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

All right. We'll get started. I'm Will Nance, I cover payments here at Goldman Sachs. We're delighted to have Cameron Bready, President and CEO of Global Payments here to talk with us about the business and hopefully some of the trends we're seeing right now. So thanks for being here.

Of course. Thanks very much for having me.

Cameron, maybe kicking it off kind of high level. You took over the role June 1, I think that puts us almost at the 100-day mark. So maybe can you talk about the first 100 days in office. What's changed? What stays the same? And where are you devoting the most of your attention today?

Yes. It's a great question, obviously, a good way to start the conversation. So I would say, first and foremost, the first 100 days for me have been focused on just ensuring a seamless transition and stability in the business. I put a lot of time and attention on internally, just the organization making sure that I'm spending time with our people all around the globe. I've been doing a fair amount of traveling, as you can imagine, spending time in a lot of our major locations and spending time with our team members around the world. Secondly, I've been spending a lot of time with our customers and our shareholders and our Board members. Again, wanting to ensure that we have a very seamless, smooth transition with Jeff leaving and me taking over the CEO role, and just spending time really listening to our key constituents, getting different perspectives on the company, the business, our performance, et cetera, as I begin to shape, I would say, my plan for our organization more broadly. Given I've been at the company for 10 years or nearly 10 years, obviously, the message I've been articulating is, I wouldn't expect any radical changes, but there are a number of things that I'm going to be focused on in the CEO role as I think about where I want to position -- how I want to position the business, where I want the business to be 3, 5 years down the road. I would say, first and foremost, on that front, I'm really focused on continuing to make Global Payments easy to do business with. I think we have the right strategies as an organization, I'm sure we'll talk more about that through our conversation today, but I really want to continue to make sure that we're making it as easy as possible for Global Payments to do business with our customers to meet them how and where they want to be met, making our solutions easily consumable, making all of our capability available ubiquitously to them in the different markets around the globe that we serve. And then obviously, coupling that with a level of service that I think is distinctive in the marketplace relative to our competitors. Second, I'm very focused on execution. We have a lot of great competitors in our business who have great people, great assets, are in good markets. And I think what separates one company from the next is really execution. So operational excellence has long been a hallmark of Global Payments. I expect to even improve upon that as we move forward in time. I want to make it easier to get things done inside of our environment. We're a big company, 27,000 people, 40 physical markets around the globe, focusing on execution and operational excellence is highly important to me. And then lastly, I'm really focused on our culture. I want our culture to be second to none. I'm a big culture guy, and I'm happy to admit that and focusing on making Global Payments, a culture that really is second to none, where we're able to retain our most talented people. We're able to attract the right talent to the organization, and we're able to align our team members around our vision, mission and objectives of the organization to make them feel like they're part of something bigger I think can have really positive impacts for the business long term.

Great. Maybe we shift gears, talk about the business a little bit. I think you mentioned on the call, consumer trends have been relatively stable so far this year. What have you been seeing more recently in consumer spending trends?

Yes. I think this is an ongoing stability, quite frankly, is probably the simplest way to describe it. We're seeing a lot of resiliency in the consumer. I think, obviously, where consumers are spending has evolved a little bit, and I think that's been well documented and well discussed. Clearly, services and experiences are outpacing physical goods. And certainly, we're seeing different trends across different vertical markets by and large. But I would say, overall, the consumer remains very healthy. On a relative basis, as we sit here today, it remains very resilient, and the trends we've seen in the business have been very stable. We said on our Q2 earnings call at the beginning of August, that July looked a lot like Q2 and August trends look a lot like July and pretty much right on top of what you heard or what you saw from Visa, who, I think, published August metrics last week. So we're seeing good stability in the consumer. Again, some verticals are outperforming others. Some geographies are outperforming others. But I would say, by and large, the trends are pretty stable and consistent with our expectations that we -- that underlie our guidance for the full year.

Yes. No, that makes sense. You mentioned the Visa metrics. The 9% to 10% merchant guide this past quarter, they drove a lot of anxiety after we saw U.S. spending decelerate, you ended up meaningfully outperforming the card networks, specifically relative to some of the Visa metrics that a lot of us track. Are there any notable mix or performance dynamics that you'd call out behind the recent outperformance?

