Fidelity National Information Services Inc (FIS) 2014 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.

(Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host Pete Gunnlaugsson.

Thank you Roxanne. Good morning everyone and welcome to our third 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 operations report. Woody Woodall, Chief Financial Officer will continue with a detailed financial review.

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 a 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 the GAAP and non-GAAP results are provided in the attachments to the press release. With that, I will turn the call over to Frank to discuss the third quarter financial highlights on slide 6.

Thanks Pete, good morning everyone and thank you for joining us on today's call. I am pleased to report that the third quarter was another strong quarter for FIS. Positioning us well to achieve our full-year growth outlook. Our results underscore of the strength of our business model and our long-term client relationships, which drive significantly recurring revenue and consistent profitable growth.

Looking at the details of the quarter, revenue increased 7% on a reported basis and 5% on an organic basis to $1.6 billion and year-to-date to $4.7 billion. This marks our 19th consecutive quarter of organic revenue growth.

Adjusted earnings per share rose 8% to $0.80, in line with our expectations and year-to-date to $2.23. Sales execution was strong in the quarter and we maintain a robust pipeline going into last quarter of the year.

These results demonstrate the continuing successful execution of the business strategy we outlined in 2012. First, we are optimizing performance through organic growth with an ongoing focus on double digit growth and earnings per share.

Second, we are delivering strategic value to our clients through solution innovation and transformation. Third, we are committed to enhancing shareholder value through a strong financial performance and disciplined capital allocation. Reflecting this commitment, we have returned over $680 million in dividends and share repurchase to our shareholders in the first nine months of 2014 and over $2.5 billion since the beginning of 2011.

Before I turn the call over to Gary for our business strategy and operating highlights, I'd like to comment on a recent announcement of my new role as Executive Chairman of the FIS Board, effective January 1, 2015. I've had the extreme pleasure of leading this Company for the last five years.

I'm very proud of what we have accomplished together. We have delivered consistently strong financial performance during a very challenging environment for our clients, achieved great investment grade status and driven shareholder returns of over 140%.

Additionally, FIS has ranked consistently among the industry leaders financial technology providers. Including a number one position in the annual IDC Financial Insights FinTech ranking for four consecutive years.

It has truly been my honor and privilege to have served as the CEO of this Company. Additionally, I'd like to recognize and congratulate Gary on the announcement of his promotion to President and CEO of FIS also effective January 1.

Gary is a 26 year veteran of FIS and there is no better person to lead the Company into its next chapter. I have a tremendous amount of respect and confidence in Gary and know he will be immensely successful in his new role.

Gary.

Thanks everyone for joining us this morning and thank you Frank for the vote of confidence. I'd like to congratulate you on your new role as Executive Chairman and thank you on behalf of our 40,000 employees and me personally for your exemplary leadership.

FIS is now the leading global financial technology company with incredible talent, valuable relationships with over 14,000 clients globally, and a track record of strong financial performance. I look forward to continuing this legacy and am honored to lead this Company in January as the new President and CEO.

Turning to slide 8, as Frank discussed, the third quarter was another strong quarter of financial performance and strategic progress for FIS. We continue to capitalize on the increasing global market demand for scalable, outsource solutions and transformational services.

In the quarter, we again recorded strong sales and strategic wins across all markets with new bookings up significantly in the quarter, and year-to-date.

We further expanded our global payments portfolio to drive growth opportunities in key markets. This includes our recent acquisition of Clear2Pay, which I'll discuss in a few minutes.

We generated positive momentum with existing deployments and expanding business with established clients. We continue to affirm our investment strategy to better penetrate the global financial institution market where we saw continued traction.

Turning to the markets, in North America, financial institution mind share continues to center on improving profitability and addressing regulatory compliance challenges. As a result, we see broad-based demand for strategic technology and outsourcing solutions including strength in digital and mobile banking, emerging payments and enterprise risk and compliance solutions.

We continue our success in growing our mobile business with over 28 million registered mobile users in Q3, representing 25% year-over-year growth. Additionally, we have driven strong volume growth in mobile check deposits. With both dollar volume and item volume up over 80% year-over-year.

