Fidelity National Information Services Inc (FIS) 2013 Q4 法說會逐字稿

Ladies and gentlemen, we would like to thank you for standing by. Welcome to the FIS fourth-quarter, full-year earnings teleconference call. (Operator Instructions) As a reminder, today's conference call will be recorded.

I would now like to turn the conference over to your host and senior facilitator, Ms. Nancy Murphy. Please go ahead, ma'am.

Thank you, Steven. Good morning, everyone, and welcome to our fourth-quarter 2014 earnings conference call.

Frank Martire, Chairman and Chief Executive Officer will begin with a summary of our financial performance. Gary Norcross, President and Chief Operating Officer, will follow with the operations report. Woody Woodall, Chief Financial Officer, will continue with a detailed financial review and outlook for 2014.

Today's news release and the supplemental slide presentation are available on our website at FISglobal.com.

Let me remind you that today's remarks 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. Please refer to the Safe Harbor language on slide 3 of the presentation.

Today's remarks will also include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented. These non-GAAP measures are outlined on slide 4. Reconciliations between GAAP and non-GAAP results are provided in the attachment to the press release.

With that, I will turn the call over to Frank to discuss the financial highlights on slide 6. Frank?

Thank you, Nancy, and welcome to the FIS team. Good morning, everyone, and thank you for joining us on today's call.

2013 proved to be another very strong year for FIS. We again drove consistent execution against our targets and delivered solid returns to our shareholders.

I am proud of the progress we are making to execute the strategy we outlined in February 2012. We continued to build global scale in 2013, finishing the year with record revenue of $6.1 billion, adjusted EBITDA of $1.8 billion, and adjusted earnings per share of $2.83.

We generated $1.2 billion operating cash flow and free cash flow of $826 million. We are delivering on our commitments.

Additionally, organic revenue growth of 5% came in at the high end of our guidance range. This marks our third consecutive year of delivering organic growth of 5%.

We grew earnings per share by 13% to $2.83, which was the midpoint of the EPS guidance that we gave you in October, resulting in a five-year compound annual growth rate of 14%. In addition, our continued sales success included multiple deals in the large North American and global financial markets. We finished the year on strong footing, with a robust pipeline and good visibility heading into 2014.

Also consistent with the strategy we outlined last February, we are using our significant cash flow to drive value for our clients and our investors. First, we continue to invest for growth. Second, we stretch in our balance sheet, achieving our leverage target and investment-grade ratings from all three rating agencies.

Third, we returned $732 million to our shareholders, or approximately 90% of our free cash flow. We remain focused on returning cash through a 9% increase in the quarterly dividend and the new $2 billion share repurchase program.

All of these actions reflect the confidence we have in our business and underscore our commitment to further enhancing shareholder returns. By all accounts, 2013 was another successful year.

The success of our Company ties directly to our employees' hard work and dedication to service our clients. For that I want to personally thank our leadership team and our 39,000 employees worldwide.

I also would like to thank our loyal clients, who depend on us and trust us to keep their businesses running every day. It is because of our clients and employees that FIS continues to rank as the number-one FinTech company in the world.

Now I will turn the call over to Gary for our business strategy and operating highlights. Gary?

Thanks, Frank, and thanks for joining us this morning. My remarks today will cover the following important aspects of our 2013 performance and our focus in 2014.

First I will cover our global sales performance, emphasizing our execution and providing examples of continued demand for our breadth of solutions. Next, I will provide visibility to how and where we are investing in 2014 to accelerate our growth.

As Frank discussed, 2013 was a year of strategic progress and strong financial results. Our client-focused strategy and growth investments are driving the desired results and creating positive momentum.

The financial services industry continues along a path of fundamental change that includes connecting businesses and consumers together through new digital channels, providing instant access to information and commerce, and managing vast transaction and dollar flow, while preserving data integrity and information security.

This change brings enormous challenges for financial institutions, and significant opportunities for FIS as their strategic partner, helping to redesign and operate their businesses more efficiently. FIS is enabling this transformation by bringing the front office and back office together, streamlining banking and payments, and creating a more agile, more intelligent, and more efficient business model for financial institutions.

We are doing this by delivering a variety of offerings from our broad and deep portfolio of technology, consulting, and outsource solutions and services. This winning strategy propelled our growth in 2013 and is the underpinning of our strategic focus in 2014.

Turning to sales, we saw strong year-over-year and sequential sales growth in the fourth quarter. We continued to add new clients and expand existing relationships through cross-sell and upsell activity. This continues a trend resulting in more expansive engagements and longer contract terms.

Next I will provide highlights for each of our three key markets: North America, international, and global.

Beginning with our International business, given their accelerated progress again this quarter, we are very pleased with the continued momentum in our International business. Our revenue growth accelerated to 13% in the quarter.

For the full year, our International business grew by 11% to $1.3 billion in revenue, which is further evidence of our credibility and ability to gain scale in the markets that we serve. This position has allowed us to consistently produce double-digit compound annual revenue growth over the last five years in our International business.

Looking forward, we executed well against our sales plan and remain encouraged with the ongoing strength and quality of the International sales pipeline. The change in market dynamics is driving growth opportunities particularly in India, Southeast Asia, and parts of Europe.

We continue to see increased opportunities around long-term outsourcing arrangements, which provide more predictable revenue streams. Our focus on retail banking and payments has created an unequaled brand in the market.

In Europe, I am pleased to report that we have finalized the contract with Sainsbury Bank, solidifying a 10-year agreement for a fully outsourced FIS solution. This very large deal creates significant reoccurring revenue and is a model for other banks in the region seeking to leverage our full breadth of outsource solutions.

