FIS
#Good morning, <UNK>.
You've got two items outside of that.
You are right on the natural acceleration.
We believe it's there.
We do have the term fees that we've talked about, so you've got that captured correctly.
The cost actions, we've taken some cost actions in Q1.
You saw some further cost actions in Q2.
To the extent we don't see the sales execution that we're looking for, we'll potentially take further cost actions.
We have other levers within our cost structure that could help us continue to make sure we maintain the profitability guidance, <UNK>, and protect the profitability guidance that we give in the market place.
Those are the three big ones.
The fourth would be back to our contract delay.
We've got some milestones that we'll meet in the back half of the year on one of those larger deals that will drive some incremental earnings per share, as well.
If you add the four of those together, that is the bridge to the back half of the year.
It is a steep curve, but we're pleased with first ---+ I mean second quarter, as we saw a little bit of the flattening of that curve as we brought some extra EPS into the quarter.
We've also got a number of key deals, <UNK>, that we've signed.
As you know, given the nature of our long-term revenue streams, and the high re-occurring revenue, our deals that we sign also take often times a number of months, or even greater than a year to on-board.
You're seeing some of those large deals that we've signed historically that we've talked about come on line.
You can start seeing that in some of the numbers we've actually disclosed for IFS, et cetera, where we've got some large core banking deals that have been coming on.
All of those things, to <UNK>'s point, the levers that help us control our expense line and profitability line, and also just new sales and the on-boarding, the prior sales all give us some confidence going into the back half.
Actually, some of the term fees we've already been notified on, <UNK>, but they are waiting regulatory approval.
You've got an idea in working with the customer as to when the big conversion time horizon would be, and when you would actually see them go away.
We do have some visibility into those term fees already.
Your point is valid.
On others we don't have every dollar lined up, or have been notified on every dollar.
But we do have pretty visibility into a large chunk of those based on the conversion time frame that the customer's looking at.
Yes.
As you mentioned, these termination fees are strictly related to financial institutions getting acquired or consolidating.
To <UNK>'s point, we have to be given ---+ we're given notice, because we've got work to do to help them de-convert as they move on to their acquiring platform, which is the typical situation.
We've had some situations where it's come the opposite direction, and we've discussed on prior calls.
But we get some pretty good visibility.
Typically, this is something that can get modeled pretty easily.
What we were surprised by in the first half of the year is that we didn't get that notification ---+ which as we've said now multiple times, that's a great outcome for the Company, because we're retaining a very profitable client that's going to be buying more products and services from us.
Yes, we've actually gotten some great response through that acquisition.
As always, we put forward a very aggressive pro forma around growth as we accelerate it through our sales engine.
We also put always an aggressive target, to make sure we get the synergies necessary as we put ---+ integrate these companies into our Company.
I will tell you, we're right on plan for both of those.
Pipeline's very strong, good deal closures quarter in, quarter out.
Response from the clients have been very positive.
As we talked about when we did that acquisition, one of the things that resonated us most with Clear2Pay, especially with their open-payment framework, was the fact that they were already penetrating many of the tier ones through a single payment type around the world.
What the opportunity there is you penetrate with a particular payment type, say ACH, and then you come in and you add wires.
You add other types through the open-payment framework.
We're very pleased with his acquisition at this point.
It's integrated very cleanly into the Company.
GFS has done a good job of accelerating the product growth rate by putting it through our sales engine.
Right now it's still early, but we would say we're very pleased.
Yes, no it's a good point.
It is part of the investment.
We feel very good about our deal closure.
Year to date, frankly, when we look at total contract value on a new total contract value, we're up 10% over 2014 at this point in time.
Frankly, if you adjust it for currency, that's greater than that gross around 15%, so we feel very good about it.
From that standpoint, our pipeline's very strong, and we're opportunistic of opportunities.
As I've said on multiple calls, <UNK>, I look for deal-flow through a pipeline.
You're not going to be able to sign them all, but are we having really good deal churn, and are we making sure that our sales teams are re-filling that pipeline.
I would tell you we're seeing that.