Strong demand for FIS risk and compliance expertise and solutions drove strong growth this quarter. For example, we are currently engaged in a significant professional services project with a large financial institution to further enhance their enterprise compliance processes.

Additionally, strong demand for our technology-based regulatory training and analytics continues with a top 20 financial institution, selecting FIS industry-leading and innovative online regulatory university solution to deliver regulatory compliance training companywide and to their partner network throughout the US. Overall, it was a record sales quarter for our North American market.

Switching to our international market, it was another solid quarter of revenue growth with a number of significant new deals closed during the quarter. In Asia, the market continues to deliver significant opportunities with organizations looking to better serve the under bank and emerging payment sector.

For example, you will recall our success last year in launching the Mahila Bank, India's first bank aimed at the financial empowerment of the country?s women. This was followed last quarter by Shivalik Bank, who selected FIS to deliver a completely outsourced banking solution.

This quarter, Bandhan Bank, India's largest micro-finance institution selected FIS as their partner. Outsourcing all technology operations for its new banking operation. Bandhan Bank plans to begin operation in early 2015 with approximately 600 branches and 10 million customers.

Under a long-term outsourcing arrangement, FIS will provide a fully integrated banking and payments platform. This win builds on our current success in addressing the demand for outsourced solutions in the market.

Next, we continue to make good progress on our global financial institution market and remain pleased with our early results including the strong growth we are generating in our consulting and services business. We are pleased that after the quarter closed, Credit Agricole entered into a seven-year outsourcing agreement with FIS, one or our largest outsourcing deals to date to provide a derivatives post-trade solution.

This platform is designed to allow investment banks to share IT services and resources for cross asset derivatives, thus reducing costs and increasing efficiency. This win combines the deep capital markets content of Credit Agricole corporate and investment bank with the large scale financial technology capabilities and expertise of FIS.

Turning to slide 9. In support of our growth strategy, we are pleased with our recent acquisition of Brussels-based Clear2Pay. Global payments are one of the fastest growing segments in financial services. Clear2Pay has been a recognized leader in this segment over the last several years.

Their solutions and payment update abilities supporting corporate and retail payments expand our payment capabilities and position us to better address our clients need across all geographies, particularly among large global institutions. Using service oriented architecture on their open framework Clear2Pay is able to help clients solve the demands of an evolving and complex global payments landscape, inclusive of high-value and cross currency corporate payments, as well as ATM, point-of-sale, Internet, mobile, debit, prepaid and corporate card payments.

There are significant revenue synergies in combining Clear2Pay's assets with FIS's distribution channels and system integration capabilities. This strategic acquisition demonstrates our commitment to delivering the technologies and assets that will enable our clients to realize a modern payments environment, which encompasses all customer channels and simplifies payment operations.

Before I turn things over to Woody, and turning to slide 10, let me take a minute to recap a few key points. We had a solid third-quarter and strong year-to-date results reflecting a combination of new wins, implementations and expanded client relationships across all markets.

We continue to leverage the powerful combination of FIS technology, service capabilities and consulting expertise to bring transformational solution to our clients. We remain committed to optimizing our business and investing in the markets and solutions that are central to driving profitable growth.

Now, I'll turn it over to Woody for the financial report.

Thanks Gary.

I'll begin on slide 12 with a summary of our consolidated results for the quarter. Revenue increased 7% on the reported basis to $1.6 billion and 5% organically. Adjusted EBITDA increased 4% to $488 million and EBITDA margin was 30.4%.

Adjusted earnings per share increased 8% from the prior year quarter to $0.80 per share. Year-to-date, revenue increased 5% on a reported annual organic basis to $4.7 billion.

Adjusted EBITDA increased 4% to $1.4 billion and EBITDA margin was 29.6%, compared to 30.1% in the prior year period. Adjusted earnings per share increased 8% to $2.23 per share.

As we anticipated and called out to you last quarter, our investment in the global financial institutions market coupled with revenue mix and difficult comparisons, in the prior year period, resulted in a margin headwind for the quarter. We anticipate margins to expand in the fourth-quarter as we begin to anniversary difficult comparisons.

