Fidelity National Information Services Inc (FIS) 2016 Q1 法說會逐字稿

Welcome to the FIS first-quarter 2016 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Pete Gunnlaugsson. Please, go ahead.

Thank you, Terry. Good morning, everyone. Welcome to FIS's first-quarter 2016 earnings conference call. Turning to slide 2, Gary Norcross, President and Chief Executive Officer will begin with a business summary. Woody Woodall, Chief Financial Officer, will continue with the financial results for the first quarter. Today's news release and the supplemental slide presentation are available on our website at, FISGlobal.com.

Turning to slide 3, as always, 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 the slide.

Today's remarks will also include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented. Reconciliations between the GAAP and non-GAAP results are provided in the attachments to the press release and in the appendix to the supplemental slide presentation. Turning to slide 4, I will now turn the call over to Gary to discuss the business highlights. Gary?

Thank you, Pete. Good morning, everyone. Thank you for joining us on today's call. I am very pleased to open this morning's call reporting that FIS had a strong first quarter with good performance overall, exceeding our expectations.

We delivered strong and profitable growth. We have a solid pipeline. Our sales teams are doing a nice job of converting op wins and cross-selling and up-selling to existing clients.

Market client demand for our solutions continues with an emphasis on creating operational efficiencies and implementing transformational solutions. These results and trends underscore our confidence in achieving our full-year 2016 plan.

Turning to slide 5, our first-quarter top-line growth was driven by positive results across both operating segments. Adjusted revenue increased more than 4% organically compared to the prior-year period of $2.3 billion with the EBITDA growing almost twice as fast as revenue at 8%. Adjusted earnings per share rose 22%.

We are ahead of schedule with our SunGard integration. In fact, we see clear line of sight to exit the year with $150 million in run rate synergy. By all accounts, this is a good start to the year and creates a strong foundation for achieving our 2016 goals.

These results are further confirmation that executing on our strategy, including integrating and repositioning SunGard into our FIS business is delivering the desired results. Steady execution coupled with continued improvements in our cost structure and overall performance remains our focus this year to drive continued earnings growth.

We are in the right markets serving financial institutions and empowering our clients of all sizes, from community and regional banks to large global institutions. Strategically, we are investing in the business to deliver long-term growth and consistent shareholder returns.

Our growth strategy remains consistent and has the following key components. First, we're focused on our base business growth by effectively selling to and delivering for our existing clients. The acquisition of SunGard broadens our base business through a wider set of solutions allowing us to expand into new and adjacent markets and provide deeper value to our clients of all sizes.

Second, we're focused on continually creating enterprise value. We will accomplish this through disciplined integration of our strategic investments and innovation and by capitalizing on our expanded scale and operating leverage. This focus will enable us to create new sales opportunities to drive earnings growth.

Third, we are focused on financial discipline to maintain our strong balance sheet and improve our cash flow. We will efficiently use our strong cash flow to pay down debt in the near term and invest for growth for the longer term. We believe our strategy will consistently drive performance and results for the long term. We remain confident in this strategy.

Turn to slide 6 to review our segment highlights. We entered the first quarter with strong momentum driven in part by increased interest in our expanded portfolio. This momentum has translated into strong deal closure for the quarter and a robust quality pipeline of diversified opportunities across both operating segments.

In our integrated financial solutions business, we saw strong cross-sell activity delivering top-line growth of greater than 5% organically. This growth is driven by a balance of demand in each of our solution areas including core banking and wealth, payments in our corporate and digital solutions. This is a strong start to the year for this segment and we are pleased with its first-quarter growth.

In our banking and wealth management business, we signed several strategic long-term agreements with North American community and regional banks seeking the benefits of our fully integrated solution suite. In March, we signed a new multi-year strategic agreement with a $6 billion community bank replacing their long-term core banking, digital, network and item processing applications with FIS solutions.

We also signed a long-term agreement with the US arm of a $900 billion global institution that renewed and expanded their core processing relationship to include a full suite of item processing and associated print and mail solutions.

In our enterprise governance, risk and compliance business, we saw double-digit growth, primarily driven by institutions seeking to remediate regulatory compliance issues by working with our governance and compliance experts. Our payments business also drove double-digit growth in both our high-margin, high re-occurring network business called NYCE, which saw a significant increase in transaction volumes from a large major online retailer. In our card production business where we signed a new multi-year Master services agreement with a bank with assets in excess of $65 billion, as well as continued strength in our EMV card deployments.

Demand for our digital solutions suite was strong representing double-digit growth in our user bases for our digital banking platforms. Our mobile banking platform now supports more than 36 million end-users. Additionally, our FIS cardless cash solution has now been deployed at more than 30 early adopter institutions across the US. We are proud of our leadership position in digital money movement and innovation and expect it to continue to deliver new opportunities.