In India, we are very excited about our partner relationship with BMB, a new public sector bank empowering women as entrepreneurs, which opened its first branches to the public in the fourth quarter. This represents another outsourcing win for FIS.

Under this contract, FIS provides a solution for the bank covering all their technology needs from processing through network and branch infrastructure. We feel this win is important because India has announced the potential issuance of more banking licenses, and the success of BMB should help FIS with these additional opportunities.

Turning to Latin America, FIS successfully completed the deployment of the credit card management solution for Banco Popular in the Dominican Republic. Through this successful implementation, FIS is now processing over 1 million credit cards for this customer.

In Brazil, as we announced in Q1 the signing of Cencosud, a market leader in supermarket and retail, we are pleased to announce that we successfully implemented this outsourced card processing arrangement. This continues to drive further diversification by adding new clients to our Brazilian joint venture.

In North America, we see continued demand for our full range of solutions as clients prioritize spending around operating more efficiently, garnering more wallet share from their customers, and managing regulatory compliance. We continue to deepen our relationships with community financial institutions such as US Century Bank, offering new and needed services such as digital banking and Payment Solutions and infrastructure management.

Among the large financial institutions, where platform architecture is more complex and requires a higher degree of customization, we continue to see activity around core platform enhancements, including an expanded services relationship for solution integration for Capital One.

Additionally, our mobile business showed significant growth in 2013 on all dimensions. We implemented more than 280 new clients to our mobile platform in 2013 and have a backlog of more than 150 additional institutions due to be implemented in the first half of 2014.

This brings the total number of FIS mobile clients to more than 1,300 financial institutions, which is a 22% increase over prior year. Mobile active end-users grew 36% to 24 million.

We also received strong third-party validation of our mobile solutions through numerous awards, including winning 2013 Best in Class Mobile Banking Vendor Overall by both Javelin Strategy & Research and CEB TowerGroup. Additionally we saw significant press coverage for our mobile solutions, especially our new cardless cash access solution and mobile wallet. Based on this momentum and recognition, we believe 2014 will be another very strong year for our mobile banking business.

We also saw strong year-over-year growth in bill payment adoption, including more than 140 new implementations with more than 70 currently in process of implementation. We are pleased by several significant wins in Q4, including a large channel partner who will sell our bill payment solution to their more than 600 member institutions. Additionally, we also excited to add a large $15 billion mid-tier financial institution as a new bill payment client.

In our global financial institution market, we see continued demand for large, transformational outsourcing deals as cost containment, regulatory pressures, and front to back office transformation continue to dominate our clients' agendas. In Q4, two Tier 1 global financial institutions outsourced their program management function to FIS. This includes an expansion of the project which we discussed during last February's investor update.

For both engagements, FIS will provide access to strategic business processes and technology change experts. Each of these very large deals entails a multiyear engagement.

Next, moving on to how and where we are investing for growth in 2014. First, based on the success we have seen in 2013 and the opportunities we see within global financial institutions, we are investing an incremental $30 million in 2014 to accelerate growth in this market.

As you are aware, the majority of the IT spend comes from the largest global institutions. To capitalize on this opportunity, we are adding new global client partners, sales and client implementation support teams, as well as client-centered marketing investment.

These dedicated client teams will bring highly valuable and differentiated offers to the global financial institutions. We believe this incremental investment will better position FIS to capitalize on the opportunity in this market and be a catalyst to further promote top-line growth.

Second, we will continue to invest in solution innovations to further expand our client value proposition, to drive new opportunities for growth. This includes investments into existing solutions, into early-stage companies, and by incubating an early-stage exploratory consulting service that focuses on the disruptive technologies that are changing with the financial services industry to define new business models with our customers. We currently have several of these client initiatives underway through our innovation centers around the world.

In summary, before I turn it over to Woody, we are executing on our strategy to optimize performance and drive organic revenue growth. We delivered on our financial commitments in 2013, and we have delivered consistently strong performance over the last five years during a very challenging environment for our clients.

2013 was another strong year of sales performance, underscored by large deal signings and new client implementations that are transformational in nature. We have strong momentum and visibility heading into 2014. We continue to strategically invest in key markets and innovative solutions to drive profitable growth.

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

Thanks, Gary. I'll begin on slide 11 with a summary of our consolidated results for the quarter and the full-year 2013.

In the fourth quarter, consolidated revenue increased 5% on a reported and organic basis, after normalizing for currency and acquisitions. Adjusted EBITDA increased 4% to $487 million, and the EBITDA margin remained strong at 30.8% compared to 31.4% in the prior-year quarter, reflecting continued growth in consulting and services revenue and increased corporate expenses.

Adjusted net earnings from continuing operations increased to $222 million from the $201 million; and adjusted earnings per share increased 12% to $0.76 from $0.68 in the 2012 quarter.

For the year, revenue increased 5% on both a reported and organic basis to $6.1 billion. Adjusted EBITDA increased 5% to $1.84 billion. EBITDA margin of 30.2% was slightly favorable to the prior year.

The margin reflects a change in revenue mix resulting from strong growth in consulting and services and increased corporate expenses including sales and marketing, healthcare, and continued investment in security and risk.

Adjusted earnings per share rose 13% to $2.83 per share, which is at the midpoint of the EPS guidance we provided in October. These results include a negative foreign currency impact of $0.02 for the year, including a $0.01 impact in the fourth quarter.

Next I will continue on slide 12 with a review of segment results for the fourth quarter. Financial Solutions revenue grew 4% to $604 million in the fourth quarter, driven by growth in consulting and digital delivery channels. Financial Solutions EBITDA increased 1% to $240 million in the fourth quarter. EBITDA margin remained strong at approximately 40%, down from 41% in the prior-year quarter, primarily reflecting higher consulting and services revenue.

