ACI Worldwide Inc (ACIW) 2011 Q1 法說會逐字稿

Good morning. My name is [Sarah], and I will be your conference operator today. At this time, I would like to welcome everyone to the ACI Worldwide Financial Results for Q1 ending March 31, 2011. (Operator instructions.)

I would now like to turn the call over to Ms. Tamara Gerber, VP of IR. Ms. Gerber, you may begin.

Thanks, [Sarah]. Good morning, everybody, and thanks for joining our first quarter earnings call. The substance of today's call, like all of our earnings events, is subject to both Safe Harbor and forward-looking cautionary statements. You can find the full text of both Safe Harbor and forward-looking statements on the first and final pages of our presentation deck today, a copy of which is available on our website, as well as filed with the SEC this morning.

Our Management speakers will be Phil Heasley, our CEO, Ralph Dangelmaier, our President of Global Markets, and Scott Behrens, our CFO. All three Management members will be available for Q&A following our prepared remarks and will be joined by Louis Blatt, our Chief Product Officer, and Tony Scotto, our Senior Vice President of Global Application Development.

Before I turn the call over to Phil for his opening remarks, I'd like to remind all of you that ACI will be participating in two conferences in May, the D.A. Davidson conference in Seattle on the 12th, as well as the Stephens spring investment conference in New York on May 25th. We will be available for investor one-on-ones at both meeting events.

Thanks. Phil, please go ahead.

Thank you.

Good morning, and thank you for joining our call today. I am very pleased with ACI's first quarter performance, where we achieved better comparative results to prior year on all fronts. Atypically, ACI saw very strong quarter one sales where we have historically seen a drop in the fourth quarter from seasonally robust fourth quarter.

The results were driven by larger re-commitments in diverse markets such a Canada, Mexico, the Netherlands, Ireland, and in South Africa. Additionally, we saw significantly larger add-on capacity deals than in prior years. Clearly, our team is getting better and stronger at cross-selling and add-ons.

Our stronger performance was led, first and foremost, by a 22% improvement in recurring revenues as ACI's business is benefiting more and more from predictable, stable revenue derived from harvesting our 60-month backlog. Operating free cash flow generation was 50% stronger than last year's quarter one, driven primarily by stronger operating income.

ACI's demonstrated another quarter of growing and improving operating income and operating EBITDA. Our quarter one 2011 business generated positive operating income compared to an operating loss in the previous year. We achieved significantly stronger EBITDA than last year's quarter, up $9.3 million, to attain $16.7 million in this quarter. Again, this strong performance speaks to the culture of controlled growth and profitability that we have propagated at ACI.

Finally, my last point before turning it over to the team to take you through the quarter's performance in greater detail would remain that we closed an acquisition with ISD Corporation. This acquisition is typical of the tuck-in strategic purchases we have made over the past few years. ISD strengthens our position in the merchant retail sector both by product solution as well as making us more relevant with the retail target market space.

I will close with the thought that I trust the investor community [has a] better comprehension now of the predictability and recurring nature of our business model. We have transparency into our pipeline across all geographies, and this vantage [points] leads us to reiterate our 2011 guidance.

Ralph, please go ahead and walk us through the markets and business performance for quarter one. I'll be available on Q&A once we complete.

Thanks, Phil. Good morning. This is Ralph Dangelmaier.

As Phil said, we had a very strong quarter, a 52% increase year-over-year in sales, including a 57% increase in our new business. We had a very strong Q1 in North America and northern Europe, and our growth year-over-year was significant in all of our product categories. So it's clear that our emphasis on cross-selling to existing customers is working.

Some examples on page seven are, in North America, we're off to a great start, and Canada, too. Very large customers have recommitted to ACI with adding significant add-ons and cross-selling. One of them was a facilities management deal with Base 24 as well as a migration opportunity to EPS. In the US, we had a major payment processor who agreed to consolidate more of its transactions onto the ACI solutions.

And [in] our wholesale business, we've been very active in selling our MTS product with compliance and services solutions around the United States. Also with PRM, we've been successful. We sold a enterprise banker integration with our PRM product. We also made our 15th PRM sale in China and a new sale in the Middle East. Also, we were very strong in cross-selling our infrastructure and tools throughout North America and northern Europe.

