Global Payments Inc. (NYSE:GPN) Q2 2023 Earnings Call Transcript

Global Payments Inc. (NYSE:GPN) Q2 2023 Earnings Call Transcript August 1, 2023

Global Payments Inc. misses on earnings expectations. Reported EPS is $2.23 EPS, expectations were $2.58.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will open the lines for questions and answers. If you should require assistance during this call, please press star then zero. As a reminder, today’s conference will be recorded. At this time, I would like to turn the conference over to your host, Senior Vice President, Investor Relations, Winnie Smith. Please go ahead.

Winnie Smith: Good morning and welcome to Global Payments second quarter 2023 conference call. Our earnings release and the slides that accompany today’s call can be found on the Investor Relations area of our website at www.globalpayments.com. Before we begin, I’d like to remind you that some of the comments made by management during today’s conference call contain forward-looking statements about, among other matters, expected operating and financial results. These statements are subject to risks, uncertainties and other factors, including the impact of economic conditions on our future operations, that could cause actual results to differ materially from expectations. Certain risk factors inherent in our business are set forth in filings with the SEC, including our most recent 10-K and subsequent filings.

We caution you not to place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. We will also be referring to several non-GAAP financial measures which we believe are more reflective of our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this morning and our supplemental material available on the Investor Relations section of our website. Joining me on the call are Cameron Bready, President and CEO, and Josh Whipple, Senior Executive Vice President and CFO.

Now I’ll turn the call over to Cameron.

Cameron Bready: Thanks Winnie and good morning everyone. It is a privilege to be addressing you today for the first time as Global Payments’ CEO. I have been in this role for roughly two months and am delighted with how my tenure has begun. The transition has been seamless, as expected. Our organization and team members continue to execute at a very high level, as evidenced by the outstanding second quarter results we reported this morning. Our performance for the quarter was ahead of our expectations despite what has been an uncertain macroeconomic environment globally, driven by the effectiveness of our strategy and ongoing relentless focus on execution. On a consolidated basis, we reported 7% adjusted net revenue growth while expanding adjusted operating margins 100 basis points and delivering adjusted earnings per share growth of 11% for the quarter.

This includes a roughly 400 basis point headwind to adjusted earnings per share growth from the divestiture of Netspend’s consumer assets. Focusing on our merchant solutions business, we again delivered strong organic growth in the second quarter led by ongoing momentum in our technology-enabled businesses. Our software-centric strategy with an overlay of leading ecomm omni capabilities in value-added commerce-enablement solutions continues to drive our performance, and our ability to deliver these solutions across a diverse and attractive set of geographic markets worldwide further differentiates our business. Software sits at the heart of our merchant solutions business and is supported by a three-legged go-to-market integrated payment strategy spanning our partner ISV, vertical market software, and point of sale software businesses.

Collectively, these businesses comprise approximately 40% of our merchant solutions adjusted net revenue and are contributing a meaningful share of the growth in the business. In our partnered ISV channel, or integrated business, as we often refer to it, we continue to deliver consistent teams growth and again achieved record sales this quarter, surpassing last quarter’s strong performance. We signed 33% more integrated merchants this period than in the second quarter of 2022. We have a long history of success in our partnered ISV business and continue to gain share despite this becoming a more crowded market over the last several years. Against that backdrop, it is important to highlight why we continue to grow and win in this space. First, we have developed a more streamlined and simplified offering for partners with the options they desire, allowing us to meet both them and their merchants where and how they want to be met.

The ISV landscape has changed significantly in the last five years. Software providers desire to bring payments closer to their business and require options on the depth of integration, a clear understanding of the responsibility those depths carry with them, and the benefits of a feature-rich solution. Our simple SDKs and APIs allow us to deliver on these expectations for our ISV partners. Second, we offer three distinctive integrated payments models to our partners, allowing us to meet the unique demands of an ISV customized for its specific vertical market and merchant base. This includes a more traditional direct integrated model where we provide the most comprehensive suite of products, services and support for both the ISV and its customers.

