Fidelity National Information Services, Inc. - Analyst/Investor Day

| About: Fidelity National (FIS)

Fidelity National Information Services, Inc. (NYSE:FIS)

February 12, 2013 8:30 am ET


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

Rob Heyvaert - Corporate Executive Vice President

Frank G. D'Angelo - Former Executive Vice President of Payment Solutions


David Togut - Evercore Partners Inc., Research Division

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

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

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

George Mihalos

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

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

Brett Huff - Stephens Inc., Research Division

Mary K. Waggoner

Good morning. My name is Mary Waggoner, I'm Senior Vice President of Investor Relations for FIS. My colleague, Jonathan Fleetwood, who many of you know, is in the back of the room, making sure everything goes smoothly this morning. We'd like to welcome all of you who are joining us here in New York today for our 2012 Earnings Report and 2013 Investor Day. We'd also like to thank and welcome those of you are participating by webcast.

We'll begin the day with a discussion of our fourth quarter and 2012 results. The earnings press Release and supplemental slide presentation are posted on our website at The 2012 -- I'm sorry, the 2013 presentation will be posted on the website in about 30 minutes and will also be distributed in the room at that time.

Joining me on stage are Frank Martire, in the middle, our Chairman and Chief Executive Officer; to my left is Gary Norcross, our President and Chief Financial Officer; and to the far end is Mike Hayford, our Chief Financial Officer.

In the next 30 minutes or so, we'll include our prepared remarks to cover the 2012 operating highlights and financial results. Then we will take about a 5-minute break to reset the stage and -- before transitioning into the 2013 portion of the meeting. There will be a Q&A session, about 30 minutes after the 2013 presentation, so we ask that you hold all of your questions until that time.

Now I would like to direct your attention to Page 3 for the Safe Harbor commentary. Please note that today's discussion will contain forward-looking statements. These statements are subject to risk and uncertainties as described in our filings with the SEC and this morning's press release. 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.

Also, as noted on Page 4, today's discussion will include comments and references to non-GAAP results in order to provide you with more meaningful comparisons to prior periods. Reconciliations of the GAAP to non-GAAP results are included in the press release and are also available on our website.

Now I will turn it over to our Chairman and CEO, Frank Martire.

Frank R. Martire

Thank you, Mary. First of all, I'd like to thank you all for being here today, those in person and those on the webcast. We hope you find it to be very informative and insightful. We're certainly excited about the company and the company's future, and we certainly hope that you feel the same way. So thanks for taking the time. Thanks for being with us for the earnings call presentation and the Investor to follow up.

I will begin with a brief overview of our financial results and business highlights for 2012. Gary will follow with an update of our business strategy and operating results, and Mike will provide additional insight into our financials for the fourth quarter and the full year.

I will begin with Page 6. 2012 proved to be another very strong year for FIS. I am pleased with the progress we are making to execute the strategy we outlined at last February's Investor Day. We continue to build global scale, finishing the year with record revenue of $5.8 billion, $1.7 billion EBITDA and earnings of $2.50 per share. We generated $1.2 billion operating cash flow and record free cash flow of $873 million.

Turning to Page 7. At last year's Investor Day, we articulated a change in strategy, moving away from large scale acquisitions and towards optimizing performance to drive organic revenue growth and margin expansion. We committed to delivering double-digit earnings per share growth and outlined a disciplined capital allocation plan.

As shown on Page 8, in 2012, we met or exceeded every financial target that we communicated in February of 2012. We generated 5% organic revenue growth, which was at the high end of our guidance range. Revenue increased 3% on a reported basis and EBITDA grew more than 5%. The margin expanded by 60 basis points. Earnings per share increased 13% to $2.50 per share. Free cash flow came in stronger than expected at $873 million. In other words, we are delivering on our commitments.

Now we'll continue on Page 9. We also remain focus on servicing our clients and driving new sales. We finished 2012 on a strong note with solid growth in global sales and a robust pipeline heading into 2013. As the market dynamics shift, the more our clients rely on our multidimensional service offerings, we have several transformational initiatives underway, including new agreements with Webster Bank and a large global investment bank. Both relationships service excellent examples of how FIS is helping our clients adapt their business strategies. These large and strategic-oriented initiatives leverage our domain expertise and portfolio depth. Gary will provide more detail on these projects and other new sales -- and sales wins later.

Consistent with the strategy we outlined last February, we are utilizing our significant cash flow to drive value for our clients and our investors as shown on Page 10. First, we continue to invest for growth to internal product development and infrastructure enhancements. We also completed 3 small acquisitions in 2012 which complement and extend our existing capabilities and provide us with additional products to cross sell. In addition, we're excited about the pending acquisition of mFoundry, which will solidify our position in the fast-growing mobile market. Gary and Mike will provide additional details later in the presentation.

Second, strengthening our balance sheet was another important area of focus for FIS in 2012. We reduced debt by $424 million and improved the debt-to-EBITDA ratio to 2.5x over the last 12 months. We also attained 2 investment-grade credit ratings, including the recent upgrade by S&P. Third, we returned $686 million to shareholders in 2012 through dividend and share repurchases. As noted in this morning's press release, our Board of Directors approved a 10% increase in the quarterly dividend to $0.22 a share from $0.20, which translates into $0.88 per share on an annual basis. All of these actions reflect the confidence we have in our business and underscore our commitment to further enhancing shareholder returns.

To recap the year on Page 11, our strong performance in 2012 highlights the strength of our operating model, our commitment to drive value to our clients and success in executing our business strategy. This continue to trend our strong financial results in each of the last 4 years, including 14% compound annual EPS growth, despite a very challenging environment for our clients and the economy overall. And we are very proud of the fact that the market has rewarded our longtime shareholders with a cumulative 5-year total return of 57%, compared to 9% for the S&P 500.

The success of our company ties directly to our employees' hard work and dedication in serving our clients. For that, I want to personally thank our leadership team and our 35,000 employees worldwide. I also would like to thank our loyal clients who depend on us and trusts us to keep their business running every day. It is because of our clients and our employees that FIS continues to rank as the #1 FinTech company in the world.

Now I will turn it over to Gary for the business strategy and operating highlights. Thank you. Gary?

Gary A. Norcross

Thanks, Frank, and thanks again to everyone for joining us today. We have a lot of material to cover, so I'll provide a brief overview of the operating highlights in order to spend more time discussing the results driven from our business strategy.

My initial remarks will focus on 3 key points. First, I will discuss the operating highlights for the year. Second, I will cover our global sales performance, emphasizing our execution and providing examples of continued demand for our full breadth of solutions. Last, I will update where we are expanding our value propositions in investing for growth, including our pending acquisition of mFoundry, which expands our mobile solutions suite. I will continue the presentation on Page 13.

As Frank mentioned, 2012 was another very strong year for FIS. Growth in the existing base, coupled with new client engagements, translated into 5% organic growth for the year, following equally strong results in 2011. The leverage inherent in our volume-based businesses, combined with diligent cost management contributed to a 60 basis point improvement in the EBITDA margin. Strong sales execution, including record new contract value in 2012 creates solid momentum going into 2013.

As highlighted on Page 14, we saw strong growth in global sales in 2012, which increased 27% over our record sales in 2011. The overall market continues to gravitate beyond single product purchases to multi-solution partnerships as clients seek to leverage our scale and product and services capabilities. These trends are resulting in large deal size and longer contract terms. As a point of reference, sales contracts greater than $25 million accounted for more than 40% of our total contract value in 2012. Compared to less than 20% of total contract value in 2009,through 2011.

Additionally, we are successfully expanding our relationships and reach within our top accounts. Across our top 25 accounts, we've driven 23% growth overall in the last 2 years and individually. 18 out of our top 25 clients increased their spend by 5% or more during that time. We see ongoing demand for our core solutions with the bias towards leveraging outsourcing versus license deals. We closed 30 new core processing deals in 2012, half of which were signed in the fourth quarter. We are also seeing opportunities to expand existing solution in new markets. For example, FIS was recently selected to provide electronic benefit processing services to the State of Florida. This 3-year agreement leverages our existing debit platform and provides recurring revenue at accretive margins.

Our international business had the strongest sales results in the history of 2012. The majority of the new deals were large outsourcing transactions, including the India ATM opportunity that we discussed on our third quarter call. While these solutions take longer to implement, we are encouraged by the continued shift from license sales to servicing deals, which will result in higher reoccurring revenue streams and more predictable earnings. International sales are off to a great start in 2013, with more than $60 million in new contract value signed to date.

Now I will continue on Page 15. The changing market dynamics are clearly transforming the way our clients operate, which is driving incremental demand for our leverage solutions, consulting expertise and services around intellectual property. The strategy behind our acquisition of capital in 2010 was to become involved earlier in the planning and design process in order to capture more wallet share. The strategy is taking hold, as evidenced by new large scale initiatives at Webster Bank and a leading global financial services firm. Webster is a great example on how our leverage solutions and processing expertise can drive meaningful value in cost savings through our clients. As part of the bank's transformation initiative, Webster will move a significant portion of their IP functions to FIS, and will also deploy several new FIS solutions, including the NYCE network, remote deposit capture and other expanded payment opportunities. As a result, Webster will benefit from more efficient operating processes and lower IP spend, while also improving the quality and speed of banking for their customers.

A second example is the global investment bank, which recently tapped FIS' Capco consulting organization to manage a multiyear transformational project aimed at reducing costs. This engagement represents a strong long-term partnering commitment and further illustrates the strategic value that Capco brings to FIS. These types of transactions continue to reaffirm our current solution set and further differentiate FIS from our competition as no other provider in the industry has our extensive breadth of product solutions, the depth of services capabilities and the ability to successfully deliver these types of transformational engagements. I'll provide more color around these types of deals later this morning.

Switching topics, I'll continue on Page 16 with an update on where we are expanding our value proposition. At last year's investor conference, we described our 3-point strategy around portfolio management, including investing in early-stage, emerging and established solutions. Today, I'd like to share with you our progress against that strategy. We completed 3 small acquisitions in 2012, including ICS and Memento, which further expand our regulatory compliance and risk management offerings; and the ProNet, which supplements our existing outsourcing and advisory capabilities. Each of these tuck-in deals exemplifies how we have solutions to fill the client need, integrate them with our existing platforms and distribute the additional products across our large client base. We are seeing strong traction with these new offerings.

Next, I'll provide a few examples of the investments we are making in new technology and driving innovation to our clients. We have several exciting initiatives underway that leverage our global payment capabilities. Last quarter, we discussed PayNet, which supports the real-time payment solutions. In addition, yesterday, we announced the launch of People Pay, our new secure online, next-generation P2P solution. This advanced offering which leverages our Pay Net network, enables real-time consumer payment using either e-mail address or mobile phone number. People Pay empowers our clients to provide P2P capabilities to their customers for multiple channels through a real-time good funds model.

This means consumers have the ability to securely move money, however they want through a bank-centric trusted brand. This allows our clients to offer a much broader money movement experience, which will help them drive adoption. We've now successfully completed several client test pilots. The pilots have gone very well, and the feedback on our solution have been extremely positive. This exciting internally developed innovation, coupled with the mFoundry technology which will drive our mobility around People Pay, has created a significant sales pipeline for growth. You have an opportunity to see first-hand demonstration to several of these new solutions during the breakout session later today.

Turning to Page 17, I will discuss the pending acquisition of mFoundry. We are very excited about this transaction. Consumers have adopted the mobile channel faster than any other delivery channel in existence and delivering industry best solutions that enable financial institutions to reach and serve their customers is a vital area of focus for our company. mFoundry is the premier platform for mobile banking and currently services approximately 1/3 of the top 50 banks, including HSBC and Bank of America. This transaction positions FIS as one of the leading mobile providers in the financial services space with a combined client base of more than 1,200 institutions and retailers.

FIS has partnered with mFoundry since 2009 to provide mobile solutions to our clients. Similar to the approach we have followed when investing in early-stage technologies in the past, we established a 22% ownership position in mFoundry as adoption of the mobile channel began to accelerate. And on January 31, we announced plans to acquire the remaining 78%. Owning the underlying technology that enables mobile commerce will significantly enhance our strategic positioning as the mobile channel continues to gain share, and will enable us to leverage our capabilities over a broader customer base.

Now on Page 18, I would like to leave you with the following thoughts before turning the discussion over to Mike. 2012 was another outstanding year for our company as we continue to execute our global business strategy. We are executing on our plan to optimize performance and drive organic revenue growth and margin expansion. We delivered on every single one of our financial commitments in 2012, and we've delivered consistently strong performance over the last 5 years during a very challenging environment for our clients. We continue to expand the value proposition to clients by investing in solution innovation and integration, and I look forward to sharing some additional thoughts and plans for the coming year later this morning.

2012 was a record-breaking sales year for FIS. Our global sales performance surpassed the 2011 record by 27%. The size of many of these signings and the transformational nature of these engagements provide us with a strong momentum heading into 2013.

Now I'll turn it over to Mike for the financial report.

Michael D. Hayford

Thanks, Gary. I'll begin on Page 20 and walk through the financial results for the quarter and the full year 2012. In the fourth quarter, consolidated revenue increased 2.7% to $1.5 billion and grew 3.1% on an organic basis. EBITDA totaled $470 million and the margin was 31.4%. Adjusted earnings per share totaled $0.68 in the quarter. These results reflects the first full quarter impact of the M&I deconversions, which reduced organic growth by approximately by 110 basis points. For the full year, revenue increased 3.2% to $5.8 billion, including $100 million in headwinds related to foreign currency. Revenue increased 4.6% on an organic basis. EBITDA increased 5.3% to $1.7 billion, and the margin expanded 60 basis points to 30.1%. Full year adjusted earnings per share totaled $2.50, a 12.6% increase over prior year and is at the midpoint of our annual guidance.

On Page 21 is a reconciliation of earnings per share from GAAP to adjusted EPS. GAAP earnings per share totaled $0.49 in the fourth quarter and $1.82 for the year. We add back $0.13 in acquisition related amortization for the fourth quarter and $0.55 for the full year. Other adjustments including accelerated stock, and other compensation cost, which totaled $0.05 in the fourth quarter and $0.10 for the year. We also add back $0.04 to the full year results for the debt refinancing that we completed in the first quarter of 2012. That brings us to adjusted EPS of $0.68 in the fourth quarter and $3.50 for the full year. The average share count was 298 million for the fourth quarter and for the full year. This represents a 1% decrease in shares outstanding compared to the fourth quarter of 2011 and a 3% decline from 307 million average shares for the full year 2011. Next we'll continue in operating segments.

