Fidelity National Information Services Inc (FIS) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the FIS third-quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, today's call is being recorded.

Your hosting speaker, Senior Vice President Investor Relations, Mary Waggoner. Please go ahead.

Thank you, Kevin, and welcome to everyone joining us this morning. With me today are Frank Martire, President and Chief Executive Officer; Gary Norcross, Chief Operating Officer; and Mike Hayford, Chief Financial Officer.

Before we begin, we ask that you please mark your calendars for our Analyst Day which is being planned for February 14, 2012 in Orlando, Florida. The event will coincide with our fourth-quarter earnings release. We will be sending out registration details in the next few weeks.

Now we will proceed with the third-quarter earnings reports. Today's news release and supplemental slide presentation have been posted to our website at fisglobal.com. A replay of this webcast will be available shortly after the call.

Please refer to the Safe Harbor language on page two of the presentation. Today's discussion will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The Company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law.

Today's comments will focus on results from continuing operations and will include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented. Reconciliations between GAAP and non-GAAP results are provided in the attachment to the press release and the supplemental slide presentation.

I will now turn the call over to Frank Martire for an overview of third-quarter results.

Thanks, Mary. Good morning, everyone, and thank you for joining us on today's call. I will keep my remarks brief to allow plenty of time for your questions. I will begin the discussion with a brief summary of our third-quarter financial results and business highlights. Gary will follow with the operations report and Mike will provide additional insight into our financial results and our outlook for the remainder of 2011. We will also share some preliminary thoughts on 2012.

Overall, we are pleased with our solid topline performance and strong growth in earnings per share. Revenue increased to $1.4 billion in the quarter, representing organic growth of 4.1%. Our results were driven by continued strong performance in our international business, which grew 21.9% on an organic basis. Earnings per share increased 19.2% to $0.62 in the third quarter and free cash flow was strong at $193 million.

We continue to compete very well on the strength of our solutions. We added several new clients during the quarter including KeyBanc and Berkshire Bank in North America as well as new clients in Germany. Gary will provide additional sales highlights a little later on the call. We believe that our growing global footprint and our international business in particular provide us with a strategic advantage over our competitors.

We also continue to look for opportunities to augment organic growth through internal investment and targeted acquisitions. As in the past, we will be disciplined in our approach and we will apply our cash to debt repayment or share repurchases if we cannot find deals that fit strategically, financially, and operationally.

We repurchased approximately $181 million of stock in the third quarter and have another 7 million shares remaining under the February 2010 authorization. Additionally as we announced this morning, our Board has approved a new $500 million share repurchase plan which at yesterday's closing price represents approximately 19 million additional shares.

Looking back on the first nine months of the year, the team has driven solid organic revenue growth and managed the business very well in a difficult economic environment. We are proud to be ranked as the number one provider on the 2011 FinTech 100, which is a result of the continued confidence that our clients have in us.

As we look ahead to the fourth quarter and 2012, we remain focused on helping our clients meet their overall business objectives and on driving higher revenue and earnings growth and strong free cash flow.

Now Gary will continue with the business report. Gary?

Thank you, Frank, and thanks to everyone on the call. I will begin today's review with an overview of the global sales climate followed by the operating highlights. We see continued investment spending by financial institutions despite persistent economic and regulatory challenges. We are pleased with the progress we are making to gain additional share in the large financial institution and international markets.

The demand for our professional services remains strong and continues to grow on a consecutive quarter basis. We are also seeing increased interest in back-office outsourcing and managed IP services. For example, a top-tier bank in North America recently opted to outsource a substantial portion of its statement production and mail services to FIS, which will drive meaningful cost savings for the bank and generate a recurring revenue stream for FIS. This services growth is offsetting the declines in license sales as our clients seek to leverage our global scale and processing capabilities to execute their business strategies.

Earlier this year we discussed the brand strength of our TouchPoint Channel solution in the large bank market, including a new agreement with the Bank of Oklahoma. I am pleased to announce that the First National Bank of Omaha with $17 billion in assets will deploy TouchPoint in its more than 140 branches in seven states in 2012 replacing its existing in-house teller platform.

As Frank mentioned, our international business continues to perform very well, providing FIS with a strategic advantage over other providers. We are announcing increased demands for both core and payment solutions outside North America and experienced growth across all major international regions in the third quarter, including Europe.

We continue to make good progress in diversifying our international client base and product offerings in EMEA, Latin America, and Asia Pacific. Over the past year, we have announced reciprocal ATM agreements with China Union Pay, Korea Financial Telecom, and the UK Link Network. While we do not expect to generate significant revenue from these relationships in the near term, we are hopeful that the increased visibility will open the door to expanded relationships in the future.

Given the increased focus on European banks, I would like to provide some additional insight on our European business. First, the majority of our revenue in Europe is generated by clients in Germany, France, and the United Kingdom. Less than 2% of our European revenue and less than 1% of our international revenue is generated from clients in Spain, Italy, Greece, Ireland, and Portugal.

Second, our revenue streams are highly reoccurring. The vast majority of the services that we provide are mission-critical to our clients and are not discretionary.

Finally, increased regulatory oversight coupled with the need for banks to reassess their current infrastructure to manage costs more closely often opens the door for third-party providers like FIS and Capco, as evidenced by the continued strong performances of both businesses in Europe.

Although we have seen some lengthening of the sales cycle, we have not seen a marked decline in the sales pipeline. We continue to build on our strong market position and are adding new clients throughout Europe. In September, we announced that DAB, a private bank based in Munich, will migrate to our core banking platform. In addition, LBBW, which is Germany's fifth-largest bank, will deploy several FIS commercial treasury and global transfer solutions to support their wire transfer and direct payment operations. And earlier this month, FIS was once again recognized as a leading prepaid organization in the region.

Turning to our North America business, we continue to compete very well in the mid tier community and LFI markets and are winning new clients. We continue to believe that the need for banks to upgrade their technology to support their business plans will drive demand for core platform replacements. We recently announced that Berkshire Bank, a subsidiary of Berkshire Hills Bancorp and Alliant Bank will migrate to our core processing solution. Both banks will also implement a full range of ancillary channel, ESP, network, and eBanking solutions.

We continued to generate solid cross sales and will soon begin providing ePayment and mobile banking solutions to Marquette Bank, a longtime FIS core processing client.