Next, I will continue on slide 13 with a review of segment results. Financial solutions revenue increased 9% to $633 million and grew 6% organically driven by growth and consulting in professional services, risk and compliance, and mobile banking. We also completed the Reliance Financial acquisition in July, which contributed to reported revenue growth.

Financial solutions EBITDA increased 5% to $251 million, while EBITDA margin was 39.6%, compared to 41.4% last year. As mentioned earlier, this was driven by a change in revenue mix and lower termination fees compared to the prior year quarter.

Turning to slide 14. Payment solutions revenue increased 2% on both the reported and organic basis to $615 million, reflecting growth in network solutions, debit processing and software license sales. Payment solutions EBITDA was $262 million and the EBITDA margin expanded 30 basis points to 42.7%.

Moving to slide 15, international revenue grew 12% to $358 million and increased 9% organically. We continue to see strong growth in Europe and Asia. The macro economic trends in Brazil have resulted in slower than anticipated growth in Latin America causing a headwind to our overall international growth rate in the third quarter.

International EBITDA margin was 22.9% down from 25.3% in the prior year quarter, primarily reflecting lower license sales and increased investment in the global financial institutions market. Corporate expense was $108 million in the quarter and we expect approximately $110 million in the fourth-quarter. Ongoing discipline cost management has enabled us to reduce corporate expense by 3% year-to-date.

Moving onto a reconciliation of GAAP to non-GAAP EPS, on slide 16. GAAP earnings were $0.53 per share. Third quarter 2014 GAAP results are adjusted to exclude $0.13 per share in acquisition related purchase amortization, $0.09 per share for costs related referencing activities as noted in the second-quarter and completed in the third quarter, and $0.06 per share for acquisition, integration, and severance costs.

The effective tax rate was 31.2%, down from the prior year quarter, primarily due to realization of certain acquired loss carry forward assets. We expect an effective tax rate of 34% to 35% for the fourth-quarter yielding a full year effective tax rate of 32% to 33%.

Moving onto cash flow on slide 17. Adjusted cash flow from operations totaled $287 million and free cash flow was $201 million for the quarter.

Capital expenditures totaled $86 million or 5.4% of revenue in the third-quarter and $273 million or 5.8% of revenue year-to-date. We continue to expect full year capital expenditures between 5.5% and 6% of revenue.

Turning to slide 18. We continue to invest for growth including acquisition of Clear2Pay, which closed earlier this month. In light of the accelerating demand for corporate payments, the additional capabilities afforded by Clear2Pay are expected to be a tailwind to our long-term organic revenue and earnings growth. We anticipate margins from this business to approach our consolidated margins once full run rate synergies are achieved and the business gains scale.

On a standalone basis, Clear2Pay is expected to generate revenue of approximately $135 million for 2014. The transaction was funded with a combination of offshore cash and borrowings from existing credit facilities.

We anticipated this acquisition to be neutral to 2014 adjusted EPS and slightly accreted to 2015 adjusted EPS. Earnings-per-share accretion further accelerates in 2016 as full run rate synergies are achieved.

Additionally, in September we entered into an agreement to divest non-strategic assets from Certegy Check gaming business for proceeds of approximately $235 million in cash. We expect to close the transaction in April 2015. Combined, these transactions are expected to be neutral to 2015 adjusted EPS.

Moving on to the balance sheet. As of quarter end, debt totaled $5 billion with a weighted average interest rate of 3.1%. Our leverage ratio was 2.6 times debt to EBITDA and we anticipate ending the year at approximately 2.5 times, including the impact of the acquisition of Clear2Pay.

In the third-quarter, we returned $218 million to shareholders including $68 million in dividends and $150 million in share repurchases. Year-to-date, we have returned $681 million to shareholders, up 26% from the prior year period.

Repurchase activity reduced our weighted average diluted shares to 287 million in the third-quarter from 293 million last year. Approximately, $1.5 billion remains under our share repurchase authorization.

Moving on to slide in 19. We are reiterating our revenue and EBITDA guidance and narrowing the EPS range of our outlook for full-year 2014. We now expect organic revenue growth of 4.5% to 6.5%, adjusted EBITDA growth of 4.5% to 6.5%, adjusted earnings per share of $3.06 to $3.12 reflecting growth of 9% to 11%. This compares to our previous guidance of 8% to 12% growth. Finally, we continue to expect free cash flow to approximate adjusted net earnings.