On Page 22, Financial Solutions revenue increased 8.4% to $578 million in the fourth quarter and grew 6.4% organically. In the fourth quarter, Financial Solutions EBITDA increased 10.9% to $237 million and the EBITDA margin expanded 90 basis points to 41%. Full year revenue increased 8.2% to $2.2 billion and grew 7% organically, driven by growth in account processing, consulting revenue and professional services. The EBITDA increase 5.1% to $884 million in 2012, the full year margin was 39.4%, which reflects increased spending information security in 2012, as well as change in product mix.

On Page 23, Payment Solutions revenue declined 1.2% to $601 million in the fourth quarter of 2012 and increased 0.5% excluding the check businesses. Previously disclosed client deconversions including M&I negatively impacted growth by approximately 180 basis points in the fourth quarter. Payment Solutions EBITDA totaled $246 million in the quarter, the margin increased 40 basis points to 40.9%, partially fueled by continued growth in the NYCE PIN debit network. Full year revenue was comparable to 2011 revenue at $2.4 billion, and increased 2.2% on an adjusted basis. Full year EBITDA increased 6.6% to $968 million, while the margin increased to 240 basis points to 40.7%, driven by growth in high-margin transaction volumes and disciplined cost management. We are encouraged by the continued strong performance within our NYCE business having now past the anniversary of the priority routing rule change in October, both NYCE and our bill payment business posted double-digit increases for the year.

On Page 24, the internal revenues totaled $321 million in the fourth quarter, including a $70 million unfavorable currency impact. Organic growth was 5.9% for the quarter. International EBITDA totaled $89 million and the margin was 27.8%. A couple of large deals that we had expected to close by year end were pushed into 2013, which caused the international results to come in slightly lower than we had anticipated. The international revenues totaled $1.2 billion for the year, including a $100 million currency headwind. International revenue grew 8.7% on an organic basis. EBITDA increased 2% to $275 million and the full year margin expanded 40 basis points to 23.3%.

On Page 25, a summary of the free cash flow. Cash flow from operations totaled $1,047,000,000 for the year. We add back a one-time tax payment of approximately $105 million related to the sale of the health care business and a $70 million net change in settlement activity. Capital expenditures for the year totaled $296 million or approximately 5% of revenue. This brings us to cash flow of $873 million which is a 9% increase compared to 2011. The increase in free cash flow was driven by growth in earnings and lower cash taxes and improvements in working capital.

On Page 26, is a summary of our cash flow business in 2012. Last February, we outlined our capital allocation strategy which focus on investing for growth, strengthening the balance sheet and returning cash to shareholders. We have delivered on all aspects of the strategy during 2012. In addition to $296 million product enhancements and infrastructure, we spent approximately $64 million net of cash and product acquisitions in 2012. These acquisitions broadened the regulatory compliance and advisory product suite, and provided additional infrastructure outsourcing capabilities for community banks. We made significant progress in de-risking the balance sheet in 2012. We reduced total debt by $424 million to $4.4 billion. Debt-to-EBITDA improved to 2.5x as of end of year 2012. In January, we repaid the remaining $250 million outstanding under the term loan due in 2014 and when we are upgraded to investment grade by S&P on January 17. A combination of the repayment on the 2014 term loan and the S&P upgrade resulted in the release of our collateral from our -- for the facility, which means we have a fully -- now a fully unsecured capital structure.

We returned $684 million to shareholders in 2012 through dividends and share repurchases. As we announced this morning, our Board of Directors approved a 10% increase in the dividend which equates to $0.88 per share annually for an approximate yield of 2.3%. We repurchased 14 million shares in 2012 at a total cost of approximately $451 million for an average cost of $32.12 per share. This includes the $5.7 million block purchase from Warburg Pincus in the fourth quarter at a total cost of approximately $200 million or $35.03 per share, which is a 3% discount to the market. Approximately $650 million from repurchased authority remains under our existing plan.

On Page 27, I'll do a short summary of the mFoundry deal that both Frank and Gary had spoke to. As Gary referenced earlier, owning the underlying mobile technology strengthens our mobile banking offering and supports our product focus acquisition strategy. Under the terms of agreement, FIS would pay approximately $120 million in cash to acquire the remaining 78% ownership in mFoundry. The transaction which was included in our guidance is expected to be slightly dilutive to EPS in 2013. We anticipate completing the transaction by the end of the first quarter.

On Page 28, I'll summarize our key takeaways for 2012 before I turn back to Mary. We executed according to the plan that we outlined last February and delivered on each of our financial targets, including 5% organic revenue growth for the year, 60 basis points of EBITDA margin expansion, and a 13% increase in earnings per share. We generated more than $1.2 billion in adjusted operating cash and $873 million in free cash flow. Consistent with our capital allocation plan, we strengthened the balance sheet, returned $686 million to shareholders and completed only small-scale tuck-in acquisitions.

That concludes our review of 2012 results for the fourth quarter and full year. As Mary mentioned earlier, we'll take questions on 2012 results at the end of our Investor Day presentation. With that, I'll turn it back to Mary, and she'll cover the agenda for the rest of the day.

Mary K. Waggoner

Okay. We're actually going to take about a 5-minute break while we reset the stage. So if you could be back here by 5 minutes after 9, which is actually about 4 minutes, that would be great. Thank you.


Mary K. Waggoner

Welcome back. We're now ready to proceed with the 2013 portion of today's presentation. Once again, I will direct your attention to the forward-looking statements. During this -- for the second time this morning, please note that today's discussion will contain forward-looking statements. Our statements are subject to risks and uncertainties as described in our filings with the SEC. We undertake no obligation to update any forward-looking statements. Also, today's comments will refer to non-GAAP measures, the reconciliations between the GAAP and non-GAAP results are posted on our website and some are also provided at the back of the presentation.

So just a high-level overview of what you can expect for the rest of this morning. First, Frank Martire, our Chairman and CEO, will come to the podium and discuss a strategic overview of the company. He will be followed by Gary Norcross, our President and Chief Operating Officer, who will provide an overview of the business and our strategic performance. Rob Hayvaert, Corporate Executive Vice President of FIS and Founder and CEO of Capco, will provide some insight on global banking trends. And Mike Hayford will close out today with an update on the financial overview and discussion around value creation. Then we will have a 30 minute Q&A where you'll have an opportunity to ask the team questions about the 2012 results and about 2013. And then you will also have, at the conclusion of all those, the presentations, you will have a chance to visit the topic tables again, and see some of our new exciting innovative solutions.

With that, I will turn it over to our Chairman and CEO, Frank Martire.

Frank R. Martire

Okay. Good morning, again. Again, thanks for being with us today. So we're going talk to you about the company as you would expect, but we're very excited about not only proud of the performance we've had over the last several years, but also so excited and confident about the future of FIS and where we're going as a corporation. You'll hear that from Gary, from Mike and from Rob and myself, and as you talk to the executive management team here.

We're going to talk to you of 3 different things on my agenda: leading the market, executing our strategy and driving shareholder return. We are the market leader. We're proud of it. We've worked hard for it. We like to think we've earned it. Revenue, $5.8 billion; EBITDA, $1.7 billion; operating cash flow, north of $1 billion, $1.2 billion. Over 14,000 loyal dedicated partners or clients in over 100 countries, we truly are a global international company. You'll hear that more and more as Rob speaks, as Gary speaks, as Mike speaks to you later. And over 35,000 committed, dedicated, loyal employees, who are the reasons why we are successful as we are.

So you look at our performance. Strong market leadership. We're in a great industry, and we happen to be #1 in the industry. And like I said, we're very proud of that with, therefore, our clients. High recurring revenue, 80% recurring revenue, 15% CAGR growth over the last -- since 2008, 15% on revenue. Consistent EPS growth -- since 2008, 14%. Strong, strong cash generation, over $1 billion of operating cash a year. And we returned cash to shareholders, return in the form of over $1 billion in the last 2 years. So commitment to return to our shareholders.

But then what it's really about and I always talk about it, everybody has a strategy. Every company has a strategy, and you need one. But what's most important? What's most important is that we execute, that we execute on our strategy.

So if you look at it, over the last decade or so, right, we started off as a company saying, "We need size. We need scale. We have to grow." We did a lot of acquisitions. Strategic acquisitions that fit the company's future to take care of our clients, give them the products that they need and give us the size and scale we need to optimize our expenses.

Then we've gone into a phase of integration and building. So now we've integrated the products. Because when we had all these products, our clients said to us, "Okay, I get it. Now you got to integrate them." Because that's what's most important to us, and that's what we're doing. And now, the phase we're in now is we optimize performance. You see that in our margin expansion. So we've gone through all these phases. And I think the thing I'd like to leave you with is we executed so well in each one of these stages. We knew where we were and where we want to be and exactly how to get there.

So expanding client relationships. We have loyal, dedicated, committed clients. We expand those relationships. We always talk about new sales. And in this industry, we talked a lot about new sales, new sales, 10 years ago, 5 to new clients. Today, we have a relationship with almost every client that's out there, financial institution. So our job is to cross-sell products, and how do you cross-sell products? You do it because of your reputation. We've done so well because we deliver for our clients. Before they're going to buy a new product from us, they know whether they're running some product with us already, and our reputation is the key for us getting new business. Expanding client relationships.

And then we'll build partner by whatever is appropriate. In the case of -- we build products. We got PayNet, and People Pay as products. We acquire mFoundry is the recent one that we're doing, from an acquisition standpoint. And then we cross-sell. But we get these products for our clients. We know the future of our company is based on the fact that we could keep our clients competitive. We do what we need to do. If it's building, buying, joint venture, partnering, whatever it is that's appropriate to take care of our clients future, that's what we do.

And then we lead through transformation. Our clients are going through a transformation. You'll hear a lot about that from Rob and Gary. And they've moved to a change -- changing. And global institutions, the large financial institutions, the markets we're in that we're going in a lot heavier, we have the products. That's why we're so excited, optimistic, confident about our future because we have the products for the large financial institutions and the global entities.

And we drive margin expansion. If you look at the last year, 60 basis points improvement, continuous improvement year-after-year. So while we're growing our revenue, while we're growing our business, we look to optimize our business and expand margins along the way.

5 years strong performance. 15% revenue growth, I mentioned that already. $3.4 billion to $5.8 billion. Grow the top line, but grow the bottom line, the EBITDA. 21% CAGR growth. But look at the margin expansion, 550 basis points. Each year, we've optimized. Each year, we look at our business and step back and say, "How can we run it better? How can we run it better internally and most importantly for our clients?" EPS growth. 14% CAGR over 5 years, from the $1.50 to $2.50. We've executed. We've delivered. You have confidence about the future because -- which we've been able to do in the past. And if you could deliver and execute, you're confident you could keep doing it.

So our guidance, February -- in February of 2012 that we gave for the year 2012. We look at each category. Revenue, 3% to 5%. We hit that 5% revenue growth. EBITDA, 5% to 7%. We had over 5% EBITDA growth. Margin expansion, 40% to 80%. We had 60 basis points. Of 40 to 80 basis points, we had 60 basis points of margin expansion. And EPS, 10% to 15%. We had 13%. You check every box. It's not that easy, but we have to go through and do it. But we stay focused. We stay focused on our clients and our commitment to our employees, and then we drive these results based on it.

But we manage our business every day. We don't step back once a year and look at it, if we managed it each and every day, and we know the parameters we're looking to accomplish and we know exactly how to get there, and we stayed focused.

So how do we sustain our value? Well, we expand client relationships. We have all these client relationships. Our clients know we're going to be there, 5, 10, 15, 20, 30 years from now. They also know we will have the products to keep them competitive. At the end of the day, clients convert onto our system. It's a big job. It's significant. It impacts the -- it impacts their clients, their customers. It impacts their employees when they go through these conversions. So what they say to themselves are, "Will this company be there for me 5, 10, 15, 20 years from now? Will they be competitive? We don't want to go through a number of conversions. We want to know we'll be state of the art and that we'll be able to compete." That's what we build. We build loyalty. We build partnerships.

We invest in innovation. You'll see a lot of it today. We're going to have some demos and presentations on it. But even with the PayNet or the People Pay or the mFoundry, we innovate, innovate, innovate. Those are just several examples, just a few examples of the hundreds of things that we do. Make no mistake about it, our clients depend on us to do it. Our clients are not there saying to us, " Well, we need this. Could you start developing and give it to us in a year." What they say is "We need it and we need it now." And they expect us to be there for them.

And then we develop tomorrow's leaders. And I think this one sometimes doesn't get as much attention as it should. The reality as you grow as a business, it is so, so important to have leaders in the company. The leaders not being the 4 people who would be on stage today, who will be speaking to you, but they're important. We'd like to think we're important. But the reality, it's the depth of the team below us, some of the people like Gary is going to introduce today when he gets up here and thousands of others in this company. We have an obligation and responsibility to develop our people. They're the future leaders of this company, we know it. We do not take it for granted. And we've built some great leaders in the company, and we will continue to do so.

So if we look at our mid-term financial targets. Organic revenue growth, 4% to 7%; adjusted EBITDA, 30% to 50%, EPS, 12% to 15%; operating cash flow, greater than $5 billion; debt-to-EBITDA ratio of 2 to 2.5 range. We threw numbers up here, right? And we talk about it. And why are we so confident about it? Well we've delivered. 2012, for instance, we just showed how we delivered. We just showed that to you. You'll hear more about it. But we are so confident we could deliver on these and hopefully exceed them because we are so well positioned as a company.

And then finally, driving shareholder returns. If you look at it, between our EPS growth and our dividend, we're returning 18%. If you look at our peers, well above our peers. That's what we're returning, it's 18% to our shareholders. We're pretty proud of that. It takes a lot of work, a lot of focus. But clearly, we attained our objectives.

Our value proposition, right. If you look at our return, it's 15%. And in some cases, we're less than our peers. We like to think there's some room to grow there, right, based on all our performance and our track record. We would like to hope and think that we have some room to expand and to grow from a value standpoint.

