FIS
#On the Brexit front, certainly I wouldn't say we're seeing a massive tailwind on our consulting business related to Brexit.
I will say that our European consulting group has performed very well and we continue to see growth there.
The opportunity for that to be a tailwind certainly exists, but I wouldn't tell you that we're attributing Brexit as a major growth engine for us in 2017.
If you go into the tax rate, <UNK>, if you go back to May, we look at the bridge of earnings growth over the next couple of years, the tax rate was a component of that.
We're just getting it a little faster than we anticipate.
And to your comment with regard to revenue growth, we wanted to make sure we put together another conservative guide that we felt very comfortable being able to meet or exceed.
Joe, we started on this journey, as we've talked about a number of times, FIS has a very clear playbook that we like to execute on these large transformational acquisitions.
That takes us about two years.
At the end of two years what we would tell you is by then the companies are so integrated it's really hard to determine what is truly based on synergies and what are just operating efficiencies that our teams continue to drive in.
So, we're really halfway through the process at this point in time.
2016 was an outstanding year from an integration standpoint.
We raised guidance on our synergies twice in 2016.
Frankly, at the time we started this, we thought there were $200 million of synergies over two years.
We got that in year one on an exit rate, as <UNK> talked about.
We just raised it again now to we think we'll exit 2017 with $275 million.
we've got roughly 11 months to go here left on where we're really focused on what I would say executing our plans and playbook and then it will just become part of the operating unit.
But we're very focused on it.
We think there's a lot of opportunity.
I think I've shared on prior calls this has been the best combination we've been through as a Company.
The teams have come together very well.
The cultures have come together very well.
The clients have been very receptive.
We're actually starting to see some nice cross sell and upsell across the existing SunGard base, frankly.
We've talked about where they have not pooled their products up under common salesforces to get cross sell and upsell of their own solution suite.
I highlighted a couple of those on the call today.
11 months ago, but I would tell you we're very confident and continuing to integrate this company.
And the teams are very focused to continue to discover opportunities to get cost out and operate more efficiently and drive value back to our shareholders and also to our clients.
We're trying to help everybody understand the new norm in our product portfolio mix.
When you really look at the institutional wholesale side, it's always going to have a strong quarter in Q4.
And that's very traditional with licensed businesses.
You've got people wrapping up their budget years, they're wanting to sign on in license products and get projects kicked off so they can then get deployed throughout the next year.
So, you'll always see Q4 being a heavier weight on institutional wholesale.
Frankly, we saw it across the board in that group.
Very strong production out of the asset management group, out of a lot of our risk and compliance solutions.
So, we're just very pleased with where that revenue flowed in and, frankly, the results of the team.
I think some of it is we are starting to get cross sell and upsell across the SunGard portfolio, which would push that growth rate a little higher.
The leadership team has done excellent, the sales team, consolidating that.
We've got a fantastic sales leader over that group and really driving the team appropriately.
It really came in as expected from that standpoint with regards to the quarter, but it was across all of the major business lines.
We don't have a specific one.
What we talked about in May, if you look back to the guide we talked about in May, what would drive it to the lower end to the 3% to 6% and what would drive it to the higher end of the 3% to 6%, continued higher levels of consolidation would drive you towards the lower end and that's where we're at.
We're still at a high level of consolidation, and there's very little de novo activity in the marketplace.
The business, as I talked about earlier, <UNK>, the business really does run ---+ it's got a seasonality effect to it.
So, you'll see the quarters of IMW behave very much like they did last year.
We did have a very large license fee on a renewal in Q1 last year.
You won't see that repeat.
That's just due to timing of the renewal.
Frankly, the business, the pipelines are very strong.
But expect the seasonality in this business to follow very similar to what you saw in 2016.
Once again, this year we'll have a very large Q4 heavily weighted around licensees, which is very traditional of the business, but the other quarters will follow pretty much in alignment with last year's.
I think the broader commentary is really going to be around continued consolidation.
You've seen IFS running in the lower end of that for a few years.
We've got some tailwinds specifically this year in EMV and the people-based project.
But we think that lower end, that 3% to 4% zone is where you're at, really, given consolidation being the broader driver there.
Yes, <UNK>, just to build on that, you're really seeing consolidation run 5% to 6% per year.
No de novo activity.
We've only had two de novos since 2010.
So, you really have no additional customers coming in.
The new disrupters, I want to be careful about that.
We're not seeing an increased level of competition in 2017 that we didn't see in 2016.
So, the reality is we do, as we've talked about for years, see pricing compression in this segment.
But I would tell you, when you look at our guide for 2017, there really is no material changes in expectations, from our standpoint.
We're not materially seeing increased competition over 2016 or increased pricing compression.
