Fiserv Inc (FISV) 2012 Q1 法說會逐字稿

Welcome to the Fiserv first-quarter 2012 earnings conference call. All participants will be in a listen-only mode until the question and answer session begins following the presentation. Today's call is being recorded and is being broadcast live over the internet at www.Fiserv.com. In addition there are supplemental materials for today's call available at the Company's website. To access those materials, go to the Company's website at www.Fiserv.com, and click on the earnings call link in the events section of the homepage. The call is expected to last about an hour and you may disconnect from the call at any time. Now, I will turn the call over to Peter Holbrook, Vice President of Investor Relations at Fiserv

Thank you, Carol. Good afternoon, everyone, and thank you for joining us on our first-quarter earnings call. With me on today's call is our CEO, Jeff Yabuki; our CFO, Tom Hirsch; and Mark Ernst, our Chief Operating Officer.

Our remarks today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We will make forward-looking statements about among other matters adjusted revenue, adjusted internal revenue growth, adjusted earnings per share, adjusted operating margin, free cash flow, free cash flow per share, sales pipeline, acquisitions, and our strategic initiatives. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Please refer to our earnings release which can be found on our website at www.Fiserv.com for a discussion of these risk factors. You should also refer to our earnings release for an explanation of the non-GAAP financial measures discussed in this conference call and for a reconciliation of those measures to the nearest applicable GAAP measures. These non-GAAP measures are indicators that Management uses to provide additional meaningful comparisons between current results and prior reported results and as a basis for planning and forecasting for future periods. I will now turn the call over to Jeff.

Thanks, Peter. Good afternoon. On the heals of our strong finish to 2011 we delivered revenue growth and adjusted EPS that exceeded our internal expectations for the quarter. We are pleased with our start to the year and are well positioned to achieve results within our full-year guidance. Adjusted revenue increased 5% in the quarter and adjusted internal revenue growth was 4%, including solid results in both our payments and financial segments. Adjusted earnings per share was up 18% for the quarter to $1.20 and adjusted operating margin expanded 40 basis points over the first quarter of 2011.

Free cash flow was $183 million in the quarter, below the outstanding results in the comparative quarter, primarily related to relative changes in working capital. Cash flow remains on track for the year. In February, we reinforced our commitment to building shareholder value through an additional repurchase authorization for 10 million shares. To that end, we also repurchased 3.7 million shares in the quarter. We've established three key enterprise priorities to help you better gauge our current performance and strategic progress in 2012. First, to deliver an increased level of high-quality revenue growth and meet our earnings commitments. Next, to center the Fiserv culture on growth leading to more clients, deeper relationships, and a larger share of our strategic solutions. And third, to deliver innovation that increases differentiation and enhances results for our clients.

Adjusted internal revenue growth of 4% matched our strong fourth-quarter performance and accelerated from 3% in the first quarter of 2011. Growth in the quarter was driven by recurring revenue in our debit and account processing businesses, along with solid performance across our digital channels, reflecting strong demand for mobile banking solutions and the industry's renewed focus on online banking. Adjusted operating income was up 6% in the quarter leading to higher operating margin and another quarter of double-digit adjusted EPS growth. Strengthening the foundation of our growth culture leads to better results now and into the future. We are executing against our go-to-market strategy which is well aligned with technology and consumer trends. As proof points of the market demand, we signed a combined 230 payments clients to our bill payment, debit, and P2P solutions in the quarter, and nearly 150 clients selected our market-leading mobile solution. We also had two additional large credit unions commit to Accumen, our next-generation account processing platform in the quarter. We remain encouraged by the strong interest in this advanced technology platform and as important, the significant number of additional solutions that are being purchased along with the core.

Last week, we hosted over 3,600 attendees at our 2012 Spring Client Event Fiserv Forum. This event will end up being one of the largest gatherings of financial institution executives in the US this year. In addition to having marquise speakers such as President Bill Clinton, and Dr. Fareed Zakaria, we had strategy sessions, product forums, and user groups. We also hosted a 70,000 square foot solution center showcasing more than 100 of our leading technology solutions geared at driving a broad range of value for our clients. The feedback on the event has been outstanding.

Our third priority is to deliver meaningful innovation that helps drive differentiation and enhance success for our clients. We announced in February that we will combine the Popmoney and ZashPay P2P payments products and networks and market the enhanced service as Popmoney. The integration will merge the best features of both solutions into a common branded interface, provide best-in-class risk management, and process payments using the same secure and scalable Fiserv technologies that are currently used to move billions of payments. The combined network which includes some of the largest financial institutions in the US has nearly 1,500 enrolled institutions with combined initial reach of more than 35 million existing online and mobile banking consumer relationships. The reach of the Popmoney network combined with advanced capabilities such as request money, multiple funding and receipt options, and both online and mobile functionality have us very well positioned to host the largest financial institution-centric P2P network in the country. Lastly, we will also integrate Popmoney into our CheckFree RXP payment suite which is in use at about 3,600 financial institutions. We expect the migration to be complete by mid year.