Key message I'd like to leave you with and that you'll hear it throughout the day. We have strong market momentum. We have strong, strong relationships with our clients, and we're in all the markets and we have strong fundamentals as a company. And we're #1 in the FinTech 100.

We have exciting opportunities for growth. It's not like this is where we are today, where do we need to be tomorrow? We know exactly what we need to go after, global expansion, large FIs, large financial institutions, that's where we're going. We're well positioned for it. We have the products, the capabilities, the people who understand these markets and have penetrated them, and we know that's where a lot of our growth is coming from.

This one is so important. You got to be consistent and you have to deliver. Be consistent about your message, what you're doing, what you've done, what you're going to do, and then deliver on it. And we have a record of delivering on it.

And then finally, shareholder return. We have to drive sustainable performance. We've done that, with mid-single-digit -- double-digit EPS return, right? We talked about it being 14% in the last -- since 2008. Significant EPS. And then we have deployment of capital and dividends that we pay and share buyback, right, that we do for our shareholders. The results are there. Our shareholders have seen those results, but it's because of our dedication, focus and commitment to those shareholders.

But how do we drive those results once again? It's because of what we do for our clients. We build our relationship with our clients. If you look at the fundamentals of our business, it's our relationship with our clients, and that drives all the other results, because we build, we cross-sell, we expand, because of those relationships. But because of the hard work we do behind it to make sure we will deliver for them, and that they see us as a trusted partner. At the end of the day, when we go into their office and believe this, the executive team makes hundreds, if not thousands, of trips a year to our clients. The #1 most important thing for them is that we're a trusted partner of theirs.

I'd like to thank you for being here. Gary is going to follow up now. We're going to take questions at the end. But you'll hear more from Gary and the rest of the team about this company, the future of the company and why we're so optimistic about our future. Thank you.

Gary A. Norcross

Thanks, Frank. And once again, I want to welcome everybody here today. We're very excited to be here. We always look forward to this time to get to talk about not only our accomplishments in the past but where we're going in the future. Frank gave you an update on our strategy. And what I want to do today is really give you an update on our strategic performance. If you think our strategy is going to fall -- my presentation is going to fall over 3 categories. But first, I want to give you a little background on our company and dig into a few more things that Frank talked about and really talk about our global position, the foundation that we have built that we believe positions us for superior growth, not only today, but in the future.

We'll then going to ask Rob to come up, Rob Heyvaert, who is the CEO of our Capco consulting group. We wanted Rob to come up and really talk about the trends that are going on in the industry, but better yet, what are the underlying things -- what are the underlying that is pushing these trends? What's causing these trends to occur? And then what I want to do is come back up after Rob and talk about how we're going to execute against those things and give you some ideas of how we're going to grow the company going forward.

But before I get started, I'd be remiss if I didn't introduce what I feel is obviously the best team in the industry. One of the reasons I say that, they've been with us a very long time. And when you look at these results that we went over in the fourth quarter, when we look over for 2012, when you look over the historical results, it's these people that are driving the results each and every day. And it makes these kinds of presentations pretty easy for me to get up and talk about because I'm really just bragging on their hard work. So I'll start over here, Ram Chary. Ram will stand up. Ram is our Global CIO. Ram has been with us since 2007. Ram runs all of our delivery organizations, all of our IP, all of our captive. When you think about margin expansion, we all participate, Ram does a lot of it. He also drives a lot of our nonfinancial institution P&L, so global commercial services, our retail and merchant businesses and North America.

James Susoreny, who's been with us since 2002. Jim has done a phenomenal job for us. Jim drives all of North American sales and client engagement. So when you think about -- not quite all 14,000, but when you think about how many clients we have in North America, it's Jim's team, and we're going to talk a lot about that distribution model that shows up every day and drives growth.

Anthony Jabbour. Anthony Jabbour runs all of North American financial institutions for us. So he's got the lion's share of the business. So he has to square off against all the projects that we have going on each and every day in North America. A lot of innovation we're highlighting is coming out of Anthony's organization. So a phenomenal member of the team.

Mark Davey, Mark Davey drives all of that international growth you've seen minus the Capco contribution. But when you look at that huge percentages of growth and the big sales, Mark drives all that across Latin America, EMEA and Asia-Pacific.

Amy Morgan [ph] is here. Amy Morgan [ph] runs all of our client loyalty business. We get -- as Frank said, we take client loyalty, we can't take it more importantly. We believe everything about our business revolves around those 14,000 clients and cross-selling them and managing their loyalty or measuring their loyalty and what they think about us is very, very important. And Amy [ph] does a great job with that.

And Ellyn Raftery down in the front row. She's the newest member of the team. She's our Chief Marketing Officer. So she's been helping us improve our internal and external communications and also drive a closer bond between marketing and our sales forces around the world. So a great member.

I've got Woody Woodall down here. I want to introduce Woody. Woody is our Chief Accounting Officer. So all of these things have to come together in order to push these numbers.

And then Kirk Larsen, who's our Treasurer. Kirk is a key member of the team and also works very closely with the business lines.

And then Mike Oates, who's sitting out in the front row. He is our Corporate General Counsel and also Head of HR. So I just wanted to introduce these guys. They'll be here today. There's a lot of other FIS people here today. And certainly, when you're back at the topic tables, please make sure you corner them and -- because these are the guys that make it work each and every day.

So with that, let me jump in the presentation and really talk about our global positioning.

So as Frank talked about, the key to our growth is the foundation that we think we have laid over the last 8 years. Frankly, if you go back all the way from 2002 and you work for the last decade, you'll see a key strategy that was deployed through acquisitioning, integrating and now we're operationalizing and growing the businesses.

As I talk about some of the things later today, I want you to keep in mind just this foundation, though, that we can deploy business against, and that's a key differentiator for us against our competitors. And we feel like it's also a key value proposition that we drive for our financial institutions. We're in more than 100 countries. But we're not sitting around. Mark every day is not waking up trying to figure out the next country he's going to go into. We're in the important countries you want to be in. So we're in the U.K. We're in Germany. We're huge in Brazil. We have a very growing presence in Latin America. Asia-Pacific, I'll talk about some of those numbers. The organic growth that we've driven out of Asia-Pacific, both in India, as well as other regions of the country and Australia are very, very strong.

So having these 14,000 clients and being able to cross-sell and up-sell, our key is, as we discussed in the investor earnings call, our sales last year was 27% in new contract value over 2011, and 2011 was a record year. It's the ability of those 800-plus sales professionals that we have worldwide, which is the largest sales force in the industry. To be able to deploy that across those 14,000 clients is really what makes the difference.

And then, we cannot trivialize our financial scale as well. Rob is going to come up and talk about some trends and what's driving those trends. I'm going to come up and give you some real-life examples after that. The financial scale of this company allows us to actually go deploy against many of these trends, and that's very, very important and also a key differentiator for us and all of this combined with more than 35,000 resources worldwide. And what we'd like to say is not only do we have a large amount of resources, which are driving value each and every day to our clients, but they're in the right locations, all right? So we have the right amount of offshore complements. We have the right amount of in-country employees. And so it really gives us a very, very strong platform to grow on. But this, frankly, would not be good enough.

If you look at -- so that's a global reach. That's a product reach. That's an employee reach. But we also have a processing reach. Clearly, outsourcing is growing even faster. The trend toward outsourcing is even faster than what we were expecting when you look at some of the sales that we accomplished in last year.

And you have to have credibility in that processing. Last year, we processed more than 27 billion transactions, moved over $5.5 trillion of money. And what was interesting is we have access to more than 750 million end consumers.

So when we talk about our mobile strategy and innovation and we talk about why we did mFoundry, think about our reach as a company. So it's not that we're buying a small product tuck-in, we're buying a capability that we can leverage across the enterprise of the #1 FinTech provider in the industry, and that gives us a very powerful position to grow in the future.

If you also think about our revenue, our revenue is spread very nicely across multiple markets. On the next slide, I'm going to talk about the characteristics of these markets. And I think it's very important because the differentiator for us is the fact that we operate in multiple markets and we have scale in multiple markets, and it allows us to continue to weather growth as some of these markets dip and fall. We have a very strong position in the North American community bank business, which will be community banks and regional banks, less than $10 billion. That's a business that's growing for us. And we'll talk about the statistics of that business and what those -- what that market is actually looking for.

In North America, we have an equally impressive presence. And in North America, we're just not a mono-line player, we actually have payments, we have core process and we have services. And it's that scale and leverage, which allows us to continue to grow this business.

And then we talked about the value of being in the international markets, and that being 20% of our revenue. A lot of our competitors talk about and say, they want to move into a large financial institution marketplace. A lot of people talk about wanting to move in the international marketplace. The very quick answer is it takes a different type of product, it takes a different type of service and it takes years to penetrate those markets. We understand why they want to move in those markets because they're growing very rapidly, but it takes years to get to that position, and FIS is already there.

The remaining portion of our revenue is really geared around our nonfinancial institutions. Now this is where the health care business resided last year. And frankly, last year, we made the decision to sell off health care. I think part of a good strategy is as much about what you're not going to do, it's what you're going to do. And while the health care was a great business for us, we were subscaled. And so we had a real decision to make. Do we go put capital behind the health care market segment and really grow that? Or do we divest that, find someone who is more committed to health care and allow us to deploy our resources against the financial services and the financial institutions? And obviously, that's what we chose to do because we think there's that kind of opportunity.

But what's left in nonfinancial is a lot of capabilities that underwrite our delivery in the financial institutions. So when you think about global commercial services or we're leveraging our data center footprints to actually lower our unit cost, that then allows us to compete more effectively in financial institutions. So it's a very important piece of business for us from a strategy standpoint.

Let's turn to the markets I talked about, and let's talk about the characteristics of those markets. One, IBC has projected that in 2013, the less than $10 billion market in the U.S. will spend $17 billion. So it is a robust market. For us, we see moderate growth in that space. Certainly, people in that space are looking for a total end-to-end solution capability. They had no room for customization. They had no room for large professional services engagement. They really need a total suite. Obviously, we're very well positioned there. We got the broadest product suite in the industry and the broadest outsourcing capabilities in the industry. So we'll continue every year to increase market share. I mentioned in the earnings script, signing 20 new core deals just in the last quarter, all of that came in this market segment.

When we think about the greater than $10 billion marketplace, it's a smaller market. There's only 100 institutions in North America greater than $10 billion. But when you look, the spend is obviously much greater. Larger the institution, the more spend they deploy. And this year, they're estimating about $40 billion in spend in that market. Once again, very well positioned. What you start looking for in these markets in greater than $10 billion, and I'll give you an example later in the presentation. These guys are going to look for more specific products, specific components. They're going to do some in-house building. They're going to maybe outsource some components. They're going to look for large services capabilities, so they're very unique and complex type of solutions to deploy in these markets.

Once again, as we talked through the presentation today, FIS is the only company positioned to take advantage of that. Because it is more than just a product, it has to be a component. You had to wrap services around it. You had to bring in consulting and transformative services like Capco. And all of these things allow you to grow this market in a meaningful way. And we've seen high growth in this market in 2012. Mike talked about the performance of the FSG segment for 2012, obviously very, very strong growth. And most of that was driven out of this greater than $10 billion, so we're doing very well in that market.

Our international markets, clearly, because of its size, would have the largest spend, estimated at $133 billion. By far, this is our highest growth area. We're very, very confident that we can maintain double -- and grow double-digit growth in our international markets. We've seen a very rapid move to outsourcing, which has actually surprised us, but that's a great thing for us long term. It gives us more predictability in our numbers, and it also allows us to grow business through more strategic relationships. Our distribution network is the largest in the industry, with the solution set that they can deploy against that base.

So with that, you kind of understand the markets require different needs. So when you think about that, you'd have to start thinking about how we stack up to our competitors. Now I'm the first to tell you that no matter what, there really are no bad competitors left in this industry. We have the utmost respect for everybody who's in this space. We compete with them each and every day. We like to believe that we win more than we lose, and I think our results prove that.

But when you think about the markets that I've talked and the complexity, you really have a complexity as you move up in the asset size. The larger the institution, the larger geographic reach, you have a complexity to deal with that. And when you think about the complexity of the solution, all right, so what they're needing. They're no longer needing a cradle-to-grave solution. They're looking for component-level architectures. They're looking for robust middleware. They're looking for huge services, organizations that deploy across BPO and ITO.

When you consider those things, it's kind of easy to place our competitors on this grid. When you think about competitors like TSYS and First Data , great companies, and they do have geographic reach. We run into them in Europe. We run into them in Latin America. We run into them in the U.S. We run into them in larger institutions. But their day-to-day is very focused on a niche. It's very focused around debit or credit or merchant. They're pretty much mono-line players, very good at what they do. We compete very effectively with them, and there's a number of instances where we won against these guys every year.

When you think of competitors like Pfizer and Jack Henry, there, again, more robust solutions, right? They have an end-to-end capability. But when you start moving up market and you have to start dealing with customization, you have to start dealing with component-level architecture, you have to start dealing with: "We need 1 thousand people to deploy against this back-office objective," those guys don’t have the scale, and they don't have the capabilities because they're primarily focused on the less than $10 billion marketplace. When you add all of that together, we frankly feel that FIS is the only provider in the industry that can meet the solution complexity component that exist, as well as the institution complexity component, and that's why you're seeing the consistent strong results over the last several years.

But it's one thing to be executing, it's another thing to be recognized. And Frank talked a little bit about this. We take great pride in getting these awards because it's a third party's endorsement that what we're doing is right. And whether you look at business execution, which is us continued to be ranked #1 for 2 years in a row on the FinTech 100 or when you look at product execution, whether it's around BPO excellence, Gartner and the leading retail core banking Magic Quadrant, Aite, we're getting endorsements from both sides. And obviously, that makes us feel good that our strategy is working, our investments are working and our customers, more important, are getting their -- the results they expect with the relationship.

So in wrapping this up, I want to talk about how we truly are positioned to capitalize on this market, before I turn it over to Rob. At the end of the day, nobody in this industry has a foundation, has a broader solution breadth than FIS. We have over 300 products and services. And not only that, we have extremely strong capabilities around professional services, business consulting, BPO and ITO. In fact, out of 35,000 employees, we talked about this with you guys years ago about the evolution of this market, we have now grown to more than 22,000 people in this company driving professional services, BPO and ITO to our clients.

