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

Thank you again for joining us. First of all, it's really great to have you on for, I don't know, how many years in a row we've had you for our conference. So I really do appreciate you being with us.

Thanks for having me, Darrin.

Let me start off. Before we get into some of the recent trends, which I know everyone is going to want to talk about and some of the noise and the craziness in the world today. I just want to talk a little bit about where you see the business today, bigger picture. A, your -- as the CEO, where are you spending most of your time and priorities; b, when you think of what you want global payments to be, where do you see the business positioned now? What are some of the data points that we can expect in '22 that shows some of the momentum from some of the investments you've made over the last year or two?

Well, Darrin, my priorities in the areas we focus on as a company at Global Payments really been consistent for most of the last decade. We really had a unique strategy, as you know, that's driven the rates of growth that you've seen from us for many years and our expectations for the future, including, in particular, 2022. And that strategy really has all been centered around digitization, which is a process that we began when we started running the company 8.5 years ago. Specifically for us, we focus on 4 key pillars to our strategy, and those are software, both owned and partnered, omnichannel dominance, exposure to faster growth markets, and now, of course, we announced in September of last year, at our investor conference, B2B, which is our newest strategic pillar. We talked a lot about each one of these things at our September Investor Conference. So I encourage anybody who's not had a chance to review our 70-plus page slide show from last fall, if you want to do so. But I want to emphasize here, Darrin, that last year, in the middle of the year, we crossed the threshold of our business that comes from technology enablement or digitization to over 60% of our business. And of course, that's something that we target now to be 3/4 of our business over the next cycle, which I think addresses one of the questions you asked now kind of where we are and where we're heading. Really, in short, we raised our cycle guide last fall, our growth has accelerated. We're selling more market-leading technologies today to more distinctive and defensible distribution channels that we ever had previously. And of course, we've announced marquee deals with 2 of the largest technology companies, Amazon AWS and Google, to extend our lead and deepen our moat. That's resulted, Darrin, in record new bookings that we've announced in merchant for any number of quarters since the pandemic began, plus marquee wins an issuer like Triust and Caixa despite all the challenges that we've had fronted us. So really, I think today, in summary, we view ourselves as the top quartile SaaS company, leading omnichannel acquirer across virtual and physical markets and a leading B2B player already at scale across developed and emerging markets. And then finally, all those things drove the guidance, Darrin, that we provided just about a month ago on our year-end call and specifically for 10% to 11% constant currency revenue growth this year in 2022, up to 150 basis points of margin expansion, excluding acquisitions, and 17% to 20% earnings per share growth. To answer your question, that's what I'm focused on delivering and driving the business towards.

Okay. That's really helpful, Jeff. Let's take it a step back and just run through a quick reminder on fourth quarter trends. And then really what you're seeing as much as you can comment even qualitatively on so far through first quarter. Maybe if you can also touch on coming out of Omicron and what that looks like as well as, unfortunately, the events in the war in Ukraine? And maybe if there's -- if you could just touch on what you're seeing around that, if anything, if there's any implications we can talk about?