As Phil mentioned, we did have major renewals and recommitments in countries like Indonesia, Ireland, the Netherlands, South Africa, and we're thrilled that the ISD Corporation, that acquisition really strengthened our position in merchant retail primarily across the United States.

So as it relates to some of the trends we see, we've talked about in the past, we still see quite a few trends in the Americas around cost pressures and continuing investments, as well as a continuing need for compliance. In EMEA, we just came back from a week in Germany where we got all of our customers together.

And we kind of break those markets into two parts, one called developed markets, where it's very similar to the Americas, where there's cost pressures that drive efficiencies around payments, and also in developing markets, where the interest of leapfrogging traditional payment paradigms, like going to mobile and prepaid, is a big trend that we're working with. In Asia, what we're really helping the customers with there is the payment infrastructure, because the continued growth in volume is really putting pressure on the different infrastructures they have for payments.

So overall, we're very pleased with the quarter, and I'm going to hand things over to Scott so he can give you more information on the detailed financials.

Okay. Thanks, Ralph, and good morning, everyone. I'll be starting my comments on slide 10 with key takeaways from the quarter, starting first with sales.

As Ralph's already mentioned, we really started the year off strong in sales bookings, overall sales bookings being up 52% compared to last year. And of particular note is the growth in new business, again that being the sale of new accounts, new applications, and add-on business, which was up 57% over last year.

In considering our first quarter can be a seasonally soft quarter for us for sales, we're obviously very pleased with the sales demand that we're seeing to start off the year.

Turning next to 60-month backlog, which as we've said in the past is really the key barometer of how we measure the long-term economic health and value of the business, 60-month backlog grew $47 million during the three months ended March 31, driven by a combination of the quarter's strong sales, our acquisition of ISD, as well as foreign currency movements.

We also saw a strong revenue quarter, coming in at just over $104 million, which represents a $17 million, or 19%, increase over the prior year first quarter. This was led by strong growth in recurring revenue, that growing $14 million, or 22%, over the prior year quarter, and overall 95% of our current quarter revenue came out of backlog, with the remaining 5% of revenue converting from current quarter sales.

And finally on this slide, we saw strong growth in operating free cash flow, up nearly 50% over last year's first quarter.

Turning to slide seven, we saw operating expense growth primarily in two areas. Selling and marketing expenses were up, which is reflective of our higher sales activity in the quarter, and also higher R&D expense, which really reflects our investment in accelerating our product development really to meet a higher customer sales demand.

And finally on this slide, we saw strong growth in operating income and operating EBITDA, increasing more than $8 million and $9 million respectively over the prior year quarter.

Turning then to slide 12, this is our normal depiction of the ratio of the revenue that's derived from backlog versus that portion of revenue that's derived from current period sales. As you can see, the mix is consistent compared to last year. And just overall, we're very pleased with the recurring revenue stream that's coming out of backlog, which is providing us a stable, predictable and solid base of our revenue stream.

And lastly on slide 13, at this point in time we are tracking as we expected, so we are reaffirming the guidance we laid out in our February earnings call for the full year 2011.

So in summary, compared to Q1 last year, we saw strong growth in sales, strong growth in revenue, which contributed to growth in operating earnings and operating EBITDA. We saw strong growth in cash flow. And finally, we are tracking to our full year guidance expectations. So overall, we're very pleased with the strong start to 2011.

So that concludes my prepared remarks. Operator, we are ready to open the line to questions at this time. Thank you.

(Operator instructions.)

Wayne Johnson from Raymond James.

Hi, yes, good morning. Congratulations on a great result today and for the first quarter.

Just a couple of follow-up questions here. Can you break out a little bit more on the rationale for the purchase of ISD? What kind of functionality does it bring to the table? Does it do something that you guys didn't have, and is it a new service offering that you can now tuck into -- yes, your core offering? That's A.

And then, B, can you tell us about the magnitude of ISD's customer base for starters?

I'll start the answer, and I'll let Ralph chime in a little bit.

This actually is an add-on [tool]. We have -- we always talk about our retail business, and we tend to talk an awful lot about [EPS]. But we also, for a very long time, have been in the retail commerce server business, which is a much smaller offering to much smaller institutions and whatnot, and it doesn't need the robustness and the throughput and whatnot.