So huge growth in that area. And clearly, FIS is the leader in solution breadth. If you think about our market reach, we serve all sizes of financial institutions with the proper solution. We're not trying to take a community bank product and move it upmarket. We're not trying to take a product that were utilizing at Bank of America and try to sell it to a community bank. You have to have the right products to hit this markets, and clearly, our reach is there. Our 35,000 employees and growing is a differentiator for us. It really allows us to drive much greater value into our clients. And then, our presence in a broad global geography is second to none.

Our industry experience, 40-plus years in the fin tech space. As I introduced the team, I should have mentioned this is all they've ever done. This is all I've ever done, I've been with this company 25 years, all Mike, all Frank has ever done. We hire people from this industry because it's a very complex one, and our ability to simplify this and partner with our clients to drive them value and allow them to compete really helps us as we compete against our competitors.

And then finally, our client relationships. Our cross-sells is what drives this company. Every sell we do practically now is generated through an existing client of some sort. And being able to drive that and being able to differentiate -- allow them to differentiate in the market is very important, and we think all 4 of these things really drive an unmatched global position for FIS and the ability for us to be very successful in the years to come.

So with that, I'd like to turn it over to Rob, and Rob is going to come up and talk about some of the global trends. And then, I'll come back and rejoin and talk about the execution.

Rob Heyvaert

Thank you, Gary. Good morning, everybody. It's really a pleasure to be here.

For some of you who have a loss of memory, I stood here 2 years ago. The ink was just fresh on the documents, with FIS buying Capco, and I had all this excitement about what we were going to do and how wonderful this was going to be. And it's with a lot of pride actually, I stand here now today to tell you, 2 years later -- and many have written about it -- I think, some of you have written about, "Will this work? Will Capco and FIS get well together? Will, basically, a product company do well with a services company?" I can tell you it's been a resounding success.

And as Frank and Gary mentioned, the first big success, that we are proud to announce a very significant win, which, sadly, we cannot name the institution. But we can say that we've won, and I'll talk about it in a minute. It's a trend, by the way. We've won a very large transformation deal, that is the sort of indicative sign that our industry is in huge challenge, but also have huge opportunities.

And I don't want to be pedantic because I think many of you, I hope at least, reads the Financial Times and The Wall Street Journal. So I'm going to give you global trends, but I'm going to try to talk to you about what's really happening in the backdrop of financial services. And because I spend my life talking to CIOs and COOs, I think it makes a lot of sense to give you some of those comments.

But however, death by a thousand PowerPoints or by too many talks, maybe I would like to summarize it in one little sentence. I was at the World Economic Forum a couple of days ago, 2 weeks ago, and one of the top CEOs of one of the largest financial institutions in North America, leaned over to me in a workshop and said, "The bottom line, Rob, is we are going to get smaller and more focused and you guys are going to get bigger." And this is a very important dynamic, and I'll try to explain to you why I think this is so fundamental.

First of all, I'm not going through all these slides, but the bottom line is, in 2008, something detrimental happened to financial services. And we've been almost -- it's been 5 years, and you could argue that some have rebuilt, some have reduced. But while that was going on, that sort of trying to get the banks to get their self-confidence again, there was all that other stuff going on. Economically, there were growth markets. Technologically, it's been unbelievable what happened between 2008 and 2012.

If you add the social aspect, so the electronifcation of society, you could argue that while banks were actually shivering from 2008, there was all the stuff going on that had a huge impact on our industry. So I would argue that financial services has a huge challenge in front of them, as you know, but I would argue even a huge opportunity. So let me try to explain to you quickly what I think are some of the great opportunities existing in financial services. But the fact that somebody says to me, "You guys are going to get bigger, we're going to get smaller and more focused", it sort of gives the alarm bell up to me and saying, this might be the right time to invest in a company like ours.

First of all, market liquidity, and some call it the next bubble. But the bottom line is financial services have dramatic access to liquidity. Interest rates close to 0, they're going to do something. We actually are doing something. The companies are just coming back to financial services, and they will do something with market liquidity. If anything, they will probably use that liquidity, massive -- as an execution opportunity for transformation.

And then, as an opportunity to have access to the unbanked. 10 million people in the U.S. are unbanked. 2.2 billion people in the world are unbanked. So I would argue that there is a very significant opportunity for financial services to access that. I would argue that FIS as an organization, with its global reach, its assets, and all those kind of things that I'll come to back in a minute, have a huge opportunity.

The banks are wondering. And they're getting their self-confidence back, and they know that they need to do something about this. Another great statistic on wealth creation in emerging markets. There's about 2 point -- no, it's 1.5 billion people that will enter the middle class by 2020. So you could argue that instead of sort of being concerned about risk, banks need to go on the offense, but they really need to ask themselves who they want to be.

They can't be everything to everybody because there's clearly overcapacity and the margins are disappearing. So more and more banks have to ask themselves where their real opportunity lies. And this could be seen as a challenge that's called reduced cost advantage of offshore. I hope many of you or some of you are covering the offshore firms, and they've thrived in this area. Because -- for one simple reason, taking somebody out of a very expensive location, put them in a cheap location was saving money for financial institutions. And it worked for a while, but you could argue that the statistics are showing that there was a 6:1 difference in the last couple of years. It's going to go down to 2:1.

And basically, if anything, labor arbitrage has its limits. And financial institutions will have to think through why they do not have to take the whole process out of the certain equation, why they have to do a certain processing, like every other banks were doing the same. So while it's a risk, it's also an opportunity for them to have dramatic cost savings, and I'll come back to that.

And the most exciting thing for me and for us as a firm, because -- I've learned one thing over the past 2 years, I thought I was not only going to meet a very efficient organization in FIS, I've met brilliant minds in innovation. This company had been able to master onetime efficiency, but also to really focus on innovation. And banking everywhere is what it's going to be all about. So -- and we could have a debate. The topic of debate: Are the telcos going to win? Are the new entrants going to win? I would argue that traditional banks today with the data they have, they might as well -- using partners like us, we've given them a platform where they can bank everywhere, could be the winners. But they need to act. And as a result of that, they need to partner to do so, but there's all other stuff going on in the data mining as a result of that.

The last opportunity for banks is bank transparency and security. And it's a big hassle for banks, the whole security and the regulation. At the same time, this is something they know and they are starting to master. So for every new entry in the market, it's going to be much harder, and it's an opportunity for them to actually clean up and rethink how they do a better job in transparency and security.

So all these topics basically allow, I believe, for a healthy market for a company like ours. But having said that, the math just doesn't work. This is, I think, very powerful statistic. If you take all of the expense of all the operation technology around the world, in financial services, they are spending $2.5 trillion, $2.5 trillion in that business. So I believe, relative to that, if you want to link that their return on equity, they will never get to a sustainable 15%. And you and anybody else will not invest in banks when their return on equity is not 15%.

So we did the math, assuming there's a slight decline in fees on financial services, which is going to happen because some of these stuff -- these things aren't going away, they need to take about $800 billion out of the system. That means that a large institution, which probably you're part of, needs to take out -- if you spend $3 billion on IT, you probably have to take out $1.5 billion or $2 billion. So it's really dramatic.

So I'm going to try to explain a little bit the trends that is no longer, "Let's put some people offshore. Let's do some funny stuff there. Let's build a couple of branches there." That's not going to cut it. And the fundamentals of an organization, the fundamentals of an industry is all about return on equity, as I'm sure you know.

But on top of that, and that's a very interesting part, it's not about cost cutting. It's about, as I just said, how -- what's the future of that bank? Are we going to get attacked by new entrants? And how are we going to make sure we have fee business coming our way that is profitable? So the answers are you have to cut cost dramatically, and you have to reinvent yourself.

And I know some of the banks have been on the offense already. But the majority of the banks need to think through how they can be specialized, will they work on the retirees, will they go for the younger generation, will they go more specialized in a local area, will they move on into corporate side. So it's very important you have a specialization in the organization. And on top of that, I think they need to expand their reliability and predictability of services.

And the most overused word at the World Economic Forum a couple of weeks ago, but the most important word that exists is trust. One of the things they have to start thinking about is how they can rebuild the trust, and make sure that they can lock in their clients. So they have to do all that, while reducing $800 billion, while making sure they're in profitable business.

So I would argue there's a lot to be done, and they need very strong partners for that. So what is the world going to look like to the man who said to me, "You guys are good to be bigger. We're going to get smaller." It's the only way to get the $800 billion. Because nobody was sleeping at the wheel as the CIO of any organization. These numbers are no longer, "Let's reduce by 10%, by 15%." Some banks need to reduce by 50%, 60%, to 70% their operational cost. And the only way to do it is to go from traditional outsourcing, which I showed we have today, so there's parts of their profiting that's already outsourced, is to go the extra mile, to go into product management and even to go into the front end to outsource.

This is good news for us. It's actually good news for banks because they can get back to their return on equity, and they can focus on what is really their specialization. It's bad news for some of our competitors, and I'll talk about that later. This is complicated stuff. This is not about taking some IT specialist -- or operations specialist, take him out of New York and put him in Bangalore. This is about fundamentally understanding and having the assets to serve your client on a one-to-many relationships.

And when I say one to many, I mean we have to create factories, and it's nothing different from what happened in textiles in the 1800s, in the automotive in the 1950s or what's happened to technology in 19 -- in the beginning of -- a couple of -- 20, 30 years ago. It's really all about the industrialization, and it's a very heavy word. And for those who are interested, there are some papers at the back to read through, the industrialization of financial services. In other words, we have to go away from doing everything yourself in the bank. And this will be an evolution, so today we have a great foundation. But 7 years from now, you'll see a full decomposition of what I call the value chain of financial services, and I think it's a massive opportunity for us as an organization.

It used to be that you outsource only around the bank, and Gary will talk about it. We have just won a very significant changed bank outsourcing, and it's pretty unique. So for the first time, actually I would say, in North America, on Wall Street, one of the largest Wall Street banks, and you have to judge who that is, have decided to outsource its change function to us. So we, as an organization, are going to manage them through change. Instead of them managing the change, we'll do it for them. So in other words, they understood that it's one thing to outsource certain things. But more and more, you have to outsource to save the bank opportunity of the business, which is a great thing.

So if you kind of think about it, I'm looking at this as I'm going to want to either invest or buy more stock of FIS, what does it mean for FIS? The bottom line is, not a lot of people have the capability to do this. So let me try to tell you what actually it takes, first of all, to be in that game, which, I think, again, is a very significant opportunity for us as an organization. First, breadth of solutions. It used to be a hobby of banks to sort of buy something, a nice widget there and buy something there and do everything themselves.

More and more, you're seeing that in this equation, where you're really talking about an industrialization, it is absolutely impossible to just choose 1, 2, 3, 4, 5 vendors. So in order to play in that game that I just talked about, it's all about breadth of solution, and Gary will talk about it. Second to none, FIS has a great breadth of solution, so I would say a tick in the box.

The second one is global scale. And the business that was built by Mark in international and the way we are dealing with clients today is unprecedented. And it's a necessity. As much as I respect some of the competitors Gary put on the board, if you will not act globally in a strong way, you don't -- you can't follow your clients.

And I don't want to be -- if you look at North America, it is what it is. But you look at the rest of the world, there's a lot of stuff happening. And everybody says, "Oh, my god, Europe, exposure to Europe." Let me be specific, Europe, the euro is there. Mario Draghi and the team have said, "We're going to build a European union for banks" That is a massive opportunity for consolidation. So as a result of that, you need to be able to be in Europe and act. Even if it's a North American bank that wants to come into Europe or a North America one that comes into Asia or Asia that's expanding, so global scale is fundamental, and that's another great tick in the box. I mean, I was so overwhelmed by the kind of depth and capably FIS has globally that Mark has built over the years.

And last but not least, some people say you can't bring efficiency and innovation in the same room. Because efficiency is all about, "Let's make sure the machine is running on time", innovation is questioning why you run the machines on time. The real ability between those 2 is fundamental. And you'll see it in the topic tables, we've been able to marry both. And Gary has done a great job in sort of making sure that on the one hand, he has factories doing what they need to do. And he gives space, and he allows us and other people to create innovation within the organization. But it's -- innovation is what's going to that out of this, I would say, challenge as a result and certainly, not just pure efficiency and cost cutting.

So summary, although you might wonder if financial services will ever be the same, I can assure you somebody always talks about a tipping point. And the message is there, it's impossible to continue the way we continue and as we get the massive opportunities for us as an organization. And I hope you look forward, as I do, to see our continuing, I would say, delivery on these amazing opportunities.

Thank you. Gary?

Gary A. Norcross

Thanks, Rob. So with that as a background, we'll take an $800 billion opportunity, and we'll try to deploy against that. So we're excited actually about the trends. We're excited about -- when we think about my first section, where we established, what we would argue is the most robust foundation in the industry.

We're very excited about our position that we have to be able to take care of some of these very, very real trends. So in this section, I'd really like to talk about our global execution. And I want you to think through these 4 key growth drivers, and I want to talk about each of these. So when we think about 2013, 2014, 2015, when Mike comes in -- up and talks about our guidance, I want to you to think through these growth drivers that we're focused on each and every day and how we can execute against these.

One, as Rob talked about, to capitalize on the demand for outsourcing. Now outsourcing is a much broader term than as Rob describes, the factory running on time where we see outsourcing going is that is just a small component of it. Frankly, we see that growing into transformative services, professional services, et cetera, and I'll talk more about that later in the presentation. How do we expand wallet share? Another key growth driver for us is we have to continue to grow our sales engines, up 27% over last year. The year prior, it was a record year as well. How do we make 2013 a successful year that's bigger than 2012? And frankly, we'd see that in our pipeline and are excited about those opportunities. How do we develop new innovative products? How do we take that innovation and feed those 800-plus sales resources in that go-to-market strategy, and how do we drive real differentiating value for our clients and continue to grow the business? And then finally, a lot of people in the room will ask me, "How are you going to continue to get margin expansion? How are you going to get 30 to 50 basis points or whatever the number is?" And I want to talk about the things we think about, and how we feel very confident that we can be able to execute on that.