Over the past few quarters we have highlighted several new bill payment relationships with top 30 banks. I am very pleased to report that in the third quarter we successfully converted Fifth Third Bank, KeyBanc, and BMO Harris. In addition to electronic payments, we are also providing vendor warehousing, electronic billing, and remittance services to all three banks. Each of these new clients previously utilized an in-house or competitor solution to perform these services.

We are seeing renewed interest from financial institutions in our credit card and credit loyalty programs in response to the interchange limits on debit transactions. We completed several new client conversions in the quarter including Amalgamated Bank, Royal Credit Union, and INTRUST.

We also recently extended our long-standing credit card processing agreement with the Independent Community Bankers of America. FIS is the only core provider to offer integrated end-to-end credit card solutions, which further underscores the benefits of our broad product capabilities.

I would like to leave you with the following thoughts before turning the call over to Mike for the financial report. In North America, we expect that bank consolidation will continue to create both challenges and opportunities. Future revenue streams are likely to be diminished in those instances where we are providing services to both entities. Nevertheless we believe that FIS is better positioned than other providers over the long run given our broad market presence and leadership in the mid and large bank space.

We do not believe that we are unduly exposed to the challenges confronting the European markets, in light of our diverse client base and product mix. Further we believe that our international presence will continue to be a strong growth engine for our Company.

Although the sales cycle has lengthened, we continue to see investment decisions being made. Additionally the strong sales that we have achieved over the last few quarters provide us with a solid implementation pipeline. We continue to expect a challenging environment for our clients in 2012. However, given the non-discretionary nature of our services and our strong business model, we expect that we will continue to drive profitable growth in 2012.

Now I will turn it over to Mike for the financial report.

Thanks, Gary. I will begin on slide four. Adjusted revenue increased 10.8% to $1.4 billion in the third quarter. Organic revenue growth after being normalized for acquisitions and currency was 4.1%. Strong growth in the international business offset difficult year-over-year comparisons in FSC as well as ongoing headwinds within our payments business.

Third-quarter EBITDA increased 2.7% to $438 million. EBITDA margin was 30.7% compared to 33.1% in the third quarter of 2010, reflecting a higher portion of consulting revenues, growth in lower margin businesses including the Brazilian card operation, and nonrecurring items in both periods. These items include approximately $10 million in merger integration and severance costs in the third quarter 2011 and a $10 million benefit related to settlement of a legal matter in the third quarter of 2010, a $20 million swing recorded to nonrecurring items.

As shown on slide five, EBITDA margin compares favorably to the prior year when adjusted for the Capco acquisition and the nonrecurring items from both periods.

Financial solutions on slide six, revenue increased 7.8% to $523 million and increased 0.6% on an organic basis. As you may recall, FSC had a particularly difficult comparison due to a large software sale in the third quarter of 2010. Organic growth was also negatively impacted by the reduction in (inaudible) for a large capital client, as we have previously discussed.

Financial solutions EBITDA increased 1.9% to $224 million compared to $220 million in the 2010 quarter. The EBITDA margin was 42.8% compared to 45.3% in the prior year reflecting the higher mix of consulting revenue and approximately $2 million of integration and severance costs in the third quarter of 2011 in addition to a large license sale in the third quarter of 2010.

As shown on slide seven, Payment Solutions revenue totaled $604 million, which is a modest improvement over the third quarter of 2010. Payment Solutions revenue increased 2% excluding the check business.

Third-quarter revenue declined on a sequential basis due to the peak tax processing revenues in the second quarter of 2011. While we are pleased with our progress in signing new clients, PSC continues to be challenged due to the decline in check usage, competitive pricing, and consolidation within the client base.

Payment Solutions EBITDA totaled $230 million including approximately $4 million in integration and severance costs. EBITDA increased slightly excluding the one-time costs. EBITDA margin declined to 38% in the third quarter of 2011 compared to 38.4% in the third quarter of 2010.

As shown on slide eight, international revenue increased 49.3% to $298 million and grew 21.9% on an organic basis. The continued strong performance is due primarily to higher card processing volumes in Brazil as well as growth within Capco's European business, which continues to perform very well.

As a reminder, we have now cycled past the anniversary of the Bradesco card conversion, which occurred at the beginning of October 2010. Although new card issuance in Brazil remains strong, we will face tougher year-over-year comparisons beginning in the fourth quarter of 2011.

International EBITDA increased 44.1% to $67 million in the third quarter. The margin was 22.5% compared to 23.3% in the prior year reflecting the addition of Capco, continued strong growth in Brazil, and approximately $1 million of integration and severance costs.

To reiterate Gary's remarks regarding our European business, keep in mind that Greece, Spain, Portugal, Italy, and Ireland account for only a small portion, less than 1% of our international revenue base. The majority of the revenue is recurring and is not discretionary. While we are monitoring the markets closely, we continue to feel good about our European business.

Corporate expense totaled $83 million in the third quarter 2011 compared to $71 million in the third quarter of 2010. The increase was driven largely by the reimbursement of $10 million of legal fees in last year's numbers as previously discussed and approximately $3 million of severance and M&A related costs in the current period.

Please turn to slide nine for a reconciliation of net earnings. Third-quarter net earnings from continuing operations increased 6.8% to $189 million compared to $177 million in the third quarter of 2010. The effective tax rate declined to 30.6% in the third quarter of 2011 compared to 36.6% in the prior year quarter due to federal tax planning strategies and a nonrecurring benefit related to our international business. We now anticipate a full-year tax rate of approximately 33% in 2011.

Earnings per share increased 19.2% to $0.62 per share compared to $0.52 per share in the third quarter 2010. The only adjustment to our reported GAAP numbers in the current quarter is the after-tax impact of purchase price amortization of $44 million or $0.14 per share. Approximately $10 million of one-time costs including merger, integration and severance costs were included in our results for the third quarter of 2010 -- sorry, 2011.

These costs, which were excluded from the prior year results lowered earnings by approximately $0.02 per share in the current quarter. Minority interest reduced earnings per share by approximately $0.01 in the current quarter.

As shown on slide 10, free cash flow totaled $193 million compared to $220 million in the third quarter 2010. The decrease was primarily due to the interest on our senior unsecured notes, which is payable in July and January of the year.

Capital expenditures declined to $82 million in the third quarter of 2011 as compared to $93 million in the third quarter of 2010. As Frank mentioned, we purchased approximately 6.6 million shares during the third quarter at a total cost of $181 million. Seven million shares remain under the February 2010 authorization and our Board recently approved an additional $500 million repurchase authority, which is effective through December of 2013.