And we've always had a relatively small share of that retail market, and then it's kind of scattered around in many places. And I think retailers are understanding more and more, both as a result of PCI, from a compliance standpoint, as well as wanting to manage -- they're the third party in every payment, and they're becoming more and more intelligent in terms of how they're managing their participation.

So we thought this made a lot of sense in terms of us gaining a little more strength in that category. We actually picked up about 140 customers. And to us, that's very positive because it's against the segment that we largely haven't been in.

Ralph, do you want to add on?

Yes. I would just add onto that is that we've all been involved in this. It's a very good company. They've got -- they have a good product, and we're going to take some color to that product and add it into our offering. And also, we've got a good opportunity to cross-sell these 140 customers some offerings that we had that we think gives us good visibility over the next couple years. So overall, I think it makes a lot of sense for our merchant business, so we end up having over 200 customers now in the merchant business, which makes us a very large player.

Okay, that's terrific. I appreciate that color. And onto some of the financial metrics, and everything was very robust and healthy in the Q. But taking that and looking at the year, why not raise guidance after such a strong first quarter, which historically has been pretty weak and maybe the lumpiest of the lumpy quarters, if you will. So it seems like the first quarter's become more important, particularly compared to last few years.

Let me answer that. I mean, if you were to ask us -- if you were to ask me, I would say that I'm now comfortable -- we're now comfortable at the high end of the guidance. We give guidance in ranges, and we're probably more comfortable in the high end.

We traditionally have the opposite situation going because our business is so lopsided to the second half of the year. We did say we were going to start to flatten it out by going to our recurring revenue model, and was kind of neat to see us go -- it's not that big a deal to go from 94% to 95% recurring revenue from backlog, but it was kind of nice to see that it [land up] being going from $82 million to $99 million. That's the real importance of seeing it flattening out.

We have always tried to stay away from overly pushing our result on any quarterly basis. We've always said that our business is much more an annual cycle business, and that -- so we don't -- in the past we've refused to bring it down, and at this point we need a couple quarters of positive results like this before we would just go and kind of brag our way into a higher guidance. So what we're saying is that we're comfortable at the higher range of where we are. We're not ready to leap outside our range right now.

Tom McCrohan from Janney Capital Markets.

Hi, thanks for taking the question, and congratulations on a really solid quarter, everyone.

I just wanted to ask you a question on the demand environment. I mean, seems like some of the sales activity you've been seeing is on cross-selling, getting larger share of wallet, and that makes tremendous sense. But if we talk -- Ralph, we talk about kind of more the outlook, it's more kind of bigger-picture stuff about banks around the world trying to kind of improve operating efficiencies, which seems like a much different type of sale than kind of a cross-sell. It's more like a -- kind of rip-and-replace big project.

So I'm just wondering, when you talk about that environment of banks trying to reduce -- or improve, I'm sorry -- operating efficiencies, are we in the early innings of that, and what should we anticipate as far as kind of those type of sales in your outlook?

So to answer your question, I don't think -- they're not different at all. I mean, the cross-selling around the consolidation efficiency is what we're talking about, so it really is the same thing. And this trend has been going on, I think, since the financial crisis, and I see it continuing for a while.

Let me -- our customers are looking much more for solutions than they are for components at this point, and that causes us to be able to bring to the table two or three of our products as a solution versus them building by themselves half or a quarter of the solution. And so that's one aspect of [them].

Secondly, we can get them a lower unit cost in a shorter timeframe than they can kind of against their historical methods. But probably the most obvious of [it] is these companies that were either multi-regional or they're multinational. They're very much going to a much more global thought process and whatnot, and they don't think about a market and then its infrastructure. They think about the global market and what kind of global infrastructure they need underneath it.

So you're seeing the data -- you're seeing companies collapse the number of data centers, going to single product sets that are allowing them to bring a -- they could sell a product across the world or across a region without having to change operationally each piece of the business that they're going into. So we're facilitating a move to a global outlook, or a full -- it could be a regional outlook if they're not global and whatnot, and it is a significant -- it does have significant -- moving the redundancies has a very significant impact on their infrastructure. And that's what's driving it.