We're also not seeing a decline.
We haven't modeled a decline in compression.
And, as we talked about in May, that just naturally pushes IFS to the lower end of that range we gave.
We think the guide, as <UNK> says, is conservative for the year because, frankly, we want to make sure that we have something we're very comfortable in meeting.
We haven't seen any material shift in it, but it is a fact.
That's just what is going on in the industry right now.
Yes.
You had a people-based services project in IFS that was completed in the third quarter that won't recur in the first quarter.
You've got accelerated EMV growth in the first quarter of 2016 that will be a difficult grow over in 2017.
And we had a large license renewal in the IMW, the institutional and wholesale group, in global trading that will not recur in the first quarter.
Those are the three biggies that are headwinds for Q1.
In 2017, certainly ---+ let's answer your first question ---+ we believe we've got the strongest solutions suite in the industry in both retail banking payments and institutional wholesale.
So, we're very confident in the capability.
Frankly, the sale of public sector, we disclosed that as we were pulling together the SunGard acquisition.
We said we're going to look at our non-strategic assets and see if we can find a more strategic home for those assets because they don't fit in the Company.
So, that's just us following a very focused strategy in deployment.
When we look around, are there going to be some tuck-ins that need to be occur.
Frankly, we don't have those on the white board at this point.
We see some investment that we're making in our products.
I highlighted the stuff we're doing around our private cloud deployment.
That's going very well.
We also have very strong growth in our digital capabilities.
Some of our next generation payment capabilities, as highlighted, with PB are doing very well.
But even in our traditional businesses, we continue to sign and take shares.
So, we're very comfortable with our product suite.
We're very comfortable where we compete.
So, 2017 we're going to look to repeat what we did in 2016 with that and sell very aggressively in the market.
I am glad you asked the question because I think I actually misspoke on <UNK>'s and I want to make sure we've got it clear.
This year we have $4.15 to $4.30 range I just outlined.
We believe we can grow that 13% to 18% in 2018, which I still think that collected will imply $4.65, $4.68 to almost $5.
That guidance has stayed intact.
What I was trying to isolate was PS&E around the original guide will be difficult.
But our range of $4.15 to $4.30 should grow 13% to 18% in 2018, to be clear.
I think I misspoke earlier.
I'm glad you asked the question to clarify.
The reported number, $9.2 billion ---+ $9.241 billion ---+ is the base to grow off of.
Again, you've got three moving parts.
You've got the sale of PS&E, about 3 points negative.
You've got our deferred revenue acquisition adjustment from SunGard acquisition.
And then we've got about a $75 million expected headwind from FX.
So, you definitely got that right in terms of your base there.
To add, as far as the consulting business, as we talked about, <UNK>, in prior remarks, very comfortable with the leadership team, very comfortable of the refocus back towards transformational consulting engagements, going very well.
Certainly, as we've talked about on prior calls, that business will continue to grow in alignment with IFS's numbers going forward.
So, very complementary to our solution set, engaging them in opportunities where we also have product penetration, and that's working very well.
<UNK>, it's a good question.
We've talked about it a lot.
Certainly we wanted to isolate our non-strategic businesses for our investors so they could get some transparency around it.
What remains in that business is our former ---+ our Certegy check business, which we all know what is going on with the declines around checks, especially at the point of sale.
You've also got a global commercial services business which is really just IT infrastructure sales.
Both of them are non-strategic for us at this time.
In a perfect world, if there was a valid divestiture to be had, certainly we would do that.
But we're also, at IFS, we're not going to make a bad business decision.
Frankly, we have good leadership over both of those groups, very focused on serving the clients.
So, they'll deal with the macro issues that they're facing very effectively.
But if there was an opportunity that presented itself and it made financial sense, we absolutely would consider it.
Pure play, holiday play.
You always see a bump in Q4 around the holidays because you see volumes come in and nothing more than that.
We still expect that to be a decliner over time.
Yes.
Absolutely.
We tried to add some color around the commentary.
We believe we'll be able to prepay all of our prepayable debt in 2017 and still generate excess cash flow in late 2017 and into 2018 and we could be buying back share.
Thank you for joining us today, for your questions and your continued interest in IFS.
We are very pleased with our results, concluding a very strong year of performance and earnings growth.
We have a solid pipeline heading into 2017 and we are confident in our strategy and our business model.
This provides us continued belief in our ability to consistently execute and deliver tangible value to both our clients and shareholders.
Thank you to our loyal clients who depend on and trust us to keep their businesses competitive every day.
Thank you also to our FIS leaders and our more than 55,000 employees around the globe for their hard work and commitment.
It is because of them that FIS continues to empower the financial world.
Thank you for joining us today.
