Fidelity National Information Services, Inc. (FIS) Q2 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the FIS Second Quarter Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mary Waggoner. Please go ahead.

Thank you, Kathy, and welcome to everyone joining us this afternoon. Today's news release and supplemental slide presentation have been posted to our website at www.fisglobal.com. A replay of the audio portion of this call will be available on the website, as well as the dial-in number shortly after the call. With us today are Frank Martire, President and Chief Executive Officer; Gary Norcross, Chief Operating Officer; and Mike Hayford, Chief Financial Officer. Please refer to the safe harbor language on Page 2 of the presentation. Today's discussion will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Today's comments will focus on results from continuing operations and will include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented. Reconciliations between GAAP and non-GAAP results is provided in the attachment to the press release and the supplemental slide presentation. I will now turn the call over to Frank Martire.

Thanks, Mary. Good afternoon, everyone, and thank you for joining us on today's call. I will begin the discussion with a brief summary of our financial results and business highlights for the second quarter. Gary will follow with the operations report, and then Mike will provide additional insight into our financial results and outlook for 2011. We are very pleased with our continued revenue momentum and the strong growth in earnings per share. Revenue increased to $1.4 billion in the second quarter, which represents organic growth of 5.8%. These results were driven by strong performance within our Financial Solutions and International segments, including strong growth within Capco's European practice. Earnings per share increased 17% to $0.55 in the second quarter, and free cash flow rose to $195 million. Starting with our Investor Day in 2009 and again in 2010, we shared with you our path to achieving 6% to 9% organic revenue growth. Because we serve all major market segments in the U.S., including community institutions, regional banks and large banks, and also have a substantial international business, we believe that FIS is very well positioned to participate in the market recovery as evidenced by the progress we are making towards achieving our long-term growth plan. Organic growth has improved consistently during the last 6 quarters and has measured approximately 6% in each of the last 3 reporting periods. As we have discussed on prior calls, 2010 was a great year for new sales. We are off to another excellent start in 2011, and our global sales pipeline is stronger than ever. As you will hear from Gary a little later on in the call, we continue to build on the success of the FIS and Metavante combination, which has enabled us to leverage our combined banking and Payment Solutions and industry expertise. We expect to achieve similar success with our recent acquisition of Capco. Capco's deep domain expertise and strong relationship in the large U.S. and global banking markets, combined with our market-leading technology, creates a very compelling value proposition for our clients. Demand for Capco's services is particularly robust in Europe, as shown by the strong growth in the first half of the year. We are very excited about having Capco as part of the FIS team, as we work with clients to solve their business challenges and transform their technology platforms. Overall, we are very pleased with our second quarter results and the progress we are making to increase organic revenue growth and to drive higher earnings per share. And I am extremely proud of our management team and employees for staying focused on serving our clients and growing the business. Now Gary will continue with the business report. Gary?

Thank you, Frank, and thanks to everyone on the call. I will begin today's review with an overview of the global sales climate, followed by the operating highlights. As Frank discussed, we continue to see evidence of an improved spending environment, which is driving strong growth in our sales pipeline across the globe. Industry consolidation, regulatory changes and the ongoing challenges of competition and processing scale that our clients are facing, continue to drive opportunity for FIS. The combination of our product set, which we believe is the broadest in the industry, and our global distribution team, have allowed us to participate in the improving spend environment. As discussed last quarter, we have seen clients continue to favor hosted solutions over in-house implementation, which have resulted in a mix shift from license revenue to processing and professional services. These trends provide longer-term stable revenue streams and also eliminate some of the volatility in both our revenue and margins due to onetime license fees. Next, I am pleased to highlight some of our recent sales wins. Expansion of our core client base is an integral part of our growth strategy. These important relationships not only generate high reoccurring revenue and strong incremental margins, they also account for significant cross sales every year. We continue to gain market share in the community and mid-tier market, where the integration of our core platforms with delivery channels and Payment Solutions is a strong competitive differentiator for FIS. 2010 was a record year for core competitive wins, and we continue to win new business in 2011. Second quarter signings included United Bank, with approximately $9 billion in assets, and a large West Coast bank with more than $6 billion in assets. These new clients will also utilize a wide range of channel and Payment Solutions,…

