Fiserv, Inc. (FISV) Q1 2015 Earnings Report, Transcript and Summary

Welcome to the Fiserv 2015 First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I will turn the call over to Stephanie Gregor, Vice President of Investor Relations at Fiserv.

Thank you, and good afternoon. With me today are Jeff Yabuki, our Chief Executive Officer; Tom Hirsch, our Chief Financial Officer; and Mark Ernst, our Chief Operating Officer. Please note that our earnings release and supplemental presentation for the quarter are available on the Investor Relations section of fiserv.com. Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results and strategic initiatives. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. Please refer to our earnings release for a discussion of these risk factors. You should also refer to our materials for today's call for an explanation of the non-GAAP financial measures discussed in this conference call, along with the reconciliation of those measures to the nearest applicable GAAP measures. These non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior reported results and as a basis for planning and forecasting for future periods. Unless stated otherwise, performance comparisons made throughout this call are year-over-year metrics. You may notice that we've excluded the performance metric summary from our slide presentation, but we'll continue to include relevant metrics in our prepared remarks based upon strategic focus, impact on our results and other meaningful factors. Let me also remind you that we are holding our Investor Day on Tuesday, June 16, in New York City. The general session will begin at 9:30 a.m. and should end around noon, followed by an optional lunch discussion. Invitations will be sent out soon and we look forward to seeing you at the event. With that, I will turn the call over to Jeff.

Thanks, Stephanie, and good afternoon, everyone. We are pleased with our strong financial results in the quarter and are on track to meet our objectives for the year. We delivered internal revenue growth of 4% against what was, by far, our most difficult revenue comparison of the year. These results include a 1 percentage point drag on revenue from a combination of currency and lower termination fees in the quarter. Our continuing focus on high-quality revenue growth and operational efficiency drove an increase in adjusted operating income of 8% and a 150-basis-point expansion in adjusted operating margin. Adjusted earnings per share was up 9% despite an 8 percentage point negative tax rate impact on adjusted EPS in the quarter. Free cash flow per share was up an impressive 22% in the quarter. Sales were 83% of quota in the quarter and slightly below last year's record Q1 results. We remain confident about our sales and revenue prospects for the remainder of the year. For the second straight year, we were recognized as one of Fortune Magazine's World's Most Admired Companies. In April, we were also named one of America's Best Employers by Forbes Magazine. In both cases, we were the only one of our core competitors to be recognized, which we believe is a reflection of our cultural focus on delivering superior value for our clients, associates and shareholders. We identified 3 key enterprise priorities for 2015 in our last call, which we will update you on each quarter. The priorities are: first, continue to build high-quality revenue while meeting our earnings commitments; second, build and extend client relationships with an increased emphasis on Payment and Channel Solutions; and third, to deliver innovation and integration which enables differentiation and value for our clients. As I mentioned, internal revenue growth was 4% in the quarter compared to 6% in last year's Q1, led by very strong performance in a number of our recurring revenue businesses. Growth was strong across several areas in the quarter, such as card services, digital solutions, including Mobiliti ASP, and account processing. We continue to focus on building high-quality recurring revenue, which should lead to an increase in our internal revenue growth rate again this year. This targeted growth profile also helps fuel our objective to sustainably grow operating margin which, for this year, is targeted to expand by at least 100 -- by at least 50 basis points. In the quarter, adjusted operating margin increased 150 basis points. Free cash flow per share was up a very strong 22% in the quarter, reflecting the results of our attractive business model combined with the benefit of consistent disciplined capital allocation. Overall, we are on track to deliver on each of our financial commitments for the year. Our second priority is to build and extend client relationships, and we did just that in the quarter. We recently announced that Vibrant Credit Union, with assets in excess of $500 million, selected the DNA account processing platform, along with a number of Fiserv integrated solutions to help them deliver a unique experience to each of their 41,000 members. 4 new DNA clients went live in the quarter. We expect to more than double the number of new DNA institutions that go live this year as compared to 2014. Our core account processing growth opportunities extend well beyond DNA as our account processing offerings meet the needs of a diverse end market. During the quarter, a top 40 bank selected our Signature account processing platform, along with a full suite of our market-leading products, such as item processing, electronic bill payment, Popmoney, debit processing and the ACCEL network. We are excited about the opportunity to provide this new client a uniquely differentiated experience when they go live next year. Digital solutions and mobile in particular continue to be a high priority for the market. We added to our Mobiliti consumer business signing 36 new clients in the quarter. Late last year, we began implementing programs to help our clients drive higher levels of mobile adoption, which contributed to even stronger growth in Mobiliti ASP subscribers in Q1. Mobile usage also tends to enable a variety of value-add opportunities, such as real-time payments and deposits, mobile capture and Snap to Pay. As you may recall, our Mobiliti Business solution went live in the fourth quarter of last year. Through the end of Q1, we've already signed 8% of the business banking client base to this important new solution. Although only a handful of clients are currently live, we expect this strategic product to drive value for some of our clients' most profitable customers and an attractive recurring revenue stream for us. We just wrapped our Spring forum client event, where we hosted nearly 4,000 people, representing a broad range of financial institutions, billers, lenders and other purveyors of financial products. At forum, we provided updates on our market-leading solutions and latest innovations from across the company. Our solutions center was highly trafficked with more than 2,000 unique visits to different product areas, including the NOW network, digital solutions, real-time payments, lending, billing, EMV and investment services. We are pleased with the early returns from forum and look forward to our next event coming in the fall. Our third priority is to deliver innovation and integration, which enables differentiation in value for our clients. While we expect to cover several of these opportunities in depth at our Investor Day, some highlights for the quarter include a new unique agreement with Morgan Stanley to jointly provide a global turnkey asset management platform for financial institutions outside the U.S. Our market-leading managed account technology solution, which now supports multicurrency, portfolio accounting, model management and trading, will be combined with the breadth and expertise of Morgan Stanley to create differentiated value and an attractive source of brand new growth. We're excited about this opportunity and expect to go live in early 2016. We're gaining traction in embedding our real-time payment capabilities into CheckFree RXP and Popmoney. Real-time transactions were up 54% in the quarter, which has a dual benefit of meeting a critical customer need while delivering high-quality fee revenue for our clients. We also advanced our new real-time deposit capability in the quarter. This newer use case allows consumers faster, guaranteed access to their funds and drives fee revenue for our clients. These real-time opportunities, which are generally enabled by the NOW network, are a strong link to changing consumer expectations. Interest for Agiliti, our U.K. cloud-based account processing solution, expanded once again in the quarter. The far-reaching demand has moved from being core-based to include several key add-on solutions, such as card processing, digital capabilities and risk. We continue to build out our integrated platform and expect to go live later this year. Last, we continued our focus on EMV. The number and level of client conversations remains elevated and we've increased our capacity to deliver against the anticipated market demand. And while debit EMV card issuance continues to lack credit, we expect to see a ramp in the second half of the year and expect that to continue over the next several years. With that, let me turn the call over to Tom to provide additional detail on our results.