Turning to slide 13, Payment Solutions revenue increased 3% to $618 million, and 4% excluding the check businesses, reflecting growth in electronic payments, including debit, credit, and network solutions. We continue to see improving stability in the check-related businesses, which totaled $110 million in the fourth quarter of 2013 compared to $115 million in the prior year.

Payment Solutions EBITDA increased 7% to $262 million in the quarter, and the margin increased 150 basis points to 42.4%, driven primarily by growth on our leveraged platforms.

Now we will cover our International business on slide 14. Organic revenue growth in our International business accelerated to 13% in the fourth quarter, driven by double-digit growth in Latin America and continued growth in Europe and Asia. Strong sales execution, implementation of deals previously sold, and ongoing demand for consulting and services contributed to the strong performance.

International EBITDA increased 11% to $99 million for the fourth quarter. EBITDA margin was 27.7%, comparable to the prior year, reflecting continued strong demand for consulting and professional services, increased processing revenue, partially offset by lower license revenue.

Corporate expense was $114 million in the quarter, up $12 million from the prior-year period, primarily driven by increased sales and marketing expense and higher healthcare costs.

Moving onto a reconciliation of GAAP to non-GAAP EPS on slide 15, GAAP earnings totaled $0.26 per share, compared to $0.49 per share in the fourth quarter of 2012. GAAP results are adjusted to exclude $0.35 for a previously announced charge for acquisition-related earnout and incentive plans resulting from Capco's consistently improving performance and growth prospects, as outlined in the 8-K filed on December 20. This charge reflects the final settlement and amendment of the Capco earnout and incentive plan provisions.

Fourth-quarter results also exclude $0.13 per share in acquisition-related purchase amortization, and $0.02 per share in cost actions related to the rightsizing of our labor force in Germany. These costs are over and above normal course of business workforce reductions due to the unique nature of separation costs in the German labor market.

Moving on to cash flow on slide 16, adjusted cash flow from operations totaled $431 million in the fourth quarter of 2013. Capital expenditures totaled $98 million or approximately 6.2% of revenue, primarily reflecting increased investment in growth initiatives. This brings us to free cash flow of $334 million in the quarter, compared to $365 million in the fourth quarter of 2012.

For the year, adjusted cash flow from operations totaled $1.2 billion. Capital expenditures totaled $336 million or 5.5% of revenue, resulting in free cash flow of $826 million, which is consistent with our guidance for free cash flow conversion to approximate adjusted net earnings. The year-over-year decrease in free cash flow primarily reflected lower cash tax payments in 2012.

Our uses of cash flow during 2013 were consistent with our capital allocation priorities of investing for future growth, maintaining a strong balance sheet, and returning cash to shareholders. As shown on slide 17, we returned approximately $191 million to shareholders in the fourth quarter, including $65 million in dividends and $126 million in share repurchases.

We repurchased 2.5 million shares in the open market at an average cost of $50.73 per share. For the year, we repurchased 10.7 million shares or approximately 4% of the outstanding shares at a cost of approximately $476 million or $44.58 per share.

The share repurchase program drove a decrease in our weighted average diluted share count to 294.2 million in 2013 from 297.5 million last year. At the end of the quarter, basic shares outstanding were 288.2 million.

Debt outstanding totaled $4.5 billion as of December 31. The weighted average interest rate was 4% at year end. Total debt-to-EBITDA was 2.4 times, which is in line with our targeted debt-to-EBITDA ratio of at or slightly below 2.5 times.

Moving on to slide 18, I will discuss our outlook for 2014. We expect reported and organic revenue growth of 4.5% to 6.5%, driven by accelerated growth in International and continued strong demand for consulting and services.

We anticipate EBITDA growth in line with revenue growth. This includes approximately $30 million of planned incremental investment to take advantage of opportunities in the global financial institution market which Gary mentioned earlier on the call.

We believe the additional investment which we are modeling to occur ratably throughout 2014 will enable us to accelerate our revenue growth. We expect to maintain strong EBITDA margins, comparable to 2013.

As a reminder, termination fees in 2013 were skewed more heavily in the first half of the year and will create difficult revenue and profit comparisons in the first and second quarters of 2014. We are anticipating the effective tax rate to be in the range of 33% to 34%, compared to 32% in 2013. As a reminder, the 2013 rate benefited from favorable resolution of tax items and R&D tax credits.

We expect 2014 adjusted earnings per share in the range of $3.05 to $3.16, which is an 8% to 12% increase over 2013. To be clear, this range includes $0.07 of incremental investment related to the global financial institution market.

We expect free cash flow to approximate adjusted net earnings. Planned uses of cash in 2014 are consistent with our existing capital allocation priorities, including reinvesting 5.5% to 6% of revenue in CapEx, maintaining debt-to-EBITDA at or slightly below 2.5 times, and pursuing tuck-in acquisitions to augment our existing capabilities.

In addition, as Frank noted, our Board recently approved a 9% increase in the quarterly dividend to $0.24 per share, and authorized a new $2 billion share repurchase plan which replaces the existing plan. Consistent with recent practice, we anticipate share repurchases to occur throughout the course of 2014.

In summary, we are very pleased with our 2013 financial performance and consistent execution of our strategy. We are optimistic about our revenue growth and opportunities, based on new client signings in 2013, combined with a strong pipeline headed into 2014. We remain focused on driving EPS growth and creating value for our shareholders.

That concludes our prepared remarks. Operator, we can now open the lines for questions.

(Operator Instructions) Ashwin Shirvaikar, Citi.

Thank you. Good morning, Frank, Gary, Woody. So, pretty solid revenue growth and guidance. Can you help bridge the gap between let's say middle of the range, 5.5% revenue growth, which is certainly above expectations, and the middle of the range, say 10% EPS growth? How much -- you announced the new expanded buyback; how much of that gap is buyback versus -- it sounds like there isn't much debt paydown, margin expansion.

