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Executives

Mary K. Waggoner - Senior Vice President of Investor Relations

Frank Martire - Chief Executive Officer, President, Director and Member of Executive Committee

Gary Norcross - Chief Operating Officer

Mark Owen Davey - Executive Vice President of International Operations

James Susoreny - Executive Vice President of Business Development

Rob Heyvaert - Corporate Executive Vice President

Analysts

David Togut - Evercore Partners Inc., Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Barton B. Hooper - Wallace R. Weitz & Co.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Greg Smith - Sterne Agee & Leach Inc., Research Division

Kartik Mehta - Northcoast Research

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Unknown Analyst

Fidelity National Information Services (FIS) Q4 2011 Earnings Call February 14, 2012 8:30 AM ET

Mary K. Waggoner

Good morning. If we could have everyone take their seats, we'll get started. My name is Mary Waggoner, I'm Senior Vice President of Investor Relations for FIS. I'd like to welcome all of you who have gathered with us in Orlando this morning. Thank you for making the trip. We'd also like to welcome, and thank those of you who are participating via webcast. We've modified the format of this year's event in a couple of ways. First, we are hosting FIS Investor Day 2012 in conjunction with our Global Leadership Summit. So in addition to our guests from the investment community, we are joined by more than 300 of our leaders from around the world. We're very excited to have all you with us and hope that you will find today's presentation insightful and informative. Second, we will begin the day with a discussion of fourth quarter and full year 2011 results. The earnings press release and supplemental slide presentation have been posted on our website at fisglobal.com. The 2012 presentation will be posted on the website in approximately 30 or 40 minutes, and we'll make copies available in the room at that time.

Joining me on stage are Frank Martire, Chief Executive Officer; Gary Norcross, Chief Operating Officer; and Mike Hayford, Chief Financial Officer. The next 30 minutes or so will include prepared remarks read by Frank, Mike and Gary on our -- covering our 2011 operating and financial results. Then we will transition to the 2012 strategy discussion and financial outlook. There will be a 30-minute Q&A session for the investment community at the end of both presentations, and we ask that you hold your questions until that time. We'll take questions from the leadership team later this afternoon and tomorrow. And we will conclude today's -- this morning's event with a topic table reception, where members of the investment community will have an opportunity to interact with several additional members of our leadership team. And that will be in the Crystal Ballroom, just immediately across the hall, where you all were for breakfast this morning.

Now I'd like to direct your attention to Slide 4 for the Safe Harbor commentary. Please note that today's discussion will contain forward-looking statements. The statements are subject to risk and uncertainties as described in our filings with the SEC. FIS undertakes no obligation to update any forward-looking statements, whether as a result of new information, future or otherwise, except as required by law. In addition, today's discussion will include comments and references to non-GAAP financial results in order to provide you with more meaningful comparisons for the periods presented. Reconciliations of GAAP to non-GAAP results are available in the earnings press release, which is located on the tables in front of you, and are also posted on our website, fisglobal.com.

Now, I'll turn the presentation over to our CEO, Frank Martire. Frank?

Frank Martire

Thank you, Mary. Sorry, I didn’t leave time for the applause there. Thanks, Mary. Good morning. I'd like to welcome you to the event, the investment community to Orlando. Thank you for being here. Those on the webcast, all the FIS global leaders out there, welcome. We hope you find it to be, as Mary said, very informative and insightful. We're pretty excited about our company and our future, and we hope you will be too. I will begin the presentation with a quick overview of our financial results and business highlights for 2011. Gary will follow with the operations report, and Mike will provide additional insight into our fourth quarter and full year results.

2011 was another strong year for FIS, and I'm pleased with the progress we are making to execute our global business strategy. We continue to build global scale, finishing the year with more than $5.7 billion in revenue and $1.7 billion in EBITDA. We generated adjusted net earnings of $698 million and $1.2 billion in operating cash. The team is doing a nice job executing our business plan, as evidenced by 5% organic top line growth and 12% growth in earnings per share in 2011. Organic growth has steadily improved since 2009, led by strong results within our international business. International revenue increased to $1.2 billion in 2011, and grew 22% organically for the year driven by strong performance in both the FIS and Capco businesses. Our international business continues to play a key role in our growth strategy, and we are excited to have surpassed the $1 billion milestone.

Importantly, we maintained our focus, generating new sales and expanding existing client relationships. We are very pleased to announce our new agreement with the Royal Bank of Canada to establish this new direct bank in the U.S. This is the first of what we believe will be many joint initiatives between FIS and Capco. Gary will provide more detail on the project later in the presentation. FIS has consistently delivered strong financial results in one of the most challenging environments in banking history. Revenue has increased from $3.4 billion in 2008 to more than $5.7 billion in 2011, or approximately 20% per year on a compounded basis. EBITDA has increased by 27% on average, and the EBITDA margin has increased 480 basis points during that time. And we have consistently delivered mid-teens EPS growth. These strong results illustrate the strength of our business model and our ability to execute. We have also been very disciplined in allocating capital. While we continue to invest for growth, our ability to leverage investments across our global enterprise has resulted in more efficient use of capital. We also continue to strengthen our balance sheet. We've reduced our debt by $382 million in 2011, and improved the leverage ratio to approximately 2.8x at year end. And our strong free cash flow enabled us to return approximately $460 million in cash to shareholders through share repurchases and dividends in 2011. As noted in yesterday's press release, our Board of Directors increased the annual dividend to $0.80 per share and also approved the new $1 billion share repurchase program. These actions reflect our confidence in our business outlook and our commitment to further enhancing shareholder returns.

We continue to feel very good about our business. As you will hear throughout today's presentation, we are highly focused on driving growth and margin expansion, while continuing to invest in the future. We will continue to be very disciplined in managing our capital, and we are committed to enhancing shareholder value. Our success is tied directly to the hard work, dedication of our employees and how well we serve our clients. I would like to take this opportunity to personally thank our leadership team, many of whom are with us this morning, and our 33,000 employees worldwide. I would also like to thank our clients, who depend on us and trust us to keep their business running every day.

Now, I will turn it over to Gary for the operating highlights. Gary?

Gary Norcross

Thanks, Frank, and thanks to everyone for being with us today. We have a lot of material to cover, so I'll provide a brief overview of the fourth quarter operating highlights in order to spend more time discussing our business strategies in the next presentation.

Overall buying decisions strengthened in the fourth quarter both on a sequential and year-over-year basis. We continue to experience solid demand for outsourced processing, back office support and professional services as clients seek to leverage our scale and broad service capabilities. As we discussed during last year's investor update and all throughout the year, we think we have a great opportunity to gain more share in the large financial institution market space. We experienced strong sales growth within this market in the fourth quarter on a year-over-year and sequential basis, which points that the investments in our sales force for this market are paying off. We continue to be the provider of choice for direct banks in North America. Barclays Bank, one of our large outsourced clients in the U.K., will use our core solution for their new direct bank in the U.S. And as Frank mentioned earlier, we are very pleased to announce that FIS and Capco were selected by RBC to assist in establishing its new direct bank to serve its cross-border clients in the U.S. The project scope, which included defining the targeted operating model, building interfaces between multiple internal and external systems and operating the core banking platform on an outsourced basis, demonstrates our ability to deliver transformation in the market and clearly differentiates FIS from other technology providers and large-scale system integrators. Both RBC and Barclays are great examples of the power of our global go-to-market strategy.

The investments we had made to integrate our solutions continue to provide FIS with a key competitive advantage in all the markets we serve. We supported more than 100 core platform conversions in North America during 2011. As we have discussed in the past, these relationships drive meaningful pull-through revenue including payments, back office support and professional services. We continue to invest in early-stage and emerging technologies to drive innovation. We experienced strong growth in our mobile client base throughout 2011, including People's United Bank and BMO Harris in the fourth quarter. We surpassed 1.5 million mobile endpoints in 2011, and we continue to expect rapid growth within this channel.

We are also having great success with our bill payment solution. We converted more than 270 institutions to our platform during 2011, and have a strong conversion pipeline heading into 2012. In addition, we are seeing continued strength in our Internet banking and next-generation core solutions.

Our international business continues to produce very strong results. As Frank discussed, international revenues surpassed the $1 billion mark in 2011, and now represents 20% of the total company. We continue to benefit from strong card growth in Brazil, where we are processing more than 50 million cards. We also saw strong growth in Europe in both the traditional FIS business, as well as Capco's European practice. We continue to view Europe as a great place to do business given the size of the market, the strategic relationships that we have with our clients and the opportunity to capture additional share.

I am very pleased to report that ING recently committed to FIS as its enterprise-wide core banking provider. We are making great progress leveraging our Payment Solutions internationally. We continue to win share in debit, and are also pleased with the success of our U.K. prepaid platform, which we acquired through the Metavante acquisition. We added 20 new clients to the U.K. platform in 2011 and were recently named the leading prepaid organization for the U.K. in Europe.