Yes, sure, Darrin. So we delivered record fourth quarter and record full year '21 results that exceeded our expectations. We also achieved record transactions across the business in the fourth quarter, including a new peak during the holidays despite the impact of incremental COVID-19 variance throughout plus we delivered record free cash flow. And really, we expect to earn more of the same for calendar 2022. Our merchant volumes, which, as you know, Darrin, we've now disclosed quarterly going back 3 years, continue to meaningfully outperform and credit volume trends as reported by the networks, and our outperformance relative to the market has been consistent really throughout the pandemic, highlighting our continued share gains. As it relates to your question, Darrin, about kind of current events, I'm really happy to report that the recovery in volumes post Omicron toward the end of January continued into February. We've seen sequential improvement from January to February, consistent with the data disclosed by Visa in the last week and also consistent with our expectations. So we're super pleased with our performance so far in 2022. Looking at the bookings and sales trends for full year '21, as you know, global merchant bookings increased 20% relative to 2020. And as you mentioned in your note, Darrin, after the quarter, our mid counts were up 16% versus 2019. And in the fourth quarter, both our integrated business and our U.S. payments and payroll businesses delivered 20% growth versus the fourth quarter of '20. And our booking trends also remained strong in many of our vertical markets businesses. So for example, at AdvancedMD and Healthcare, delivered bookings growth of 40% in the fourth quarter and 26% for the full year. Our enterprise quick service restaurant, cloud point-of-sale software business grew bookings 50% in '21. And the recent acquisitions that we made in vertical market in particular, had a great year as well with Zego's bookings in real estate, up 20% and MineralTree and B2B up 19%. And finally, our e-comm omnichannel businesses grew 20% year-over-year and quarter-over-quarter. As for how that translates into revenue, Darrin, I'd say that these trends give us a lot of confidence in our outlook for 2022 for merchant revenue to be up in the low double digits, assuming we remain on a path toward recovery for the rest of the year. And then finally to answer last question, Darrin, it's worth pointing out that our Russian business was less than 1/2 of 1% of our revenue in '21, and we expect it to be even lower in 2022. So it's immaterial to Global Payments. And just for the record, we have no revenue in Ukraine. So we don't expect either of those things to have any impact on our business.

I thought it was -- Jeff, it was very notable to see the volume growth rate you guys disclosed, which is really helpful, by the way, outperformed Visa's credit card volume. And I think you really underscored your positioning and your market share positioning strength. When we think about the driving force of that from your perspective, it clearly underscores some of your reach from whether it's the sales or some of the verticals. But frankly, there's still some areas that I think are under 2019 levels still embedded in the business that have room to rebound, right? Can you just touch on that for a minute in terms of what areas do you think still have some room to go? And then maybe thinking about yields that can come with that?

Yes, it's a great question. So let me just go through kind of [indiscernible] stuff. I'll start with what you just asked about some of our markets. So I would say in the aggregate, a number of our merchant businesses, Darrin, are actually back at or ahead of the number they would have been at despite COVID-19 as we said in the last couple of calls. So I would say the vast majority of our business, particularly in merchant is ahead of where we always would have expected to be, going back to January and February of 2020. Regarding businesses, to your question that have not fully recovered to 2019 levels at this point, really, that's very limited to just a few of our vertical markets businesses in some specific geographic locations. But the nice thing about where we are, Darrin, as we said in our call last month, is as of the fourth quarter of last year, on a year-over-year basis, our vertical markets businesses, in the aggregate, performed in line with the broader merchant business. And in this year, in 2022, we expect our vertical markets businesses to collectively be a tailwind to growth in the aggregate as these markets continue to recover. So [indiscernible] where we are. So I think we're kind of beyond that and that stuff is actually going to be a tailwind as a point of inflection for growth starting obviously this past January as we entered into 2022. The other thing I want to highlight because I think it's embedded in your question is, we don't expect the recovery to be perfectly linear, and we don't need perfection and we don't assume it to hit the high end of our ranges. So our 17% to 20% target earnings per share growth for this year on a constant currency basis is right in line with the raised cycle guidance, Darrin, that we gave at our September Investor Conference, despite a worsening of the macro environment since last September. And we also continue to expect 100% free cash flow for conversion. And to break it down further by segment, Darrin, this includes mid-teens growth for our integrated business, roughly 20% growth assumption for our e-comm omnichannel solutions and double-digit growth for vertical markets businesses. I'd also say that we expect Visa's recent announcement, I think it was last week, Darrin, of a 10 basis point rollback in interchange in the U.S. for SMBs to be a tailwind to our performance. So lowering costs for our customers is always a good thing. If you know what Visa said, Darrin, which is that $250,000 Visa volume for just Visa cards in the U.S., that's really right in our wheelhouse, Darrin, and is our sweet spot. Our merchant business here in the U.S. where average merchant is probably $500,000, $600,000 of card volume. So it's right in the sweet spot and in our wheelhouse.