As I said, the results are showing that we're up year to date against this time last year on new sales, and frankly, across both groups.
All in all, we're pleased with the results, and pleased with the investment, and we've highlighted a number of those sales.
When we bring a sale forward in our prepared remarks, keep in mind these are large multi-million-dollar engagements.
The team's doing a nice job.
If you remember in my prepared remarks, we sold a small investment.
It ended up being about $7 million in there, <UNK>.
That was ---+ the other's just normal noise in there, but $7 million was a small investment gain.
Thank you.
Yes, we would still say that's exactly where we think we're going to land, still in that 5% to 7% range, <UNK>.
Given what we've done to date and talked about the back half of the year it may trend towards the lower end of that, but still in that 5% to 7% range.
Yes, I think it's still there.
Well, to answer your question on the first part about the multi-billion-dollar financial institutions and signing those large deals, are there others in the pipeline.
The answer is yes.
I think what you've seen over the last several years is we've consistently executed on those.
I'll go back to [Anumpla].
I'll go back to the Citi announcement.
All of these are big engagements with very large multi-engagements.
CIT last quarter.
If you think about it, we continue to sign and close very nice transactions in that size.
If you look in GFS, Credit Agricole is a great example where we started with a consulting engagement.
It's led to a professional services engagement.
We're now engaging around the product side.
Good growth of the way we think that GFS will head in the way we ---+ investments we've made.
There's other large deals in the pipeline that we continue to pursue.
Of course we don't sign them all, right.
But that goes back to my deal flow comment in the earlier question.
All in all, we are pleased with the size of institutions we're sign.
We're pleased with ---+ we're starting to see product pull-through in the GFS organization, and IFS continues to execute very effectively.
Thanks Darren.
Yes, I think fourth quarter typically if you map out the path has a little bit of a higher growth rate as the institutions are working through their capital planning and capital budgeting process.
We do see them flushing some capital budgets in the fourth quarter.
That's historic, in terms of both IFS and GFS.
You will see a little bit of a ramp there.
Also to add on that, your always see nice transaction spikes in the fourth quarter due to the holiday season.
That's exactly right.
You will see a little bit higher in the fourth, but that's more normal trend line, if you will, there.
Beyond that, we don't have a significant other transaction change or volume change that we haven't already discussed in terms of either term fees or sales execution.
IFS really has very little, if any, currency impact in it.
Nothing there in terms of that constant currency.
Then you can back-math where we are, where we're going to be sort of 5% to 7% in the aggregate, for the full year, what we've got through the first half of the year, at about 3.2% for the quarter.
You can back-math it and see what your models say.
It will be some of both, because some of the term fees are flowing through IFS.
We're getting over some of the comps that we've talked about.
Then GFS would also have some acceleration of the deals we've talked about signing.
Yes, we've outlined ---+ we've talked about full year we thought we would have about $50 million.
In the first half of the year we've had about $11 million, so very small.
We do anticipate term fees to be much more significant in the back half of the year.
I can't reiterate this enough.
I know you guys are looking quarter to quarter.
I can't reiterate this enough that lower term fees is a good thing for us long term.
We maintain the customer relationship, we cross-sell, we up-sell, and we keep the profitability line.
I think last year was about $20 million, with a full year 2014 of about $75 million.
But as we said earlier in another question, you just can't predict when these things are going to happen.
M&A is going to ---+ consolidation is going to occur at different times, and so there's always lumpiness around these kind of fees.
All right.
Thank you for your questions today and for your continued interest in FIS.
I'd like to summarize by saying we continue to deliver revenue growth fueled by significant re-occurring revenue streams, with industry-leading margins and strong sales results.
We are pleased with our recent restructuring and re-segmentation of our business, which has allowed us to align our services and solution portfolio to address clients' unique business challenges.
In closing, I'd like to thank are more than 42,000 employees around the world who are committed to empowering our clients each and every day.
This passion for moving our clients' businesses forward to make them successful has earned us the loyalty of over 14,000 institutions across the globe.
Together we are empowering the financial world.
Thank you for joining us today.