And I think we're in the second or third inning. We're not in the sixth or seventh inning of that.

So you guys have been though leaders of this whole payments hub concept, which is really kind of helpful, and it seems like that probably starts a lot of good dialogues. Are there any banks that are currently today global banks that are kind of end-to-end 100% on ACI doing a whole payments hub today?

Well, we have customers that -- I [set] most of the payment hub opportunity, from a truly global standpoint, in front of us, so answer it that way. But we do have some customers that have an awful lot of our product, right? So the opportunity with them is how to bring them together and how to make us more ubiquitous in terms of their offering.

But the vast majority of our opportunity is where we're strong in an aspect of our business, and now we're being viewed -- well, we are being viewed as a thought leader, and they're coming to us for solutions that are requiring many more aspects of our business than they have in the past.

And is there any -- on the competitive side, Phil, is there anyone else that has kind of the end-to-end payment hub solution set that you folks bring to the table?

Well, you know I don't like to talk about competitors, but I do believe that we have -- if you think about it from a risk and what's traditionally called wholesale and retail, no one has the product breadth that we have in the payments category.

Okay. And then one last question and I'll jump off. The quarter, you did $122 million in sales or bookings. Full year guidance was in the high 400 range, so I'm kind of getting to that same kind of question that the prior analyst was asking. So at the current run rate, you're already on track to hit the high end of that guidance. And assuming -- even with the flattening out you're talking about, seems like you may do well over $500 million in annual bookings even with the flattening out of the phasing. So is this just conservatism, or am I thinking about this wrong?

Well, let me answer that. We don't actually guide on sales, right, but we did answer the question that said that we thought we were going to be in the high 400s, right, is what we said. And that's -- if we were to guide to that, we'd be forced to be looking at the other side of 500 at this point. So we really don't guide on sales, but yes, we're no longer looking at the high 400s.

Gil Luria from Wedbush Securities.

Good morning. One of the things you've been able to do because of your market position, because you're larger than your next size competitor by a factor of 10, is serve -- develop a product and serve your customers, sell to your customers at a fairly steady run rate of operating expenses, which for a while there was around $90 million. In the last couple of quarters that's jumped up, and you're talking about increasing sales and increasing product development.

How much do you need to do that considering how weak your competition is, how small your competition is? Do you really need to increase that investment? And if so, should we think, especially now that you're going to add an acquisition of more of a run rate of $100 million a quarter of operating expenses?

Well, I'll let Scott answer after -- I want to -- you kind of asked a business question up front there.

We believe that there's huge opportunity in the market, and it's not going to be obtained without requisite R&D spending. And we've said to you folks for a long time now that gee, it would be great if we spent the 13% to 15% that the industry spends, and we spend more like 17% to 19% on R&D. And we see that -- we see R&D -- we see efficiencies in how we manage our expenses, but we see R&D as a very major element in what we're doing.

And it's not so much a competitive issue. It's that we see the market need, and in order to fulfill the market need, we need to invest to obtain it. So it has nothing to do with competitive pressures and whatnot. It has to do with the opportunities that's out there.

Now having said that, and I'll let Scott answer, we pretty much told you that our run rate was going to be in the mid 90s, and this quarter it got bumped up probably a million or so by FX change. So you'd be a little bit higher than that from a FX standpoint. That impacted us by about a million or so. But no, we're not talking about going to $100 million, so -- Scott?

Yes, really not much more to add to that other than we are tracking relatively close to our expectations. We were expecting roughly $95 million a quarter in spend. FX is impacting us. We haven't seen the dollar this low since 2009, so that is driving up operating expense. But in full disclosure, it's also driving up our revenue, too, so at the margin level it's fairly neutralized.

We did have higher sales in the quarter, so that drove up a bit relative to our phasing expectation for the year. But yes, no, we're still pretty comfortable with the level of spend and the level of investment we're making in selling and investment in product. Really, all that goes into building the long-term annuity stream in our 60-month backlog.