Thanks, Jeff, and good afternoon, everyone. Internal revenue growth was 4% and adjusted revenue was up to $1.2 billion in the quarter, against our toughest compare of the year. This performance was even stronger below the surface, given the negative currency impact along with lower termination fees which, together, push our growth rate down by 1 percentage point. Growth in our card processing, digital channels, including Mobiliti, account processing and risk solutions led our performance in the quarter. This high-quality revenue growth and a continued focus on operational efficiency drove an 8% increase in adjusted operating income to $371 million and an impressive 150 basis point increase in adjusted operating margin. Adjusted earnings per share for the quarter was $0.89, increasing 9% over last year. Our adjusted EPS in the quarter was negatively impacted by about $0.07 or 8 percentage points of growth from this year's much higher comparable tax rate due to significant discrete tax benefits in last year's first quarter. Moving onto the segment results. Our Payments segment adjusted revenue, all internal, was up 4% to $613 million compared to one of our strongest growth quarters in the past several years. Growth was led by our card processing and digital channels businesses and was partially offset by the anniversary impact of some larger bill payment client implementations and biller headwinds. We believe the Payments segment revenue growth in the quarter will be the low watermark of the year as biller headwinds ease at the end of the second quarter, ongoing conversion of the Mobiliti backlog, Output Solutions revenue acceleration and the early revenue benefit of EMV. For reference, we continue to expect that the majority of the EMV-related revenue will bias to later in the year. Debit transaction growth was a very strong 12% in the quarter, driven by the dual benefit of growing card usage and strong sales. Mobiliti growth was excellent as backlog grew and ASP subscribers increased 65% year-over-year to more than 3.2 million. Bill payment transaction growth remained in the low single digits and P2P transactions grew 30% in the quarter. Our focus on delivering value-added services in these solutions closely aligned -- aligns with the industry's focus on faster payments. Real-time transactions were up more than 50% in the quarter. Payments segment adjusted operating income grew 6% to $191 million and operating margin expanded 60 basis points. This solid performance includes the offsetting negative impact of additional investments in several areas, including Biller Solutions and expanding our EMV capabilities. Adjusted revenue in the Financial segment was up 3% to $594 million. Performance was solid in our recurring revenue businesses, including account processing and lending, notwithstanding the more than 1% negative revenue growth impact from currency and lower termination fees. Adjusted operating income in the Financial segment was up 10% to $204 million. This very strong performance translated to a 220-basis-point increase in segment adjusted operating margin for the quarter. These results were driven by high-quality revenue growth in our account processing businesses and the positive impact from our operational efficiency programs. The corporate segment generated an operating loss of $24 million, which is in line with last year's results. Our effective adjusted tax rate in the quarter was 35%, up sharply compared to the prior year, but in line with our full year expectations. Last year's tax rate of 30% benefited from significant discrete tax benefits. Free cash flow per share is one of our most important performance metrics. Free cash flow in the quarter was up significantly to $268 million and up an even stronger 22% on a per share basis to $1.10. Strong operating earnings growth and working capital improvements drove the excellent quarterly results. Total debt at quarter end was $3.9 billion or 2.2x trailing 12-month adjusted EBITDA, well within our target leverage ratio. We allocated $290 million to share repurchase in the quarter, buying 3.8 million shares at an average cost of $75 per share. There were 16 million remaining shares authorized for repurchase at quarter's end. With that, let me turn the call back over to Jeff.