In short, it was another good year for our company. We continue to execute our global sales strategy.

I'd like to leave you with the following thoughts before turning the discussion over to Mike.

We continue to see investment decisions being made and are encouraged by the fourth quarter sales and solid momentum going into 2012. We are winning new deals and expanding existing client relationships. We believe international will continue to be a growth engine for our company. We remain bullish on our European business, and we are excited about the opportunities we have for continued growth in all the markets we serve. Our focus on innovation, new product development and enhancements including mobile, bill pay and loyalty offerings is producing tangible benefits and driving strong profitable growth for our company. While we believe that 2012 will continue to be a year of transition for the financial industry, we believe the outlook is improving, and we are confident that we will continue to win share and lead the market.

Now I'll turn it over to Mike.

Mark Owen Davey

Thanks very much, Mike, and good morning, everybody. Mike just asked us to spend a few minutes talking about what leadership means for FIS and particularly, I think it's important in the context that the meeting this morning, which we’ve just had, which is about our earnings results, and of course, the meeting we've got coming up right now, which is about our strategy, are just 2 meetings in a series of meetings we're having this week. Right after we finish this meeting, we have our annual leadership conference, which is a conference we have every year, where we assemble the top 300 people in the company, who really set the tone and direction for the organization overall. And putting 300 people together in an event such as this from literally all around the world, from Brazil, London, Singapore, Australia is a real big investment in terms of time but it shows really, how seriously we take leadership as an organization.

And our conference this year actually has 3 themes. And these 3 themes are out of our guiding principles, which really drive everything that we do. The first one we're going to be talking about -- the first theme, which we're going to take is about our strategy and the execution of our strategy, and you'll be hearing more about that in the next presentation. Secondly, we're also going be talking about some of the operational things that we're doing as an organization to further improve the quality of service and the quality of the products that we offer to our clients. And the final thing is, we're actually going to be talking about our focus on clients. And we're actually going to be hearing some of our clients and sharing their opinions and views about us, how we can actually continue to improve those relationships that we have with our clients going forward. So it's a very exciting time for us. And as part of that agenda, we actually are really looking forward to sharing our ideas and our thoughts and actually driving the strategy of the business as we go forward. After the leadership conference, we're then moving on. And we actually have a sales conference, which is our Global Sales Conference, where we get together all the people who are involved in sales for the company and we plan for next year as well as celebrate, of course, the success of 2011.

So with that, could I ask Jim to go through comments about his views on leadership.

James Susoreny

Thank you, Mark. My name is Jim Susoreny, I'm an Executive Vice President. I manage the sales and client management function here at FIS. So as Mark just referenced, this is a big week for us here, all week long. But now that we've been ranked #1 on the annual FinTech 100 list as a company, we continue to become the company that our clients and prospects come to and look for, for not only the IT solutions but for strategic thought leadership. So these companies from the standpoint of an institution size, all institutions, from de novos to the largest global institutions. They can be confident with our leadership position that the projects that we engage with them will have a successful completion, and these are projects from transformational-type industry projects to company transformation projects, all the way through to department transformation within a company. Being the leader really does one thing for us. It gives us access, so that as a sales and client management force, we can get access to the decision-makers, to the executives, not only of our current client base but of our new account opportunities. As you all know, a significant amount of our business comes from our current client base and cross-sell.

So I'll tell you, the key for us though, is once a prospect becomes a client, it's to nurture the relationship and nurture the relationship not only around solutions and service but more importantly around people and strategic thinking. And one way we do that is in a meeting like this, as Mark mentioned. But in the sales meeting following, what we do is educate. We train and we arm our sales and client management force with the tools necessary for them to not only complete their annual plans but to work on the strategic multiyear plan with their clients. All meant to meet our clients’ business objectives. I want to personally thank you all for your time today, and I want to turn it over to my colleague, Rob Heyvaert.

Rob Heyvaert

Good morning. My name is Rob Heyvaert, I'm the Chairman and CEO of Capco, and it's a real pleasure to be here. I joined the family about a year ago. And they've asked me to make a few comments on leadership and actually mainly leadership looking into the future. What does the future hold for banks, and what does the future hold for a company like ours and how important is it to be a leader and how important it is to have scaled size global reach to get there. In order to understand that, I think we need to have a backdrop. And the backdrop is the financial services institutions are, really, today in an area they've never been before. The margins are compressing. There's huge regulation coming from every side. There's actually, I would even argue, a tremendous amount of confusion for what's going on in the industry. The return on equity is going down dramatically, and it's really not sustainable. Often people think that a recovery will make and fix everything. This time around, for financial institutions, it's a very different story. It's a story about cost takeouts, but it's also a story about keeping up to hyper-connectivity and social media. As a result of that, a company like ours have never been more relevant than today. There is tremendous transformation going on.

You could probably argue, you could compare it to the manufacturing industry, where financial institutions have stopped doing everything the same like bank A, like bank B and like bank C is doing for the very simple reason that they cannot afford it. It's unaffordable. As a result of that, a company like ours, who gets in very early with the Capco acquisition, having a conversation at the top of the house with a C level executive going all the way to the execution of operations and technology. That full stack is what we call leadership. That full stack implemented at a local level in Canada, in the U.S. but at a global level in Asia or Europe. As a result of that, I would argue that this company is better positioned than anybody else to be a trusted partner and have the scale to work with financial institutions. As a result of that, institutions will stop doing a lot of stuff themselves. They will rely on FIS, its ability to run in a secure way operations and technology businesses for the clients. We will have a difficult market for banks in the future, but FIS will profit tremendously, we believe, from that difficulty. And we will help financial institutions to take out roughly $500 billion of costs because that's what it takes to get back to return on equity. We feel very bullish about the future.

It's a pleasure to have you, and I hope my colleagues will give you an interesting morning about the future of FIS. Thank you.

Mary K. Waggoner

Okay. We're now ready to move into the 2012 strategy discussion and financial outlook. I'm going to stall for just a moment because the 8-K has not yet been filed with the 2012 presentation. As soon as that is up and available, we'll pass out the books. But we can go ahead and get started with the beginning portion of the presentation.

We will -- Frank will lead off with a strategy discussion followed by Gary Norcross. And Mike Hayford will come up again to talk about business strategy, growth strategy and financial outlook. Then we will have an executive panel to handle Q&A for about 30 minutes, and then proceed on over to the Crystal Ballroom for the topic table discussions. For the investment community, there are surveys for you to fill out. We would really appreciate you're doing that, we value your input. Anything we can do in terms of timing flow, format, information that we provide for next year's Investor Day, we would welcome your input. So if you would fill those out as we go throughout the day, Laurie [ph] and team will pick those up and will summarize those results and use that for feedback for the next event. So with that, I'll ask Frank Martire to come back up to the stage.

Frank Martire

Thank you, Mary. Good morning, again. Thanks again, Mark, Rob and Jim. Very nice job of talking about leadership and our company and our future. So I thought I'd give you an update on our key strengths in the company and our strategy and our focus, always a focus on our performance.

I'll start with our key strengths. The question always asked, why? Why invest in FIS? Our market leadership position. Jim talked about it a little bit a few moments ago. Our clients know who we are. Even ones who aren't our clients know who we are, they respect us. They know us, they know we'll deliver and we get references from our clients every day. That is so powerful to us in the marketplace.

We have high recurring revenue. Over 80% of our revenue is recurring. Stable growth, consistent stable growth in a company. And we know that will continue because we have the confidence in our company and the confidence in our clients.

Strong EPS growth. We do mid-teens EPS growth historically. We don't talk about the future and what it's going to be. We talk about our history and what we've done because that gives credibility when we do talk about the future.

Very strong cash generation. We generate cash, strong cash flow, and value-enhancing capital allocation. Our $1 billion share repurchase announcement and agreement and authorization, $1 billion. And we increased our dividends from $0.20 to $0.80 a year. Commitment to our shareholders, commitment to add value.

So where is FIS today? Our revenues, $5.7 billion. EBITDA, top line’s growing, bottom line growing. EBITDA, $1.7 billion. Very strong operating cash flow, $1.2 billion. Over 14,000 loyal clients in over 100 countries worldwide and 33,000 of the best employees in the world. Our leadership position has been recognized. We're #1 on the FinTech 500 -- 100, #1. We're in the Fortune 500, the Forbes 2000. And Barron's is an interesting one that we're very proud of. We rank #3 ahead of some very, very prestigious companies. And it's based on cash flow return on investment, primarily cash flow return on investment over a 3-year period of time, we rank #3. Very proud of those results.

We are a global company. But when we talk about it, we don't talk about being in different regions and having a client or 2. We're talking about meaningful in each region, a meaningful presence in each region. So if you look at North America, we're a leading core and payment processing company. 15,000 employees, 80% of our revenue, as I talked about, recurring and focus obviously in the U.S. and Canada.