Debt outstanding declined to less than $4.9 billion as of September 30 and the weighted-average interest rate was approximately 5.1% at quarter end.

Looking ahead to 2012, we have $215 million of mandatory debt payments coming due in addition to our $325 million term loan A facility which matures in January. We are monitoring the debt markets closely and currently anticipate that we will extend, refinance, or use our revolver to retire the 2012 term loan A facility. Additional details on our debt are provided in the appendix.

Before opening the lines for questions, I will provide a few comments regarding our full-year 2011 outlook and share some additional thoughts regarding 2012.

We continue to anticipate reported revenue growth of approximately 10% for 2011 and organic revenue growth of approximately 5% for the full year. We expect 4% to 5% growth in EBITDA for full year 2011. As we guided in September, we expect that lower interest costs, shares outstanding combined with more favorable tax rate will offset the EBITDA challenges in 2011.

We are tightening our earnings outlook for the full year to $2.24 to $2.30 per share, which is an increase of approximately 11% to 14% per share compared to 2010. We expect free cash flow to come in slightly higher than adjusted earnings in 2011 due primarily to timing differences.

Turning to 2012, while we have not yet finalized the 2012 plan, we want to share some preliminary thoughts regarding the overall market environment. We will provide more detailed guidance at our Analyst Day, which is scheduled for February 14.

As Gary outlined, we continue to expect a challenging economic environment for our clients in 2012; however given the nondiscretionary nature of our services and our strong business model, we expect that we will continue to drive organic revenue growth in 2012. We anticipate that revenue growth within our international business will continue to outpace the North America growth given the more mature markets in the US, the highly competitive environment, and the ongoing impact of bank consolidations.

We believe that improved operating leverage and our ability to manage costs will enable us to more than offset continued pricing compression and client consolidation in 2012. With that in mind, we expect EBITDA to grow more closely in line with revenue in 2012 and expect the margin to be higher compared to 2011.

Finally our thoughts regarding the use of cash remain consistent with our previous outlook. While we are focused on growing the business organically, we continue to look for opportunities to augment growth with mergers and acquisitions.

That being said, the newly authorized share repurchase program provides us with additional flexibility to repurchase stock if we are unable to find deals that provide good strategic and financial benefits for FIS.

That concludes our prepared comments. Thank you for your time this morning. We look forward to seeing you all in Orlando on February 14. Operator, you may now open the line for questions.

(Operator Instructions). Glenn Greene, Oppenheimer.

Thank you. Good morning. I guess a few questions. I guess the first one would be kind of the fourth-quarter implicit EBITDA ramp. By my quick sort of back of the envelope I get about $490 million EBITDA. Maybe, Mike, you can tell me if that directionally makes sense. And how do you sort of think about the ramp from 3Q to 4Q? I know there is some seasonality there.

I think that's directionally correct. There is a little ramp going in the fourth quarter. There's always a little seasonality. I think as we've stated throughout the year, we have had continued sales success heading back into last year. So we've got some backlog coming on board. So we feel pretty good about the finish to the year.

So there is going to be a little ramp expected going into fourth quarter.

No other specific callouts or is it sort of the normal seasonality? I guess the question is how do you get comfortable with that?

I think it's normal seasonality. Again, it's the backlog of sales that we've previously closed.

Okay, then not to press too much on the high-level 2012 comments, but sort of just suggesting some organic growth, people are probably going to walk away from this call saying that's kind of disappointing relative to what we have sort of seen year-to-date. Maybe what some of the commentary from some of your peers?

And also related to that, it kind of sounded like flattish margin leverage.

First of all, we're not really giving our outlook for 2012 at this stage, so I think the message there is that even though the market -- there's a little choppiness and uncertainty in the financial institutions, we do expect to grow next year. I will leave it at that.

We expect growth -- we will come out and share the level that we expect to grow when we do our call on February 14. So the intent isn't to mean that say anything other than we are going to grow.

Secondly on the margin, we said it was important as we looked at '10 -- '11 versus '10, we had some margin compression in some various areas. When we do apples-to-apples comparison, we feel pretty good about the underlying business continuing to perform. And so as they look at '12 versus '11, we just wanted to make a statement that we do expect we'll get some margin expansion in '12.

So, Glenn, our intent was to say that we expect growth next year. We were not looking to be specific as to what that would be at this point.

As we stated, we still have a very strong pipeline. We are not seeing any degradation in our pipeline and we are continuing to close business out there.

Great, I will jump back in queue. Thanks.

Greg Smith, Sterne, Agee.

Can you just step back? EBITDA has been shaded lower and it seems like we are not getting that much margin expansion next year, but just what are some of the specific challenges that have come up this year relative to expectations a number of months ago?

Well, let's answer those in order. First of all, we're not saying how much margin expansion we are getting next year. We're just saying we are getting some. So I don't want anybody to read into that that we are trying to indicate a level of expansion.

And again what we have tried to do in 2011 as we have gone through the year is show you where the margin expansion challenges are. So if you look at some of a couple of the big items we've called out, clearly Capco has driven some nice growth. They performed well in Europe. We have had some challenges in the North American market and so overall, it has been dilutive to the margins. We have called that out each quarters so you can see how that impacts.

Again our view on Capco is still very bullish for the long haul. I think they've done a nice job of moving their business forward and we think that the opportunities it allows for the broader FIS to get involved in some large transactions is -- continues to be very important for us.

We have also had some one-time items and again last year those one-time items were not embedded in the EBITDA that you are looking at. So as you look at some of the integration-related costs or the one-time costs related to severance and M&A that we've called out each quarter. Then again trying to look at last year this quarter we had some items last year that were one-time of nature.

So the margins are a little lower than we had anticipated going into the year but compared to last year, we feel pretty good that we are maintaining our own and expanding them slightly in an apples-to-apples comparison.

Greg, this is Gary. Keep in mind as well, we talked about it in my remarks for the last several quarters. We continue to see a trend towards services, professional services, outsourcing services, back-office services that just come on in a different revenue mix than our licensing business. So when we were going through a planning side, we always saw that the larger institutions were going to look -- and all of the institutions would look to leverage scale over time to get more cost-efficient. But that trend has gone faster through 2011 than what we thought.

Okay, then just broadly on cost savings opportunities, where do we stand? Is there any low hanging fruit left from all the acquisitions or are we largely done with that at this point?