So with that, let's get into the capitalizing on demand for outsourcing. Celent has actually come out and said between 2012 and 2015. External spend, so spend IT organizations or financial institutions are going to have what third-party providers is going to grow by 18%. So we feel very bullish that the fact that we even have third-party research firms coming out and seeing this trend towards outsourcing. But when we think about it, like I talked earlier, we think around the markets that we serve. So when this industry started, everybody built their products in-house. I mean, they just built it themselves. Even community institutions and regional banks at the time built it themselves. What we've seen is every market, due to the trends Rob discussed, every single market has moved faster through this paradigm. So last year, we talked about really institution, small institutions, they're fully outsourcing everything today. When you think about large institutions greater than 10, they're moving through application outsourcing, now starting to look to solution outsourcing. And then even international, which never did anything outsourcing in the last 3 or 4 years, we've seen this huge trend. We clearly see the future of this expediting. In fact, I want to give a couple of examples that we -- that Rob mentioned in going to some details of what is driving these banks to actually -- if you remember, his diagram that showed 3 and 7 years out projections to describe how some of these banks are already in the 7-year position. So they're really early adopters of these transformations.

The first example I want to give you on that is Webster Bank. This is a great example for us, they're about $20 billion institution, great customer of ours. They had outsourced their core banking with us sometime ago. They had licensed some of our product capabilities and ran them in-house. They actually developed a number of their software solutions themselves. They had developed a bill payment platform. They had developed some other middle-ware products. They had licensed third-party solutions to drive some of their payment capabilities. And then finally, on an in-house basis, they were managing all of their infrastructure. So what they would have is one would argue a very complex environment. This is a great example where I met with the president and we talked about some of their challenges, and the very first thing we did was, say, look let's not try to come up with the answers, let's engage Capco. So we took Capco, and we actually engaged them into Webster for a transformational study. They executed on that study. They worked with their team, and the results of that are significant. What came out of that was a willingness to actually deploy many of these products and services to FIS. So not only did we extend our current core banking outsourcing agreement, we also are going to take over all their infrastructure services, their voice, their server and desktop, their network services, their expanded payment offerings. We're going to guarantee the movement onto our leveraged scale of our products and services. The advantage to us between 2012, 2015, our revenue is going to grow by more than 50% at very, very good margins. The advantage to Webster is they are actually going to see substantial cost savings. But more importantly, the result of that by 2015 is they're going to have a much simpler, fully-leveraged, deployable benefit to their end customer. So they're going to be able to compete more effectively in the market, because as you could imagine, them trying to keep that complex system in sync, they needed to be focused on banking with their clients, not trying to focus on how to drive the technology platform. So a great example of this 3- to 7-year vision here today in North America in a $20 billion bank.

The other example that we signed in Q4 was the example Rob talked about a global financial institution. Let me give you a little more insight in that. As you work up into the largest institutions in the world, they make the Webster example look simple, right, due to the level of their complexity. And if you think about what goes on in these global financial institutions just like in every financial institutions, one of the most complex areas in this institution is really their change sourcing function. And what that means is how do I get new products launched, how do I get my systems updated, how do I get the latest technology installed? And that is a very cumbersome process due to the legacy environments exist in those institutions.

Once again, Capco -- which I think both of these examples just further cements why we did this transaction, Capco engaged in a consulting exercise to understand what was going on to try to give them recommendations to improve that because their speed to market was just too slow and their costs were just way too high. Through that interaction, what the result was, was to come back and say let's outsource that to FIS and Capco. Let's have a long-term engagement, where we'll take that process. As you would expect, a company our size, we're pretty good at change sourcing, that's what we do for a living. So how do we take our capabilities, our intellectual property, our intellectual capabilities and deploy it against that institution over a long period of time, drive cost savings for the institution, but more importantly drive a much faster speed to market. So 2 great examples that I think bring relevance to where we see the industry going. And there's countless examples of that, that we accomplished in 2012 alone.

So if you think about the demand for outsourced cap lines, the other big thing is how are we going to expand share? And we have to focus on these 4 criteria when we talk about expanding share. We talked about our long-standing client relationships. But our contracts, you might not realize, are anywhere from 3, 5 and 7 years in length for an average of around 5 years, but we have very, very long-term contracts. We have multiple solutions deployed in our institutions, and we don't run those contracts coterminously. So it's a very sticky relationship. Most of our contracts have some type of escalator, some type of cost-of-living adjustment in them, and they not only adjust off that, adjust off unit prices. So very, very long, detailed reoccurring revenues. And so it's our ability to deploy against those that we can bring the next product, the next solution to help them, our clients, as they do more business with FIS, to lower their overall cost, to improve their go to market, and obviously for us to drive our revenue and profits.

I think one of the best ways to look at expanding share is just look at the results historically. And what we're seeing with our pipeline are these results are going to continue. Rob talked a little bit about Europe. I talked about Europe in some of my opening comments. The European market is performing very, very well for us. We're deploying both core banking and payments. We are having a lot of services components in Europe and a lot of consulting, especially with the Capco brand, and we've seen tremendous growth. Obviously, some of that growth in 2010 was augmented by Capco coming onto the team. But if you look at Europe, we feel very confident, given our pipeline, very confident with the results we've had year-to-date that we're going to be very consistent over last year's performance. So we're going to see good solid growth in Europe.

When we think about Asia Pacific, where we deploy core banking and payments and also services, we have built this entire business organically. And over the last 3 years, the compound annual growth rate has been 14%. That growth rate is going to accelerate. When you take a look at the India ATM contract alone, over the next several years, that is going to ramp up significantly. So we're going to see very strong growth. We've seen strong growth in Asia historically. We're going to see even stronger growth in Asia in the future. And the pipeline, once again, is very robust in that country. I'm scheduled to actually go meet with our -- one of our newest clients that we just signed in Vietnam in a couple of weeks, Vietinbank. And when you look at that capabilities, we're already talking about what additional products and services we can bring to that market even before we got the first big contract implemented.

Latin America, you guys know the Brazil story very well. It's been a great story for us. But under Mark's leadership, we made a change in management in Latin America over the last several years. Last year, we saw the tipping point for Latin America outside of Brazil. We saw a very solid growth. Our Latin America is growing 16% over the last 3 years, that's accelerating. We've got a pipeline now around that management team, executing in other countries outside of Brazil. Brazil is going to continue with its strength, but we're now executing in other countries out in Latin America. So we're very excited about the historical success, but also the pipeline justifying the future expansion.

Also our global results continue to grow as well. These are real trends. Between 2010 to 2012, we've seen a record number of contracts signed, and we saw a record in '11 over '10. We've seen a record in '12 over '11. We talked about in this morning's earnings script, our larger deals, which confirms this desire for banks to transform, this desire for banks to offload services around product are growing. The number of deals last year greater than $25 million were 40% compared to 2010, which were 20%. And then when you look at our global CV, with 27% growth. And this year, we're entering 2013 with the largest pipeline we've had in the history of this company. So we're very confident when we look at 2013 and very excited in the years out.

When you look at the top 25 clients, you remember I talked about you have to have credibility in the large financial institution space, and we don't believe credibility is driven through a monoline product. You have to have credibility in the large financial institution space and international space to compete, and I think this slide sums it up pretty well. If you look at our top 25 clients, the growth rate in revenue from 2010 to 2012 is 23%, and 18 out of top 25 grew by more than 5% in the last 2 years. So what that tells us is we have credibility in those spaces. We're able to bring more and more product, more and more service to those customers.

So finally, the key to keeping that going, and Rob talked about it, the single biggest key is how do we innovate. And some of us, I think, were guilty about not talking enough about our innovation. We tend to like to talk about our results. And but one of the things you'll realize as being the #1 provider in the FinTech space, we believe we're also the #1 innovator in the FinTech space.

Last year, we talked about this discipline we have around managing our products through a product maturity life cycle. Troy Bradley, our Chief Technology Officer, is not here today, but one of his jobs of many is to work with all of our development and forces worldwide and made sure that the products and services were placed in the appropriate place on this grid. He further made sure that we're making investments that are going to drive our growth. And so every year, we have a very fundamental discipline of taking and redeploying investment to hopefully innovative solutions that can drive our growth. But if not, we'll let it drop right to the bottom line. We're not going to spend money on a very mature established solution that has no future growth but just great foundation in financial institutions. And the majority of our revenue does fit in an established solution section which, as I said, provides that foundation for us to cross sell and upsell.

But when we start thinking about innovation, the area of emerging solutions, this is really an area where we're building internally, and we talked about this. You're going to see it at the topic tables later this morning, but you're going to see the level of innovation that we're driving, and the ability to cross sell that across our base is incredible. Our reach is incredible, and our ability to cross sell those and drive revenue is very important. So we have stuff like next-generation core, integrated channels, integrated fraud.

When you think about early-stage solutions, this is where, every now and then we'll do some internal investment here. This is really way-out-there stuff that we're not sure where it's going to end up. The end foundry relationship started here. We started here. We built it over time. We built up to 22% ownership in that company, and now that we see that it's moved up to really an emerging category, where we see how to monetize mobile and how to mobile enabler of our solutions. The adoption is there. We're buying the entire company. What's interesting for most people they don't realize, this is driving over $900 million of revenue each and every year into this company, and it's growing not to steal a punchline -- from a later side -- it is growing 2x our entire company's -- rate. So from a product vertical, this innovation is really pushing the FIS engine.

But let's talk about some of our early-stage solutions that you'll see at the topic tables today. PayNet is a great solution. PayNet was actually born internally out of internal need. Neil Marcous, sitting in the back of the room, he runs our NYCE Network. He's also been a part of building out this PayNet infrastructure. We had an internal need. we process a lot of checks at the point of sale. One of our exposures were how to settle checks real time to minimize our risk and fraud, and that's really how the idea of PayNet came up. But as we started building that and using it internally, what we realized is how do we go push that out to our customers and is there any value in our customers? I'll tell you, the response from our client base has been overwhelming. What clients are looking for is a real-time means to settle any payment. They want it simple. They've got to lower; their costs. And based on it, having real time, it allows them to help manage their risk. So when you think about what PayNet fits, when you think about ACH, it's low cost and slow, right? But it is low cost. When you think about a wire, very expensive, but it is very fast. And when you think about a check, it's very expensive, and it's also slow. So PayNet meets all of these needs and drives a low-cost, real-time alternative at very, very fast response times. But, as I said, this is already generating real results. We announced it last quarter, we're already processing 400,000 transactions a quarter. We already have more than 170 financial institutions participating, and we have 0.5 million DDA account. That's in a little over 4 months.

So if you think about where we're going, some of the guys wanted me to give you projections of where PayNet was going, it's a little too unrealistic. I like that they're reaching. But this is a big growth area for us because it drives real client benefits, it's simple, and it lowers their risk exposures for transactions, and we're going to see huge demand on that.

As we started building the other products, what we realized is we needed to build a next-generation P2P platform. And so as we've started building that out, we announced yesterday PeoplePay, we're a better environment to clear that than through PayNet, right, because obviously, we've got other competitors out there offering P2P products. They're clearing through ACH. That's a 3-day lag period. There's not a lot of interaction in P2P that someone wants to take over 3 days. Also, we built a next-generation solution. We've been in the P2P business. We have over 600 clients in our first generation. We took a combination of internally developed stuff, some third-party stuff, and it was like a lot of stuff in the market. What we backed away from is that [indiscernible] said, how do we actually take this to the next level? How do you drive it to any checking account, any prepay, any gift card? How do you run it through mobile, right? How do you settle it real time? And what you're going to see today is this exists today, it's not a future roadmap item. This is fully deployed. We've piloted it with a number of our clients. The response from our clients have been phenomenal. The team did a great job building out the solution. And really the pipeline is extremely full to bring onto this product offering. As I said, you'll see it later today.

We also talked a lot about mobile. Now I should mention, these stats do not represent the mFoundry acquisition. So it's important to understand that they're just going to get that much bigger. But if you look and you look at iPay, they projected that U.S. mobile banking users by 2016 are going to grow at about 30% compounded annual growth rate. We've been doing a little better than that. Since 2010, our growth rate has been 183%. It includes more than 1/3 of the top 50 banks. Today, we have over 3 million users on our mobile capabilities even prior to closing on the mFoundry acquisition.

What's great about this opportunity from an innovation standpoint? And Susan Hawkins [ph] and her team are here, and they'll be at the topic tables, is we have barely scratched the surface of our client base. We've only sold it to 17% of our core banking clients. We've sold it to almost none of our card-based 3%, and for those in audience who know, we are the dominant provider in cards. We have over 85 million debit cards in production. We have over 80 million credit cards worldwide. We're the largest processor in prepaid in the industry with most people arguing somewhere around 60% market share on our prepaid platforms. This is a huge opportunity for us, and this is even prior to us bringing on mFoundry, which will obviously be the mobile enablement platform for all of our solutions going forward.

So finally, when you think about innovation, as I said, 15% of our revenue growing 2 times our company for compounded annual growth rate of greater than 10% dating back to 2009. We have a lot more things in the hopper. We thought we'd save it for a later day, but you just see the level of innovation that we're driving into our base. And in every point, it starts with how do we deploy it across our client base and how do we leverage our scale worldwide that we have today, and that's why you see the results that we're talking about today.

So with that, let's convert to our optimizing performance. We announced a new strategy last year. We announced that we were moving from acquiring and integrating to truly optimizing performance. Some of us felt like we've been doing that since 2009. We haven't done a big acquisition in 2009, and we consistently got significant margin expansion, significant growth. But I do think it's been very, very healthy last year for us to redirect and refocus on how we're going to run the company going forward. And Mike will talk about, when he comes up, talk about our future and where we're projected. But a lot of people ask me, how are we going to get the to 30 to 50 basis points? I can tell you, without question, this team, I talked about Bragner [ph] our greatest team in the industry, we don't wake up every morning worrying about how we're going to get margin expansion. It's built into our model. It's the easiest way to describe it. It's pretty much guaranteed if we execute on our revenue objectives, we're going to get our profit objectives. We're going to get our margin expansion. But I will tell you every single year when we go through the planning process, we think about a lot of levers that helps us guarantee that, and I try to boil them down in a couple of discrete groupings. But obviously, our new sales lift, we want to make sure that our sales team are cross-selling and upselling our existing capabilities or our future innovation, and that comes on in very highly leveraged environments and comes on at very high margins.