At our client conference last week, we conducted multiple live demonstrations of realtime Popmoney transactions via our ACCEL/Exchange PIN debit network. These interbank transactions posted directly to and from live bank accounts and could be viewed in their respective accounts through online banking within a matter of only seconds. We expect to begin offering realtime enabled transactions within the Popmoney network late in 2012. With that, let me hand the discussion to Tom who will provide more detail on our financial results.

Thanks, Jeff, and good afternoon, everyone. As Jeff mentioned our strong start to the year for revenue and earnings growth was ahead of our planned results for the quarter. Adjusted revenue increased 5% to $1.03 billion. Adjusted internal revenue growth was 4% for the second consecutive quarter, accelerating from 3% in the first quarter of 2011. Adjusted earnings per share increased a very strong 18% to $1.20 in the quarter. Adjusted operating income grew 6% in the quarter to $296 million, and adjusted operating margin increased 40 basis points to 28.7% compared with the first quarter of 2011. Scale, which underlies many of our businesses, and the continued success of our operational effectiveness initiatives provides us an opportunity to expand margin, even as we buildout our new solutions.

Now on to the segment results. Adjusted revenue in the payment segment increased 6% to $545 million. Adjusted internal revenue growth for the quarter was 3% which is up sequentially from 2% in the fourth quarter of 2011. Growth was driven primarily by strength in card services, output solutions, and digital channels. As expected, the Wachovia Bill payment deconversion and the Durbin Effect on our biller business had a negative impact on segment revenue growth in the quarter. Excluding the impact of the Wachovia deconversion, bill payment transactions grew 4% in the quarter. The loss of two remit-only clients and the decline in volume from a core competitor that formally resold CheckFree RXP negatively impacted bill pay transaction growth by about 300 basis points in the period.

Our debit business continued its strong performance as transactions increased 19% in the quarter. We added 59 new debit clients in the quarter and also expanded the footprint of our ACCEL/Exchange network by winning several larger network deals related to the new Durbin requirements. Expanding the size of our realtime network is important, both for adding growth in the short term and increasing the number of endpoints encompassed within our longer-term network strategy.

As seen on page 7 of the supplemental materials we will now provide P2P transaction growth each quarter. For the quarter, P2P transactions including Popmoney and ZashPay increased by 126% compared to the prior-year period. Although P2P transactions and the related revenue are still low, tenured clients are seeing more usage and our sales and implementation pipelines continue to grow. P2P was a hot topic at our client conference last week which heated up even more after the realtime demos.

Operating income for the payment segment increased 3% to $161 million in the quarter. Adjusted operating margin was 29.5% down 80 basis points from the first quarter of 2011. This was due primarily to increased investments in online banking, mobile, the expected margin dilution of the CashEdge acquisition and the Wachovia Bill payment deconversion. Growth accelerated in the financial segment as first-quarter revenue increased 4% to $501 million over the prior-year period. Adjusted internal revenue growth was also 4%. Revenue growth in the quarter was driven primarily by recurring revenue in our account processing and lending businesses along with an increase in termination fees. As anticipated we also saw a slowing of the rate of revenue decline in item processing versus the prior year. Financial segment operating income in the quarter increased 9% to $151 million. Operating margin increased 130 basis points to 30.2% compared with the prior year.

Our adjusted effective tax rate was in line with expectations at 34.5% in the quarter compared with 36.3% in the first quarter of 2011. This resulted in a favorable impact on adjusted EPS in the quarter of roughly $0.03 compared to last year. We are making good progress on sustainably reducing our tax rate and continue to believe our effective tax rate will be approximately 36% for the full year. Free cash flow was $183 million in the quarter, a decrease of $61 million from the prior year, which was our strongest quarter for free cash flow in the last four years. Although the net change in working capital was positive in the current quarter, it was far less so than the $77 million positive working capital impact in the prior-year comparable quarter. Most of the decrease in the quarter can be attributed to a $32 million increase in cash tax payments and $21 million of increased incentive and profit-sharing payments paid in 2012 for 2011 accruals. As Jeff mentioned up front, we remain on track to achieve our free cash flow guidance for the year.

Total debt at March 31 was $3.4 billion or 2.4 times trailing 12 months EBITDA. As I mentioned on our last call, we plan to refinance our $1.1 billion term loan which matures this November. Given the expected terms of the refinance, we anticipate that our next mandatory debt repayment would be $300 million in October of 2015. We repurchased 3.7 million shares of stock in the quarter for $245 million. At quarter end there were approximately 11 million shares remaining under our existing share repurchase authorizations. With that, I will now turn the call back over to Jeff.