Within our corporate liquidity business, we signed a multi-million dollar agreement with a leading commercial financing and leasing company to upgrade and host its trade management solution. This is a great early example of how FIS scale and global distribution creates value and growth advantages for our acquired companies.

Two weeks ago, we hosted over 1,200 North American community and regional bankers at one of our annual conferences. The event was focused on disruptive technologies, particularly in digital and enabled us to showcase and demo many FIS solutions to these bank executives.

Client response was overwhelmingly positive, as they look to run their banks more efficiently and invest in new innovative technology so they can effectively compete and growth their institutions. All of these new and extended relationships demonstrate FIS strength in serving the banking and payment needs of North American institutions regardless of size, creating predictable revenues, tied to long-term contracts and deployed in a one-to-many model.

Turning to our global financial solutions business, we are very pleased with the early progress in this segment attributable to the changes we implemented last year combined with the new portfolio offerings from the SunGard acquisition. In the quarter, we delivered top-line growth greater than 4% organically. A significant change from last year, approximately 85% of total revenue for this segment is now driven from IP-led solutions due to the SunGard acquisition.

We also have a much more diversified pipeline primarily driven by the addition of new offerings from SunGard and our Clear2Pay next generation payment solutions. While this will bring slower than historical growth for this segment due to the IP-led nature of future deals, it will also bring higher profit margins accompanied with more predictable revenue. The segment's institutional and wholesale business comprised primarily of the former SunGard business drove more than 5% organic growth with good margin expansion in the quarter.

Growth was driven from demand and trading volumes and strong demand for capital markets, risk and compliance solutions. We also saw good renewal activity in the quarter.

Our Clear2Pay solutions drove double-digit growth to the top-line. Our integration efforts have nearly doubled the margin profile of this business since we acquired the Company in October 2014. This global payments delivery platform continues to gain [malient] demand as the need for more real-time and least cost routing with payments gains momentum.

In Europe, we continue to see success with challenger banks. Atom Bank, the UK's first all digital bank, went live last month ahead of schedule. FIS will continue to be their long term strategic technology partner of choice.

In Brazil, we were encouraged to see continuing gains in transaction volumes, primarily due to the expanded relationship with one of our strategic clients in the region. Overall card processing in Brazil is up 11% excluding currency year-over-year.

Additionally, we entered into a new multi-year strategic agreement to help this same client advance its digital banking strategy. Both of these new agreements are positive steps forward for us in a region that continues to be challenged by macroeconomic conditions.

Our consulting business is delivering on expectations and had a good quarter. The overall pipeline is growing as expected and supports our belief that 2016 will be an improved year for consulting.

Turning next to slide 7. Before I turn the call over to Woody for the financial review, I would like to summarize by reemphasizing that we are very pleased with our first-quarter results. The strong performance reinforces our confidence in our 2016 operating plan. To meet our goals, we will continue to focus on: our integration efforts with high intensity; driving profitable growth through new sales; maintaining a strong balance sheet through paying down debt; and returning cash to shareholders. With that, I would like to turn the call over to Woody for additional detail on the financial results for the quarter. Woody?

Thanks Gary, I will begin on slide 9. In the first quarter, adjusted revenue increased to $2.3 billion or 4.2% on an organic basis. Adjusted EBITDA grew to $637 million, an 8.1% increase compared to the prior year on an adjusted combined basis, as if we owned SunGard in the prior-year period. This represents 170 basis points of margin expansion.

Adjusted net earnings from continuing operations was $259 million. Adjusted earnings per share increased 22% to $0.79 per share compared to $0.65 per share in the prior-year period.

As Gary mentioned, we're very pleased with the start of the year and with the efforts of the SunGard integration teams. The integration efforts have provided incremental synergies which benefit earnings per share for the quarter by about $0.01. As noted earlier, we now have line of sight to exit the year and an expense synergy run rate of $150 million, ahead of our original expectations of $100 million. We expect the earnings impact of this increase in run rate synergies to be more heavily weighted in the second half of the year and drive benefit into 2017. We remain highly focused on accelerating and over-driving our synergies.

As you know, we closed the SunGard transaction on November 30, 2015, with all the results of the acquired businesses flowing into the GFS segment for the month of December. During the first quarter, we have made minor adjustments to the reporting structure of certain businesses to more accurately reflect the way investment decisions are made and how we're operating the Company. We have moved the public sector in education, retail check processing and our commercial services business into the corporate and other segment.