If you look at Europe, again, core and payment processing. Over 2,000 employees, large presence. Focus in the U.K., Germany, France, Western Europe, no exposure in some of the less financially stable countries like Greece. We’re in Western Europe and growing in the U.K., Germany, France.

You look at Latin America. We're the #1 third-party processor in Brazil. #1, second to none. Asia Pacific, we do core and payment processing. 6,000 employees. Australia, India, China, Thailand, large presence. We truly are a global company. We have a very strong track record of execution. At the end of the day, it's what have you done and then what are you going to do for me. So let's talk about what we've done.

We've grown from $3.4 billion to $5.7 billion from 2008 to 2011 top line. 20% CAGR. What about the bottom line? $800 million to $1.7 billion, 27% EBITDA growth CAGR. 27% 2008 through 2011 and 480 basis point margin expansion. And I talked about it, mid-teens EPS growth. So that's what we've done, consistently grown this company, top line, bottom line.

We're first in financial technology. We're very client focused. Anybody you talk to in this company will talk about our focus on our clients. They are our future. We have the domain expertise. We know the business. We know the banking business, financial institution business, we know it. Our clients expect us and respect us for that. We have thought leadership. Rob talked about it a little bit. Our clients want to know how we're going to keep them competitive, not just today but 3 years from now and 5 years from now and what they need to do. And then, that we'll have the innovation of products to get them there. But clearly, that we know how to help them get there.

Our employees, we get the best. Top talent in the industry. Results-oriented people. We give them career advancement opportunities. We take care of our employees because they're our most precious asset, and they are our future. We're the investment of choice, we really believe that. Look at our financial performance historically and what we talk about going forward. We have disciplined capital allocation. You've seen that, we've delivered on that on our capital allocation, talking about the share repurchase authorization, talking about our dividends increase and superior value creation for our shareholders. We keep our shareholders in mind all the time. We focus on our clients and we focus on our employees because we know and we truly believe at the end of the day, if we do those 2 things, we will clearly take care of our shareholders.

Moving on to our strategy. So look at FIS and what's happened over the last decade, the last 10 years. We were in a major acquisitive mode. We did a lot of acquisitions 2003 to, say, 2009. So why did we do that? We needed size, we needed scale. We needed to grow our market presence. We needed products for our clients. The way to do that and get there as fast as possible was by being acquisitive, and that's what we did. That was our focus. But then our clients said to us, you’ve got the products now, you have the scale, you have the size, you need to integrate it all for value to us. So we spent that time, 2009 to 2011 approximately, integrating, integrating, integrating, making it seamless for our clients. Adding true, true value for our clients.

Now what we've got to do going forward? We're going to optimize that environment, make it cost effective, cross-sell our products, generate new revenue, optimize our expense base. So if you look at it, it's 3 phases strategically. One from an acquisitive phase, one through an integration phase and a build and then one clearly to an optimization.

Our 4-point strategy. Expand our client relationships. We'll buy, build or partner to add solutions. Lead market through transformation and continuously improve and drive margin expansion. I'm going to talk briefly to each.

So we're looking to expand our global reach with all of our clients, in all the regions of the world. So look in North America. I'll give you a couple of examples of clients. People's Bank in Bridgeport, Connecticut is about a $28 billion institution. And they converted in our system in 2010, and Jack Barnes is the CEO there, and I've got to meet Jack in 2008. And Jack said to me, "You know what, we've never outsourced in the long, long history of People's Bank in Bridgeport, never outsourced, we ran in-house. That's what we do. Why should I even consider being able -- outsourcing with you besides cost optimization, being cost effective, why should I be able to trust you?" We started that dialogue in 2008, and the reason why I bring it up is, you don't just go out to these large institutions and say overnight, I could save you money. I could save you a few dollars, so come with me. They got to get to know you. They got to get to trust you. They have to believe in you and your people and your products before they'll even consider going on our system. Those are the types of relationships we build.

First Niagara Bank, $30 billion institution, keep growing that. John Petrey is going be here with our leadership team. Gary has known him a long time. Built a long, long-term relationship with him. Talking about the benefits of this partnership with FIS. RBC, we've got the existing new direct bank agreement. Fantastic agreement for this company. How do you build them? You build them on strong relationships.

Europe. ING has committed to FIS as their global platform. Think about that. ING, as their global platform, phenomenal for us. The National Australia Bank. We have relationship with them, not only in the U.K. and in Australia, and Bruce Jennings is here from the U.K. Mark Davey has built a long-term relationship with him, and he'll address our leadership team also. Tremendous loyalty.

Latin America. We process more than 50 million cards through our JV there, 50 million. Bradesco, who our partner is there, launched the ELO card earlier this year, private label card. They’ve signed already over 400,000 people to that card base. We continue to outsource there. We continue to build the business. We continue to have a great leader there for us in Brazil in Reginaldo Zero, who's with us today. Just fantastic growth business for -- a great story for FIS.

Asia Pacific. Bank of India and Union Bank, they're driving approximately 3,000 ATMs with us. We've launched a new prepaid card for Woolworths, Australia's largest retailer. In China, we do core processing for about 15 banks. In Thailand, 8 of the top 10 banks do their core processing with FIS.

So when we talk about our presence in all these regions, we're not talking about a small presence or having a few people land it. We're talking about significant presence and significant growth opportunities.

Buy, build or partner. This is pretty easy for us. We do all 3. Whatever brings the product to our customers, with the optimal product as quickly as we can and as efficient as we can is the way we'll go. We're not prejudiced to buying, building or partnering. We will do what we need to do to take care of our clients and we will invest, and we will continue to invest into the future.

And we're leading through transformation. Rob talked about the thought leadership. Our clients come to us and yes, we have to have product. But they start by saying to us, okay, help me get where I need to be. And maybe sometimes, where exactly do I need to be. We depend on you, FIS. You need to help us with these answers. You need to partner with us. As to where we need to be, how we're going to get there. Where we are today, where we need to be, how we're getting there and then, do you have the products to make sure that we could be highly competitive and that's what we do for our clients. So that truly is a transformation. We're not just out there selling products. We're selling thought leadership, okay. We're being -- truly being the partner and then we have the domain expertise. You have to have it. You have to have the industry knowledge. You have to have the leaders in your company from the very top on down, spending their career in the financial institution business. That's where they should be because that's what they expect of us, not being in some other industry. This is the industry they expect us to have knowledge in.

And continuous improvements to drive margin expansion. You know what, day-to-day. We talk about optimization, cost optimization, driving expansion and I talked about the 480 basis points of expansion. And you say, how do you get there? Do you just sit down and say, this is it for this year or the next year. No, we do it during the budget cycle. We do talk about it, but we do it every day. We make sure we optimize our business every day in the best interest of our clients and the organization and the shareholders. And we discuss it during the annual budget cycle, so we have targets. And we're talking about a target going forward in future years, of 30 to 50 basis points improvement every year. And that's what we expect. We expect our organization to deliver and our leaders, and we do. And we do it in such a fashion that we give even better service to our clients.

One final thought, our focus on performance. So you look at our company, we have high recurring revenue. We've demonstrated that in the past, we will continue to in the future, with stable growth, over 80% recurring. Continuous margin expansion. The 480 basis points we talked about, the 30 to 50 going forward, continuous margin expansion. Strong EPS growth, mid-teens EPS growth. Very, very strong cash flow. And we focused on the use of our cash flow. Our debt repayment, we discussed today. The dividends going from $0.20 to $0.80. The share repurchase authorization of $1 billion. Focused on enhanced shareholder return. So as we look at our company, why are we excited? We're excited because we have over 300 leaders here today, talking to you with excitement and how excited they are about the future of this company. We're excited because our clients are so loyal to us, and our clients go out of their way to give references to us and talk about this great company. That's why we're excited about the future of FIS.

I want to thank you for your time. And now, I'm going to turn over to Gary Norcross, our Chief Operating Officer. Thank you.

Gary Norcross

Well, good morning. I'm really looking forward to spending the morning with you. As you guys might know, my name is Gary Norcross, Chief Operating Officer. I've been with the company 23 years. And before I get into the presentation, I'm kind of just cut to the punchline. When you look at our position in markets, as many of the people have talked about, when you look at our solutions set, when you look at what's going on in the economy and how everything is driving in our direction of this company we built out, I've never been more excited in my career to be part of a company. And I think if you look around at more than -- our more than 300 leaders, it clearly defines the results that Frank talked about earlier, has been brought by these people in this room. We've got the finest leadership group in the industry, bar none. I'll put them up against anybody. And so the outlook is very, very bright for FIS, and we're very excited about where we're going.

