Feb 4, 2015
Executives
Stephanie Gregor - VP, IR Jeff Yabuki - President and CEO Tom Hirsch - EVP and CFO Mark Ernst - EVP and COO
Analysts
Jim Snyder - Goldman Sachs Rayna Kumar - Evercore ISI David Koning - Robert W. Baird Ramsey El-Assal - Jefferies Chris Shutler - William Blair Paul Condra - BMO Capital Markets Darrin Peller - Barclays Tien-tsin Huang - JPMorgan Brett Huff - Stephens Glenn Greene - Oppenheimer Kartik Mehta - Northcoast Research
Operator
Welcome to the Fiserv Fourth Quarter and Full Year 2014 Conference Call. All participants will be in a listen-only mode until the question-and-answer-session begins following the presentation.
As a reminder, today's conference is being recorded. At this time, I will turn the call over to Stephanie Gregor, Vice President of Investor Relations at Fiserv.
Stephanie Gregor
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 a 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.
I must state that otherwise, performance comparisons made throughout this call are year-over-year metric. Please note that due to the timing of our Spring Client Conference, we will release our first quarter's earnings a bit later than usual.
And also we're pleased to announce that we will hold our Investor Day on June 16 in New York City. And with that, I will turn the call over to Jeff.
Jeff Yabuki
Thanks Stephanie, and good afternoon, everyone. Very solid performance in the fourth quarter capped off an excellent 2014.
We increased our adjusted internal revenue growth by 150 basis points, recorded our 29th consecutive year of double-digit adjusted earnings per share growth and delivered record levels of both sales and free cash flow per share. We're pleased with our accomplishments for the year.
We enter 2015 with momentum and focus. We intend to deliver strong results, which we expect will include our fourth straight year of increasing our adjusted internal revenue growth rate.
However, before we fully define expectations for 2015, let me recap some highlights for the quarter and the year. At the outset of 2014, we communicated three key priorities to help you gauge our progress for the year.
First to continue building high quality revenue growth while meeting our earnings commitments. Second, extend market momentum to deepen client relationships with a larger share of our strategic solutions and third to deliver innovation and integration, which enhances results for our clients.
One of our key objectives is to increase our internal revenue growth rate annually and 2014 was no exception. Our adjusted internal revenue growth rate was up more than 150 basis points to 4.3% for the year.
These results also include a negative currency impact in the fourth quarter, which prevented us from being at the top end our full year internal revenue growth guidance. Adjusted internal revenue was up 4% in the quarter.
Adjusted earnings per share was up 13% in the quarter and for the full year, also increased 13% to $3.37. Importantly, adjusted operating margin for 2014 was up more than 50 basis points, consistent with our goal of delivering high quality revenue growth.
Free cash flow performance was stellar at $965 million for the year, which does not include $110 million of dividend distributions from our StoneRiver investment. Combining our well defined capital allocation strategy, with strong cash flow generation, resulted in a 15% increase in free cash flow per share to a record $3.82 for the year.
To that end, we allocated nearly $1.2 billion to share repurchase in 2014, which reduced our comparative share count by 6% at December 31. Our second priority was extending market momentum to deepen client relationships with a larger share of our strategic solutions.
On that front, we closed seven DNA sales in the quarter, 26 for the full year and have now added 57 new clients since the acquisition in 2013. The DNA platform is highly attractive for progressive institutions looking for real time straight-through processing, modern architecture and have a desire to look to deliver new value in a data centric world.
Only 15 DNA clients went live in 2014 and we expect that number to more than double in 2015. In addition, integrated sales for open solutions continues to perform beyond our initial revenue synergy estimates with $40 million in 2014 and $60 million cumulative since the 2013 acquisition.
We continue to ride the digital wave adding nearly 400 new mobility clients in 2014. We now have over 14 million mobile users and importantly, grew the mobility ASP community by more than 60% for the year to nearly three million subscribers.
We also went live with our mobility business solution in the quarter and are seeing strong demand for our mobile enabled commercial capabilities. Sales for our market-leading digital payment solutions were strong in the quarter as well.
With 109 signings, Q4 was our strongest bill payment sales quarter since 2012 and we added a total of 356 new clients for the year. We also added over 300 financial institutions to the Popmoney network.
We have a strong digital payment presence at many of the largest financial institutions in the country. As an example Citizens Bank, a $131 billion financial institution renewed its agreement with Fiserv for multiple digital payment capabilities, signing a seven-year extension for CheckFree RXP, Popmoney and TransferNow along with small business versions of each of these services.