We have also included the recently acquired SunGard wealth management and corporate liquidity businesses in the IFS segment. Included in the press release this morning, we have also provided historical adjusted combined financial information for 2015 and 2014 by quarter. These historical combined financials include SunGard's results as if we owned them January 1, 2014 and reflect these changes in order to provide you greater clarity and better comparisons to the prior years.

Moving to slide 10. IFS has been strengthened by combining the acquired wealth management assets with FIS wealth solutions and by adding liquidity solutions to our corporate and digital solutions. This slide highlights the key additions to the IFS segment from the SunGard acquisition.

Moving to slide 11, in the first quarter, integrated financial solutions organic revenue grew 5.4% to $1.1 billion. I am pleased with how IFS is starting the year. EBITDA increased to $426 million, an increase of 2.2% compared to the prior-year period on an adjusted combined basis, with 130 basis points of margin decline.

We are pleased with the pace of revenue growth in the quarter; although, the over-drive came in lower margin solutions and services revenue. This revenue mix cost approximately 30 basis points of decline in margin for the quarter compared to our expectations. Additionally, as planned, we had higher incentive accruals in the quarter.

Turning to slide 12, banking and wealth grew 5.1% for the quarter. This was driven primarily by wealth solutions and continued market demand for regulatory and compliance. We're also pleased with payments growth of 6.7%. This was driven by volume and debit, payments over the NYCE network and EMV card production. Corporate and digital grew 3.7%, with mobile banking posting a double-digit growth rate in the quarter.

Turning to slide 13, the GFS segment has been strengthened by the institutional and wholesale solutions from the SunGard acquisition. These businesses include capital markets, global trading and buy side and now comprise of about 50% of the total revenue. Our traditional GFS banking and payments and consulting businesses remain part of GFS.

Moving to slide 14, in the quarter, global financial solutions organic revenue grew 4.4% to $990 million. EBITDA increased to $251 million, a 12.1% increase compared to the prior year on an adjusted combined basis. This represents 270 basis points of margin expansion. The addition of SunGard improves the revenue stream in this segment by increasing the mission critical, intellectual property driven, recurring revenue of GFS, while providing opportunities to accelerate margin expansion in the segment.

Moving to slide 15, our institutional and wholesale business grew 5.4%. We're very pleased with the start of the year. Growth was driven primarily by strong demand in global trading and capital markets risk and compliance solution. Banking and payment's organic revenue grew 4% to $351 million, which was supported by double-digit growth in Clear2Pay.

Despite the ongoing macroeconomic challenges in Brazil, we continue to see strong growth in card processing volumes in that market. In addition, our first two fully outsourced clients in India continue to experience good growth.

The consulting business, performance was in line with our expectations. We are building momentum based on a strong pipeline, which gives us confidence that 2016 will have improved results.

Moving to slide 16. As stated earlier, the corporate and other segment now includes the public sector and education, retail check processing and commercial services business. This reporting structure change reflects how we make investment decisions to support these non-financial services customers. Adjusted revenue in the quarter was $151 million, with an EBITDA loss of $40 million.

The corporate and other segment also includes results of $76 million of corporate expenses, which compares favorably to adjusted combined corporate expense of $89 million in the prior year reflecting cost management and synergy obtainment. The corporate and other segment declined 5% on an organic basis.

The public sector and education business had strong organic growth of 7.1%. Organic growth in the commercial services business declined 13% driven by a final stub period of the non-strategic contract non-renewal discussed last year. Retail check processing declined 6.1% reflecting a continued decline in check processing volumes.

Moving to slide 17. For the quarter, free cash flow was $338 million. As of March 31, we had $11.3 billion of debt outstanding. During the quarter, we repaid $150 million of debt.

We returned $85 million to shareholders through dividends. We also ended the quarter with weighted average shares outstanding of $327 million on a fully-diluted basis.

We are highly focused on cash flow generation to delever the balance sheet. It will continue to be a priority for us in the upcoming quarters. As expected, the effective tax rate increased to 35% for the quarter, driven primarily by the inclusion of SunGard and the results.

Moving to slide 18, in conclusion, we are very pleased with the start to 2016, top-line growth and synergy execution. We are highly confident in our full-year 2016 plan. We continue to expect organic revenue growth of 3% to 4%, adjusted EPS of $3.70 to $3.80 per share, a 15% to 18% increase and free cash flow to adjusted -- to approximate adjusted net earnings.

Further, we believe that the market's current consensus view of the second quarter is in line with our expectation. We remain focused on constantly improving cash flow generation, delevering our balance sheet, investing for growth and returning cash to shareholders. That concludes our prepared remarks. Operator, you may now open the line for questions.

(Operator Instructions)

Dave Koning, Baird.

Great job.

Thanks, Dave.

Just a couple questions, the first one, is there a way for you to give us the growth, just SunGard standalone growth and then core FIS standalone growth in the quarter? Were they both around the same 4% level?