But that being said, I do want to talk about a number of areas for us. I want to talk about market and market positioning. I think it's important to understand, there are different markets in the financial institution place, in the financial institution marketplace. And a lot of people talk about their desire to go in international markets or go into LFI. You can't understand how much time that takes and how much commitment that takes. Some of these markets take years or decades to break into. And I want to talk about our positioning in those. I also want to talk about our strategic execution. Frank laid out at a high level our strategy, but how do we implement it. How do the 300 people in this room, how are they going to go forward and implement this strategy and we're going to talk about that. And then finally, how do you drive performance through that. How do you get the margin expansion, the free cash flow that continue to allow you to invest back in solutions.

So with that, let's jump into the market segmentation. This is how we view the market. So if you think about it, all of these markets are very strategic. We feel it is very important for us to participate in all markets because there are certain markets that might have issues that others don't and for us to be distributed across all the markets is a key differentiator for us. If you look at less than $10 billion, clearly, very strong competitive position and I'll talk about the attributes of each of these markets in a minute, but we've got a very strong competitive position. There are a lot of competitors here. As I mentioned, we did over 100 conversions in this space last year. We talked about in the earnings call. Our large financial institution market's a very important one. We're going to give you some framework of what's going on in that market, the growth characteristics of that market, some things we're very excited about. Clearly, we've got the leading market position there, and it's growing based on our 2011 results. We've talked so much about international but international is such a key differentiator for us. Under the leadership of Mark Davey and his team and the Capco European practice, what we're accomplishing in the international markets are really second to none.

And then non-financial, I won't talk a lot about non-financial today, not because it's strategic. The reality is, what we're doing in non-financial is we're going into adjacent markets where we can leverage our assets and technology. So a great example of that would be we’ve, obviously, built out the largest outsourcing footprint in North America. We've got the largest, most strategic data centers that exist in the industry. We take that industry footprint, and we're able to deploy that into other markets, at really very nice revenues and very nice margins. What that allows us to do is underwrite our costs, right, for delivery back into the financial institution marketplace and allows us to drive leverage. So non-financial is a very strategic area of focus for us as well.

Let's look at the various attributes of the markets. Less than $10 billion, talked about this, large number of institutions in North America here. We're seeing this market segment decline at a rate of about 3% to 5% per year whether it's FDIC closures or acquisitions, this market's going to consistently decline at about that rate. Lots of competitors in this space. In a minute, we'll talk about the evolution of the markets and where people are and their buying habits. But at the end of the day, these banks are looking for single source providers. They're absolutely looking for ways that they can compete with the large institutions, and they have to leverage their buying power with a single solution provider. At the end of the day, our advantage is very, very strong market position here. Very highly rated products. Frank talked about, we do a lot of surveys through our clients. And we get valuable feedback from our clients on how we're performing. What's their loyalty to us, but not only that, just how our product’s functioning and what comes back year in and year out is just how much our products mean to our clients and how well they perform. We're increasing market share in here. As I said, over 100 conversions just last year alone. The great thing about all of these markets I'm talking about is really our sales force and the ability to deploy our sales force across these various markets but more to come on that later.

If you look at the $10 billion, I should have mentioned on the less than $10 billion, projected spend of about $24 billion, you'll see various numbers. You can see the source of what we're including there. Not as fast a growth there. Frankly, we still have some elements of clients that are less than $10 billion that are struggling to hold on, right? I mean they're struggling to figure out how to survive. We're starting to see a lot more clients buy in that space but still an element of clients that are struggling. In the greater than $10 billion, about 100 institutions, 98 to be exact today, very sophisticated buyers. As you get larger and larger in that space, clearly, the buyers are very sophisticated. They understand their product needs. They understand their solution needs. They're starting to spend more and more around services. As Rob talked about, a lot of things going in this segment, specifically, where they've made some decisions that are very tough for them. So at the end of the day, we're seeing a lot -- very high increase in services spend. We're seeing more and more clients look towards outsourcing or ways to get leverage out of this. The nice thing about where FIS is positioned, and this is why I'm so positive on where we are as a company, is our market strength is growing here and we truly do have credibility here. Frank mentioned People's United Bank. If you think about large-scale transformation projects that have gone on in the last 2 years, I really can't think of anybody other than FIS that’s delivered them. And that reputation is building. And there are countless examples of failed implementations in this space. And so at the end of the day, if you're going to make a decision to go for a transformation project, you want these 300 people pulling on your rope for you. You want them to get that implementation installed and across the line, and we've got a proven track record of doing that. So very, very important and with that credibility, we're able to continue to cross sell. We actually, last year, talked about redeploying some of our resources in the sales engine under Jim Susoreny and focus more on LFI, which is one of our strengths of our leveraged sales force. We did that. And interesting enough, our sales increased by almost 60% in this segment alone last year on contract value. So you see the benefit and the flexibility of our sales force.

When you think about international, very important segment to participate in as well, and one of the things I tell everybody, as I mentioned earlier, these things take time to get into. You can't sit around. When our competitors say, "Hey, we're going to go international," I immediately think I'll see you in 20 years. It takes years to build out, decades to build out a presence in these countries, a solution set that will meet these individual country needs, to gain credibility and break in those markets. Clearly, our largest competitor here is in-house developed in the international market. We've seen limited outsourcing to date, but then when you look where outsourcing is occurring, FIS is the chosen solution provider, whether it's our joint venture in Brazil where we’re the largest third-party outsourcer of card processing, the Barclays Bank that we talked about where we've outsourced consumer lending. And we've got countless examples of that but still, outsourcing is more at its infancy. Very large market at $131 billion, certainly our highest growth area, and make no surprises, it's going to continue to be our highest growth area as a company. Our global distribution network that we built out is really second to none. Going forward, we want to continue to expand our products, but we have the broadest products available now in the international market place, and our size and scale are definitely differentiators and advantages.

So I’ve talked about the sales force. Let's tee this up. I mean, at the end of the day, we have more than 650 sales professionals. And as Mark and Jim mentioned earlier, they're coming here on Wednesday. So we've got our leadership community in over the next 2 days, we'll be talking about our strategy, we'll be talking about execution against 2012 and beyond, product innovation. Now -- then we'll bring in our sales force, more than 600 people will be here, and we'll be discussing our go-to-market plans, redeploying resources in where we see market activity that's appropriate. How to drive new product through that engine. We've proven, and I'll talk in a minute about our innovation around our product life cycle. We've proven the more products that we produce that meet our clients' needs, putting it through our sales force really is an unprecedented advantage for us, and we see great lift. And as I mentioned earlier, just being able to shift those resources from certain markets to LFI last year, seeing that 60% bump. So those are the kind of things that this engine allows us to do, this distribution capability.

What's interesting is the economy is helping. I mean, Rob was talking about the economy and some of the things that banks are dealing with. And if you think about it, it could be pretty dire, right? I mean, how are the banks going to survive in this space. I can assure you they will, but there are a lot going on. There's multiple pressures coming from every angle. A lot of banks in the large FI and in international markets are struggling with past decisions. When their profitability was growing, they really didn't reconcile in their mind what is my underlying solution architecture need to be. How do I need to pull this together so I can deliver future value and compete. These past decisions are weighing very heavily. In fact, recently, I was at a very large bank in North America and they were simply wanting to leverage and launch their mobile solutions. The problem is, their series of bad decisions that they had made over the last 5 years was really a major impediment to do something as simple as launching mobile tablet in the marketplace and therefore, they were struggling with how to retain their clients with that need. Great problem for FIS to solve. I mean, the first thing we do there, obviously, engage Capco in that engagement, come in, build out a transformational plan on how to take them from where they are today over multiple phases and get them where they need to be, all while embracing these new product launches. So a great example of how the power of FIS truly is the only company out there that can come in and help these institutions transform.

It's really also these market pressures are playing to our strategic focus. In a minute, I'll talk about the shift towards outsourcing. It's not a new slide. We talk about this every year but the economy is speeding this up. I can tell you today, we're having more conversations in the LFI space about outsourcing and how to get leverage and leverage the scale of FIS than we've ever had in the history of our company. So these economic issues are pushing these banks very hard, and we're in the perfect position to take advantage of it. If you look, as I've mentioned, we've talked about this a number of years. Clearly, I've been with the company 23 years. When I started with this company, everybody in the industry was a pure monoline player. Single product delivering for a single problem. What we saw over the years, is we saw an evolution of where various markets started going to buy broader solution capabilities. And so as Frank mentioned, we did a series of acquisitions and we did those series of acquisitions to build out the broadest application suite in the industry, and we did it to serve all the market segments that exist. I'll tell you today, we're very well equipped with our arsenal of products and services and our leadership team and our markets and very comfortable. So we don't have the need to go out and do the large-scale acquisitions to continue to grow the businesses we serve today. But what we saw was the markets had continued to evolve. So they've gone from point-to-point solution to application outsourcing to solution outsourcing, right? And now, we see a large demand for transformational services, all driven, frankly, by the economic needs. There was a point in time where a $50 billion bank would sit and look at you and say, "I have no desire to fully outsource everything I have. I have scaling better than you guys can do it." Today, that's no longer the answer. Today, the answer is, I'm burdened by all the investment. My costs are going through the roof. I'm shutting down branches to get cost out of my infrastructure. My IT costs continue to accelerate. I'm not getting the lift I need to be able to invest in new products. I can't come back and invest in new products without doing a giant services engagement because of all these fragmented solutions. FIS, as I said, plays to our strengths and allows us to participate in those conversations like no other.

