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Fidelity National Information Services (NYSE:FIS)

Q1 2012 Earnings Call

April 26, 2012 8:30 am ET

Executives

Mary K. Waggoner - Senior Vice President of Investor Relations

Frank R. Martire - Chairman, Chief Executive Officer and Member of Executive Committee

Gary A. Norcross - President and Chief Operating Officer

Michael D. Hayford - Chief Financial Officer and Corporate Executive Vice President

Analysts

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

Nathan J. Novak - Robert W. Baird & Co. Incorporated, Research Division

David Togut - Evercore Partners Inc., Research Division

Brett Huff - Stephens Inc., Research Division

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

Roman Leal - Goldman Sachs Group Inc., Research Division

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

Ashwin Shirvaikar - Citigroup Inc, Research Division

Kartik Mehta - Northcoast Research

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the FIS First Quarter Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. With that being said, I'll turn the conference, now, to Ms. Mary Waggoner. Please go ahead.

Mary K. Waggoner

Thank you, Jon. Good morning, and welcome to everyone joining us on the call. Joining me today are Frank Martire, Chairman and Chief Executive Officer; Gary Norcross, President and Chief Operating Officer; and Mike Hayford, Chief Financial Officer. Today's news release and supplemental slide presentation have been posted to our website at fisglobal.com. A replay of this morning's call will be available shortly.

Please refer to the Safe Harbor language on Slide 3 of the presentation. Our comments today will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Today's discussion will focus on results from continuing operations and will include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented as outlined on Slide 4. Reconciliations between GAAP and non-GAAP results are provided in the attachment to the press release and the supplemental slide presentation. The presentation will begin on Slide 6.

I will now turn the call over to Frank Martire for an overview of first quarter results. Frank?

Frank R. Martire

Thanks, Mary. Good morning, everyone, and thank you for joining us on today's call.

I'll begin today's business review with a brief summary of our financial performance and business highlights for the first quarter of 2012. Gary will follow with the operations report and Mike will provide additional insight into our financial results and our outlook for the remainder of the year.

We are very pleased with our strong first quarter results. Organic revenue growth improved to 5.3% in the first quarter, driven by solid performance across all businesses. EBITDA increased 10.3% and the EBITDA margin expanded 150 basis points to 28.1%. Earnings per share totaled $0.55, which represents a 22% increase compared to the first quarter of 2011. These results reflect our ongoing focus on increasing organic growth, driving margin expansion and delivering double-digit growth in earnings per share. The team is doing a great job executing the strategy that we described at the Investor Day.

I will now continue with Slide 7. We are making solid progress in expanding client relationships in all of the markets that we serve. Last week, we hosted the first of several client conferences scheduled for 2012. The discussions we are having with clients indicate that they are increasingly focused on driving future growth given the progress they have made to improve profitability and strengthen their balance sheets. I was also very pleased with the positive feedback regarding our product offerings and integrated solutions. We feel good about the strength of our client relationships. We recently completed 2 solution enhancing acquisitions to further expand our risk, fraud and compliance offerings, which are key areas of focus for financial institutions. These acquisitions support our strategy to buy, build and invest in new products to cross-sell to our clients. Gary and Mike will provide additional details regarding these investments later on the call.

Throughout 2011 and 2012, we have made, and will continue to make, significant investments to improve our overall information security and risk management functions. For example, on March 9, we announced the hiring of Greg Schaffer as our new Chief Information Security Officer. Greg previously worked as Assistant Secretary for Cybersecurity and Communications for the Department of Homeland Security. On April 17, we announced the hiring of Greg Montana as our new Chief Risk Officer. Greg previously worked as Senior Operational Risk Executive for Bank of America. Both positions report directly to me. We look forward to the additional experience that these 2 new executives bring to FIS.

Overall, I am very encouraged with our strong start to the year and the progress we are making towards achieving our 2012 objectives. We are working hard to maintain this momentum and are committed to executing the strategy that we communicated at our Investor Day. As always, our management team and employees are focused on serving our clients, growing the business and driving value for our shareholders.

One last thing before I turn the call over to Gary. Our ranking as the world's leading FinTech provider is due in large part to the execution of a disciplined, highly successful acquisition strategy. Bill Foley begin laying the foundation for FIS in 2003, with the acquisition of Alltel Information Services, and served as Board Chairman since taking the company public in 2006 through March 2012. On behalf of our board, our management team and our employees around the world, we would like to extend our sincere appreciation to Bill for the outstanding vision and leadership he has contributed in the creation and evolution of our company. We look forward to his ongoing involvement with FIS as Vice Chairman of the Board.

Now I will turn the call over to Gary for the business report. Gary?

Gary A. Norcross

Thanks, Frank, and thanks to everyone for being with us today. My presentation begins on Slide 9. I'll begin with an update on the global sales climate, followed by a summary of business highlights for the quarter. Although the regulatory environment has created challenges for financial institutions, they are moving forward, developing and executing new revenue strategies. We are encouraged by the renewed focus on growth and investing for the future. Ongoing initiatives to improve efficiencies continue to favor outsourcing over in-house solutions. While we anticipate that 2012 will continue to be a time of transition for the financial industry, we believe that the outlook for the banking sector and the economy as a whole is improving.

If you would turn to Slide 10, I will cover some of the business highlights for the quarter beginning with North America.

As Frank mentioned, we hosted the first of 4 annual client conferences last week. The conference was very successful, with more than 1,000 clients in attendance, which is a significant increase compared to last year. Activity surrounding the more than 100 FIS products and services being demoed was high, as was participation in the 130 breakout sessions which included topics ranging from merchant-funded rewards, to chip-based technology, to mobile solutions. In addition to being a great opportunity for our entire team to interact face-to-face with clients, the annual conferences provide valuable insight into how we can best allocate our investment dollars to generate additional cross-selling opportunities.