Pretty close. If you look at legacy SunGard, the organic growth, Dave, was about 4% -- right at 4%. So that left us at a similar level on the FIS side, slightly higher than that obviously. Obviously, we saw good margin expansion with the combination of the efforts they put in place as well as the synergy execution on a standalone basis. It will get more and more difficult to talk about them on a standalone basis, as we work through our playbook of integration. But good results on both sides.

Okay. Then I guess, the second question, when we look back at 2015, every quarter in there, you were doing 0% to 2% core organic growth. This quarter 4%, it's so much better. Was there anything one-time in this quarter that drove it better? Then maybe can you just talk about what is really -- what are the two or three things that have gotten a lot better right now, compared to last year.

Yes. Dave, we really saw just a good solid quarter across the board. Every business line executed very well. The SunGard integrations went extremely well, so the sales teams have not had much distraction at all. We had a real solid kick off this year. We also had some strong sales that we signaled in the back half of last year that are now translating to the growth this year. We have seen some improvement in our people-based services business, which is also -- was a pretty big headwind throughout the year for us last year. But I would just say, across the board we saw improvement.

We highlighted a number of those areas with good strong transaction growth in our network. We're seeing strong demand for some of our next generation innovations we are doing. We also continue to see good response from the sales team around core offerings and all of the pull-through that, that can generate across our product suite. To Woody's point, SunGard, the former SunGard business performed very well for us. We were pleased with the results of that. We had modeled that acquisition in that range that came in on the high end. So all-in-all, just a good quarter across the board.

Great, thanks. Great to hear.

Thanks, Dave.

Darrin Peller, Barclays.

Nice job. I just want to start off, when we look at the additional wins that you still have rolling on throughout the year -- I'm thinking about Sainsbury still rolling out, and Credit Agricole. I know we've talked about issuer processing wins like CapOne and others. Is this going to be a set up, where 4% is the start of an acceleration still through the year? I know initially your guidance was 3% to 4%, with more of a second half weighted year, here you are starting at 4%.

Darrin, as I said, we're pleased with the quarter. I think we continue to stay focused on the guidance we've issued. We realize that one quarter doesn't make a year, so we are focused on the results. As you mentioned, we've got a lot of stuff that is in the pipeline coming online but frankly, we have that every quarter. The [taste on] execution in 2016 focused on the integration of SunGard, focused on continuing to close out our saes and getting them on boarded in an appropriate way.

Makes sense. Just a quick follow-up, we get a lot of questions on SunGard in terms of the strength of its abilities, especially given the capital markets volatility we're seeing in volume levels. Can you just comment on the strength of 4% now there in SunGard? If that is really sustainable? Then, maybe just to add on to that any cross-selling opportunities you see that we can benefit from between SunGard and the legacy FIS over the course of this year on the revenue side?

Yes. No, absolutely, the nice thing about SunGard is they look very similar to the way FIS has looked for years. These are very mission-critical, highly re-occurring software products that are required in order for a financial institution to open its doors. So, while sometimes we can see impact due to transaction volumes or trading volumes, no different than we can on, for example, our debit network, the reality is for these institutions to open their doors they need it.

So this mission critical nature is very important. We are seeing some really nice opportunities for pull-through, actually I highlighted one in this quarter with that large commercial leasing company. This was a fantastic relationship that FIS had and by the combination with SunGard, we were able to pull in our new offerings in a particular area that they were looking at and win that transaction.

We are already starting to see some of that. As I've said in the past, what you will watch for is that really in the back half of the year and early 2017. But sales cycles are long in this business. But early signs are we will have a lot of opportunity in the global marketplace with our combined capabilities.

Okay. All right, that's great. Just last question, I will turn it back to the queue. On the consulting side, it was really good to see the re-acceleration there on the people-based. Is that -- I guess that's Capco primarily, right? Is that re-acceleration something sustainable now? We don't have to worry about it slipping back to negative territory?

That was our Capco consulting business. As you mentioned, we were pleased with the quarter as well. We have talked about in the past, when you look at consulting business, you really look at about 120 to 180 days out. We've got very strong book-to-bill right now coming through Q1, which would indicate good solid Q2. Then that pushes into Q3 and Q4, but we feel good about what the team's accomplished. We certainly made a strategic shift there and that strategy looks like it is paying off for us.

That's excellent. Thanks, guys.

Jim Schneider, Goldman Sachs.

I was wondering, given the solid growth you put up in SunGard in the first quarter, do you still feel confident that you can get to the upper end of the original 3% to 5% SunGard growth rate you had laid out there at the start of February?