And in terms of margin expansion, how much of a drag should the term fee impact from last year be in first half versus second half?

Yes, Ashwin, thanks. I will hit the last question first. If you remember, term fees were weighted about 70% in the first half -- or the term fees related to BMO were about 70% in the first half compared to 30% in the back half. So if you take our $40 million term fee we disclosed, you're looking at $28 million in the first half of the year as a tough comp.

In terms of looking at the composition of EBITDA versus EPS growth, first and foremost, the investment is about $0.07, to be clear. So without that investment we were looking at more of a 10% to 14% type EPS growth, and that investment is about 50 basis points of margin.

But bridging all the way down to EPS growth, you have seen us buy, I guess 300 million -- 400 million, 450 million, and 475 million over the last three years in terms of share buybacks. Leaving our debt at or around 2.5 times, not deleveraging any further, you could see that increasing somewhat as our plan for 2014 in terms of share buyback.

Okay, got it. Just wanted to delve a little bit deeper into that $0.07 of investment. These types of investments, obviously, while the impact is positive, they tend to rarely be one-time in nature as it's ongoing; you're always investing in something.

Is there a reason you are calling out that $0.07 of investment this time around? Is it related to any specific contract?

I know the opportunity is very, very large, so it is the right thing to do. But could you provide more detail?

Yes, Ashwin, this is Gary. I think that is a great question. If you look at the success that we are having with global financial institutions -- and frankly, just look at the historic success of FIS -- as we built traction in that market, as we have seen Capco come on and penetrate the consulting services business and gain more share in that space, and the success we have had there, as we have gotten some of the signings -- as I highlighted, two Tier 1 signings in Q4 -- we are just very bullish on that market and see a very unique opportunity.

So based on that confidence that we've had from the past, we thought it was time to increase our go-to-market staff there. So you will see us adding people around global client partners which -- and building out teams that we can square off against these very large financial institutions more effectively. Because we think there is other opportunities there that we are just not getting.

Obviously, as Woody talked about earlier, there are some mix issues as we see that. But we are very confident that not only do we get strong revenue growth, we get strong EBITDA production through these engagements as well.

So the reason why we are carving it out, it is an additional investment that is not typical for us. We have waited to see us gain some traction; and with that traction and with that confidence and with the opportunity, we think now is the time to invest more people to go square off on some of those sales engagements.

And we readily expect, as you know, this should push our growth higher. And if it doesn't, we will actually pull down the investment. But we feel confident that there is enough opportunity there that we can grow this market.

The last one is based on a couple of figures. Gary just summarized it really nice -- is the impact of the sales we have seen, the track record we have had. But as important is the pipeline we see in front of us.

Opportunity.

Yes, it is clearly understood. One clarification if I may. I got the $0.01 negative FX impact in 4Q. Is there -- I missed what the FX forward impact in 2014, what is your assumption.

We have outlined organic growth, so we pull out the FX on the revenue. To the extent we have got impact on the EPS line of significance, Ashwin, we will call it out on the individual calls versus trying to give you any kind of headlights on that right now.

Right. No, makes sense. Thank you, guys. Congratulations.

Brett Huff, Stephens Inc.

Good morning, guys. Congrats on some good momentum here. Just two questions for me. Gary, you called out a few things, the finalization of Sainsbury, the new India bank deal, a couple of large program management deals; and I think you used the term very large on all of them.

Can you give us a sense? I think your policy is anything over 25 million TCV is called out. Where do these things stand relative to that, if you can give us additional color?

It's a great question, Brett, and you know we typically stay away from sizing individual deals. We certainly size the India ATM deal as $500 million at the time we disclosed that.

These are very large. They are much larger than the $25 million in size.

Sainsbury, as you would imagine, ramps up over a period of time because it's a very large implementation as we convert it on to all of our products and services. But all of these that I mentioned are much larger than the $25 million in size, so they are very good deals for us.

And, Brett, I think the thing that is happening here is what we talked about on the last few calls. As we went back a few years we used to talk about one or two large deals; now we talk about 10, 15, 20 significantly sized deals that are in our pipeline.

Okay. Then just to put a finer point on the investment, I want to make sure I get it. So this is -- and, Gary, I think you answered it this way. It sounds like it's mostly people and it sounds like it's mostly -- I don't know if you call them sales or maybe business development or those kind of teams that are trying to figure out how you all can help some of these big FIs. Is that the right way to think about it?

Yes, so if you think about it, Brett, we have identified a number of financial institutions that fall in this category for us. Obviously there is actually more than what we have put in this category; but we think there is about 30 institutions that we can truly square off against on these opportunities and win new business.

So what we are building is dedicated teams for some of these financial institutions that we weren't serving throughout the year. We were trying to serve them through leverage teams. And what we have realized is really building out a robust team that can be dedicated to one of these global financial institutions, that is where you are going to find the opportunity.

You are going to start with typically some type of transformational consulting engagement. That will typically follow on like what we mentioned with some large program management opportunities. And then you are going to follow on with products and services, as we have seen with the success of Sainsbury.

So we think the model works very well. We have proven that model throughout 2013. When we look at the opportunity across those institutions, the need to build out some more dedicated teams just makes sense.

So to Ashwin's point earlier, it is a one-time, meaning it is a one-time ramp. But these are going to be ongoing costs for these dedicated teams.

Of course, as we get success across these other institutions, don't be surprised when we come back and build out additional teams for other larger institutions we are not serving. But we are very confident and bullish that there is an opportunity here and that we need to go put the teams in place to go get some of that opportunity.

Great. That's what I needed. Congrats again. Thanks, guys.

Dave Koning, Baird.

