overall Merchant volume growth at FIS may lag Visa and Mastercard if we just kind of consider them in the market? Could it modestly lag Visa, Mastercard until these SMB eCommerce efforts gain more traction? Because I just think there's important mix differences sometimes that people lose sight of and perhaps it's not always fair to just flat out look at your Merchant volume growth versus visa and Mastercard?

No, I think that's exactly right. We talk about this a lot. I think you've got to really look at what we call the subsegments within Merchant, and then you've really got to look at the industries that you serve to really get to where the volume growth should be. The reality is certain countries, we have little to no exposure in. For example, China and in Russia with the exception of maybe some eCommerce capabilities. So as an example -- or when you push down an SMB that is growing very rapidly right now, we're subscale in SMB, and we're indirect in that market. So -- but when then you look at eCommerce, given our success in eCommerce, we're actually outgrowing the TAM there and growing much better, and our volume is growing higher. And so same way with our enterprise functions, we expect to grow those volumes greater than the overall TAM as well. So yes, I think it's reasonable to assume that our volumes will perform under the networks because, frankly, they see all volume in all industries and all segments, and we don't. But we do think it's a good corollary to the direction of the business. Trend lines ought to be similar, and we've consistently seen that throughout the pandemic.

Yes. You guys have been doing that nice chart for a number of quarters now. And we can see trajectory-wise, I think that you definitely see correlation there versus the networks. So if we think about travel, obviously, certainly a pretty relevant vertical for FIS's Merchant business. And Omicron kind of put a little dent in the in the travel recovery that was happening back in the fall, especially from a cross-border standpoint. So maybe just remind us what percent of Merchant revenue comes from travel. And how does that split between domestic and cross-border? And then we'd love to just hear kind of the latest on what you're seeing on the travel front, now that we've kind of gotten past the worst of Omicron.

Yes. Pre-COVID, travel and airlines was about 6% of total revenues. During the pandemic, it dropped as low as about 2% of the Merchant revenue base. We did see recovery starting last year like we projected. Omicron, to your point, did hit it. Our travel business is heavily skewed towards cross-border international travel. We do have domestic carriers as well outside the U.S. in certain spaces. We do still believe and travel will be a tailwind for us this year. So we're continuing to see recovery even coming out of Omicron. So we've started to see that recovery. And it will be a tailwind to the overall growth of the businesses.

And so what about kind of in recent weeks, I mean, just with Russia-Ukraine, geopolitical uncertainty, has there been any noticeable headwinds that have freshly emerged on international travel in your portfolio?

Not in our book. We haven't seen it. I think Q1, it will be a tailwind for us in Q1. And I think -- but the only potential headwind we've seen is just some of our eCommerce, to Woody's point earlier, it should be less than 1% of the Merchant revenue, which is a great clarification. So it's -- but it's -- but not travel and airlines, specifically. We don't handle Russia from that standpoint in that lens. So -- and as I said, we continue to see travel and airlines be a tailwind for us in the quarter.

You mentioned enterprise eCom a couple of times, certainly a very important market for FIS. I wanted to kind of dive in on the competitive landscape there, which continues to be a pretty hot topic for the investment community. So maybe take us inside this market, talk about how you see FIS's positioning and really who are the primary competitors that you see in global enterprise eCom.

Well, really, there's only 2 providers that can do true global eCommerce providers -- services in the market. And so the reality is we continue to see strong growth in that business as we leverage into large corporates and drive those into market. Most of our competition or most of the people we're taking that off would be local providers where we're lining up new countries and we're bringing on our existing customers as they penetrate in those markets or large corporates that are playing on a global scale that are highly fragmented across a number of providers. Because our ability to do currency translation, cross-border money movement, the power of our systems is just really unparalleled in that area. But it is a real scarce asset. I mean when you look at it, we're -- as I said, there's really only 2 providers that can truly handle global eCommerce. But most of the market is expanding so rapidly that there's plenty of market share for both of those providers to take advantage of. And as I said, most of our takeaways, we're seeing large regional financial institutions or other local providers as we continue to push across the globe.

So we've been hearing in this vein, more about some of these kind of, I'll call them, kind of localized cross-border specialists, like a dLocal, for example, in Latin America. Is that a type of competitor, if you will, that you're seeing emerge in any noticeable way? Or any thoughts there?