Right. This has to be credit card volume that's below $250,000, if I remember correctly, right?

Yes, that's correct. That's right in the sweet spot for us. As it relates to our issuer business, again, our outlook is consistent with the cycle guide that we outlined in September, again, despite a more challenging macro since then. And we do expect, and I think Visa and Mastercard, Darrin, said the same thing. We do expect our commercial card business to recover as the year progresses, which is what Visa and Mastercard also talked about for travel, and we'll also benefit an issuer from a robust conversion pipeline particularly in the second half. What we said, Darrin, in our call last month was we have something like 22 million cards in the conversion pipeline for issuer in the back half of this year, 30 million total. And that does not include the Caixa win, which is another 30 million, Darrin, and it actually doubles our conversion pipeline. So it puts us in a really good position. And finally, we'll talk more about this, I know in a little bit, but our business and consumer portfolio does face a tough revenue comparison in the first quarter because we're growing over 2 consecutive years of stimulus in the first quarter by '21. I know it's something that you've commented on publicly in your notes. We do expect to deliver growth in the mid- to high single-digit range for the balance of this year once we get to the first quarter, which again is consistent with our long-term expectations. But as you know, we did announce a strategic review of our NetSpend consumer piece, which is about 85% of that business is sharpen our focus on our B2B assets. So I think the business is in a really good place. I think despite the macro overlay, Darrin, what we think over here is really as a financial and operating manner, I don't think our businesses have really been in a better position than they are sitting here today.

That's great to hear, Jeff. Let me follow up on the merchant point. I mean I think the 16% growth in MIDs over the last couple of years is a pretty big deal actually. And when you consider that on top of the 50% growth we've seen in the software side, I mean, clearly, you're showing some traction with a lot of your investments. How do you feel about your position in your merchant business now? You've done quite a few deals in software over the past few years. Do you think you're in the right assets from a software standpoint? Do you feel like you want to do more this year on that front, and then we can go maybe a little bit -- dive a little deeper into the merchant side as well?

Yes. Sure, Darrin. Obviously, we're a big fan of owned and partnered software at our company. I mean, today, as we said in September that we're a top quartile software-as-a-service tech company, Darrin, not just in payments, but really in the United States in the public markets in the U.S. So top quartile software-as-a-service technology company with nearly $3 billion of software revenue annually, cloud-centric and mainly, of course, with AWS and Google. Really no one in and around financial technology, has this position in cloud-native SaaS, really nobody. At the time of our 2018 investor conference, Darrin, you can go back and remember that long ago, it seems like eons ago given all that we've been through as a world, but we set much of our presentation in 2018, discussing why the convergence of software and payments was a really important trend. And to be honest, we faced some skepticism during that period about that strategy, namely, we were told it's really tough to execute and filled with conflict and that kind of thing. I think history since then has actually proven us right. It's now dogma, as we said in September, that software and payments have converged despite all the [ problem ] that we endured at the time. And we're really pleased with the leading position we have in software today. But as you asked, expanding our software portfolio remains a top priority and will be a key driver of our mix shift to 75%-plus tech-enabled revenue over the cycle. We've invested nearly $2.5 billion in acquisitions since the pandemic began, nearly 60% of which, to be honest, has been in software. We did report on the results in Zego in real estate and MineralTree and B2B in our last call couldn't be more pleased with their early performance really post acquisition. So we certainly look to do more. We think we'll be able to win it back with our strategy there, and I'm really pleased, Darrin, that we started investing heavily in that business 5-plus years ago.

I was going to talk about M& a little later, but while we're on the topic of software and acquisitions, have the bid-ask spreads start to come in a little bit? I mean, obviously, valuations are pretty insanely volatile at the moment, both on the growth side and pretty much across the market so when you consider what you can actually acquire now, just given valuations both on the private and the public side are coming quite a bit.