Our model is becoming more and more transparent, that in our business, sales doesn't go directly to -- I think everyone knows that sales doesn't go directly to revenue. We go from sales to backlog, backlog to revenue. And as long as we're doing significantly 20%, 25%, 30% more in sales than we are in revenue, we're always going to have an investment pressure. But we also know the reward for that investment pressure because it's sitting in backlog as the result of the sale, and then the reward becomes in the recurring revenue because, once it's harvested, it comes out in the recurring revenue standpoint.

So it's sales drives backlog, backlog drives investment, produces income. And we're not satisfied with our current margins. So we would not go and commit to, say, $100 million a quarter at this point until we actually harvested more recurring revenue than we have at this point.

And my second question is can you -- obviously you don't guide quarterly, but can you tell us what the impact of FX and ISD is going to be on your second quarter?

Well I'd say generally, from an FX perspective right now, we're seeing probably about a $1 million impact to revenue, $1 million impact to expense, roughly. It about neutralizes itself in operating income. From an ISD perspective, we're not disclosing the revenue and expense impact. But to give you a magnitude of size, ISD added about $20 million -- a little more than $20 million to 60-month backlog, that being mostly maintenance. So if that gives you some indication of size, that was a major contributor to our growth in 60-month backlog.

George Sutton from Craig-Hallum.

Good morning, guys. So, Ralph, I liked your breakdown of the developed and the developing opportunities in EMEA. I was wondering if you could give us a sense of the size of those different opportunities, from your perspective, on a relative basis.

The size of the opportunities? I mean, that's kind of a hard question to answer. I mean, they really vary, George. I mean, some of them are smaller in order to just get into the market. You know, we might do some entry point kind of situations, and some might be a little bit bigger because some of the customers may be coming off of a [processors] or coming off a consolidated -- coming off of multiple systems and they weren't trying to handle things in a solution. So it really varies depending on the solution. There's no kind of single answer there. It's just kind of--.

--Well, maybe let me ask it better. Related specifically to the developing markets, you're talking about leapfrogging traditional payment paradigms. And that suggests what Phil talks about as a solution sale. And I'm just wondering, is there a lot of opportunity in the developing markets based on that movement?

I don't know if I'd say there's a lot of opportunity, but it's a very diverse pipeline. I mean, there's the opportunity that we're capturing all over the place. I mean, it is something that is really contributing to sales, and it makes me feel very comfortable that we have kind of two markets to go after there, one that's kind of developing and one that's already developed. It gives us good options and good flexibility with the pipeline.

Got you.

Now, if you want to look at things, George, that really -- that provide us a nice horizon from a growth standpoint, yes, this does, but just from a GBP standpoint, we're not going to go double. The Middle East has been very good to us, but the Middle East is not going to move the dial in a huge way. Where we're very confident is in our renewal and add-on sales and whatnot around the world and whatnot.

But if you were to -- point-blank, I would tell you that Japan and India and Germany, where we have toeholds -- and maybe India we have our whole foot, right -- but in Germany and Japan, we basically only have toehold positions. And they are the third and fourth largest economies in the world, and we believe that our solutions are very relevant in those markets. And we believe that they're both retooling, and we believe we can do very well in those markets. And we've demonstrated that by doing well in Italy and France and some other adjacent markets. And I think our foray into Japan's working -- is working well.

And then, [comma], next phase would be becoming really relevant in China, who hasn't even begun to build the kind of infrastructure that we're capable of providing, that quite honestly is going to need throughput and volume abilities, the kind of persistence that we provide. It's going to need -- India and China are going to need it. Instead of dealing in the hundreds of millions of customers, they're going to have to figure out how to do it in closer to billion -- they're going to have to cross the billion mark.

So that's where we really see the large opportunity, but we don't -- that's not a 10 -- I mean, that's not an '11 or even beginning of '12, but that's where we get the big opportunity. But in order to do that, we have to have a very solid, very predictable, very transparent underlying revenue stream in order to tackle those big opportunities.

Thanks for the color.

Scott, is there any way to give some sense of EPS migration metrics, or just a broad sense there?

I'm not sure what you mean in terms of metrics.

We've migrated X number of customers. We've got Y number of customers to go.