We also offer a full payment facilitation, or payfac model where the partners have access to our leading payments technologies, although much of the operating complexity, including compliance and regulatory requirements, reside with the ISV. Additionally, we recently launched our new progressive payment facilitation, or profac model, a hybrid option which provides many of the benefits of payment facilitation while minimizing the heavy burden that comes as a payfac. Our profac model is unique to Global Payments, serving as another example of our leadership in integrated payments. We have seen great interest in this proposition and have a strong pipeline of partners seeking to board in the coming quarters. Our full spectrum of integrated solutions allows us to customize our offerings and provide different levels of support based on the specific needs of our partners.

Third, across all these models, we offer a higher level of service than our peers, including for our payfac and profac customers, and we also provide our partners with a breadth of commerce enablement and value-added solutions to sell into their merchant base, which meaningfully increases the revenue opportunity and accelerates growth. This includes human capital management software, payroll, loyalty, tailored marketing solutions, BNPL, and call center support, amongst others, again all customized to meet the unique needs of each partner. Overall, our technology leadership, unrivalled distribution, tailored operating model, comprehensive suite of products and capabilities, and best-in-class service and support is why we win. We meet the specific needs of our partners, which differentiates us in the marketplace and is allowing us to achieve sustainable high rates of growth at attractive margins.

Turning to our vertical markets business, our approach is largely consistent with how we think about the ISV partner channel with the exception being that we control the entirety of the technology stack and monetize it accordingly. This business again delivered double digit growth this quarter led by strength in our Zego, Xenial, and school solutions businesses. Zego has seen great momentum in the student housing vertical and recently expanded its relationships with Scion, as well as another large player in this space. Zego is also partnering with our higher education business, TouchNet, to help us capture a greater portion of the student payments value chain through our campus management and one card solutions. Focusing on Xenial, we announced our partnership with the Atlanta Hawks earlier this year and are now officially live with our Xenial cloud point of sale solutions at State Farm Arena.

Xenial also recently signed an agreement with Sodexo, one of the leading food service management companies globally to be its preferred point of sale and kiosk partner. With this win, Xenial is now the partner of choice for the three largest players in the food service management space. Our school solutions business had a strong quarter, achieving a new school district partnership with Oklahoma City, expanding its partnership with Baltimore County, and extending a large existing relationship with Chicago public schools for several more years. Additionally, Active recently signed the City of Toronto, its largest ever win in the community vertical and one of 14 new partnerships achieved in this space during the quarter. In vertical markets where the primary mode of competition is at the point of sale, we go to market through one ecosystem of owned POS software solutions with two distinct operating platforms, one for restaurants and one for retail.

These cloud-based software solutions operate on a single hardware environment custom designed, built and branded with a modern look and feel. Our POS business grew 20%-plus again this quarter as we continue to see strong demand for our solutions and benefit from releases of product enhancements, including email marketing, customer engagement, and our latest mobile-first online ordering platform, and we expect this momentum to continue on the heels of the launch of our next generation POS platform later this year. Our latest solution provides best-in-class offerings coupled with the full local support and service capabilities to delight our merchant customers in these verticals. Importantly, our software platforms are vertically fluid, which unlike more horizontal solutions in the market offers feature-rich capabilities geared towards the specific requirements of businesses we serve with capabilities that integrate seamlessly.

More to come on this. Our technology-enabled strategy is further enhanced by our differentiated ecommerce and omnichannel capabilities which we overlay across all of our businesses, channels, verticals and geographies. Today, roughly 30% of the volume in our business is ecommerce, well above the overall percentage of retail sales tied to ecommerce. We again saw mid-teens growth in ecommerce related adjusted net revenues globally in the second quarter. We continue to benefit from our ability to seamlessly blend physical and virtual worlds in more markets than our peers, supporting the strong growth trends we have seen in ecommerce across our businesses. To that end, we are pleased to have recently signed a new partnership with EasyPark Group, a global provider of digital parking services across the U.S, Canada and the U.K. Our exposure to some of the most attractive secular growth markets globally remains an important part of our strategy, both in terms of contributing to our overall rates of growth and providing us the global footprint and scale we need to support complex multinational corporations like EasyPark.