Thanks, Gary, and good afternoon. I'll begin with Slide 4 of the supplemental materials. Adjusted revenue growth was 13% for the quarter. Organic revenue growth, which is normalized for acquisitions and currency, was 5.8%, driven by strong results in financial solutions and our international business. Second quarter EBITDA increased 5.9% to $415 million compared to $392 million in the second quarter of 2010. EBITDA margin was 28.8% compared to 30.7% in the prior year quarter. On Slide 5, we have provided a bridge that illustrates the impact of acquisitions and onetime items on our margin. Starting with the reported margin of 28.8% in the second quarter of 2011, we have adjusted the margin impact of the Capco acquisition. And as you recall, the lower margin consulting business has a negative impact on our overall margin. Additionally, approximately $5 million in onetime costs related to integration, severance, and M&A activity were included in the current year quarterly results. These costs were excluded from our adjusted operating results in 2010. This bridges to an EBITDA margin that is comparable to the prior year quarter. On Page 6. Financial Solutions revenue increased 12.7% to $516 million and grew 5.2% organically. The increase was due primarily to strong growth in services revenue. Financial Solutions EBITDA increased 3.5% to $208 million. EBITDA margin was 40.3% compared to 43.9% in the prior year quarter, reflecting the higher mix of consulting and services revenue and lower license revenue. As shown on Slide 7, Payment Solutions revenue totaled $632 million in the second quarter of 2011, which is a slight improvement over the second quarter of 2010. Payment Solutions revenue increased 4.1% compared to the second quarter of 2010, excluding the check business and the impact of the merchant platform consolidation. As you recall, merchant revenues recorded at…

[Operator Instructions] Our first question comes from Dave Koning with Baird. David Koning - Robert W. Baird & Co. Incorporated: I guess my first question, just on the margin bridge on Page 4, it seems to imply that capital was something like 150, 160 basis points margin drag, which would imply that EBITDA is about 0 -- is about breakeven right now. And I'm wondering, is that a seasonal factor? I would imagine you'd expect that to get nicely better but maybe you could comment just a little bit on that and kind of how that improves.

David, I would say first of all, the margin for Capco as we described in the past, we expect to be lower than the rest of our operating numbers, our operating business units. And as you can see, the start of the year, we're running probably a little behind where we anticipated. So I would view it as sliding a little bit maybe where we had anticipated, although we would've expected the second half of the year to build and drive a little bit more profit than the first half of the year for Capco. So we're actually pleased with the start we had. I think there's probably a little -- I think Europe's off to a very, very strong start in the first half of the year. Our Canadian business is doing extremely well in North America. We had a couple of challenges with some clients in the U.S., really not related to what Capco's doing but more related to the nature of the business and some kind of global financial industry changes that impacted a couple of the customers there. So I think we're off -- maybe a little bit behind on earnings, very strong revenue growth. And we anticipate earnings to pick up in the second half. David Koning - Robert W. Baird & Co. Incorporated: And I guess one other thing from the supplement, this quarter, the interest rate weighted average was 5%. Last quarter it was 5.2%. And I know -- I think you had $1.5 billion of interest rate hedges rolling off this quarter. I mean, Is it fair to say that you might have redone them at a little better rates now and extended those nicely or something? Because it does look like the interest rate's nicely down.

Yes, I think it's the hedges, it's -- as we pay down -- some of the debt, we paid down at the higher rate. And then as you said, the fixed-to-floating kind of ratio has improved a little bit the overall cost. David Koning - Robert W. Baird & Co. Incorporated: Okay. And then lastly, just quickly, your Payments segment, it seems like much less of a headwind from check trends now. And I know that they'll likely continue to be negative. But between that and then the anniversary that interchange headwind, I mean, it seems like there's a much less of a headwind going forward, and even probably maybe a tailwind as you anniversary some of this stuff the next several quarters. Maybe you could just comment on that too.

David, I'm assuming you're referring to the check business and the check verification business that we have, the paper-based businesses. I think it's a fairly consistent headwind. It's about 400 basis points, 4% of growth on the top line, which is kind of what we've been seeing, 3.5%, 4.5%, in that range. So I think 4% is kind of consistent with that. The headwinds, I think we're battling through them, so that the team did a nice job in the other parts of the business to have again a slight revenue growth. And if you adjust out again the impact of the accounting change and the impact of the paper businesses, a pretty respectable 4% growth year-over-year in the quarter. But I think those headwinds are going to be fairly consistent as the business gets to be a smaller and smaller piece of the business, they do diminish over time.