Look, we're seeing startups. We're seeing competition. Don't get me wrong. It's a very competitive market, but so is the banking industry, so is the capital market. I mean financial services is competitive. I've been doing this now for 34 years. It always has been and always will be. There's always been start-ups in our various verticals. And do we see those from time to time? The answer is yes. But at FIS, being the global player we are, there are just unique differences that we can drive to these larger relationships that others cannot. And so as we highlight key wins in market, are we taking them off some of the disruptors? We have. But are we losing significant share to the disruptors? We're not. And so we're just going to continue to execute our playbook on a global basis through eCommerce. And you'll continue to see that business outgrow the addressable market growth, and we're very confident in that.

Yes. I would imagine there's just some real scale benefits too, right, in the space that your clients appreciate?

Absolutely. Absolutely. As I've shared earlier, our ability to handle all the various currency translations, alternative payment methods that are needed to launch in market, just even the licensing and ability to move money in certain regions, in certain countries, it really does differentiate us in a substantial way. And so now that we've gotten our investment behind from a technology standpoint, the new acquiring platform and Access Worldpay went live last year, we've had a lot of success with that. We'll continue to see our global eCommerce business not only be the fastest-growing subsegment, but it will also continue to be a larger and larger percentage of the pie, which also makes us comfortable that we can outgrow the overall TAM growth of the industry by a couple of points. So we feel good about where we're positioned. And we're doing some things to address some areas where we're not positioned that well, like we talked about earlier, in the SMB market with the Payrix acquisition.

For sure, for sure. One other topic we continue to get asked a fair amount about in Merchant is just yields. And I think you guys have commented in the past that in kind of a normalized environment, if you will, Merchant revenue should grow faster than volumes. So maybe we can just talk about what would be the drivers typically on those positive yield dynamics. I think maybe you said on average, you could think of revenue growing 2, 3 points faster than volumes. But recall correctly, so we'd just like to get some color on that topic.

Woody, you want to take that one?

Yes. Why don't I grab that one. In a globalized environment, we would think revenue would outpace volume for really a couple of reasons. One, value-added services. Think about incremental share of wallet. Think about things like our new AuthMax Preferred product or our Premium Payback solution product that we would have into the Merchant itself. It will be an incremental revenue generator without any incremental volume. So that's probably the biggest thing that we've seen in terms of yield benefit outside of volume. The second would be around mix itself and having positive mix coming out of the eCommerce business as it becomes a larger and larger portion of our book. Those are the 2 primary reasons we've seen yield. Think about it typically to what we've discussed in banking where you've got cross-sell, up-sell into the existing Merchant, value-added service is what helps you. You might not get the incremental volume increase, but you get incremental revenue out of the wallet from that customer based on those incremental services.

That makes sense, that makes sense. Okay. Yes, thanks for that. FIS recently took a pause with share repurchase and wanted to just understand the circumstances surrounding that. And what are the implications for balance sheet deployment as we proceed through 2022?

Why don't I grab that as well, Gary. I just think it's probably a broader capital allocation question. I would tell you, I think our capital allocation policies remain consistent for a decade. We continue to invest for growth. We always have whether that be organically or inorganically, pay a reasonable dividend. You saw us increase that dividend 20% last year, and we'll continue to increase that dividend and then return excess cash to shareholders through share repurchase. In 2021, we bought back 2 billion shares, which was more than originally expected. We did pause in the fourth quarter, spent most of our excess free cash flow in the fourth quarter purchasing Payrix. And then we paused in Q1 to reduce our debt, our leverage back to sub-3x, which is what we agreed to follow the rating agencies, to maintain and keep our current credit rating, which we think is very important, particularly going into a rising rate environment. We got our leverage back to below 3 turns by the end of the first quarter, which is a little bit faster than we originally thought and began repurchasing shares again in Q2. We've slated about $3 billion of excess free cash flow for share repurchase in 2022, most of that being in the back half of this year. And then we think we can buy $6 billion in 2023. And given the current market multiples and valuation, we think that's the highest and best use of capital in the next 24 months or so, Jason.

$6 billion in 2023, it's a big number. Okay, great. No, that all makes sense. I mean maybe just another side question on that. Can you just remind us in your current debt stack, what's the mix of variable versus fixed rate?

