ACI Worldwide Inc (ACIW) 2016 Q3 法說會逐字稿

Good morning. My name is Kaneesia, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the ACI Worldwide Reports Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would like to turn the conference over to Mr. Kraft. Sir, you may begin.

Thank you, Kaneesia and good morning, everybody. Today's call, like all of our events, is subject to both Safe Harbor and forward-looking statements. You can find the full text of both statements on the first and final pages of our presentation deck today, a copy of which is available on our website as well as with the SEC.

On this morning's call we have, Phil Heasley, our CEO and Scott Behrens, our CFO.

With that I'd like to turn the call over to Phil.

Thanks, John and good morning, everyone. ACI has been very busy since we last spoke. We're pleased with where we are with the business even though we did not attain our guidance. We continue to see growing interest in our Universal Payments solution and significant momentum in our SaaS and platform delivery options. The benefit to the UP retail payment solution are compelling to both our customers and ACI, the customers obtain our market leading next-generation UP BASE-eps technology which they can migrate transaction volumes at their own pace. This generates significant cost savings to the customer and allows them to consolidate non-ACI transaction volume while producing incremental revenue for ACI.

With UP in the mix, we think our large customer average deal size will grow from the current $30 million to $40 million up to $70 million to $80 million. In addition, customers are increasingly opting for subscription payment terms. Due to the larger commitments, our current renewal negotiations are taking longer than they have in the past, and we are moving the contract signing dates closer to the contract termination date. This has impacted our forecast for 2016. During the quarter we chose not to close certain renewals early. We are also willing to push out these renewals into next year if it means obtaining appropriate pricing. And our 2016 guidance update reflects the potential of later timing of closes. It's important to understand that the later signings of these renewals are driven by timing, and that we're making the conscious decision to realize the economic value of our annuity stream to ACI and our long-term shareholders.

We continue to see growing interest in our SaaS and platform offerings. SaaS and platform bookings increased 24% over last year, including several important contracts with net new customers, including our first instant payment deal in Europe, and a large payment services provider in South America, who will be selling our ReD anti-fraud platform. We also signed one of the largest quick service restaurant chains in the world, who is a new customer to ACI and it's the third top four (inaudible) fast food chain running on our SaaS solution.

Our omni-channel software will power store, mobile e-commerce systems as well as providing anti-fraud protection. These new contracts are [examples] of recent new customer wins, and a testament to our leadership in the market, range of functionality and unrivaled scalability. While we've had significant bookings in our SaaS and platform business, we have not implemented this new business as quickly as we planned. The good news is that our first wave of (inaudible) projects have now gone live. These projects and the overall market delays with (inaudible) put us behind in several implementations. Our 12-month backlog in our platform and SaaS business totals approximately $460 million, which is up $40 million versus where we started the year and is expected to grow even further before the end of the year. This positions us very well for growth as we enter 2017, but its value was originally planned in 2016.

Lastly, our new European data center is live and we have our UP platform running active in this facility as well as in our Norcross, Georgia data center. These facilities will support instant payments, retail payments, e-commerce and other UP-enabled solutions. In our centers, we can also demonstrate to our customers the value of our UP 2.1 on Linux, and the 50% plus savings that accrues. We now have the ability to directly provide the efficiencies. We expect to have a number of instant payment deals in 2017. Also, we look just 2017 with the data center build cost behind us, our capital expenditures are expected to decline approximately $25 million, and our one-time acquisition and integration expenses will be significantly reduced. We're also looking forward to our new partnership with VocaLink to increase the adoption of payment related initiatives globally. I truly believe our growth positioning is more exciting than it's ever been.

With that let me turn it over to Scott to provide details of our third quarter financial results and our updated guidance.

Thanks, Phil and good morning, everyone. I first plan to go through the highlights of the third quarter and then update our outlook for 2016. We will then open the line for questions.

I'll be starting my comments on slide 6, with key takeaways from the quarter. We saw strong growth in new bookings in the quarter up 9% from last year with SaaS and platform bookings in particular, up 24%. We continue to see strong sales growth in our merchant retailer solution, including our global e-commerce payments and card-not-present fraud detection platform businesses. We expect Q4 bookings to be strong and continue to expect full-year new bookings to be in the upper single-digit. These bookings contributed to solid growth in our 60-month backlog of $42 million in the quarter to $4 billion, our 12-month backlog came down slightly by $2 million to $850 million. Both of these adjusted for changes in foreign currency.

