George Sutton: Thank you. Nice to see the continued buyback emphasis and Tom, welcome to the call. So, Tom, I’m curious, the way you described the business, I liked it. You said we’ve got a substantial opportunity, a large untapped opportunity, growing fast. The market, I think, has viewed this largely as a relatively mature business without necessarily the open-ended sounding growth that you’re talking about. I wondered if you could just give us your perspective on that thought process.
Thomas W. Warsop, III: Yes, sure. And I think it’s related to the last topic in many ways. So the — this — and I know I keep using the same word, but the revolution in real time payments it’s — you can feel it. But as we’ve highlighted, today, it’s 10%-ish of our business. It should become a significantly larger portion. And as real time payments subsume primarily cash transactions around the world, that’s an entirely different part of the payment ecosystem for us to participate in, which we really have very little to do with the cash transactions around the world, which in many countries account for the bulk of payments. So that is really exciting. And I think when I look at some of the geographies where we’ve played a lesser role.
I mean, I think about Africa, in particular, I spent a lot of time with our — with the team that’s chasing after and supporting the business in Africa recently, and there is a huge set of opportunities there that we barely scratch the surface up. So there’s some geographic opportunities that we really haven’t pursued as strongly as we will. There’s the real time payments revolution. And then the final point I would make is that I think we’ve talked about before that we now offer most of our products in a SaaS, a Software-as-a-Service model, which we have not done previously until quite recently, and we have a couple of those clients that are live today, a couple of others that are coming live soon. And that, again, opens up a whole new segment of the market.
So smaller financial institutions around the world that don’t have the infrastructure to manage our software themselves. So they don’t have the data center that they need, they don’t have the expertise. Now we have created offerings, which will allow us to support even a different set of financial institutions. So that’s a bunch of stuff I just threw at you, but when you put it all together, it creates a lot of really interesting opportunities. And our biggest challenge, I think, is make sure we focus on the ones that are going to make the biggest difference and don’t spread ourselves too thin.
George Sutton: One other question we have, I believe been anticipating the NextGen platform to be launched this quarter. There wasn’t any sort of mention of that on the call. Could you just address where that stands?
Scott Behrens: Yes, that’s really — that’s ultimately going to be the FedNow offering, at least as it relates to the U.S., the rest of the investment is really being made in overseas hub capabilities. So in the U.S., it will lead to the FedNow. Yes, which is a bit later this year, as we said.
George Sutton: Okay. Thanks, guys.
Scott Behrens: Sure.
Operator: Our next question comes from the line of Charles Nabhan from Stephens. Please proceed.
Charles Nabhan: Good morning and thank you for taking my questions. Had a quick one on the Biller segment. If I heard you correctly, you said that you were 70% of the way grew your contract negotiations. So with that said, I was wondering if you expect to be complete by year-end ’23? And then secondly, given some of the new wins in the segment over the past year or so, is there anything different about the normalized margin profile of the business given some of the new verticals that are growing and some of the new wins that have come on recently?
Thomas W. Warsop, III: Let me — I will touch on the 70% question, and I will let Scott respond to the second part of the question. So we are roughly 70% through, and as I think we’ve described before, this is a — I wish it were a situation where you could send out a letter and say, your prices change, but that actually isn’t how it works. We literally need to go contract by contract. So that is what we are doing. I would expect substantially all of that work to be completed this year. I don’t know that it will be 100%. I hope it is, but it will be closed if it’s not 100% and the reason I’m hedging that just a little — just to give you a tiny bit of color on it is when you’re talking about clients in the utility space, utilities, as we know, are highly regulated entities.
And to the point where their rates and fees have to be approved in multiple places in the regulatory environment and particularly with — they tend to be called the public utilities commission or something similar to that in their local jurisdiction, and they have absolute authority to approve or not approve rates and fees. And so we can come to an agreement with a utility provider, but it still has to go through an approval process, a comment period, all those things that you have to do in a highly regulated environment. So we are working through these things with our clients. Honestly, I haven’t found — we haven’t found a single client that doesn’t understand why we’re having the discussion and what needs to happen. I’m not saying they’re happy about it because at the end of the day, it’s an increase that they’re going to be paying, but they do understand.
And we are just slogging through it one at a time, as I said. But the quick answer to your question is, yes, we expect essentially all of it to be complete this year.
Scott Behrens: Yes. And in relation to the margin profile in 2023, in particular, you’re going to see two benefits of the margin profile of business. One is the go line of revenue growth that we are going to see in 2023 in the Biller segment from the deals we sold prior to 2022. That went live late in 2022, we have a full benefit of that revenue in 2023. That revenue layered on top of a relative fixed cost base. So that business has scale. So that’s going to drive profitability in 2023. And second will be this year-over-year benefit of these interchange initiatives. So number one will be the revenue growth from the go-lives that you hear late in 2022, but benefit next year, and second will be the interchange initiatives. So if you look at every quarter this year, Q1 — lease interchange as a percentage of the total biller revenue will be about at par with Q1 last year, but Q2, Q3 and Q4, you’ll see a significant year-over-year improvement.
Charles Nabhan: Got it. Okay. And as a follow-up, I want to touch on the Merchant segment. I know it doesn’t get a lot of airtime, but revenue was up 8%, slightly below your double-digit target. So my question is, number one, is it — when you think about getting back to a normalized — hitting your target in ’24, is it still — should we still expect the Merchant segment to be up double digits? And then secondly, could you talk a little about some of the growth drivers of the business during the quarter?
Scott Behrens: Yes, I mean ultimately the short answer on 2024, yes, in terms of double digits. If you look at merchant exit rate of recurring revenue growth in Q4 2022 is 9% year-over-year on a constant currency basis. So that’s really the –they have a little bit of a licensed software business, but most of that is going to be recurring revenue, that trajectory of growth continues here in 2023. So that light and software business is becoming a smaller portion of that business. Again, recurring revenue exited last year at 9%. This year will be our fastest-growing segment at double-digit growth and further growth in 2024. But what is driving the growth in that business is really a lot of secular trends in the particular e-commerce electronic transactions, because it’s not — although we have an omni-commerce in-store presence capability, the bulk of our merchant capabilities are very geared towards e-commerce, whether that’s e-comm alternative payment gateways, card not present fraud detection, which is really e-commerce merchant transaction.
So it’s really the secular growth in e-commerce. And I think it came up on the last call where we’re seeing in terms of transaction volume there in Merchant we did see high — we thought we’d end the year strong in transaction volume. We actually came in a little bit higher in transaction volumes in the Merchant segment. So we’re not seeing a lot of weakness there as it relates to global economic concerns. So we are pretty happy with where we are at going into ’23.
