Global Payments Inc. (GPN) Earnings Call Transcript & Summary

Thanks, everyone, for joining. My name is Tien-Tsin Huang. I cover the payments and IT services sector at JPMorgan. And so happy to have Global Payments with us for this session. We're going to do a fireside chat. And if you have questions, we'll take questions from the Ask a Question portal. I'll be watching that here as we go. With us from Global Payments, Jeff Sloan, the CEO of the company, and always great to have any time with Jeff. So Jeff, thank you so much for sparing a few minutes with us today to catch up.

Well, Tien-Tsin, thank you very much for having me.

No, of course. So let's get right into it. I've gathered a lot of great questions from investors. Hopefully, we can get through them all.

I'll just get right to it. Pretty harsh reaction to 1Q results here. What do you think the market is underappreciating, Jeff?

Well, I think it's a combination of a couple of things, Tien-Tsin. We tend not to focus overall on the day-to-day, to and fro the market. I think it's important to remember that in the roughly 7 years we've been running that company, our stock is up 8x, so I certainly think the market gets it right over a period of time. And look, we reported at a tough time when folks like Apple and Amazon reported probably the best quarters in corporate history, yet other stocks trade down as the Nasdaq went through a bit of a market correction. But I would say in terms of the second point, in terms of the market, I think, may not be appreciating fully is just really the sustained share gains I think that we've experienced over the last 3 and 4 quarters. A great example is we view really Visa and Mastercard as proxies for the market. In the most recent quarter, the first quarter of 2021, Visa's revenues, I think, declined about 2%. Mastercard, organically, had revenue growth of about 3%. Our overall company grew revenue 5%. Our merchant revenue was up 4.4% in the first quarter. I'd also say, sequentially, our total revenue and merchant revenues were up 800 to 900 basis points sequentially from the fourth quarter of 2020, Tien-Tsin, to the first quarter of 2021. So certainly relative to the markets, and I view the networks as a proxy for the market, far better performance than the numbers reported in the markets. And then second, I would say relative to our more direct peers, Fidelity or Fiserv, for example, I think Fidelity was up about 1% merchant in the first quarter. Again, ours was 4x that rate of growth at 4.4%. And I think Fiserv has similar number to ours in terms of merchant growth in the first quarter. But I think you have to remember that we're in 38 countries, not just 1. So while the U.S. is incredibly important to our business, that's 3/4 of our business. Obviously, the other markets outside the United States which we're absorbing, primarily in Asia, Europe and Canada in that number, and also Fiserv has its different revenue mix being more debit than we are than credit. So I think on a relative basis, being the same place as Fiserv, is pretty good performance for the first quarter. Certainly on a comparative basis to the markets of Fidelity, I think the numbers are pretty terrific. And of course, as we said in the call in early May, Tien-Tsin, that performance actually accelerated into April. And we said in the call that in the month of March, we were up 20% revenue year-over-year for the overall business and near 30% in earnings. Those numbers continue to improve and accelerate into April and actually continue to accelerate now into May. So I think from a market point of view, that will ultimately, I think, be borne out, obviously, as we continue to report our results. But certainly, we're in a very healthy place.

Yes. So let's just stay with the topic of the recovery there. I'm sure the U.S. is doing quite well is what we've heard throughout the conference, but it's a little uneven outside the U.S. And in India, for example, it's pretty tough, as you highlighted there. So maybe give us a quick update on what you're seeing, where are you optimistic, where are you feeling a little more cautious from a recovery standpoint.