Yes. We've got about 65% fixed, maybe 35% floating. That floating rate debt is primarily in European and U.S. commercial paper, which is a very, very low rate right now. And that would be if we paid any debt down, it would probably be in that commercial paper space. We're about 65% fixed at this time.

Helpful. Okay. I did get a question logged in here through the portal, which is around issuer processing and specifically kind of modern versus traditional, if you will, card issuance. Just talk about kind of time to market in terms of modern platforms versus platforms that people might consider to be not as modern. Is there a significant difference in time to market? And what's the competitive landscape? How is that evolving on the kind of the issuer processing side of things? And are you seeing changes there?

Yes. No, look, our issuer processing business has grown very well through the pandemic. I think if you go back and look at it, I mean, it's performed, as I said, exceptionally well during that time. We started making an investment about 4 years ago in our next-generation issuer platform called PaymentsOne. We've kind of taken a little different path as we think about modernization and transformation. So as we bring on various components, in some instances, we only sell in new greenfield areas. And in some areas, we migrate the back book. In some areas, we do both. PaymentsOne, we've chosen to do both. And so you've seen the really solid organic growth. And you've also seen us be able to take out a lot of costs from our legacy platforms as we've migrated that back book to the PaymentsOne platform. Our debit solutions are very, very strong. We're in the process of rolling out our credit solutions through PaymentsOne this year. But we feel very competitive in that market and seeing really strong organic growth. When we bought Worldpay, Worldpay's issuer business had been a very low- to no-growth business even just migrating that over the additional services that Woody talked about a minute ago about how we leverage those additional services for yield. One of the things that's a competitive advantage for us is our customers want to do more business with us. So even in the issuer business, our ability to bring more wraparound services and drive that overall issuer business aggressively has been a very important contribution for us, and you've seen that growth rate accelerate significantly with the Worldpay acquisition. So we feel very good about the competitive landscape. The market is starting to evolve where more and more nontraditional issuers, a lot of people will call them fintechs, are looking for those capabilities to be able to launch. And that once again, our PaymentsOne platform, in concert with our Code Connect platform, which is a micro services layer that's been also very successful, allows us to extend into those markets. And so that's really new market opportunities for us as we push into those markets. But we feel great about our issuer business.

So you're starting to see some traction with some of those kind of next-gen customers, if you will, the fintechs there? Okay.

We are. Historically, to be honest, Jason, we've had so much opportunity in other areas. Those tend to be very, very small relationships. And as they start, obviously, that can grow to be very big. But certainly, we're -- we have actually started developing and actually building a go-to-market team just focused on that particular area and starting to see very nice traction there. But on traditional large-scale issuers, we've had phenomenal success and migrated a number of competitive wins that we've highlighted each and every quarter. And that's why you've seen that issuer business grow as much as it has throughout the pandemic. It's just really competitive takeaways.

And it's mostly debit-centric on the issuer processing side?

We are having debit-centric. We do more credit outside the U.S., but we're really heavily skewed towards the debit vertical on issuing. And always have been.

Right. Right. One other follow-up that's sort of balance sheet related, but potential portfolio reshaping, this has become certainly a more of a hot topic that investors have been talking about for at least the last 6 to 9 months, call it, in the sector. We did see one of your competitors make an announcement along these lines recently. And just wanted to get your latest thinking whether it be acquisitions or divestitures or a combination of both, just when you think about the way the portfolio overall is constituted currently, if you're perhaps giving more significant thought to some possible reshaping?

Yes. Look, I mean we consistently move assets that we don't think fits our strategy long term into our other segment. And then we either run those for cash, and so eventually run them out or ideally sell them if there's a responsible buyer. We feel really good about our asset portfolio. Obviously, with the stock dislocation Woody talked about earlier, we think the single best use of cash in the near term is share repurchase. Frankly, we think the valuation of the company is -- we've not seen this level of disconnect. So it's just the single most best use and lowest risk return for the company and for our shareholders. But as we continue to look, we'll continue to evaluate what's the best alternative to accelerate shareholder returns. And so at this point in time, we feel great about our portfolio. We feel good, really good about our competitive position in all of our segments and our execution. We've just got to continue to do things to accelerate shareholder returns and growth in the share price.