Yes. I would say a couple of things, Will, maybe to start the conversation, but look, this comparison against the network metrics started back in the pandemic. And it was really a way to demonstrate kind of how businesses were performing relative to what we saw in the market more broadly at that point in time. And I would caution investors not to over-index one way or the other relative to how we might stack up versus Visa and Mastercard numbers for a couple of reasons. One is they represent the market, right? And we don't represent the market. We represent the mix of businesses and verticals and geographies that we're serving, but we don't really represent the market. So there may be times like last year where our numbers were slightly behind the networks because you were seeing this massive uptick in travel on the heels of the pandemic and everyone wanting to go and visit all these places that they missed out on over the last 2 or 3 years. And we don't have a lot of exposure to travel. Conversely, that was a benefit for us this year as travel comps were difficult and the networks were lapping those during the summer time frame, given we didn't have a lot of travel exposure, we didn't have those difficult comps to have to lap and that obviously benefited us as a metric matter. So -- again, I always caution not to over-index against what the networks are producing. The way I think about the business is we have very good diversity across vertical markets those that are traditionally considered discretionary and nondiscretionary. We have a very good mix of businesses geographically. We have good exposure to faster growth markets. And generally, what I'd like to see is, is there a good correlation in our business between volume growth and the overall rate of revenue growth in the business. And how are we doing as a volume growth matter in those segments of the market that we're really targeting with our business because we're not trying to be all things to all people, and we're not trying to represent the market broadly. We're trying to win share, grow our business attractively in the segments of the market where we're choosing to compete.

Yes. No, that makes sense. So it sounds like the macro backdrop is relatively benign so far relative to what people may be feared coming into the year. I think there's been a lot of discussion around how much conservatism was in your guide. You guys, I think, cleaned up that message that there's a range of outcomes that the guidance contemplates. What puts us at the higher or the lower end this year of 5% to 10%?

Yes, it's a fair question. And I don't know that we covered ourselves in glory in Q1, as we talked about the guide, I do think we tried to clean that up a little bit in Q2 and try to better articulate how we think about the overall range of guidance. So I would say a couple of things. One is we never guide for perfection. This is a big complex machine operating in a lot of markets around the globe. So we never expect everything to go right nor do we expect everything to go wrong when we set a guide for the year. The second thing I would say, particularly given the uncertainty in the macro backdrop going into the year is we did try to accommodate a range of macro outcomes in the year. So sitting here midyear, given where we are, what would drive us towards the lower end would be a slowdown in spending certainly relative to the trends that we saw in the Q2 time frame in July and August as well. So something that would be certainly less constructive from a consumer spending perspective than what we've seen would push us towards the lower end of that guidance range. So to say it another way, our guide can accommodate some softness in consumer spending between now and the end of the year. Clearly, if the macro falls off a cliff for whatever reason, I don't anticipate that sitting here today, that might put a little pressure on the low end of the guidance range, but we can accommodate some sort of softening. And if things are better than we expect. The consumer suddenly spends at greater levels than they are kind of currently or the macro backdrop becomes more constructive. Again, I also don't think that's likely to be the case. Then certainly, I think that brings into play the upper end of the guidance range that we've articulated. But basically, our base case is kind of status quo. Continued resiliency of the consumer and stable sort of spending patterns, but not a lot of significant upside to that, not certainly a lot of significant downside to it either.

Makes sense. Maybe to double quick on the strategy in Merchant. I mean there's been a number of strategic transactions recently. You've refocused the business. You've had a smooth management transition. Hoping the stock will recover a little bit. Business appears to be performing stronger than it has in several years. I guess, from here, how would you frame the strategy for the company, why Global Payments wins in the market in Merchant?