Thanks, Tom. Following the strongest sales quarter and year in the Company's history, sales in the first quarter of 2012 were expectedly slow, attaining 58% of straight line quota. As part of our growth focus, sales quota for the year was increased by about 20% over the '11 numbers, which is reflected in the current results; however, our qualified pipeline at the end of the quarter was quite strong, increasing 29% over the same period last year. We expect our momentum to build throughout the year and lead to another strong performance for our world-class salesforce.

We also increased our year-over-year integrated sales target by almost 30% to $200 million even. Integrated sales followed the trend of new sales of $32 million in the quarter or 16% of target. Once again, payments and channel solutions led our results in the quarter. Our operational effectiveness initiatives yielded a strong $13 million of savings in the quarter, representing about one-third of our annual target.

Before I comment on guidance, let me update you briefly on the environment. As expected, regulatory actions continue to abate in 2012. Through April 27, there have been 27 regulatory actions, a 44% reduction from the 48 actions during the same period last year. Total assets have impacted institutions to date are down 63% to $7 billion. While narrow spreads, weak loan demand, and sluggish economic growth are conspiring to prolong the tough environment for financial institutions, we believe the current market is more stable than we have seen over the last year; however, we do expect some volatility throughout the year with the net of a slow continuing recovery this year. Financial institutions remain focused on growing revenue, increasing efficiency, expanding customer relationships, and exploring ways to build their business through channel preference and data advantages. Lastly, holistic money movement across all customer types is getting significant attention, which given our product set, should spur additional growth.

As I've said up front we are solidly on track to achieve our full-year financial guidance. Even with our above-plan performance in the quarter, we continue to expect much stronger results in the second half of 2012. At this point in the year, we believe that any perceived overperformance for the quarter should be considered as derisking our full-year results. We continue to expect adjusted revenue to increase 4% to 6% and adjusted internal revenue growth of 3% to 4.5% for the year. We expect adjusted earnings per share for the year of $5.04 to $5.20, a range of 10% to 14% compared to the $4.58 we earned in 2011. We continue to expect 2012 adjusted operating margin expansion of at least 50 basis points, free cash flow growth of 8% to 12%, and free cash flow per share of at least $5.70.

We're pleased with our start to the year. We are seeing growth opportunities in the market, our industry-leading solutions are in demand, and we are layering on high-quality revenue that should recur for years to come. This doesn't just happen. It's the cumulative effort of our 20,000 associates around the world who prove daily that commitment and hard work do indeed translate to superior results for our clients. With that, Carol, let's open the line for questions.

(Operator Instructions)

Julio Quinteros, Goldman Sachs.

I wanted to start with the bill payment business because I think you're probably the third Company in the last couple days that has reported pretty good trends on the bill payment side. Can you guys just characterize what might be happening on the bill payment business, what's driving consumers back to bill payment, has something changed in the proposition that seems to have spurred more bill payment related activities?

Well, I think one of the thins that's going on within financial institutions is for years, the CheckFree folks and then subsequent to our acquisition, we have been touting the retention kind of a depth of relationship benefits of bill pay and we have seen several larger institutions putting real muscle behind that to try to gain larger shares of wallet. So we think that's one thing and that's a continuation of trends that we had seen at Banc of America. I think Banc of America really built their business in understanding that and that's one of the reasons why they've grown so large over the years.

The second thing that frankly we're beginning to see but it's early is the growth in the bill payment business goes in spurts and now that we're seeing mobile take off, we're seeing both people use, people who were bill pay users begin to use mobile to supplement their online behavior, but more importantly as mobile is growing in its reach, we see new consumers coming on. We're seeing very very strong performance in bill pay in the mobile banking channel. In fact what we can see right now is by far bill payment is the technology that is getting the highest amount of utilization in the mobile space, and because we have those two solutions together, we think that there's a bit of an embedded advantage. Third, which I think is premature so I'm starting to talk a little bit more about the future, Julio, but we do believe that bill payment especially with the addition of P2P will begin to rise faster as people get more and more used to paying their bills online, and even today of the 20 billion or so bills that are in the US, there's less than 2 billion paid electronically through bank aggregators and even if you add direct payment at website, you still have probably 60% to 70% of the bills still being made or payments being made using paper so there's still a long runway there.

Great, and then just on the acquired revenue contribution from CashEdge, just relative to the estimates that we had, it looks like that one came in or acquired revenue contribution came in a little bit lower than expected. Do you guys have any color on CashEdge revenue contribution in the quarter or just the way to think about how that should ramp for the rest of this year?

Yes, we anticipate, Julio, that that business is going to ramp rapidly as we go through the year. There's a lot of new clients there and clearly on the adoption side also as that subscription revenue base continues to grow, so we knew it was going to continue to have some pretty high growth rates on a quarter-over-quarter basis, so it's right within where our expectations thought it would be at this time.