Yes, obviously, Darrin, the nice thing about us is if you go back in the nearly 9 years, you've been running the company, to be honest, the capital allocation priorities, either an M&A or repurchase, really haven't changed for us. We balance the investment in the business and capital returns while maintaining flexibility. Look, our pipeline is full today. There's a lot of -- just as we all surmised the [indiscernible], Darrin, there's a lot of broken IPOs, a lot of companies that are products macerating as real businesses, which they're not. I think the market in terms of how they perform, tells you as much kind of every day when you're looking at them. So we really look at what's available. The issue is really not the pipeline. We have a lot of things that we believe that we can do, both financially and strategically as well as culturally. But we do view the bar for M&A to be pretty high today, not because of the valuation ask, Darrin, but because of what we consider to be the extraordinarily compelling return characteristics for the alternative, which is repurchasing our stock. So it's not so much that the bid-ask is different or it's hard to bridge. Look, we're a strategic buyer. We're generating record amounts of free cash flow last year. We'll do the same this year. We have a fair amount of leverage capacity. I think what we said back in September, Darrin, was like something like $28 billion over the next cycle of free cash flow plus leverage capacity that we can reinvest in our businesses. We already invest. We will invest this year, $1.7 billion in OpEx and CapEx, just through our own internal technology environment, and that free cash flow number is net of those investments. So we have plenty of capacity to do it. It really comes down to, Darrin, not the valuation ask, but the returns relative to the repurchase. And I think that's something we're obviously very focused on. We've repurchased about 6% of the company since the 2020 period during the pandemic. That doesn't include the current $2 billion authorization that we announced last month. Depending on where things shake out over time, that could be another 5%. So 6% and 5% is 11%. And obviously, if we were to do something with NetSpend in the foreseeable term, that would be incremental to those numbers. So look, we have plenty of things that we can do. There's plenty of broken IPOs and other companies out there that obviously cascades to the market. I think, Darrin, it's just a question of what's the best return for our shareholders. And for right now, we've got our thumbs on the scale of repurchase. But look, we have -- we look at most things, and I think our pipeline is full. It would be good to get a few days, Darrin, of stability in the capital markets to just come to a point of view. But the current environment suits us kind of any which way.

Okay. That makes a lot of sense. Let me follow up on the yields for a minute, going back to what you were saying before about -- you touched on interchange potentially being a tailwind, but more broadly speaking, even beyond that, I think the mix on gas per gas transactions, for example, had an impact on your yield, just given that you get paid a fixed fee there, right? Volume numbers were higher yet. But when we consider what it can be going forward post pandemic and really hopefully post the geopolitical crisis, and you think about some of the business coming back, I think you were somewhere in the 5 to 8 basis points higher pre-pandemic than you may be now based on the mix. Do you see that coming back up again just as mix normalizes?

Yes, it's a great question. I would just start by saying that our yields really have been stable throughout the pandemic. I think you touched on some of the reasons that there may be quarter-to-quarter differences. So several of our vertical markets businesses, think gaming, K-12 and ACTIVE, were more pandemic impacted. And given, Darrin, that the majority of our revenues in those businesses are software-driven versus payments, that creates some lumpiness kind of quarter-to-quarter with really little impact on volumes because those are primarily kind of software businesses. So given the diversity of our businesses across verticals, channels, geographies, software as well as payments, you're naturally going to have ebbing and flowing. The most recent thing is what you just talked about, in the fourth quarter, we obviously saw an impact from higher fuel prices. That will -- given where oil is today, Darrin, that's going to continue for some period of time. Because in that legacy kind of Heartland business, we get paid like $0.01, plus or minus, a transaction. So the retail price of fuel really doesn't drive -- does not drive our revenue in that business, but obviously, it does drive volume-based disclosure. So this translates into higher volumes, but really the same level of revenue at the end of the day. So you will see some variability around it. Just to give you a sense, Darrin, I think that the impact from vertical markets to our fourth quarter volume versus revenue was about 400 or 500 basis points. So that would have narrowed the gap, Darrin. If you take out those 2 or 3 businesses that I described, and they would have been closer in terms of alignment in the way of saying kind of a higher yield. So at the end of the day, our view internally is that our yield has been remarkably consistent. In terms of our expectations for longer-term yields over time, listen, our focus is on continuing to lead with tech, software complexity, deliver more and more value. The more we come around -- more value like data and analytics transactions, the better off we'll be. So we're really pleased with the stability in our yields, and we expect that really to continue.