We do. We're pleased with the growth rate right now. We're pleased with the pipeline. We're pleased with how things are shaping up on the SunGard side. So absolutely, we still feel confident in what we have laid out and our ability to drive revenues in those levels.

Thanks. Maybe just on the cost side of things, with the increased synergy target, can you maybe talk about where some of those increased synergies are coming from? Are those additional synergies or just pull-forward to the original synergy you expected to see in 2017? Are those more likely to come on the cost revenue side or the SG&A side?

I would say, it's a combination of both. As we went into this, we realized that SunGard would have not as much overlap to some of our traditional large acquisitions we have done. So we really stayed focused on the SG&A side. We stayed focused on our leverage services side. What we have realized as we have gone through this process is, there are some opportunities within the former SunGard business to implement changes in the way FIS operates these businesses.

So, we've seen a combination of accelerated pull-through that was identified in due diligence. We've also seen some opportunities that are new that we didn't discover during due diligence. So we're confident that we will exit this year with a $150 million in run rate. As you guys have seen in the past, we typically beat our projections on synergies.

To add some color on your other question there, it was more highly weighted in the corporate cost right now, with cost coming out of the operations on an ongoing basis.

Absolutely.

A little heavier in the corporate cost early as you might imagine.

Great. Thanks so much.

Brett Huff, Stephens.

Congrats on a nice quarter.

(multiple speakers) Thanks, Brett.

One, more detailed question on Capco. I think the 1.8% growth in consulting that you all give us in the GFS segment, sub-segment breakdown, that includes both Capco legacy as well as the new SunGard, is that right?

That is correct. The SunGard portion is pretty small, Brett. So if you remember, the views on the --

Okay. So that 1.8% -- I think Darrin asked this question, I just wanted to be sure. So that Capco growth last quarter was negative 10% organic constant currency. Is there an equivalent number you can give us? Or is that 1.8% apples-to apples?

It is close, Brett. You're probably plus or minus 0.2 of a point.

Okay.

It definitely was an improvement from the fourth quarter.

As Woody said, the SunGard consulting piece was very small.

Yes.

Okay, that's helpful. Then, also in the legacy GFS business, I know it was a little bit weaker on the regular processing type businesses in the 4Q. Any discussion on that? I think there was some Asia weakness and things like that. How did that fare again on a sequential basis on that revenue growth, if you could give us a little insight there?

Yes. I think what you saw was really good growth in the Clear2Pay, good growth in Brazil that we talked about, India was very positive. On the opposite side of that, you still had some drag from the people-based services business. They weren't down like they were sequentially in the fourth quarter. They were more along the flat area year-over-year but still a drag to overall growth. So, definitely saw an improvement but still a drag to overall growth.

That's great. That's what I needed. Thank you, guys.

Thank you.

David Togut, Evercore.

Congratulations on the strong start. Just a question about EMV. You called out strength there, Gary. Where are you in the EMV manufacturing and personalization process? What inning are you approximately?

We are in the very early stages. We appreciate the congratulations, but when you look at EMV, we're at the very early innings of this. We were quick to market, as we've discussed. We have seen this as a tailwind every quarter for us. We are still -- the vast majority of the plastics we're producing in the quarter are still non-EMV. So we've got a lot of room to run with EMV as we roll that out.

How much longer do you see EMV as a tailwind? Will this push into 2017?

I think that would be a reasonable assumption based on what we have seen today.

Got it. Then you highlighted, I think, a couple weeks ago that you are pretty close to launching a real-time payments network at the beginning of next year. Can you talk a little bit about that? What your plans are for that?

Yes. No, actually -- we actually launched a real-time payment network a couple of years ago. In PayNet, we have actually partnered with a very large customer that handles some of the largest global banks. We are deploying a lot of our technology for that real-time payment environment, as we've discussed, David. There going to be multiple networks to get this done. What we care about is that the underlying technology is FIS capabilities.

Certainly, that is all been augmented by our Clear2Pay acquisition that we did now a couple of years ago, as we highlighted. You see a tremendous growth in Clear2Pay. That is all around this real-time payments and also least cost routing. So, we think we're in very good position for this as this comes online. But that client that we announced, I think, it was either one or two quarters ago, that process is going very well.

Got it. A couple quick housekeeping questions. When you reported your fourth quarter, I think, Woody, you called out $150 million of revenue headwind from FX.

Yes.

Are you updating your FX guidance? I think that was mostly from the real at the time.

Yes, I can give you some color. We put in our guide about $150 million. I would tell you we're more on expectation of around $100 million given today's rates, David. As you know, pretty volatile. But we're thinking more in the $100 million zone right now.

Got it. Then just finally, what do you expect the deferred revenue adjustments to be on SunGard for each of the second, third and fourth quarters?