Sure. It's a great question. So look, we're physically present in 38 countries. The U.S. is one of those. In 38 countries around the world, we do business cross-border in more than 100. So to your point, I think we do have a pretty good point of view on what's going on. Let's just start with the United States, which is roughly 3/4 of our company in terms of revenue and also in terms of employee and team member base. It's hard to overstate really how good things are right now in terms of trend here in the United States. So I think Visa, Tien-Tsin, came out with some metrics in the U.S. toward the end of April, up 60% in volumes. Our numbers for April are in excess of that here -- by a pretty healthy margin. Here in the United States, we saw a very substantial growth rates even just in the third quarter heading into April, and our integrated business grew 23%, first quarter of '21 over '20 before lapping the pandemic. E-commerce was up 20% ex-T&E. Our relationship base business was up 9%, backing out Canada. And Europe really domestically was up well into the double digits. So -- and those trends have continued to April and into May, as I mentioned a minute ago. So certainly, in terms of puts and takes around the world, it's very difficult to convey to you how sound the business is here in the United States, and that has continued into April and May with really record bookings in our relationship-led business here in the United States in April. And I think 2 of the last 3 quarters really were record bookings quarters for our relationship business here in the U.S., and our integrated business has a record bookings quarter in the first quarter, too. So we're in a really good place there. Outside the United States, I would say our business was roughly flat in the first quarter of '21 versus '20, particularly in Europe and Asia. I would say post our first quarter heading into April and May, certainly, you've seen some markets, you mentioned some of them in Asia. In particular, Singapore and Taiwan go a bit into further lockdown in the last few weeks. I think India and the Philippines, as you know, were kind of already there really at the end of the first quarter. Europe has begun reopening primarily in United Kingdom and in Spain. I think we said, Tien-Tsin, on the May call, that Spain was up in April 80% year-over-year in revenue in the month of Spain -- in the month of May -- April, sorry, for Spain jobs was terrific. But certain markets like the Czech Republic and Ireland in Europe remain under a fair amount of restriction. U.K., obviously, reopening, as is Russia. So I think it's puts and takes outside the United States. But thankfully, for us, U.S., our market, 3/4 of the company, we continue to see a lot of strength heading into May.

All right. Great. No, that's a great overview. So before we dig into the segments and the bookings and the products and whatnot, I just want to -- since I have you here, ask a big picture question that's on a lot of our minds just around Global Payments tech stack, right with you, your clients, your partners, your competitors, they're all going on this digital and cloud journey. So I wanted to hear from you, where do you think you are in that journey in modernizing Global's tech? What's sort of the plan here in the short and the long term?

Well, I think there's really 2 answers to that. So let's just start with where we are today, Tien-Tsin. So we announced last year that we crossed the 60% threshold for our merchant business of technology enablement, which means that we're selling our own software, partnered software, or we're selling e-commerce omnichannel solutions. That 60% was a goal that we had set in March of '18 when it was 50% to reach by the end of last year. We exceeded that. We'll announce it on our upcoming Investor Day in September. I don't want to steal all the thunder now Tien-Tsin, from that day because I want you to come, and I want everybody to come in September. But that number is going to be north of 70%. Probably 3/4 of the business will be technology-enabled, is our goal over the next few years. That's just to level set where are we today. The second part of what you asked, though, kind of where are we heading beyond the 75% is we've announced unique and exclusive partnerships on both technology and distribution in the last 9 months in issuing with AWS and in merchant with Google that are really distinctive to us. So I think we'll set the tone for further digitization beyond the 75% number really for years to come. So on the issuing side with AWS, we've got a unique relationship, an exclusive relationship really with them. First, on the technology side, to modernize and take the code from cloud-enabled into cloud native, and then ultimately to port that over to the AWS cloud. That project was really started on our announcement in August of 2020, although TSYS have been working on cloud enablement and data optimization enhancement for at least 18 months prior to our merger announcement in May, just about 2 years ago, in May of 2019. We're starting to see the benefits of that already with new product releases and develops, and again, kind of stay tuned there. But where we're really seeing benefit, and we've been disclosing this, Tien-Tsin, in the last number of calls, is in terms of our distribution and co-sell partnership with AWS. So we've already announced our first joint win, which was a takeaway from one of your other speakers in Asia, and we expect to go live with that large multinational bank this year. The testing environment is already up and running. So our prime in the cloud with AWS is already a live instance and pilot in that market in Asia. And we hope to replicate that in other markets. But I think we said on our most recent call, Tien-Tsin, we've got a dozen letters of intent, 6 of which with AWS, 6 of which are competitive takeaways. And we feel really good about where we are and kind of where we're heading and look for us to expand into the Neobank and the start-up area with AWS in the near future. And that's part of the tripling of the TAM that we announced with AWS when we announced that relationship just about 9 months ago. Second, as it relates to Google, which we just announced in February of 2021, most of our code in merchant, on your question about tech stack, is already cloud native. And in fact, a bunch of our solutions like our merchant portal, our chargeback solution, which is really state-of-the-art, are already resident in Google Cloud today. So that's less of a lift to more just a shift. And there, it's really about, on the technology, optimizing our 35 data centers here in the United States and really reducing them to 3. We're already down from 40-odd data centers post the TSYS merger, so we're already making progress there. And just like AWS, you'll start to see the benefit of that, Tien-Tsin, at the end of '23 on the pure tech side.heading into 2024 really is that significant margin enhancement from doing that. But we're also very pleased with the co-sell relationship, which again is unique to us and Google. And there's a few elements there. One is Google as a merchant. Think YouTube, think Google Music. Things are sold on Google today where Google is the merchant. We expect that volume to come to us starting as soon in Asia, as the third quarter, which we announced a few weeks ago on our call, third quarter '21. We expect that in North America, with Google as a merchant to go live by the end of this year with us and already piloting 2 customers here in the United States, with Google jointly at the enterprise level. So in addition to Google as a merchant, we have an enterprise relationship where we have a rev share back to Google for customers who refer to us. And then third, with Google, we also have our ability, which again is unique to us with Google, to integrate Google my Business growing around my business as well as Gmail, which is Google workspace, into our existing merchant portal at Global Payments, which is already in use with hundreds of thousands of merchant customers globally, but especially here in the United States, and that's exclusive to us. So if you're a Google customer and you use that to run your business, you're only going to get that integration to a merchant portal with us here in the United States and globally. And the reverse is also true, which is if you're a Global Payments merchant portal customer today and you want to use Google, you can only get that in 1 place, and that's unique and exclusive to us with Google for the next number of years. So I think the answer to your question is we're already in a very good place, 60%, on our way to 70% in terms of digitization. But I'd also say that the AWS and Google partnerships will propel us even further on the technology journey.