Our customer base, I talked about the long-term nature of it, we want our clients growing. And the good news is a lot of our clients are growing. And as they grow, their transactions, their accounts, high revenue grows, and it comes on at very high margins. I talked about what Troy Bradley does in evaluating across our 3 tiers of maturity around product maturity, and that does 2 things: It frees up money for us to deploy against innovation, which is our first choice; or if we can find something that we need to innovate that can help grow our company, then it deploys right to the bottom line, very, very consistent we do it every year.

Data center consolidations. We think one of our core competencies is integrating companies. We've done it our whole career. We did it for the last decade. But we still have 30-plus data centers around the world. And Ram Chary and his team every year, their issue is you got to do it for less. You got to drive efficiencies. You got to make sure you get the scale, and, look, that's heavy lifting. We know that. But every year you see that footprint consolidate down a little further and for us to leverage more scale and ability.

And then finally, that we look at product rationalization. If you think about where our products are, I just gave you an example of PeoplePay. We had a first-generation product. We've rolled out the next generation product. We're going to quickly cross sell it through our 600 clients, but what that will allow us to do is actually shut down that first generation solution over the next several years. And therefore, it will rationalize and fall to our bottom line. So all of that -- these levers help us very easily get to the margin expansion that I know you guys and our teams look to get every year.

So to sum it up, before I turn it over to Mike, we feel we really do have a formula for success. We think we have strong market position and, hopefully, we prove that today and hopefully, we prove we're in the markets that are really growing, right? So we're in all markets, and it takes a unique product combination and unique service combinations delivered against those. But when you think of large financial institutions, you think of international marketplace, no one's better positioned.

We have favorable market dynamics that Rob talked about, $800 billion of cost takeouts is going to need to occur. FIS is in the absolute best position to drive against that and get those costs out for the global financial institutions. Our focus on innovation, it's very deliberate. We innovate around things that actually drive revenue and profit and drive differentiation for our clients in the market.

And then finally, we think we have very, very strong proven execution. I talked about this last year, but there are no such thing as failed FIS projects in this world today. And if you partner with FIS, you're going to get your project in and you're going to get -- and it's going to be successful, and that's something that we put our reputation up every single day that we go to work. And all of these things combined, we believe, really drives an industry-leading performance.

So with that, I want to ask Mike to come up and talk about the financials, and then we'll rejoin for the Q&A.

Michael D. Hayford

Thanks, Gary. I'm going to try to hit on 3 things. I'll spend a little time on the business model. Obviously, Frank and Gary hit kind of the highlights how we differentiate FIS and how our model operates. I'll just try to connect that with the financials on a go-forward basis. I'll talk to you some of the financial targets, specifically for the outlook for '13, where we think we'll be. And then I'll come back to -- with the generation of cash, how we expect to deploy it going forward.

I've used this slide before, I think, the exact same slide last -- I think it's important to repeat. If you look at our business and you look at our company, Gary did a very nice job of explaining how, even in our space, I think there's quite a differentiation in how you can go to market and how you can be a resilient organization. But we look at our revenue stream and you look at, even in a very difficult environment like we went through in '08, '09, our revenues held up very well. It's very recurring, meaning we don't have to go out and resell 100% every year. We resell a portion of that, stable and the other word I've added, diversified. If you look at our mix of geographies, you look at our mix of size of institution to go after. We're in the accretive [ph] marketplace. We're in the large, big market, which we think is a higher growth market and we're in the international markets going around the globe, which has also a much higher growth opportunity for us. The ability to expand margin -- Gary went through some of the levers. I think the gist of his statement there is there are no longer low-hanging fruit in our organization. We went through a span over the last 4 years We bumped up our margin by 550 basis points. When we go out there today, you have to actually take specific action, was consolidated data center, consolidated product platforms to become more efficient, but that worked in the size and scale of our organization. The team knows how to do the work, and we do it each year. So we're very comfortable with the ability to expand margin, but it is specific targeted actions that we have to take.

The ability to consistently grow EPS. We talked about some of the history in the last 5 years. We'll talk about where we ended up in '12, but we have a model we think we can continue to drive 12% to 15% EPS growth. We've done that in the recent past. We actually did that last year, and we have a strong belief we can continue to do that going forward. And then with that strong cash generation, obviously, you saw the shift in capital allocation strategy last year when we refocused on organic growth as opposed to M&A driven growth. With that, came a lot of cash to redeploy back into our shareholder. So we'll talk about how we're going to do that going forward.

Our revenue streams on the left-hand side, again, highly recurring revenues, just kind of the mix. So processing and maintenance, which at the long-term generally, 5- to 7-year contracted revenue streams, that big pie is about 80% of the total. We split professional services into 2 pieces. We have what we call recurring professional services. And that's basically we have clients that we're in supporting, and each year we do more and more work. So we're not actually out doing specific project that comes to an end but rather we've got people embedded at clients that work -- tends to recur, tends to look like some of the transaction-based recurring revenue streams. But it gets broken out as professional Services. Those combined -- they're about 90%. So you'd say a recurring portion of our stream is around 90%.

On the right-hand side, just to show you the base underlying business continues to grow the processing. The long-term outsourcing contracts Gary talked about. The maintenance streams tied to our software. Our software business is not growing. Gary talked international as a very good example. That business is transitioning, people doing more outsourcing, signing more long-term contracts, less of a quarter-to-quarter software business. Software for us is about 2% of our overall annual fees on the license side.

Even our professional services revenue tends to be mission-critical. So we treat it as non -- not recurring, as we show you the big pie. But you can see that even in a window where banks were really fighting for survival at the end of '08 into '09, we still maintained a pretty high percentage of our professional services fees. What that speaks to is we're not there doing the next project at new capability. We do those things. But quite frankly, a lot of the work we're doing is to operate and run, turn on the lights, add the feature functions to make this -- to complete, it's not a luxury. It's a necessity in terms of the bank.

You can see the purple slice adding on, which is the Capco team. Again, what Capco is doing is deploying knowledge. They're deploying knowledge in the financial industry space. I wouldn't look at what we do in the Capco team similar to what some of the other consulting groups do. We're leveraging in deploying knowledge in financial space. So we talk about banks. Rob did a good job of sharing the gist of it, bankers aren't waiting for the end of this current downturn cycle, where good old days are going to come back. The banks that survived realized the good old days are gone, and they have to change and adjust as a bank. What the Capco team does is help them figure out how they're going to transform. So their business, as Rob shared, is doing extremely well right now simply because banks have to find a way to change their business model.

Professional services, again, it's a very high recurring piece of the pie. Anthony and his teams are out there deployed, and they're doing enhancements, upgrades, maintenance, support, everything for the client really outsource, but it is PSO work for us.

And you see in the piece, that revenue stream, the PSO has been growing about 18%. So that's very solid growth. Particularly last year, we had good growth. So let's go back -- and it's a track record over the last 5 years. Revenue at 15% CAGR.

EBITDA, so you can see, we took some big step functions. The biggest step function, quite frankly, was related to the merger of FIS and Metavante where we did have a lot of overlap, we did have a lot of low-hanging fruit. We took out $260 million of EBITDA in a very structured, organized fashion. So we got a pretty big improvement, 550 basis points in the last 5 years of margin improvement. So going forward, again, it's more kind of singles every year going out there and doing discrete actions and driving some more savings to get that EBITDA to expand.

EPS growth in the last 4-year CAGR, 14%. So consistently driving earnings per share growth, which is probably the most important measure on this page given that we use shares to do Metavante acquisition. So the share count is in there. So that's pure ability to execute and drive earnings growth.

This is a slide that we've shared last year, so I think we've all had this in our deck 3 to 4 times, and if you meet with us, we obviously, put in our deck every -- kind of we go down the road. We'll keep putting it in the deck. I think, it's important for people to understand, as Gary said, inside the company, we haven't done a large deal since 2009. I think the marketplace had expected us to go and do another large deal. We made it very clear last year. So a very discrete line in the sand last February at Investor Day that we are not an M&A company. We are an organic growth company. We're focused on building product. We're focused on acquiring tuck-ins. We're focused on building value for clients and growing in that fashion. And as you saw from the '12 results, I think people looked at that and said, "You really have a model to grow organically." And obviously, just with 5% organic growth last year, the ability to expand margins, 60 points, driving EPS growth of 13% and then being able to give back not only managed down our debt, as we said, we are going to do and get to 2.5x, but also -- then giving back a large chunk of capital to our shareholder base.

So inside, what's on the financial targets? Again, last year, we laid out the targets and we laid them out on the context of -- we used to have to say we had long-range targets. We came out of the crisis in '09, '10 saying we're kind of rebuilding confidence in the marketplace, and we went from flat growth of 3% to 5%. But we said in the foreseeable future, we put a window of '12, 2012 to 2015, in that 4-year span, here's what we think you should expect: 4% to 7% on the top line, 30 to 50 basis point margin expansion, 12% to 15% EPS CAGR. Operating cash flow, cumulative of $5 billion, so about $1.2 billion pre-CapEx per year; and then debt to EBITDA, in that 2 to 2.5 range. So those are our guidelines outlook for the 4-year window. And as you can see in 2012, we really executed on all those guidelines that we set forth.

As we look at 2013, starting with organic revenue growth. Our organic revenue growth expectation for '13 is 3% to 5%. And then our reported revenue growth for 4% to 6%. We expect a slight headwind on currency. We've got a couple -- we had, obviously, the mFoundry deal built in there. That drives a little bit higher revenue. Some of the other deals we did last year was in a pop-up reported revenue, higher than organic.

Organic revenue 3% to 5% does include -- obviously, we talked about the M&I impact the deal [ph] consolidation. We talked about having addressed the EBITDA impact in 2013, but we still have a revenue impact, and so that's about 100 basis points. So without M&I, we'll be 4% to 6% range, very similar to what we saw in the last 2 years in '11 and '12.

Margin expansion, again, 30 to 50 basis points. I think you'll see us continue to focus on that range. Last year, we did 60. We had a few things coming out of '11. We had spent some money that we had an opportunity in '12 to get a little bit greater margin expansion, but you should expect 30 to 50 in '13, which is consistent with our mid-term outlook.

And then EPS, $2.77 to $2.87. In our EPS, obviously, we got the upgrade in January. So we took in account what we anticipate for overall interests. For the year, we obviously, we announced the mFoundry deal. So mFoundry is slightly diluted, but that's in those numbers. So those numbers, as we sit here today, are our expectations for '13.

And then free cash flow conversion, I mean, this is what we tell you every year. Adjusted net earnings, last year, we had a little bit more pop. We had some distinct advantage mostly came through on the tax side. We had some benefits of tax planning. We also had some -- based on some of the option exercise, we had some benefit on cash taxes, which popped up our conversion, obviously, last year was higher than net earnings. And then going forward, you should expect to see it come back pretty close from that earnings and continue to see earnings convert 100% into cash.

Let's spend just a little bit of time on the capital allocation. You can see the cash flow, and those of who that follow us for a number of years, the chart -- if I went back prior to '08 would not look so pretty. We used to have earnings without cash. The team has put a lot of focus on cash, and you can see for the last 3, 4 years, we have done an outstanding job of converting that earnings into free cash flow.

This is -- so capital allocation is going to be same story as we've been telling you for the last 12 months, so there's no change to the overall practice. We did have a very strong focus on the balance sheet, getting our debt levels paid down, getting into investment grade. Again, we've got 2 out of 3 rating agencies, which have us rated at investment-grades right now -- at investment-grade. So we think we've done a pretty good job on the balance sheet side, but continue to focus on managing the balance sheet. We also continue to focus on investing for growth. So growth investment, as you can see the examples Gary went through, not only doing some small acquisitions, which we did 3 small ones last year. We've announced the mFoundry this year. But also putting money back to work. So putting the CapEx dollar back to work and building our products that we can leverage throughout our customers. So innovating from inside FIS and creating new product capabilities we can take to market. So we'll always continue to look at what's our best use of money. So to the extent the teams come forward with reinvestment dollars, we're generally pretty generous with that.

And then lastly, return capital to shareholders. We shifted the strategy. We had a lot of cash that historically was used to go do deals. We, obviously, bumped up our dividend last year from the fourfold increase from $0.20 to $0.80. You saw this morning, we bumped it up 10%, so it's a $0.22 a quarter. That was approved by the board. And also we'll continue to do share repurchases. Again, we've laid out about a $250 million kind of the baseline. You've seen us do more than that the last couple of years. And depending on whether we use dollars to do more deals, we'll buy back more shares.

The balance sheet. You can see the numbers deleveraging, we're down to $4.4 billion of total debt. we've also shifted the mix. At one point, we were very, very high, 100% bank debt. We're now about 45% bonds, so fixed rate debt stretched out 7 and 10 years. We as I mentioned before in the early presentation, we paid out -- we had a TLA note that was due in 2014, that was coming current this quarter. We paid that off, it was last -- some piece of secured debt that's released all the -- that with the upgrade, made our debt unsecured, so that was the last kind of component there. So we don't have any near-term financing needs. We have a 4.9% weighted average in terms of overall debt at $4.4 billion. Investing for growth, again, we will always take money and reinvest in product to maintain our customer base, as well to invest and innovate for growth. You can see this bar, the total spend went up, that was once we combine with Metavante but the percent of revenues actually go down, so we're actually spending an absolute more dollar amount. We've got fewer platforms to support, so the dollars per platform, actually, getting higher amounts, so we can continue to improve our product. But as a percent of total revenue because of scale and leverage, we're only spending 5% of our dollars.

Just to kind of reemphasize, again, we haven't really done deal since '09. '09 was Metavante transaction. '10, obviously, was Capco, which is the bulk of that $400 million. So in the last 3 years, we've done 7 deals, less than $500 million that we've deployed doing acquisitions. We've talked -- in that range, when you look, I don't have the pie this year, we showed the pie last year around capital reinvestment, dividend around buyback and then M&A, and you should expect around $150 million to $250 million is kind of the M&A range that you might see us do, probably, not much outside that bandwidth unless we saw something very strategic. But that's kind of what you've seen in the last 3 years. The focus on what we're doing. Gary talked about the reach and the distribution. If we can get more products to put into that channel, we have a very high degree of confidence that we can cross sell and get a much higher return out of that product once we get it into our pipeline. So that's really the focus on M&A, is to get those products, get them in the pipeline, get them in the quivers of the account teams and let them cross sell.