Thanks, Tom. Sales for the quarter were solid at 83% of quota. These results were slightly off last year's exceptional Q1 results, but generally consistent with expectations coming off our very strong Q4 finish. We had several high-profile wins in the quarter, which demonstrate the power of both our integrated value proposition and the innovation that we are supplying to the dynamic market. For the full year, we expect actual sales value to be up roughly 10% compared to last year's record level. Integrated sales were $44 million or 18% of our full year goal. During the quarter, we also passed through the $900 million mark for cumulative integrated sales in the second phase of our program, which we launched in 2010. We expect to surpass our 5-year program goal of $950 million of total integrated sales in the second quarter. We're on track with our Operational Effectiveness goals, achieving $13 million in the quarter and are making good progress against our infrastructure consolidation this year. For example, we expect to complete our Alpharetta building project and consolidate a number of our Atlanta-based facilities and over 2,000 associates in the fourth quarter of this year. Not only do we expect increased associate engagement and enhanced client interaction, we also expect to see meaningful Operational Effectiveness benefits in 2016 and beyond. There were only 5 regulatory actions in the quarter, which was consistent with last year's level. While at forum, we had the opportunity to hear directly from our clients about their priorities and technology focus. Tone continues to moderately improve and strategic conversations tend to center on building revenue, delivering digital capabilities, faster payments and a focus on differentiated customer experiences. Overall, we are on track to achieve our objectives for the year. We continue to expect internal revenue growth of 5% to 6% and adjusted earnings per share of $3.73 to $3.83, a range of 11% to 14% growth for the year. We also expect internal revenue growth to further accelerate in the second half of the year as more of our sales and related revenue come online. We expect full year adjusted operating margin to expand at least 50 basis points and, importantly, that free cash flow per share will be at least $4.12 for the year. In conclusion, we are pleased with our strong start to the year. We're on track to meet our financial and strategic commitments, which include recording an increase in the rate of internal revenue growth for the third consecutive year. These results and the third-party recognition I mentioned upfront are a strong testament to the focus and dedication of our more than 21,000 associates who drive value for our clients each and every day. With that, Mary, let's open the line for questions.

[Operator Instructions] Our first question comes from Tien-tsin Huang of JPMorgan.