Revenue came in below our expectations and financial guidance as certain renewals were signed in the -- were not signed in the timeframe we originally expected. As Phil mentioned, we are seeing large term renewals push out close through their expiration dates than we've seen in the past. As a result, we are delayed in recognizing the non-recurring license and capacity revenues we would normally see upon these renewals. This can clearly be seen in the metrics provided in the quarterly investor deck, particularly the contract duration metric which is at its lowest in the five years we have reported the metric.

So for the quarter, revenue was $217 million, up 1% over the prior year quarter on a constant currency basis, but underlying this change in revenue was a $13 million increase in recurring revenue or nearly 8% compared to the prior-year quarter, offset by a decline in non-recurring revenue of $12 million. So even though we did not see the non-recurring license revenues from renewals as expected, we continue to see healthy growth from our stable, predictable recurring revenue streams.

Excluding CFS, in the indirect cost during our TSA period adjusted EBITDA was $35 million, down from the $46 million generated in Q3, 2015. The decline was primarily driven by the timing of the very high margin non-recurring initial license fee revenue I just mentioned.

Operating free cash flow, excluding our previously announced one-time capital investments in our European data center and cyber security was a negative $1 million and we ended the quarter with $51 million in cash, essentially flat with Q2. Our debt balance at quarter-end was $753 million, which is down $186 million year-to-date, and lastly, we have $78 million remaining on our share buyback authorization.

Turning next to slide 7, with our full-year outlook. Based on what we are seeing with term extensions pushing out close to their exploration, and our expectation is that this trend will continue, we are reducing our full-year guidance. For the full-year 2016, we now expect to generate revenue from ongoing operations in a range of $960 million to $990 million, down from a range of $990 million to $1.02 billion. Adjusted EBITDA in 2016 is now expected to be in a range of $235 million to $245 million, down from a range of $265 million to $275 million. And these ranges exclude the CFS contribution in Q1 2016 as well as other one-time items. And again, we continue to expect full-year 2016 net new bookings to grow in the upper single-digits.

That concludes my prepared remarks. Operator, we are ready to open the line for questions at this time.

(Operator Instructions) Brett Huff, Stephens.

I wanted to ask, first of all, can you give us just a little bit more detail on how the new contracts are structured? I guess it sounds like there is renewals of the core debit processing customers, and then we're including some of the UP functionality in the renewal, so give us a little more detail on what's different about these new contracts, it's making more complex and therefore kind of getting them pushed out?

We talked about our RPS program starting last year and, under the RPS program, we allow the class of customers to renew their deal and receive the UP technology in a bundled fashion. And then it allows them for new products or a migration to start moving from their high-cost classic hardware and middleware infrastructure to much more efficient, our recommendation is 2.1, x86/Linux environment, and that's why we put it in the -- that's why we've installed it ourselves, Brett. And what it's doing is, it's actually, if you look at our bookings and our projected bookings, we are going to be well above our expectations in terms of UP bookings for the year, what is slowing down is negotiating our way through this new renewal portion of RPS and certainly the larger -- certainly the larger deals. I mean this time of the year, we're -- we have to go from the procurement departments to the strategy departments of our customer base and we're doing that. And you'll see -- whether we have to wait a quarter or we have to even wait two quarters, to me it's worth it for the annuity stream. You've seen, if you look at page 18 of our presentation, you see where we've deliberately brought down our duration from almost three down to almost two. And so it doesn't make sense anymore to renew 18 months to 30 months out unless people run out of capacity, they need more volume. Now we're going to renew 6 months to 18 months and not trade away the economic value. We spent almost $1 billion on building this new technology, we have to be patient in getting paid for it.

And my follow-up is, it sounds like you're obviously heavily engaged with some of those larger clients in talking about UP and its value proposition. How are you hearing or kind of what are the -- what's the feedback so far on the bundled UP functionality? What are folks excited about using it for, what are they seeing as the key value prop from that?

Well, the industry has leaders and it has lemmings, right? So I'll tell you more about -- I'll tell you two interesting phenomena that's taking place. Some of the leaders really get there and this is all around the world and we're seeing some really quick adoption and we have one customer that will testify to 90% unit cost reduction and that's hardware, software and us -- and our new switch is almost twice as fast which also -- so it's not only cheaper hardware, but less hardware because of the speeds that it can run on the x86. So we have people that are just jumping into it.