We have a question from Julio Quinteros with Goldman Sachs.

So good to be back over here, on the coverage side. Couple of quick questions from my side. When you look at the comment that you made about the shift from sort of traditional license sales to the hosted model, how should we think about that in terms of any drag or even lift to the current revenue model? And I guess just sort of theoretically, how would this be different from the old service bureau model that I guess I'm probably more familiar with when you think about what you referred to as hosted today?

Well, I mean, I think it's very similar to the old service bureau model. So service bureau, ASP, hosted in the cloud, I think are all very common. It's a shared a leverage model that is connected to a platform that we're operating in some central location. And so we like that business a lot. It does have an impact upfront versus getting a licensed professional services upfront. When we signed those deals, those revenues are spread over a 7-year contract typically. But it creates more recurring revenue and more predictability. And again, to the extent we get on a leveraged platform, we'll make those profits over time.

Any sense on what percentage of your business today is sort of spread across the hosted model versus the license model?

Well we've talked about in the past is our -- what we would term as our recurring revenue. And recurring revenue for us is revenue streams that we do not have to go out and sign a new contract. And we're in the mid-80s, so 83%, 84%, 85%, in that range. It's come down slightly. I think we were up as high as 87% at one point. But with Capco, most of that is not occurring. So in that mid-80s is kind of the level of recurring revenue that we have as a company.

Got it. And then on the comments, we saw the release yesterday about the NYCE additions kind of post-Durbin. Maybe just help us characterize a little bit about what are the clients actually looking for when they come to you guys now sort of post-Durbin world? What is the specific demand driver or the issue that these clients are coming and signing up for NYCE now. Beyond kind of the obvious, is there something additional they're looking for from you guys?

Yes, Julio, this is Gary. I think there's a couple of things they're looking for, and NYCE helps do that. Couple of things. With the Durbin decisions and final rulings in June, you now have to have multiple, at least 2 networks for your debit processing. And NYCE is benefiting our clients because it's the most issuer-focused network in the industry. So we guarantee to maximize the interchange to the financial institution. And our clients and our new customers see value in that. So there's really 2 things driving it. One is Durbin and the need to have multiple networks. But two, the fact that we're so issuer-centric instead of being merchant-centric with our NYCE network, our financial institutions are seeing a lot of value in that.

Do these clients need to actually be core client as well?

No, not at all.

Okay. Got it. Great. And then just one last question on Capco. Do you guys have any metrics on Capco headcount utilization levels and then any plans for headcount additions going forward?

We haven't really shared the headcount of Capco. I think the comments that you heard us talk about today, Gary covered the strong results in Europe. The company is growing, growing very well. We think they're doing very well in their markets. And we also think they're doing extremely well competing for talent in the consulting business. So our plans are to continue to grow, grow headcount. They focus on utilization each and every day to drive profit.

We have a question from Ashwin Shirvaikar with Citigroup.

I want to start with Capco. As Capco grows, should we expect at least some level of operating leverage in that model? Or should it be -- should we consider it like a typical consulting business, which has limited operating leverage? I'm trying to figure out what the longer-term impact of Capco growing faster than the rest of the business is on margins.

Well, I'd say it's kind of not like a typical consulting company. They're very people based. So it's not the same kind of leverage model that you would get out of a hosted solutions -- we kind of discussed a leverage model that belongs to processing contract. Having said that, we know when we brought them on board at the size and scale they were, even a little over a year to ago where we expect them to be in '11, they're going to continue to get some operating leverage out of the fact that they're larger, driving more revenues to cover their kind of business unit level costs or corporate costs at the capital level. So we have -- sort of our target long-term is to get into the mid-teens for EBITDA margin. And we've also shared that for 2011 we expect it to be lower than that. We expect to it to be around 10% for the year 2011.

Great. Okay. And when I look at the Payments business, obviously the overhang from Durbin and other regulatory issues, has had sort of hurt [ph] growth in that business. But now that some of that stuff is behind us, should we expect some pent-up demand to emerge?