Yes. No, that's great overview. So bridging that into merchant and e-com, you talked about them as a client. I get this question a lot. Where is Global Payments at from a competitive standpoint with both e-comm as well as omni? I think -- I don't know if there's a way to separate them, but the lines are starting to blurring, but it does feel like you have a good position on the omni side given your historical presence on the physical world. So talk to us about e-comm and omni.

Yes. I would say pretty pandemic, Tien-Tsin, we've looked at it as e-com and then omni. I would say post-pandemic, one of the things that, that pandemic has done, I agree completely with Dan Schulman at PayPal here, who I know is also at your conference is, the pandemic has brought forward by 3 to 5 years the shift towards omnichannel enablement. If you're a merchant now, small merchant, it doesn't matter, any market you're in. If you don't have a physical, but especially in virtual concurrent presence, you could be in a bad place coming out of the -- during and coming out of the pandemic. So we've collapsed it all now, Tien-Tsin. We really just call it omnichannel, especially post the pandemic. So look, we're in a really healthy place. By way of size, and we publicly disclose this, and we'll do this again, of course, at our Investor Day in September, we'll do $1 billion to $1.2 billion this year in revenue in our omnichannel businesses. We think that's one of the largest businesses in the world. As we disclosed in March of '21, Tien-Tsin, that business grew 20% ex-T&E in the first quarter of '21 year-over-year before we start anniversarying substantially the pandemic. That's the same number that Visa disclosed for its business, that 20% growth for e-com ex-T&E. So we think we're in a really good place there. By way of comparison, if you look at the commerce department, card-not-present is about 14% of U.S. retail economy. It's about 20% of our merchant business. And the aggregate of all of our businesses, e-com is about 25% of the revenue of the whole company if you include issuing as well as our Netspend business in B&C. So we think we're really well represented there. In terms of how we approach the market, we really attack it a few ways. Number one, taking a small and midsized business online domestically, so having a frictionless environment for consumers and merchants online in their home markets. The small and midsized business, we think we're distinctive there. As Karen said on the May call, bookings in that business I just described in the United States were 330% in the first quarter of 2 months, so a pretty healthy number. Another really healthy number, Tien-Tsin, is omnichannel QSR deliveries for us, and orders went from almost 0 to $100 million last year. And, Tien-Tsin, in the first quarter of this year, we've already done $70 million in the first quarter, so almost a $300 million run rate, where you can order from your phone, pay with your thumb or face and have it delivered via Door Dash, et cetera. And that's actually in our vertical markets, Zego business, that gives you some indication of growth. So the first element is taking small and midsized businesses online in their home markets. The second is selective MNCs in markets that are hard to serve. And a great example of that, Tien-Tsin, is Uber and Uber Eats, which we took away from adding in as a competitive win at the end of last year. In the span of 1 quarter, Tien-Tsin, that's become one of our larger e-com omni merchants in Asia Pacific, really from a standing start at the end of last year. I think the reason that Uber and Uber Eats went with us in Asia Pacific is number one, I think our technology with our unified commerce product, which is single API sign-on, which released into the market 2.5 years ago, well in advance of our competitors, is selling very well, kind of point number one. So there really is not a lot of technological distinction between us and our direct peers there. And I think we're ahead of the game, really. And then the other reason, Tien-Tsin, is that we have a local presence in Taiwan. So we probably have 50 people domiciled in Taiwan, supporting our physical as well as our virtual business. That's probably 50 more people than many of our competitors in that market, and Uber and Uber Eats saw that as a value add. So selective MNCs where we think our physical as well as our virtual presence can really make a difference is the other thing that we're focused on. Lastly, I would say, in response to your question, I do think there's been a permanent growth shift in our business and omnichannel coming from the pandemic. So we were growing that business, Tien-Tsin, kind of 15% organic top line for, I don't know, last number of years that we've been describing it. More recently, that was 20% ex-T&E acceleration in the first quarter. And to be honest, based on what we're seeing and what you hear from Dan, I just don't think that's going to change. So I think there's been a permanent share shift toward omnichannel acceptance. I think we're the beneficiary of that trend. And I expect that sustained revenue growth number to stay.