So if you look, wrapping up our market positioning, clearly, we're well established in all markets. I hope you see that. And then as I said, we've been in these markets for decades and in many instances, as I shared with you, this is not something that you just decide you want to enter. It takes that amount of time to build out the relationships Frank talked about and others. Economic issues are really playing to our strengths, all right? So while a lot of people -- we would love to see the economy turn around faster, we would love to see all financial institutions return back to their normalized buying habits and frankly, Mike's going to talk about our long-term guidance. We think we need that market lift in order to get to the higher end of our guidance as we've discussed in the past. But right now, the good news is, the economic issues are pushing very large institutions to make decisions different than what they've made in the past. The shift towards outsourcing, where we are a clear leader. Every conversation, we just do not have conversations anymore about licensing software. It is always about some type of outsourcing engagement, some type of professional services engagement, some type of broader, much more broader solution. So with that, after looking at the markets, let's talk about and focus on the strategy and where we're going with the strategy Frank discussed.

Our strategy focus falls in really 3 distinct areas and every area is meant to increase drive, increase profitable growth, period, end of story. I think it's important that we require focus on all these areas and because of all these things, it really does allow us to outpace our competitors. The first area of focus is one around solutions, all right? So if you think about it, this breadth of capability is a requirement. Monoline players are struggling for survivability every day in this market. If all you can bring is a single or a couple of product solution, it is very, very difficult to compete. And so people are struggling with this. The breadth of capabilities, we have more than 300 products and services today. That breadth is absolutely key. In a minute, I'm going to talk to you about our portfolio management process because it's very important for you to understand how we take that $300 million of capital and invest back in our software. Obviously, we have to develop -- and so that's all geared around our fundamental business. We also have to develop an innovation, and we're going to talk about innovation and the importance that innovation is playing in our company today and then this area around services.

So very focused on our solutions, but we can't be just focused there, we have to further penetrate the large financial institution marketplace. So if you add the broader solution, the advantage is deploying that across more markets. The more markets you can deploy it across, obviously, the more growth you can get, the more profitable growth you can get, and so that is key. And we've talked about the difficult nature of penetrating some of those markets a few minutes ago. So it's very important to further penetrate our LFI. And then finally, we have to grow geographically. We cannot be a North American-based company any longer, we have to look globally. We talked about our global marketplace being 20%. But I also talked in our earnings calls of examples where we had a large strategic relationship with Barclays. Barclays decides to come to the U.S. and launch a direct bank, who do they look for but their partner from Europe, or from the U.K. to help launch in the U.S. And so it's key to think about the full geographic reach, all right?

We're going to dig into all 5 of these sub bullets. But before I do that, I really want you to kind of understand our thought process around portfolio management. We think it's a key differentiator for our company and one that we are very proud of. The very first thing is, there are certainly some very well-established solutions that we have to offer. We talk about them all the time, our integrated cores, our traditional payment offerings. This is where our traditional R&D is spent here. Obviously, these are slower growth-type product offerings for us but very, very strategic. These are the kind of relationships that allows that sales force I discussed earlier, those 650 people, to come and deploy across that broader group. So very established solutions are very key. But we also focus on emerging solutions. This is an area where we do development, and where we've done some really exciting tuck-in acquisitions and, frankly, you'll hear us talk about doing future tuck-in acquisitions in this space. These are the things where we saw an opportunity years ago, invested heavily, and now they're paying off. A great example of that would be, almost 6 years ago at investor update, we talked about next-generation core processing. We talked about online real-time straight through processing, platform independence, all of these things and the importance of that and we saw an inflection point in the market. Now our profile suite, clearly, the fastest growing core product in our company today. Very strong internationally. The standard in direct banks in the U.S. and we're starting to see opportunities in the large retail marketplace with it. We wouldn't have that solution had we not seen that opportunity almost 6 years ago and started making those investments ahead of the curve. We also saw it in integrated channels. When you start thinking about what's going on in the channel marketplace, people want to bring mobile, people want to bring a wallet. People want to bring all these various things, having an integrated channel strategy wrapped around your solution to allow you to easily plug what's the next applicable channel is very important. Once again, made those investments over 5 years ago, started then, built through the curve and now we're seeing phenomenal growth through our TouchPoint suite. Think about some of the tuck-in acquisitions last year, 2 very small ones. We did Gifts [ph], which was an international wire product, money movement product. We did Compliance Coach, that took advantage of the issues going on in regulatory compliance and education needs. Both of those companies have performed exceedingly well, well ahead of our pro forma expectations on the acquisition and that's just a reflection of being able to put these kind of products in [ph] their distribution engine.

There's a third area that we like to talk about in our portfolio management strategy, and this is early-stage solutions. Frankly, we choose to partner invest here. There's a lot of people that are doing irrational acquisitions in this space. I mean, I’m really viewing them as irrational. Very, very large dollar amounts paid for very small revenue streams with no predictability on what the outcome’s going to be in the future. We choose to partner and make minority investments here. We'll take a small minority position. We'll take a board seat. We'll direct development. We'll let a lot of spend go on with those companies, frankly, without a revenue stream outside of the company. We'll build a practice around it. A great example of that would be some of the stuff we're talking about in mobile, some of the stuff we're talking about in wallet. We've been able to build a very profitable business around our mobile activities meanwhile, while everybody -- where the people that are building these solutions are dumping a lot of irrational money, because we're not sure exactly where all that’s going to end out. At the end of the year, we've broken through 1.5 million users. Obviously, we think we're at an inflection point and that'll still grow. Mobile wallet is still, obviously, another great example. We're not sure what's going to win. Is it going to be in SAE [ph]? Is it going to be 2D barcode? No one knows exactly what's going to win. And so at the end of the day, by making these small investments, partnering first, putting it through our sales engine, letting your customers who want to take advantage of that early adoption do that gives tremendous growth for us. What you need to understand is this is a cyclical activity. So at one point in time, next-generation core was in the early-stage solution category, right? And so if you think about it, things build up and circle through this. What I think's real interesting, it might surprise you, is more than 15% of our revenue now is coming from these type of activities and in a minute, we'll talk about in 2012 seeing almost $900 million of revenue come out of this area at very profitable numbers.

So let's break down some of those 5 key areas. When you think about the fundamental business, very, very strong clients here. Very predictable, high recurring revenue, allows us to look out and make key strategic investments in some of those innovative solutions, very high scale and leverage, incremental margins are very strong as we bring on new products and services. Our focus here is very clear. Cross-sell, cross-sell, cross-sell. As Jim talked about, in the U.S. markets now, we're more than 14,000 clients. The majority of our sales come from cross-selling additional products and services to existing clients. We have to drive product efficiencies here, so we do need to do some investment to keep our efficiencies going and further help drive our cross-sells. So great example of that would be in our fundamental business, we're doing some investment to help integrate our Internet banking product more tightly and allow it to become almost the de facto standard for Internet banking and it allows us to further drive that. I was talking to the leader of Internet banking not too long ago, Susan Hawkins, and we were talking about that. She really feels we still have even 3 to 5 years of white space just in our existing base to continue to ramp those kind of products, and it's through that integration that drives that value. Innovation, we talked a lot about it. But at the end of the day, this is a business that has grown at almost an 11% CAGR. So you got 15% of the company revenue growing at more than twice our overall growth rate. The pace of adoption here is clearly accelerating. There's a lot of people clamoring for these type of innovative solutions to retain clients but that’s one of the things we didn't talk about in those markets, those financial institutions are seeing new incumbents coming in that are nontraditional competitors. And for that, they have to have the type of technology that allows them to keep and retain clients. So this is a great business for us. We've always focused our development here. I mean, very traditionally, our fundamental business, we really just keep in regulatory compliance. We do minor enhancements to drive integration. We funnel our investment on this area, and that's why you see the kind of high growth. The distribution network is the key. If we didn't have the more than 600 sales resources, couldn't drive these kind of products. But we've proven through our tuck-in acquisitions, through our net new development that running it through that sales force, we can certainly drive superior results. A great example, we've talked a lot about mobile. We've chosen a partner here. We got 2 very strategic relationships. We’re monetizing within foundry, both of them very, very strong companies. In that instance, just over the last 18 months, per our sales force, we’ve signed more than 400 clients on our mobile application. So you see the kind of opportunity that occurs.