I would tell you, we probably expect similar levels. It is an adjustment associated with purchase accounting. So we're adjusting it back in as if SunGard would have recorded under GAAP. But we would expect similar levels through 2016 and it falling away into 2017, almost nonexistent in 2017.

Thank you. Congratulations.

Thanks, David.

Tien-tsin Huang, JPMorgan.

Good quarter here, from me.

Thanks, Tien-tsin.

Good to talk to you guys. Just a couple of questions. Gary, you had mentioned within GFS, the IP-led deals, right? Potentially higher margins, more predictable but lower growth. Just to dig in on that, is that just a result of higher maintenance mix as opposed to license fees and people-based? We're just trying to understand that timing a little bit better.

Yes. No, there has been a huge shift in GFS. Certainly, we'll go into a lot more detail next week at our investor update. But when you look at the complement of SunGard products and services and the amount of assets that they brought into GFS from that acquisition, the percentage of revenue tied to now true software and software solutions, whether it is license, maintenance or outsourcing has increased that segment now to be about 85% of the revenue. So this is a huge shift that has occurred since prior to the acquisition.

As you know, product-related sales tend to take longer, right? Then you have to go through an implementation cycle to onboard. So naturally growth is going to slow a little bit than say traditional people-based services businesses that are somewhat detached from software. But the advantage to that concentration is now you're going to see margins lift significantly in GFS. We think we're going to have a great opportunity with some nice margin expansion in the coming years in that business, as it starts taking on more of the characteristics of a true classic IP-type company.

Got you. No, it's a good outcome. Then different question, Gary, just on the new sales or bookings in the aggregate, not just consulting I know there's been some mixed signals out there in terms of bank spend on the IT front. How do see it? How did first quarter come in versus plan on new sales?

Yes. No, we had a good, as you say, we had a good solid first quarter. We saw good renewal activity across both IFS and GFS. We saw some good closings and I highlighted some of the larger ones in my prepared remarks. We see a really good pipeline. I would say, we have not seen anything shift with regards to those results; although, as we've talked about now for multiple quarters, it is a very competitive market. Based on that, we have got -- we think we have got the solution set in the mission critical applications to win in those deals. But, all-in-all, it was a good quarter across the board.

All right, good. Just last one on guidance, I totally appreciate the conservatism in keeping guidance the same, but any incremental signs of weakness out there? Or revenue dis-synergies that might give you pause in raising guidance? It doesn't sound like it, but just wanted to make sure.

No. I would say no, just a good start to the year. Feel good about the guidance we have laid out and are confident we'll be able to meet it.

Great. Thank you.

Ashwin Shirvaikar, Citibank.

Good performance on the bottom-line and cash flow.

Thanks, Ashwin.

I just want to start with the guidance question because I just want to figure out based on the earnings benefit of [fire] synergies which you guys said was back-end loaded, we also have a 1Q beat and on the top-line $50 million extra -- $50 million from FX and all of that stuff. What would cause you to be at the lower end of the range, given all of these positive things? Is it the high accruals on the stock-based expense, that kind of stuff? What causes you to be at the lower end?

Yes. I think if you saw a fall-back in the people-based services that we saw last year you can see some of that.

Absolutely.

If we didn't have good sales execution in the back half of the year, you could see some of that. So, those would be the kinds of things that could happen, Ashwin. We don't foresee those at this point, given what our forecast looks like. But again, one quarter doesn't make a year. We want to make sure we hit what we have outlined in the marketplace.

Understood. Then as you rebuild the Capco pipeline, is the nature or attributes of the contracts that you are signing and the projects that you're getting, is it different than the last time you were rebuilding that may have run into some issues back then?

Yes. No, as we talked about at the end of last year, we made a strategic shift back to more strategic type transformational consulting, which is the original ethos of our Capco business. As a result of that, we have seen our partners get much more focused on those particular areas. We've seen our pipeline grow. We've seen, more importantly, our book-to-bill number increase significantly, which is two very positive signs.

As I said, gave us confidence for Q1. Gives us confidence for Q2. We have got some more work to do for Q3 and Q4, but that is the nature of the consulting business. So, we are pleased with our early results of that change. It really does put us in now, back into a different conversation where we are able to influence some of the transformation that is going on in the market. It's really helping us augment a number of our IP services.

So we highlighted, for example, a large digital transformation with one of our more strategic clients in South America. We'll deliver that through our capital organization because it is a one-to-one. But that was led because of the significant relationship FIS has and our ability to leverage that relationship. So those kind of combinations are really what the intent has always been for our capital consulting business. As I said, the team has done a nice job.

