Fidelity National Information Services, Inc. (FIS) Q4 2018 Earnings Conference Call Transcript

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

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Image source: The Motley Fool.

Q4 2018 Earnings Conference Call
Feb. 12, 2019 , 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the FIS Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode, later we will conduct a question-and-answer session, instructions will be given at that time. (Operator Instructions) And as a reminder, this conference is being recorded.

I’d now like to turn the conference over to our host, Mr. Pete Gunnlaugsson. Please go ahead, sir.

Peter GunnlaugssonSenior Vice President, Investor Relations

Thank you, Brad. Good morning everyone, and welcome to FIS’ fourth quarter 2018 earnings conference call .

Turning to Slide two. Gary Norcross, Chairman, President and Chief Executive Officer will begin today’s call with company highlights for the quarter and the year. Woody Woodall, our Chief Financial Officer will continue with the financial results for the quarter and full year concluding with 2019 guidance. This conference call is also being webcasted with today’s news release and corresponding presentation available on our website at fisglobal.com.

Turning to Slide three. Today’s remarks will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. I refer you to the Safe Harbor language on the slide.

Materials presented today will also include references to non-GAAP financial measures in order to provide more meaningful comparisons between the periods presented. Reconciliations between the GAAP and non-GAAP results are provided in the attachments to the press release and in the appendix of the supplemental slide presentation.

Turning to Slide four. It is now my pleasure to turn the call over to Gary. Gary?

Gary NorcrossChairman, President and Chief Executive Officer

Thank you, Pete. Good morning and thank you for joining us. Today, I’m very pleased to announce our Q4 and full year earnings results. 2018 was a very good year for FIS as we consistently and successfully executed on the strategic plan, we discussed during our Investor Day last May. While impacted throughout the year by revenue mix, especially in our institutional and wholesale division, we exceeded profitability and earnings expectations and net revenue expectations for the full year. From a strategy delivery viewpoint, we exceeded our plans on data center consolidation, solution modernization and sales execution, which gives us strong confidence as we start 2019. This confidence allows us to continue building on our multi-year track record of delivering solid revenue growth, exceptional margin expansion and significant shareholder returns.

For the year, total shareholder returns exceeded the S&P 500 by approximately 17%, driven by consolidated margin expansion of 280 basis points, adjusted earnings-per-share growth of 22.5% and a return of over $1.6 billion to shareholders through share repurchases and dividends. These results underscore the resiliency of our business model and showcase our ability to create both short and long-term value for our shareholders, while executing on our modernization and transformation strategies. Over the last three years, we have strategically tuned our solution portfolio resulting in divestitures of over $1 billion in annual revenue.

During the same period, the market has rewarded our business performance with a $15 billion increase in our market capitalization, representing almost 80% growth over that period. Our financial services focused solutions portfolio combined with our large and loyal client base have enabled us to grow through dynamic market conditions.

We exited 2018 with very strong sales momentum and pipeline. Our full year sales results were the strongest in our company’s history and as typical, Q4 was our strongest new sales quarter of the year. This sales success resulted in a significant increase in our contract backlog that Woody will discuss later in the call. This not only gives us confidence in 2019 but in our long-term outlook. Across the company, we continue to see more demand for Software-as-a-Service deployments, which will continue to increase our overall reoccurring revenue, predictability in earnings and free cash flow.

Moving to Slide five for a review of the segment highlights. Our Integrated Financial Solutions segment drove top line organic revenue growth of 2.5% for the quarter and 4% for the year. As previously discussed, our annual revenue growth for this segment is at the high-end of its range and continues to accelerate year-over-year. Margins expanded by 90 basis points in the quarter and 60 basis points for the year. Additionally, our mass enablement strategy is accelerating product penetration within our markets using an innovative and faster deployment model. This transformative approach leverages our investments in data center and solution monetization and is a key growth initiative, generating more than $10 million of new revenue in 2018. We expect this deployment methodology to continue to accelerate growth as we bring innovative solutions to market.

Based on the success in 2018 from a revenue and sales perspective and the deployment innovations I just discussed, we are expecting this segment to further accelerate its growth in 2019 by approximately 100 basis points. This organic growth is highly reoccurring in nature with strong industry-leading margins and very high free cash flow conversion. The IFS segment had its largest sales quarter in Q4 with over $800 million in new contract value, resulting in a growth rate of more than 25% in new contract sales for the full year. Several of these wins highlight not only the variable size of institutions we serve, but the complexity of solution the market is looking for FIS to deliver.

For example, a top 25 US financial institution expanded its long-standing FIS relationship by entering into a new multi-year agreement to outsource the Bank’s wealth management services. With this move, the Bank is reducing its cost by utilizing FIS variable cost operating model and gaining robust new capabilities by migrating to the industry-leading suite of FIS wealth solutions.

In another example, a $20 billion US community bank selected FIS as its core banking and digital provider in support of the bank’s goal to modernize its environment, transform its branches and make better use of business intelligence and analytics across its enterprise. This bank had traditionally run a series of discrete products on premise in a highly customized manner. FIS ability to leverage our next generation cloud-based omni-channel digital platform, DIGITAL ONE with our extensive capabilities and scaled outsourcing of core processing and back office services was the key differentiator in winning this business against the competition.

As we discussed in May of last year, our historical investment over the last three years in data center and solution modernization is showing value in these large complex wins throughout the industry. Our IFS Payments division also continues to deliver strong growth, supported by increased transaction volume and competitive sales wins. As an example of just one of the key in-quarter wins for our Payments division, the US arm of a top tier global financial institution of more than $100 billion signed a multi-year payment outsourcing agreement with FIS in support of its goals to grow revenue and implement a market-leading Payments-as-a-Service solution supporting both business-to-business and consumer-to-business transaction. Our industry-leading solutions in this space were the key drivers for this win.

Our significant investments in modernization and technology are also paying dividends with key new wins in the large US bank market. We have discussed on many calls that we think the large regionals will start to move toward modernization of their platforms and we believe our successes in 2018 are significant indicators that transformation is starting to take place. These transformations will occur not only with our next-generation capabilities, but will be consumed through our industry-leading cloud deployment on a subscription basis in most, if not, all situations.