Our faster growth markets again contributed to our strong performance in the quarter as we saw double digit growth in Spain, central Europe and Asia Pacific. In APAC specifically, we signed new merchant relationships with several large retailers across multiple geographies, including A.S. Watson Group, Foot Locker, and [indiscernible]. EVO aligns well with our overarching strategy, and its performance was consistent with our expectations for the quarter. We remain excited about the synergy opportunities we see as a combined company, both revenue and expense, and remain very much on track to deliver at least $125 million of run rate synergies from the transaction. Turning to issuer, we achieved mid single digit growth in the quarter consistent with our expectations and longer term targets.

Transaction growth remained strong throughout the quarter led by our commercial business, highlighting ongoing recovery trends in cross-border corporate travel. Traditional accounts on file increased by approximately $10 million sequentially as we benefit from the strong growth within our existing large financial institution clients and the ongoing execution of our conversion pipeline. As yet another example of our successful strategy of aligning with market share winners, Deutsche Bank, our largest client in the [indiscernible] region, recently announced a new issuing partnership with Lufthansa for its Miles & More MasterCard, one of the leading credit card portfolios in Germany and Europe. We were also delighted to assign multi-year extensions with 118 118 Money in the U.K. and another large longstanding financial institution partner here in the U.S. this quarter.

We currently have eight LOIs with institutions worldwide, nearly all of which were achieved through a competitive RFP process, and several will go direct to cloud by our collaboration with AWS, our preferred issuer technology solutions partner. Our relationship with many of the most complex and sophisticated institutions globally speaks to our competitiveness well into the remainder of this decade and beyond, and our issuer conversion pipeline remains at near record post merger levels, providing further confidence in our growth trajectory well into the future. The future for our business remains very bright as we execute on our multi-year strategy to modernize our technology platforms in cloud native environments, positioning us to provide market leading technologies at scale through more distinctive and defensible distribution channels in more markets than we ever have previously.

Our unique collaboration with AWS is tracking well. We now have our first client in production with our cloud native next gen analytics solution and have a number of additional customers preparing to join our cloud journey by leveraging capabilities we are launching together with AWS throughout the year. Moving to B2B, we continue to drive strong growth with both corporates and financial institutions as we leverage our capabilities across three focus segments within the overarching B2B market: software driven workflow automation, money in and money out funds flows, and employer solutions. Starting with software, our AP and AR workflow automation solutions that include integrations with the leading ERP environments continue to see great momentum.

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MineralTree achieved its best bookings quarter since the acquisition, underpinning the strong growth we are seeing in our primary midmarket segment as businesses focus their attention on automating their AP processes. We also remain excited about the opportunity we now have to combine MineralTree and EVO software to create a single AP/AR solution with rich data and analytics that will provide a unique value proposition to midmarket customers. As for B2B funds flows, as one of the largest virtual cards issuers in the world, we have significant scale and all of the payment rails and capabilities necessary to support customers in making money out payments in their businesses. Virtual card use continues to expand, contributing to the nearly 20% growth achieved in our commercial business.

Over the last 12 months, we issued nearly 80 million virtual cards, enabling roughly $47 billion in spend. Additionally, we are seeing strong growth on the money in side with our B2B payment acceptance solutions as more and more of this spend shifts towards digital channels. Our B2B bookings in merchant solutions have more than doubled since the fourth quarter of 2022 and we expect this momentum to continue as we further align EVO with our existing capabilities and pursue our B2B software-centric go-to-market strategy. Finally, we provide employer solutions, including our pay card, earned wage access, and expense management offerings in issuer solutions, and our human capital management and payroll solutions in our merchant business. This quarter, our pay card business signed new partnerships with Creative Mobile Technologies, a large taxi company with a significant presence in the top metropolitan cities in the U.S., and with Acara Solutions, a staffing solutions provider in the senior living vertical.

Our EWA business achieved a new partnership with Bravo Foods, a large QSR franchisee in the United States. Our software-driven human capital management and payroll solutions business delivered high teens adjusted net revenue growth and mid teens new sales growth for the second quarter. We are pursuing a very similar strategy in B2B as we have in merchant solutions over the past several years. We lead with software to differentiate our capabilities and provide the vertical fluency clients demand. We integrate our payment solutions into our software to monetize payment flows, and we deliver value-added services that enrich our relationships with our clients, driving further efficiencies in their businesses while increasing our average revenue per customer.

With the breadth of capabilities we have and a focused technology-enabled strategy, we could not be better positioned to capture share and accelerate growth in B2B over the long term. With that, I will turn the call over to Josh.