Look, it's a great question. And I think the -- we need to do a better job just as a management team and as an organization kind of tightening up our story and being a little more clear, I think, as it relates to our strategy, how we're focusing our efforts in our business and what is allowing us to win in the marketplace. I do think if you rewind the clock back to February 2021, at our investor conference, we did a pretty good job of setting the foundation for that. And I think since then, we've all supplied a little bit, I think, in terms of how we've been articulating our strategy around Merchant, in particular, and where we're taking the business as we move forward in time. As I step back and think about it, I think you have to look at it through a few different dimensions. First is technology. Our goal with our Merchant business is really to lead with technology and software sits at the heart of that strategy. We spend a lot of time on our Q2 earnings call trying to set the groundwork for more focus as it relates to our strategy around where we're playing in software, how we're going to market across -- excuse me, both partnered and owned software assets. Why strategy -- why software is so critical to the Merchant strategy as we move forward in time. The second element, as we think about technology is really our omnichannel capability. So often when we're leading with software, we're also attaching payments on an omnichannel basis. And sometimes when we're not leading with software, we're leading with the omnichannel capabilities we can deliver today. Every vertical market needs an omnichannel strategy. That's the way the world is going. Obviously, our ability to combine both physical and virtual payment capabilities, delivering true seamless omnichannel experiences. I think it's a point of differentiation for Global Payments, particularly in the small to midsized market that we tend to play in. And that is, as a technology matter, I think where we're placing a lot of emphasis around the business as we move forward in time, particularly as, again, every vertical market begins to develop more virtual an omnichannel solution. So from a technology dimensioning perspective, we continue to support our technology-enabled strategy. We try to lead with differentiated technology that avoids competing on the basis of price, particularly in more commoditized segments of the market. And that remains, I think, core to our overall merchant strategy as we go forward. And then you have to dimension it across geography. We have an attractive mix of geographic markets that we serve in our business. Some are more mature and maybe not as fast growing from just an overall secular trend matter, but many of the markets we serve are very attractive from a secular trend perspective. So I think we have good geographic diversity and a good mix of faster growth markets with very attractive secular trends in mature markets where we have good scale to generate a lot of cash that help fund other growth initiatives in the business. So from a merchant perspective, I generally think about the business kind of across those dimensions. And then we try to obviously couple that with a level of service and capability that I think is distinctive again, relative to what other competitors in our markets tend to provide.

Yes. And I guess on the earnings call, you laid out kind of Merchant according to Cameron, 40% of the business being software led. I was hoping we can maybe unpack a couple of those components and you talk about how you think about the strategy and the trends in each of those.

Yes, happy to.

So maybe starting off with within the software-led vertical, we've historically talked about owned software and partnered software. How do you decide whether or not to partner with an ISV or own the software outright?

Yes, it's a good question, and it may sound funny to say this, but I'm somewhat ambivalent about where we partner versus where we don't. We have very strict criteria for the kind of vertical markets that we want to own software in. But I believe in both the software partnered strategy, and I believe in both the -- in the owned software strategy. And I think those 2 models can live in harmony for the foreseeable future. So we've had very good success of partnering in some vertical markets with ISVs and owning our own assets in other vertical markets. And again, those 2 models can live in harmony, and I like that as a go-forward strategic positioning matter. As it relates to where do we want to own, it generally boils down to large addressable markets. We want to be in markets -- large vertical markets where it makes sense for us to own underlying software assets that are big enough to be worth our time and attention. I think today, our own software assets encompass something like 50% of the GDP in the U.S. market. So we want to be in the right markets with large addressable spend components where we think owning software is attractive. Secondly, we want to be in highly fragmented vertical markets from a software perspective. We want to have good opportunity to continue to see software growth in the business as well as the ability to monetize payment flows and bring other value-added services to those businesses that give us what we would envision being long runways for growth in the business. Third, obviously, there's got to be a nexus with payments, I should have led with that. But clearly, we're only interested in those vertical markets where there's some nexus prepayments. And then lastly, I would say, we are sort of trying to skew towards markets that have international applicability. Part of our strategy long term is to bring our software capabilities from the U.S. to other markets where we think there's applicability for those software solutions where we can create our own integrated payments markets where they don't exist today. So that's generally how we think about markets that we want to own software in. And I think if you look at those verticals where we have acquired software assets, they generally fit that bill.

Yes. Makes sense. I think you called out double-digit growth across the owned software vertical with, I think, strength in Zego, Xenial, School Solutions. How do you approach operating multiple vertical software companies that scale within a single organization?