Got it. Just a couple of quick questions, one is the corporate and other piece. Should we look at these as maybe less strategic assets to you guys? There has been speculation the past, for example, that the public business might be up for sale. What might be the conditions under which you'll say yes to that sort of transaction?

I think we always look for ways to look at the portfolio and what are the best fits for the long term and what are not the best fits for the long term. We've talked about if we had some ability to sell some assets that could accelerate the deleveraging of the balance sheet, which we are very focused on. But frankly, it is just we think about those businesses slightly different in their customer base and how we would service that customer base versus traditional financial institutions. So just look at them a little differently.

Yes. We saw a great quarter frankly in public sector. The leadership team is doing an outstanding job with that business. But I would say, Ashwin, as you have seen historically, as we have products that don't necessarily fit our strategy, it doesn't mean that they are not great businesses. So, we divested our healthcare business, as an example. We divested our gaming business. But in the meantime, we're going to continue to drive these business lines. We've got great leadership over them and continue to maximize our shareholder returns.

Last real quick question, can you provide a cadence for debt repayment?

We talked about looking at all excess free cash flow effectively being used to pay down debt. You can look at our history of driving free cash flow in terms of the curve, Ashwin, along with what we have guided to this year. Minus dividends, that excess will be used to repay debt. That would be a good way to model it.

Great. Thank you, guys.

Ramsey El-Assal, Jefferies.

Congratulations on a strong quarter.

Thank you.

Are you seeing any different types of -- now that you've had the asset under your belt for a little while, are you seeing any different types of cyclicality impacting SunGard versus your core retail bank business? Things like inflows or performance and asset management business or the broader financial market, is there any incremental kind of math to keep an eye on as it regards to SunGard performance?

Ramsey, when we first bought SunGard, honestly, we talked about it when we made the announcement. You're looking at a company that looked very similar to FIS, either the early part of this century or in the late 1990s. It had a heavy license fee concentration, so we were very focused on the license fee component of the revenue because that can be more cyclical and also be somewhat more volatile. What we liked about what SunGard had done is those licenses would then form the perm licenses.

Back to the mission criticality of it, if people don't renew those licenses, those products can no longer be utilized in the particular institution; therefore, not only are they mission critical, they are very large and very complex to implement. So we continue to watch that metric. But we also feel much better about that now after we have owned the Company for some period of time. We continue to watch just like in all of our large global institutions, the macroeconomic issues that are going to impact spend.

One of the things that we like about FIS is the fact that we have such a diversified revenue portfolio. So what you are finding is this spend can move around the institution. So increased regulatory change can perhaps drive more focus on regulatory and compliance. We now have a suite of solutions to deal with regulatory compliance. We also have robust professional services capabilities around that, as an example. So what we've got to do is just make sure that our sales teams are tracking where the revenue is being spent, so that we can continue to maximize our growth through -- as the industry shifts.

Okay. Second one, you mentioned an increase in transaction volumes from a big online retailer. Can you give us a little more color there? Was that a new acceptance win? Or was that an existing relationship that ramped up for some reason?

Yes. It was an absolute new win. It's been ramping up over quarters after implementation.

Got it. Okay. Last quick one, what is your updated leverage levels -- leverage ratio after the quarter?

I think we're looking just under 4%, Ramsey, based on estimated synergies. But just under 4%.

All right, got it. Thanks. That's all for me, guys.

George Mihalos, Cowen.

Let me add my congratulations for the start of the year.

Thanks, George.

Just wanted to ask, historically the IFS segment has been less volatile than GFS. You are off to a good start here at north of 5%. Is there anything we should be aware of that could cause that rate to deviate throughout the rest of the year? Or do you expect it to be pretty uniform?

Yes. The biggest thing that we always watch for in IFS -- as you said, it's very predictable for us -- is really where acquisitions are occurring in-market. So the thing that is almost impossible to predict in this industry is when two financial institutions are going to come together, the size of that combination and where their processing is going to end up post combination. So those are the things that can really impact IFS. We saw that over the last couple of years with some really large combinations. It drives a high termination fee, which drops right to the bottom line, but then you've got to fill in the processing volume.

Other than that, really the business is all the software that we deploy in IFS is extremely mission critical. We have had good strong sales success over the last several years, as evidenced by the holes created in the example I just gave and the sales team's ability to fill that in. So we are continuing to monitor IFS, but to Woody's point earlier, we feel good about the quarter they had. Frankly, feel good about what the year is shaping up to look like for them.

Okay, I appreciate the color. Then just two quick ones, I'm not sure if you guys gave the term fees in the quarter or maybe what they were a year ago? Then as it relates to SunGard, the 4% growth, was that pretty uniform throughout both segments, both IFS and GFS? Thank you.