To summarize, this guidance is in line with our full-year outlook we provided in February; we are on track to deliver another year of profitable growth, and we are optimistic about the opportunities that lie ahead. We will continue to focus on deploying capital, in value enhancing ways, including investing for growth, maintaining a strong balance sheet, and returning cash to shareholders.

That concludes our prepared remarks. Operator, please open the line for questions.

(Operator Instructions)

Dave Koning, Baird

Hey guys nice job again. Congrats to Gary and Frank, both of you, great progress for so many years so congrats on the transition.

Very nice of you to say.

Thanks Dave.

First of all, you've had so many good wins in the last several quarters, is there a timeframe where we should look to see kind of the biggest impact of those wins coming on on a year-over-year basis? Basically, we've had about 5% growth for a while now. Are we going to see, in the next two or three quarters, kind of a ramp up just as all those deal wins really come together?

Dave, I'll take that one. If you look back, our organic revenue growth this year has gone in line with what we outlined for the year. First-quarter organic was about 4%, first half was 4.5%, third-quarter 5%.

That acceleration we've been talking about for some time, we're starting to see and if you now model that forward, for revenue growth of flat 4.5% to 6.5%, we anticipate continued acceleration into the fourth-quarter. I don't think you're going to see a shift on a dime, in terms of the revenue growth curve changing but we continue to see it accelerating as we anticipated.

Yes, Dave, just to build on a little bit of that. As you know, these are, most of these deals we're announcing are very large scale outsourcing deals, they take time to ramp up. We've talked about that on prior calls, so we're looking for, as Woody said, just steady improvement of our organic growth going into the future.

Okay and then I guess the secondary question on that is, this year margins have been down a little bit year to date and part of that, obviously is because of some of the new deal wins and consulting growth. Is margin something you think from this year is kind of a baseline that should expand over the next couple of years, even as that revenue starts to accelerate?

I think as we've talked about before, we made some specific investments this year, that put some headwind on margin and we had some difficult comparisons that put some headwind on margins. We anticipate fourth-quarter to actually see some level margin expansion as we begin to anniversary those comparisons. While we're not completed with our 2015 planning, we do anticipate margin expansion going into the future, similar to levels you've seen in the past.

Absolutely

So Dave, we fully expect to see margin expansion into 2015 and beyond, okay.

Just one quick last one. Do you think Apple Pay, you know they talk about how the banks might be willing to give up 15 basis points. I still struggle to know why they would give up what could be 15% of their interchange fee for something that doesn't give them that much of a benefit. I'm just wondering if you've talked to banks on that and why they might be willing to do it?

You know Dave, I think it's too early to really comment on Apple Pay. Where we see the positives of it, it does raise awareness, right? It generates transactions as you know us having the hosting count. It gets back to us and if it creates more volume that will be a positive thing for us. It's early. There's going to be a lot of room. Some of the questions you're bringing up, we are discussing what their financial institutions and I think a lot of people are trying to decide where all this is going to settle out.

Clearly, Apple Pay is going to have a role but there's room for, there is going to have to be more than just one mobile payment provider in the industry. As you know, we're doing a lot with MCX under the brand CurrentC. We've actually enabled some of our customers to utilize Apple Pay as well. I think it's going to be early to see, to be commenting on how all this is going to sort out and where the volume is actually going to end up.

Got it. Yes, thanks, good job.

Thanks Dave.

David Togut, Evercore

Thank you, congratulations Gary and Frank.

Thanks Dave.

Thank you, appreciate it Dave.

Gary, should we expect you to do things differently as the new CEO of FIS?

David, it's a great question. I've been here 26 years and Frank and I have had a great partnership over the last five. So no, I would not expect any radical changes. We are very focused on continuing accelerate our long-term growth and generating, expanding profits associated with that. Hopefully you've seen over the last year we've made some shifts of rolling out our strategy and focusing on what we see as three very distinct markets.