Your strategy of owning software has become very clearly a smart move when you consider what we're seeing with some of the PayFacs out there now and the PayFac enablement where software companies trying to do more on their own. But I think there's also maybe a bit of a stretch on how much it's impacting the market. With that said, maybe just give us a little color on your thoughts on that trend in payback enablement, and how much of an impact it's had on your business?

Let's just start by saying we're rooting for PayFacs. We have the largest PayFac in the world, PayPal as a customer for a long time. As we mentioned in October, I think, Darrin, they recently renewed and expanded our relationship at the end of '21 for the next number of years. And we think by adding crypto in a number of vertical markets with PayPal that we can double our TAM with PayPal over the next cycle. So let me just start by saying we're rooting for those guys at the end of the day. So that's actually good news for our business. But if you back up further and you kind of put that to one sign, the VAR/ISO, now called PayFac, was a concern nearly a decade ago, when we bought APT, which was really our first foray into owned and partnered software. The fear then was obviously disintermediation commoditization. But I would say, Darrin, that deal was done, and I hate to date myself, Darrin, by kind of giving you dates, but that was, believe or not, almost 9.5 years ago now. So I certainly feel old when I talk about deals we've done that are literally this summer are going to be 10 years old. It doesn't make me feel any younger. But this, in fact -- so now we have a 9.5 year history, Darrin, to answer your question, in fact, it's simply not happened in our business, nor do we see a trend in that direction. So if you back up further, you'd say, look, ISVs express interest and become a PayFac for 3 primary reasons: one, just money, economics; two, better control on certain of their processes like enrollment, onboarding that kind of thing; and three, if they have something funky in funding that they're trying to solve for by controlling more of the flow. Really, the only trend that we've seen over time is towards the third thing in terms of funding and settlement, but that requires a lot of work, as you know, to support at that time disbursement model, which I'll come back to. So we support PayFacs and kind of any category they'd like to be supported. I mentioned a minute ago, we have the largest in the world that's been our customers just renewed for a number of years. First of all, on the economic side, I think it's more important to divide a bigger pie rather than to redivide into smaller slices -- into more slices the existing pie. So the economics are a function of the size of the TAM. I think we've been very good with things like data and analytics, things like Google and merchant to expand the size of target addressable market. So we do share more of the economics because the TAM gets bigger rather than recutting the sharing ratio with our VAR/ISVs and PayFacs. Second, I don't think anybody has a better self-service onboarding environment than we do. Our merchant portal, I believe, is market leading. That's where you'll find the Google software, for example. And third, there's a lot of cost that goes into these things in terms of underwriting, credit selection, that kind of thing that we're just really uniquely positioned to do and most VAR/ISOs, PayFacs are really not at the end of the day. So even when we speak to founder-owned PayFac and public ISVs, the vast majority of those discussions with us and with us signing a partnership agreement, which extends our relationship with those VAR/ISOs and PayFac. And look, as you know, that stuff is mostly embedded, Darrin, in our Global Payments Integrated business. That business, during the pandemic, is actually growing more quickly today, Darrin, than it was pre-pandemic, which is something we talked about in September. We're just coming off of a quarter where our Integrated business accelerated to the high 20s organic revenue growth year-over-year. So if anything, that business is growing more quickly now than, Darrin, in a much bigger size it is like 9.5 years ago, we bought the thing in the first place. Again, I had to date myself, but those are the facts.

You mentioned Google a minute ago. So maybe we'll shift there now and just talk a bit about your relationship with Google and to that degree with Amazon and AWS on the issuer side. If you could just give us some examples of what that's really doing for your business on either side, right, whether it's the merchant side or the issuer side, clearly, we've been seeing the bookings go in the right direction. So I imagine there's a correlation. But if you can give us a little bit more color on that, and what you expect there would be great.