Returning capital to shareholders, again, with the announcement last year, also we have a bunch of capital, a bunch of cash freed up, so you're going to see the shift -- this is the dividend policy, so back to pre-2012. 2012, obviously, about $250 million. This shift is going to be slightly higher with the increase that we just announced.

This is just the share count. So '10, '11, '12 you can see the average share count going from 352 to 307 to 298. We just add it together. We had a lot of options exercised last year, so you probably saw a lot of shares come through. We used some of the proceeds from that to take some of that dilution back out, but just thought we'd share. So our overhanging of options cut in half, so going forward we would not expect to see the level of option exercise that you saw in '12. So we think that's, obviously, a very good boding forward in terms of the overhang from options.

Frank went through these slides, but I thought I'll share these again. I think, this is a pretty telling statement. So if you look at -- in this -- so the 18%, it's a little bit FIS made-up number, so it's 16% 5-year CAGR and then we added on top of that a 2.3% yield on our dividend. So if you look at FIS, you get 18% pro forma returns, so to speak, compared to Pfizer or Jack, S&P 500 or TSYS. So clearly, in the last 5 years, we've outperformed our peer group when it comes to actually returning -- performance returns. The marketplace though has discounted us. We just popped up about S&P 500 towards end of last year, but we're still at discount to Pfizer and obviously, TSYS and Jack Henry. So if you look at that, you say -- and again, our expectation going forward 12% to 15% EPS growth in the dividend that put your yield slightly over almost 2.5%. So we -- they're a little out of whack there. We think the market, and with the execution, will continue to execute quarter-to-quarter. At some point, we would expect that to catch up.

So just in summary, and Frank started with this slide again. #1 in the marketplace, what does #1 gets you? It gets you Visibility access, you can walk into any door, you can walk into any CEOs office. The guys at Capco can go to big institutions and they can sell top down. They don't have explain who FIS is. As we go into Community Banks, they know FIS, as Gary said, it's going to be there next year, 5 years, 10 years, 30 years, that's very important in today's marketplace.

High recurring revenue -- we've seen very stable operating model. You can see even in a downturn, where other companies obviously went strong, negative on the revenue, their earnings got crushed, our revenues stay flat, our earning are able to maintain and stay up. So our business model, recurring revenue model allows us to go through cycles. We think the next cycle, actually, even in our market, we don't think is going to take off. We do think the opportunity for creating value net-net, in the large institution, institutions that haven't used a leverage model in the past, need to start getting leverage on their infrastructure. That's our business. So our simple model to an institution like Webster, if you're doing it one-to-one, your prospects is going to be x. FIS is at one to many, we can take that cost structure down. And we think we'll see more and more of that going forward. The ability to generate EPS growth again going back to last 4 years, 5 years, 14%, 13% last year, very consistent EPS growth. The cash generation, being able to take those earnings, turn them into cash and then, obviously, on the far right, take that cash with a change in policy last year and give that back via dividends and share repurchase to shareholders.

With that, I'm going to have Gary and Frank join me up here. We're going to do Q&A and we'll cover, obviously, your questions from the fourth quarter earnings call, as well as anything from Investor Day deck.

Question-and-Answer Session

Mary K. Waggoner

Jamie and Jamie are going to be coming around with microphones. So if you have a question, please speak into the microphone, so that those on the webcast can hear you.

David Togut - Evercore Partners Inc., Research Division

David Togut, Evercore Partners. For example, on the fourth quarter, you mentioned like there were some fields internationally that slipped down in 4Q. Can you tell us whether signed those yet [indiscernible] a number of prospects were actually broken down?

Michael D. Hayford

Yes, I think start of the first quarter went very strong. Mark is here with that, and their team has started out very strong. Our full year, I think, was right around 9%. So we said we thought we'd be around 10%, so we're just a little short from the full year. We expect them to have strong first quarter through 2013.

David Togut - Evercore Partners Inc., Research Division

Then as a follow-up. Can you update us on Banco Bradesco, where do you stand with card processing JVs in terms of the number of cards and what do you see in the growth prospects for that?

Gary A. Norcross

Yes, it's a great business for us. Obviously, we've got a very strategic partnership with Bradesco. Actually, card volumes dipped during the economic recessions and we've seen them rebound. I mean, we sold in the last quarter about 2.2 million cards added to that platform in the last quarter. So it's back to about where it was prior to the economic recession.

Frank G. D'Angelo

It's going to make us feel pretty good. There's growth taking place within there, which was nice.

Gary A. Norcross

And keep in mind, it always had positive organic growth and never at time did we -- would we book in anything short of couple a hundred thousand cards a month. So that's -- it's had good consistent performance but it had a nice rebound in Q4.

David Togut - Evercore Partners Inc., Research Division

One final question, on your platform, the Pfizer OSI transaction, how does it impacts your business particularly in the credit union space in the U.S.?

Gary A. Norcross

Well, for us, when you look at that, obviously, as I shared earlier, there's really no, we think, poor performing providers left in the space. I'm sure Pfizer have had their reasons for the acquisition. It didn't fit within our needs. When you look at the credit union space, specifically, they're very loyal to associations and they're -- and the way they take their business or take business function is different than, say, banks and, certainly, large financial institutions. But we compete very well against them, especially, in the payment space. We don't have a real large core banking base in the credit union market. So really, we grow in the credit union market based on our payment capabilities, and we do a lot of that through our association partners like CSCU and CO-OP, and those are very strategic partners for us.

Michael D. Hayford

You have to look at -- we compete with Pfizer, we compete with OSI. When they combine, our team looks at that as an opportunity to lessen turmoil. So if you look at that, you're not getting a new competitor, you're not getting of any per se stronger. But I think, our teams are already putting together plans to go after some opportunity.

Frank G. D'Angelo

Yes. So we, clearly, see as an opportunity, as Gary was talking about. We're focused more with creating payment space and so on, so we don't see this impacting us at all. On the other hand, we really see it as an opportunity for us.

Gary A. Norcross

Yes, especially on the banking space. I mean, if you look, Open Solutions hadn't fully rationalized that BISYS acquisition. So you've got a base that's still traditionally in flux. If you talk to Jim and talk about some of the wins we had in 2012 and 2011, we had a lot of wins off that base. So to Mike's point, I mean, it's a real opportunity in the banking space, any time you get consolidation, because Pfizer's going to have to take cost out of that transaction, given the amount they paid for it. So it will be a good opportunity for us.

Frank R. Martire

David Koning.

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

Dave Koning at Baird. And I guess, my first question, just in North America, the smaller bank segment, you talked about that being, I guess, kind of moderate or slower growth than some of the more exciting places. But I think that actually grew. I looked at the last Analyst Day slides, I think, it's 39% -- and last year it was 37%, so it seems like a pretty good year there. And so I am wondering, did that mean that, did the larger banks lag a little and that just -- it means that there's kind of a bigger tail of opportunity there still or ...

Gary A. Norcross

No, I mean, what we're trying to drive is we see that market as consistent. I mean, we've had great execution. We're taking share in that market. There's really 3 providers left in that space in the less than $10 billion. You guys can figure out who that is, and so we're competing exceptionally well. We're actually in our large financial institution market seeing a lot of growth, especially, around the services component that Mike highlighted on his slide. So the message was we don't see it accelerating. We certainly see it to be consistent over last year.

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

All right, great. And my one other question, in Asia-Pacific, your employees grew pretty dramatically over the last year from about 6000 to 8000, and is that mostly serving the Asia-Pacific market? Or there's a lot of that really serving the North America?

Gary A. Norcross

A lot of it serving North America. So we talked about Ram's role in the captive world, we have -- what's nice about FIS is we've got a great blend between on and offshore, and taking advantage of that. But a lot of our offshore capabilities are growing. Our onshore are as well, but a lot of that acceleration is supporting the North American markets, supporting other markets around the world and we also are seeing great growth in Asia. So we're seeing growth due to that as well, so it's a is a combination of those, but it's more led by the captive that's seeing the most growth.

Frank G. D'Angelo

And Ron does a great job leveraging those resources across the company.

Gary A. Norcross

And that's being split between India and the Philippines.

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

Glenn Greene with Oppenheimer. I guess, the first question, I just wanted to drill down on the 27% sales growth, I think, that's an annual figure, maybe a little bit of color by the segment payments, financial international and how much capital contributed to that?

Gary A. Norcross

Yes. It's -- well, let me explain what that is. That's 27% in total contract value over the life of the agreement, and that's new contract value, so we don't disclose renewals. Jim will hate this for me. I just expect he's going to get to renewals, right. So we stay more focused on the new CV, and -- but that's spread over the average -- over the term length of the contract. It's really across the board. Capco had a good year, so Capco absolutely contributed both in the Europe and also North American numbers. Mark had a phenomenal year throughout Asia and also some signings in Latin America and Europe. And Jim have a good year. We have had a dip, as we talked about in second quarter last year, but his team rebounded very, very strong in the second half of the year, and it was across-the-board. We don't really think about it across payments and core processing quite as much. It's more about what's going on with our particular clients and where we can penetrate it.

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

All right. And then on the -- I guess you're calling them the transformational deals -- Webster and the large global investment bank, any way to sort of frame what are magnitude, size, duration of the deals? And the follow-up to that is, are you increasingly competing with offshore vendors, and do you have a comparable cost base to compete with the offshore vendors if you do that?

Gary A. Norcross

The size and scale, the large investment bank is 5 years, if memory serves, and the Webster engagement is fully extended out another 7 years. Are we competing with the large offshore vendors? Not as much as you would think. Because keep in mind, our differentiation is more around product and service on a combination. So we typically bring some type of product orientation, some kind of innovation with service and that's a real differentiator. We'd probably run in -- we have, say, we've run into Accenture more in those situations in those large deals. Frankly, when we were looking at these 2 examples, there really was not -- one was a center and one was -- there weren't a lot of options on Webster, meaning it was such a complex arrangement after we vetted through the whole process. FIS was the only company that could provide it and so...

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

It sounds like you got a pipeline...

Gary A. Norcross

We've got a very robust pipeline. I'll tell you, I tried to share it in my remarks. It's where our growth is coming. This need that Rob pointed out of reducing cost is real. And what's happening now is they have to look for companies like us, because Mike said, if you can't deploy it to many, you can't win these deals. So offshore labor arbitrage has kind of run its course. That's a one-to-one relationship. You give them to me, I can cut 40% and we're done. But that doesn't work long term. You've driven no innovation. You've driven no transformation throughout the bank. You're not delivering any the service in a different way. You're not translating any impact. It's a onetime -- it's just a onetime impact on the cost line. So we actually don't see them as competitors much.

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

And just quick final, is the mFoundry revenue and the EBITDA contribution to think about?

Frank R. Martire

mFoundry and revenue.

Michael D. Hayford

Right. I mean, the -- we're not going to share the numbers per se, the revenue numbers. But the earnings, it's a small negative headwind for us this year. But that's a deal that, in terms of strategy, owning the mobile platform, everybody's always asked over the years, where we would go in and actually deploy capital to get into some of the newer technology. We always thought mobile as critical. We had great partnership, but we want to potentially own it. So we had a great opportunity to do it. So it's kind of -- it's factored into the numbers in '13, but we do expect long-term going that's not only -- mobile is not only going to grow, but the cross-sells, the add-ons to mobile platform which we have a lot of those already, are going to be a big growth.

Frank G. D'Angelo

And the clients appreciate the fact that we own it now. They wanted to see us have control over the product and the product development.

Gary A. Norcross

But to Mike's point, the key that came out of that was those frameworks and you have to keep thinking about at FIS, we have so much breadth. Now being able to deploy that across those breadths, it's not going to be a mobile banking story or mobile payments story, that's a component of it. it's really mobile and enabling everything we do for the end consumer to have that unique experience with the financial institutions. And that is what the financial institutions really like in our vision and, actually, not even our vision which you'll see in the topic tables today. They're liking the deployment.

Unknown Analyst

Based on Rob's comments, it seems like Capco, at least for the next few years, has some really interesting opportunities. Is there a need for you to increase your investment in Capco? Or is there enough scale there that you can meet the demands?

Frank G. D'Angelo

Well, we're certainly not going to let Rob answer that question. We are increasing our investment in Capco. Capco is growing significantly, and we will continue to invest. Yes, we do see major opportunities in there. We clearly deal both with the large, obviously the large financial institutions globally and the things we could be doing for them that, clearly, 3, 4 years ago, they were not talking about doing, and now they're aggressively are having conversation with us. So as they expand, as they want our services, we will not hesitate or be shy about growing Capco.

Gary A. Norcross

We've already grown. Well, there's already more than 2,000 consultants in that group today. So we've grown it, substantially, since the acquisition.

Frank G. D'Angelo

How many did you have when we started, Rob?

Rob Heyvaert


Frank G. D'Angelo


Gary A. Norcross

700 to 2000. So we have been pushing a lot of investment in that group and it's been paying off. I mean, when you look at, really, this linkage in the combination of the transformational consulting engagements and services engagements we're getting -- we've been talking about this for some time, but it's real.

Frank G. D'Angelo

And it's working for us in North America and offshore and Europe, especially.

Unknown Analyst

And then just as a follow-up to Capco, has there been a change in the percentage of products that are sold in the Capco kind of clients or FIS products today versus when you were completely independent. What has been the trend? Has that given you an opportunity to cross sell more products?

Michael D. Hayford

They were already clients, so it's kind of hard for Jim and Marco to have those clients with relationship and relationship manager. So I don't think we've really look at it that way. We've looked at this large transformational deals, which are really the top down sales, right. So you actually start with the top, you start with ideas, you start with expertise and then you bring products in, so those are the ones we're highlighting where those are starting to yield benefits. But how many products would cross sell -- they've got all the clients, they're all intermingled, so we don't really track it that way.

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

It's Ramsey El-Assal from Jefferies. On the 390,000 pay net, quarterly pay net transactions, are those all currently peer-to-peer payments or are there other transaction categories mixed in there like e-commerce or just the law there [ph] or anything like that?

Gary A. Norcross

No, no, we're doing quite a bit of different things. I mean, we're doing -- we're driving a lot of our check authorization business transactions through that. So we're seeing a variety of transactions coming through. And as I shared in my comments, when we're talking to financial institutions, it's really hit a need in the industry. And so we're excited about that and that level of transaction is going to grow.

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

And are you speaking to merchants and have your thoughts evolved at all in terms of deploying pay net in the more disruptive capacity perhaps as an authorization network for merchants?