On the other side, we have people that are dragging their feet, saying we see the benefit for it, but we don't know whether we want to invest in it and whatnot. And a very interesting phenomena is taking place and it's one that requires us to stay patient, is that a lot of the very large customers of some of our very large customers are now (inaudible) that they want those efficiencies, and it's the reason why we built AOD out to be able to supply this to medium and even large institutions that need that kind of -- for competitive reasons, they need that kind of efficiency in the marketplace right now.

So it's a very fluid, it's very -- it's positive, it's kind of an interesting situation where we'd be ahead in bookings. Unfortunately, we are behind in hosting on our -- we have the same EMV issues that everyone else does, but we've got our first wave out there. And we are engaged in very good -- not only with our core renewal base, but with new strategic participants too.

Peter Heckmann, Avondale.

Scott, what's the implied growth in organic SNET needed in the fourth quarter or what's the number needed to get to a high-single-digit SNET growth factoring in the divestiture? Do you need to grow SNET growth like 12% -- about 12% in the fourth quarter to get there?

That sounds about right.

Okay. And you talked about -- I mean the bookings growth looks good. You talked about some slower conversions, it doesn't appear that we're seeing it as much in the 60-month backlog. Can you talk about why we're not seeing that number grow a bit more?

Well, we had -- we did have pretty sizable growth in the quarter of $40 million. So we actually (multiple speakers).

On a percentage basis, on an organic percentage basis, would that be like 2%?

Well, if you look historically, the backlog growth has been solid in the 2% to 3% range, starting with 2015, we started seeing that uptick, now between a range of 3% to 4%. I mean, when you're moving a $4 billion number, you know 1% differences can be really significant. So we started seeing an uptick in that 60-month backlog last year closer to 4%, which is above our long-term average. So I would expect to see that as we close out this year as well. Part of that is timing on some of these large renewals, not only is it renewing this business, but it's also the incremental value that we'll receive -- that our cash due to renewal. So part of that is, and we disclosed, as Phil mentioned in our appendix to the investor deck, a duration that something we put out there for some time, the average remaining contract term is at the lowest point in the five years that we published the metrics. So that shows that we have a kind of book of business that is really imminently large contracts that are coming to their expiration points, here in the near term. So that will drive -- that in addition to driving new booking value, it would also drive the backlog up.

Okay. And then just as a follow-up, and a follow-up to Brett's question, I'm still not sure I understand the comment in the press release about bundling universal payments in with renewals. Is that -- did you say that's just on the retail payment system side or is that also on the bank side and talk about the economics of that waiving that, the ILF and then just getting revenue when they convert volumes and if that were the case, why would that be slowing down negotiations?

The RPS program, which we told you about, we put in a year ago, it only eliminates the ILF, if they entered the RPS program and there is two levels to it. One level, you have reduced ILF because they produce -- they have to produce at percentage growth, incremental volume over run rate. We go to full subscription when they commit to 25% incremental volumes, in that case we go to a full. And that's above the run rate, that's not above last contract. So that's the incentive and that's -- quite honestly, that's the complication, right, because we have to be prescriptive in terms of how it's actually of economic benefit to them and us. Everyone wants a new technology, but think about it, they would love to pay for it as though it was the old technology, right? So we are -- we are letting them keep their old technology and migrate at their own pace and we are providing them the new technology and therefore, it doesn't have the same price point.

David Eller, Wells Fargo.

It looks like Q3 sales were a little bit more than 10% below the guidance you gave on July 28, and I was wondering if you could talk about maybe when you started to see a change and may be kind of what was the main driver? I think you called out making a conscious decision, but if there was anything beyond that?

Well, I think just to clarify, you're (inaudible) revenue not the sales bookings, that's offshore, our sales bookings were actually up 9% over last year. But on the revenue side, the delay is coming from really the customers, these are deals that we thought we're going to close before the end of September. And in some cases, these are customers that -- now that they flipped into the fourth quarter, they are in their quarter of expiration. So it was based on the maturities and negotiations at the time.

And I think what Phil is talking about in terms of customer having choices right down is they've got to organizationally decide do they just want to do a standard renewal or are they ready organizationally to take advantage of the UP capabilities, but that's typically going to mean consolidating volumes on to ACI platforms. There is infrastructure decisions they have to make and they got to be ready to make those. So they're really -- their dilemma right now is which path that they want to go down.

And so those term renewals for which we were expecting some of the non-recurring revenue on renewal, they aren't lost, they're likely either pushed into the fourth quarter or depending on their expiration, may be pushed out to the early part of next year. So again, those are deals we expected would close this quarter, delays in the assessment of which half these customers want to take is really pushing them closer to their expiration date.