Well, Ashwin, this is Gary. As I mentioned in the call, we did see some pent-up demand on particularly stuff like the network positioning in and around Durbin. As part of the overall rulings, the network portion of Durbin does not have to be implemented until April of 2012. So we should see a number of signings in the second half of 2011 and then revenue starting to be generated due to that in 2012. As also indicated, to give you some insight into the size of the opportunity, we've been running a number of webinars around Durbin and around NYCE particularly. And we've had over 1,000 financial institutions dial in to those webinars and participate and learn how the NYCE network can drive value to them and satisfy the needs of this regulatory change.

And as I look at say maybe the small bank exemption, what percentage of your client base is relatively unaffected? Is there a way to quantify that, maybe?

Well, we really have not broken down our clients base across the various sizes. The nice thing about our Payments business, we mentioned in the announcement some scale items around our Bill Payment Solutions and some of our other solutions and also, as you see in the release yesterday, the first half this year, we had record signings on our NYCE network. Really our payment capability spread pretty much the gamut of institutions, both sides throughout the U.S. And so, we really haven't disclosed the breakdown of how our payments revenue is between large financial institutions and community institutions.

And then my last question, on Misys. At what point might you be ready with the due diligence done and so on and so forth due to speak? I mean, are we getting close to that point? Or should we be looking for an announcement? What's the decision process here, if you don't mind sharing that?

Well, Ashwin, I mean, you know that we obviously had throughout the press release said that we had made an approach to the company and are evaluating and having discussions with the company. I think suffice it to say that when we get to a point where we have something to announce, we'll announce it. And until we get there, we really have nothing to discuss on the topic.

We have a question from Glenn Greene with Oppenheimer. Glenn Greene - Oppenheimer & Co. Inc.: First question. I guess it's for Gary. I know you sort of talked about 2010 sort of being very strong sort of contract signing year and this year continuing at sort of a fast pace. Is there any way to frame what contract signings look like maybe year-to-date this year relative to a year ago? And maybe a little bit of color across the industries. What's really -- which segments are sort of driving the strong contract signings?

Yes, no, it's a great question, and we have traditionally not disclosed the size of our pipeline. But we, as I stated, we did have a record 2010. And I will tell you the first half of the year, we're ahead of where we were at this point last year. We know we got -- obviously, we've got the second half of the year so we got to continue to perform. Our pipeline, though, has continued to grow very significantly as well. So all of those are positive signs for us as a company. As far as the markets that we're seeing this growth in, frankly, as I shared in some of the examples, we're seeing great success in community markets, in large institutions and in our international markets as well. So there really is just no one specific area that we're seeing the growth. It's really coming from all the segments.

Yes, I think that's what's key there, Glenn. We're getting it from the small community banks, the mid-tier, the large, and the International segment. So it's right across the board for us, which is very positive, obviously. Glenn Greene - Oppenheimer & Co. Inc.: Would it be fair to say that we're -- the banks respect [ph] and sort of getting back to normalcy in making decisions? I guess it's a little surprising to me that we are sort of seeing the decisions sort of happening as you're suggesting so quickly.

Well, I think as we've shared, this is 3 quarters in a row with almost 6% organic growth. So I would say it hasn't just come back quickly, right? We've worked through it each and every quarter. And as we've shared on each quarterly call, we continue to see banks who have weathered the financial storm to now starting to free up their capital dollars, to start making investments so they can compete in this cycle and gain market share. And given the breadth of our solutions, that plays very well for us. I'm not here to say that there still aren't institutions out there that are hunkered down and not making any buying decisions because there are. The fortunate thing for us is we're just seeing more and more of those get through their process and now starting to focus on buying. And as we shared in the examples, we're seeing in the U.S., and frankly, globally as well, strong demand for our core banking solutions. That typically drives our Payment Solutions as well through that. But as the example of Intuit and several others, the Fifth Third example, we're also seeing strong demand just for our Payment Solutions as well. Glenn Greene - Oppenheimer & Co. Inc.: And then on the International business, which 3 quarters in a row keeps blowing away my estimates at least, can you just sort of help? Are there a couple of things to call out other than the Bradesco conversion that's really driving the very strong organic growth?