For example, 2 product acquisitions that we discussed earlier this year at Investor Day, GIFTS and Compliance Coach, and the ongoing enhancements we are making to integrate them with the core are great examples of how our investments are filling product gaps for our clients and driving incremental growth for our company. GIFTS, which is an integrated wire transfer and money management solution, has grown more than 30% through cross-sales to new and existing clients. Compliance Coach, which is a regulatory training and compliance tool, has grown by more than 50% since we acquired the company. We are also seeing good growth in professional services, Channel Solutions and our Global Commercial business. We are very pleased with the solid results in our Payments business, which grew 4.2%, excluding the check-related businesses. We continued to analyze transaction trends, including the impact of the Durbin Amendment, now that the 3 major milestones are behind us. These milestones and results are: First, volumes have held up well since the end of priority routing, which was effective October 1, 2011. Second, transactions have remained consistent post April 1, 2012, which is when the restrictions on network exclusivity went into effect. And third, we're closely monitoring volumes to assess the potential impact on the pricing changes that were implemented by VISA on April 14, 2012.

Next, I will provide an update on our International business on Slide 11. International continues to be a growth driver for our company. While organic growth of 7% in the first quarter is below our full year target, we expect double-digit growth in 2012. Brazil remains a great market for us with strong growth in card volumes and back office services. Growth in Europe is being driven primarily by the Capco Consulting business. However, we are also seeing ongoing demand for discretionary professional services, including the enterprise core platform upgrade for ING that we discussed at Investor Day. The Asia-Pacific region also continues to provide growth opportunities for our company. As we have discussed on prior calls, a number of banks in Asia utilize FIS as their core processing partner. We are seeing increased demand for our comprehensive integrated branch channel solutions and we were very excited to announce our first TouchPoint deal in Thailand earlier this week. We are also very pleased with the success we are having with our Payment Solutions throughout the region.

Moving to Slide 12. Organic growth of 5.3% in the first quarter improved sequentially compared to the fourth quarter of 2011, and was driven by solid performance across each of our operating segments. Growth in the higher margin businesses, including Payments, coupled with an ongoing focus on managing cost, contributed to the 150 basis points improvement in the margin. Our shift in strategy from large transformative acquisitions, is allowing us to focus on driving organic growth and optimizing performance across our company. As we discussed at our Annual Investor Day, we are targeting 3 areas to drive improvement, including revenue growth, focusing resources on high growth businesses and strong cost management. And we are executing on that strategy.

Turning to Slide 13. Similar to the GIFTS and Compliance Coach deals that I discussed earlier, ongoing investment in targeted product acquisitions are key components of our plan to sell more solutions across our extensive client network. This past Monday, we announced 2 product-focused acquisitions that support our strategy to provide end-to-end fraud, risk and compliance solutions to our clients. The first acquisition, ICS Risk Advisors, provides outsourced risk management and regulatory compliance programs to community institutions, as well as several top-tier banks. The second, Memento, provides enterprise fraud solutions to global financial institutions including 7 of the top 25 banks in the U.S. These products, which complement our earlier Compliance Coach acquisition, are great examples of investments we are making to help our clients address some of their most pressing challenges, including managing through an increasingly more complex regulatory environment.

Next, if you will turn to Slide 14, I'll provide an update on the investments we are making to improve information security across FIS.

As you recall, FIS experienced a cyber attack on our Sunrise platform in the first quarter of 2011. The financial impact related to the breach was borne solely by FIS, as previously reported. At that time, we took immediate steps to notify the affected clients and to remediate the problem. We also hired 2 third-party firms to conduct an independent review of our information security. Our executive management team and our Board of Directors have been actively engaged in the company's information security and risk management functions before, during and after the Sunrise event. Based on the nature of our business, FIS is periodically reviewed by the regulatory agencies that govern financial institutions. Upon completion of an interim review in late 2011, the regulators issued a confidential examination report to FIS related to information security and risk management. We responded to this report and described the actions that we have taken, and will take, to address the requested enhancements. The regulatory agencies distributed a letter to our clients in March of 2012, describing the requested improvements, along with acknowledging FIS's commitment to make the improvements. We are working closely with our customers to respond to their questions and update them on our progress. Our conversations have been very productive, and importantly, we did not see any significant impact on results in the first quarter.

Overall, we believe the steps we have already taken to improve information security, together with the additional investments that we are making in 2012, will result in FIS being an even better, stronger company.

In closing, I'd like to leave you with the following key takeaways, which are outlined on Slide 15. We are very pleased with our strong first quarter performance and the progress we are making to improve organic growth and drive margin expansion. We are delivering on our product-focused M&A strategy. Information security remains a top priority at FIS and we have made substantial progress against our planned enhancements. We remain focused on serving our clients and executing our business strategy.

Again, thank you for joining us this morning. I'll now turn it over to Mike for the financial report.

Michael D. Hayford

Thanks, Gary.

I'll begin on Slide 17 with a summary of our first quarter results. Revenue increased 4.6% to $1.4 billion in the first quarter. Organic growth, after being normalized for currency, was 5.3%, driven by growth in processing volumes, transaction growth and higher professional services revenue. First quarter EBITDA increased 10.3% to $406 million. The EBITDA margin expanded 150 basis points to 28.1%, reflecting growth in account processing, payment transactions, disciplined cost management and lower severance and integration costs compared to the first quarter of 2011. Also, as you will recall, the prior year quarter included a $13 million loss related to the Sunrise platform. In 2012, we are making significant investments to enhance overall security and risk management as Gary and Frank described earlier. These incremental investments were included in the guidance that we provided at our Investor Day.

Detail on the operating segments, starting with FSG, begins on Slide 18.

Financial Solutions revenue increased 7% to $539 million compared to the first quarter of 2011, driven by growth in data processing, professional services and global commercial services. Financial Solutions' EBITDA increased 7.1% to $209 million compared to $195 million in 2011 first quarter. EBITDA margin increased slightly compared to the prior year.

As shown on Slide 19, Payment Solutions revenue increased 2.6% to $631 million and increased 4.2% excluding the Check businesses. We are seeing nice growth across our electronic Payments business, which have partially offset the lower volumes in the Check business. Payment Solutions EBITDA increased 13.7% to $249 million compared to $219 million in the first quarter of 2011. EBITDA margin increased 380 basis points to 39.5% in the first quarter of 2012 compared to 35.7% in the first quarter of 2011 due to growth in transaction volumes and an ongoing focus on cost management.

Turning to International on Slide 20. International revenue increased 3.2% to $277 million and grew 7.1% on an organic basis, excluding a $10 million currency headwind. As Gary mentioned, we benefited from strong transaction services growth in Brazil, as well as growth in Europe driven primarily by Capco. International EBITDA increased 5.1% to $51 million compared to $49 million in the prior-year quarter. The margin increased 40 basis points to 18.6%.