Good margins here. I want to ask on that first. Just the 150 bps expansion, despite the lower term fees, anything unusual this quarter and that you'd consider raising your margin outlook for the year, given the big start in Q1?

Yes, I'll take that and Jeff will add to that. And I think there was -- really wasn't anything unusual in there. It's again the layering on to that high-quality recurring revenue that we really have in both segments. And it's been a big focus of our company, as you know, over the last several years as we've kind of accelerated our revenue -- internal revenue growth rate, and we plan on doing that again this year. So again, high-quality recurring revenue, continuing to focus on our operational efficiencies, and those are the primary drivers. And at this time, we're not going to be changing our guidance.

Yes, I would say, Tien-tsin, that it's early in the year. I mean, we expect to continue to perform well throughout the year. And we'll obviously take a better look at that when we get through at least the first half. Just to accentuate a point that Tom made, for several years as you will recall, we talked about making investments in some of our new products solutions, such as Mobiliti ASP, which we had to spend a lot of capital both human and financial, upfront, build the solution, sell it, distribute it, continue to add feature and function. And now we're getting to a point where we have scale. And as that scale -- as we continue to add users, we continue to get nice drop through benefits in that. So it's solutions like that, that are really adding to our margin because of that focus on this high-quality recurring revenue.

All right. So high incremental margins, got it. Just as my follow-up and I guess just on the EMV front. I know you said that, that could push you to the higher end for the year on the revenue side. Just curious, at what point would you start to have enough order flow for you to sort of make that call that it's coming through? I'm guessing we won't see a lot of change over close to the holidays. So I'm just trying to understand the timing of when that might be visible to you.

Yes, sure. Thanks. And I mean I would say that we always knew that the EMV revenue would buy us to late in the year. We've got -- we've just, as I mentioned, had our client conference. We had lots and lots of discussion around EMV. We've got a lot of demand that is building in the pipeline. And frankly, we won't know enough until at least into the third quarter on where we'll end up biasing for the year. I would say right now, we would be slightly below where we would have expected to be or where we potentially anticipated to be. And it's only because of the timing of institutions. On the other side of the coin, I would say, we're increasingly optimistic about the size of the opportunity, and we'll certainly talk more about that at Investor Day.

Our next question is from David Togut of Evercore ISI.

Could you update us specifically on sales performance in the quarter of DNA? Anything to call out in terms of new bookings and competitive trends?

Yes. I would say we had -- definitely had some wins in the quarter. We had very strong fourth quarter. Last year, we had a couple of transaction that slid from Q4 to Q1, which make Q4 -- I'm sorry, made Q1 quite strong last year. We continue to be extremely happy with the performance of DNA. We expect to more than double the number of go lives we have this year. We mentioned the Vibrant Credit Union win. It was a very nice win against one of our more entrenched competitors. And so we continue to have a lot of interest in the solution on the larger credit union side as well as on the large bank side as more and more of the bank -- the larger banking institutions are looking at real-time as an option and given that DNA is the only real modern technology platform that is U.S.-based, interest is quite high.

And I'll just add to that that the pipelines that we have right now have never been stronger for that both on the credit union and the banking side. So we're very pleased with that.

Great. And just as a follow-up, I noticed that you didn't provide a metrics page in the handout, Tom, although you did -- I think Jeff went through a couple of metrics. Perhaps you could give Operational Effectiveness versus target? And then, if you could provide the breakout of term fees both for the first quarter of this year and then the year-ago number. And just to slip in one more, just the quarter end share count.

Yes, we've -- obviously, all the metrics -- we put all the metrics inside our script, David. So they are all in there. We just have a number of different metrics that will change over time, depending on relevance. And so -- but all those metrics are in there. We have 13 million of Operational Effectiveness benefits in the quarter, so another strong quarter of execution. And so that was very positive. Regarding the share count, as of April 30, that is 236.8 million. As of March 30, it was 237.7 million regarding that. And regarding term fees, they're down approximately $5 million from where we were last year, so that was roughly a 50-basis-point hit to our growth rate.

Anything to call out in terms of term fee comparisons for 2Q to 4Q?