Are there maybe like underappreciated connection points or synergies, if you will, among your business segments that perhaps The Street is not fully appreciating? Because I think sometimes it's easy for someone from the outside looking in to just say like, oh, why don't you get out of this business or get out of that business and raise a bunch of cash. But anything along those lines you'd maybe highlight?

Oh, I think absolutely. I mean that's one of the things that we think people continue to miss. So even though we continue to disclose, I mean, we've driven well over $700 million just in cross-sells with the Worldpay combination. If you look, all 3 of our segments are benefiting from each other. We're getting cross-sells across all 3 of those segments and pulling through additional revenue growth due to those relationships. We've sold treasury management systems into our large Merchant base, as an example, that has benefited Capital Markets. We've sold modern banking platform to large Capital Markets customers, as an example, where they pulled in our retail banking assets. You've seen a lot of issuer growth as you look at what we've done with loyalty as a service where we're bringing our loyalty points to bear to be a currency, premium payback. We pulled that into the Merchant base substantially. We've seen a lot of pull through. We've seen benefit in our debit network as we've addressed debit routing. We have also raw capabilities into our Merchant base where we're leveraging some of our AML capabilities, some of our fraud capabilities where we're bringing both issuer and acquiring together. And we talked about that with our AuthMax product. So there's tremendous cross-sells. And what we're excited about is we're really just getting started. I mean you're going to hear us talk more and more about that, where we think there's a tremendous opportunity to leverage our capabilities more broadly across our client base. And that's not an asset issue, that's a go-to-market issue. So it's just really about getting -- continuing to get our sales teams positioned properly with the right tools to allow them to understand the capabilities in a way that allows them to drive it into their customers. So we're really excited about the potential for that in the future. And I don't think that the market appreciates that.

Totally fair. You mentioned Modern Banking Platform, or MBP. We did want to ask about that. Can you give us just an update on how are the implementations going? I mean you're doing a lot of them. You signed a bunch of new MBP customers over the last 2 years. So maybe we can get just kind of a general update on how many of those are fully live, how many are in progress. Maybe we can start there, and then I've got a follow-on or 2 to that.

Yes. We've got -- well, we've got an extremely full pipeline. I mean we've sold 19 customers to date. We've got 9 fully in production now. That number continues to grow. Teams are executing very well. As we talked about in prior calls, the issue there is we've got to make sure that we continue to ramp our delivery resources in a dramatic way. These are huge clients that we've signed on, and they're very complex engagements. But honestly, that positions us very well. There's really no other company that could pull off the size of implementation. So I'm really proud of the team. I'm really proud -- it's great to see what's going on in the pipeline. Obviously, we want to be very conscious that we don't oversell that product because it's very early stages. We can also continue to invest in that capability. We've seen customers already take on additional modules. We launched our lending module last year. And we continue -- when you look at an overall module standpoint of the componentized architecture, we're really now done with all the major components that we're going to be releasing. It's now just building out functionality within each of those. And you're going to see a 10-plus year run of where Modern Banking Platform is just going to continue to take share and continue to move. Right now, we're in that early adoption phase where people are -- the early adopters are leaning in on cloud. But in a decade, we're going to see the whole industry running on cloud retail core banking. So the product is very well positioned. And it's going to be a big contributor, not only to sales going forward, but the cross-sells and pull through all the things I talked about earlier, which is significant.

So despite the 19 wins to date, the pipeline is still pretty robust. You have a bunch more this year to be signed?

Absolutely. Yes, no, we -- as I said, we're continuing to monitor our ability to deliver so we don't oversell. I mean that's the first thing we could do, is sign a bunch of clients that we couldn't get live. I think you're seeing great traction. Almost 50% of the sold base is now live. And you're continuing to see us put up 1 or 2 wins pretty much every quarter. And so when you look at the pipeline, when you look at the engagement, the good news is everybody that looks at the capability says that there's just really nothing that can compare to it from overall architecture standpoint, design standpoint. Even a functional standpoint, we are well ahead of where the rest of the market is. Of course, we did start investing in this capability a lot earlier than the rest of the market. So you would expect the [indiscernible] to be quite a bit ahead. But anyway, we're really excited about the potential of this for the next decade.

And the lending module, like you said, launched last year. So I guess if we look at those 19 MBP customers to date, they all started with the deposit module. I mean how many of them have signed on for lending? And have you started to actually do any implementations of the lending module yet? Or where are we in that?