Oh. No, I mean, we have -- the metrics are pretty consistent with what we've provided in the past in terms of the overall number of migrations. I think it's still around seven. It's probably upticking recently with two or three recent migrations here over the last couple quarters. But it's still -- again, remember, we're in a hybrid environment, so it's not -- what we're giving are kind of the full migrations. Some of our customers are taking a path of migrating some of the more critical modules first, and so it's very difficult to give what would be a migration statistic because it's either all -- in our numbers that we've provided historically, it's either a full migration or it's not. But most are iterative.

Ralph and I just spent a lot of time in Berlin with our European customers, and I think it's fair and prudent for us to tell you guys that we now believe that migrations are going to be a very iterative -- we have certain programs like Networks First and whatnot. And we're not going to see a lot of -- I think it's safe at this point to say that we're not going to see a lot of big bang migrations. We're going to see it go from 100% classic to 80% classic, and the 20% EPS to 40%.

And of course what a lot of them are doing is they're combining the first conversation we had, saying, "Gee, we need to use this in a more ubiquitous way that's going to save us money, and we also are going to have to migrate from sunsetted, closed environment to a much more open environment. And oh, by the way, we need the open environment to really get the saves across -- we can't have it in this closed cell to get the kind of saves we want."

So now we're finding win-win areas where they're saying, "Gee, we can be much more relevant against a lot larger piece of our customers' volume, but we have to do that" -- we almost [land] up solving the new opportunity and migrating the historical piece into it. You might want to talk to--.

--Yes. I mean, you've had a lot of conversations.

Oh, yes, yes. So I think it would -- obviously the -- exactly what they're saying. It's folks are looking at migration as a process over multiple years. And they're going to go component after component at a time and not really rip out everything and replace everything out of the gate. And we have services programs and product programs and development globally that support that. So anyway, I think that is a good trend, and that's something that we're very supportive, and the customers really, really like that, really like that approach.

Helpful clarification. Thanks, guys.

John Kraft from D.A. Davidson.

Good morning, and let me also say congratulations for the encouraging quarter.

Thanks, John.

I guess the first question is about the bookings that you signed in Q1. I'm trying to get a better feel for the implementation timeline. I guess I'm assuming that the domestic processor is the biggest project. Is that true, and how long of an implementation cycle are we looking at for that one?

That big processor, that's probably somewhere between 12 and 18 months to complete shutting down one of their internal systems and moving the transactions over to our system.

And I guess at a high level as well for you, Ralph, are these new -- I mean, I guess this wasn't a new app totally, but primarily are you seeing that these are in-house institutions, or are they competitive takeaways? And is that changing?

So I'd say it's both. It's competitive takeaways and it's in-house systems. And I don't see that changing, and I think it's been consistently (inaudible) in the past. And I see it the same way right now, and I see it that way going in the future.

Okay. And one for you, Scott. As far as the taxes -- tax rate, I guess could you talk about the tax situation in Q1 as well as what you expect for the rest of the year?

Yes. Q1 we're starting off similar to how we have started off in years past. We're going to have -- we're starting off with the high effective tax rate. I expect the year to end lower than the 44% effective tax rate we had in 2010. It'll normalize as we get through the year.

If you look at it just optically compared to Q1 of last year, last year we had a tax expense on a pretax loss. So now that has flipped. Obviously we're getting pretax earnings, and we're getting -- it's still obviously a high effective tax rate, but that will normalize as we get throughout the year.

Target 40%-ish?

Yes, south of 44%, yes, that's a reasonable target.

Okay. Thanks, guys. That's all I have.

Brett Huff from Stephens.

Good afternoon, everybody -- I'm sorry, good morning, everybody.

Morning.

A couple of just follow-up questions. I think this was asked in a different way before, but I want to make sure I get it.

It seems like that you guys probably sold some things earlier and recognized a little revenue earlier than you thought you would in the year, and that partially contributed to the strength in addition to just overall cyclical trends getting better. Is it fair to say that we'll see a little bit flatter progression sequentially for the first couple quarters versus the typical ramp? Is that the right way to think about what's going on?

No. I think we're still going to have our typical back half of year ramp. I wouldn't say we recognized more from sales, really. 95% of the quarter's revenue came out of backlog, but we only had 5% come out of current quarter sales. So most of the sales activity really rolled into backlog.