Yes. No, I agree. It does feel like it's permanent. It does feel like it's a structural change. Okay, no, that's a good update. I appreciate the MNC sort of breakout as well when you're thinking about it. How about on the relationship-led, I know we spend so much time on the digital stuff. But for me, hearing how well the relationship-led business did in the quarter, I thought, was a real standout. So what are you doing differently there? Is the sales motion just in such a good spot from a product standpoint? Or pitch us up on that.

Well, we couldn't be more delighted with our performance, as you said. So just some math, so in the first quarter of '21, before we lap the pandemic, that business grew 9% in revenue. And if you exclude Canada, because we include Canada in that business, and Canada was under a lot of regulatory restriction because of COVID in the first quarter, that business actually grew double digits organic in the first quarter '21 before you lap the pandemic. Bookings were up 27% in the first quarter in that business. They also had a blowout April, as I think we described a little bit on the May call, well in excess of the Visa. 60% volume numbers that I think Visa described publicly for most of the month of April, and that continues to accelerate really into May. So we couldn't be more pleased with where that business is. I think, Tien-Tsin, and I also say it just before I forget it, 2 of the last 3 quarters at Heartland, our relationship-led business were record quarters for Heartland. Think about that in the context of the pandemic. And April itself was a record bookings month for Heartland. April of 2021. So the math is great. We couldn't be more pleased with where that business sits today. I think what we're doing right there is a few things. First of all, what I would say is the product releases, as we've described over time in calendar 2020, were all-time record number of product releases in our relationship-led businesses. And the bookings, going back to what I said a minute ago, to have 2 of your 3 best quarters ever in bookings, what you're seeing now, Tien-Tsin, is the flow-through from those bookings last year into revenue in the first quarter of '21 continuing into April and May. So I think we're in a really healthy place. I think we've got the right product suite. We'll obviously talk more about that in our September investor datacom, but we've got the right product suite, we've got the right sales focus. Increasingly, what they're selling even in Heartland is technology-enabled, so probably 50% of the solutions that they're selling today are semi-integrated. It's not a full integration that we have in Global Payments integrated, but semi-integrated. And the other thing I would say is they've done a great job selling e-com. So back to the point made a minute ago, in the relationship-led U.S. business, in the first quarter, Tien-Tsin, 330% growth in e-com bookings in the first quarter of '21. A lot of that's being driven by the relationship-led business. So it's a combination of very good execution, terrific leadership by that business, but also I think the right products, the right focus. And I think it's pretty clear that we've captured meaningful share in that business relative to Visa and Mastercard as proxies for what the market is doing.