Yes. I mean, look, at a high level, those are really market changing, exclusive distribution and technology relationships and our businesses are really unique to us. So here we are 1.5 years into the Amazon announcement and just about a year now into the Google announcement, and we really couldn't be more pleased with how we're going. So let's just start with Google, which is merchant. So we're really -- we're busy there, reimagining core services we deliver. We don't just sell products really with Google, we sell results, and that's why we call it Run and Grow My Business, which is a name a lot of their software. So we're selling opportunities for our merchant customers globally to run and grow their businesses more effectively and efficiently on a unique basis. So it's not about price. It's about growing a pie and the TAM. A great way to think about this, Darrin, on the commerce enablement side is something like data analytics. As we talked about in September, that is now a 9-figure business that we invented all organically hosted in the Google Cloud, up from $0 of revenue more or less in 2018. So we invented this thing from scratch, and will do well into the 9 figures this year posted in the Google Cloud. We also went live with Google as a merchant customer in multiple markets in Asia Pacific in the third quarter of last year. And as we said last month, Darrin, we expect to launch Google as a merchant with us in North America by the end of this quarter. To be honest, those are simply market share gaining competitive takeaways. When we announced it, some of the incumbents said they weren't losing business. We want you to go ask them now how it feels. We've also initiated an exclusive co-sell program and are starting to see referrals of enterprise cloud clients. Again, those are competitive takeaways. Probably most importantly, we launched the first phase of Run and Grow My Business, that's the software that integrates Google solutions with our capabilities in our proprietary digital portal environment last quarter. And what I'm really most excited about is this year, we continue to expect to launch the next phase of Run and Grow My Business software, where we'll bring online ordering, inventory and reservations into our merchant portal ecosystem exclusively. You should think Shopify and OpenTable when you think about what that will look like. So our multiyear strategic partnership really facilitates co-innovation between Google and Global Payments and our product teams, and I think is really a game changer, both with them as a customer, but also with our go-to-market strategy. As it relates to AWS, which is really issuer and what I'll call B2B business, our business segment, listen, as we said when we announced 1.5 years ago, Darrin, that triples our TAM in our issuer business. I don't think you need a better example, Darrin, than Caixa. That announcement, as we said last quarter with Caixa, when that goes live, as we expect in the back half of next year, we expect this to be among the first legacy direct cloud transformation in card issuing technologies among major financial institutions. And it will be the first entry for TSYS certainly on the large side into the attractive Iberian marketplace. We also recently announced our partnership with Virgin Money over the summer. We believe when you combine Virgin Money, Darrin, with Caixa, we'll then become a global payments a leading debit technology provider across Europe. And then finally with AWS, the co-sell has been fantastic. We announced last month, 34 active prospects in the pipeline of AWS, 11 of which are fintech, neobanks and start-ups. And I think as you noted in your note after our quarter with extended [indiscernible], we're already live with a number of the fintech start-ups, which came to us through AWS. So we couldn't be more pleased with where we sit. And then lastly, I would say on the cost side, I mean, listen, revenue and tech are great. But regarding cost opportunities with Amazon and with Google over the next several years, we will migrate the vast majority of our tech workloads to the cloud with those guys, significantly reducing our data center footprint and streamlining our operating environments and enhancing ESG and that will drive meaningful cost efficiencies starting in 2024. Now we'll partly reinvest some of those savings but those will also be margin-enhancing and accelerating opportunities. So we couldn't be more excited about where we are with Amazon and Google.

That's amazing. That pipeline you talked about with Amazon specifically, just to follow up on that, the number you mentioned was that's issuer processing deals, correct me if I'm wrong, that crosses from credit to debit.

Yes, that's correct, that's all manner. So that when we announced the other day with the Xtend, I know you have Brex speaking at your conference, but Xtend is in commercial card, right? So it's not like your historical consumer, right? So it's neobank start-up, fintech, Xtend into commercial card. We're providing the underlying technology through TSYS credit and debit into Xtend. So that's exactly right.