Yes. Hey, guys. Nice momentum. I guess my first question, just mobile; you mentioned quite a bit of success in the mobile channel. A couple things there.

That is within the Financial segment, if I remember right. Maybe how big in terms of total revenue is that?

Yes, we haven't disclosed total revenue around that, Dave. What I can tell you is it's not a giant contributor at this point, but it's growing very rapidly right now. So again we haven't disclosed this particular dollar amount, but the growth profile is extremely exciting.

Yes, David, I wouldn't call the number yet meaningful. But I would say to you the potential and the opportunity is very meaningful, what we see.

Yes, at its current course and speed it will be a very major contributor to our overall top line and bottom line. And it is within the Financial segment and does show the traction that we are just getting in North America, and frankly building on the strength of the mFoundry acquisition.

So that has turned out to be a phenomenal acquisition for us. The integration back into our channel delivery strategy has worked very, very well, and we are just continuing to see great momentum there. But it is going to be a big contributor for us. There is no question.

Okay, great. Secondly, just corporate costs, you mentioned they were up again in Q4. I think for the full year they might have been up about 15% or so. Is that something now that will baseline into 2014, or do you expect that to keep growing pretty fast?

No, we expect that to be effectively flat to 2013 in 2014. That will be the expected number.

You saw a ramp-up continuing in security and risk in 2013, which was the primary driver of that major growth component for the full year. We did see some increases in per-claim costs in our healthcare area in the back half of the year.

But we believe that is really more of a normal area. We expect corporate costs to be effectively flat.

Okay, great. Then my final question. Just the deal signings have been really strong. I am wondering; is there a timing throughout the year of revenue growth ramps or acceleration? Or do you expect growth to be pretty stable throughout the year?

Again, as we've talked about the difficult comps, we have got some challenging comps in the first half of the year and believe a combination of the removal of those difficult comps, combined with some acceleration of these signings, revenue growth will be higher in the back half of the year this year.

As you know, Dave, you know this business well. That is why we highlighted Cencosud on the call. We signed that in Q1; we implemented it in Q4. That is about as aggressive as you can get with these large transactions.

So there is typically a ramp of anywhere from 9 to 18 months to bring these online. The India ATM deal was longer, just getting the scope. But a lot of these will be contributors first and the second half.

Sounds good. Thanks. Great job.

Darrin Peller, Barclays.

Thanks, guys. First question is on the buyback plan. Obviously, a fairly material increase.

Like you said earlier, I think you bought back about half of what your authorization was last year. Now with a $2 billion authorization, are we talking about a pretty aggressive year buyback? Can you give us a sense of what percentage of the authorization we should be looking for?

Well, you know, we haven't really guided specifically to the dollar amounts in-year. But we can see over the past three years our default use of cash has been share buyback.

Should we find some M&A activity that is accretive in nature and very strategic to us, we could do some of that. But again, our default use is share buyback.

You couple that with leaving our leverage at 2 to 2.5 or slightly below 2.5, with EBITDA growth we could potentially take on some debt to maintain our leverage profile.

But we will buy shares ratably. The buyback was over four years; so if you do that ratably that is $500 million range or so. And then we continue to take out option dilution as well.

All right. That's helpful. Thanks. One other question. On the International side, obviously you are investing even more heavily in it now, and we see the growth accelerating: up to 13%, a pretty impressive rate.

Can you just give us another sense of the drivers going on? What sort of secular shift you are seeing, how sustainable is this type of growth rate? A little more specifics beyond just the consulting side and the Capco.

I mean, Capco is a part of it, but a little bit more granularity would be helpful as to what we should really be looking for and what is driving it.

Yes. Darrin, I think there is a couple of things. First, you've got to look back historically. We have now had five consecutive years of very strong double-digit growth, compounded annual growth. So we are very confident we can keep this continue.

Some of the things that is driving it, actually the consulting component is actually a relatively small piece. We are just seeing great movement -- and we have talked about on prior calls tremendous movement towards our solutions and capabilities especially on an outsourcing basis.

So you have seen three or four years ago a much heavier license component and much more discrete, independent decisions. Today you are seeing a Sainsbury Bank moving pretty much everything they have across core banking and payments on a full-on outsourcing basis. Those kind of deals didn't occur three or four years ago.

You are seeing the India ATM, which is a huge ATM payment outsourcing engagement. And then you continue to see our growth in Latin America.

So what is happening is these larger financial institutions within these countries, and as we have talked on prior calls we are very focused on a dozen very discrete countries where we are going deep in those countries by broadening our solution set in those. You are seeing them struggle under their own regulatory burdens. Frankly you are seeing them struggle in getting their costs out, very similar to what we saw here in the US.

So for that they are turning and now starting to look for outsourcing opportunities and how to get on a product that is being built for many institutions that they can leverage. So that is really the success of our growth.

And the reason why we are bullish and feel good about the future in International is how robust the pipeline is. When you look at the kind of deals the team is engaging in -- as I said, three years ago, heavily license laden. Now it is almost all outsourcing. So that shift from license to outsourcing model has occurred much more rapid in the International markets than we thought, and it makes us much more confident.

And it also makes us -- frankly, the nature of our business makes us much more immune to economic shifts that occur within these countries. These are critical applications that are required to keep the lights on. So at the end of the day no matter what is going on in the economics, you've got to process your payment transactions, you've got to process your banking accounts.

So we are confident about what the future holds for us in these markets.

Yes, in the International growth we look at -- Capco has been a great acquisition for us; consulting has done very well for us. But the International business standalone has been an incredibly successful for us over multiple years, and that is why you hear so much optimism here.

To add some color to that, license revenue in the fourth quarter of 2013 was down 6%. Revenue growth was 13%. So it is a combination of processing and outsourcing deals and the consulting (multiple speakers)

Right, right.