On Slide 21, corporate overhead totaled $104 million in the first quarter of 2012. These results exclude approximately $19 million for the accelerated vesting of equity grants and a non-compete payment related to change in board responsibilities and executive roles. We expect corporate overhead to average approximately $95 million per quarter for the remainder of 2012.

Slide 22 provides a reconciliation of net earnings. First quarter net earnings from continuing operations increased 17.8% to $162 million compared to $138 million in the first quarter of 2011. Earnings per share from continuing operations, as adjusted, increased 22.2% to $0.55 per share compared with $0.45 per share in the first quarter of 2011. Our reported GAAP numbers are adjusted for the after-tax impact of purchased price amortization of $42 million or $0.14 per share. Also excluded from our adjusted results are after-tax costs of $12 million or $0.04 per share in debt refinancing costs and $12 million or $0.04 per share related to the accelerated equity compensation and non-compete costs that I described earlier.

Weighted average shares totaled 295 million in the first quarter of 2012, down from approximately 309 million shares in the first quarter of 2011. The effective tax rate was approximately 34%.

As shown on Slide 23, cash flow from operations totaled $204 million in the first quarter of 2012 compared to $260 million in the prior year. The decline was largely due to a final payment of $42 million related to an interest rate swap assumed in the Metavante acquisition. As a reminder, we expect to make a payment of approximately $28 million to our Brazil joint venture partner in the second quarter of 2012. Capital expenditures totaled $65 million in the first quarter, which resulted in free cash flow of $136 million compared to $130 million in the prior-year quarter.

Beginning this quarter, we have modified our definition of free cash flow to exclude the impact of net changes in settlement, assets and liabilities. These timing difference, associated with the movement of customer funds in our Payment business, that generally clear the following day, we believe that excluding these timing differences provides a better measure of our ability to convert earnings to cash and is a measurement that we will use going forward.

On Slide 24, we have received very positive feedback regarding the strategy that we presented at Investor Day, and are executing to that plan. As illustrated in this slide, we are investing for growth, including the $65 million in CapEx that I mentioned earlier. We continue to focus on strengthening the balance sheet. Mandatory debt payments totaled approximately $59 million in the first quarter. Debt outstanding was $4.8 billion and the weighted average interest rate was 4.7% at quarter end as summarized in the appendix. Debt to EBITDA was unchanged at 2.8x.

In February, our board approved a fourfold increase in the dividend to $0.20 per quarter, which resulted in $59 million in shareholder dividends in the first quarter of 2012 compared to $15 million in the first quarter of 2011. We repurchased approximately 3.7 million shares during the first quarter for a total cost of $101 million. Also in February, we announced a new $1 billion purchase authorization, and we anticipate executing approximately $250 million in share repurchases on an annual basis.

If you'll turn to Slide 25, I'll provide an overview of our recent debt refinancing.

In March, we issued an additional $700 million in 10-year unsecured notes at 5% and used the net proceeds to reduce the Term Loan B. We also extended the maturities on our Term Loan A and revolver to 2017 and reduced the spread by 25 basis points. We're making good progress towards achieving investment-grade credit ratings. In March, Fitch increased our rating to BBB- and S&P increased our rating to BB+. S&P subsequently revised its outlook for FIS from stable to positive.

In summary, our recent actions: first, extended the overall duration by approximately 2 years; second, reduced the weighted average interest rate to 4.7%; and third, substantially advanced our progress towards achieving an investment-grade rating.

Now turning to Slide 26. As Gary and Frank mentioned, as part of our new strategy that we discussed at Investor Day, we are focusing our M&A activity on buying, building or investing in products to cross-sell across our distribution network. The ICS and Memento deals, which have a combined purchase price of approximately $40 million, complements our existing risk and compliance products and are part of our strategy to provide end-to-end risk management solutions to our clients. Similar to the smaller product deals that we've done in the past, we believe these new offerings will pay ongoing dividends for FIS and our clients. We continued to look for opportunities like these to further build out our overall product offerings.

Before I open the line for questioning, I will provide a few takeaway points from today's overview as summarized on Slide 27.

We are encouraged by the strong first quarter operating results and the progress we are making to achieve our full year objectives. We take information securities very seriously. The additional cost of the investments we are making are included in the guidance as we discussed during our Investor Day in February. As Gary mentioned, we did not see a significant negative impact on first quarter results as a result of the regulatory letter. We continue to communicate with our clients regarding our progress and are closely monitoring sales activity for any potential future impact.

We are executing the business strategy we communicated at Investor Day including, first of all, driving organic growth and margin expansion. Second, we are making progress in executing our capital allocation plan, including extending the duration of our debt, reducing the weighted average interest rate and working towards achieving an investment grade rating on our debt. Third, we returned $160 million in cash to shareholders through dividends and share repurchases in the first quarter. And we completed 2 small product acquisitions aimed at driving future cross-sales, which is consistent with the M&A strategy we presented during our Investor Day.

Operator, we can now open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And first, go to the line of Glenn Greene with Oppenheimer.

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

Yes, I guess the first question, maybe for Gary. If there's any way to give us a little bit more color on the sales activity and new bookings activity in the quarter, either from a year-over-year or even sequential perspective? Any way to sort of quantify the overall market and how you're been doing?

Gary A. Norcross

Yes, Glenn. No, it's a great question. We typically don't disclose what our actual sales details are but our sales for the quarter were strong. The nice thing about our company is we've got a very diversified product portfolio. So where we see some maybe lumpiness in International, we see a pickup in global commercial services or if we see a slowdown in other areas. But the quarter, we had strong results. They were ahead of what they were in Q1 of last year. And so, based on the feedback that we got through our investor show and others, we feel confident about the year. I mean, the team's very focused and we're starting to see people talk a lot about coming out of this regulatory issue, this economy and how to get back to growing their financial institutions and their other businesses we serve.

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

Any sense that discretionary sort of spending decisions have improved or loosened a bit?

Gary A. Norcross

Well, I think it's too early to say. I mean, we certainly -- as we shared in our prepared remarks, we see some positive trends around spending. I mean, certainly the increase in conference attendance, I think, is an indication that people are getting back out in the market and wanting to start understanding ways they can grow their financial institutions, and as I've said, we've got a lot of activity in the sales force.