I would say no, no longer low hanging fruit. But I would say we are kind of two years past the integration of Metavante and I think Gary and the team continue to look for ways to get more leverage. I think going -- as we're looking through the budget process going into 2012, we will continue to do that and I think they are doing a nice job of finding some additional areas to get some leverage. We have to do that every year as we've talked about in the past.

And so I think we will certainly get some of those going into next year. I don't think that they are simple things to do. I think the team has done a nice job of finding them.

Okay, and then just one last question. Any initial range for the tax rate next year, Mike?

I will hold off on that. It's a little difficult year-over-year as we look at it. Part of the challenge this year versus last year -- if you remember last year, we didn't get the (inaudible) credit till the fourth quarter. So fourth-quarter rate was extremely low and then the full year was -- came in -- this year the team has done a very nice job. There's some one-time things. There's some other things that will carry forward into next year.

But we will -- when he get to kind of the full year outlook, we will give you the tax expectations.

Okay, thank you.

Dave Koning, Baird.

I guess first of all just on international, it's clearly evident you talked about the deceleration coming just with the very strong growth you've had the last four quarters and with the anniversary of the Brazil portfolio. How should we look at the mix of growth now though? Is that still a double-digit grower that business as you kind of outlined before? And kind of how do the other two businesses, financial and payments in North America may be offset? Are those going to start to pick up the new growth a little bit in Q4? It seems like the costs maybe are a little easier.

Does that get a little better or how should we think about this kind of going forward the next couple quarters?

First on international, as you can see we have had tremendous growth this year, much higher than obviously teens that we would anticipate long-term. But as we shared some of that is going to be -- we are going to grow her, that Tedesco conversion. Just keep in mind, we still expect very strong growth in that Brazil operation. It just doesn't have the one-time pop that you have from a conversion.

So our long-term expectations for international continues to be double-digit. We still think that's going to be a much faster growth market for us than the US market. Your points on the rest, FSC had very good growth., the first two quarters of the year. The third quarter really was just some grow-over challenges, just some licenses that we had booked third quarter of last year. So I would expect it to pick up again in the fourth quarter.

PAC has been a challenge for us. We are seeing a lot of movement, a lot of activity around -- coming out of Durban. Even day by day, the bank is kind of changing their strategy. So I think we've still got to wait and see how that comes out. The team has done a nice job of maintaining earnings in that area, and we do expect that we're going to get a little bit better growth than we have seen recent quarters but that -- PSC is going to continue to be a tough business.

FSC, we expect third quarter as more of an anomaly for the year than the norm. And international, we are still pretty bullish on that long-term.

Okay, then just a few real quick ones. I guess you sold your portion of monetized, the 51% US portion that you owned. Is that in guidance? Well, is there going to be a gain in Q4 from that, and is that in guidance?

No, that wasn't in my outlook that I gave you. We are still doing the accounting, but there will be -- we would expect a slight pickup on that just the way that worked out. Just to clarify, we basically sold our portion of the JV, but took equity in the parent company. So we are still very involved in monetizing.

And have an ongoing commercial arrangement.

And have a partnership going forward. Just, if nothing else, changed the structure a little bit.

Okay, and then the other two quick ones there, just what was Capco's year-over-year growth in Q3 standalone? Is the minority interest, that $3.9 million or whatever -- that was a lot higher than normal. Is that going to stay higher or is that going to go back to the $1 million or so a quarter?

Well, the minority interest is tied to our JV down in Brazil and so as that grows that number is going to continue to grow. So we expect Brazil to continue to perform so that number would continue to be at that level or hopefully go up right as we get more earnings.

Capco North America had relatively flat growth year-over-year. The European operations had very strong growth year-over-year. So Capco European organic growth year-over-year the third quarter, the Brazil JV third quarter, and then as we've seen the rest of the year, the international business outside of that has also had continued strong growth.

Sounds good. Thank you.

Peter Heckman, Avondale Partners.

Good morning. As regards Capco and some of the expertise that it brought in the capital markets area, can you talk about some of the projects or some of the demands drivers within capital markets that might be driving some professional services work or strategic consulting? And then any success in kind of porting that expertise over to the US or other markets?

Well, I think on the capital markets side, that's one of their -- they've got four really domains that they focus their consulting business in and capital markets being a very strong kind of legacy of that organization that continue to have a lot of success. There's a couple deals we didn't share today that they are finalizing particularly over in Europe. The capital markets marketplace has the same kind of pressures and challenges as commercial banking and retail banking and I think their position and reputation in that market is extremely strong.

So they have continued to do well and we will talk about some of the deals as we get those signed and ready to announce. I would say bringing capital markets expertise, obviously we've got a little --a limited overlap in capital markets, so I'd say it's more those relationships and those financial institutions where it provides value to the rest of FIS. So they generally have a higher level of relationship where they have worked with more C-level executives over the years and have formed deep relationships. And that has been a tremendous success bringing FIS in for those discussions, dialogue.

It's early-stage solving. The business challenges that the FIs have, whether it be efficiency, whether it be kind of new technology or products or change in markets or regulatory and then it's generally earlier stage in responding to an RFP. So we've been pretty excited about that level of access to the executives that they brought to us.

Keep in mind, Pete, as Mike stated, they have for domains, so it's just not purely capital markets and we are seeing a lot of consulting engagements in and around this transformation in both Europe and North America, where these larger clients are struggling with getting more efficient. And also while the North American growth rates and the EBITDA production has not been what we expected as we shared with you in a prior call, that was due to a very, very large single client loss.

So the team there in North America has done a very good job of selling through that and now they have a far less concentrated client base, so they have far less exposure. So that organization is in a much better position going forward and seeing consulting engagements across all four of their domains.

Got it. Okay, that's helpful. Then as regards -- you brought in the bill payment for BMO Harris. Can you talk about the conversion of M&I and BMO to Systematics, how that's going and when do you expect final conversion?

Yes, well, we are still working through it with BMO Harris. As you guys are aware, we've talked about it on prior calls, we have the processing relationship with BMO Harris and also with M&I. So as we pull these two groups together, right now the conversion is scheduled for third quarter of next year but we are still working through the details of that. And there are going to be components like we mentioned this quarter where BMO Harris came on with their bill payment onto our solution stack. So obviously M&I was using us for bill payment services as well, so that gets combined together.

So we are trying to stage the project. Any project of this size will require some staging and we expect a significant long-term relationship with the combined entity.

All right, thank you.

Brent Huff, Stephens Inc.