Obviously, our biggest opportunity for expansion is in the global financial institution marketplace, because as we shared in the past we feel we're underpenetrated there. We are going to continue to carry on the legacy that Frank has established an excited about the opportunities. So when you start thinking about capital allocation, Woody hit on how we're focused on driving a capital to help accelerate profitable growth and we are going to focus on the markets that we've been discussing.

Understood. If you could address some of the big growth drivers, that you've touched on in the past. In particular, India ATM, if you could talk about the ramp of that contract second, Sainsbury UK, and then third, if you could give us what the account growth was in the Banco Bradesco JV in the quarter?

Sure be happy to do that. Let's just to go in the order that you brought them up. In India, the team continues to perform very well. That project is right on plan. The team has done a phenomenal job deploying our ATMs. We are continuing to see adoption rise on the curve that we had hoped. So, everything is green with regards to our India ATM deployment and we see no issues hitting our pro forma that we announced to the market when we signed that transaction. We've also continued to build on that as well, so it's not just that contract, we continue to drive additional contracts related to our India ATM business.

Also, hopefully we've hit on a few things that -- what you're seeing with FIS is, once we build credibility in these key markets like India ATM, now we're moving into the core bank processing. We are very excited about some of the recent announcements in India outside of the ATM EFT business, whether it's Mahila bank, Shivalik or the one we just announced, Bandhan Bank. These are three new banks essentially in India and looking for a complete core banking and payment system and there's been three that have come out and FIS has signed all three. I can't be more complimentary to our team in that region; they?re just doing a great job.

Sainsbury also continues to progress well. I know Frank was actually over there the last couple of weeks meeting with the executive team on one of his trips. When you look at something the size of Sainsbury, you're always going to have some opportunities to improve the timeline. You're also going to have some opportunities that will come up you have to address. There's nothing been out of the norm in the Sainsbury deployment. We feel very good about our progress there and we feel very good about rolling Sainsbury into production in the 2015 timeframe, which we discussed.

As far as Bradesco, Bradesco we've seen frankly our international business, the economic issues going on in Brazil, as a whole, impacted our international numbers a little more than we expected. With that being said, transactions and cards were up in our Brazilian joint venture. We are seeing some things where were actually moving some volume around, so we're moving some things out of our call center and moving that into more automated solutions, like our IVR and that actually is providing a little headwinds to our revenue. All-in-all, given the macroeconomic climate of Brazil, we're pleased at what's going on in the joint venture. Although it was a little more of a headwind than we expected in the quarter.

Said a different way on the Brazil, David, we did continue to see growth in transactions and card, just at a slower rate than we've seen in the past.

That's right.

Understood, a quick final question. Woody, I think your three year guidance would imply a pretty substantial acceleration in revenue and earnings growth in FY2015. Are you on track for that?

We have not adjusted our midyear or midterm guidance. We're staying in-line with the same guidance that we had, which is 4% to 7% on top 30 to 50 basis points of margin expansion and the EPS as outlined in our previous guidance.

Understood. Thank you very much

Brett Huff, Stevens Incorporated.

Good morning guys. Congrats to all those folks who are moving around up there. (laughter) I think you?ve talked a little bit about this but I wanted to dig in a little bit because we think this is a really important driver, is the global financial initiative that you mentioned already, I think, Gary and Frank. Can you give us -- I know that these deals are big and they are moving to the pipeline. Can you give us to some anecdotal examples of how those things are progressing,? How those conversations are going? Any particular wins that have come out of that smaller or large this quarter?

Then, incremental spending plans, I know that is something that, if this thing works, that may need more capital. I think you answered the margin question by saying that you expect margins to expand. Any other color on GFI?

Yes, let me take that one and then also we can address the rest of the margin as well. Hopefully Brett, what we're trying to do is, every quarter, bring you some examples. Let's first talk about the investment. As you guys know, we invested more than $30 million in our go to market strategies in GFI and I would tell you when we made that investment, at the early part of this year, we also announced we'd be looking for proof points for success. What we are doing is every quarter trying to come back and give the markets some insight in those proof points.

We started very early on with one of the largest investment banks in the industry, doing a very large chain sourcing deal. That transaction has gone exceptionally well. The team has done a very nice job of ramping up that service and you're starting to see that flow-through in our growth numbers in both our FSG and ISG segment.