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

Okay. And then, Mike, on the EBITDA margin up 150 basis points, obviously, tracking well above your full year 40 to 80 basis point expectation. Sort of how should we think about it? Was there sort of some timing of expenses? Obviously, you had the Sunrise grow-over which helped a little bit but not a lot. Maybe just a little more color on the 150 basis points relative to the 40, 80 guide for the year.

Michael D. Hayford

Well, I mean, first, I'd say we're very pleased with the number. Obviously, it's a good start to the year. It is -- for the full year, we're still very comfortable with the expectations we set. The first year -- or the first quarter, year-over-year, obviously had -- that comp from last year, had Sunrise in it. So if you normalize out Sunrise, we're in the band with that, that you'd expect for the full year. Now again, when we give expectations, we didn't strip Sunrise out. But I think on a quarter-to-quarter, it's a little bit more impact. Full year, again, we're pleased with the start. We're particularly pleased -- we had a very strong quarter in Payments, the work that Gary's team has done to really drive the cost and then you have a business like that which has so much leverage and the volumes come back. They drop right to the bottom line, so we're encouraged by that start.

Operator

And next we'll go to Dave Koning from Robert W. Baird.

Nathan J. Novak - Robert W. Baird & Co. Incorporated, Research Division

This is Nathan Novak on the line for Dave Koning. Could you expand a little bit on the lumpiness that you're seeing in International, what's causing that? Are you seeing just a fairly normalized accounts being added in Brazil?

Gary A. Norcross

Yes. Nate, I'll take that one. Our international business always has a little lumpiness on the sales side. So I wouldn't read anything into it. We've got, actually, one of the largest pipelines we've had in International. We had a very strong sales quarter. The reality is, where you start seeing lumpiness is whether that's more license-oriented or more services-oriented. The first quarter, we had a lot of services-oriented business which, obviously, we get that revenue over the term of the agreement. Brazil was very strong. I mean we're continuing to see nice growth in both -- not only accounts but also transactions. We're also seeing nice growth in our EBITDA margins as we're bringing on more scale to those environments. So, yes, we're still very bullish on our international markets and we think we'll have a good year.

Frank R. Martire

Nate, the other think you see -- Brazil, agreements are strong, capital in Europe is very strong. But we had a very strong fourth quarter in International and sometimes you'll see that, where people will flush out their budgets at the end of the year and then start in the next year it's a little slower. So like, again, I think to Gary's point, to the full year we still are very confident of that business. The first quarter -- with the strong fourth quarter not necessarily unexpected.

Nathan J. Novak - Robert W. Baird & Co. Incorporated, Research Division

Great. Gary, could you expand on any type of impacts you're seeing on the NYCE network from Durbin, of the interchangeables that have been in place for a couple of quarters now and the dual brand requirements up for about a month now. Anything specifically that you're seeing there?

Gary A. Norcross

Honestly, Nate, we're not. We're actually continuing to see very good volumes in our NYCE network. We're seeing nice growth there. It's too early to tell, on the Visa pricing changes, they've just recently gone in. But as I shared earlier with those first 2 milestones, actually, we've seen no impact and that business continues to grow for us very nicely. So the team has done well executing the selling of NYCE across our financial institutions. We're seeing, just like Mike mentioned, good strong transaction growth in the first quarter across all of our Payments businesses, and of course, NYCE is going to be the recipient of that. Being a network, a lot of those transactions.

Nathan J. Novak - Robert W. Baird & Co. Incorporated, Research Division

Excellent, excellent. Good to hear. And the just last, housekeeping one for me. Do you have an assumption on the R&D tax credit implied with your 34% tax rate function? I mean, if that does not get passed, if that does not get renewed, does your tax rate guidance have to change?

Gary A. Norcross

Yes. I think we anticipate and plan for a -- it's not a huge impact for us. The tax, the R&D tax credit. But I would say, our team continues to look for other ways get benefits. So I think we're comfortable with the 34%.

Operator

And next we'll go to David Togut with Evercore Partners.

David Togut - Evercore Partners Inc., Research Division

Could you sort of walk us through, as you usually do, the unit pricing trends in Financial Solutions, going from Community Banks to mega banks, unit pricing and demand trends? And have you seen any change on a quarter-over-quarter basis?

Gary A. Norcross

You know, Dave, we really haven't. We watch this very closely. It's a very competitive environment out there. In the community bank markets, we continue to see the person with the most broadest comprehensive solutions, we see that as a competitive advantage. But with that being said, as you move up market, you get into more pricing compression and more competitive because more competitors start coming into the mix. So, honestly, we're not seeing any material change in that. We continue to see good growth in our sales pipeline. We're seeing good results out of our sales engine. The interactions we're having, not only with our clients, but our prospects are all positive. But at the end of the day, it's still a competitive market out there, and so we're not seeing any material change.

David Togut - Evercore Partners Inc., Research Division

Have you seen any pickup in spending at the mega banks, just given the increased focused on growth that you highlighted earlier?

Gary A. Norcross

We are. Our conversations are increasing in that area as well. As we've shared on prior calls, we certainly, through this economic crisis, are now having conversations with the very large financial institutions that were different prior to the economic collapse. They were much more mono-line engaged. We were seeing -- where they would do a lot of their services in-house. And so as the result of that, we've seen a very nice increase in our professional services business through the LFI base. And we're also seeing our conversations broadened with regards to the type of solutions we're targeting. So we're very positive on what's going on in the LFI. I think we've shared before, we've got a dedicated team in that market, which has helped a lot. Capco has helped a lot as they come in and they're opening a lot of doors. So those moves, the move of Capco, the move of a dedicated sales force, the economic impact to the LFI's, conversations have definitely changed. And I think you're seeing it in the last several quarters in how much our professional services business has been growing and you'll see it in the future in our other sales as well.

Operator

Our next question is from Brett Huff with Stephens.

Brett Huff - Stephens Inc., Research Division

One question. Can you just go through the security issue again? I know you outlined it pretty nicely, but I'm confused about sort of what triggered the investigation, what the findings were and then kind of what the remediation -- if there's remediation that needed to occur or is this -- kind of give us, can you just go through that again, for us, in more detail?