Wow. That's great to hear. Maybe we could just shift gears just in interest of time, although we can probably go on and on about all these topics. The strategic review of NetSpend, number one, I guess, just comment quickly on your, will you anticipate around that in terms of whether it's timing or what you're hoping for? And then you're obviously holding on to the B2B side, right, and you're doubling down there, combined with what you did with MineralTree as well. Maybe you could just touch on your strategy, and what you'd expect us to see there?

Sure. As we discussed at the Investor Day back in September, we think B2B is a huge opportunity for us. B2B as we sized 6 months ago is a $125 trillion TAM and dwarfs the rest of the markets we currently attack. But not only that, Darrin, we believe we're already a scale player with nearly 2/3 of $1 billion of revenue in B2B. And really, we're just in the early innings of that category, not just for us but for the industry. To give you a sense, that 2/3 of $1 billion of revenue is more revenue than Avid, Bill.com and Billtrust combined. And of course, none of them has the scale in B2B and our business is already profitable. So we think we're in a really good place. So when you think about where we're going to go, particularly with MineralTree, we tend to expand from cloud SaaS and payables into the receivable side. We have an existing base of 60,000 businesses when we make it possible for every kind of payment to be made through our NetSpend assets through EWA, pay card and banking-as-a-service to get paid, combine that with $145 million accounts on file that we have in our commercial card business as well as our Heartland payroll business, which is well into the 9 figures, and we think we're really well positioned. As it relates to NetSpend in particular because you let off of that in this question, what I would say is we'll continue to give updates. But we're pleased about where we are in that process. Obviously, we give an update as we enter the next quarter, but we do plan to retain their B2B assets, which includes the 3, I mentioned, pay card or wage access and banking-as-a-service. Those combined with MineralTree combined with TSYS issuing, combined with Heartland in payroll, I think, position us very well competitively in our B2B sector businessman board.

Very helpful. Was going to touch back on capital allocation, but you pretty much hit that before. So in interest of time, we'll just -- let's just wrap it up with your long-term growth potential. I mean, again, you talked about obviously, that 10% to 11% constant currency growth range guide for '22 for top line. But 3- to 5-year cycle, I think you mentioned low double digit, right? When you think about growth rates there, is your strategy still to keep investing in areas that are going to drive top line and maintain margin expansion? Is that from an algorithm standpoint, what you have in mind or anything changed on that front? And just thinking about what you see now in terms of the business' assets and capability of continuing to grow that level versus what you saw even a year ago, given how much has changed in the world.

Yes. Listen, I think it's a great question, and I'd point you back to what Paul Todd, our CFO, said, as the foundation for our accelerated growth targets that we laid out in September, where we increased our cycle guidance, and I'll just list a few of those drivers, which really haven't changed, to your point. One is a further mix shift toward technology enablement as we target the 75% goal over the cycle. So with the beneficiaries of tailwind in the mix shift. Second, accelerated digitization brought on by the pandemic. So obviously, the pandemic has had a horrible human toll and everything else coming out of it. But as we said in our investor conference, Darrin, those businesses that we're growing quickly pre-pandemic for us along the lines of digitization, many of those growth drivers in terms of mix are actually growing more quickly today than they were pre-pandemic. Our unique and exclusive partnerships, which we talked about today with Amazon and Google for distribution and technology transformation really also have accelerated our business. We just finished talking about those, obviously, in addition of B2B, something else we just commented on as a new fourth leg to the stool. And of course, aggressive capital deployment for the cycle. We talked about the $28 billion free cash flow plus coverage capacity over the cycle, which we intend to deploy in our capital environment. All those things tell us that we're doing the right stuff that our growth is sustainable. We actually increased our targets. We obviously feel good about what we laid out a month ago, which is what you touched on a second ago. And I would say, as it relates to competition, as we talked about extensively in September, our business has always been highly competitive and really that environment hasn't changed. And here we are having produced the best year in our history in '21, best fourth quarter in our history in '21, and with our guide for 2022 last month, by definition, the best years of expectations we've ever set out for a business consistent with what we said in September, despite a worsening macro environment since the fall of '21. So we feel really good about where we are, Darrin, and really excited about the future and where we're heading.