Good morning. A quick question. Just trying to get a little bone of classification if possible on the Capco US big project that went away. I think it was in mid 1Q that you started talking about it. Can you give us any sort of how big that is, what kind of impact that had on organic growth for the Company or in the North America segment this quarter?

I don't know if quarter wises, but that was -- last year there was a client that was driving approximately $60 million of revenue to Capco and this year it's probably under $10 million or around $10 million. So again, it was a large client, significant client. It was a surprise to Capco and us obviously. It was one of these situations where it wasn't project-related or even technology investment. It was a business decision at the FI level and not just in this project but across the board in terms of what they decided to do going forward.

So you can see the impact on a year-over-year basis. That was a pretty strong revenue stream for Capco last year third and fourth quarter and then this year it's much, much smaller.

Sure, and then just in terms of the conversations with clients both in the US and in -- I guess specifically in Europe, Gary, I always appreciate your insight into that and kind of what they are asking, what they are thinking. Has anything really changed versus last quarter in the US and what has changed in the conversations versus last quarter in Europe?

You know, Brett, I appreciate the question. But it really hasn't changed that much quarter-over-quarter. Whether you are in Europe, whether you are in Asia, Latin America, or North America, our clients are looking to -- for help and they are looking -- and our prospects are looking for help and they are looking for primarily leveraging it through the services side. So that's why we continue to see that growth in services quarter-over-quarter.

Everybody want to leverage our scale. They realize they can no longer afford to run their legacy applications. They no longer afford to continue with large in-house development shops and so they are looking for ways for us to help transform them in a more cost-effective way. And so that really hasn't changed over the last two quarters and if you -- we monitor our pipeline very closely and we continue to see just more and more demand in those areas.

Okay, and then you called out some pricing in payments, Mike. Can you -- any more specific detail on that? Has that gotten worse than prior quarters or is that just sort of reiterating a fact of life in sort of processing?

Yes, I think that's more kind of how the business works. There's been some compression. We see it every year as he put our plans together. I don't know that I would say it's significantly worse or different this year or this quarter. But it is -- part of the payments challenge as we talk about is -- you've got the check secular decline. You've got some pricing pressure which is normal. You've got some consolidation of some customers in that business and then we've had a little slowdown as we've talked about in the past. People waiting to see the outcome of the Durbin and how that would impact them and I think quite frankly we are still going to see a little. We just have to wait and see where institutions come down and what they're going to do with their debit programs and --

And as we approach April.

And it's changed, right? It's changed week by week.

And then any --? Just last quick question on housekeeping. The corporate cost run rate has moved around a little bit. Any -- what's a good number going forward or is -- will that jump around?

I think if you normalize this quarter, it's similar to last year's quarter, so in the 85 to 90 range.

Okay. Thank you very much. I appreciate your time.

David Togut, Evercore Partners.

Thank you very much. Gary, your opening comments were very helpful in terms of client trends. Could you elaborate a bit as you kind of -- let's say start with community banks up to mid to large sized banks in terms of unit demand trends and financial segment. And also if you could layer on some insights in terms of unit pricing trends?

Yes, I'd be happy to do that. When you look at community institutions, let's just start there. That was where you started. If you look at community, there's still an element of community institutions that are struggling with survival. We continue to see FDIC closures or arranged marriages in the market. But I would tell you there's a very large portion of community institutions that have weathered the storm and making some investments as evidenced by our core wins and some of our competitive cross sales.

Interesting towards the latter part of the third quarter, we saw a spike in our new account openings due to some of the fee generation tactics that the large financial institutions put in place. As you guys are aware, a lot of those institutions now have pulled back on those fees but there really is -- we really could see an increase of account movement to those community institutions. Obviously that benefits us because we are -- we do so much outsourcing in that space. We will get increases in account volumes on the core banking side and get increases on the transaction side, on our payments businesses.

So I think the majority of the community institutions have weathered the storm and they are starting to make strategic acquisitions -- starting to make strategic acquisitions and strategic investments.

When we move up in the midtier market once again, we are a very, very large provider in that space, heavily tied to outsourcing. Mid-tier and large financial institutions both are really driving a lot of services business for us. Those services are coming really in two forms.

So keep in mind the data processing that we always provide and the payment processing, but when I talk about services, I'm talking about IT services to either drive implementation where our financial institutions are acquiring other financial institutions. So we continue to see very strong demand in that area.

We are also seeing unique enhancements in support of our clients driving programming services into their organization to make them more efficient as well.

So when you start moving up in that market, you see a lot more of the acquisitions occurring. We think. as I shared my comments, we think we are very favorably positioned there given our market share in mid tier ad LFI and we have seen that over the last several quarters with our business growth in those areas.

Could you elaborate also on unit pricing trends in each segment as well?

As Mike shared with you, pricing compression has been -- I've been in this business for well over 20 years and we have always seen some form of pricing compression. It's a competitive market. Are those pricing compressions increasing? I would say slightly yes, but I would also tell you that we are -- given our scale, we are able to compete very, very effectively in that market because of our scale. The nice thing that's playing in our favor is the cost of the unsustainable trend towards outsourcing of not only your data processing but your professional services, your back-office services, because of our scale in that area, it really puts us in a very nice position on that front.

Just finally, Mike, a question for you. I think Greg asked a little earlier about the cost picture. Your principal competitor has I think a very sizable cost take-out program in place. Since you are in the same businesses essentially, why wouldn't you start a more formal quantified cost take-out program to help margins longer-term?

First of all, we've had one, right? We've had one as part of the merger integration with FIS and Metavante. I think the approach that they have chosen to share a five-year plan and lay that out, we as part of our annual budgeting cycle and going through this, as we talked about, Gary and team scrub through and they find ways to take out costs. It's the nature of our business. You have to do it every year. That's how you get your earnings growth and it's part of how you get your expansion.

So I appreciate the input. We will look at how we do that, how many years we set a target, but I think we've talked in the past about kind of the basis points per year that we target. And when we get to our Investor Day, we will clearly lay that out.

Yes, I was just going to add a little bit historically just look back on our -- we have always been very prudent with our expenses. And to Mike's point, we have always -- the team has done an excellent job of managing their expenses and instead of making a big deal about it, we just expect our teams to be more efficient each and every year in the services they deliver.

Now there are going to be an occasional exceptions, but as Mike said, we're going through the 2012 process. We are just like every year scrubbing our businesses, building out our plans, and being very focused. And we want to make sure that we get margin expansion in 2012 and continue to grow our business. So that's the way we have always run the Company.

