Fidelity National Information Services, Earnings Call NUGGETS: M&I Harris Relationship, Sales Environment and Pipeline Activity

On Tuesday, Fidelity National Information Services, Inc. (NYSE:FIS) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

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M&I Harris Relationship

David Koning – Baird Equity Research: And I guess first of all, just a little more clarity on the M&I Harris relationship. I think I remember back when Metavante was acquired, you ran about $120 million revenue run rate, and I know Harris adds a little bit more to that. But it seems like a pretty high incremental margin if you’re only losing part of that revenue and to lose $60 million of EBITDA. I mean is that just it’s that it is very high incremental margin?

Gary Norcross – President and COO: Obviously, one of the benefits that our environment is, when you operate fully outsourced environments on highly leveraged platform, those incremental margins can be very high. We’ll continue to have a significant relationship with BMO Harris going forward. In fact, they will still be a top 10 client. We certainly think we’ll drive higher revenue through our professional services engagement as well, and obviously we’ll continue to sell additional clients on to that platform. But at the end of the day, we’re going to have a very strong relationship with them going forward.

Frank R. Martire – Chairman and CEO: David, that’s right, that’s very important to us. They’re clearly a top-tier bank and one that we want to build a very large relationship with and one that we’ve had a great partnership with over many years.

David Koning – Baird Equity Research: And there is no reason over a long period of time that you can’t build it back up pretty significantly?

Gary Norcross – President and COO: Absolutely.

Frank R. Martire – Chairman and CEO: Absolutely. Absolutely, that’s what we will do.

David Koning – Baird Equity Research: And then the second one is, the last few years the second half EBITDA margin has usually been about 3% better than the first half EBITDA margin. This year the way that guidance is kind of setting up is probably a little less. It looks more like 200 basis points better, maybe even a little less than that in the second half relative to first half, is that because some of the growth might be coming on at a little lower margin or is it conservatism or maybe kind of fill us in on that.

Michael D. Hayford – Corporate EVP and CFO: Well, I think we had a very strong start to the year obviously. We had some particular (in-payments), we had some revenue come on at very strong margins. I think it’s a great start to the first half of the year. I think we’ve got as we referenced some challenging comps in the second half. And we have some clients who have been de-converting, so it’s a little bit different than we saw last year, but that’s how we anticipate the year to build out.

Sales Environment and Pipeline Activity

Glenn Greene – Oppenheimer & Co. Inc: I just wanted to make sure I’m understanding sort of the pipeline and sales activity, so maybe that’s the questions for Gary. If I heard right, North America sales was down a little bit year-over-year, but in aggregate you were sort of saying sales was kind of flat year-over-year, maybe you could just sort of give me a little bit help on sort of the environment and sort of more importantly pipeline activity.

Gary Norcross – President and COO: It’s a great question I appreciate you asking for the clarification, all-in-all our sales were on par for the full-year when you look at international sales or non-financial institution sales. Clearly within North American financial institutions in the second quarter, we saw a little slow down. As we mentioned, we don’t feel we’ve lost any business due to our clients getting a letter from the regulators, although we will say we’ve had a number of conversations and we do think that some of those deals got delayed into the third quarter, but we’re very confident based on our pipeline, not only in financial institutions, but also in non-financials and international, we’re going to continue to end the year very strong.

Glenn Greene – Oppenheimer & Co. Inc: So, other than the letter than went out, I guess a lot of people are sort of concerned about the macro environment and sort of spending activity and levels. There is obviously been a lot of mixed messages from a lot of the big IT services companies regarding North American Financial Services. So, was there anything beyond just sort of the letter kind of stemming deal closures?

Frank R. Martire – Chairman and CEO: Not really. I mean at the end of the day, we actually the number of deals that we had signed to financial intuitions were actually up. So our clients are making decisions. We think some of our bigger deals just got pushed into the third quarter because we are having another conversation. So, at the end of the day our clients, especially financial institutions worldwide they are all dealing with regulatory challenges frankly unprecedented regulatory challenges, they are generating a very, very obviously difficult economy, but even as the economy rebounds they’re trying to figure out how to reinvent themselves. So, we saw strong growth in our professional services business. So, we can’t lose sight of that as well. So all-in-all, we still think we can get back what we missed in the second quarter on the full year within financial institutions and we think non-financial as well as international is going to continue to have a strong year.

Glenn Greene – Oppenheimer & Co. Inc: Then how about quickly an update on Capco sort of thinking both North America and Europe, and particularly interested in activity for transformational larger deals sort of leveraging both Capco and FIS products?

Frank R. Martire – Chairman and CEO: Yeah, well Capco was up significantly. They had a fantastic quarter and it that was both in North America and in Europe, and we continue to see Capco’s consulting business as I said grow very strongly and most of it is around more transformative type consulting engagements. I would tell you the way our teams are working our sales teams and our business with Capco both North America and Europe, we’re very pleased with and that organization is certainly performing within our expectations at this time.

Glenn Greene – Oppenheimer & Co. Inc: Anyway to put a number on the Capco growth?

Michael D. Hayford – Corporate EVP and CFO: Well, I mean we haven’t really carved Capco out. What we shared last year is they were a little behind our expectations and plan, and we’re excited that in the second quarter they’re ahead of us, (I think) their plan or expectations (for them). So, the size – you saw the size we acquired, and was around a little over $200 million, and so obviously we’ve seen growth from that point.

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