Well, I think 2 things. One, certainly getting Bradesco converted and getting the joint venture from being a startup to an ongoing entity where we're focused on the market and able to grow relationships in Brazil is certainly key. But we also, and we shared with this in the -- in multiple of our investor updates, several years ago, we made a conscious decision to start transitioning our revenue away from a license model to more of an outsourcing and processing and professional services model. And while the percentage of our reoccurring revenue in that business is still less than our overall company, that change, both market-driven and driven by us, we're seeing benefits in our revenue streams and starting to see more predictability and more growth due to that higher reoccurring revenue. Glenn Greene - Oppenheimer & Co. Inc.: And then just one quick one, the Intuit bill pay win, was it the digital insight piece within Intuit?

Correct. Glenn Greene - Oppenheimer & Co. Inc.: Okay, so it's the smaller, obviously, the smaller FIs?

Yes, this is Michael. It's the smaller -- it's the credit unions and the smaller community banks. But we do all of Intuit's -- they have a number asterisks [ph] to bill pay that we provided the processing for.

You have a question from Brett Huff with Stephens Inc.

The question on corporate, I know you told us last quarter that you thought sort of $90 million would be the run rate, but I'm confused about the swing from what I think my math is right would've been $82 million last quarter x the onetime Sunrise platform charge to $94 million this quarter. A, is my math right based on how you guys think about it? And B, if so, can you just give us a sense of what's changed from the last quarter to this quarter that was added cost there?

Yes, I think we had a few miscellaneous things. We had some, we talked about some integration-related costs that hit the corporate line. We had some M&A-related costs, which -- the corporate line. I don't think there was anything. I'm trying to think if there was any other big item that would have hit at that level. So I think that maybe $4 million above the guidance was probably some of those onetime things that we described, integration-related costs, some severance and M&A-related costs.

Okay. And then I think, Gary, you talked about this. One of the goals of Capco besides adding a lot of great professional services, expertise and domain expertise, was ultimately to try and get into one of these transformational deals that you've talked about, that it's core but broader at a big bank. And Gary, I think you mentioned that and you're happy with the progress. Can you give us a little more color on that? How many of those prospects are out there? Can you -- Is there any way to sort of give us how big that opportunity is?

Well, I think there's -- suffice it to say, at this point in our ownership, we're very pleased with the conversations we're having. How many transformative deals are there out in the market? We really don't know, but we're having a number of key conversations both in Europe and in North America. These conversations, though, Brett, as you would expect, take a long time to work through. Certainly, not only do we bring in the consulting power and domain expertise of Capco, but bringing our wealth of solution in IT to the conversations. But at this point, we've got a number of key opportunities that we're pursuing. And we feel very good that we're going to sign some of these transformative opportunities.

And then, Mike, I think there's a question for you, in terms of international, how do you see that organic growth or even the total top line growth trending over the rest of the year? I agree with the first news on last, that you guys have continued to outpace my expectations. I'm trying to just get a better sense of where I'm wrong. Any guidance from you guys on the international number?

Well, I mean, I think I would take it [ph] in the fourth quarter, the year-over-year comps can be a little more difficult for Brazil because we did, we converted that in October of last year. The other big driver of this is Capco, and as we shared, their year-over-year growth is much greater than we anticipated in Europe, which is growing into that International segment. So I think those are the 2 big drivers that are probably outpacing what we had expected, and therefore, I think what people have expected in terms of our growth internationally. As Gary said, the rest of that business is doing very well. The team's done a great job of penetrating some of the higher growth markets in Asia, in India, China, other parts of Latin America. And then our European practice is doing well. So I think they're executing real solid, and then you've got a little extra push obviously from Brazil, which is showing very good growth. And then the Capco services is growing very strong as well.

That's helpful. And then just one last question, and I want to make sure I heard you right. I think you were -- in the discussion of Capco, you said that you were a little behind on that. And I think you then said that might have been driving a little bit behind on the first half earnings versus where you all expected. First of all, did I hear that right? And second of all, what gives you confidence that you'll pick up some of that slack in the second half specifically?

Well, as I shared, we had a very specific situation in the U.S. We had some clients who just due to the changes in the environment, no longer had the funding to spend on a series of projects that were fairly large for Capco. Now they're not a significant portion of the overall FIS, but to Capco, they were a decent chunk of their revenue opportunity. So what they've done is they've, for the most part, been able to keep their people together and go out and sign other clients. So I think it just -- it challenged them for a 3, 4-month period of time where they had to go out and find new clients, where they'd expected to start very large projects to kick off the beginning of the year. Those didn't materialize. This is within an individual client. And so they've gone out and found other business. So as we enter the second half, and we've sat down and walked through where they stand, particularly what the utilization rate is and what their pipeline is for getting new client projects going, we feel pretty good about the second half.