Gary A. Norcross

Sure. I'll be happy to do that, Brett. I mean, we've always taken security at FIS very seriously. As you know, we're regulated by the same government bodies that regulate financial institutions. Our review cycle is every 2 years. But in the interim year, they'll have an interim review. And so, based on the Sunrise management, we had 2 different third parties come in and review our whole enterprise. Because frankly, as being the largest FinTech provider we felt, if we could be exposed, honestly anybody could be. And so we realized the significance of this as an industry issue. We realized that we're helping our clients each and every day deal with these situations. So we wanted to bring in 2 comprehensive third-party reviews. We did that. As we've shared with you, we're implementing a lot of changes. We think they're all very positive. Some of them around staffing, some of them are around architecture. These are things that you're going to have to have ongoing. As we came through our interim review cycle, the regulatory body agreed that we need to make some changes. They decided to communicate that that to our clients. We've been in, really, constant communication with our clients on this topic. We're very proactive, we've been very transparent about all these issues. The conversations have been very positive. Our clients appreciate all we're doing and they realize the severity of what's going on in the industry and they appreciate us stepping up and taking care of these things. So we're continuing to work with the regulatory body as we always have and we are going to continue to implement our plans as we discussed at Investor Day and earlier.

Frank R. Martire

We just finished a client conference and we spent a lot of time with over 1,000 clients. I mean, we talked to them on this subject and all. And they just feel really good about the communication we've had with them, the progress we're making, the working relationship we have with them. And so that's going very, very well. And we have another client conference coming up soon and we expect the same results out of that.

Brett Huff - Stephens Inc., Research Division

That's helpful. And then just one last issue. A little bit on the NYCE network again. Have you guys had any pin debit wins now that the network exclusivity has come into effect? Anything that you can tell us about?

Gary A. Norcross

No, as a mentioned earlier, we have. The sales team has just done an excellent job promoting our NYCE network. Not only across our client base but across other financial institutions that we don't have a major core, a major debit engagement with. And so, we have had some nice wins, and we continue to see good growth out of that business. We're also excited about some of the innovation that we're doing in that group as well, that we talked a little bit about at Investor Day, and there'll be more things coming. So all in all, we feel great about that business.

Operator

And next, go to Greg Smith with Sterne Agee.

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

Gary, can you talk a little bit about the card processing business in the U.S.? Are you guys moving upmarket at all and competing for maybe some larger portfolios with TSYS and First Data or are you kind of staying in the smaller end, as far as size of institutions?

Gary A. Norcross

Well, Greg it's a good question. We've always had some sizable institutions, especially on our debit card business, and we continue to sell very effectively in that market. Our credit card business, we've got a number of large institutions. We are not seeing as much movement on credit card. Frankly, that's a pretty stable market. The clients we have, we're seeing growth on and so that business had a good year last year and we expect it to have a good year this year. But we absolutely believe we have a very, very competitive footprint in credit on the card side. So as we move, if and when that market starts evaluating alternatives, we'll certainly be positioned to take advantage of that. Of course, that has done very well in our international markets, as highlighted by the Brazil joint venture and some of the other announcements we made. Debit, as I said, we've always been strong in the, what we would consider larger institutions, and we continued to compete and win business there. Our prepaid business, also, we can't lose sight of that. We've got a nice balance of prepaid and we really have 2 platforms. We have a platform that's focused on community institutions and a platform that's really focused on very, very large issuers, and we have a huge position in that space. So across the board, the sales team, we think, continues to do a good job maximizing those opportunities.

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

Great. And then, Mike, on the 2 acquisitions. I apologize if I missed this, but have you given the revenue contribution we should expect and have those deals closed at this point?

Michael D. Hayford

They have both closed. We did not share the revenue expectation. And I think, again, on those deals, you can see the magnitude. $40 million in purchase price, they're smaller deals. They're specifically focused on targets, on -- sorry, private companies that have -- they're in areas where we expect to see a fair amount growth. You can see risk and compliance, as Gary talked about, is a fairly hot area for the marketplace. And the team there has built a nice strategy, they've identified a comprehensive solution and these are 2 things they wanted to go fill in, fill out that product suite. So, the goal is to get them, the relative early stage, and then to grow them aggressively using our distribution.

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

Yes, okay. So just your standard, good product, limited distribution, pumping through your distribution channel, grow it dramatically?

Frank R. Martire

Yes. Solid products and high demand by our clients also.

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

Perfect. Okay, and then just lastly, as we're looking to model 2Q, just anything special we should think about kind of 2Q relative to 1Q? We've got sort of a normal, seasonal uptick we expect in your business. But any other items in the year ago quarter, anything else we should be thinking about?

Michael D. Hayford

The only thing we called out is the cash payment to our JV partner in Brazil which, obviously, [ph] cash flow. But other than that -- again, I referenced that first quarter was a really strong, clean financial result. There wasn't anything unique or onetime nature in there. A real strong performance in Payments, so we're encouraged by that as we head in the second quarter, but there's nothing in the second quarter, particularly year-over-year, that would be of a nature to call out.

Operator

Our next question is from Julio Quinteros with Goldman Sachs.

Roman Leal - Goldman Sachs Group Inc., Research Division

It's actually Roman Leal in for Julio. First, I want to follow-up on the M&A theme. What are some other product sets that you would like to enhance or add to your suite of offerings or what are some of these other hot topics, hot areas in Financial Solutions?

Gary A. Norcross

Well, Roman, this is Gary. I'll start and then I'm sure the other guys will want to chime in. But at the end of the day, what's nice about our transition to a more product-focused acquisition is the business lines are now reaching out and driving through their strategy a lot of these opportunities. But as we mentioned earlier, risk, fraud and compliance is a very, very exciting area. You've already seen us do 2 here. When you start thinking about some of the innovation that's going on around payments, innovation that's going on around mobile. There's some exciting concepts around that. So it's really based on our client demand. So as we talked about, when we were at our last conference, one of the great things is really getting that feedback from our clients. And we want these product acquisitions to not only be geared towards where our business lines want to see the strengths go. But also where our clients want us to take them and so it's a real nice mix across risk, across payments, across delivery. We've got some opportunities that we think would help to grow some of our international businesses along those lines.

Frank R. Martire

So, Roman, as we look at it, we just step back, we listen carefully to our clients. So we may decide to build it, put a lot into investment, as you know, for the future, for the clients. Or if in fact, the right thing is to acquire it, that's what we'll do. But it's always by listening to what the client's needs are.