Yes. I think first and foremost, I would say we leave the running of the software assets themselves, whether it's building new feature functionality, obviously maintaining the underlying platforms that are serving customers -- we leave that to the underlying business leaders who are running those businesses for us. So I'm not a health care practice management software expert and I'm not going to be. But Amanda, who runs that business for us is. So I think it's having an operating model that recognizes that the most institutional knowledge, the most market knowledge and customer knowledge resides with the leadership team that are running those businesses for us, and they need to control the underlying software platforms themselves that are -- that they're going to market with and they're serving our customers with. What we are able to bring behind that, of course, is a lot of scale and resource that support those businesses that allow each of those businesses to operate at a level of scale that otherwise they wouldn't be able to on their own. If you look at all of our vertical market software businesses, they're arguably all subscale to some degree. There are $100 million to a couple of $100 million businesses individually. But when you're able to bring all the breadth and depth of resources that Global Payments can bring across infrastructure management, security, procurement, finance, accounting, legal, HR, et cetera, we bring a lot of scale plus the ability to monetize payments across common platforms in the vertical market businesses that I think allow them to operate at a scale that is significantly greater than what they could if they were again, on a stand-alone basis. The other thing we've been doing more of across the vertical market businesses is trying to operate them as a collective business and less of a collection of businesses. So we've been able to drive more scale just across the verticals around digital marketing strategies around software development and how we're leveraging development resources to support multiple vertical market businesses versus having to have them siloed in each of the underlying vertical businesses. So the idea there is, again, we're generating incremental scale, which allows us to invest more in those businesses and allows us to bring new vertical market businesses into a more scaled platform with a clear playbook as to how to drive incremental scale in newly acquired assets as well.

Yes, makes sense. And then on the partnered side, roughly $1.2 billion in revenue, investors have seen the impact of PayFac such as [indiscernible] had in the ISV channel in areas such as restaurants. Could you remind us the main verticals that you're in and the integrated business, kind of why you guys are more insulated from that dynamic? And then I'd love to hear more about the ProFac product that you announced this quarter?

Yes, sure. I would just step back and say, we've been in the integrated business for over a decade now. It's still growing kind of in the teens levels. It's one of our best-performing businesses and has been for many, many years. So our partnered model from an integrated perspective, continues to be a core part of the strategy going forward, and I'm very enthusiastic about the future prospects for the business. I think if you step back and look at the business more broadly, I think part of the value proposition we have in that space is we have a significant diversity of vertical market exposure. So I think we're in something like 70-plus vertical markets today with our integrated business with 7,000 partners. So we have great diversity -- vertical market, great diversity of partners and I think that really positions us well relative to other competitors who are in that space today. The second thing that we have really going for us is the ability to deliver very customized solutions because of the scale that we bring. There's not many businesses out there that have a $1 billion of integrated revenue. Frankly, I can't think of really any outside of us. So we have a tremendous amount of scale and capability that we've developed over a long period of time. that allows us to really drive more tailored and targeted and customized operating models with our partners, including our new ProFac model that you referenced in your question. So part of our strategy there is to really create an environment where we can deliver payment facilitation tools and capabilities to ISVs that need those specific capabilities, but do it with a level of service in an operating model more consistent with a direct integrated model. So I'd like to think of it as all the gain of being a payment facilitator without the pain, right. So payment facilitation is right for some, those ISVs that need sort of specific onboarding requirements and need some special funding capabilities and who have the scale, perhaps to take on the burden of being a payment company. But most ISVs don't fit that model. Most ISVs may have some specific onboarding or funding requirements but they don't really have the scale to be a payment company, and they really shouldn't be investing in all the infrastructure required to be a registered payment entity. So our ProFac model is really geared toward those types of ISVs. Those that need the specific capabilities but don't want to take the burden of being a payment company on themselves, and it's getting great receptivity in the marketplace and really excited about how we can grow that segment of the integrated channel in addition to the traditional direct integrated model and a pure payment facilitation model that is suitable for many of our clients today.

And do you see that ProFac model being more addressable to existing ISVs or net new?

I think both, quite frankly. And ironically, we have a lot of payment facilitation customers who are saying, "I might be more interested in the ProFac model because I've tried being a payment company. And you know what, it's really hard. It's a lot of investment, it's distracting me from what I'm really good at, which is developing software for the specific vertical market that I'm trying to serve. And if I can unload that burden back on to you where you have the scale and resources to be able to do that much more effectively than I can, then it's a great proposition for me because I want to get out of being a payments company." So it's certainly attracted to new ISVs that are looking for more payment facilitation tools, and it's attractive for, I think, existing ISVs who may have gone the payment facilitation route and decided it's not always chalked up to be.

Yes. Makes sense. So 40% of the business software led, we just heard about that. What are the main pieces of the remaining 60% of the business? I think international relationship-led, wholesale? What are the growth dynamics across each of these sleeves of the business?