Yes. Term fees in 2016 first quarter were $8 million, that compares to $5 million last year, so again, much lower than history. With regard to SunGard within the two groups, I think, institutional and wholesale, you saw at 5.4%. For the corporate liquidity and treasury, obviously, a little lower than that, flow into the IFS group, with public sector and education growing at 7%. So, 5.4% for the institutional wholesale, 7% for public sector and education, a slight decline in the corporate liquidity that flows into the IFS Group.

Paul Condra, Credit Suisse.

I wanted to just ask -- you gave us the segment restatements and some of the pro forma detail which is very helpful. Thanks for that. Can you just give us a little detail, what kind of growth trajectory, margin trajectory you might be looking for in those segments just for the year?

Yes. I think we added some color on that back into, in February when we gave guidance. The GFS segment, we think, full year will be 26% or more in terms of the improvement from a structural standpoint of adding SunGard in it, plus the synergy attainment. On the IFS segment for the full year, I think, we still think 10 to 20 basis points for the full year is a good answer, obviously, you're seeing a little bit of a headwind there. In terms of some incentive accruals, which are a little more difficult comp in the first and second quarter. But I think those outlined margin profiles are still intact for the full year.

Can you help us just to understand the revenue in the corporate segment for the year?

Yes. It is pretty ratable. We anticipate it -- with anniversary the contract renewal in the second quarter, so you shouldn't see GCS with a similar level of organic decline. I think public sector continues to perform well so that the high single-digit grower that we saw in Q1 should continue. Then with regards to the check processing business, that one, we do think volumes will continue to decline over time.

Okay, great. Then lastly, you mentioned you are ahead on getting to the $150 million in synergies. You had previously said you wanted to get to $200 million by the end of 2017. So, do you think you could be above that by the end of 2017? Or get there earlier? Can you make any comments about that?

We're going to go through all of that here in a week at our investor update and give you guys a lot more guidance. But if you look historically with FIS and our large acquisitions, we have always been able to exceed our goals in those particular areas. Frankly, we're off to a very good start. We feel confident in exiting the year with $150 million in run rate. As more synergies go from identification to projects and timelines for implementation, we will certainly update you guys as we go forward.

Okay, thank you.

Bryan Keane, Deutsche Bank.

Just want to understand a couple things. On the guidance, you didn't raise the guidance but with the lower FX and the higher synergies, I guess I would have expected you guys to take-up the guidance a little bit. But is there anything offsetting that, that's going the other way? That is causing you guys not to raise guidance? Or is that just being conservative?

I would tell you it's just being conservative. It was a very good start to the year, one quarter doesn't make a year; just being conservative.

Okay, that's helpful. Then on the IFS margins, they were a little bit lower than you planned. It sounds like it was incentive accruals. Just, can you help us understand what that is exactly? Then what going forward should we expect for those margins should they recover in the second quarter?

Yes. I think we expected the incentive accruals. As you remember last year, we brought incentive accruals down, with the results that we had. What we didn't expect or saw some over-drive in the revenue, some of that margin mix impacted us, so that was about 30 basis points off what our expectation was. So, pretty close, but pleased with the revenue growth.

Okay. Then going forward there, on the IFS, the margins, will we see the improvement?

Yes, again, we think the full year's still sort of a 10 to 20 basis point growth curve. You obviously could see some change in that should the mix continue or accelerate. But we still think that 10 to 20 is a pretty good answer.

Then the other clarification, just on NYCE, there was a large retailer that drove the volumes there. Usually, we always think about bank wins driving some of the EFT networks. Can you just talk a little bit about that relationship? How that drives growth to NYCE?

Yes. Well, NYCE is one of the largest debit networks in-market. It is always been a strong grower for us. As you said, it's very issuer-centric, but as we also sign a merchant's -- large merchant's ability on the acquiring side, but then funnel those transactions, those debit transactions through that network -- those volumes, since that business is a click model as those transactions come through, you'll see natural revenue ramp. Obviously natural profit contribution from that ramp.

Okay, that makes sense. That's all I had. Congrats on the great start.

Thanks.

Thank you. I will turn it back over to Mr. Norcross for any closing remarks.

Thank you for your questions today and for your continued interest in FIS. Our deep focus and investment in financial services is allowing us to drive change in the industry. We offer solutions that are making our clients businesses run efficiently, while at the same time providing them the opportunity to grow and differentiate themselves in an ever more competitive and strenuous regulatory environment.

I would like to thank our leaders and our more than 55,000 employees for their hard work and dedication in serving our clients. As important, I 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 empower the financial world. Finally, please make plans to join us on May 10 for our upcoming Investor Day conference at the St Regis Hotel in New York or by dialing in to the live WebEx of the event. Thank you for joining us today.

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