Roman Leal - Goldman Sachs Group Inc., Research Division

Okay. And was slightly surprised to hear your commentary about the lack of activity in credit. Was that comment more specifically related to the large banks? Are you seeing that in large financial institutions or is that across-the-board?

Gary A. Norcross

No, I was dealing, specifically, on credit card new sales. I thought that was the question. Obviously, there's a lot of strong demand around some of the credit offerings on lending, consumer, commercial, especially small business. Seeing a lot of activity in that area. So I was addressing the comment strictly towards credit card sales in the large bank market and we haven't seen much movement in that area in recent years, where people are moving from one solution to another. But we do have a very, very competitive platform for credit card processing and actually have some large institutions.

Roman Leal - Goldman Sachs Group Inc., Research Division

Great. And then just one last one on the International side. Can you just give anything you want to share on the pipeline? How strong that looks versus a year ago?

Gary A. Norcross

Well, as I mentioned -- I mean, the pipeline is very strong. We had a good quarter. As I said, it's always hard to predict because we have a higher percentage in international license fees, more software sales. So that's what gets some of the lumpiness in the quarters. But we had a good strong quarter in sales, we've got a good strong pipeline, we feel good about our double-digit growth going into the year. And so we feel good about it.

Operator

Our next question is from the line of Tien-Tsin Huang with JPMorgan.

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

I want to ask about Europe, I guess. Some of the IT services firms have been talking about some of the European firms being more open to outsourcing. I'm curious if you're seeing that at all? And if so, would the newer deals change in the way of mix shift between license sales to maybe more traditional processing or would you need to take over assets? I'm just curious what's happening on the ground because it seems like a lot is changing.

Michael D. Hayford

Yes. I mean we, I think, are fairly bullish on Europe. Notwithstanding the challenges that the economies have, as well as the FIs. We've seen the discretionary spend, particularly around Capco, continue to be very strong. So we look at that when institutions are spending on Professional Services, that's an indication that they are using discretionary dollars. Those are typically the first things they cut back on and we've, as we referenced, had a very strong quarter in that area. But we would agree with that sentiment. As the European banks continue to have pressure and financial pressures and have to look at ways to cut costs and do things differently, that they would be more open to outsourcing, more open to using a leverage model. We've seen that, in our FIS and Capco teams, working jointly over in Europe, sourcing a lot of opportunities. We haven't seen a lot of -- we've got a couple of relationships over there, that we've had, that are outsourced. I'd say the pipeline and activity is very active, we'd like to see some of those hit. But we think those institutions have to consider -- reconsider their model, look more out externally and look at a leveraged provider like FIS.

Frank R. Martire

Yes, we strongly believe that's the case and what makes us feel good, is we're well positioned for it, as Mike just talked about. Both for our current offerings and with the addition of Capco and the capabilities they have.

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

And Just on the Sunrise issue, just to clarify. I know there' been a lot of questions on that now. Could it have any impact on your client prospecting? I mean, I get that there's going to be more costs and things to deal with, but just on the prospecting side, how's that going to change?

Gary A. Norcross

Well, at this point in time, we haven't seen any change in that. I mean, as far as the cost, we had it build into our guidance for the full year. We've talked about that. We think you're going to have to have an ongoing diligence to these type of issues going forward. But as we mentioned, we had a very large conference last week. We had a lot of prospects there, the engagement was very, very strong. And so, as I said, the pipeline indicators, the sales results for Q1, we're confident in the year.

Michael D. Hayford

I think the reality is the institutions, they have to ask questions, they have to follow up as part of their vendor management plan. They are doing that. Our teams have to be more active communicating, as Frank and Gary have both talked about, we're out -- very transparent, proactive with them on the issue and then more importantly, what we're doing. It's good and bad. It's a lot of work, a lot more communication that we have to do, the sales teams have to work a lot harder. The good thing is we get in front those clients, in front of the executives, more frequently than we otherwise would. And as Gary mentioned, those conversations, we spend a portion of the conversation explaining what we're doing. And then you spend a portion of the conversation talking about what else we can do for you. But it is, it's more work, it's hard work and we got to keep hammering through that, throughout the year.

Frank R. Martire

And we just see it as the course of business, things we have to do and we'll continue to do.

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

Got it. And I'm sorry you had to deal with it. Last one then I'll jump off. And a lot of questions on Durbin II. Just -- I know the VISA pricing strategy looks pretty aggressive to when the merchant business -- I'm curious, at a high level, without giving details, what else can you do beyond cutting price to sort of protect your base? I mean is there a chance to maybe bundle more network services with your core, I'm just curious if there's other creative ways to sort of deal with that situation.

Gary A. Norcross

Yes. Now, that's exactly what we're doing, I mean, as I've said we've had great growth in that business over the last year. And we're doing a lot of bundling today. I mean we bundled it with our debit offerings, we've bundled it with our core offerings. We're doing some innovation, ourself, across that, that we are talking to clients about. And so as I've said, we've monitored it very close, because I think this question has come up on a number of calls. And as you would expect, we don't know what the impact of some of these things are going to be. You just have to monitor it. But so far, we've actually seen no impact through this process. And at the end of the day, it still comes back to offering the most comprehensive solution you can in the market. And those things work to our advantage given the fact that we have that.

Operator

And next we'll go to Ashwin Shirvaikar.

Ashwin Shirvaikar - Citigroup Inc, Research Division

I guess, my first question is the trend towards outsourcing increasing, that's obviously good news. You've said the pipeline is strong a couple of times. I wanted to ask more about, if there's anything in the pipeline that's different in terms of size or complexity or margin profile or is it pretty much a normal looking pipeline?

Gary A. Norcross

No, we have a good solid pipeline across all of our markets. I would tell you we're seeing backdoor outsourcing. We're seeing stronger demand in global commercial services than what we've seen in the past. Once again, I think that's just our ability to leverage our scale on an outsourcing basis. So that's all positive. Our focus with Capco, in the LFI space, is starting to produce results as well. That's driving more services businesses and that will truly trend, over time, to more outsourcing as well. So we feel good about all the segments. The companies have come together very cleanly. We've got a very focused sales engine and the moves we feel we've made in the last year are starting to pay benefits across all of those segments.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay. And I can understand the beneficial EBITDA grow-over related to the Sunrise event last year, but your revenue growth also is above the range and that guidance not changed. Is that just being conservative with the outlook or is there anything in the timing of upcoming conversions?