We have a question from John Kraft with D.A. Davidson. John Kraft - D.A. Davidson & Co.: I wanted to go back to Durbin and specific to prepaid. I guess my question is, how would you characterize the interest level at your banks in offering a prepaid or some sort of debit prepaid card now, this quarter, versus last quarter, given that we've heard some commentary from the Fed sort of suggesting they're going to discourage the banks from flipping the switch, if you will, from a debit to a prepaid. Is that something that's affecting their interest levels?

Yes, I think, John, that's a good point. We got a lot of clarity in the June 29 finalization. And one of those was they clarified certain things around prepaid, where earlier we thought we were going to see some opportunities where our clients might look to launch some type of reloadable prepaid card to generate -- to not have to deal with the Durbin regulation. But as I said, we got a lot of those issues clarified. We still are, though, with that as a backdrop. So those kind of conversations that deal with Durbin have lessened. But we do continue to see strong demand for our prepaid offerings in our financial institutions, not only in U.S. but as a -- pointed out especially in our international markets, it's becoming a much -- it's becoming a very viable way to serve some of the underserved, underbanked communities. And so we continue to see conversations around that. But the conversations we were having around Durbin have lessened. John Kraft - D.A. Davidson & Co.: Got you. That's helpful. And then I guess just second and last, can you elaborate a little bit more on this conversion at Intuit on bill pay? Is it -- was there an upgrade in your interface or some sort of a platform that's driving this? Or is this a price? Or is this sort of just let's consolidate everything back onto the legacy Metavante platform because it's just easier for Intuit to have 1 rather than 2?

Well, I think at the end of the day, we have a tremendous relationship with Intuit first and foremost. And I think that relationship drove an expansion of the partnership. But I also think when you look at the investments we've made in our bill payment platform, we're seeing substantial results in the market with new signings. And so Fifth Third's a great example of that, and as we highlighted, that's a number of top 30 institutions in the last 12 months. So the product is very functionally rich. It's a very strong solution in the market. Combine that with our overall relationship, it just made sense to expand that going forward.

John, it's been a very successful relationship, and a win-win for both Intuit and ourselves. So we as we work together closely with the senior executives and the operations people at Intuit, it's been very rewarding for both sides, and that's allowed us to continue to grow the relationship.

Our final question comes from David Togut with Evercore Partners.

Gary, within your Financial Solutions segment, have you seen any change in pricing trends if you look at the span of banks you serve from credit unions up to mega banks?

David, I wouldn't say we've seen any change. I mean, it's very competitive. The market's very competitive, and the nice thing given FIS's scale and our product suite, we're able to compete very effectively in those markets. But I would say we've not seen any demonstratable change in recent months.

And then just a question on capital allocation for you, Mike. With FIS shares trading at the same price, which you repurchased 23% of the outstanding last year, why not get more aggressive here on share repurchase instead of acquiring a business at a premium?

Well, I mean, David, you obviously understand that you look at those things at all kind of point in time, right? So I think we disclosed our discussions with Misys almost 3 weeks ago now. And the market's moved around a little bit because of that. I think we've been very consistent. We've said that we'll look first to grow our business through M&A where we can get a return on our investment and get some leverage. We think we have a good team to do that. We think we have a successful track record. And if we can't find deals that get the proper return, we'll use the capital to buy back shares. And obviously, at our current trading price, the shares are a lot more attractive than it was even a month or 2 ago. So suffice it to say we'll always continue to keep those 2 things in mind. And we'll always judge any use of capital for M&A against that relatively low risk share repurchase.

When you say earn proper return from acquisitions, what are you referring to exactly? Are you saying accretive to EPS? Or are you using some type of IRR metric?

Well, we do both. But at the end of the day, we think it's important that we get a return on cash. So we look at an IRR hurdle that would be consistent with what a return to the shareholders is over a period of time.

We'd like to thank all of you for joining us today. Please remain on the line for the telephone replay instructions, and have a good evening.

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