Which is a model we prefer, obviously. You get license fees, you get a much more spiky revenue and profit stream. But this gives us a much more predictable -- and frankly, gives us good vision into what the future holds.

All right. Just this last question and I will turn it back to the queue. In the domestic markets, are we seeing -- is it vendor consolidation that is really driving? There has definitely been a lot more RFPs than we have seen, like you said earlier, at any point in the past few years.

Again, is that just a consolidation phase going on, where banks are thinking, we prefer to use one or two or three vendors versus others? Can you give us a little more color there, and then I will just turn it back.

I think what we are seeing in the US is financial institutions are coming out of the financial crisis of 2008. They have weathered the storm. You see the number of closures have pretty much all gone away.

So they have worked through their loan issues, and now they are focused on how do you get more efficient, how do you get on more leverageable platforms that allow them to compete in the market? So because of that what we are really seeing is, not only in the largest banks but all the way through the community banking market, you are seeing a lot more RFPs.

And I think it's just the combination of weathering those storms and working through their loan issues and now focusing on the future. And all of those drive great opportunities for us at FIS.

Yes, Darrin, they are looking to increase market share, right? And they are being very aggressive about it, and they know for a fact they need the most competitive products in order to be able to do that. That is why I think you see that increased activity also.

Very good. All right. Thanks, guys.

Tien-tsin Huang, JPMorgan.

Hi, great. Good morning. Just a follow-up, a few follow-ups to some of the questions that were asked. All good questions.

Just the -- you have been hearing -- we have been hearing that there is a lot of inorganic opportunity, especially in Europe. I am curious if that is consistent with what you are seeing in terms of where you are investing.

And I am curious if your appetite to do acquisitions has changed, and if you would be willing to do something bigger than just a tuck-in.

You know, we are starting to see more opportunities out there, Tien-tsin, as we look around. Frankly, as you know we have been very picky on what we look for. Frankly, it needs to bring a new product and/or service for an existing market we serve or break us into a new market.

Do we have some more room? We have done some tuck-in acquisitions throughout last year. Those have been very successful for us.

Would we change our capital allocation policy? No. We are very focused on keeping investment-grade. We are very focused on, as you see with the increase in our dividend of 9%, very focused on our share buyback and investing in our solutions.

But would we do something that is more medium-sized if it had the right fit and could drive our Company faster? Sure; we would look at that. But we are really not in the market to just go buy overlapping product and services and troubled companies. That doesn't make sense for us.

We certainly have a lot of available cash in our International markets. As you pointed out, Europe, that is very tax efficient to be able to use it that way. But we are continuing with our very diligent approach to looking at opportunities.

We talked to you a couple years ago about being focused on organic growth, and that is what you have seen us do. We internalize; we stayed focused on our organic growth; did some tuck-in acquisitions.

You never say never to something large, right? But I think mid-tier and mid-tier type acquisitions, some we may look at. But the reality is we have been very focused on organic growth in the Company in order to keep that focus.

You have. This makes sense. So just on -- in the global financial institution, this opportunity, so investing around the 30 institutions you are talking about. A couple questions there.

Is Capco aligned with some of those relationships? And who are you competing with on some of these? Is it different, or is it mostly just an in-house going to outsource?

No, it's a great question, and honestly one of the -- when you look, we have been very pleased with the Capco acquisition. It just couldn't have gone better for us from the standpoint of their growth. Really pulling that up under -- Rob Heyvaert is the founder of Capco; we are actually placing and have placed our global financial institution business also up under Rob.

So we see tremendous benefit as we pull the synergies together of the leading financial services consulting arm with the leading product and services arm in the industry. So we do see some great opportunities there, and those will naturally align.

Do Capco have relationships in those institutions? Yes. FIS does as well. So that combination we think will really be positive for us.

We leverage that relationship both ways.

Absolutely.

And then the competition for those big -- for the big ones?

Well, competition would be the list of the usual suspects. Obviously we run into the Accentures of the world, we run into the large Indian firms, we still run into in-house development organizations a lot, right? So the technology arm of financial institutions is who we are competing with.

But as you can see in our recent success in signings, we feel good about our capabilities. And keep in mind, the financial institutions are looking to bring not only their cost down but being able to streamline their operations to compete more effectively. And there is really no one better than FIS at doing that.

And we have a very unique opportunity with the combination of our services and our products as we bring it together.

Sure, sure. No; fingers crossed you guys get more than your share. Thank you.

Glenn Greene, Oppenheimer.

Thank you. Good morning, everyone. First question is really just a clarification for Gary. Sorry to parse words here, but just on the investment, you talked about it both as a one-time investment and then an ongoing cost.

So just clarity: are we going to see that 50 basis point margin drag go away or come back in 2015?

No, I apologize. You are going to see a one-time ramp in resource; and then obviously the resource will continue. But we expect that resource to drag some significant revenue opportunities for us.

It is incremental investment 2013 to 2014. But those ongoing payroll dollars, etc., should be in our numbers.

Yes, exactly.

But we fully anticipate to get revenue growth from returns on those investments.

Absolutely.

Okay.

I think what we are saying is we will manage it well. If we put incremental investment it's because we are seeing a nice return. If we decide to tone back the investment and pull it back a little, it is because we are not being as successful as we thought we would be.

But right now we are incredibly optimistic that we will be.

Okay. Makes a lot of sense. Then on your long-term guide, it's obviously the 12% to 15% CAGR through 2015. Just looking at the midpoint of your range for 2014 it implies, if my math is right, about a 13% lift into 2015 to get to the low end of the guide. Are you still confident in that 12% to 15% CAGR?