Turning to our Global Financial Solutions segment, the business recorded top line organic growth of nearly 4% for the quarter and 2% for the full year. Margins across this segment expanded by 400 basis points and 470 basis points compared to the prior year quarter and year. While we are very pleased with this continued transformation, revenue growth is being impacted by the movement to outsourcing and the recent accounting change on license recognition and therefore creating a mix issue. However, the profit contribution in the revenue is of much higher quality, because of our growing scale in this market, we are now seeing EBITDA margins approach 40% on an ongoing basis and will continue to expand in the future. This expansion was driven by continual improvements in the segments SaaS revenue, data center consolidation and leverage across all our key business functions. Given our current level of margins, which have improved by over 1,400 basis points since 2015, the profit contribution being delivered from this segment has more than doubled.

Turning to our divisions within the GFS segment. Results in our institutional and wholesale division fell short of expectations due to the revenue mix and accounting change I highlighted earlier. As we have seen throughout the industry, our trading and brokerage business has been impacted by lower volumes and slower than anticipated sales. We believe our trading business will continue to be a headwind for this division, but will continue to be offset by the higher quality SaaS sales that are occurring in our buy side and compliance and regulatory businesses. Our growth in SaaS deployment sales was up 25% in this division, which also saw a significant growth of more than 20% in new logo competitive wins where our industry-leading I&W capabilities replace many significant competitors.

Our banking division saw a nice growth, fueled in part by the industry’s need for a clear path toward a modern banking solution. For example, a large multinational bank has selected our cloud native next generation core banking platform to expand its presence in the US. In addition to core banking, this client will also take advantage of our DIGITAL ONE omni-channel platform that I referenced in the IFS segment. Our ability to get leverage from our overall development cycle is paying hu ge dividends for our ongoing margin as well as growth expansion. This new deal adds a premier client logo to the long list of clients who have relied on FIS to launch a digitally focused bank in support of their growth strategies.

Our GFS Payments business also had an exceptionally strong quarter and full year, much of this growth was driven by strong payment transaction volumes in Latin America and competitive new sales wins. As previously announced, we have successfully closed our Brazilian joint venture and entered into a new five-year commercial agreement with our former JV partner. We are very pleased to have closed on this transaction six months earlier than plan, providing us a faster start and getting a wider portfolio of our solutions into this expanding and attractive market.

I was recently in India and met with several of the largest Tier 1 institutions in the country and universally, they are all looking for ways to modernize their core digital and payments infrastructure. Given our market presence and historical success in the country, we are well positioned to capture these transformations in the future. In conclusion, our GFS segment, we remain confident in continued acceleration of revenue growth in 2019 compared to the prior year period and bullish on the ongoing business transformation that is occurring on SaaS deployment and continued market share gains.

Moving to Slide six, focusing next on some of our large-scale corporate initiatives that our leadership team is remained focused on executing our strategy which we outlined for you last May during our Investor conference. In summary, we continue to transform our operating environment through our cloud and data center consolidation strategy. Currently more than 55% of our North American distributed systems portfolio is running in our cloud environment, well ahead of the 50% target that we announced at the start of 2018. By year-end we expect this percentage to increase over 65% on a global basis.

Due to this success we exited the year ahead of the $100 million in run rate savings that we shared with you in our last Investor Conference. We are continuing to fine-tune our service management, capacity on-demand and fast provisioning, so that our clients benefit from industry-leading scale, up-time performance and resiliency in a fully secure FIS environment. We’ve begun to see early positive reaction to our new modern banking and payments platforms. These new solutions are enabling our clients to run and grow their businesses more effectively by connecting with their customers through more modern and meaningful experiences.

In proof points that our investments are delivering differentiating value, our new cloud based DIGITAL ONE platform has already grown to serve more than $10 million consumers in the US in 2018. Additionally, we on-boarded more than 50 clients to our unified payments platform in 2018 and expect that number to expand dramatically throughout 2019. Finally, we have once again been named a Fortune Most Admired Company and for the fourth year in a row, we set a top the Chartis RiskTech100 Rankings.

Before I turn the call over to Woody for the financial review, we strongly believe that scale and solution capability is the key to driving continued growth in meeting the demands of a very rapidly changing industry. As you know, inorganic growth opportunities have been and will continue to be a key component of our long-term success. Our approach and strategy toward these opportunities has not changed. If it fits our overall strategy, drives accelerated growth for our company and is actionable we will execute accordingly. I’d like to reaffirm that we are pleased with our full year 2018 results and the momentum we have created. We expect this positive momentum to continue into 2019 and beyond as we continue to execute the transformation and monetization strategies discussed last May.

Woody will now provide additional detail on the financial results for the quarter and full year. Woody?

James Woody WoodallChief Financial Officer

Thanks Gary. Turning to Slide eight. In the fourth quarter, revenue increased 3.2% on an organic basis and EBITDA grew to $864 million, a 5.3% increase compared to the prior year period. Fourth quarter revenue was negatively impacted by approximately $40 million due to divestitures. EBITDA margin expanded 200 basis points to 39.9% and adjusted earnings per share grew 29% to $1.60 per share. For the year, revenue increased 2.8% on an organic basis and EBITDA grew to $3.1 billion, a 5% increase compared to the prior year period. EBITDA margin expanded 280 basis points to 37.2% and adjusted earnings per share grew 22.5% to $5.23 per share. We are pleased with delivering on our full year consolidated guidance.

Moving to Slide nine. As expected in the fourth quarter IFS revenue grew on an organic basis by 2.5%, while EBITDA grew 4.5% with 90 basis points of expansion. Margin expansion was driven by growth in our payments business that has high operating leverage. For the year IFS revenue increased 3.9% on an organic basis. EBITDA increased 4.7% with margin expansion of 60 basis points to 44.6%. We are very pleased with IFS’s full year performance, which was driven by balanced demand across all divisions for the year and continued robust sales. We expect this momentum to carry into 2019, translating into accelerated revenue growth.

Turning to Slide 10. Banking and wealth grew 1.5% for the quarter. For the full year, this group grew a strong 4.3%, primarily driven by our wealth and retirement solutions. Payments had another robust quarter and grew 5.2% as our network services continue to see sustained volume growth, as well as growth in new solution offerings. For the full year, this business grew 3.3%. Corporate and digital was relatively flat for the quarter, as digital growth was offset by a difficult license comparable in our corporate liquidity solutions, for the full year they grew 3.7%.