Josh Whipple: Thanks Cameron. We are pleased with our outstanding financial performance in the second quarter, which exceeded our expectations despite what continues to be an uncertain macroeconomic environment. Specifically, we delivered adjusted net revenue of $2.2 billion, an increase of 7% from the same period in the prior year. Excluding the impact of dispositions, adjusted net revenue increased 15%. Adjusted operating margin for the quarter increased 100 basis points to 44.8%, highlighting strong and consistent execution across our businesses. The net result was adjusted earnings per share of $2.62, an increase of 11% compared to the same period in 2022, or 15% excluding the impact of dispositions. Taking a closer look at performance by segment, merchant solutions achieved adjusted net revenue of $1.68 billion for the second quarter, a 17% improvement from the prior year or over 9% growth excluding the impact of EVO and dispositions.

As Cameron highlighted, this performance was led by the ongoing strength of our technology-enabled businesses, which grew double digits this quarter, while we also benefited from consistent low double digit growth in our factor growth markets, including Spain, central Europe, and Asia Pacific. This was partially offset by macro softness in limited geographies, including the U.K. where rising interest rates and the high inflation levels are negatively impacting consumer spending, and in Canada where GDP growth has slowed and is expected to have turned negative in the month of June. We delivered an adjusted operating margin of 48.5% in the segment, which was ahead of our expectations. This represented a decline of 170 basis points due to the acquisition of EVO; however, excluding the impact of EVO and dispositions, adjusted operating margin increased 50 basis points.

Our issuer solutions business produced adjusted net revenue of $505 million, reflecting 5% constant currency growth consistent with our long term targets. The core issuer business also grew mid single digits on a constant currency basis this quarter, driven by strength in volume-based revenue. As Cameron highlighted, traditional accounts on file increased by approximately $10 million sequentially as we continue to see healthy account growth with our larger consumer portfolio customers and benefit from the ongoing execution of our conversion pipeline. Transactions again grew double digits compared to the second quarter of 2022, led by commercial card transactions which increased 17%. This was partially offset, as expected, by slower growth in managed services as we continued to pivot our issuer business to more technology enablement and less lower margin outsourced call center business.

Finally, we delivered adjusted operating margin of 46.7%, an increase of 300 basis points from the prior year, fueled by our top line growth and our continuing focus on driving efficiencies in the business. From a cash flow standpoint, we produced adjusted free cash flow for the quarter of $543 million, which is an approximately 80% conversion rate of adjusted net income to free cash flow. We continue to target converting roughly 100% of adjusted earnings to adjusted free cash flow for the full year, excluding roughly a five point impact of the timing change to recognizing research and development tax credits. For the year, we expect our free cash flow to follow a similar trajectory to 2022 as we benefit from seasonality and a higher conversion rate in the second half of the year.

We invested $169 million in capital expenditures during the quarter and continue to expect capital investment to be approximately $630 million in 2023, consistent with our prior outlook. This quarter, we also repurchased approximately 2 million of our shares for roughly $200 million. During the quarter, we reduced outstanding debt by approximately $650 million. Our balance sheet remains healthy. We have over $2.5 billion of available liquidity and our leverage position is roughly 3.7 times currently, a reduction from the peak levels we realized upon closing of the EVO transaction. We remain on track to return to a leverage level consistent with our longer term targets in the low 3s by the end of 2023 while maintaining existing investment-grade ratings.

As we highlighted last quarter, in January we established a $2 billion commercial paper program which is supported by our revolving credit agreement and allows us to further optimize our capital structure and reduce our overall cost of borrowing. At the end of the second quarter, we had $1.8 billion of commercial paper outstanding, up from $1 billion at the end of March, highlighting the attractiveness and credit quality of Global Payments. Our total indebtedness is approximately 85% fixed with a weighted average cost of debt of 3.9%. We are pleased with how our business is positioned following our first half performance, and we are raising our financial outlook for the year. We now expect reported adjusted net revenue to range from $8.660 billion to $8.735 billion, reflecting growth of 7% to 8% over 2022.