All right. That's really helpful. Look, we're kind of in [indiscernible] time. Let me just take 1 or 2 quick -- very quick ones from the audience, and we'll wrap it up. One of them is just you can give us any idea of what Google and AWS may be able to do for GPN margins and free cash flow that could bring less CapEx over time?

Yes, I think that's fair. So I think the general -- once you get to maturity, which is really going to start at the end of '23 and heading into '24, meaning once the data centers start decommissioning, we've already taken them down, I mean pre -- right post the merger with TSYS, we probably had 40-odd data centers. I think now we're down to 30, and we're on our way with 3 -- on our way to 3 post AWS and Google. Listen, I think a good rule of thumb is you can cut, call it, 10 to 20 points out of your operating expense once at full maturity, which we won't be initially from the outsourcing arrangements and hosting the cloud with AWS and Google. Now in fairness, we won't realize all that, that's incremental, Darrin, to the 50 to 75 we laid out. In fairness, we won't realize all that because some of the amount, of course, we intend to reinvest incrementally back in our businesses to continue to accelerate growth. But you will see a significant drop in expense and an increase in margin as you enter '24 with those 2 deals, partly will be reinvested back into our business to accelerate growth. But there's no doubt, as we decommission 30-odd data centers down to 3, you are going to see margin improvement incrementally coming out of those arrangements, which is what you would expect to see as you demise 30-odd data centers down the range.

Sure. Very last, very quick one, just high level. When thinking about large deals versus small deals or mergers between you and others, I mean, I think there's a question that just, a, would regulators or DOJ in this environment even want to see something like that? And B, do you think scale still matters where that could be a good thing? Or would you rather focus on tuck-in deals and smaller acquisitions?

Well, let me start with the second part of what you asked because I think that's pretty straightforward. So we're in a scale business. We'll do $60 billion, $70 billion, whatever it is, transactions this year. As a company, and we'll probably have volumes flowing through us, Darrin, in the low trillions, right? So Obviously, we're in an environment where scale margins are at 80%, 90%, with average margins at 42%, having more scale is a good thing, right? That's just the mathematics of how our business works, and we're not really unique from that point of view. So scale with deals always make sense because of where I just kind of listed as a purely mathematical matter. I don't think we're done. Going back to the first part of what you asked, I think there's plenty of competition in our businesses. I can't speak to the political kind of overtones to how people look at it. But I can tell you as a business person's point of view, there's plenty of consolidation to come in our business, whether it's vertical market software, horizontal, acquisitions, new geographic market entries where we've not entered in a geography or in a geography already but not at a scale sense. There's plenty more we can do, Darrin, as a lay person thinking about what the business environment is. Our business has always been competitive. As I mentioned before, it's not going to change tomorrow is being more competitive and there probably have never been more people in and out of our businesses today in terms of how we think about the TAM at the end of the day. So I really don't view that as a real constraint as a practical manner, kind of what we do. How people view that will depend on the facts and circumstances, that's hard to say. But as an operating matter, I don't think we're anywhere near in any of our markets any kind of a limit on kind of what we can do. And instead, it's driven by the second part of what you said, which is what are the scale economies. Now we have a lengthy pipeline. We obviously love software-related vertical markets as it relates to real estate, as it relates to B2B. We've got plenty of blue sky in those businesses. So listen, I think all that stuff is open. I think we'll be judicious in what we do, given our ability to drive returns, but I think we're in a really happy kind of competitive place as it relates to our ability to do deals.

Understood. Great. Jeff, thank you so much for joining us. Really appreciate the time. Guys, for everyone on, the next panel is starting actually just about in a minute, BNPL with PayPal and Simpl. But Jeff, thank you again, be well, and we'll catch up again soon.

Thanks for having us.

Take care.