Turning to Slide 11. In the fourth quarter GFS revenue grew 3.7% organically while EBITDA grew 9.1%, for the quarter, this represents 400 basis points of margin expansion to 42.8%. Although revenue grew slower than expected, EBITDA grew more than two times faster compared to revenue in the quarter, speaking to the increased operating leverage of the segment and a positive long-term revenue mix trend. For the year, revenue increased 2.1% organically. EBITDA grew 5.1% compared to the prior year, reflecting 470 basis points of margin expansion to 37.4%. We are pleased with the ongoing EBITDA margin profile in the segments which continues to expand in line with our previous comments throughout the year.

Moving to Slide 12. For the quarter, our institutional and wholesale business declined 2% and was flat for the year. Positive results in the quarter for our buy side solutions were offset by a few items. Trading volumes were down year-over-year and were the primary driver impacting growth for the quarter. Upfront license sales were less than expected, as we continue to see sales of long-term recurring outsourcing agreements outpacing upfront license sales, which impacts the quarterly revenue growth, upfront license sales we’re down 15% while recurring revenue sales were up 25% in the quarter. This trend will continue to improve the long-term quality of the revenue stream.

Finally, as we closed out the year, the positive impact of 606 was less than we originally expected. This time last year we outlined and expected 1 point tailwind for GFS for the full year related to 606 and the actual impact was closer to flat. We do not expect 606 to impact 2019 in a meaningful way.

As Gary mentioned, although we’re disappointed with the results for this Group, we remain confident in the long-term prospects of the business and the markets we address and we made organizational changes to improve the growth in this business. We anticipate I&W returning to low single-digit growth in 2019. Banking and payments grew 10.7% in the quarter, primarily driven by strong demand for our digital solutions in North America, along with continued growth in our international payments businesses. The quarter also benefited from revenue related to the dissolution of the Brazil JV, absent this one-time revenue, this Group still grew a healthy 8%. For the full year, the business grew 5% in line with our expectations.

Moving to Slide 13. Our Corporate and Other segment revenue grew 8.3% for the quarter, the $65 million with an EBITDA loss of $77 million. As previously discussed, we do not expect any ongoing revenue headwinds from this segment. Moving forward, we anticipate corporate expenses on a quarterly basis to be $70 million to $80 million. For the full year corporate expense declined 9%. We finished the year with a revenue backlog of $20.5 billion, an increase of $1 billion compared to the prior year driven by the robust sales execution we have discussed throughout the year. The increase in our backlog gives us a high level of confidence to achieve our 2019 guidance.

Moving to Slide 14. Free cash flow was $551 million for the quarter, representing 25% of revenue and about $1.5 billion for the full year. For the quarter, cash flow comparisons were negatively impacted by higher-than-expected CapEx for our data center consolidation efforts, product investment, higher sales commissions and the previously discussed tax benefit in the prior year. Debt outstanding as of December 31st, was $9 billion with an effective weighted average interest rate of 3.3%. Our effective tax rate for the year was 17.5%. The decrease in our effective tax rate in the fourth quarter was driven by implementation of new corporate tax reform guidance implemented in the period. We anticipate a full year 2019 effective tax rate of approximately 19%.

During the fourth quarter we returned $255 million to shareholders through the repurchase of 1.4 million shares for approximately $150 million, and $105 million through dividend. For the full year, we returned $1.6 billion to shareholders through the repurchase of 12 million shares for approximately $1.2 billion and $420 million through dividends. $2.7 billion remaining on our existing share repurchase authorization. The weighted average diluted share count was 329 million for the quarter and 332 million for the year. Going into 2019, our capital allocation principles remain consistent. We’ll continue to invest in innovation and product development to better serve our clients and lead the market. We recently increased our quarterly dividend 9% to $0.35 per share and we’ll continue to grow it in line with our free cash flow. Finally, we will assess value creating M&A opportunities and absent any actionable deals, we’ll continue to repurchase shares.

Turning to Slide 15. Before I provide 2019 guidance, I wanted to give a quick update on the Brazil JV unwind, as well as the change of our non-GAAP EPS calculation. On January 4th, we announced the successful unwinding of our joint venture in Brazil. We previously anticipated this transaction to close by the end of the second quarter of 2019. Consistent with the transaction announcement in the fall, this transaction will result in $225 million headwind to 2019 reported revenue growth, which is accounted for in our 2018 organic revenue base. In addition, we now expect approximately $0.08 earning per share headwind in 2019, driven by the earlier than anticipated closing of the transaction. As Gary mentioned, we are very excited about the next chapter of our growth story in Brazil and the broader Latin America market.

As you saw this morning in our earnings release, we have revised our reporting of adjusted earnings per share. We have historically excluded purchase accounting intangible amortization from our non-GAAP earnings. As part of a normal review of our public filings and discussions with the Securities and Exchange Commission, they expressed an objection to our approach regarding adjusted EPS. After several lengthy discussions with the SEC, which included comparisons of our peers, analyst and investor expectations, we agreed on an approach with the SEC that will exclude all depreciation and amortization from our adjusted EPS. We will continue to provide detailed disclosures of the components of D&A and the related tax benefits should you choose to calculate under the old method.

We were a lot of discord as a transition period to make this adjustment in our reporting. And our fourth quarter and full-year results are available in both methods within the earnings release. Give this transition and to assist you with your models, we have also provided quarterly and full year reconciliation for 2018 and full year 2017. Going forward, we’ll will continue to provide detailed data points to reconcile back to our prior method of calculating adjusted EPS within the footnotes. However, we will not speak to it on future earnings call s. Our guidance for 2019 and future results will follow the new method.

Turning to Slide 16. This morning, we reported an adjusted EPS of $5.23 per share. The prescribed change to exclude all D&A will increase adjusted EPS by $1.70 per share. Additionally, the impact of divested businesses including the JV unwind is approximately $0.12 resulting in a 2018 EPS base of $6.81.

Turning to Slide 17. Due to in-year divestitures and the JV dissolution, I wanted to give a transparent walk in our organic revenue base. As we called out on last quarter’s call, we have successfully completed our divestiture program and are entering 2019 with a focused and high-quality set of assets.

Turning to Slide 18. For 2019, we expect organic revenue growth of 3.5% to 4.5%. This represents continued revenue acceleration and is in line with the long-term growth strategy outlined last year at our Investor Day. Consolidated adjusted EBITDA margin expansion of 150 basis points to 200 basis points, which exceeds our mid-term outlook, adjusted earnings per share of $7.35 to $7.55, representing growth of 8% to 11% compared to a baseline EPS of $6.81. And free cash flow as a percentage of revenue of approximately 20%, which represents greater than 10% growth in free cash flow. Consistent with our historical practices, we have provided supplemental planning assumptions in the appendix material.