Okay. And then kind of as a follow-up, I think you mentioned the typical period for renewal would be 18 months to 30 months out, now it's going to be 6 months to 18 months. And I think you said you might have to wait two quarters to three quarters additional to kind of sign some of those deals. So should we be expecting pressure kind of going through Q1 of 2017 or Q2 or like what's the outlook for next year?

No, Scott, you may answer it, but if you look at page 8, again I go to that (inaudible) we brought the duration down significantly already. And this is not the first quarter and quite honestly it's not first year that we've been -- we're just -- there's no value to our shareholders for us to negotiate against ourselves for a 90-day result.

And we've just come to the firmament that that -- in terms of the value, the annuity value going forward, that makes the most sense, we're giving very, very good value for our price, and there's no reason for us to negotiate against ourselves.

I don't know, I'm sure you guys are aware of this, but a lot of our competitors or a lot of people in the field, I guess it's better to say, they're throwing everything in the kitchen sink to make their numbers. And sometimes, you have to have the guts to zag when everyone else is zagging and say, I'm going to save my dry powder instead of throwing it in the kitchen sink to make my numbers every quarter.

So why would we discount the value of ACI? Because there is a dry patch that everyone's participating in right now, take your lumps for 90 days and worst case, we take our lumps for 180 days, we do not be taking lumps in 2017, because we see ourselves to a renewal structure that largely eliminates us negotiating against ourselves. Kind of the (multiple speakers) answering that, but is that is the nuts and bolts.

I guess maybe the way I would -- maybe to ask it in a different way, should we be kind of expecting 2017 growth to be more second half weighted than first half weighted?

Well, let me answer this question. What we're seeing right now, our deals that are slipping closer to expiration, there is essentially a back-end to that in that deals that slipped out of Q3, either expire in Q4 or in some cases, it expire in the first half of next year. And so those deals will essentially get done before their expiration date. I mean that's essentially, so do the back-end. So the fact that deals that we had originally expected to be in the second half of this year are actually going to push to the first half of next year, I think that would be more of a tailwind than headwind in the first half.

And then maybe if you could just speak for one second on capital allocation, you got the $78 million of share repurchase authorization, I wondered if maybe this would be -- you might be looking to be more aggressively deploying that this year or whether you'll -- maybe just going to keep that in your pocket?

Well, we actually have -- we purchased $60 million this year so far, I would just say our projected normal use of cash flow, again be debt repurchase, investments in tuck-ins and we do still have $78 million left as well.

George Sutton, Craig-Hallam.

Thank you. Phil, you started off the call saying you're pleased with where you are and I wanted to put my former private equity head on for a second. So the public market this morning are obviously going to mark the [stock] down because of the results, if instead this was a private equity call and we were looking at our investment quarter-over-quarter, in your view would we be marking up the value of the business for any reason, keeping it the same or looking at any revisions, just out of curiosity.

Well, I think if we are a private -- and there's a lot of private equity guys that follow this Company. I think that if -- on the private equity side, they deployed what we did because what we've done is we've said that the forward value of the Company is more important to us than 90 days or 180 days. And you know, George, we are booking more, yes we have an issue in terms of getting our SaaS and platform business, either implemented or boarded as quickly as we should. And we're going to work on that. That's a negative. But the only negative there also is timing. The reason we did this is that we believe with the size of our SaaS and platform business, it's now bigger from a 60-month backlog standpoint than our installed. We are at a point that we just don't have to discount our installed business, and in order to do that we have to wait 180 days to get the cash flow annuity stream where it needs to be then, we'll wait. Who knows, maybe everyone -- maybe people will turn around and try to renew quicker and whatnot, but we're just not going to negotiate against ourselves.

And I actually -- the street will [ding] us for a period of time, and then next year we're going to -- we'll end up being something totally different because we've got stronger annuity streams and we have the leverage instead of people trying to use leverage against us. I mean, I see what everyone else is doing to try to make their quarters, and I just am not going to go around, I'm just not going to go with the crowd.

Understand. So I appreciate your thoughts on that. So relative to your -- you talked about leaders and lemmings relative to customers or potential customers. So what I'm curious about is, you talked about what the leaders are doing, I'm curious why are the lemmings not acting, I mean if they're going to see unit costs come down, if they're going to see greater functionality, what do you see keeping them from moving quicker?