Gary A. Norcross

Well, right now, we're very focused on financial institutions. We're very focused on solving the financial institution needs. I mean, we've looked at a lot of alternatives. And one of the things that's exciting as we build out this technology is more opportunities present themselves. So we're certainly evaluating our options going forward.

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

Okay, one follow-up. You mentioned the dominant position in prepay. Can you describe to us a little bit the kind of prepay card categories that comprise the majority of your business? Are you heavy in government payroll, general-purpose reloadable? And also, what types of services are you providing or do you step in as the program manager or are you also just providing anything from on-boarding to processing to anything?

Gary A. Norcross

The quick answer is yes on almost all of that, once you get to program management. But we do a lot of GIFTS, a lot of GPR and we do it around the globe. We really stop, pretty much, at the program management function. We've not taken -- we've not stepped into that group. We tend to sell our services to program managers. We also, obviously, sell it to financial institutions. We do full on-boarding, full-servicing, full call center on that function, full processing, obviously, card generation as well, so all of the back offices, right up to about program managements where we stopped.

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

Okay, and that's helpful. And one quick last one. Any incremental thoughts on these as paved and how that's impacted NYCE? Is there any incremental sign that they're taking any share with that technology?

Gary A. Norcross

Well, I think Mike shared in the earnings script, actually NYCE has performed exceptionally well and we've, actually, annualized through most of the changes. And so the team has done an excellent job. We talked about it on our prior calls. We have defensive and offensive strategies to leverage our network. NYCE is a very large one and those are working. So now we continue to see, actually, good strong growth out of the NYCE network.

Unknown Analyst

How do you expect or how are you seeing your customers charging their customers for people paying mobile?

Gary A. Norcross

Well, it's up to the financial institution. And I think, that some of the struggles financial institutions have had is how to monetize some of these alternative delivery channels. I think, the best -- most people, some people are charging for it. But I would tell you, most of our clients are incenting adoption under those channels because it lowers their costs, and they're doing it by transferring their cost to a more efficient channel. We try to help them with various ways. As you would expect also on those 2 fronts, consumers are leading adoption. They're actually driving adoption a little harder than in prior channels. So when we saw the first ATM go in 30 years ago, or whatever the time frame was, banks had to spend a lot of time on educating the consumer base to get them to use it. And there was a slow adoption curve for that to take off. We're not seeing that in mobile whatsoever, and the consumers are demanding it. So right now most banks are in a hurry up mode to try to get to the functionality to offer and compete, and then they're driving adoption programs through loyalty or through various overall program characteristics to drive -- and drive further use of that.

George Mihalos

George Mihalos, Crédit Suisse. Two quick questions. In one of your slides, you mentioned that about 29% of your revenue is sourced from large North American financial institutions. Is there a way to subsegment that a little bit further in terms of the contribution from megabanks versus the regional banks? And then my other question would be just as the non-FI portfolio continues to grow, are there any margin implications with that?

Michael D. Hayford

On your first question, we had to do segments. You got the top 4 and then you got kind of rest of top 100 which is what that -- our line is at $10 billion, so we have to track that very closely. That's part of how you sell and how you build a relationship model because they buy very differently at the top than at the $10 billion regional level. The margin, you could see the non-FI we're leveraging, so we're leveraging something. A lot of that is in the retail space where we're leveraging payment technology or we're leveraging infrastructure, so leveraging data centers, leveraging offshore resources. So we're pretty careful. We'd rather not grow that if we can't grow that at decent margin. So that, actually, is not a big margin headwind for us.

Gary A. Norcross

Yes. In fact, I mean, Ron could talk about it at the break. But the reality is, we look for opportunities that leverage our existing capacity. So the beauty of that global commercial businesses is that we have excess capacity in one of our floors. We can sell to that excess capacity. It actually drives our margins and helps our margins augment. So we're not a classic commercial services provider where we're just trying to get any IT. It's led around a capacity need.

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

Pete Heckmann with Avondale Partners. I'm still not 100% clear on your 2013 revenue guidance, the difference between organic growth and total revenue growth. Can you talk a little bit more about the components? Do you include any unannounced acquisitions in that? It seems to me that revenue figure is much larger than what I would have expected from mFoundry. Do you include any termination fees, in either total revenue growth or organic revenue growth? And then talk about a little bit more just about the perceived headwind. Is that 50 basis points?

Michael D. Hayford

Yes, I wouldn't get too [indiscernible] on the reported number, so the organic number is really what we focused on, 3 to 5 and again there's 100 point headwind in there from the M&I deconversion. But the reported one has the carryover for deals we did last year and it's obviously got kind of expected when mFoundry closed, where we think that's going to be and then you got rounding. And so it's not as big of spread as it would look -- it's 100 basis point spread right now.

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

Okay. And then the issue of term fees, can you remind if there were any expected term fees and how they might [indiscernible] basis?

Michael D. Hayford

The only term fees that were called out for '13. We've got 40-ish onetime related termination/partnership fees with the M&I BMO Harris consolidation. Other than that like term fees in '12 versus '11 were fairly consistent. We don't -- I mean, the numbers are, year-over-year, very close and outside of M&I, we would expect them to be similarly close in '13 versus '12. So if we have something that is material, that shifts it above kind of comparably year-over-year we call it out like the M&I. And that term fee is going to be a little more front end loaded. So I think front end, the first 6 months, first 2 quarters will be relatively even but they will account for about 70% of the term fee and then 30% in the last 2 quarters.

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

This is Tien-Tsin Huang from JPMorgan. Just first on mFoundry, I know it's a good asset. I'm curious if that was a competitive process and what can you do differently by owning it and also how does this change, if at all, your relationship with Monetize

Gary A. Norcross

Yes. It's a great question. You know we've had a great relationship with both those companies over the years. We've had -- and the mFoundry relationship, we went down more of a consumer interaction relationship standpoint. The Monetize deployment went down from more of a payment orientation. And both of them are still very good -- Monetize is still a good partner for us and we still plan on utilizing some of those capabilities. When we bought mFoundry though, the reason why we did is we've seen more adoption really on the consumer focus, the consumer-centric model, and that's where we see everything going. So over time really mFoundry will become our mobile framework, and by owning it we're going to able to direct more of the innovation, more of the R&D towards the areas of growth we see are occurring within financial institutions and will be able to augment our customer base. So owning that asset was very important for us.

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

Will it be heavy integration work upfront to sort of plug into the core?

Gary A. Norcross

They really won't. That's what's great about this one, specifically. We've had a partnership, I guess, going all the way back to 2008. We built up our ownership over time, so we built up with 22%. So as part of that, we already have that capability very integrated. What we are going to do is be leveraging some of those frameworks across some of our other solutions, and we're going to help expedite those roadmaps. But the integration into our core offerings is there, and that's what's good about this one.

Frank G. D'Angelo

That's a nice big advantage when you already have an existing relationship and you've done the integration already, it's when you do something like this and acquire you already have that behind you.

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

Yes, make sense. Just a quick follow-up, I guess, on capital allocation. I can sense the frustration with the multiple. So should we read that into the idea that you'll be stepping up your buybacks if that persists. I know that mFoundry deal is done but should we interpret that as potentially bigger appetite to do buybacks?

Michael D. Hayford

Well, I mean, we got to say that it will be 250 a year, maybe even closer to 400 to 450 a year, so I think we've been buying back when the opportunity arises. I think we expect that going forward, again, the level of M&A, if we see an asset that we think is very critical, I mean, mobile is -- I don't think you view mobile is an it, mobile is a platform that we're going to add layers on top of, and it's critical to the future of banking. But if we don't find assets that are that strategic, you've seen us use the dollars to buy back shares, we'll continue to do that.

Brett Huff - Stephens Inc., Research Division

Brett Huff from Stephens. A quick question on margins. 60 basis points of margin expansion this year was nice, especially, given some of the headwinds in security and mix shift services. When I look forward to the 30 or 50 basis points next year, can you just go through the puts and takes on the margin we're going to get some help from the term fee. I think, our call services -- our technology spending on the security stuff is going to continue a little bit or maybe taper. Can you just sort of go through what's kind of in that 30 to 50?

Michael D. Hayford

I mean, I think, it's kind of the way to put this stairstep in there, but it's going to be kind of a normalized stairstep we're going to see every year. You've got to deal with your renewals, your discounting, deal with any losses you might have to consolidation. You get pick ups on price increase, you get picks up -- this time we're going to get a high margin term fee out of M&I relationship. On the security aspect, we had 2 things in '12. We had an elevated level of spending on day-to-day operational security, I mean, the staff and the management, the tools around security. We see that continuing and that spending level to continue to be high that -- I think, that's going to be the price of doing business. You guys have all read about the attacks on the major banks. So the attacks going on the major banks, you can say those attacks are going on against dollar providers. So we have to have that level of security to protect our customers. There's some project related work tied to security and the security incident we had 2 years ago now where we went through and did some additional analysis and walked through there. The bulk of that project work is done, so that project work won't repeat. We may have some other projects that we do in '13, so that might pick up -- help us a little bit. But I think, it's a good old-fashioned, you push all that together. And then Gary and the team is out, literally, a number that says, here's where we got to be more efficient. They get this much growth, here's the kind of margin the business we are bringing on, here's the kind of efficiency we've got to drive, and we go and make that happen. And we plan for that range, if things come out better, we drive revenue a little higher, we're going to get -- revenue is going to come on and give us more leverage. But we try to be fairly cautious with that outlook we give you.

Brett Huff - Stephens Inc., Research Division

Okay. One follow-up on the BMO Harris issue. So the 100 basis points or 110 basis points, I think, that you called out, negative impact to 4Q, that's a full run rate, and I think, you said next year you're looking at 100 basis points. Is there anything more from that or once we lap that I guess 4Q next year, were we sort of free of that?

Michael D. Hayford

Yes, well the conversion was early October of '12, so once we get to fourth quarter we'll be lapse, so that will come out of there in terms of year-over-year comp.

Brett Huff - Stephens Inc., Research Division

Okay, and the last question. On the free cash flow growth, I think, you said 100% conversion from net income, down to free cash net income is, I think, 12%, 15%, should we expect a similar type growth for free cash?

Michael D. Hayford

Yes, you should expect, I mean, you can do the math on EPS growth of '12 to '15 and see where our adjusted earnings should could come out and that translates to cash.

Frank G. D'Angelo

Any other questions? One right here.

Unknown Analyst

Any progress on those 2014 BMO.

Michael D. Hayford

Yes. I mean, we talked about the sales and the full year sales in fourth quarter. And again, we're not hung up in, oh, we have to sell more BMO. We'd like to sell more BMO, we had a lot of success there. We're not hung up we got to sell more into that platform, we'd like it sell more in the platform. We focus on where do we have opportunities for growth and we're pretty pleased with the sales that we're driving last year, last -- fourth quarter of last year, and then to this year. So that where we sell off the '14.

Gary A. Norcross

Yes, I mean, we lose clients every year due to acquisition. So this is nothing new to us and the ability of the team to sell-through that is what's key. And so the reality is when you look at the fact that our sales grew 27%, when you look at where we're entering this year with the largest pipeline we've had in history, we feel very confident we are going to sell-through that. And if you look at the growth that we're already touting for 2013, it's still substantial over many of our competitors. So we feel like the team is really executing well against that. The good news is that we had a BMO relationship. I think did we lose sight of that, 1 plus 1 is never going to be 2 for us. But if you don't have the other side of the 1, more times than not it's going to equal 0. And so the relationship that we got out of that combination is phenomenal. We have more meetings now than we've ever had. We're talking doing the right opportunities in Canada now. And so we're really at a different strategic discussion with that institution, and given the success of our pipeline and given the success of our sales results, it's going to fill across multiple areas. I mean, we feel very confident about that.

Mary K. Waggoner

Okay. If we don't have any more questions. I think, Frank has a few closing comments and then we'll adjourn to the reception.

Frank R. Martire

Well, first of all, thank you for being here and it's, let's see, it's gone almost 3 hours as we sat through this, so we really do appreciate that who are listening too on the webcast. But we hope you found it to be very informative. And we hope that you really felt the passion that we have and the enthusiasm we have for this company and the future of our company. If you look at it from a shareholder return standpoint, we have organic revenue growth and organic revenue growth, in the last 2 years has been 5% or greater, right? And then the margin expansion, when you look at the margin expansion since 2008, 550 basis points. So we got to organic revenue growth, the margin expansion, the disciplined capital allocation. What does that mean? Be it the innovation that we're doing that Gary has talked about a lot today on new product development or an acquisition we may do for our product gap that we have or buyback a stock that we may be doing, repurchasing shares of stock, which has all led to a double-digit EPS growth and we're confident that will continue. And if you add together what the dividend payments we're doing, we clearly see ourselves continue to do superior shareholder return. Because of our track record of doing it and how well we're positioned for the future, we are very confident we can continue to do it for our shareholders. And if I may just one final comment, I don't have 20 more slides, we're done. I'm sure you're happy about that. If I may and you'll allow me to do it, I think, most of you know, if not all, that Mike Hayford is going to be moving on. Mike's been our CFO since we put together Metavante and FIS. I worked with Mike for 10 years in Metavante and then the combination, Mike was a Chief Operating Officer at Metavante, was CFO and Chief Operating Officer, did about everything. And then CFO, like I just said at FIS, 20 years with the company. So he joined Metavante and helped build Metavante from what was a very small company, part of M&I data services to what it is today. He's been in the trenches. He's watched it growth. He's been a deep part of that growth. We wouldn't have had it without him, and then we look at ourselves today as we keep transitioning the company, right, to what it is today, from doing a lot of M&A and now through the large organic growth and the optimization, and what we've seen transpired over the years, the success we had over the years, and Mike's been a very, very large instrumental part of that. So on the part of myself, this executive management team that you see here, we would just like to take this opportunity, if you would join us that would be nice, to thank Mike so much for all he's contributed to this company. Thank you, Mike.

Do you have any closing words, Mary?

Mary K. Waggoner

I just like to invite you all to the management reception that we'll host until, probably, about 12:30. And you'll also have an opportunity, if you didn't have a chance beforehand, to visit the topic table and learn more about some of the product innovations that were doing. Thank you very much for being here today.

Frank R. Martire

Thank you.

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