I wanted to provide some additional color on the calendarization of our top line growth. As we discussed on our first quarter 2018 earnings call, GFS had a very strong license revenue, which create a difficult compare this upcoming quarter. Because of this we expect first quarter consolidated organic revenue growth to be the low watermark of growth for the year. The second, third and fourth quarters should be at or above the midpoint of our guide. Finally, first quarter adjusted EPS is expected to be in a range of $1.54 to $1.58 per share.

Turning to Slide 19. We continue to believe we have a strong and resilient business model and we’ll continue to lever our market leadership to produce accelerating top line growth, exceptional margin expansion and robust cash flow. These strengths allow us to invest for future growth and return value to our shareholders.

That concludes our prepared remarks. Operator, you may now open the line for questions.

Questions and Answers:

Operator

(Operator Instructions) We’ll go to the line of Dave Koning, please go ahead.

David KoningBaird Equity Research — Analyst

Yes. Hey guys, thank you. And I guess, first of all, just thinking through, when we think of IFS and GFS, are they both — you expect both to be pretty similar growth through 2019 and I would assume in Q1 GFS would be lower than IFS just simply because of some of the license timing stuff, is that fair?

Gary NorcrossChairman, President and Chief Executive Officer

Yes. Given our sales success throughout 2018, Dave, we actually see both segments accelerating, growth rate going into 2019, but as Woody talked about, Q1 in GFS given the grow over and will be the low watermark for the full year.

James Woody WoodallChief Financial Officer

If you look at the color between the two segments, Dave, we actually expect IFS to grow roughly 100 basis points and accelerate roughly 100 basis points. So, even higher than the 4% we saw this year. When you look at our midpoint being a 4% growth that would translate into GFS being closer to 3%, really driven by this mix shift in the GFS segment.

David KoningBaird Equity Research — Analyst

Okay, great. And I guess just my follow-up. Free cash flow, I know for much of the year you talked about kind of a 110% or 105% or something like that conversion on cash earnings, it looked like you finished the year, I think we have 86% of cash earnings under the old method. Maybe you can talk through that and it seems like guidance as well, a little lower than what we had previously thought on cash flow?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, if you look at cash flow, there are really two items that were impacting 2018 for the full year. If you look at that Hurricane Irma tax relief that we got last year in terms of the benefit and had to pay this year, plus the increase in sales commission payments, both were roughly $100 million apiece, if you add those two together, we were really close to a 100% free cash flow conversion. Going forward, continuing to invest, we’re investing roughly 7.5% of revenue back into data center consolidation, modernization and product. So that might be a little higher than we originally anticipated, but certainly are pleased with the 20% free cash flow conversion as a percentage of revenue.

David KoningBaird Equity Research — Analyst

Okay, great, thanks guys.

Operator

And our next question will come from the line of David Togut. Please go ahead.

David TogutEvercore Partners — Analyst

Thank you. Good morning. I’d like to ask about industry consolidation, two impacts, first, your thoughts on competitive impact from Fiserv’s announced acquisition of First Data. And then the second impact obviously is consolidation in the customer base, SunTrust, BB&T, and you’ve said that isn’t — they’re not core clients, but how do you think about kind of modeling in the impact of customer consolidation into your guidance both near and long-term?

Gary NorcrossChairman, President and Chief Executive Officer

Well, the first on the competitive front, David, we talked a lot about this. We think that the market is going to continue to need to consolidate, scale is going to be a key contributor to be able to compete and grow and certainly historically FIS is participated in those inorganic activities. We will always look for opportunities that center around our three main verticals, whether it’s retail banking, payments or institutional wholesale. We want to take good care of the capital and the company that our shareholders are entrusted to us, and certainly as we look for opportunities that can accelerate our growth rate and help us grow our scale, that’s going to be important. When you look at the industry consolidation across the various financial institutions, we actually modeled going in 2019, a very consistent level of industry consolidation. It’s very hard to predict when these announcements are going to occur, it’s very hard to predict what the impact could be both positive and negative, depending on how the institutions come together. But at this point in time in 2019 for modeling purposes, we’ve modeled consistent over 2018 from a consolidation standpoint.

David TogutEvercore Partners — Analyst

And by consistent you mean you’ve modeled in a specific headwind to revenue and EPS or –?

James Woody WoodallChief Financial Officer

Yes, very similar to what we’ve done in the past between customer losses and compression roughly 150 basis points a year, Dave, just like we have in the past, we don’t see any acceleration, if you will, of potential customer losses here. In fact, one of the comments on one of the bank consolidation calls was that their need to continue to expand and invest in modernization and technology to compete in the future and we think that could be a certainly a benefit for us on a go-forward basis.

Gary NorcrossChairman, President and Chief Executive Officer

And as we highlighted throughout the call, David, I mean you see a number of really large wins for us across 2018 and where large institutions are doing just that modernization and investment. So to Woody’s point, that should be a — that could be a positive tailwind for us.

David TogutEvercore Partners — Analyst

Understood. Just a quick final question. Now the 2019 EPS guidance calls for 8% to 11% growth on an adjusted basis, that is somewhat below your three-year target of 10% to 13% growth. Is that just the math of the new adjusted EPS reporting structure or is it mostly a slow start on I&W?

James Woody WoodallChief Financial Officer

I think the biggest difference is a tax headwind in 2019 compared to 2018, David. We landed with a lower tax rate in 2018 at 17.5%, we think 2019 is going to be roughly 19%. Actually, if you look at old method, new method, we guided $7.35 to $7.55. If I were guiding old method, I would have guided $5.60 to $5.80 with a midpoint of $5.70 and really the difference between that and current consensus estimates is the early closing of Brazil, which cost us about $0.08 versus our original expectation.

David TogutEvercore Partners — Analyst

Understood. Thank you very much.

Gary NorcrossChairman, President and Chief Executive Officer

Thank you.

Operator

And the next question in queue will come from Brett Huff. Please go ahead.

Brett HuffStephens, Inc. — Analyst

Good morning, guys how are you doing?

Gary NorcrossChairman, President and Chief Executive Officer

Good morning, Brett.