Well, some of them have bigger problems than this, George. And some of them are -- this huge shift from card-present purchasing to card-not-present purchasing, and it really is changing the nomenclature of the entire industry. So I'm not talking about the ATM side of the business, that steady ATM, and really good and whatnot, but it's de minimis versus the point of sale e-commerce side of the business.

And I think everyone, I think there is the notion that they can get bigger. And there's fundamental -- people are trying -- there's a lot of big players out there that are just trying to put a course on to everything that they do. And therefore, improve their margins. Whereas other guys are out there and they're restructuring their business models and believe it or not, they're probably showing a little bit less 90-day good news than some of the guys that probably have real 360-day, 720-day issues when these guys can come to market with a much more integrated, much more efficient offerings. We see it on the merchant side of the business too, 75%, 80% EMV is still sits in front of the US market. So you've got a bunch of leaders who are out there getting it done and using it as a lever to have more control on payments and then you got 75% to 80% that's trying to figure out what to do, how to get there.

Paul Condra, Credit Suisse.

Scott, I just wanted to ask about expenses. So if I'm just kind of trying to get your EBITDA for the year, and I'm wondering sequentially where do we see the kind of leverage or improvement expenses just to kind of help get there?

Well, two things. For those deals, for example that have pushed out to the fourth quarter, they come with, on renewals, they come with the ILF. A lot of that revenue is -- it's very high margin, there's very, very little incremental cost on those, it's primarily the slowing cost.

And then also, our generally our cost structure is relatively fixed, both on the license software side as well as the SaaS side. So even where we see an uplift in the SaaS business, it's on a relatively fixed cost base. So the incremental revenue that we get in Q4, it's going to drive pretty high incremental margins.

Okay. So those cost and expense lines look like pretty good run rate levels.

Yes, I mean we typically exit the year at a lower -- if we look at the four-quarter view, we'll typically exit the year at a lower cost structure and we're expecting that this year as well.

And could you comment on just kind of the new accounts application line that was setup so strongly. What's the product there that's driving that and how does that kind of feed into, I guess the bigger strategy, what you've been talking about with renewals and larger deals, does that matter? Thanks.

Where that strength is coming from is from our PAY.ON product, our ReD product very much so from our retail merchant, not retail bank, but retail merchants, we told you that we just signed another one of the global top players in SaaS (inaudible) and whatnot. The growth is coming very, very much so on the SaaS side, and on the platform side of our business. And then the renewals actually aren't lagging by that much but then on the more installed side of the business, we're not -- we are seeing growth, but we're not seeing anywhere near the growth that we're seeing on the SaaS side and the platform side of the business.

And how should we think about that, like it from margin contribution perspective, is that business sales?

That's a perfect question, because this is going to be the second to last quarter that we report our numbers the way we are reporting our numbers, because as we go into next year, we're going to start presenting ourselves as on a two P&L basis. We're going to give you our SaaS -- we're going to give you our SaaS results and the profit model that's sits underneath that. And we're going to give you the installed and the profit model that sits underneath it, because we're really averaging two different behaviors at the moment, and going into next year, we see the importance of actually changing how we do that especially with -- five years ago SaaS wasn't 20% of our business, now it's a larger piece of our [66%] and more and more of our customers are asking us to either platform or run the SaaS, their business and that's where our growth is coming from. And it's important that we're going start delineating that for you.

And I guess just -- I wanted to -- if you could talk about competition, I mean, I think you've made some comments, but when you think about the delays in the installed side, and how much of that is maybe related to just more products out there that your clients are looking at versus just kind of struggling with you on pricing and agreements and getting things where they wanted to be?

On the EMV side, our limiting factor is our ability to implement. We could only take on as much business as we can implement and grow out our capability and we've got -- so that one, the demand, our product is doing extremely well as it relates to that and that's very much true in card-not-present fraud management and that's also true in terms of the gateway infrastructure on PAY.ON. We have good traction in new markets as it relates to either to expanding our growing our installed base and we are a little bit limited, we just opened up (inaudible) data center because we have so much business in Europe that we need of our quad, we need two centers in Europe, two centers in the US. We've consolidated over two dozen centers into these four quads that we have [growing] and as we keep -- as we stabilize that, we can then reach out further across the globe, but right now we're limited to North America, the Western Hemisphere and Europe in terms of our SaaS and hosted SaaS and platform business. So the growth there is extremely good. I think there is a basic sea change in terms of where and how people want to put new technology, and we're seeing it come even from our traditional customers. There's much more interest in SaaS delivered than installed software.