I would say the only other thing I would say Julio is there was a little bit of a slowdown in the market as the market was waiting for us to make a more public decision on which of the networks we were going to move forward with. And so now that that has been done and we've seen the pipeline fill up and people start to take action again as we would have expected, so we feel very good about where CashEdge is, both in their core business as well as in P2P. We also are getting very good movement in the small business Pop solution which is really business-to-business or consumer-to-business P2P as well as on the aggregation front.

At the Analyst day I think you guys suggested that that would be about $80 million in revenue for 2012. Is that a number you guys are still comfortable with?

In that range, yes.

Okay. Great. Thanks guys, good luck.

Brett Huff, Stephens.

Congrats on a nice quarter. I wanted to dig in on SG&A. At least versus our model it was a little higher than we expected. Was there anything going on there, were there some payments to sales folks because we had a good sales quarter or anything like that that we should pay attention to?

No, I don't think there was anything unusual there. I think some of the SG&A associated with the acquisition of CashEdge is a little bit higher maybe than our normal businesses but outside of that there really wasn't anything too unusual in there from that standpoint.

Okay. And second question is you guys have talked about the investments that you've made or continue to make in the sort of top four or five technology initiatives you have. Is that spending still continuing at about the same level, is it accelerating or decelerating? And can you give us an update on the return on that and are you starting to see early positive signs or are we still too far out on some of those items?

I would say that the spend is still accelerating in line with what we would have expected for where we were in the year. You'll recall that when we laid that out last year, we expected that we would start to see a decline in that spend but also see the benefit of the revenue ramp. It's one of the reasons why we believe with a fair amount of conviction that the second half of the year is going to be better than the first half of the year, so we are tracking in a manner that's consistent with the way we laid that out. From a demand perspective, I would say that we are seeing the demand look again about what we thought it would be across each of the different solutions. I would say that demand in the CashEdge suite and specifically on the small business product has probably been a little bit better than we thought, and again maybe there's a small offset because we had a little bit of a slowdown in the salespipe. But our implementation as Tom mentioned our implementation pipeline is strong and our sales pipeline is strong, so on balance that I feel good about where we are and how we're tracking against the plan that we laid out in last October.

Okay, I just want to make sure I understood you right. The spending is still accelerating as you expected. You mentioned the back half. Do you think that that back half benefit will because spending is starting to taper and/or because you'll start to see some revenue from that? I just want to make sure I got that last bit.

Yes, it will be flattening out, tapering relative so that the slope of the spend will, we'll be spending but we won't be increasing it at the rate we had been increasing it and then the revenue will be coming on and then as we get towards the end of the year, we actually should begin to see that taper.

Okay, great. That's what I needed, thank you.

Glenn Greene, Oppenheimer.

I guess the first question maybe for Jeff, just want to go back to the sales quota attainment and kind of how to think about that. Obviously the fourth quarter was really strong but I would have assumed you'd sort of thought through that in terms of the timing of the sales activity for the year going in the first quarter. So I'm highlighting that thinking about that 58% quota attainment relative to the goal. How should we think about that or get comfortable with that?

It's actually pretty simple, Glenn. We don't bother to pace our quota. We merely take a straight line quota throughout the year and so the very nature of the strength of our fourth quarter, so we don't say well the first quarter is going to be much lower and the fourth quarter is going to be much higher even though we know that's going to happen, because we think there's a little bit too much subjectivity in there and so we just take a straight line basis that's consistent with what we have always done. And then as we said we also increased our quota significantly on a year-to-year basis, so those two items combined are leaving us where we are for the first quarter. We don't have concern about that given how strong the fourth quarter was, that tends to drain your pipeline but we also talked about the fact that our pipeline was up I want to say 29% on a year-over-year basis so that actually gives us a lot of optimism for the sales results that we'll see during 2012.

Okay, that's helpful. But I know you've been disclosing this the last few quarters at least maybe on a year-to-date basis, but anyway to frame the sales growth for getting relative to the quota but just the absolute sales growth?

Yes, on an absolute basis we would actually -- our sales results would be down quarter-to-quarter, which again we're not surprised about just given the pure strength of the results in Q4 and the size of the pipeline gain at the end of Q1. So had we paced it out, we would have paced it out to look very close to how it looks right now.

We have a number of deals out there, Glenn as you know that can move from quarter to quarter just depending on when those deals sign, so as Jeff indicated our pipeline from a standpoint of where it is year-over-year, we're in good shape there.

Okay. Maybe back to a different topic on Durbin and the ACCEL wins, I think you highlighted seven wins, was that a net seven wins and maybe a little bit of background on what's going on in the market and what are you seeing?