Yes. I mean, first and foremost, as we talked about at the beginning of our conversation around technology enablement is really our e-com and omni solution. So we have, obviously, 40% of the business today that's really tied to software, but we sell e-com omni solutions across the entirety of the business. And we're really leading with more technology capabilities in that area. So that represents about 25% of the remaining revenue base of the business. So between software and plus e-com and omni that's not already captured in that software bucket, I mean that's 65% of the business that's tied to what we would characterize as technology enablement. And that means 35% of the business is more traditional kind of card-present capabilities that we have across a mix of geographic markets, as I mentioned before, some obviously, faster growth geographies that have very good secular growth trends and then some mature markets like the U.K. and Canada, for example, that aren't growing quite as quickly, but obviously have attractive margins, generate a lot of cash, et cetera. And then the balance is going to be tied to a wholesale business. It represents about 8% of our total company today that, again, is not growing at the same pace as our direct channels, but obviously, is a good-sized business that generates a lot of cash as well that we redeploy elsewhere.

Got it. And in the relationship-led business, I think you mentioned in the earnings call, you anticipate continued momentum following the launch of the next-gen POS system later this year. I don't want to steal your thunder, but anything you'd be willing to share about a sneak peek on what that might look like.

Yes. Sure, I'll be happy to. I'll start by saying we think about, obviously, our point-of-sale software business as part of the overall 40% software portfolio itself. So that's really a 3-legged stool partnered through our integrated business, vertical market, ISV that we own ourselves and then our point-of-sale software, which is really focused on restaurant and retail, where the mode of competition and our go-to-market strategy is really around delivering point-of-sale software to restaurant owners and retail operators generally again in the SMB space here in the U.S. market and abroad. So I mentioned on our second quarter call, we are launching our B2 of our Heartland Restaurant and Heartland Retail platform. So our really sort of small to mid-market oriented U.S. platform for restaurant and retail late this year as we head into -- in early 2024. So very excited about the next generation of point-of-sale systems. We're seeing 20-plus percent growth in that point-of-sale software business today on our V1 platform. And we think our V2 platform will really enhance the feature functionality and capabilities that we can bring to market with our point-of-sale software solutions in the U.S. market and obviously continue to position us to grow at that 20-plus percent range for the foreseeable future. So very competitive offering relative to what might be perceived as best-of-breed in the marketplace today from a feature functionality capability. I think we can couple that with obviously more distinctive and diversified distribution streams plus servicing capabilities, again, that other competitors we can't match with the scale that we bring. So we're really delighted and excited to share more about that story as we move forward in time. And again, if I'm a little self-critical, I don't think we've done the best job sort of framing up our point-of-sale software strategy, how we segment the market, where we're playing, how we're taking those assets to international markets, and that's something you should expect us to share a lot more about as we move forward.

Awesome. Maybe just to round out the discussion on Merchant. So e-commerce, I know in your e-com, omni, the way you've talked about it, it's woven into all of your verticals, some of the recent dynamic that e-com-focused competitors such as PayPal and Adient as both renewed concerns about commoditization of payments, a race to the bottom. What are your thoughts on competitive dynamics, specifically in e-com, but also where you play? And then how do you differentiate your omni capabilities from peers?

Yes. I think you really have to segment the market again and look at the lens through which those comments were made as it relates to the large enterprise e-com-only sort of environment versus where we play in then more SMB-oriented space. So in the e-com, large e-com-only enterprise space, yes, there has been more competition, more price pressure, a more commoditization of the solutions over time. I think we've seen less of that in the small to medium-sized space. Our strategy has largely been premised around moving our physical brick-and-mortar customers to an omnichannel environment. So if you look at the vast majority of our e-com volume today around the globe, it's tied to small- to medium-sized businesses, and is tied to relationships where we do both e-com and face-to-face card present for our customers. So what we've seen is continued kind of mid-teens growth in that space with volume growing at a similar level as you see more e-com volume kind of cannibalized traditional card-present volume. And for us, that's fine. Because as I think about it, I love to use the example of the veterinarian. And what we've seen post pandemic is a lot of these physical card-present experiences that become card-not-present experiences. So it used to be my wife would bring the dog to the vet, she'd spend 30 minutes in there with the dog. She's got back with the dog, she'd come out, she'd fight the dog off from attacking other dogs and pay at the counter and a really clunky kind of experience. Now she brings a dog, drops her off, drives away. She comes back a few hours later, picks up the dog and she gets a text by -- pay-by-link text from the vet. So that traditional card-present experience is now a card-not-present e-com experience, which is great for us. So that's the way the world is going and the ability to create, again, those seamless omnichannel experiences for small to medium customers. That's our sweet spot. That's where we really choose to play. We don't really play in the enterprise e-com-only space. And the market for those solutions continues to be very strong. And as a result, our growth in that channel has been quite strong as well.