We did have, as you know, last year -- when we look back at last year, I think our first quarter of last year was our lowest quarter of the year until we were down here in the first quarter compared to last year. And then it kind of accelerated through the year. They were pretty consistent. So when you look at 2014, and we continue to manage that within our overall guidance in depth. But overall, in the first quarter, they were down. And again last year, in the first quarter was our lowest level.

And David, the Operational Effectiveness goal for the full year is $50 million.

Our next question comes from Jim Schneider of Goldman Sachs.

Relative to the 30 DNA wins you're expecting to capture this year, I think you mentioned 4 came in, in Q1. Was that in line with what you had expected? Or did any deals slip out into the following quarters? And can you maybe just update us on the profile of those on-boardings you expect? Is it more back end-loaded than front half?

Sure. Thanks, Jim. The -- so just for clarity, we had 4 new DNA clients go live in the first quarter. We expect that to be 30 or so for the full year that will bias into the second half of the year. And some of our very large implementations will go live in the second half of the year. We're on track where we would expect it to be on those implementations. I'm going to separate that from sales for a minute. The sales momentum is quite strong. As Tom mentioned, the pipeline is at its fullest level ever. And we are seeing a lot more interest from larger institutions, frankly, those institutions that would not be having the conversations with us, but for the fact that we have this modern technology platform. Again, when we acquired Open Solutions, we anticipated a number of benefits. Frankly, we had not anticipated the fact that the world would change so dramatically since January 2013 that real-time would become so critical, along with the processing and data capability of that platform. So we're involved in a number of larger transactions. Now the negative, to the extent there is one, is those larger transactions tend to have long sales cycles. But we're excited to be in there. And frankly, another of the benefits is, as you know, we have a lot of very strong relationships with large financial institutions that tend to be based in our payments, technologies or -- and/or our channels technologies, our risk technologies. And this is now giving us an opportunity to be able to go in and have more wholesome conversations centered on the core processing solution of DNA.

That's helpful. And then, as a follow-up. One of your primary competitors this quarter cited some significant or increasing pricing pressure in debit processing. I was wondering if, first of all, that's something that you see in the market? And second, if it -- if so, is it big enough to impact your results as you head through the year?

So we announced in the quarter that we have 12% debit growth. Obviously, that's coming from a combination of what I would call a kind of a lag utilization rate in the market. And -- but the other real factor is we have a significant sales engine. And the majority of our sales really come from selling into our existing client base. So we've got a number of over 5,000 account processing clients. We've developed differentiation that's centered in integration, whether it's into the core or into our mobile services, risk services, et cetera. So that's a very different value proposition. Now we're also competing against some of the larger players that are not connected to our core. But the reality is, is that the majority of our success has historically come from the integration value that we can create in core. And that's a different sales, a different transaction, certainly, we have to price into the market. But frankly, because we can deliver value that no other provider can deliver, we are able to create a better arrangement overall.

Our next question is coming from Ramsey El-Assal of Jefferies.

I wanted to clarify something that you said on DNA. Are you expecting the kind of cadence of your implementations to flow more into the back half of the year? Or is it more of sort of a steady stream and you're just expecting a couple of large ones in the second half?

We are expecting in the range of 30 for the full year. We had 4 in the first quarter. And they will continue to ramp. The beauty of an account processing client is they're -- it's recurring revenue and it lasts typically for a long period of time. The downside is implementation cycles are anywhere from 12 to 24 months. So if you think back to the successes that we've had in winning these clients, as they go, it just takes time to go live. So I do see it being biased to later in the year, both in terms of absolute numbers as well as in terms of some of the sizing of the transactions, primarily because of when the wins -- when we won the clients. And we think that will continue into the following year. So we're going to continue to have success in that arena.

Okay. This is sort of a longer view of the question, is asking for your longer view on sort of margin expansion over the next 24 or 36 months. I mean, obviously, there's some great intrinsic operating leverage in the business. Are there any product categories or areas of cost takeout that you think are particularly -- would be a particularly sort of consistently additive source of margin expansion over time?