Brett HuffStephens, Inc. — Analyst

Can you talk a little bit about the revenue shift that you guys have been mentioning. I think this came up a couple times, maybe one or two quarters in — earlier in 2018. Why is this accelerating so much? Is it a function of you’re kind of pushing your modernization by modularity? Is there some big change that the bigger banks you guys server maybe the medium sized banks, they are choosing outsourcing more, what’s the acceleration that’s driving this longer rev rec?

Gary NorcrossChairman, President and Chief Executive Officer

I think, Brett, we’re seeing it in the sales cycle. I think larger institutions are looking at their total cost of ownership, they’re looking at their legacy technology debt that they have in place. We’re running it on premise, frankly, as I look at our more modern solutions and being able to consume that with the investments that we’re delivering in our private cloud surrounded by our robust security measures, so they’re seeing higher availability, lower total cost of ownership. And as we discussed, we just — we felt for a long time, the industry is going to start moving in that direction. And for years classic community banks, what we define as community banks, were all outsourcing, but now as you move up market, you see $20 billion institutions, $100 billion institutions now looking for ways to leverage our investment and scale around technology and modernization. And that’s just playing out in our sales efforts. Including the I&W side, as I highlighted in the call, our sales on SaaS model deployments in I&W were up significantly year-over-year and that’s just an indicator of the market looking for ways to lower their total cost of ownership and leverage our scale and investment.

Brett HuffStephens, Inc. — Analyst

Now that’s helpful. And then, Woody, I think in your guidance, I believe you said that you expect CapEx to come in at 7.5%, did I hear that right?

James Woody WoodallChief Financial Officer

I said 7.5% of revenue for CapEx in 2019, which is a continued acceleration off of 2018 really around this modernization of the innovation work that we have and the data center consolidation which is driving some of the market expansion.

Gary NorcrossChairman, President and Chief Executive Officer

Yes, as you can see, I mean, we’re well ahead of where we thought we would be on data center consolidation and the return we’re getting on that investment through not only cost saves, but just availability and market recognition is — has been very beneficial. So we want to continue to lean in on that program and accelerate that for the remaining couple years.

Brett HuffStephens, Inc. — Analyst

Next the data center, should we expect a higher level? I mean, is this now an industry where we just kind of have to spend a little more to keep ahead of the technology curve, even if we look ex the data centers, I mean usually I think it’s been 5% to 6%. Should we expect 6% to 7% even ex data centers going forward or how do we think about the reinvestment that you guys need to do?

Gary NorcrossChairman, President and Chief Executive Officer

We talked about that last May in our Investor update. As you think about it, the industry, we’ve been a leader in this industry for the last 50 years and as we think about where the future is, clearly there is a tremendous amount of legacy technology that’s going to have to be modernized for the future. It’s going to have to be built with cloud deployment from the ground up. And so we do see a hump here, where we’re going to happen invest at a level. But as we talked about in May, we see that declining back to more normalized levels once we’ve moved our legacy technology and application to the future and the whole industry will have to go through this process. You’re seeing it with every call.

As Woody highlighted, when you look at the BB&T-SunTrust combination, they highlighted the need to be able to invest in innovation and digital, that’s just really a different way of saying needing to move their technology stack from historical positions to the future and so we’ll see this run in the sevens as we’re doing today, we’ll also — but we’ll see the advantages of that and then once we get through this curve over the next couple of years, you’ll see it return back to a normalized 5% to 6% as we discussed in May.

Brett HuffStephens, Inc. — Analyst

Okay, that’s all I needed. Thanks guys.

Operator

And the next question or comment will come from the line of Darrin Peller, please go ahead, sir.

Darrin PellerWolfe Research — Analyst

Thanks guys. Look, just, we’re getting a lot of questions though on just the outlook. Just to make sure that where the confidence is coming from and the acceleration of over 100 basis points on top line. So maybe just give us a little more color on whether or not how much of that is already — and what you’ve already signed in terms of new bookings that you had some pretty strong growth out of the quarter?

And then any more granularity you’d give us on the sub-segments, what kind of acceleration influences the I&W category that showed some weakness this quarter? Where the payments business continuing to shows some strength, any more color would be great? Thanks.

James Woody WoodallChief Financial Officer

Yes, I mean, I think most of the strength comes in the sales commentary we’ve been talking about and the buildup of the backlog, that $20.5 billion, a significant chunk of that comes through as we’ve show in our 10-K disclosures and our 10-Q disclosures each quarter. We anticipated that to grow and it did along with this — with the sales themselves. If you look at the components of growth by segment in 2019, I think across the three groups IFS, all those guys will accelerate over the 2018 growth rates. If you break it down between banking and payments and institutional wholesale within GFS, let’s call GFS a roughly 3% grower for full year, you’re going to see higher growth than that out of banking and payments, slightly lower growth in that out of institutional and wholesale for the full year, again with some headwind in Q1 on GFS, but broadly that 4% midpoint for the full year.

Gary NorcrossChairman, President and Chief Executive Officer

Yes, that’s right, Darrin —

Darrin PellerWolfe Research — Analyst

Okay, now that’s helpful color.

Gary NorcrossChairman, President and Chief Executive Officer

— I mean, if you look, the sales success was very, very strong last year, and to Woody’s point, highly reoccurring nature of our business, going into the 2019, we don’t have any more risks than what we would have in 2018, it’s just good strong sales performance and now we’ve got on-board those sales and get the results of that and continue to sell through the year.

Darrin PellerWolfe Research — Analyst

Alright, that’s helpful. Gary, just a quick follow-up. I mean — I know you were asked briefly about the deal, M&A environment. But I guess we’re just getting a lot of questions, so maybe a little more pointedly. I mean, what are your thoughts in terms of your need or not the lack thereof to get something done now, it’s been a little while obviously. And if so, I mean, just remind us the areas that you think about is the core priorities for M&A for FIS, the next year or two? Thank you.

Gary NorcrossChairman, President and Chief Executive Officer

Yes now, look Darrin, I mean, as we’ve talked about consistently inorganic activities will play a role in our strategy. You’ve seen us focus on playing a portfolio, I would tell you that work is done. You’ve seen us focused on strengthening our balance sheet, I would tell you that work is done. You’ve seen our investment strategies and the results for that with margin expansion, so we feel great about the position the company is in, we feel great about our ability to compete in the industry today as we currently sit. With that as a backdrop, we would be interested in pursuing something inorganically if it fits our strategy, we want to find something that will definitely accelerate our growth rate.