Great. Maybe switching gears to Issuer. This business has had a lot of momentum. You mentioned 8 LOIs, one through competitive RFP processes. One of the largest ones has been Caixa, which I believe is one of the first to go live on the AWS-based platform. What's driving a lot of momentum in this business?

Yes. I think it's a few things. One is it's a very defined strategy around partnering with winners in the overall card issuing space. So if you look at our partners more broadly, they're gaining share, and they're growing in the card issuing environments in which they're operating, which is good for our business. For example, on the Q2 call, I announced that we have been working with Deutsche Bank, who just won the Lufthansa Miles & More sort of issuing program in Germany. That's a great win for us. It adds to our existing relationship with Deutsche Bank. So as our customers are winning in the market, we're growing alongside of them, which is great for our business. Secondly is we have a platform that is far more feature-rich, far more scalable than anyone else in the marketplace today and we see that come across in every competitive process that we participate in. We don't win them all, but I would say hands down across the board our technology is always ranked as the best. So we may not be the cheapest, but I think from a feature functionality and capability perspective, I think, we are really well positioned as a technology matter to continue to win in the marketplace. And third, as we move those environments to be cloud native, where we deconstruct those platforms, those end-to-end platforms to be more micro services, and we can deliver those in a way that customers want to be able to consume them going back to my earlier comments at the beginning of our discussion, I think that opens up new TAM for us to play in. We can go down market to midsize and smaller financial institutions. We'll have an offering that I think is better suited towards more fintech startups. So the size of the TAM for that business is going to increase pretty meaningfully, which again, gives me a lot of optimism and enthusiasm about our ability to sustain and accelerate rates of growth in the issuer business over the medium term.

Yes. I want to make sure we touch on capital allocation. I mean, obviously, you're in delevering mode post the EVO deal. But as we look out into 2024, do you anticipate returning to M&A? And then maybe talk about how you're thinking about M&A going forward with you at the helm?

Yes. I think to your point, we are very focused on getting our leverage back to our targetable leverage ratio, and we've said we expect to be there by the end of this year, 2023. So -- that puts us in the place where I'd say 2024 is more of a normal kind of capital allocation environment for us. And I think if you look back in time, and I'll just take the period kind of 2021 until now, we've deployed somewhere in the neighborhood of roughly $12 billion of capital in the business. Roughly 50% of that has been in share repurchases and about 50% of that has been in M&A. So I think we've had a pretty balanced capital allocation strategy over the last few years. And I would expect that to continue to be the case going forward. My priority is to continue to invest and grow the business. And I certainly think M&A is a core competency that allows us to do that very effectively and generate attractive returns for our shareholders, but I'm very return-focused. So any M&A that we consider, one, it's got to be actionable, of course. And then two, the return proposition has to be an attractive use of our capital relative to the alternative use which we generally measure as share repurchase. So my hope is the multiple is in a little better place as we get towards the end of the year, we'll make that equation a little easier for M&A to be competitive. But I would just simply say M&A has got to be competitive as a return matter with returning capital to shareholders, and we'll be very disciplined in terms of how we think about M&A versus the alternative use of capital.

Makes sense. And, I guess, when you think about how you would like to allocate capital in M&A, is there any kind of preference for things like software-oriented assets or international markets? Or I know you probably take a portfolio approach, but what's the most attractive place to expand?

Yes. I mean obviously, with software being at the heart of the merchant strategy in particular finding more software, integrated payment opportunities that advance that thesis, I would say, clearly, is a priority for me. But at the same time, exposure to additional faster-growth markets or greater scale in attractive faster growth markets that we're in today, is also a very attractive use of capital and has generated historically a very strong return for our business, and I would expect them to continue to do so going forward if we're able to find the right opportunity. So on balance, I would probably prioritize software. But again, it all goes down to what's actionable, what fits our strategy. And -- we're going to be very disciplined about ensuring that anything we do from an M&A perspective has a very clear and strong nexus to the strategies that we're focused on as a business. And as we move forward in time, I expect to sharpen our focus on the elements of the strategy that I think have the most meaningful impact on the business longer term.

Makes sense. Well, I think we're out of time, but thank you so much for being here. Really enjoyed the conversation.

Thanks for having me. Take care. Thanks.