Well, when you think about the margin expansion, as you said, it really comes from 2 primary arenas. It comes from scaling, either scaling new product investments or being additive to existing solutions that are already scaled. So that's 1 category. Within that category, we're always looking for how can we be more efficient part to be able to expand margin, but frankly part of that is to ensure that we're able to continue to invest in our products in a meaningful way. The other big piece of margin expansion, frankly, is on the Operational Effectiveness that we have been executing really fairly well since 2007. Most of that work has not touched our infrastructure today. We've done -- we've had small numbers of data centers to be consolidated. We've done a location here or there. We're now focused on making sure that we are able to leverage the company that we built over the last -- for the last 3 to 5, 7 years. And Tom and I both talked about the fact that we're doing these infrastructure consolidations. So we're doing more on the data center front. We're doing more in looking for ways to bring people together to create better communities of effort around our clients. And then lastly, we're also continuing to focus on what are the right ways for us to get the best leverage across our labor bases. We're pretty spread out. We still have lots of opportunities to create value there. So those are the 3 areas that we're really focused on right now from an Operational Effectiveness. Combined with the scale, that really gives us a high degree of confidence that we're going to be able to continue to expand margin consistent with our long-term guidance in the foreseeable future. Lastly, I would say that you'll see us spend a fair amount of energy on this at Investor Day to be able to provide confidence for the next several years that, that will continue, not just for us, but for also for you, our owners.

Next is from Darrin Peller of Barclays.

Listen, just want to quickly follow up on the margin first. I mean, obviously, I think it's a follow-up to Tien-tsin's question earlier. 150 basis points in the quarter was clearly more than we had anticipated. We did anticipate some expansion, but still when I look at the G&A number, Tom, over the past -- I don't think I've seen it that low over the past 5 quarters. I mean, is there anything -- and I think you said there was nothing unusual. So I guess the bigger question is, is that new G&A number sort of sustainable at that run rate or maybe on a percentage of revenue basis you can look at it that way? And then I just have a follow-up on the drivers on mobile for a moment.

Yes, I think and, Darrin, you may be looking at kind of the GAAP number, and sometimes that GAAP number includes kind of a higher levels of severance like we had in the previous quarter last year. So when we look at our SG&A rate today, we do believe that is sustainable. Clearly, it's going to fluctuate on a quarterly basis. We don't manage it that way. But we continue to believe we're at a good place there, and we'll continue to leverage in our operating model.

All right. I guess just more broadly, Tom, and I mean, G&A overall just your cost structure. It sounds like there's nothing unusual in that number -- in the overall expenses number. So that percentage of revenue margin-wise sounds like that's a good number.

Yes, absolutely.

That's great to hear. All right. And then just listen, on the mobile side, again, the growth rate has been outstanding. And I guess we just want to understand, in terms of business mix, I know you guys have been somewhat reluctant to call out specific percentage of revenue for mobile. But what about just overall online banking mobile, some of the more digital initiatives on that front? If you can give us a little more color on percentage of your business now because obviously it's a big growth driver for you.

Yes. You're right, we have stayed away from that and we're going to continue to stay away from that at least for today's call. We'll supply a bit more detail on that at Investor Day because it really is becoming a bigger part of the business. And we actually see it -- we see it being able to become an even larger part of the business going forward, not just in terms of driving subscription revenue or license revenue -- or services revenue, depending on the deployment method, but also the importance of mobile as it kind of drags along additional capabilities, whether they be payments and the like. So we will definitely spend more time on it. The point that we were trying to make earlier, just as it relates to margin, is as you know, Darrin, we were -- we've been investing in this for a number of years. We're now at the point where we're -- we've hit the tipping point, and we would expect it to be fairly positive for us from now over the next several years.

And I guess, later in the year, with term fees coming on or a more normal comp, that's -- I guess, as a follow-up to the question earlier on the call, that should only be better, right?

That's correct, but we're going to continue to make investments as we go. So I mean, we obviously are sticking with our guidance right now of 50 basis points for the -- at least 50 basis points for the full year. We need to get past Q2 and take a look at it before we make any adjustments.

Yes, we did have -- as I previously said, Darrin, we did have higher levels of termination fees in the last 3 quarters of last year, just so you're fully aware of that.

Okay, on a comp basis, makes sense guys. All right.

Thank you.

Next is David Koning of Baird.

Yes, so I guess the first question it sounded like you were talking about the second half being better than the first half in terms of growth. But it looks like the second quarter is actually the easiest comp of the year. And I'm wondering, should Q2 be better than Q1 in growth, just given it's a much easier comp?