Yes, we are still confident in our 12% to 15% CAGR. Haven't adjusted anything on our long-term guidance. What we did do is to call out the margin expansion issue will be a little muted because of the specific investment.

Okay, great. Then Woody, just it might be helpful if you could directionally talk us through segment growth and margin expectations for 2014. Or should it look a lot like 2013, with a kick obviously from the International and maybe from unit margins because of International?

Yes, I think I will start with, I think International you will see continued acceleration of growth there. In our Payments business you are still looking at low to mid single digit. And in the FSG a low to mid single, mid single digit growth there, with some acceleration in the back half of the year.

Any commentary on margins?

In terms of margins, I would say the consulting and services, the shift in the revenue will continue to put some pressure in the FSG business in terms of margin. We do believe we will get some expansion internationally; and then Payments continue have very good rich margins.

Okay, great. Thanks a lot.

Bryan Keane, Deutsche Bank.

Yes, hi. Good morning. Just wanted to follow up on Glenn's questions there. On International, the acceleration of growth organic, can that get up to mid to high teens? Or where do you guys think that goes, especially as we go into next year and then we think about the long-term growth rate of this business now with these investments?

Well, really pleased with the outlook from fourth quarter at 13%. I don't know what mid to high means for you, but we are very pleased with 13%.

Our 2014 plan with a lot of the deal signings that we have looks pretty solid. So I would say we feel really good about our ability to continue to accelerate International revenue growth.

Just to add on that, Bryan, some of that, to Woody's point, we feel very confident in the growth. But keep -- a lot of these businesses are tied to transaction volumes and growth in those as well. So that is what is exciting about some of this long-term business.

When you look at the India component as an example, we keep bringing that up, but that is going to ramp up over the next three or four years. Right now we are seeing good adoption around those deployments. And so as that continues, as financial inclusion grabs hold more throughout India, it could further push our growth even higher.

So we think there is just a great opportunity here to consistently perform in the International market.

Bryan, what we like a lot is the recurring revenue model in this International growth. So once you get it, you have a long-term revenue stream coming from it. That continues, as Gary just said, to grow.

Okay. No, that's helpful. Just turning to the Financial Solutions Group, the EBITDA growth there was, I think, 1%. It had been hovering around -- or for the year, I think it was 6%. Just want to make sure I understand the components there that drag that down.

It sounds like that probably continues, I am guessing with the lack of M&I fees going forward.

Yes, the term fee challenge is going to be there in terms of the FSG segment. Some of the term fees are also in PSG, don't forget that.

But what we are seeing really is that consulting and services growth in FSG putting some drag on margin in that particular segment. Again, trying to accelerate top-line growth and trading some margin expansion for profit dollars being the trade we are willing to make.

What is the breakout between the term fees between FSG and PSG?

I think we gave you some color on that in the third quarter. I'm going to have to get back with you on that one, though.

Then the follow-up question to that is -- I know it is $28 million for the first half. Just remind us; is it split equally between the first and the second quarter? I just want to make sure we set our models accordingly.

It was split pretty ratably, yes.

Okay. All right. Super. Thanks, guys.

David Togut, Evercore.

Thank you. Good morning, gentlemen. Gary, you highlighted the strength of bookings in the fourth quarter and for the full year overall. Can you quantify what bookings were both for the quarter and for the year, on a year-over-year basis?

No, we try to stay away from giving those type of numbers, David. I can tell you it was up.

As you know, 2012 was a very strong year for us as well; 2013 was up over 2012. We saw sequential growth Q4 over Q3, and we continue to see a very robust pipeline.

So we do see, as we mentioned throughout the call, our mix continues to change, but we think that is a positive thing. It just helps the strength and capabilities of what FIS has to deliver, and it allows us to square off where those opportunities are.

So while we are seeing more opportunity around complex business services, complex outsourcing engagements, that is positive that we have the capabilities to deliver on that.

David, I will add some color. If you remember 2012 -- I think it was our highest sales year ever, including that $0.5 billion India deal. And we have incremental growth over that.

That's correct.

I see. Okay. Then just as a follow-up, Gary, in your remarks you focused a lot on the large global FI market. But what are you seeing demand-wise from the small to medium-size financial institutions in the US? If you could provide some color on pricing also, that would be helpful.

No, it's a great question. I tried to bring some focus on the midsize and community banks. If you reference the mobile banking, you reference the bill payment, if you look at those engagements, a lot of that is penetrated through the community and midtier market.

So we are still seeing strong demand for cross-sells and upsells to that market. Really that capability of that end-to-end outsourced solution or back-office services is resonating there.

From a competitive situation in that market we see the same original -- the same competitors you can name. And while it is competitive, are we seeing any increase in pricing compression? In the aggregate, I would say no.

We run into an occasional deal where there is some significant price increase. But typically, as we have done in the past, you are able to cross sell and upsell additional product and service that not only covers the price compression but also grows our revenue stream for us in a fairly good manner.

So we still are very bullish on that market. We think we have got great position in that market and a great product suite. And our sales team is executing very well.

Great. Thanks for that, and just a final question for me. A couple quarters back you talked about your contract with MCX. What are your expectations for the timing of the MCX launch? And what magnitude of revenue would you expect this year and next from that?

Well, we're going to have to leave the launch to MCX. That is up to them to announce that.

I know they've been kind of slow coming out what their plans are. It has not been due to lack of work.

We have talked about our pricing model. Really, we are paid for building out and running the network and settling the transactions. So, we really don't have any interchange involvement at all. That is going to be settled out with the financial institutions.

So as their transaction volumes grow, we naturally grow. If you remember when we disclosed that for the first time in one of our quarterly calls, there are minimums in the contract; and you will start seeing contribution this year from MCX to FIS from a revenue standpoint.

Would it be material?