Wayne Johnson, Raymond James.

The two questions, first for Scott. How should we think about the debt pay down cadence going forward? And you guys have done a great job of reducing net debt levels recently, how should we think about that next year?

While we generally look at the term amortization, I mean we obviously we've got to do the term amortization, get the revolver down to zero but I don't think over and above the kind of a schedule debt payments that we would necessarily pay down that the term debt any earlier, obviously we'll redeploy the excess cash in other places. But again I would look (multiple speakers) the term plus the revolver.

And then, Phil, you touched on it a little bit already, you were saying that EMV kind of phase 1 is enabled, at the risk of talking about EMV here, what was phase 1 for you guys and what's kind of phase 2 and phase 3 and how do you see that unfolding over the next couple of years and how does ACI benefit from those trends?

For us, phase 1 of EMV was -- we're approaching it a little bit differently than you'd -- I guess everyone has a different approach. What we're doing is we're basically installing payment engines into medium to -- hard medium to very large retailers and we're giving them the ability to not only manage EMV, but actually to manage their payments so that they can go and -- I used to think it was going to be least cost routing, but I don't think it's going to be least cost for routing anymore. I think it's going to be just a multiplicity of endpoints, they're just going to decide what business they put where.

So we've been very, very busy in the business of, basically putting Postilion switches at a whole series of retailers and getting them enabled -- and from an EMV standpoint, and helping them in terms of how to rethink how they deal with PCI and their rewards programs, whatnot, although we are not directly involved in those. Our limiting factor is we could only do N number of those against the resources and learning curve and the EMV, how the standards and whatnot were coming out.

We've finished our first wave and instead of trying to just make a fortune on the margins of that, we're basically making decision to double our ability -- to double the number of engines that we wind up deploying and whatnot. So we're going out on a bit of vector, because we believe this is a multi-year -- it's a little bit of a land grab in terms of -- there is a fundamental change going on. We've got a very unique product because remember when I spoke today about the large fast food company we talked about that we've putting the engine and we're putting the EMV capability in, we're putting the fraud capability, and we're putting the networking, the gateway capability. And so we're actually giving them -- we are giving retailers the ability to manage their payment versus fines, a single payment management arrangement so that's our role.

And so kind of if we're in phase 1 right now, what does phase 2 and phase 3 look like?

Well, I think phase 2 hopefully is twice as many in about 75% to 80% of the time to implement. And then phase 3 hopefully is broadening that out a couple of times, again on top of that and hopefully bringing in the time to implement even a little bit further. And we're actually refocusing our organization to be able to do that globally, right? So we've got the guys in South Africa coming humming away on that and we're just building the capability to allow that to come to fruition. We see this as a very big global opportunity, plus it allows them to have input to managing with that average interchange, with that average cost of sale.

Alex Veytsman, Monness Crespi & Hardt.

I just want to follow-up on the capital allocation question, right? So we have about $78 million outstanding in share buybacks. And my question is first of all, are you expecting any buybacks next quarter or is that we (inaudible) delayed now until 2017? And I guess tied to that, I mean do you expect to up your authorization next year?

Well, I'd say we've historically taken a pretty balanced approach in terms of our use of cash. We've done that this year with share buyback, I don't think that necessarily project what our intention was in the fourth quarter, but I'd say going forward, we'll continue to be balanced in our use of cash as well.

Right. And as far as -- I imagine that you would probably mix it with some new deals, with some targeted deals, I guess like at this point especially given everything which you've done over the last couple of years and of course CFS, what is your kind of a targeted deal size, and I guess in which part of the revenue streams do we see some upside?

Well, when we say targeted deal size, as Phil mentioned, many of these larger deals historically have been in the $30 million to $40 million range are essentially looking to be 2X that size. As customers assess their strategy for the next five years, a standard renewal would probably be back at those $30 million to $40 million size, but a renewal that included the Universal Payments capability is likely to be about 2X that size. And so that's what our customers are assessing right now is are they ready organizationally to take advantage of that technology in the near term, and they've got to be ready organizationally to take advantage of that once they (inaudible) renewal, otherwise they go down a normal renewal path. That's where, we believe and as we get to the end of the expiration on these, it's one of two paths, I believe that especially if were to add on many of our large renewals that we'll see in the next 18 months, that many of those will go down to larger UP path.

And at this time, there are no questions.

Thanks everybody for joining us, we look forward to catching up in the coming weeks.

This concludes today's conference. You may now disconnect.