We also announced the Jefferies transaction, which is a very exciting transaction. That too, is a later stage signing, so it's obviously earlier in the deployment cycle but that too -- that project is going exceptionally well. Then, of course, this quarter that Credit Agricole utility that we just announced is very significant. That's one of the largest outsourcing contracts we've signed and as a Company, you know, we've signed some significant ones. What's interesting about this one, this is truly a utility that allows us to bring on other investment banks to deal with their post trade derivatives. So we're excited about that opportunity. We got a nice pipeline of additional customers that are looking at coming on to that.

I would tell you right now, we're very pleased with the investment we chose to make in the early part of this year. We're also pleased with the results we're seeing. When you build on now, then you have to layer on the recent announcement around Clear2Pay. Clear2Pay I talked about in my comments how it brings next generation payment capabilities across a broad swath of payment channels. What's most interesting for us is their early penetration into some of these GFI institutions.

Now, you've got very robust consulting. That's been a proof point for the last 3 to 4 years. You have now seen us lead with multiple, very large, services engagements. And now you see us bringing the Clear2Pay asset up under that distribution channel, with some of their early wins over the last several years being a leader in really payment transformation in that market. We think all of those things would make us very comfortable with the direction and investment we're making and the future success and profits of that market.

Okay that's helpful. Just to be clear on the margin, I think what, Woody, you said before that you fully -- and I think Frank too, you fully expect margins to expand next year regardless of the mix? Whether it's GFI heavy or not, GFI heavy, did I hear that right?

You did and if you think about this year, the incremental investment and the headwinds we still kind of guided to flat margin. We don't anticipate incremental investment in those same level of resources and we don't anticipate the same level of difficult comparisons. Therefore, the underlying traditional model is going to generate margin expansion.

Exactly. Brett, if you think about it, right, we had a large loss with M&I due to the acquisition and anniversarying those difficult comps out. We also chose to make an investment to actually break into really a new market. What you're seeing now is, we're having enough success that that market will self sustain investment going forward, so we as a Company have always been able to generate margin expansion on our business. That is going to continue into next year as these things anniversary out.

Now the various markets, the margins will expand at different rates, right? Some markets that we're in actually are, we're deploying a product once across many, many financial institutions. We can expect to see more margin expansion but even in our GFI market with services and the products that we now see the capabilities of pulling into that group, you're going to see margin expansion across all of our markets.

Okay that's what I needed. Thanks guys.

Thank you.

Bryan Keane, Deutsche Bank

Hi, this is Ashish Sabadra calling on behalf of Bryan Keane. Let me add my congrats to both you Frank and Gary.

Thank you.

Thank you.

A quick question on the international, a quick follow-up to an earlier question. It looks like you have a solid momentum in Asia and EMEA and then a slight slowdown in Latin America. As we think forward, how should we think about the FX impact and the momentum going into the business going forward in International side?

We're blended across the euro, the Brazilian real, the pound sterling and the rupee would be our major currencies. We do anticipate some headwind in the fourth-quarter based on what the back half of September did in terms of currency movements. Again, we do not believe that to be significant to our earnings per share at this point, but it could impact reported growth by as much as a point, at least is what we're anticipating. Again, our organic revenue growth, we pull that impact out but don't anticipate it to be significant at the earnings level.

Ultimately, because of the different geographies that we play in, we have some that are somewhat of a tailwind, some that are somewhat of a headwind. But at a blended rate, we don't see it as being a significant item for us at this point.

I think, as far as the business goes, it's kind of testament of our geographic disbursement. If you think about it, Latin America or Brazil especially has been a very strong tailwind for us for the last several years. We've seen Asia as a very fast growing market as well but Europe has struggled and we talked about that over the past. Now, we see our European investments, as we indicated very early on last year, we saw an early precursor of our consulting businesses growing in Europe and we said that is typically a precursor of now services contracts and then product.

Now you've seen us lead with that very process and you've seen Sainsbury and other big announcements that we've made. Now Europe's turned into a tailwind as the Brazilian economy has fallen a little bit. It's our diversification, geographic disbursement of our business that allows us comparable -- to continue to maintain that double-digit growth in those markets on a blended rate.