Yes. No, it sounds like the right content. And of course, you've got the sales force to go out and sell it. So it does feel like sustainability is real here because the backlog has been good. So the right question for us to ask is just on the bookings side, how that's performing, is that the most important KPI here?

Yes. I think that's exactly right. So we obviously disclosed publicly a lot of our bookings every quarter. We obviously watch that very closely. Just a few points that I think are worth pointing out on recent bookings trends. So let's just start with our Global Payments Integrated business [ in ways ] aside from bookings. The bookings from last year have translated into revenue in Global Payments Integrated. That business grew 23% in the first quarter of '21 over '20 before lapping the pandemic. As you would expect, it accelerated into April, as you would expect, given the comparison. So I would say bookings there, in the first quarter, 120% year-over-year growth in bookings, and Global Payments Integrated ahead of our budget in bookings growth for that business. We talked already about the relationship-led business. Let's talk about Canada for a second, also a big payments market for us. 40% growth year-over-year in bookings in the first quarter in Canada. Let's look at our vertical markets businesses. AdvancedMD, which had a fantastic year during calendar '20, mid-teens growth in bookings in the first quarter of Advanced, I think mid-teens revenue growth in the first quarter for AdvancedMD year-over-year. Teladoc visits are at a run rate of 2 million visits coming out of the first quarter. We did 0.5 million visits in the first quarter of 2021. All of last year was 1.5 million, so we're looking at a run rate going from 1.5 million to 2 million in Teladoc visits coming out of AdvancedMD. As we said in the call a few weeks ago, Tien-Tsin, our Xenial restaurant point-of-sale cloud SaaS business, record bookings growth in that business as well in the first quarter of '21. So the nice thing about where we are is the bookings from last year, which were terrific, are flowing into revenue this year already. And the bookings that we're doing now will hit revenue in the back half of this year continuing well into 2022. So we feel really good about where we are from a sales momentum point of view. And you're right, other than just how is the P&L doing, bookings is the most important KPI that I look at.

Okay. Got it. So this is great. So before we go to the software-owned and Zego, I do want to ask you about that. How about the 3 vertical market businesses? I know that's been lagging. And it sounds like that could be some upside to the extent that, that comes back. And then also, your outlook for the non-tech-enabled business, the 30% to 40% that's not tech-enabled, what do you see post-pandemic there?

So I view those 3 businesses, with primarily gaming active and K-12 schools as being, as you said, right, kind of the canaries in the gold mine. When things weren't going well last year, those were the 3 that were probably most impacted. The good news is 2 of those 3 have really turned. Sitting here today in May as we announced on the call a few weeks ago, our gaming business actually grew year-over-year. We've seen fantastic growth in our sports gaming, and our iGaming business has grown very substantially off of a low base prior to the pandemic, which I think is also terrific to see. We also saw -- and we also had a very good booking cycle on gaming, too, so that growth is going to hopefully be sustained. In our active business, we saw mid-teens bookings growth in the first quarter of '21 and very substantial sequential revenue improvement in the first quarter of '21 relative to the fourth quarter of '20 in our active business. So listen, on 2 of the 3, I'm pretty optimistic, and I think have really turned heading into the middle and back half of calendar 2021. Collectively, they were about a 300 to 400 basis point headwind in the first quarter of '21 as a revenue matter as it relates to the merchant business that we report. I would say, though, that the 1 business we're still watching pretty closely is the K-12 business. We make a fair amount of our [indiscernible] on school lunches and the moratorium -- the free lunch program has been extended into the spring of 2022, beyond the end of this calendar year, so we'll have to watch and see really how that plays out. But 2 of the 3 businesses have really turned pretty substantially, and we're very optimistic about where those are heading. I'd also tell you, based on updates I've gotten from our businesses, I do think Canada is likely to start reopening if the health data continues and the vaccination continues the way it is toward the end of the second quarter. It will be more of the third quarter of event, which I think is good to see, as well as many of our markets in Europe heading into the third quarter. So I don't think there'll be a lot of impact incrementally in the second quarter from the non-U.S. markets, especially Canada and Europe. I do expect that to be a tailwind if the trends continue heading into the third quarter and the rest of the year. So I think that's good news for our business going forward.