We also want to find something that fits within our financial services focus. We’re interested, as I think about the company, I think about three broad categories and I think about them on a global basis. So we think about retail banking, we think about payments and we think about institutional wholesale. And there is a number of opportunities within each of those areas that could make sense from a strategy viewpoint, of course, they would have to be actionable and have to make financial sense. But we do believe that the market will continue to consolidate both on the provider side, as well as on the financial institution side and financial services side. So in scale it’s going to continue to drive and be a differentiator, the need to invest, to continue to modernize both the technology and application layers, and to innovate around those so that our customers can deal with various disruptors in the industry are going to be important and scale will contribute to that.

Darrin PellerWolfe Research — Analyst

Alright, thanks guys.

Operator

And the next question in queue will come from Chris Shutler. Please go ahead.

Andrew NicholasWilliam Blair — Analyst

Hi guys, this is actually Andrew Nicholas in for Chris. Just hoping you could talk a little bit about the recent sales activity in the Institutional and Wholesale segment. I’m mainly curious how the recent market volatility impacted the quarter and the pipeline in that business? And then also how much of the revenue in I&W is priced based on assets?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, now we did see some impact in some of our trading platforms due to volatility, but I also highlighted last year we had a great year of new logo wins in the I&W business where our products continue to take share from a lot of competition in that space. So we’re excited about some of the results that we’ve seen and that of course our SaaS sales are way up as well. We got a number of different products, so pricing is never answered just on a simple unit price, but most of our products are tied to — from a pricing viewpoint tied to some type of unit price and then hosting license fees wrapped around that in the I&W Space.

James Woody WoodallChief Financial Officer

As we’ve talked about in the past, the amount of revenue tired to asset size is very, very small. The amount of revenue tied to trading and volumes is roughly 2.5% of consolidated revenue. So, still in the big picture, a relatively small impact from a volatility perspective.

Andrew NicholasWilliam Blair — Analyst

Okay, great, that’s very helpful. And then, second, I was hoping you could walk through the different factors that would drive you to the high versus low-end of your margin expansion guidance? Thanks.

James Woody WoodallChief Financial Officer

Yes, I think continued efforts around data center consolidation, which is really one of the primary drivers on the outsized margin expansion versus what we talked about last year. Our divestiture activity which we’ve completed this year are driving roughly 30 basis points of margin expansion in 2019. And then continued efforts around managing our costs and deploying one-to-many model type revenues that continue to provide higher incremental margins. Those are the three primary components that help us drive that margin expansion and will help us move toward the higher end there.

Andrew NicholasWilliam Blair — Analyst

Thank you.

Operator

And next question will come — one moment here — will come from the line of Jim Schneider. Please go ahead.

Jim SchneiderGoldman Sachs — Analyst

Good morning, thanks for taking my question. I was wondering if you can maybe talk a little bit more around the IFS accelerations, specifically which products are the ones that are picking up? Maybe talk about which ancillary products, as well as if you’re seeing any kind of new core wins in that acceleration number from four to five this year.

Gary NorcrossChairman, President and Chief Executive Officer

Yes, now, I mean as Woody mentioned and we tried to cover some of that in the prepared remarks, honestly we’ve seen good growth across all of the sub-segments within IFS. So we’ve highlighted some really nice core banking wins in 2008 on actually an outsource basis or in a SaaS deployment, we think that trend is going to continue, our pipeline looks good there, as we bring new capabilities in markets. We’ve seen some strengthening in our payments business throughout 2018 and going into 2019. We’ve seen some great results around mass enablement around that customer base and ability to really innovatively deploy products faster into that market and that’s going to expand.

So, and when you look at the digital footprint, we highlighted our new DIGITAL ONE platform that we brought to market in 2018. Saw a lot of opportunity for that in the GFS segment in 2018, which help overdrive some of the banking business there, but that’s actually now deploying in our IFS market, so getting good reception on that. So we’re really seeing our sales effort hitting on all cylinders. We tend to skew toward the larger side of Community Banking historically and we highlighted a number of examples in the script of where that came through in the quarter.

Jim SchneiderGoldman Sachs — Analyst

It’s helpful, thanks. Then maybe as a quick follow-up, relative to the BB&T-SunTrust environment, I guess different angle on it, which is, what are your clients saying about their competitive response if any to that merger, kept (ph) the next level down from the merged super regionals and can you maybe talk about where they might decide to invest more versus any places you think that might pull back a little bit?

Gary NorcrossChairman, President and Chief Executive Officer

I think it’s early to say what the response is. We’ve got to see how that combination transpires. I would say, in general, if you look at the large regionals or really large community institutions, we’re seeing in our sales success throughout 2018, really starting to see a strong demand to modernize the platforms. A lot of those institutions have been dealing with a level of technology and application that for years and they’re looking for how do we modernize our platforms and lower our total cost of ownership. We’ve highlighted a couple of examples in the script.

We’re a $100 billion institution moved to a much more robust Payments-as-a-Service solution, leveraging all of FIS’s capabilities and leveraging our cloud based deployments. We have another $20 billion institution that really is moving from a series of discrete solutions that they were leveraging in-house development resources to bring together and really taking advantage of the full solution suite of FIS. And those are just indicators that while people are looking to merge and grab scale, so they can have investment dollars to accelerate their innovation and change, all of them are still talking about the need to change. So, do we think there will be further consolidation, as Woody talked about, we don’t believe it’s going to accelerate over where it was in 2018, but it’s very hard to predict.

Jim SchneiderGoldman Sachs — Analyst

Thank you.

Operator

And we’ll go to line of Ashwin Shirvaikar. Please go ahead.

Ashwin ShirvaikarCiti — Analyst

Hey, Gary. Hi, Woody. My question, at least my first question was, you talked already about the cadence of revenues through the year is improving as you go from 1Q to 4Q. Could you talk about the cadence of margin improvement, particularly given you’re saying that you’re quite far along on the data center consolidation side and solution modernization. So could you kind of talk about how we should think about how the cost side flows through?

James Woody WoodallChief Financial Officer

Yes, if you think about, we’ll continue to see incremental benefit of data center consolidation along the year. So that will help incrementally grow margins from Q1 through to Q4. The divestiture components will go in line with where the timeline is on the divestitures and sales, so you’ll see that flowing relatively ratable over the year. And in the first quarter, we’ll probably be a little lower in terms of margin expansion because of the heavy license component that we talked about this time last year in the first quarter of 2018. So that should give you some color on how we think about where the margins will flow, Ashwin.