David, this is Frank. It's not clear why we made an announcement on expensed takeouts. It's how we've run our business each and every day. I will tell you as we go through the budget cycle if we feel we need to get more aggressive in our operations and expense takeout, we will do that. So that's clearly something we look at. But we are going to do it as a course of business and if we feel those are the steps we need to take, then we are up for it and we will take those steps.

Thank you very much.

Ashwin Sirvaikar, Citi.

Thanks, so if I better phrase your margin comments, you said you had the ability to offset such things as revenue mix, pricing, and so on for 2012. You provided some details of pricing there. Are there any other one-time factors we need to worry about for 2012 that you need to account for other than revenue mix and pricing?

Again, I think our business as we look at it going forward, it's been this way. You have got the pricing compression. You've got consolidation in the marketplace and then you've got the opportunity within our installed base. We do get to push through some increases in some parts of the business. You get volume growth. Gary talked about our customers adding accounts, adding -- consolidating with banks and then you sell and you grow.

I think the story for '12 is going to be very similar. We have shown that we can do that and get topline growth, but those headwinds are not something new. Again, we haven't seen dramatic changes. We had that in '08 and '09 but we haven't had that kind of ongoing. It's been more normalized compression and loss and that would be our expectation going into '12.

So we will certainly lay that out but I think you should look at it and say 2012 normalized year, challenging as ever but we expect to grow.

Okay, and use of cash -- what's your thoughts between M&A versus debt pay down versus buybacks? How full is your deal pipeline looking? Any comments on deal pricing?

So we've got debt we have to maintain. We talked about what our mandatory payments are next year. We think we have done a nice job of deleveraging from the recap last summer and continue to move towards our EBITDA multiple targets that we have had.

Secondly, we always are out in the market looking for acquisitions. We still think there's opportunities to do some acquisitions or you heard some of the products companies we've brought in the past, expand market share, diversify internationally or other segments in the market where we can get higher growth.

So we will continue to look at that. And then as you've seen if we can't find the right fit strategically with the proper financial return, we will use some of that cash flow and buy back shares and our Board has allowed us the flexibility with their renewal of our buyback program to do more of that. But we're still pretty bullish on finding some deals to get some added growth and continue to consolidate the marketplace.

Any comments on deal pricing there?

You know, I'd say the deal pipeline is very active. I think we are continuing to see -- we've seen this probably in the last three or four years that institutions like to have a vendor of size and scale. They like to have a provider who is going to be around for the long haul. They like to have a provider that has a strong balance sheet and cash flow to reinvest in the business. And they prefer to work with fewer vendors that they have some leverage with and a broad relationship.

And so I think we have seen companies that don't fit all those characteristics continue to come up as potential opportunities for us. I'd say the pipeline is as active as ever and again, we think there is some nice opportunities to pursue.

I am not quite as bullish on the pricing expectations. I think that you go through these cycles where pricing is always pegged to the highest valuation in a historical sense as opposed to a future sense and so we just have to be disciplined as a buyer and make sure we don't overpay. We get the right value out an

So we have an eye for growth clearly organically, but clearly also with acquisitions. But we will be prudent and what we will spend and financially to make sure there's a return on the business, but we clearly do have an eye towards acquisitions and we want to grow the Company that way along with our organic growth.

Okay, got it. Thank you.

Julio Quinteros, Goldman Sachs.

Great, Mike, maybe just to go back and try and I guess continue to be on this 2012 commentary a little bit more. You do expect to see organic growth and on top of that, you do expect to see EBITDA margins expand. Is that correct?

It is and that's the two comments we've made and here is why we're making those comments. I think we have gone through periods in the last couple of months have been a fair amount of noise about financial institutions particularly in Europe. And while we think they are under continued challenges, the nature of our business because of what we do and how important we are to FIs, we still think there's opportunities for us to grow. And so we just want to make the statement that we don't -- while we see it's challenging, we still see it's a growth market for us and we're going to get growth in 2012.

The comment on margin is if you look back at our history the last five years, I think we've done as well as anybody at taking our EBITDA margins and improving them. This year we have explained year-over-year if you do apples-to-apples, it is a pretty solid margin story but at an absolute level, it's a little lower than people would look at it, what we had anticipated.

So going into '12, that's the focus of Gary and his team, to find out where we can take -- make improvements, focus on mix, focus on taking costs out and getting some margin expansion in 2012.

So if you look at that, we clearly expect to have organic growth next year, okay, to clarify that point one more time, and also there will be a very clear focus on margin expansion into 2012 from the top management of this Company on down.

Understood. Maybe just two other quick points. On the point about consolidation in the industry, is there something specific that you guys are expecting to materialize in 2012, a large client going away or something along those lines that would cause you to flag that? I was just a little surprised because consolidation happens all the time. But it just seems like this time at least you guys went out of your way to make it a point.

No, I think we try to make it a point every quarter that we have consolidation. We talked in the past about the one and we got the question again today. M&I has been merging with Harris. We're working through that. We're sitting on both sides but I think we have been pretty up front as that moves, we think it's going to reduce our revenue stream over the long haul but still be a significant client.

We don't -- we are not trying to highlight any additional consolidation other than the ongoing risk in the marketplace, but I think we have highlighted that consistently.

These are risks that everybody is exposed to in the industry. In fact we have highlighted a number of times on calls just the fact that our position in the mid tier and large financial institution actually consolidation could play to our strength right? Because a lot of the acquisitions that are occurring is the mid tier and larger institutions doing the acquiring -- and doing the nature of our leverage model. So it's just an industry issue.

Got it, and just lastly, the ATM guys, the Diebolds and NCRs of the world, they have reported really strong order growth from the small and community sized banks. Just trying to juxtapose a little bit in terms of where the priorities could be right now for the banks. When you sort of lay out core versus some of the channels, whether it's the retail branches themselves or the ATMs, is there something interesting happening in the industry here that seems to be driving a little bit more spending on some of this ATM technology versus the core systems or do these things kind of happen in sequence and we're sort of in the natural course of the upgrades that have to happen?

I'm just curious on how that eventually impacts the core as we start thinking about kind of the next couple of years here.