That's great. Quick question on the of the EMV card conversion you highlighted on the last call, a large win there. I was wondering if you could give an update on that, as well as if you can talk about the opportunity there with the EMV upgrade cycle.

I appreciate the question. EMV as we've shared with you before, we think it's got some potential to push our revenue stream and certainly we actually signed some other EMV contracts this quarter. We do continue to see momentum growing there, as far as the one that we mentioned last quarter, everything is on target and we're starting to issue those cards. We feel good about our capabilities in EMV, once again, we saw this very early and made the investments very early on. Our systems have been EMV capable for years because of our international processing capabilities, so we feel good about that.

That's great. I just wanted to clarify on the EMV, these opportunities you are seeing not just you have a core processing presence but maybe able to tap into these global financial institutions in the US, which may be doing the card conversion. Is that the right way to think about it?

Correct, we're signing more customers onto our EMV platform and generating EMV cards than just ones where we have core processing relationships. Absolutely.

That's great. On the payment segment, slight improvement there. How should we think about the fourth-quarter and then going into the FY2015, what are the puts and takes in that particular segment?

We saw some heavier volumes in our NYCE business and in our debit business actually performed well in the quarter. We did see some licensing this quarter that we don't necessarily anticipate, it gets lumpy, so it's hard to say. I would say, we are still looking at sort of low- to mid-single-digit in that segment in terms of growth in the near future and in the foreseeable future.

That's great. One final question on the acquisition. You mentioned the combination of the acquisition and divestiture Certegy that will be neutral to EPS next year. How should we think about the revenue? So you mentioned $135 million from Clear2Pay this year. Can you just talk about the growth rate, growth profile in that business and how much is the revenue loss from Certegy?

The Certegy gaming business on a standalone annualized basis is about $50 million, so depending on when we close, I would have to model it out from there. We anticipate closing in April, so you can kind of model it out from there.

Okay, that?s great. Thank you.

Ramsay El-Assal, Jefferies

Hi Guys. I know Clear2Pay is Belgian-based but I think they have a number of US clients, as well. I guess my question is, how will Clear2Pay's ongoing revenue sort of be divied up? Should we expect a boost in the payment segment growth rate related to the Company's US-based clients, or am I correct that there are -- there is a sizable US business?

About 25% of the revenue currently is US-based. You are correct, we do anticipate that to accelerate as we bring it into our distribution channel and push it through our relationships and sales channels, so we do anticipate that to increase. The business from a segmentation standpoint is aligned based on geography, so that 20% will flow through the financial solution segment and the balance of the non-US business will flow into the international segment. I'm sorry, in the payment segment. The payment segment and the balance into the international segment.

That's what I thought, okay, great. I wanted to revisit the EMV question. How are your unit economics different on an EMV card versus a mag stripe card? I would assume that the EMV card is going to have a much higher ticket. How does both the unit revenue and profitability for EMV versus mag stripe differ?

That's a great question. You're exactly right. The ticket price is much higher on EMV, so you're going to see a nice revenue opportunity or we will in that business. Our unit volumes are still a lot less than what are mag stripe is, so profitability will rise as our volumes rise in that business. We feel comfortable that will be able to attain and maintain the current profit margins we have in that business going forward.

Okay. Just a perfunctory question around MCX, any new developments you can share, any incremental color? I know there was some media chatter about a potential data breach on their system during this beta period. That didn't touch you guys, I'm assuming? Anything you can share on MCX?

No, it didn't touch us at all. We heard the same chatter. I think it was around some email issues but it had no relation to us whatsoever. As far as the pilot, we shared with you the pilot last quarter. The pilot continues to progress and I think they are on target for the dates they described. We still feel good about the relationship and ongoing opportunity.

Fantastic thanks for your time.

Sashi Tanuku, Citi.

Hi, it's actually Ashwin Shirvaikar from Citi. My congratulations as well Frank and Gary. My question is on Capco. If you could talk about how they're doing standalone, as well as in terms of pulling -- continuing to pull new projects and new contracts into the mix.