Ashwin ShirvaikarCiti — Analyst

Okay, got it. And then the second question is, broadly speaking, as you talk about year-over-year improvement in demand, it seems to me, you’ve touched on a few points and I just like to confirm, I mean there seems to be a higher win rate perhaps, there seems to be broadly maybe more demand for the particular products that you are now bringing and you’re also, with mass enablement, onboarding faster. Is that — am I understanding correct that you’re actually checking all these boxes?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, no, I think, I would add one more. I think the trend toward outsourcing our SaaS deployment leveraging our investment around cloud, so our data center consolidation is really driving two things. One, it is driving cost reductions, we’ve highlighted that, but it’s really elevating our technology stack much more modern architecture and deployment with much higher resiliency and so all of those things are feeding into people wanting to leverage that investment that FIS is made. And so therefore, as we’ve talked in the past, as we move from on-premise deployment to SaaS deployment, you’re going to see a much higher revenue stream, larger contracts, et cetera. But I think those three things are really driving the increase in growth rates that we’ve talked about.

James Woody WoodallChief Financial Officer

If you think back a few years ago, we started increasing our investment in CapEx, that CapEx is not just hard assets for data center consolidation, but it’s also around product and innovation and trying to bring those new solutions to market faster. I think all of those things collectively are resonating with the client base and it’s resonating in the actual sales closure rates.

Gary NorcrossChairman, President and Chief Executive Officer

Yes and the point you made about mass enablement, we are very excited about it. Obviously, generated a small — relatively small amount in 2018, but that’s accelerating dramatically going into 2019 and really how did you — one of the things, a lot of the things our clients are asking for is, how do you get product to market faster? How do remove friction through that process? And so we’ve spent a lot of money on innovating to be able to bring some of those solutions, not one at a time, but how do we deploy a new capability across a 100, across 500, across 1,000 customers. And we think it’s going to make a real impact as we continue to innovate around that and bring more and more capability to market faster.

Ashwin ShirvaikarCiti — Analyst

Understood. Safe to say that you guys are maybe in the middle innings, these kind of transitions tend to be multi-year in nature, it can take three years, four years, your middle innings is fair?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, I think that is fair. We highlighted data center consolidation. We just wrapped up the third year of data center consolidation and we’re very pleased at where we are on the run rate cost takeout. As I highlighted in the script, we’re ahead of where we originally thought. So we still have another two to three years left globally on that. We’ve got two years in the domestic. So, we’re going to continue to push through that and we’re going to continue to drive a total of more than $250 million of cost saves out of just that one exercise. But it’s more important to understand where the end stage is going to be at that point in time and at that point in time when you look at resiliency, when you look at the level of cloud-based computing we’re going to have in the industry, when you look at our security posture, we’re going to have a great environment for our clients and our prospects to take advantage of it. And then when you build the application modernization, innovation that we bring in the market, we’re excited about the future at FIS.

James Woody WoodallChief Financial Officer

And these investments are starting to translate into accelerating revenue growth from 2% to 3% to 4%. We are feeling really good about getting good return on that investment.

Ashwin ShirvaikarCiti — Analyst

Got it. Thank you, guys.

Operator

And we’ll go to the next question in queue comes from George Mihalos. Please go ahead.

George MihalosCowen and Company, LLC — Analyst

Hey, good morning guys. So just wanted to ask on Brazil, now that you’re liberated from Bradesco, how have the sales opportunities been, just curious kind of how the commentary is with other potential clients and partners? And then the $0.08 of dilution, just want to make sure I understand where that’s coming from? Is that because of the change in reporting or is there something else that’s driving that dilution?

Gary NorcrossChairman, President and Chief Executive Officer

Well, first, we’ve got a great long-term relationship with Bradesco, they just — we’ve now got a five-year commercial agreement with them. So they’re still going to be a great substantial client going forward. But you’re right, George, it really does free up the ability now for us to bring more product, more capability into that market. Historically, the way the JV worked, we were somewhat encumbered because everything had to come through that joint venture. And therefore, a lot of customers weren’t interested in giving the ownership structure. So it does now free us up to move new product capability in market. Woody, was just down there, I know he met with a lot of the clients in market and a lot of the prospects. I would tell you, our sales teams is very excited. We are also already moving some of our capabilities down there. So I think Brazil is going to be a very good market for us going forward.

James Woody WoodallChief Financial Officer

If you’re specifically asking on the $0.08 dilution, it’s really around the timing. We had anticipated this thing to close roughly June 30th of this year versus January 1st. So instead of having that revenue and EBITDA relatively consolidated for six more months, which is got done early.

George MihalosCowen and Company, LLC — Analyst

Okay, great. And just a quick follow-up, Woody, for purposes of calculating EPS before 2019, more in line with how you’ve done it in the past. Can you break out for us what your expectation is for core D&A and then intangible amortization?

James Woody WoodallChief Financial Officer

Yes, I think if you think about it, we’ve got disclosures in there that give you one-for-one. We haven’t given DNA disclosures for full year yet, but you could think about roughly $1.75 of difference between the $7.35 to $7.55 versus an old method of $5.60 to $5.80.

George MihalosCowen and Company, LLC — Analyst

Great, thanks guys.

Operator

Our next question comes from Andrew Jeffrey, please go ahead.

Andrew JeffreySunTrust Robinson Humphrey — Analyst

Hey, good morning guys, thanks for taking the question. You’ve been talking very consistently for the past year about process improvement, product delivery improvement, which I take to mean time-to-market and that newer solutions like SaaS. I just wonder if you think over a multi-year period, how do you quantify the ability to kind of bend your growth curve, I mean 2019, IFS did a little better, maybe GFS has more trading volume exposure, but on a compound basis, is there a point where some of these investments really start to improve the sustainability of your growth, the cycle notwithstanding?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, now obviously we think so, Andrew, and we’re seeing that in our sales cycle. We’re seeing sales accelerate year-over-year. We’re seeing growth rates accelerate year-over-year. We’re seeing margins accelerate year-over-year and all of that’s about our consistent strategy around modernization, both technology and the application layer and you’re right, I mean the industry is looking for more flexibility, they’re looking for more speed and they’re looking for higher availability and you’re not going to get that through the historical technology stacks. And it’s — obviously it’s a heavy lift that all providers will need to go through. And we’re just moving into our fourth year of that. And so we do feel good that you’ll continue to see our growth rates trend up. And given the reoccurring nature of our revenue, we’ll continue to be very predictable and we’ll lead the industry with regards to margin as well. So, we’re very confident in the investments. We’ve been very consistent on the strategy and we think the long-term outcome for the company is going to be a much stronger growth rate as we deploy this.