Michael D. Hayford

No. I mean it's, we were just slightly over 5, our range is 3 to 5. We had a great start to the year. I mean we'll see how we do second, third quarter, but it's early in the year. Again, we're very excited about the strong start, as you referenced, both revenue and earnings. We'd rather start this way, obviously, than be having the other discussion. But it's a great start, it's in the bandwidth we expect.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Got it. And the other expense of, I think, $20.9 million. What's in there? I apologize if you already addressed that one.

Michael D. Hayford

Yes, I mean, it's 2 things. One was refinancing costs where we issued the bonds, the $700 million of 5% bonds. And then we re-did our bank facility, our TLA and our revolver, and that's just financing debt -- or financing costs.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay. So that's onetime in nature?

Michael D. Hayford

Absolutely.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay. Last, I guess the Capco. Can you just remind me when the large client loss grow happened or has it already happened?

Michael D. Hayford

That was -- first, second quarter last year, they had the revenue, so it started hitting in the third quarter. Right now, it's kind of the peak of where they had strong numbers last year, that we're hitting, and they're doing a nice job.

Frank R. Martire

We're very pleased at the strength on the capital front, both on the European side and North America.

Operator

And next, go to Kartik Mehta with Northcoast Research.

Kartik Mehta - Northcoast Research

I was trying to understand maybe where bank spending is today versus it was last year. You've done a really good job. You look at the organic growth this quarter and it was very strong. And I'm trying to parse out execution versus market. I know this is a difficult question, but any thoughts on where maybe the market is growing relative to how you're doing?

Gary A. Norcross

Well, I mean, if you break it up, in kind of the things we talked about, professional services continues to be very strong. We like that as an indicator, that banks are spending discretionary dollars. Again, when the market went down and went down fast, professional services went away quickly. So we've continued to see strength in that, which is an indication that banks are looking forward, doing projects, spending money. Payments, as you can see, strong, pretty good organic -- adjust for organic growth if you strip out the paper, north of 4%, which is pretty strong compared to last few quarters, and importantly the profits there. So we think that's volumes coming back. And then, again, Europe for us has continued to do quite well. Again, in a market that the economy and the banks are challenged but we think that's forcing change and forcing spending with companies like us. So I think it's probably the same message we've had in the last couple of years, steady incremental improvement. We don't expect it to take a big jump at any point, but we're encouraged that it continues to move forward.

Gary A. Norcross

Yes. To build on that, Kart -- I mean, if you look at our sales success throughout 2011, obviously, we've had good steady execution from our business lines implementing those sales. Obviously, more outsourcing engagements take time, right? To go through the implementation and so there's a lag effect that these sales come online, and so we continue to see good movement in our sales engine. And as Mike said, the services engine and all that continues to positive, good steady growth.

Kartik Mehta - Northcoast Research

And then just, Gary, on the payments side. We see all the national banks offering mobile banking and wanting some of the other products. As far as community and regional banks, are you seeing the same type of demand for other products on the payment side as well or are they still being a little cautious on when you spend money on kind of ancillary products in that area?

Gary A. Norcross

No, not At all. We're seeing strong demand across all of our markets in the U.S., around mobile, around -- which we have a full solution set around mobile, not only payments but also mobile banking. We're seeing strong demand around some of the innovative products around payment wallets, etc., and all of those things we're well positioned on. So the community markets are starting. As we've shared in the past, there were 2 -- really, 2 types of institutions. There were institutions that were hanging on and there were institutions that had worked through, either their regulatory challenges and/or their economic challenges, and they were looking to spend. And naturally, they're looking at some of the new innovation coming online to help them compete. So you just got there a small institution that doesn't eliminate their need to compete with the large institutions, and so we're seeing good demand there.

Operator

Our next question is from Peter Heckmann with Avondale Partners.

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Can you talk about the -- again, with this letter from the regulatory bodies. You had talked about it being distributed to clients. Some of the media reports I read indicated that it was distributed to all domestic banks and credit unions. Is that correct?

Frank R. Martire

Well, we actually don't know. I mean, you'd have to ask the regulatory agencies around who they actually sent it to. We believe most of our clients got it. We have not been contacted by all of our clients. We've proactively sent out letters to our clients talking about this. Based on the interaction we have, we can't confirm that every single client we have has actually received a letter. And certainly, we don't know if all FIs have received that letter.

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Okay. And I guess the implication or -- well, it's a confidential letter, some of the language indicated that -- I guess, what I inferred was that the regulators were unhappy with the speed of your response to their October letter. Is that an accurate assessment?

Frank R. Martire

Well, I would actually say, no. It's probably slightly different. Again, to put it in context, that we had a breach a little over year ago. We discussed our breach, we've notified all the clients impacted, we were the only ones who had a financial loss. We talked about it on our call. And as Gary said, then we took numerous steps. Because, as good as you think you are in security, once you have a breach, you realize you have to get better. So we hired 2 different outside firms, we spent money and focus on improving security throughout 2011. The regulators came in as part of the normal process to come in and do an interim review in the fall of last year. That referenced us to something they had recommended we do organizationally. We have looked at that, we have done that. But the reference to -- we'd like you to have -- it was a really reporting on the tech service side, so they had suggested we do. And again, we've complied with that at this point. We haven't done it in October because we've been very focused on addressing and improving security up to that point.

Peter J. Heckmann - Avondale Partners, LLC, Research Division

Okay. And then moving over to the discontinued operations in item processing. You're going about 2 years since you put that in discontinued operations. What do you think is the eventual outcome there? Is that something you might see wind down in the near future?

Michael D. Hayford

Yes. That's the Brazilian BPO, we call it, or Brazilian item processing, and actually, kind of back office lock box down in Brazil. That business is effectively shut down. We're working through labor claims down there, so it's employee claims that are just -- what's driving the cost. But the business itself, we divested some, the clients took pieces back in-house and then we shut others down. But the business operations are effectively shut down. We're simply dealing with claims out of labor disputes.

Gary A. Norcross

Yes. And the labor rules, in Brazil, take typically about 3 years to work through. So it's a fairly long process in Brazil, and as Mike said, we're just working through that as a normal course.