Okay. Great. No, I think we have about 10 minutes left. I want to make sure we hit a few things. Zego. I like that proptech space on the software side. I know they do a lot in payments and they're adding a lot of software content. They've done a couple of acquisitions I think. What excites you about owning this asset?

So express is a tale of really vertical markets, and real estate was not a vertical market here in the United States because we chase GDP, and real estate is one of the largest vertical markets in the United States by way of GDP. We're really -- we're not directly present in any meaningful way in real estate prior to the announcement of the Zego transaction. We've looked at real estate as an attractive market to enter because of its size, $6.5 billion of TAM in 1 market, largely underpenetrated from a payments point of view. What we said the other day on the call, Tien-Tsin, is that we think only 3% of the market is penetrated by digital payments through Zego, so they do about $30 billion of volume and $1 trillion market opportunity today, so we couldn't be more excited. I'd also say, having looked at almost every real estate technology asset you can look at in the last 3 to 5 years, we've had a long window on this. We looked at this with Vista reported in 2017. I would tell you, Vista's done a fantastic job as a management team with substantially enhancing the Zego business. And probably one of the best diligence review reports that we've done in quite some time on a business that we've looked at, which I think is saying something. So couldn't be more excited to be in the real estate business. If you think about things that we can add to it, first, on the revenue side. We can leverage the 3,500 sales and sales support professionals we have globally at Global Payments, to be honest, to sell more Zego at the end of the day. Second, we have the ability as a payments company to drive more payment adoption into that space, even at the height of the pandemic, Tien-Tsin, while payments adoption went up at Zego in terms of the percentage of their universe using digital payments versus cash or check, it's still the clear minority of what they're selling, about 80% underpenetration. So about 80% to go or 20% digital payments penetration today at Zego. So we think we can help scale that, as we have done similar things with companies like AdvancedMD and with Active over periods of time. Third, we think we can bring the business outside the United States. Think about Canada, it's largely a domestic-only business today in the United States. So we think there's actually a lot we can do together before we start looking at the expense side of the ledger. And I think you know our track record on the expense side with TSYS and Heartland and everything we've done is also pretty good. So we think there's a real ability to dramatically increase the size of their business, our presence in the real estate vertical, which, as I said before, fits all the trends of digitization, safer commerce, omnichannel usage, frictionless environments and commerce enablement for consumers. So I think the trend is our friend here. I think we're in a really good place for a lot of talents.

Yes. No, I like that space. I think it's a good complement to EHR. It does feel like there's more penetration and software potential there, so we'll be watching that. We're almost, I guess, more than 5 minutes left. Just don't want to let you go without talking about issuer. We've heard from a lot of your larger peers they've been spending money trying to modernize their platforms. You're standing up inside of AWS. So you called out some wins, good backlog. How would you call out the pipeline or qualify the pipeline today, the backlog? Your win rates on the issuing side, how does it feel at this point?

Yes. Tien-Tsin, I would say that I think we probably have as deep a pipeline as we've ever had in that business. We've been disclosing that every quarter, so you guys can kind of see what our progress looks like and everything else. Just to start with the -- where we are actually, so we said this on the May 4 call. So we entered the first quarter really March year-over-year, '21 over '20, before we lapped that pandemic, with that business initially already growing at our mid-single-digit target year-over-year on a normalized basis, which is our goal for the remainder of the year. So I feel really good about where that business is positioned. And we did that while we were still absorbing the impact year-over-year of commercial card. Obviously, business travel still remains down year-over-year, so obviously, there's some trends that are increasing there. I would say on the pipeline side, I think what we disclosed was we have 14 letters of intent, a lot of those today are with AWS. 7 of those would be competitive takeaways if we bring those to fruition. We have about a 50% success rate, in my opinion, in winning competitive jump balls. That's obviously with people who are not current customers of TSYS and Global Payments, where it's an existing customer like Barclays U.S., which we just announced the renewal of our May 4 call. Obviously, our win rate there is pretty spectacular. And I think across a number of our markets, we feel like we've got really good market share. So we think we were early investors into the digitization of that business. I think Amazon is going to help us not just on the technology side, but also on the distribution side. You're seeing that with the wins that I think we've already announced, the 1 in Asia, which will go live at the end of the year, a multinational financial institution, which is a takeaway, as I mentioned before, from one of our competitors. We'll be the first live up and running within the AWS cloud of a large financial institution multinationally. We also announced the win with UMB Financial a couple of weeks ago. Not only, Tien-Tsin, was that a takeaway from one of your other speakers, but that will be our first data and analytics standup in the cloud with AWS for UMB, and we couldn't be more excited about that. So I think we're in a really good place in our issuer business and look for growth to accelerate as we exit 2021 and head into 2022. So I think our pipeline is really good there. I feel really optimistic about where we're heading. The last thing I'd say on issuer is that, together with AWS, we think that we have the ability to triple the size of our target addressable market. One of the things that we're going to do is go down market into neobanks and fintech startups, so I think we have the ability to look at businesses that historically we would not look at because of their size and scale and our lack of sales focus on those initiatives. So stay tuned. But I think together with AWS, we've got a unique ability to target some of those markets that we weren't in historically and that's why.