This represents an increase of $25 million at the low end of the range. We continue to expect foreign currency rates to be roughly neutral for the full year. Moving to margins, we continue to forecast annual adjusted operating margin to expand by up to 120 basis points for 2023. As a reminder, this is above our cycle guidance for margin expansion of 50 to 75 basis points annually, driven by benefits to our business mix from our ongoing shift towards technology enablement and the divestiture of NetSpend, partially offset by the lower margin profile of EVO prior to full synergy realization. To provide color at the segment level, we now anticipate our merchant segment to report adjusted net revenue growth of approximately 16% for the full year.

This is an increase from our prior outlook of 15% to 16%. We expect a modest decline in reported adjusted operating margin for the merchant business this year driven by the absorption of EVO Payments with its lower margin profile, consistent with our prior guidance. Specifically, we are forecasting margin contraction in the third quarter that will be followed by slight margin expansion in the fourth quarter as synergies ramp. Regarding the EVO integration, we have made substantial progress including the successful completion of our first 100 day plan and remain enthusiastic about the synergy opportunities available. Specifically, we are on track to realize the approximately $35 million in cost synergies this year that we outlined previously, driven primarily by the elimination of public company costs, facility rationalization, and the harmonization of duplicative vendor contracts.

Further, I am pleased to report that we have also executable plans to achieve the run rate expense synergy target of at least $125 million within two years that we committed to at the time of the announcement. As always, we remain focused on sizing expense synergy expectations with an eye towards ensuring that we maintain momentum in the combined business and that it’s well positioned to continue to grow and expand in the future. Additionally, as we discussed last quarter, although revenue synergies have a longer tail, we continue to believe we can add at least a point or two of growth on top of EVO’s existing run rate revenue base, or approximately $10 million to $15 million of revenue synergies from the business. Moving to issuer solutions, we continue to expect to deliver adjusted net revenue growth in the 5% to 6% range for the full year compared to 2022.

This outlook reflects core issuer growth of roughly 5% while we expect MineralTree and NetSpend’s B2B businesses to grow low double digits. We anticipate adjusted operating margin for the issuer business to expand by up to 60 basis points, consistent with our prior outlook, as we benefit from the natural operating leverage in the business. Turning to a couple of non-operating items, we expect net interest expense to be roughly $550 million and for our adjusted effective tax rate to be in the range of 19% to 19.5%, consistent with our prior guidance. For modeling purposes, we continue to assume excess cash is used to pay down indebtedness in the second half of 2023. Putting it all together, we now expect adjusted earnings per share for the full year to be in a range of $10.35 to $10.44, reflecting growth of 11% to 12% over 2022.

Excluding dispositions, adjusted earnings per share growth is expected to be 16% to 17% for 2023. Our second quarter results represent roughly a $0.03 adjusted earnings per share beat relative to our internal forecast. Our raised guidance for calendar 2023 essentially rolls the beat at the low end of the guidance range for the year, given the ongoing uncertainties in the macroeconomic environment globally. Similar to what you’ve heard from others, in July we saw stability in our performance compared to our second quarter results. While our base case outlook today resumes spending trends and a macroeconomic backdrop relatively consistent with the current environment, our guidance range accommodates the potential for a moderation in spending and overall macroeconomic environment over the remainder of the year.

With that, I’ll turn the call back over to Cameron.

Cameron Bready: Thanks Josh. I’ve been at Global Payments for nearly a decade, and I am more enthusiastic now than I ever have been about the opportunities in front of us. We have a compelling technology-enabled strategy, a world-class team, great partners and clients, and a global presence with diverse distribution capabilities. As I step into the CEO role, I am highly focused on several priorities for our business and customers. First is continuing to pursue the key pillars of the strategy we set forth in detail at our investor conference in September 2021, while sharpening our focus on the most attractive opportunities we see in these areas and amplifying our investment on the most impactful of these initiatives. This is the right strategy for our business and one that positions us well for continued growth and value creation.

Second is continuing to make it as easy as possible to do business with Global Payments while providing more commerce-enablement solutions that deepen our relationships with our customers. This starts with our ongoing focus on meeting our clients and customers how and where they want to be met with innovative and distinctive solutions that integrate seamlessly, and of course we need to continue to couple this with exceptional service to ensure that we delight our customers with every interaction, leveraging our scale that many competitors simply cannot match. Third is to maintain our relentless focus on execution, which has been one of the hallmarks of Global Payments and a key component of our ability to produce consistent results through market cycles.