Dave, I would say that, again, when we went all the way back to our call, when we kicked off the year in January, we really believe the second half is where it's going to be primarily. And the reasons for that are some of the things that we've already talked about are the DNA implementations, we're going to have some larger benefits from both our bill payment and international business. Our Biller headwinds, we mentioned this, that in our Biller business, which is really growing our electronic transactions, they are double-digit. We've had some tough comparisons there with some client consolidation. And those headwinds are going to bake towards the end of the second quarter. And then, also, we talked about our EMV revenue, which is primarily all second half kind of driven. So again, we continue to believe we're going to have a much stronger second half than first half. And as we're sitting here today, that continues to be that trend.

Okay. Okay and then, I guess the only other question I had on the posted July, we never really pay attention to that, but is that -- are we going to be able to see that clearly ramp? That's maybe one of the biggest indicators that we can just see, the underlying EMV kind of driving the payments growth.

Yes, I think -- I don't think it will be reflected there because of the card production. But I would comment to that, as you saw, one of the reasons in our payment segment, our Output Solutions business was fairly flat. We kind of had a difficult compare we have compared to the prior year. And again, that's one of the businesses where we really expect a better second half due to acceleration both in the base business and then also in the EMV production. As Jeff highlighted, we're primarily on the debit side, which is going to trail credit and, therefore, that's when we expect to see that.

Next is Chris Shutler of William Blair.

I thought that the comment on the Morgan Stanley relationship was interesting, guys. Maybe you can provide a little bit more detail on how that opportunity developed, who's going to be doing what. And maybe just some more color overall on what the product is going to look like.

Sure. It's a unique arrangement. As you may know, we've got a very strong position in, call it, just broadly managed account administration in the U.S. We have a very strong pricing network, a very large scaled business. And we've been working with Morgan Stanley for a couple of years. They've wanted to have a way to expand their business. And we began working together, look, how could we use our technology with their knowledge of the business and their connectivity outside the U.S. And we basically put this together in a way that allows really them to go out and take the lead almost prime, go out, make -- form and leverage their relationships outside the U.S., get it set up with product, et cetera, and then we'll go in and do the managed account administration as we do here. And so we're quite excited about it. It's nothing that we've done before. And frankly, we have a pretty high level of confidence in this because we spend a lot of time understanding Morgan Stanley's capabilities and how they're going to approach the market. And so we're pretty excited. We think it's going to drive some growth into '16. It won't have any impact this year, but it's just another driver for '16.

Sure, okay. And then just one other one, a totally different question. But I was hoping to get an update of the integrated sales efforts, specifically with former Open Solutions clients. So just wondering if there's still a big opportunity or just what inning you're in there in that opportunity?

Yes, sure, Chris. So we are -- continue to be very, very pleased with the success that we're having in providing additional value add solutions to that base, whether it's in the DNA base or the total plus [ph] base, we've had a lot of success in delivering product. We did a lot of work, as you'll recall, over the last 15, 18 months in terms of driving what I would call the first level of integration. We're now starting to bring in some of our next tier higher value -- higher integration value products. And so we are -- we remain very confident that we're going to hit or frankly exceed the revenue synergy numbers that we talked about when we acquired -- when we acquired Open. The beginning question is an interesting question because from a sales inning perspective, we're probably somewhere in the middle innings in terms of aggregate values sold. In terms of the revenue recognized on that, I would say we're in the very early stages of the ballgame and have a lot of runway left ahead. Some of that is because of implementation cues. Some of it is we've signed contracts that don't expire for -- where they have competitive agreements that don't expire for a period of time. But again, that's one of the things that gives us confidence, not just into the second half of this year, but frankly, on our exit run rate. So it's pretty early on that opportunity.

Next is Andrew Jeffrey of SunTrust.

So Jeff, interesting, because we do read a lot about real-time payments, interesting to hear your emphasis increasingly perhaps across Fiserv's business on how faster payments can drive growth. Can you be a little more granular? Do you think most of your opportunities are in terms of market share, given your technology sophistication and position or do you think it's pricing or a combination of the 2? And I'm thinking about your comments, both with regard to DNA as well as Mobiliti.