Sure, the term of art we used on that was several, just to not put a definitive number out there because we're still actually one of the reasons why our pipeline is strong is we actually have a fair amount of activity still out there even though we've come and passed April 1 there's still a fair amount of activity in the market. We actually feel really good about the number of institutions that we ended up signing on that front and the term of art around several was really around institutions larger than $10 billion so the non-exempt institutions that are not our debit processing clients. So clients for which we are not doing their debit work today have then agreed to bring us in as either on a second brand or a primary brand.

So we've made some good progress. The other reason why we're being a little bit broader on this is there are a lot of variables out there right now. It depends on how much if we're a second network how much volume comes over on the second network, what hens up with the merchants in terms of how they decide to route transactions, obviously some of the very large merchants are taking more control on their routing. But one of the underlying benefits that we're picking up in here is that as we mentioned around the realtime one of the strategies that we laid out, Glenn, at our Investor Day back in October was the ability to use ACCEL/Exchange, use that PIN debit network to do realtime and we're really excited about the fact that we were able to live demo the interbank transactions, so two separate banks transactions moving in a matter of seconds.

So the more people we have in our primary PIN debit network, of course will likely go out and set up relationships with the other networks but within our PIN debit network we're going to have more control and we literally picked up millions of new debit relationships through these several clients. So we feel like we not just set ourselves up for some more growth this year but continue to build that network potential because it's not just P2P that has realtime opportunity. There are other payment mechanisms, other ways to expedite payments that we're working on that are quite exciting and will deliver premium pricing to the financial institutions and then of course some incremental benefit to us.

Okay, great. Thank you.

Dave Koning, Baird.

Great job. So first of all we've talked about this before that the payments margin has been coming down just a bit over the last couple years and this was the first quarter that was below 30% in about four years and I know a lot of that is the investments for growth long term and that makes a lot of sense. Is some of that driven by the Durbin piece? I wouldn't imagine there would be much there but maybe just some of the same factors that contributed to the revenue headwinds too?

No, I think Dave, the biggest thing we have there is as we talked about a little bit is the investments because as you know, we have mobile in there, we have our online banking channel in there, P2P in that particular segment. And the other piece of that is the Wachovia business as you know has been deconverted and so that's impacting our year-over-year comparisons there also from a margin standpoint but those are really the bigger drivers that we have from that standpoint.

Dave the other thing that's in there right now is there is measurable dilution from CashEdge in that segment so that's a structural, we have to build back into that margin over time.

Yes, okay, that makes a lot of sense. And the other thing along that same topic is it foreseeable that you talked about a 300 basis point headwind in Q1 and as you go towards the back half of the year that dissipates and maybe somewhere around that time you resigned B of A. Is it possible the B of A almost isn't noticeable in the numbers if the timing would all work out right?

What we said as you know, Dave, overall from a Company standpoint, we feel we are going to have a stronger second half. That's the way the year is laying out. That's what we said back in early February and that's what we're saying today so clearly our overall results are going to be more positive in the second half of the year than the first half and there's a number of moving parts there but clearly we're confident that the second half is going to be better than the first half.

Great, just one housekeeping. What was the term fee in Q1?

Excuse me, Dave, I'm sorry.

Oh, yes, the term fees, what was the revenue from that in Q1?

Yes, it was up about $8 million on a year-over-year basis to about $12 million. We had $2 million in the payment segment and then the rest of that was in the financial segment.

Great, thank you.

John Kraft, at DA Davidson.

Congrats on the progress. I was hoping to follow-up on Glenn's question about your ACCEL debit network. At the analyst day you specifically were talking about gaining share when the routing exclusivity rules kicked in and in your prepared remarks you did say there was a bunch of wins so it sounds like that's happening. And then Jeff you suggested that there were lots of variables but I'm specifically interested in pricing. I've heard increasingly about price reductions by some of the other alternative networks in response to Visa's new pricing structure.

So John, are you asking how these got priced relative to our expectations?

Well, I just am curious whether the pricing is being used to offset some of these new Visa pricing initiatives if that's something that's heading south.

Yes, okay, I hear what you're saying. Not at this point. I mean most of these transactions have been in negotiation for a while, as you know, this is not necessarily new news, and I think people are to some extent sitting back and trying to get a handle on exactly what Visa is doing on their overall pricing strategy. But the differentiation that we bring within our network is the fact that we believe strongly and our clients tend to believe as well that we're going to be able to do more with the network and so to them, the opportunity is to create more revenue using the network for more than just PIN debit.

So realtime stuff.

Right.

And then if I could sneak in another one here just another clarification. The P2P transactions, those are not included in your bill pay transactions overall; correct?

No, they aren't and I think on page 7 I want to say, I'm doing that from memory, 7 in the materials you can see that we are now showing the transaction growth on a quarter-by-quarter basis.

Right, I guess what I'm wondering is I would assume at least that some of those P2P transactions would have been standard bill pay via your pay anyone feature. I'm wondering if that's some of the pressure, that was just simply cannibalization or is it too small now to make a dent?