So with that, let's talk about services. We talked about this multiple times; about 3 years ago, we were talking a lot about services. And once again, this is an area where the market has kind of come to us. About 3, almost 5 years ago, when we first got into the offshoring business, we realized that the fundamental labor arbitrage business didn't make sense for us. It was not a sustainable business model. What we chose to do instead was to build expertise around our own personal products and services and then drive that expertise strictly towards those areas and as a result of that, we've now built out more than 20,000 professionals. You see the growth since 2008, more than 25% CAGR. We see this continually growing. The demand for this is very, very high and very important for us. It leverages our core competencies. We understand the products we develop better than anybody else. We understand about how to run large outsourcing engagements. It's only natural to tack on the knowledge outsourcing around these functions. And so, as you see, we're continuing to see very, very strong growth here.

When you think about the large financial institutions in greater than $10 billion, you can see the spend, it's significant. 73% of the total spend in North America continues to drive here. So that's why it's a very, very important space for us to focus on. We have credibility though, over 28% of our revenue already exists in this space. I talked about us redeploying sales resource, and we got a 62% lift. I should have also shared with you, we didn't see a degradation in sales performance in our other markets as well, right? So it's important though, when you see those inflection points to take advantage of them. We've got significant conversations in this space. Once again, I was in a recent very large institution, and we were talking through their issues. And once again, they had made a series of very disparate investments. So once again, we were able to come in, propose to them a full-blown outsourcing engagement, focus on them a transformational way to pull some of their investments together, get more cost out of their infrastructure but also be able to offer more services. So just a lot of opportunity in this space.

The final area of strategic focus we want to talk about is international. So at the end of the day, a lot of people talk about, are you concerned about international competitors coming in North America? We’re worried about all competitors, right? But at the end of the day, North America is an extremely difficult market to break into. International is also an extremely difficult market to break into. They're both very different. And as I said, we had decades. We actually entered the international market in 1988. So we've had decades of experience building out this practice and now, you're seeing the returns of those investments. Scale and global presence are a requirement. I think you ask any of the people here in the audience from the international group, they'll tell you, if we don't have a critical presence in the country we're dealing in, it's very, very difficult to sell. You have to have globally relevant solutions here. So we're very focused on making investments in solutions that we can take into the international markets, leveraging our North American expertise. Global partnerships are certainly expanding. I gave you the Barclays example, which is so key for us and we’re seeing more and more of that going on. So at the end of the day, if you think about it, we've got 20% of our revenue now, growing at 18% CAGR. We've got 15% of our innovation revenue, growing at 11% CAGR. You start seeing a pretty compelling story of higher growth in a lot of our assets.

So in conclusion, we have a very, very strong platform for growth in the strategic execution area. We think at the end of the day, our solutions are unparalleled regarding breadth and expertise and ability to deliver. We have ongoing product innovation and investment, and it's paying off. That 15% is going to grow. You need to expect that. We expect that to continue to be a high-growth area, but we expect the percentage of our revenue coming out of innovative solutions to grow in the future. We've established a presence in all the high opportunity markets, and we have critical credibility in all the high opportunity markets. And our ability to assist clients, transform their business, we think is unparalleled. Once again, thinking about any large-scale project that's going on in the industry, really, FIS is attached to it and something that I just couldn't be more proud of the leaders in this room.

So the question is, you see the market positioning, you see the strategic execution, now really, how do you do that and still drive your margins up? So what I want to talk about, Frank talked about this, but over the years, we were rolling up the industry. I mean, we talked about starting back in 2003, all the acquisitions we did, we did go through a period of time where we integrated a lot of companies. We built a lot of global scale. All the while, since 2008, increasing margins by 480 bps. So at the end of the day, we have a proven track record of doing it. The people in this room are very, very comfortable of expanding margins in our business. We know we have to do it. Mike's going to come up and talk about not only do we have to expand margins for our shareholders, we have to make sure we redirect enough spend, so take spend down in certain areas so we can redeploy it for innovation. So we know we have to invest back in the business, all the while getting expansion.

If you think about where that comes, really, there's 3 areas that we target to optimize performance. Everybody wants to go to cost-cutting, that's the boring side of it. Really, a key area for us to focus is revenue. We have a proven ability to lead the market in revenue growth and we see that continuing. We'll continue to refine our model. We'll continue to move our resources in the appropriate place, and we'll continue to grow our distribution channel of more than 650 people. We spent most of last year taking out $260 million in cost, but there's still an opportunity to even take out more efficiencies as we grow. When you think about value-based pricing, we always like to talk about pricing compression. There is some pricing compression in certain markets. There's a lot of markets that we're actually seeing price inflation. Where we're seeing such a demand for services that we're actually able to raise our professional services rates in order to meet the demand. We're driving enhanced sales tools across our distribution channel to help them identify opportunities and close those opportunities, and we've talked a lot about alignment. We have to also leverage scale to get margin expansion. Resource realignment is a key. Last year, we saw some demands in services and what do we do? We took resources from non-revenue-producing areas to revenue-producing areas. I have to caution, we've got to make sure we don't do that all the time and we can do that temporarily to take advantage of an opportunity but a key back to our continued growth is investment back in the system. And so we’ve got to make sure that we're just not short-term looking for very, very quick revenue and very quick profits at the sake of long-term profitable growth.

We see a lot of opportunities in technology efficiencies. When we pulled FIS or Fidelity Metavante together to form FIS, we clearly consolidated a lot of our data centers, all right? And so there's now an extra turn. Now that we've consolidated the physical facilities, now there's an opportunity to consolidate the physical platforms within the facilities. That takes obviously product consolidation. We've done a very, very good job of that. We've talked about that on prior earnings calls, our ability to move our Bill Payment Solutions from the former Fidelity one, the former Metavante one, to the new FIS one with tremendous success. So we've done and we have a lot of examples of that. But as we consolidate more product that benefits our clients, it's going to naturally drive more efficiencies in our scale. And we also need to leverage development. We have -- we've done a good job historically of leveraging it, but we've got to take it to the next level. We've got to make sure that we're building it only once and making sure that we're deploying it all across those markets. And this team is certainly signed up to deliver on that.

The third area is cost management. Clearly, we got to leverage our buying power. We do a great job of this every year. But every year, we got to come back to our solution providers and make sure that we're getting our services at the lowest possible cost. We've got to proactively manage discretionary spend and we continue to look at those areas. We’ve got to make sure that we're hiring in areas that drive strategic growth and profitable growth, and make sure that we're holding firm in certain areas. But all of that, we believe can easily drive 30 to 50 basis points of annual margin expansion.

So with that, wrapping it up, we have a great business with amazing fundamentals. We're very, very proud of what we've built over the years. The market trends are in our favor. We really do feel the market is coming to us. We've made a tremendous amount of investments over the last decade, and we see the market pushing in this direction. We have very strategic clarity. I'll tell you, over the next 2 days and by the end of this week, we won't have a leader or sales rep in this organization that won't have clear insight to exactly where we need to go and how we're going to get there. We're going to continually take market with our sales engine. Leveraging that sales engine, cross-selling, upsell and growing that every single year like we've historically done and that will continue to happen. And then finally, we do have an opportunity for operating leverage through our portfolio management approach and our focus. So with all of that, we know we'll continue to deliver superior performance over the next several years.

So with that, I'd like to turn it over to Mike Hayford, and Mike will give you some more insight to the financials. Thank you.

Question-and-Answer Session

David Togut - Evercore Partners Inc., Research Division

Good morning. I'm David Togut with Evercore Partners. Two questions. First related to margins. You highlighted the rapid growth of the services business, which includes some lower margin, more labor-intensive businesses like Capco. How do you reconcile the fast growth in that business with your desire to achieve 30 basis points of margin expansion annually?

Frank Martire

It's a good question. You have to understand why we did Capco. So at the end of the day, when you look at Capco's presence in Europe and you look at Capco's presence in North America, and you look at the strategic relationships they have in that LFI community, what we're driving with Capco is really large transformational deals. RBC would be a great example of that. So there's an example where we brought in solution -- Capco brought in solution expertise, helped define the problem in the transformation, we were actually able to come in to that engagement and provide a breadth of services at very nice margins for us. So it's back to the majority of our Services business. At the end of the day, Capco is $300 million out of a $5.7 billion-odd company. So at the end of the day, the services that we're bringing wrapped around our products are coming in at much higher margins. And it's that differentiation, bringing that intellectual property to bear that allows us to do that. So really, they’re getting their foot in the door that actually allows us to build that higher gross services business.

David Togut - Evercore Partners Inc., Research Division

Just a second question on competition. Total System Services has indicated that they intend to make an aggressive push in the community bank and credit union market in terms of card issuer services. They also want to expand their footprint in Brazil from Carrefour on the private label side into more of general-purpose credit card issuer services. So have you seen them enter those 2 markets yet? And what sort of countermeasures do you have in mind?