I appreciate you asking. Just last week, I was out meeting with all of our Capco partners. The quick answer is, the group really couldn't be performing better. We feel great about that acquisition and what they've been able to accomplish. We've seen very strong year-over-year growth. We're continuing to see the number of customers, so actually, the revenue is being generated from a far greater client pool than in past. The partners and all of the teams are executing very well.

You know, we've now grown that business to over 3,000 consultants and it?s still split pretty evenly between Europe and the US and we continue to see and expect great things out of that group going forward. The team is excited about their results. You've seen it now move from just base consulting where they used to have a very short term turnover, to now, we've got a much longer term revenue stream as we're signing up much longer term services engagements. We're also seeing opportunities as we're starting to bring some product in. All of that would say that's been a fantastic acquisition for us, Ashwin, and it's going to continue to contribute strategically to FIS.

All the metrics we put in place, they've exceeded every metrics that we've established for them. Quite pleased.

That's great to hear. The second question I have -- probably one of the more frequent questions I get from investors is with regards to margin improvement at FIS. As we look at some of these earlier GFI type contracts that you've signed, do you see the prospect for margin improvement in that portfolio because it's many of those contracts are either international or consulting lag, which means that the early margins from those ought to be lower. Do you see margin improvement in that base for the earlier signed ones?

We do Ashwin. If you think about our business and where we are focused, you got our North American business that we talk about quite a bit. It's a one to many model. You see the margins we generate there and will continue to see margin expansion -- we're going to get greater margin expansion there than we will in our other markets.

Our international market, you'll see it come into more the middle of where you would expect in between the GFI and in between the North American business. You are going to see that margin expand as well. We've got the India ATM bill, we're well into that. You're starting to see volumes ramp and what those volumes, you'll see margins continue to grow in that group, so we feel good about that.

GFI specifically, actually as we've grown the consulting business, you're right, it is a lower margin. As we?ve grown the consulting business and brought on more scale in that consulting business, we've seen the team has done a very nice job in consulting, growing those margins. The services deal, as well, those long-term [natures], those come in at higher margins than traditional consulting but still lower to the overall Company. Those margins will continue to grow as well and then you got the product capabilities. That's a long-winded answer to, we do believe, that all of our businesses while they'll have different margin characteristics, they'll all grow in the future.

That's a good to hear. If I can squeeze in one question on security because that's another very frequent question. What with all the data breaches and all that kind of stuff. I guess the basic question is cost or opportunity. You guys need to spend more on security. To what extent can you monetize as well from a either a sales standpoint or pass through standpoint?

It's a great question. We've talked about this in the past. There is no such thing as being secure, we see that the rise and continued attacks across all of financial services. As you know, we've gone through an amazing investment cycle ourselves over the last three years. So I would said the quick answer is as you do that ramp, any organization in the early days, it is a cost. It does than translate and we're seeing that now translate into an opportunity for us.

I think as you make those investments and as you implement those best practices, the reality is that drives continued success and drives more business onto our platform. It went from the early stage for us as a cost to now, we talk about it through our sales cycle. People see the investments we made, the benefits that can grow to the financial institution and I think that's one of the things that's helping us with our sales success.

Is it going to continue to escalate? In other words, is the cost going to continue to escalate? The answer is yes, but I think it's on a more normalized rate. Now, there is a big ramp for all IT services companies though, to have to get their environments to where frankly most of the new standards have risen too. We feel comfortable we are there but we also know we are going to have to continue to invest. This is going to be an ongoing diligence that we?re going to focus on, but certainly our customers are seeing the advantage of that investment, frankly our prospects are as well. We think it's one of the things that's allowing us to continue to grow and take share in the markets we serve.

That's good to hear. Thank you guys and all the best.

Thank you.

I'll turn the call back over to Frank for closing comments.

Thanks everyone for your questions and your continued interest in FIS. In closing, I'd like to attribute our long-term success to the commitment and loyalty of our clients, the dedication of our employees and the support of our shareholders. We have the strongest leadership team in the industry. I am proud to be associated with our collective success and I look forward to the future as the executive chairman of FIS and working closely with Gary and the management team. Once again, thanks for joining us on today's call.

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