Well it's important. We are not, for instance we are not going into bill pay and trying to make a determination on what could be a P2P payment within bill pay. I mean these are only payments that are being made within ZashPay and within Popmoney. Nothing else, completely separate from bill pay.

But presumably those payments, those transactions might have been done over your bill pay networks?

Yes, I hear what you're saying and I think that's, I think it is impossible over the longer haul to believe that there won't be some movement between those channels. Based on what I can see in the transactions and this is obviously early and hypothetical that the people who are using P2P tend to be different than the people that are using bill pay. And today, the way the services are presented, they would not really allow someone to easily say well I would have paid my bill here in bill pay and now I'm going to do it via P2P. I think over a number of years, you could begin to see that happen but the way that the data looks right now, I would say that is not the case.

Got you, understood. Thanks guys.

David Togut, Evercore Partners.

Can you update us on the expected timing and financial impact of the Banc of America contract renewal with CheckFree?

Sure. So we continue to work very closely with B of A. We have developed a very strong and solid strategic relationship with them. Obviously, they are a very important client to us. You may recall that their agreement expires in March of '13 and we continue to work with them on how that deal will hopefully be renewed.

And what are your expectations at this point with respect to potential timing and financial impact on Fiserv?

Well, we had talked about this in the fourth-quarter call. We laid out guidance that we believe captures any potential early discount that we may provide and that we are optimistic that we'll be able to extend that deal. Obviously, the contract expires in March of '13 so those are the data points that I would provide.

Got it. And then just a question on Accumen. You've had very strong signings over the last 12, 18 months. When should we start to see some of these bookings flow into revenue?

I think we're starting now, David. We'll be clearly getting some of those as we go in this year. These are very complex conversions with a lot of extended content and so those conversions take a while to complete but we've signed a number of accounts and we'll see some impact and I would anticipate it's going to continue to ramp this year. But as we get to the end of the year we're going to have a very good ramp off as we head into 2013.

Got it. Just a final housekeeping question. What was your end of period share count for Q1?

Our shares outstanding were roughly 137.3 million.

Great. Thank you very much.

Tien-Tsin Huang, JPMorgan.

Just license sales in the quarter, how did that come in versus plan? I'm sorry if I missed that.

They were just down slightly from the prior year but just given our strong Q4, but pretty well in line but they were down substantially from the fourth quarter just given our strong fourth quarter performance, but actually held up fairly well compared to the prior year just given that Q4 performance that we had in that particular area.

Okay, and I know you've commented you were above internal plan, caught a lot of that detail but how much of it do you think is cyclical versus Fiserv specific? I'm just trying to get a sense of what's happening on the ground versus how much you guys are driving directly if you follow my question.

Can you give a little bit more clarity?

Yes, sorry, just some of the above-planned performance that you were talking about in some of those subsectors, how much of that is cyclical meaning just better, whatever same-store performance or better IT spending than expected versus Fiserv specific with some of the sales efforts that you guys have put out, obviously the Popmoney and the halo effect of that, just trying to get a sense of how much of this is macro versus something you guys drove.

Yes, I mean, I think it is a little of both. I think the sales and the demand and the growth in these big macro areas that we've been talking about and are focused on. The thing that we want -- we don't want that we think it's way too early to let anything or anyone get ahead of us. We think right now the guidance that we laid out at the beginning of the year is the right guidance and we think that the second half is going to be stronger than the first half and we just think it's prudent just to as we said to take any of the overperformance in the quarter and just use it to derisk the balance of the year and we'll see where we are at the end of the second quarter. I think we'll have much better insights at that point.

Okay, understood. Just last one just from a term fee perspective, should we expect anything of size for the balance of the year?

I think last year, we had between $25 million and $30 million of termination fees and they fall as you know through the quarter and those can be volatile just depending on where they hit. I would say the second quarter last year we had a little bit higher termination fees but there's nothing more significant from that standpoint versus our regular termination fees that we get. It's just part of the business.

Okay, very good. Thanks for everything.

Ashwin Shirvaikar, Citigroup.

Good results, guys. So I guess my question is on the pipeline and obviously that built up nicely during the quarter, but are you in a situation here where after the strong bookings we saw for a few quarters, you have to go through a period of rebuilding of the pipeline before you start seeing good bookings again, so in other words that quota attainment, is that going to be anywhere close to 100% or better until the end of the year? Should we expect it occurring soon?

Yes, that's a good question. It is clearly the strength of the fourth quarter depleted the highly highly qualified pipeline, so it leaves you with a weaker position in that the beginning of the year. That combined with the fact that we continue to notch up expectations, that's a really important point in raising quota around 20% year-over-year. I mean that's a big deal, so from that standpoint I would say we certainly had those two issues working against us, but I would also say that as Tom I think referenced earlier in Q&A, it doesn't take much. If a good sized deal ends up slipping from March 30 to April 30, things can move a lot.