Frank Martire

We see all of our competitors. But in fairness, we've not seen them in a material way in those 2 markets yet. I mean, the reality is, you have to understand what you're saying, it's back to that market positioning. So if you want to get into the credit card processing business and community markets, you're dealing with institutions that are on average are going to issue less than 10,000 cards, right? You're also going to deal with institutions that are going to need a full-service platform. What I mean by that is the ability to underwrite those things, board those cards, deal with cardholder concerns, 24/7. It gets very difficult to build a business model out on that one customer at a time. Today, we have almost 3,800 clients in that market space. So we're able to do that and serve that market back to our scale, because we look at that as a unified portfolio. So I would tell you, that's a very difficult market in community markets to enter if you don't have scale or unless you’re really prepared to go for a very long time and through organic growth one at a time, pick up 500 cards here, 8,000 cards there. Very difficult to build a business. When you look at Brazil, we're very comfortable with our position there. We're the largest third-party processor in Brazil. We've got long-term engagements with our partners. We recently extended some of our back-office work we're doing for Santander as well. So we feel very comfortable in our positions. Obviously, everybody is very focused on Brazil, right? I mean, it's a hot economy, it's a hot market. I always like to laugh and say, we were in Brazil for 15 years. So I mean, if that's good timing, I guess we'll take it. But the reality is, it took us a long time to build out that market. But we see competition across all of our industries. And we're going to be prepared to compete very hard on the service we provide, on taking care of our clients, and I think that's -- you see that bear out in our growth, and you see that bear out in our retention of our clients.

Gary Norcross

And you can see we're not stopping, right, we keep building on our scale, on our size and our reputation.

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Dave Koning at Baird. So I guess first just to focus on some of the big clients, I think BofA and Bradesco reach about 5% of revs, M&I's maybe 2%. When we look out longer-term, do you expect these to continue to grow within your guidance? And then maybe you can talk about how long these are locked up for and any risks, I guess just thinking about over the next couple of years.

Frank Martire

Well, BofA is not that large of a client for us. Obviously, Bradesco JV is large. Our relationship we have down there, it's a very unique relationship, I think we're very confident in terms of the agreement we have, not just as a commercial relationship, but also the partnership in the JV. And M&I/Harris/BMO, we've talked about that in the past, it's a combination of M&I and Harris. If you think about 1 plus 1 equals 2, it will not equal 2 for us, it will be less than 2. Somewhere between 1 and 2. We'll be handling revenue stream. We continue to work with them. Anyway, we have a great relationship, we have a great relationship at a senior level, and they've got a path they're going to go on to snag. We've got products on both sides. So with core, they're going to end up in our core, you're going to have on a core platform, a single core platform versus historically they had split that between the 2 institutions, Harrison and M&I. But that's something we don't -- the timetable for that is going to be towards the very end of '12. We don't expect much impact in '12 from that consolidation of M&I and Harris. When we go into '13, there's going to be some revenue impact, but with our contract and our term fees, we think we'll be able to preserve all of the earnings from that relationship going into '13, and so now you're back into '14. We knew about this at the end of '10. So our expectation is we will have grown through the impacts by the time we get to '14.

Frank Martire

Yes. I mean, and that contract's got a number of years left on it, but you have to understand the strategic relationship there. One, as I shared with you in some of my prepared remarks, the largest single payment implementation in Brazilian history went on there, leveraging onto our platform, the efficiencies they were able to gain, then if you get into the labor issue around unions in Brazil, the ability to outsource that function is very beneficial to us. So it's very, very strategic. They were able to increase their growth in credit card deployment, they were able to lower their overall cost and we were able to provide a superior end-to-end service. So we, and what also people seem to forget, when you look at our JV, we've got a number of other clients on that joint venture as well that are true commercial clients. So very strategic relationship, several years left on that contract. Here. Right here.

Ashwin Shirvaikar - Citigroup Inc, Research Division

It's Ashwin Shirvaikar from Citi. I heard a comment, I think you said that you don't have conversations about licensing software anymore. So could you sort of give us the background on what has licensed software been as a percent of revenues, historically, what's been the revenue growth in margin profile? And as you go more from just selling software in that I guess, 5%, 6%, 7%, 10% of your business to wrapping services around it, how do you see the implementation and the accounting of it affecting the numbers?

Frank Martire

Okay and just to clarify my comments and build on some of Mike's. What I was talking about was in the sales force, when you look at the buying habits as Mike said in that less than $10 billion market, very, very low software activity and typically, where we have software sales now it will be with a client that we formerly sold software to in the past. So our net new wins, our growth, is really all coming through that outsourcing side. And because of the economy and other things, we're seeing that trend come into the large FI and international markets where those larger institutions were typically biased to license and run it themselves. They're now asking themselves the question, what's the differentiator in me owning a data center, what's the differentiator in me leveraging it. So obviously, that, we're seeing most of our conversations in our sales engine going towards that deployment method.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay, understood. The second question I have is around M&A. And as you do mainly tuck-in acquisitions now, are there specific areas where you see a need to go acquire versus partner? What areas might those be?

Gary Norcross

Yes; I think honestly, we're not going to comment on what some of the gaps, what some of our perceived gaps are in the future. That don't make a lot of sense for us. I mean we, we're very comfortable when you start looking about some of the emerging technology, some of the innovation that’s going on with next-generation payments, some of the interesting channel deployments out there, there's also some interesting ways to drive benefits for our customers' financial institutions to retain clients so we're looking at a lot of different areas. But to Mike's point, we've been very strategic with our acquisitions, hopefully timing in, in time for the inflection point. Compliance Coach is a great example of that. We talked about that. We saw the pending regulatory change, we saw all the discussions, made the acquisition ahead of that curve and then rode through it and are riding through that regulatory curve. We're doing it also, when you start looking at some of the international mining movement, given our global presence and given that some of the things that are going on to more efficiently move money. And so you look at the GIFTS acquisition. Once again, small tuck-in, being able to deploy it across 650 institutions. So at the end of the day, those are the kind of things we're looking for. We're, when we're looking for acquisitions, we're looking out a year, 2, 3 years out of what we think, where we think the market's going to go and we want to time those acquisitions appropriately. As Mike shared with you, we prefer to build. So let's just be real clear about that. And we do a lot of internal building that we're very proud of. So if there are times when we aren't able to build it fast enough because we see the inflection point or what we think is going to be the inflection point, then we'll do a nice product acquisition and we'll look through the distribution channel appropriately.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay. One last quick modeling question on the buyback, the $1 billion buyback, is that, I see a share count number in here. Was that the average share count, or year-end share count for the 295 million? And is that the pace at which you might expect to do the buyback for the next couple of years?

Ashwin Shirvaikar - Citigroup Inc, Research Division

'12 [indiscernible].

Barton B. Hooper - Wallace R. Weitz & Co.

It's Barton Hooper with the Weitz Funds. Just a question on your sales coverage. You’ve got, yes, I think you said 300 products, 600 sales people, 14,000 clients. Do you have enough coverage to get the wallet share that you want? I realize it's skewed by a lot of the community banking but for some reason, it seems light with 33,000 employees.

Frank Martire

Actually, because of our -- it's a great question. Frankly, we've gotten a lot of efficiencies out of our distribution channel. If you look at, traditionally where our competitors will house those organizations, is they'll house them under the business lines, which is a very inefficient process. So what we've done is we've picked those sales resources up and put them across the enterprise of the entire company, and then we've invested heavily in our subject matter experts. So we're driving those people to get the doors open to then allow our subject matter experts to come through and sell appropriately. So it's a very efficient model. I have to warn people, it's a very time-consuming model to implement. We started this almost 8 years ago. And so we built that model every year building it out. So what you're seeing is the efficiencies that we gained through it as well. And I'd also point back to historically, every year, we've had record sales from the standpoint of new sales, net new revenue and data or existing customers or new clients. So we feel very comfortable with it. We continue to evaluate various markets, as I've shared with you. The LFI market, we saw back in late '10, we saw that there was going be a real opportunity as the economy started to recover and we needed to focus there so we moved resource into that, but as I said, we saw no degradation in the community sales engine as well. So we were very pleased with that result and that nimbleness is what allows us to be competitive with those number of resources.

Gary Norcross

And I think over the years, we've proven that we get the business units to work together with the sales force as one, and that takes a while. But that's working very well for us. Jim, we do have a couple of people been waiting a long time up here to ask a question.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

It's Tien-Tsin Huang from JPMorgan. Just wanted to ask about the payment services segment. I was a little surprised that the revenue growth will be a little bit down to the mid-, I guess, low-single digits for next year, what's driving that? Is it all check or is there another change in growth factors there? Maybe if you guys will give us an update on debit while you're at it?