Andrew JeffreySunTrust Robinson Humphrey — Analyst

Okay. And if you could maybe opine a little bit on geo mix. I mean a lot of the increased tech spend as you cited in the SunTrust-BB&T deal seems to be driven by US imperatives. What about Europe and rest of world, where do you think we are in terms of demand for more digitized solutions and perhaps what might change the growth parameters outside of the US?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, we’ve been fairly consistent. We saw Europe return slower than what than some of our other geos, but we had a really good year in Europe with regards to sales demand and we have a good pipeline going into 2019 on Europe. I mean one of the things that we’re doing and I referenced in the script, not only are we making all this investment in technology, we’re getting better leverage across the two segments. So we’re building out an omni-channel digital — next generation digital platform called DIGITAL ONE, great success with that in the US in 2018 in the GFS market, you’re seeing us deploy that very rapidly in the IFS market. You’re going to also see us push that into other geos around the world. So we’re getting more leverage out of our investment as well across the various segments. We’re doing the same thing with regard to our data center consolidation and our technology stack. As we move more of our compute into the cloud, both segments are able to take advantage of that with industry-leading availability and costs, so.

So all of these things, we think we’ll be able to continue to expand in the various geos we’re in. We highlighted some opportunities we have in Brazil. We still see good opportunities in Europe, especially in the UK and certain Western European countries. And then in Asia, we continued to have good solid growth in Asia and we think all of that will continue.

Andrew JeffreySunTrust Robinson Humphrey — Analyst

Thank you.

Operator

And our last question on today’s call this morning will come from Ramsey El-Assal. Please go ahead.

Ramsey El-AssalBarclays Investment Bank — Analyst

Hey guys, thanks for squeezing me in here. I wanted to ask, kind of following up on Ashwin’s question a bit. You called out really strong sales backlog and obviously your solutions are resonating in a marketplace, but is there a IT, bank IT spending sort of overlay here, it really feels like banks wallet sort of opening up in a nice way. Can you comment a little bit on the broader environment irrespective of the strength of your solutions?

Gary NorcrossChairman, President and Chief Executive Officer

Yes Ramsey, I do think we’re seeing that. I think the recovery has been slow. And I think that financial institutions broadly are realizing that they’re now having to open up their spend and actually start spending money on next generation technologies and we’re seeing the results of that in our sales cycle. They really are looking for how to achieve a higher level of availability and risk posture. You’re not going to do that unless you really embrace some of these new cloud technologies. They’re really looking for what are built digitally native from the ground up. How do we drive more open API framework, so we can build around the edges.

And all of those things FIS have been investing in very heavily, whether it’s Code Connect, which we launched last year which we’re seeing great adoption, which is truly and a new fully open API framework, whether it’s some of our next generation components that we’re now bringing to market. We highlighted a large bank that’s entering the US with a digital institution that’s going to take our cloud-native core banking solution surrounded by DIGITAL ONE or our omni-channel digital platform.

Also as you go over into the I&W space, we’re seeing a lot of demand and highlighted that with our new logo sales, that’s indications of our clients now looking to move from their historically in-house developed products or even third-party products that they customized and cobbled together moving to the future. So yes, I do think that IT spend is opening up in the market and we’re seeing in our sales cycle FIS be the beneficiary of that.

Ramsey El-AssalBarclays Investment Bank — Analyst

Okay, that makes a lot of sense. I wanted — as a quick follow up here, I wanted to ask about your margin — you’re inherent operating leverage in the business, I mean the full year of margin guidance obviously came above — came in above your three-year range. And there’s quite a bit of moving parts in terms of divestitures and mix and other factors. But when you strip away some of the non-recurring contributors like data center consolidation expense efficiency, has your underlying operating leverage kind of improved relative to, when you last gave that sort of long-term guidance just due to mix and divestitures and other factors. I mean, could we be looking at margin out performance kind of in the out years relative to that guide or is it really what’s driving the out performance sort of non-recurring factors at this point?

Gary NorcrossChairman, President and Chief Executive Officer

Yes, I think the quality of the assets at this point is better than it was when we talked about things in May last year. So to your point, I think you could see us driving midpoint or higher on that margin even in the out years once we get past data center consolidation. So, yes, I think it is an improved cost efficiency and business mix that we have, that’s an ongoing benefit.

Ramsey El-AssalBarclays Investment Bank — Analyst

That’s terrific. Thanks for taking my questions.

Gary NorcrossChairman, President and Chief Executive Officer

Thank you for joining us today and for your ongoing interest in FIS. We are pleased to deliver another year of strong revenue, profitability performance and earnings growth. We have a robust pipeline heading into 2019 with positive sales momentum. Combined with our business model and consistent execution of our strategy, we are confident that we are paving the way for a successful 2019 and beyond. I’d like to thank our loyal clients who depend on and trust us to keep their businesses running and growing every day. And I’d like to thank our leaders and employees for their hard work and dedication in serving our clients, it’s because of both that FIS continues to empower the financial world.

Thank you for joining us today.

Operator

Thank you. And today’s conference will be made available for replay after 11 o’clock this morning and running through Tuesday, February 26th at mid night. You can access the AT&T TeleConference Playback Service by dialling 1800-475-6701 and entering the access code 462122. International participants may dial 1320-365-3844. Those numbers again, 1800-475-6701 or 1320-365-3844 with the access code 462122. This does conclude our conference for today, thanks for your participation and for using AT&T TeleConference. You may now disconnect.

Duration: 67 minutes

Call participants:

Peter GunnlaugssonSenior Vice President, Investor Relations

Gary NorcrossChairman, President and Chief Executive Officer

James Woody WoodallChief Financial Officer

David KoningBaird Equity Research — Analyst

David TogutEvercore Partners — Analyst

Brett HuffStephens, Inc. — Analyst

Darrin PellerWolfe Research — Analyst

Andrew NicholasWilliam Blair — Analyst

Jim SchneiderGoldman Sachs — Analyst

Ashwin ShirvaikarCiti — Analyst

George MihalosCowen and Company, LLC — Analyst

Andrew JeffreySunTrust Robinson Humphrey — Analyst

Ramsey El-AssalBarclays Investment Bank — Analyst

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