Yes. So it's a great question. And hopefully, I'll capture in this answer. So I think about real-time on several levels, but you've got solutions, such as DNA, which I think of a little bit more as a file drawer. And we're creating this real-time capability that allows for a lot of optionality to put files in that drawer, which are the real-time applications. So it could be deposits, it could be data management, it could be payments, any of those different opportunities. And we're going to see that both in real-time core. But the mandate is coming much more off of how consumers are accessing those technologies or frankly how business owners are accessing those technologies through Mobiliti and online and the like. And we're in the enviable position of having both the account processing or the core platform as well as the channels platforms, which we have a very long legacy on the online side that we're now complementing on the mobile side. That, however, is only part of the opportunity. Frankly, I am at least, if not more, excited about the second part of the opportunity, and that is, that today, because of the solutions that we have in the market, be it the CheckFree RXP solution or Popmoney, or ACH solutions, we have rails today, which are slower rails but are moving many, many, many millions and millions and billions of transactions. And what we're seeing is financial institutions get quite excited about the opportunity to provide real-time capabilities, payments and deposits. We mentioned that in our prepared remarks. Real-time deposit credit is another intriguing opportunity, where institutions can create small fees that make sense to the consumer and make sense to them. So they can create a little bit of fee revenue, consumers can get what they want from a time to move or speed to move perspective. And because we're the enabling party, we're getting that as well. And my belief is that we're going to see some meaningful percentage, take bill pay, where we've got roughly 1.5 billion transactions a year. Some meaningful percentage of those have the propensity to go on a real-time basis. And that will create real value, not just in terms of growing the transactions, but on a RevPAR trend basis, that could be very, very impactful to our model over time. So it's a little bit of a long-winded answer. You can be sure we're going to talk about this at Investor Day. But it's a very, very important opportunity. And uniquely it's a place where the interest of consumers or users, whether they be retail or business, the financial institution, whether that be a bank, a credit union, a lender, a biller, whoever it is, and our interests all intersect at this point of real-time.

And that's helpful. Would we -- would you expect to see the adoption of real-time payments or the offer of real-time payments and bill pay for example 2 consumers be accompanied by new fee structures for those of us who have been using bill pay for a long time, we're accustomed to for the most part having free payments albeit with the lag? Would you expect to see financial institutions introducing more tiered pricing?

Yes, absolutely. And in fact, we talked about our real-time payments being up more than 50% quarter-over-quarter. Almost, I would estimate that virtually, every one of those payments carried a premium fee -- every one of those real-time payments carried a premium fee structure. Could be like a reverse interchange, but a variety of different premium add-ons are in that more than 50%.

Our last question is from Bryan Keane of Deutsche Bank.

Most of my questions have been asked and answered. I'm just curious on the EMV opportunity. We're hearing different things. I guess how big of a revenue opportunity is that for you guys? I mean, is that upwards of $100 million on an annual basis? And any possibility that they delay the October liability shift that you're hearing about?

So that -- the EMV opportunity is meaningful. There's no question about that. And we're going to talk about that in detail at our Investor Day in terms of quantifying the sizing of that. We have EMV benefits coming from 2 places. We have EMV benefits coming from our existing debit processing clients. And then we also have clients who are not our debit processing clients, who have a relationship with us through our Output Solutions business, both on the manufacturing and on the personalization side. So we'll spend time on that on Investor Day. As it relates to the liability shift, we haven't heard anything that would have us believe that that shift -- that there's going to be a delay in the shift. So we are at least planning for that to happen on time.

Okay. And then just 1 question for Tom. Just how big or how -- if you can quantify the impact of term fees in the guidance for this year, that will be helpful.

Yes, we don't. I mean, we don't quantify certain impact. So it's factored into our guidance. Clearly, one of the things I would say, Bryan, is we're coming off a very strong year in 2014 from a termination fee standpoint. So I mean that's kind of context for it.

Okay, so we'll be down this year on the...

It's hard to -- every year, we have puts and takes and things happen in the marketplace and sometimes, they come quickly. But we did have a very strong, at least, last 3 quarters of last year in regards to termination fees.

Thanks, everyone, for joining us this afternoon. We always appreciate it. And we're looking forward to seeing everyone on June 16th in New York for our investor presentation. If you have any additional questions, please don't hesitate to contact our Investor Relations team. Have a great evening.

Thank you. You may now disconnect.