We have not. But you need to just assume that all of our customers that took on deposits will eventually take on lending because it does make too much sense from an overall componentized standpoint. Most are focusing on the deposit side because that's where the most advancement needs to be at this point in time. A lot of deposit technology is very old in market. And obviously, with -- now with the rising rate environment, you're going to see the net interest margin expand. You're going to see those lending portfolios continue to grow and be profitable. So people are really looking at how to take out cost in my deposit side so that my source of funds for that lending can be at the lowest possible price. And that's where our fully SaaS cloud-deployed MVP really plays a part there. But we'll have customers continue to embrace the modules. We've already sold some other modules that we launched after deposits, our customer module and some of those things into the base. So the desire to take on more will be consistent. We do have a couple of more asset types that we've got to build out within lending. So right now, it still handles basic consumer. We've got to move it into commercial and others. But we will definitely see, everybody that buys MBP right now, they're just as interested in what we're doing in the lending side as they are on the deposit side. They're just taking the first step with deposits.

Okay. Okay. And another new product you had launched last year was a crypto-related offering for your bank customers to be able to provide crypto services to their end customers. Just tell us a little bit about that product. What's the revenue model there? And any kind of initial signs of traction you'd want to highlight?

Yes. You're talking about our NYDIG partnership, which allows our customers to buy, sell Bitcoin. From that relationship, we really take no volatility or balance sheet exposure. We've actually integrated that in a way, and it just shows the power of our modern assets. We leveraged our co-connect integration layer, which allow us to get to our Digital One platform. And Digital One has been a very successful omnichannel deployment in our banking business. It's been a key contributor to our accelerated revenue growth you've seen there. But our customers now coming through that Digital One platform, no matter whether it's coming through the branch or whether it's coming through the mobile device, they're able to see any of their holdings in Bitcoin and their overall portfolio view. They're able to, as I said, not only inquiring to that, they can buy and sell through that as well. We're launching that this year. We're seeing some interesting demand for it. We've had a lot of customers go from its, I'm not ready for that yet, our banks, to now more and more of our clients are saying, well, wait a minute, I think I do want to be able to offer that to our customers because they see it as a valid investment class today, and they see more and more interest through their customers. So we've got good strong demand. As I said, we'll enable it through our Digital One platform, which has hundreds and hundreds of financial institutions already running. So it will really just be on an adoption basis. And you'll see a really nice, smooth go-to-market from that standpoint of just enabling another investment stream or another asset class for our financial institutions and customers to own and trade in.

Okay. I just wanted to wrap here with a couple of questions on margins. I know in '22, you were guiding to the lower end of the medium-term target of 50 to 100 bps. And wage inflation seems to be the primary reason, which everyone is facing. Maybe just talk about the timing of offsets that you might see, like when it comes to the pricing escalators and the contracts and how that might inform an investor's view of margin expansion potential for the business in 2023. I guess this is maybe a Woody question.

Yes. Why don't I grab that one. Specifically to clarify, we did guide 50 to 100 basis points of expansion in 2022. It's in line with our medium-term target first. Margin expansion would have been even further, but we are facing some headwinds from wage inflation primarily. We've talked out about 100 basis points of headwind from incremental labor costs really from some incremental retention and comp increases that we've seen due to kind of the tightness in the labor market right now. To your point, CPI escalators in Banking and Capital Markets have been really low for a really long time. These are measured annually and enforced at the anniversary of the contracts. So you'll see those CPI-type escalators impacting us over the course of the year and helping and really should help offset some incremental wage inflation in '23 should we continue to see wage inflation.

Right, right, right. And just in general, there's so many investment opportunities in your business, both from an OpEx and a CapEx perspective. I mean in the framework of your medium-term outlook, are you comfortable that you've got enough room in there to invest as needed and still drive that kind of annual margin expansion?

Yes, we absolutely believe so. This continues to be operating leverage within the business. And we've always found ways to focus and drive investment to make sure we've got solid organic growth for the long term.

Excellent. Excellent. Well, I know we're out of time. It went really fast as it always does. I really appreciate the conversation. Thank you guys for participating in the Payment Symposium. We appreciate it.

Thank you, Jason.

All right. Have a great day.

You too.