We feel very good about our pipeline and actually our further weighted pipeline is even stronger on a year-over-year basis, so we think we will make some important progress between now and the next time we announce results. The only caveat that I would give you is in the 6.5 years or so that I've been here, I've at times heard the deals would get done and they end up slipping a bit. They end up getting done almost every single time but sometimes they slip so I don't think this is the kind of thing where you're going to have to wait until the fourth quarter for us to get on track.

Okay, that's good to know. I guess only one other question. There was about $0.06 of severance in the quarter and that continues to be a steady impact I think. Is that going to be with us for the foreseeable future, a steady level of just keeping on cutting costs or is that at some point going to end?

Yes, I think what I would say Ashwin is that we continue to, we have a number of efficiency objectives. As you know we have our operational effectiveness objectives as a Company. We have certain businesses that you're aware of that are also in decline, and so we have to take the appropriate actions to adjust our cost structure as appropriate in those particular areas and as to redeploy these resources and then into other areas of growth that we've talked about whether that be mobile or Accumen or online banking et cetera. So we have one of these charges in the first quarter of last year and we are going to have them from time to time, not necessarily from a size standpoint every year or every first quarter, but we will continually over the next three to five years continue to adjust our cost structure as appropriate going forward.

Yes, and I would add to that that it is declining and we have every reason to believe it will decline. And the things that we are doing around our second phase $250 million operational effectiveness program do have impacts that we believe make sense to be excluded from operations given the fact that it's really non-operational. And you can also see that in this quarter, we had $13 million of saves due to the operational effectiveness program, that's $9 million higher than it was last year in the same quarter. So we are seeing those benefits getting added into our P&L and I think at the time, I don't think, I know at the time that we explained the program, we did indicate that there would be one-time costs for the five-year period that would link to the kinds of actions that we're taking there.

Okay, got it. Understood, thank you.

Bryan Keane, Deutsche Bank.

Sales growth I guess was down and that makes sense, I mean seasonally you're not going to be able to match the fourth quarter. What was it down year-over-year?

It was down on a year-over-year basis and it was down on a year-over-year basis frankly because of this phenomenal strength in Q4. But the good news was is that the qualified pipeline grew very fast. We went from really draining the pipeline significantly to having our qualified pipeline be up nearly 30% in a matter of three months versus where it was in the prior year, so even with the 20% increase in our quota expectations for the year, we feel very good that we will end up being at or above our quota target for the year.

Okay. And when you guys say you're ahead of plan are you including the sales numbers in that comment?

That's really the financial results themselves.

Okay. And just when you say the second half will be stronger than the first, are you alluding to internal and EPS, or what exactly are you alluding to there?

Absolute performance from that standpoint both from a revenue and earnings standpoint.

So revenues themselves on an absolute basis will be higher and earnings on an absolute basis will be higher.

Okay. And then last question for me. The payments in the financial segment, obviously payments was down a little and financial was up quite a bit, somewhat similar to last quarter, what is the outlook for those two segments, should we assume similar trends going forward? I don't know if you can help me with that, Tom.

What do you mean by payments? What are you referring to, are you referring to the revenue and operating income there, Bryan?

Yes, just the payment segment was down 80 basis points, financial was up quite a bit, 130 basis points.

Oh, from a margin standpoint.

Yes, from a margin standpoint. And then going forward should we see a similar balance or does it reverse?

I think there's always ins and outs but I would say that clearly we're making more investments right now in the payment segment and the drop through rate isn't where we would like it from a long-term standpoint, so I think over the long haul you'd anticipate that there will be some upside from things like mobile and online banking, et cetera, from a margin standpoint.

Bryan, there are really three core items that are driving down the compare where we are in Q1 and we'll also see it in Q2, and that is that we've got Wachovia deconversion, that will be gone at the end of the second quarter so that should start, you'll have an apples-to-apples basis there. And then we've got the majority of the investments that we're making in the Company really besides Accumen sit in the payment segment. So towards the end of the year you'll see that start to remediate. And then the third item is really the margin dilution related to the CashEdge acquisition. So those are all impacting the payment segment at the same time so we definitely believe over time that's going to reverse back, there's no question.

Okay, great. Thanks for the color.

Greg Smith, Sterne, Agee.

Any different thinking around paying a dividend in light of how the market is treating dividend payers these days?

No. I mean, we at least as we sit here on May 1, we look at this on a pretty regular basis and frankly, we've looked at it a lot more recently because of all of the dialogue that's in the market. From our standpoint, we have been extremely disciplined at returning cash to shareholders via share repurchase. Our total return metrics are probably in the top handful of companies in terms of returning free cash flow either through the combination of share repurchase and/or dividends. At least in the last six years we've been very very consistent on that and I think we bought back about $245 million in the first quarter alone, so we feel good about that.