Yes, it really is cyclical in nature. If you look at it, we do see and we highlighted in my remarks several financial institutions that are going to our TouchPoint Channel suite. And so we are seeing investments in channel. When you're looking community institutions specifically and are upgrading of ATMs, as I've said in an earlier remark, you are seeing a natural progression of these community institutions who have survived the storm and they are making investments. Some -- a lot of the ATM technology especially in community institutions is very old.

What they are doing is they are upgrading their technology to compete with the large financial institutions. Some of the newer models provide some efficiencies with image capture and some of those things and that helps push activity out of the branch at a more cost-effective level.

So in general, it's just really a cycle but we are seeing clients invest across the channels especially in the channels that can drive more cost-effective deployment of those same services.

I would -- analogous to us is I think, we still continue to believe there's some institutions out there and probably more midsized and large who are running legacy environments around core or customer or channel that need to be upgraded. And as they continue to stabilize their balance sheets, we expect that to be opportunity in the future.

At the end of the day, the financial institutions out there are looking at just every area to help drive cost efficiencies. And coming to a more moderate core like FIS provides on an outsourcing basis, leveraging our skill and services, leveraging our solutions across the channels all benefit them from that standpoint.

Thanks, guys. Good luck.

Tien-Tsin Huang, JPMorgan.

Thanks so much. Good morning. Just a couple of questions I guess, Mike, just the international, what was the growth excluding the Brazilian JV? And tied to that, sort of, Gary, what's the outlook for sort of new wins inside the Brazilian JV, what does it look like organically or inorganically?

I don't have right in front of me. Again, the three components international growth, the JV grew well and year-over-year we have the conversion obviously of Bradesco, which was a one-time pop. But then on top of that, they continue to add new cards each month. Capco had very, very strong growth in Europe and then the rest of the business, Gary's team has done very well as well. So I don't have the split right in front of me.

Let me speak to the sales efforts within international and I think specifically you asked about the JV. To Mike's point, we are seeing good, strong -- continue to see good, strong organic growth in cards. We're up to about 48 million cards on that environment today. We are seeing a very nice pipeline of expanding services across those client bases in the joint venture. So we are still very bullish on the joint venture going forward.

When you really step away from the JV, though, the international story is very positive. We're having strong sales success in Europe and Asia and really all of the regions and really it's across a combination of core and payments. We talked a lot about that at our investor update last year. We'll talk about it more again this year.

But all in all the international story is a very strong one and we are seeing nice organic benefit across all those areas.

Good, that's good to know. Just last follow-up, just on the US side in debit, I'm curious is the bias still to think that post-Durbin you will see it to be a positive there within the debit and (inaudible) business or has the tone changed a little bit there?

I think debit is bouncing all over the -- I think Durbin is bouncing all over the place. It seems like every week someone's got another idea or a different approach. We are still cautiously optimistic. We had some very strong success in sales across our nice network. We've seen very strong growth there. We have seen nice transaction growth in debit. And so I would say we continue to be cautiously optimistic about that going into 2012. But it's going to continue to bounce around as LFI is greater than $10 billion. Try to understand what this means before the April deadline.

That's tough. My head is still spinning from it.

Back on Brazil cards, so if you remember last year when he converted them, we said about $40 million a year, so kind of 10 per quarter converted and it's grown on top of that, so it's probably 12 million, 13 million is the growth year-over-year in card.

Terrific, great to know. Thanks, guys.

Bryan Keane, Deutsche Bank.

Good morning. I just wanted to clarify the lengthening of the sales cycle. Is that just in international or is that both international and North America? Maybe what's driving that?

Really I would say in general, it's across the board and I think it's just -- I think at the end of the day it's economic. We are also seeing our pipeline grow and we are continuing to close a lot of business. We feel very comfortable about our sales performance going into 2012.

But because of all of the regulatory uncertainty around Durbin, for example, we are still seeing some hangover and people trying to figure out what decisions they are going to make and how that goes.

What we are finding is also our proposals are more broader in nature than they were in the past, so as I shared earlier, our clients are relating looking for a more holistic solution across all the board, whether it's channels, branch, delivery, core, and back office. So it just takes time.

And so we are not concerned about it but it is -- but the deal flow is lengthening, but the pipelines continue to grow. We continue to sign some very good business and we are seeing it across the globe.

Okay, that's helpful. Mike, I might have missed it, but did you give the professional services and license sales numbers year-over-year? I don't know if there's a way to look at that organically with Capco in there.

No, I didn't reference that and again, Capco year-over-year is a pretty strong growth particularly in Europe. US is actually relatively flat as we talked about year-over-year because of the loss of one big client. But PSO year-over-year is about an 8% growth. Software is actually down. We talked about some large sales last year. That's down about 12% year-over-year.

Okay, and then just last question, I think part of the confusion on '12 was I think in your comments, Mike, that you expected EBITDA to grow flat or to grow in line with revenue growth, so that would be -- unless I got that -- wrote that down wrong, that would mean you wouldn't see EBITDA margin expansion. But obviously you guys reiterated several times that you are going to see EBITDA margin expansion, so maybe you can just clarify the difference there.

That's a good catch. So in line plus, right. So it's going to be slightly higher than revenue growth because we are going to get margin expansion. So I guess the message is topline growth and then our EBITDA is going to grow slightly faster than our revenue grows.

So we may have caused some confusion there, Bryan, but we will have EBITDA margin expansion in 2012.

Absolutely.

Okay, great. Glad we cleared it up. Thanks so much.

Dan Perlin, RBC Capital Markets.

Thanks. Mike, I was wondering if you could qualify maybe a little bit how we should be thinking about the margin differential for your outsourcing versus license as that mix shift occurs next year. And then really the relative size of those deals historically or how they are being kind of packaged in RFPs.

On outsourcing versus license, the challenge of the license business is the quarter you book it, it is almost -- well, it is all profit, right? So you book it -- it' 100% margin that quarter. That's why the year-over-year comparisons are tough.

I think we look the license business more in totality and look at year-over-year the amount of license fees that we are going to book consistent with the prior year? So as we work through the 2012 plan, we will be looking at that.

But license, if it's 100% margin, our outsourcing business, you can assume it's kind of our average margin of our business. Some are higher. It generally run higher than PSO over the long haul but again, PSO can be higher margin in the short window.

But again, software, you have to match software to software or you've got to drive higher outsourcing. Gary pointed out that I'd say the deals we are engaged in, we like outsourcing opportunities that are more than a single product, so we like multiple products. We like kind of a broad base of solving a business challenge, creating a business solution as opposed to just single product technology solution. We think we have a broader breadth of products out there and we're able to go on with more scale than most of our competitors.