Okay. So really, this is just a shift up, not a shift between quarters. It's a shift just higher in total [ETS].

Yes. Well, obviously, as our total -- as our recurring revenue grows, our baseline of revenues coming out of backlog is going to contribute more obviously as a percent. 95%, as Phillip mentioned earlier, it's contributing more in terms of dollars. So our baseline going into the quarter is higher.

Okay. And then could you give us an update on the global sales deals, the 10 or so that you all are in discussion with or think that there's a prospect for? Ralph, is there any update on that that you can share?

Well, as we talked about on Investor Day, there's about 10 accounts that we're managing globally, and some sales have happened in the quarter on those. But we're progressing with them. I mean, we have campaigns. We have processes. We're working them through the year like we've done last year. And we expect some of them -- some of those opportunities to close this year. So I don't really have any significant change from what I told you guys at Investor Day, February.

So it sounds like some of them are being sold not necessarily in one big fell swoop, sort of like First Data, but more there are going to be some bits and pieces that might precede a larger sale, or some of them will just be bits and pieces over time.

Yes, that's correct, yes. Yes, some are bits and pieces, and then some might lead to a large transaction. But the bits and pieces really add up around the world.

Were some of those a meaningful contributor to the 60-month backlog increase, even ex-the ISD addition?

I actually don't think we -- I think this quarter we actually had fewer large sales than we usually do, right?

Well, we had a couple in Canada that were large.

Were the couple in Canada part of the 10?

No, they weren't. So it's (inaudible) to say the answer is nothing large really happened in global accounts.

Okay. And then just -- I want to make sure, Scott, that I got the data right. Did you say $20 million in backlog from ISD?

Yes, little more than $20 million, correct, 60-month backlog growth, yes.

Okay, that's helpful. And then last question -- and Ralph, you talked a little bit about this -- it seems that you all are doing a great job so far of taking advantage of that sort of trusted relationship you all have because of your very large installed base of [ETS], or classic and [ETS]? Any update on how that's going, those conversations? You've talked a little bit about it on prior answers, but I want to just hear - I feel like the cross-sales is one of the really key next steps. How's that progressing? How are the conversations progressing? Any change there in success rate?

I would say just (inaudible), no change. I mean, it's exactly what Phil said, we kind of stated earlier, is we go in and explain [EPS] just like we explain our other products, and say this is a migration plan, and we offer options to clients to migrate. And we try to work with them on a real good business case on how they can get extra value from the products by consolidating some of their channels. And we talked about the large processor in the United States, and we talked about one of the ones in Canada, and those are great examples of customers that believe in that and like it and are executing on it.

Okay, that's what I needed. I appreciate your time. Congrats on a nice quarter.

But we do believe, Brett, that our largest -- we agree with you that our largest opportunity is cross-selling.

Okay. Great, thank you. I appreciate it.

Wayne Johnson from Raymond James.

Hi, yes. Thanks for taking my follow-up. Just as a refresher and a reminder, two quick questions. How should we think about free cash flow for 2011, and what is the CapEx goal for that? I view that as one question.

And then the second question is you guys have done a terrific job in terms of extracting expenses and reducing overhead over the last few years, which has led to some pretty dramatic margin and EPS improvement. Should we expect any more of that?

Well, in terms of the operating free cash flow growth, we said in the February call that we're expecting a growth in cash flow to trend consistent with growth in operating EBITDA, which is in the 12% to 15% range. There's no change in that.

And from a CapEx perspective, yes, we're tracking to expectation relatively consistent with 2010. And in terms of operation -- we're always looking at continued improvements in operational efficiencies, productivity, higher utilization. So in terms of continued cost synergies and efficiency, [absolutely], we're always looking at those across our four P&Ls, as well as our corporate. But it's more of a productivity and efficiency play.

Another way of answering your question is that we are not satisfied with our current margins, and that we're going to continue to be vigilant to get our margin over 20%.

Terrific. Thank you very much.

And this concludes the Q&A portion of today's call. I turn the call back over to Ms. Gerber for any closing remarks.

Thanks, [Sarah]. Really all I had to say was thank you for joining, and we look forward to seeing some of you at our spring conferences. Bye-bye.

And this concludes today's conference call. You may now disconnect.