It was a fairly sizable contract for us at the time we disclosed it. It is a very nice engagement even with the minimums.

Okay. Thank you very much.

Ramsey El-Assal, Jefferies.

Hi, guys. I wanted to drill down a little bit on the Payment Solution margin performance; really strong in the quarter. I know Woody mentioned that this margin strength is set to continue going forward, and that I think you talked about growth in leveraged platforms helping.

But I was wondering if you could parse out the drivers of margin expansion in the Payment segment, I guess in the quarter and going forward?

Well, kind of conversely to what we've talked about in Financial Solutions and International, which has the consulting and services, which is a bit of a drag on margins, because it is in the leveraged platforms each incremental sale, each incremental revenue dollar comes on a very high incremental margin. And that is a lot of what we saw this year.

As we saw growth in bill pay, as Gary described; we continue to see growth in the network business; as those dollars come on they are coming on at very, very good margins. So that is really what we are talking about. That is the primary driver of what we saw in revenue growth -- or margin growth, excuse me, in 2013.

Okay. Switching gears, any impacts that you guys have perceived from the recent Target breach? I only mean that in the context of the demand environment for your services, whether an increased appetite for risk-related solutions, EMV migration, or any potential pullback in consumer debit card spending? Or anything at all that you can link to that high-profile Target breach?

Yes, obviously, Ramsey, I think that is one of the largest card breaches in history, and we don't do much on the acquiring side so we are pretty much immune to it. From an issuing standpoint, we are seeing some increased demand in the reissuance of cards, which is very common in this process. We have got capacity to do well over 200 million cards a year through that environment.

We are starting to have more discussions around risk opportunities, including, as you highlighted, EMV. That is a strength of FIS. One of the things that we bring to the table that people don't realize is we are one of the largest processors of EMV in the industry, given our presence in Europe, given our presence in Latin America and other areas.

So our systems have been EMV-enabled for years now. So we are very well positioned as EMV comes online in the US. We have got the capability to produce those chip cards.

So we are seeing not only a lot of conversations but starting to see some growth in actually reissuance. And some people looking to -- is this now the time to take advantage and go ahead and produce a chip card, given the fact they've got to go through the reissuance process anyway? So that has really been our exposure, what has happened on our side from Target.

Okay. One last quick one, revisiting the India ATM deal. I know that was over a relatively long period of time the revenues associated with that deal were expected to flow in.

Where would you say you were in terms of -- however you want to couch it -- a percentage of the implementation being complete, or innings, or however you want to look at it? Where are you in terms of implementing that deal?

Yes, so first, I was just over there in Q4 for the BMB launch. And obviously as you would expect, can't step foot in that country and not talk about that opportunity and where we are.

The project is going very well. I think as we discussed when we announced that project, it is about a four-year ramp to get to full capacity. So I would say we are right on target with our projects; still less than 50%, but the team is executing extremely well.

Some of the other -- as you might remember, that went out to bid and there were a lot of what they call circles that were awarded to various people. I do think some of the circles were struggling. We have actually seen some wins in new business in those circles that we didn't win because the financial institutions are looking to try to get ATMs deployed, and the people that won those circles are struggling.

So once again I just keep coming back to it; it really makes us encouraged about our opportunities. Because you don't -- when you see FIS win these large complex things, the team executes very well, we deliver on time, on budget and hit the numbers. So we are still very confident in the business case.

I would say we are still in the bottom half but (technical difficulty) and the team is deploying exceptionally well.

Okay. Thanks for your answers.

Peter Heckmann, Avondale Partners.

Hey, good morning, gentlemen. I will be brief. Just to be clear, your growth guidance of 4.5% to 6.5%, is that constant currency or is that reported?

It is both reported and organic.

Okay, but -- so I am seeing a fairly significant FX headwind in the first half of this year. So do we think in the first half we can still see 4.5% reported? Or it will be 4.5% minus the FX headwind?

I would say you're 4.5% organic is what we are looking at. Additionally, too, first half of the year has difficult comps on the term fees that we talked about as well.

Okay, okay. That's fair. Then I did have a question. it appears that one of your largest competitors on the card-issuing side is experiencing some fairly significant financial distress.

Are you seeing a benefit from banks and credit unions looking to second-source or potentially explore alternatives given that financial distress?

You know, we haven't at this point, Pete. We are such a large producer of plastics ourselves, and typically we produce that plastic in relationship to our debit and credit operations. So while that business continues to grow -- I mean, it did perform well; we certainly have seen some increase in volume.

And we have associated that with Target because a lot of them have been reissuing. But, no, we have not seen just this massive influx of plastic production. It has been very steady and consistent throughout 2013; and, frankly, we think that is going to continue throughout 2014.

As I said to the earlier question, we are seeing more demand around EMV issuance or chip card issuance, which is positive. And we are prepared and are delivering that today.

Okay, fair enough. I appreciate it.

I would now like to turn the conference call back over to Mr. Martire for any closing remarks. Please go ahead, sir.

Thank you. Well, thank you for your questions and interest in FIS. Over the last decade, FIS has emerged as a global market leader in financial technology. Our scale, solution breadth, unmatched financial industry expertise enables our clients to succeed in this era of rapid change in financial services.

So let me conclude today's call by reinforcing four key points. We operate FIS in a great industry with strong fundamentals. Our proven business model, including high recurring revenue and cash flow, drives stability and predictability.

We have a very strong track record of profitable growth. Finally, we remain focused on returning cash and driving superior returns for our shareholders.

Again I want to thank you for joining us on today's call. Have a great day.

Ladies and gentlemen, that does conclude our conference call for today. On behalf of today's panel, I would like to thank you for your participation in today's conference call and thank you for using AT&T. Have a wonderful day. You may now disconnect.