So that -- those are the kind of deals I think when Gary talks about elongating the pipeline, those take longer to sell.

Exactly, and keep in mind, we talked a lot about margin expansion and the fact that we're going to get it in 2012 as we have historically. One of the ways we get there is cost actions. One of the ways we get there is we've got a lot of leverage in our leverage processing environments, and so that naturally drives margin expansion as well.

When we talk about software, keep in mind we are trying to identify for you guys trends we are seeing in the market and I think it is safe to say that going into 2012 we think the trend is going to continue to be going towards outsourcing because that's where the financial institutions can truly get the most benefit.

So as we're going through our 2012 planning process, do we think software is going away? No, but we do continue to think that there will be a trend where more and more of our deals will go on an outsourcing basis.

Okay, so that absolute dollar per those deals in addition to the mix shift is -- sounds like it's also getting bigger given the multiple products facet. So let me just --

An outsourcing transaction on a revenue basis is typically much higher.

Yes and increasing with more products now even so. So that should be good for leverage. As we just kind of think about kind of cleansing some of the one-time stuff, so you made it sound like Capco had a negative $50 million kind of hittish this year with that North American client. So we won't have that next year but Bradesco probably added the incremental $30 million or so with that portfolio, which we also will not have that year. Is that correct?

I think those numbers are pretty accurate with what we've talked about.

Okay, then as we look at Capco's business and kind of I guess evidence to win larger RFPs, are you finding that you've been pulled into all of those deals that you would've expected to have been pulled into this year or kind of left out for lack of a product set that maybe you didn't have? I'm just wondering how that has played out thus far?

I think as we have shared, I think we've been very pleased with the type of discussions and dialogs. Two types, one is just engaging at the executive level on vision direction where FIS can help at a broader level and just the Capco consulting side to help in institutions and then very specific transactions where we are able to go in and some cases initiate a dialog and put a proposal on the table that the client was not even considering or engaged in and look at where we can help them with their product and their efficiency. And in some cases are clients, as FIs all of the globe are struggling more and more to become more efficient with their cost structures, where they have reached out and we have come in with kind of a broad proposal.

So again it's the discussion dialogue. It's gone as well, probably better than we had expected when we did the Capco transactions. These things take a lot of time. We need to get some signed and announced and shared with you guys, but we are still very pleased with the type of discussions, the type of opportunities we are seeing.

We have gotten to some levels of organizations globally that we would not have been able to do, quite honestly, on our own as everybody else would before Capco, so that has been very, very encouraging. So now we are looking to is too, as Mike said and Gary, just close some deals.

Does that make your business a little more lumpy, do you think?

Actually I think it will do the opposite. I think it will -- because the type of transactions are going to be more recurring long-term contracts.

And more transformational in nature. It will have a heavy services component, heavy delivery components, really bringing our strengths of the Company to bear for these financial institutions to help transform their institution.

End result, it should be less lumpy.

Exactly.

Super, thank you very much.

Andrew Jeffrey, SunTrust.

Thanks for taking the question. I just wanted to elaborate or ask you to elaborate a little bit on David's question with regard to the domestic competitive environment. And I realize that pricing has always been sort of modestly negative in this business, but is there -- is it your sense that because the market has the outsourced processing market has consolidated as much as it has in last few years, that increasingly it's a zero-sum game whereby you and your largest competitor are kind of going head-to-head for business kind of across the financial institution spectrum?

Or is -- or would you encourage me to think about that differently? I'm just trying to get a little more nuance on the competitive environment.

I think Andrew, a points there and Gary talked about it and Mike some. First of all, is there a price compression? Yes, it is there. And Gary even alluded to the fact that maybe it's a little bit greater than it's been in previous years. So -- but we have the size and scale that we can deal with that.

As far as our competition, I think you have to be a little bit careful there. You talk about our major competitors, there's a couple others out there who aren't the largest and who are highly competitive. They have some very good products and then there is a whole card side of the business, too, where we have other competitors.

So when we look at that landscape of competitors, we don't look at just one. There's multiple -- probably seven, eight, 10 different competitors we look at depending on what products we are selling and I don't think you should just look at it as just the largest out there because there's some others who are very -- have very viable, good products that we compete against.

Yes, to build on that, Andrew, it does change by the markets, so we don't see our traditional domestic competitors anywhere in our international markets. We see a whole different level of competitors. When you are looking at the North American business in the community markets, I think there are a lot of competitors out there across both payments and across core processing. Interesting as you move up in size, our largest single competitor in the large financial institutions is the in-house developed software. So that's a different competitor than you might think.

So it really, you have to look at it by market. You have to look at it by geographic region. It's a competitive market out there. We don't by any stretch of the imagination think that there is just one competitor. We see a lot.

To reinforce Gary comment, we have a very large international business today. When you look at that set of competitors, it's very, very different than what we have domestically.

I would say, Andrew, too, the domestic kind of full-service outsourcing market, community banks, midtier banks, we continue to believe it's going to be a small handful of providers who are going to be successful long-term. So whether it's two or three. But it's not a lot that are going to compete nationwide, and I think we still have a belief that with that marketplace there's an opportunity to continue to win deals but also to be more price disciplined over the long haul.

Okay, that's really helpful color. and then a final one on Capco. Are there any other callout customers where you have sort of event risk or how do you manage that when you look at the Capco business in light of kind of the surprise you mentioned that occurred this year?

Well, I mean the answer would be no. Again, with the very large clients that they had, it was -- the circumstance behind it were not something I think any of us would have predicted sitting in the room or any of you listening would've predicted a year ago.

They've done a great job through necessity of diversifying their revenue stream. So while they have some clients larger than others, they have a much broader customer base. They have a much broader pipeline. They have a great group of partners that go out and sell. So I think sitting here today we feel much better about their diversification, and to minimize any changes or impacts going forward.

Andrew, it's one of those good news/bad news. You hate to lose one that that's large or decrease that much, but they diversified so well that we think we are in a much, much better position going into 2012.

Great, thank you.

Thanks again, everyone, for joining us this morning. Please remain on the line for the telephone replay instructions.

30 a.m. Eastern time today and will run through November 15 midnight. You may dial the AT&T executive playback service by dialing 1-800-475-6701 with the access code 219066. International callers may dial area code 320-365-3844 access code 219066. That does conclude your conference. We do thank you for joining while using AT&T Executive Teleconference. You may now disconnect.