Gary Norcross

And let me just add, I don't know if everybody fully understands. So our PSG, Payment Solutions Group segment, so if we look at last year is at 2% or about a 2% spread between reported, we got 2%, 2% to 3% between paper and reported. It's what it's been running. So low-single digits, add a couple of points to that, you're going to get close to mid-single on the electronics side. So the paper is kind of defined headwind that we've been sharing with you guys. Another thing to keep in mind if you look at our PSG compared to our closest competitor's PSG, and I've said this before, they stole the label but then they got the components wrong. So if we take out item processing, which is in our PSG, it's not in theirs, pushed it over to FSG, Anthony's going to love us for this, and then you take eBanking, which is in their PSG, not in ours, I think you're going to see what our numbers are going to be. I know Frank D'Angelo used to send me an e-mail every year showering that our numbers were better than their PSG numbers. I haven't done the math yet, but I suspect it will be the same this year. So you can't really compare those 2. Our payments for all the reasons we've talked about, we've done a great job of driving earnings and keeping the margins very solid, as Gary pointed out. But it's a different collection [indiscernible] everybody else out there. Okay. Here's the mike.

Greg Smith - Sterne Agee & Leach Inc., Research Division

Greg Smith with Sterne Agee. Mike, just back to PSG though, the margin in 4Q stepped up quite a bit year-over-year. Was there anything unusual in that?

Greg Smith - Sterne Agee & Leach Inc., Research Division

Okay. And then from all your comments, should we interpret it definitely as Misys is off the table, so it doesn't fit to where the...

Frank Martire

What was that again?

Frank Martire

And we are very prudent about that we do, you know that at the end of the day, and the last large one we did was Metavente.

Greg Smith - Sterne Agee & Leach Inc., Research Division

And then just lastly when we look at that competitive landscape slide, the sort of, the elephant in the room to me is IBM, they're sort of missing in some key areas that you or another core processor could fill in. Do you expect IBM to make an acquisition of a core processor potentially?

Gary Norcross

We sort of like our future the way we are today, and we're very comfortable with what we're doing.

Kartik Mehta - Northcoast Research

Kartik Mehta with NorthCoast Research. Gary, in your presentation, you said you're able to raise prices in certain areas. Could you talk about maybe what those areas are, and what percentage of the company that might be?

Gary Norcross

Yes. Well, we're starting to see so much demand in some of our professional services engagements. I mean it really is supply and demand. There's a lot of demand for high-end resources in these transformation services, many of which Capco delivers. But in the LFI space, we're seeing an increased demand for implementation services, transformation services, building out releases and product functionality and so yes, we're seeing where we have the ability and have increased some of our professional services fees in those areas. Because simply, the supply of that particular type knowledge is not enough to meet some of the demands. So we're actually investing in those areas. We're hiring more people in those areas, we're training people in those areas. That's primarily been professional services. All in all, I mean, it's a pretty small percentage of our business. But we do see continued growth in that area and the point being, when we're seeing that growth, that high, and we have the ability to implement price increases appropriately, and we've done that.

Kartik Mehta - Northcoast Research

And then just the impact on your debit business, now that the Durbin Amendment's been implemented, what do you anticipate from your customers? And maybe what's happening now and what you anticipate going forward?

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Glenn Greene with Oppenheimer. I wanted to follow up on Greg Smith's question. Clearly a pretty big change in strategic focus here of going more to building as opposed to buying. Obviously, that's been the legacy of your company. You clearly looked at the Misys acquisition s sort of midyear so I just was sort of looking for a little bit more color on sort of what sort of happened in the change in thinking. You're obviously sort of setting a new tone for the company from a growth perspective going forward. So maybe little bit more background behind the thinking on that change.

Frank Martire

Yes. To reinforce it, if you look at our products today globally, and you look at our distribution channels globally, we clearly do not have to do significant acquisitions anymore. And as Mike well put it, why would you pay up for acquisitions when you already have some of those things, and you spend the last 12 years or so doing that. And that's the position we're in.

Gary Norcross

Yes, and just to, just chime in as well. At the end of the day, we build our acquisition strategy off the people in this room and off our sales channels. And at the end of the day, the best acquisition is one generated out of the business lines because there's an identified need, or generated out of your distribution channel for identified need. There are going to be product acquisitions that are going to be identified that make sense. But paying up for a very large overlapping acquisition is not being driven out of our leadership team at the moment. And so as Frank mentioned, as I mentioned, Mike mentioned, we listen to the people in this room. This is who drives the company. And so at the end of the day, making sure that we give them the tools they need to compete is what's important for us. And so at the end of the day, we're very comfortable in the markets we serve today, which is important to understand the markets we serve. But in those markets we serve, very comfortable with our product suite and this team is not telling us at all that we lack the scale to compete, that we lack the product set to compete, when in growing the business.

Glenn Greene - Oppenheimer & Co. Inc., Research Division

All right. And then, different direction, related to Capco. You obviously had the large client loss at the beginning of the year, how did Capco end up from a growth perspective in '11, and directionally, expectations for growth and margin expansions related to Capco for '12?

Gary Norcross

Yes. For growth, the U.S. was really got hit by that large client, the U.S. was a little bit slower. Europe was, I think 80% growth, 75% growth. Europe was very strong growth, combined I think, we're still on 30%, 25-ish percent organic growth versus where they ended up in '10, so they still had a very solid year, again with one client who got off, that cut the government financing, and so they kind of went out. But when we look at where they ended the year, again, we had that client kind of cut back right at the beginning of the year, made a decision that we thought we could redeploy fast enough to maintain margin. Well, that didn't work out. So we looked at the fourth quarter and where we’re operating, we feel pretty good about where it sets up for '12. I would add to that though, again, so Robin's team have to focus on running their business like every other business unit on our industry. And they all have a budget, they have a plan, they get paid to make their number. But with Capco, in addition to making their number, it's all about Frank and Gary have been involved in these deals where they walk into a CEO or a CIO or the head of an institution, and they're talking about a different operating model, different business. And it's led by, let's start with how you can think of the world differently. So obviously, it was a good start in that direction because it's totally different business model for them in the States. But the discussions and dialogue we've had continue to be positive from our perspective on how that sets up to getting some opportunities in the future.

Frank Martire

And most of these large banks that we got to globally, Capco already has a relationship and a reputation, a very positive reputation which helps us and Capco.

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Great. Are you expecting double-digit revenue growth from Capco in ’12?

Frank Martire

Absolutely. That would be correct.

Gary Norcross

Yes, absolutely. Yes they did a nice job in growing through the loss of their customer, as Mike said, ended up the year strong. We see margins returning to where we originally expected as part of the deal. Conversations between our go-to-market forces, have -- our distribution channel and our client management group, and theirs has never been stronger. So we're still very, very excited about the acquisition and why we did it.

Frank Martire

And Robin and his senior leaders are very optimistic about the future.

Mary K. Waggoner

We've got time for one more question.

Unknown Analyst

Just a -- I know how this impacts you long-term, but it seems like in memory database, big data, those types of conversations, does it make it more difficult or easier for clients that do things in-house to keep that business in-house? Does the technology make it a harder sell for you?

Gary Norcross

I would -- of course you're talking to Mike and Gary who are the most technical executives in the industry, so we should [indiscernible] I would say, any new technological innovation that's going to hit the industry. So the very big guys, it's really not about buying the technology, buying the hardware anymore, it's about buying the people and the expertise. So the big guys will go out and do that. But where do the big guys stop? Is it after the top 4 or 5, is it after the top 10, there's a line there that becomes a pretty sharp demarcation. People can't go out and hire the expertise to do the latest greatest technology, and it gets -- the thing about [indiscernible] say, we can give you the benefit of having better data warehousing, better access, better information, better analytics and do it cheaper and I would focus on solving your business problem. It's hard -- we’re competing against the CEO trying to build out infrastructure, and I think we win those debates these days.

Mary K. Waggoner

Okay. With that, I think Frank wants to make a few closing comments, and I'll follow with a few housekeeping items before we move onto the next portion.

Frank Martire

Well, first of all, I want to thank the investment community for being here today. For those of you who made the trip, I really appreciate it, I know it's a lot of valuable time. I hope you find it valuable to you. The second, for the shareholders in the room, we thank you for your confidence in us. For those who are thinking of investing in us, hopefully, we gained a little bit more of your confidence today. But for those who cover us, thank you for the coverage on FIS, we really appreciate it. I think it's kind of an interesting experience when you have 3 people standing up there, talking with the confidence we do about a company that’s our size and saying things about the future and how we feel about it. We say with confidence for just simply one reason, we have 300 leaders behind us with the same confidence and passion that we do for this company and our clients. And they have 30,000 people behind them with the same passion and confidence. That makes us feel good, that makes us totally confident that we could deliver and we will continue to. We are very passionate, we are very excited about this company. We know we have a great future. We’d like you to be a part of it and have the same enthusiasm and passion that we do. Thank you for sharing your morning with us. We appreciate it. Thank you.

Mary K. Waggoner

Just a reminder to our investors and analysts, please fill out the survey that is on the table in front of you. For those of you listening via webcast, we will e-mail that survey to you, and would appreciate your input on today's event as well. Now, I would ask most of our leadership team to remain seated so that we can escort our guests to the topic table reception. And the topic table facilitator should exit to the Crystal ballroom now as well. Thank you very much.

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