We have good competitors in our markets, and I strongly believe the consistency of execution separates one from another. Global Payments will set the standard for execution in our space. Last and certainly not least, I am focused on ensuring Global Payments’ culture is second to none. Our culture dictates how we accomplish our goals and achieve results as an organization. It is the connective tissue that makes the organization operate effectively. Having a world-class culture will further differentiate us from our competitors, drive value creation and benefit all of our constituents. I am delighted to be taking over Global Payments now that we have simplified our business and clarified our strategy going forward. With a sharpened focus, relentless execution and disciplined investment, I am confident our exceptional team will drive sustainable growth and performance.

We look forward to sharing more as we continue on our journey. The future is indeed very bright at Global Payments. Winnie?

Winnie Smith: Thanks Cameron. Before we begin our question and answer session, I’d like to ask everyone to limit their questions to one with one follow-up to accommodate everyone in the queue. Thank you. Operator, we will now go to questions.

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Q&A Session

Operator: Thank you. At this time, we will be conducting our question and answer session. [Operator instructions] Our first question is coming from the line of James Faucette with Morgan Stanley. Please proceed with your question.

James Faucette: Great, thank you very much, and thanks for all the details today. I just wanted to first understand a little bit the change in commentary, or the way you’re describing your outlook around guidance, and in particular the macro environment. Are you assuming any incremental impact or are you seeing anything there that causes you to be a little bit more cautious, or can you just talk through why you decided to temper at least your macro commentary?

Cameron Bready: Yes James, this is Cameron. Good morning. I would say a couple things, and I think some of this was covered in Josh’s prepared remarks. First and foremost, July trends are tracking very consistent with what we’re seeing in–or what we saw, excuse me, in Q2, so I think our outlook for the balance of the year reflects a relatively stable macro environment – that’s our base case sitting here today. I think the point we’re trying to emphasize, and some of this, quite frankly, is based on commentary we heard on the heels of Q1, is the range of outcomes that we’re reflecting in our guide will accommodate at the lower end some softening of the macro environment and some softening of consumer spend, should we see that.

That’s not our base case today, but if things do soften in the back half of the year relative to where we are today, I think the guidance range that we propose today, even with the increase at the low end on both revenue and EPS, would still accommodate some modest slowdown in economic activity in the back half of the year, but that’s not our base case. We’re expecting, and I think you’ve heard similar themes from others who have reported already, a relatively stable macro backdrop in the back half of the year, consistent with what we saw in Q2 and what we obviously saw in July as well.

Josh Whipple: I would just add to that, James, I think if you think back to our quarterly color that we gave you on our February earnings call, I’d say that we’re still on track, as Cameron mentioned, and we’re still trending from a cadence perspective to go ahead and deliver those second half estimates in Q3 and Q4, which if you remember, it was revenue growth in the 8% to 9% range, margin expansion 100 basis points, and EPS growth of 9% to 10%, which gets you to kind of the full year guide of revenue growth of 7% to 8% and then margin expansion of up to 120 basis points and EPS growth of 11% to 12%.

James Faucette: Thanks for that – pretty compelling algorithm, for sure. I wanted to ask a follow-up around pricing. Some of your peers have moved pricing recently, basically to reflect more of the value that they’re delivering. Where do you see your opportunities around pricing and the value you’re providing, and how should we think about that on a go-forward basis, especially if the macro remains relatively stable?

Cameron Bready: Yes James, it’s Cameron. I think my perspective on that is really we’ve tried to be consistent over a relatively long period of time in pricing our solutions and services in a way that we think reflects the value that we’re delivering to our customers. Our philosophy around pricing, I think has been by and large more consistent over a longer period of time, perhaps, than relative to some of our peers. I think what we are seeing certainly in the market environment over the last certainly six to 12 months is some of our competitors obviously being a little more aggressive on taking price. With the inflationary environment we’re operating in, and obviously I think more pressure on revenue and producing profitability for some of the smaller fintech players, we have seen more pricing action, by and large, I think across the industry, which to me just creates, I think, a more constructive competitive environment in which we’re operating, and it’s probably more constructive than it has been in a few years.