Yes, I know there's a lot of focus on neobanks and fintechs for certain. So okay, we'll be watching out for that. We're almost out of time, Jeff. I definitely want to ask you 2 things. I'll ask them together. I guess we need to keep it to a couple of minutes or less. So margins. The recovery, I think, should allow for very strong incremental margins to come through, but you also -- because you've protected the margin, the cost base well here, I would imagine you're going to have -- for some normalization of personnel costs in investments as well. So how do you balance that? Can we see margins above sort of pre-pandemic as a result of what you've done? And then of course, on M&A, you mentioned neobanks and fintech, there's so much going on. Well-funded private companies, a lot of IPO activity. Is the appetite to do M&A -- I know you just said Zego. Is the appetite to do M&A or a sense of urgency to do M&A greater now than where it was, maybe, say, at the beginning of the year?

Well, those are both great questions. I'll try to answer them pretty quickly within the timing constraint. So first, on margins, we've expanded margins 400 basis points in the 2 years since the announcement of the TSYS merger, which, by the way, next week is exactly 2 years. So it's a happy anniversary for Global Payments and TSYS as well. So 400 basis points there. I would say our guidance this year is we're up to 250 basis points of expansion. That includes the normalization of cost engine. It would have been up to 450 this year alone if those costs hadn't normalized. But I think going forward, we're going to be on a permanently higher margin trajectory, and there's a few reasons for that. Number one, we're just not done with the merger synergies yet, so we'll get some carry through on that heading into next year beyond the normal ordinary operating margin that we always get. Number two, what you said is exactly right. So the parts of our businesses that are growing most quickly are the technology-enabled businesses. A lot of our software partnered and owned assets are already at margins that are north on average, margins that are north of our already average margin of 41%. So the stuff that's recurring, the stuff that's technology, stuff that's software-enabled is coming in at very high incremental margins. I think we've talked about 70% to 80% incremental margins historically in the payments business. For example, so a lot of that is going to flow through, and that's where a lot of the margin expansion is coming from. And we should see that in the rest of the year, heading at least into the first quarter really of next year. And then second, just in the interest of time, in your question, our pipeline remains full. We started looking at M&A again very seriously in November of 2020 once the pandemic really had started to recede somewhat here in the United States. So look for us to do more things. Obviously, time will tell, but I think we've been able to balance capital return to shareholders. We did $1 billion of buyback from November of '20 through February of '21, and now we just invested $1 billion in 2 deals that we announced a few weeks ago, with more to come depending on what happens over the coming period of time. So I think we have the ability to balance each. They're not mutually exclusive. The balance sheet is only levered [ 2 6 ] net. Today, we just did about $1.5 billion in free cash flow in the last 2 quarters. So we have plenty of financial firepower and capacity. So I'll look for us to do more, but of course, time will tell.

Look, you've advocated the pandemic very well. It seems like you've set it up well to do some good things here on the recovery. And the chessboard is really fine to examine. And we're all watching to see what you do next, Jeff, for sure. So thanks for spending some time with us today. And like you said, I hope I can see you in Atlanta soon or come up to CS in New York City, okay?

Well, thank you for having us. It's always a pleasure to be here.

Jeff, it's great. Thank you so much.