Operator

And we'll go to Dan Perlin with RBC Capital Markets.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

So I just wanted to try reconcile some, I guess, commentary around the International business. You talk about being lumpy, but then you've got a mix towards services. So it seems like it's pretty positive. I'm wondering, if we think about pulling Capco into that equation and the mandates and the discussions that you're having, is it the conviction that you have, with those discussions in Capco, that have giving you the confident that International can get to the long-term number that you gave for the full year guide? Or do you see mandates in software that we didn't see -- that we can't see from here, that are also giving you that conviction? I'm just trying to see if they tie together at all.

Gary A. Norcross

Well, Dan, we look at international holistically, including Capco. And consulting is growing very nicely in the European market. But our overall business on software and services is growing very nicely as well. Well, frankly, what gives us confidence is looking at the joined pipeline of both and we're seeing a strong demand and we've got -- we're having a lot of strong sales conversations today, across both, not only consulting but also Professional Services as Mike mentioned, as also software sales as indicated by the TouchPoint success in Thailand this quarter. So it's really just looking at the pipeline, looking how the sales teams are executing across the board, looking at our volumes growth. It actually is positive that we're seeing more swing towards more outsourcing and more services because that does give a much more stable base and easier to predict. But as you can see in that business -- I mean if a license fee slides from one quarter to the next, I mean, it can provide a lumpiness. So we're very confident in our double-digit growth for international and that's all based on the combined pipelines of all of our businesses.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Okay. And just, I'm not going to beat this thing to death. But with Capco are you -- I'm just trying to think through the mandates that you would expect, right? Part of the reason you got this thing was to have these much higher-level discussions and it sounds like you're having those. So are these more holistic mandates that you're having at these discussion levels or are they still kind of piecemealing these things together?

Gary A. Norcross

No, not all. We're having some very, very broad discussions with a lot of our clients, very holistically, on how to materially transform these institutions and allowed them to be on a much more competitive basis. And I would tell you, those conversations have been very strong. As you would expect, these are big complex deals. And so we continue to work through them but the level of conversation we're having is exactly what we expected. We have had some success, as well, along those lines. And so we believe that the fundamental reason why we bought Capco still exists today, to drive broader conversations within the LFI market space, in both Europe and North America, and so we feel confident about that.

Frank R. Martire

And, Dan, that's working for us. And I think as we look at Capco, we look at it twofold. One is, the visibility and exposure, gets us at very senior levels and to all institutions globally, in conjunction with FIS. And secondly, don't forget Capco has its own independent plans and what it's doing as a business, that we're very pleased with, as we're going forward. So, on both fronts, we're feeling good about it.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Yes. It sounds like it's been a good asset for you guys. On the Payments margin, again, being so much stronger. I'm trying to balance how much of that should we be thinking is really volumes coming back relative to cost takeout. Because I'm just wondering, if it's cost takeout is that something that we could see accelerate, in terms of margin expansion throughout the year, all else equal in volumes?

Gary A. Norcross

Well, I mean, as we shared at Investor Day, we took some strong initiatives to address our cost, third and fourth quarter. We're seeing the results of that. We're also seeing good strong transaction volumes as well and you're seeing the leverage that comes out of a business like that. And so we're very confident in the Payments business. We're very pleased with the leadership we have there and what the results of that business is showing. We don't believe that the transaction volumes that you're seeing is going to require us to put those costs back in. I think it was a more -- we just made some changes to more effectively optimize those businesses. And so it just shows, not only the leverage of our operating model, which we talked about at Investor Day, but also the leverage of our revenue model as additional growth comes on.

Michael D. Hayford

I think, Dan, you kind just in the see the numbers, in terms of the overall revenue growth versus the earnings, just on a dollar. So you can -- I mean, the simple lever is those businesses have a high degree of leverage and so that incremental dollar revenue coming on, obviously, comes on a good margin. And so the paper revenues going away, as you can see. And the team has done a phenomenal job of managing profitability in the paper business, even as some of that revenues decline. But then as electronic transactions are coming on board, that is driving very high margin for us. So it's electronics business coming on board with the cost management driving very good profit.

Mary K. Waggoner

And I think we have one person waiting.

Operator

And that will be Bryan Keane with Deutsche Bank.

Bryan Keane - Deutsche Bank AG, Research Division

The financial segment, that's what surprised me the most this quarter. I think third quarter maybe was up 1%, fourth quarter maybe up 2%, now up 7%. I just want to be sure, what's driving that acceleration and how sustainable is it?

Gary A. Norcross

Well, Bryan, it's a good question. We're actually, once again, it sounds like a broken record. But we're kind of seeing it across all segments. We're having good growth in professional services, which is really hitting our financial institution business there. We're also seeing nice processing wins all throughout last year, so we're seeing on-boarding there. We're seeing global commercial services, which rolls into that business. We've seen some very nice uptick, IT outsourcing for a number of existing customers and expansion of those responsibilities and then the final area is we're seeing Capco come through their grow-over with their loss of that significant client. So really, all 3 of those areas are working very well to help with the revenue. Based on what we see in our pipeline, based on the activities, we feel good about that business going forward or that segment going forward.

Michael D. Hayford

Bryan, I think we talked about this in the third and fourth quarter calls. The third and fourth quarter had very challenging grow-overs, license businesses, license deals that we had in '10 that didn't materialize in '11. Big license deals. And so I think, even on third quarter and fourth quarter, when the growth wasn't as strong as we'd like to see, we talked about not being concerned but that was more of a grow-over challenge and then you can see that bouncing back in first quarter. So again, we're pleased with the start to the year of, really across the board.

Bryan Keane - Deutsche Bank AG, Research Division

Okay. And can you guys by quantify the increase you saw year-over-year in license sales and Professional Services?

Michael D. Hayford

In first quarter, you're talking about? I mean the grow-over -- third and fourth quarter was a challenge in the license we that had, which took the growth down. First quarter, Professional Services was 11% growth year-over-year. I don't think first quarter license was materially different than last year. But again, it was more that third and fourth quarter had that drop on license versus '10. That's made those growth numbers lower.

Mary K. Waggoner

Thanks, and we're out of time this morning. Thank you very much for joining us. We appreciate your participation.

Operator

Ladies and gentlemen, that does conclude your conference. You may now disconnect.

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