The other issue that frankly is probably beyond my pay grade is there's a lot of tax consternation right now and we think it's prudent to see how the tax laws layout and we'll continue to incorporate that into our evaluation. But Greg, I assure you that we will continue to evaluate it as we have and at some point we may come to a different conclusion, but for now we're quite comfortable with how we return to shareholders.

Great. No complaints with the buyback in the quarter. Just do you off the top of your head happen to know the adoption metrics for online banking, traditional online banking versus online, both as a subset of all banking users? Just trying to get an idea of how rapidly mobile is evolving, I mean mobile and then online and how it's evolving relative to how online evolved?

Yes, I'll give it a shot and it will be direct, at least it will be directionally correct. So today, I think the statistic is something like 85% or 90% of consumers in the US have access to the internet. They don't necessarily have it but they may have it either at home or work or both. From an online banking perspective, the number is somewhere in the area of 65% to 70% of all of the online, I'm sorry all of the people who have bank accounts have online banking access. And you may remember we showed this at our Investor Day. We have about 55 million online banking users today, so that's how that piece of the universe stratifies. On the mobile banking side, it's very very early.

I would be surprised, I don't actually have a number but I would guess it's in the $20-ish million range at the very most and we have, I think we gave a statistic at a conference recently where we had about I want to say 3.5 million or so users live on our mobile platform. And we believe that there is an inherent advantage for our clients to select our mobile, our online banking clients to select mobile because they go access into the system the same way. It was 3.7 million mobile users, so that's kind of how that would build up.

I think, Greg, you can go back too. I saw it on Investor Day, Eric Litch put up in his presentation I believe some stats around that, the adoption online banking and how we think mobile is going to go over that period of time also.

Okay, thanks. That's definitely helpful. And then just lastly any new international opportunities emerge in the quarter or subsequent?

Yes, we certainly we are actually pursuing several large international transactions. Recently, we closed a good-sized mobile deal in Europe, we're working on several mobile deals in Europe and actually a number of mobile deals around the world, that's a pretty interesting space for us, some online banking and actually some pretty good core deals in Europe. So there are good opportunities out there right now. Those international deals tend to have very long sales cycles but we continue to pursue them.

And I just have to ask, the mobile deals that's even though you're potentially not the core processor?

Oh, yes. The mobile deal that we won, I don't think we've announced, I don't think we have asked for permission to use the name but it's a very large European bank, a good-sized European bank, let me say that where we are not the core provider at all.

Okay, great. Thank you.

Kartik Mehta, North Coast Research.

You've talked a lot about the Durbin and some of the opportunities you've had. If you look back today compared to when all those past and the noise started happening about it, has the benefit what you anticipated less or more considering where we are today?

Well from my perspective, I really, I thought we would get a couple deals. I would actually say it's been slightly better than I thought it would be in terms of the size and magnitude of the institutions, and as it became more clear how competitive that space was going to be, I actually ratcheted my expectations down and we actually did far better against my ratcheted-down expectations and I'm actually quite enthusiastic about what I see going on in the market right now. I think as it's becoming more clear as to what the advantages are in using certain providers, I believe that we will actually end up winning more business throughout the year. So I would say on balance it's probably slightly better than I thought, and all of it was extra given the trajectory we were on and then the ability to have a larger underlying network through ACCEL/Exchange to do other things actually makes it a huge plus.

And then Jeff, you've said that spending seems to be accelerating and I know this is a difficult question but to the extent you could give some color on it, where do you think we are from a spending point to date by financial institutions versus what we were at its peak, whenever that was in your mind?

I would say somewhere between a third and a half of where we were. If you call the peak the beginning of '07, if that's peak period, I would say FI spend in that time was probably 5% to 6%. I would say that on balance FI spend is probably half that in the US.

And so there's a lot of room for growth as these banks continue to feel better.

Yes, I think that is absolutely the case and I think we've tried to make it more clear that we do see banks spending but they are doing a little bit of moving the money from bucket to bucket, but the general size of the spend is really not expanding very rapidly. And at some point in the future, we would expect spend to get back up to more normal levels, but frankly that's not going to happen until financial institutions can have an environment where they can make more money. It's pretty tough for FIs to make money right now.

And then just one last question, Tom. I know you said this but I apologize as I missed it. You said the term fees and you broke it out between financial and payment. Could you just repeat those numbers as to--

Sure, the contract termination fees were $12 million in the first quarter of this year, they were $4 million in the first quarter of last year, so they're up roughly $8 million; $2 million in the payment segment and the remainder in the financial segment.

Perfect. Thank you, gentlemen.

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Thank you. This concludes today's conference. You may disconnect at this time.