Our third priority was to deliver innovation and integration, which enhances results for our clients. During the quarter, we launched NOW from Fiserv.
NOW are the Network For Our World, is designed to enable payments beyond the point of sale to move with intelligence at the speed of the user's choice. We believe this capability will translate to meaningful value for financial institutions and their customers.
We recently extended our bill payment, account to account transfer and P2P relationship with U.S. Bank and are working closely with them as they provide their customers with a differentiated payment experience, based on several factors including differentiated transaction pricing and payment speed flexibility.
We're excited about the extension of our relationship and the opportunity to help U.S. Bank and the financial industry transform the more than 55 billion payments that occur beyond the point of sale each year.
Real time money movement is top of mind in the U.S. and around the world.
Given our suite of solutions, we see multiple opportunities for Fiserv to play a role in this payments transformation. We were proud to have been selected by Swift to help build the infrastructure of the New Payments Platform or NPP for Australia.
This is an expensive project whereby Swift and Fiserv will provide fast, flexible and data rich payments infrastructure to the country. This project was a key competitive win against a broad set of IT companies and a testament to the strength of our payments capabilities.
We're also seeing strong interest and agility, our new cloud based account processing solution in the U.K. Demand is high and structures across a far broader range of institutions than we originally anticipated.
We expect to continue investing in this platform in 2015 as our first clients go live late this year. With that, let me turn the call over to Tom to provide additional detail on our results.
Tom Hirsch
Thanks Jeff and good afternoon, everyone. As you heard upfront, we executed well in the quarter and our results for the year were excellent.
Adjusted revenue for the quarter and full year increased 4% to $1.2 billion and $4.7 billion respectively. Adjusted internal revenue growth was also 4% in the fourth quarter, which includes a negative currency impact of 40 basis points.
For the full year, our adjusted internal revenue growth was over 4%, increasing a 150 basis points compared to the 3% growth reported last year. adjusted earnings per share for the quarter was $0.89 and for the full year was $3.37, both increasing 13% over the prior periods, coming at the top end of our EPS guidance range for the year.
Adjusted operating margin for the quarter was up 10 basis points to 30.6%, and for the year was up 52 basis points to 30.5% driven by high quality revenue growth along with our continued focus on operational efficiency. We're particularly pleased with our payment segment performance, delivering 6% adjusted internal revenue growth in the quarter and 7% for the full year, accelerating 200 basis points over the prior year.
Performance in this $2.4 billion revenue segment, was strong across a majority of the businesses including card solutions, channels, bill payment and output solutions. As you will recall, biller headwinds were a drag at our revenue growth this year, which will annualize in the first half of 2015.
Debit transaction growth was 12% in the quarter and 11% for the year. These strong results are a combination of above market transaction growth in our client base, along with the impact of continuing strong sales.
We signed 38 new clients in the quarter and 134 for the year. We remained focus on enabling our clients to be at the forefront of the dynamic card payments landscape.
Accordingly, we expect areas such as EMV and tokenization to spur meaningful, new revenue over the next several years. Payment segment adjusted operating income was excellent, up 10% in the quarter to $202 million and for the year increased 9% to $768 million.
We had another quarter of strong adjusted operating margin performance increasing 120 basis points to 32.1% and for the full year, segment operating margin was up 70 basis points to 31.7%. Growth in the high quality payments revenue is fueling margin expansion, which we expect will continue into the foreseeable future.
Adjusted revenue in the financial segment increased 2% in both the quarter and the year to 610 million and $2.4 billion respectively. Full year adjusted internal revenue growth in the financial segment was 2% up 120 basis points over the prior year.
Growth in this segment was led by our account processing and lending businesses including strong sales to existing clients and the benefit of DNA implementations. As mentioned earlier, revenue was negatively impacted by currency, which reduced growth in the segment by 50 basis points in the quarter.
Adjusted operating income in the financial segment was $192 million in the quarter, down 8% compared to the prior year's very strong results. Adjusted operating margin in the quarter was down 300 basis points in the prior year and 130 basis points sequentially.
The margin decrease in the quarter was driven primarily by three factors. First, our results were compared to a record operating margin performance in the prior year.
Second, we had a 100 basis points of negative impact due to the timing and level of variable compensation. And finally, we experienced a 150 basis points of negative impact from our international operations, due to several factors including revenue mix and investments in our new agility solution.
For the full year adjusted operating income in the segment was up 2% to $773 million and segment margin was flat at 32.6%. Corporate segment net operating performance in the quarter improved $6 million sequentially and was $12 million better than the prior year.
This improvement was primarily driven by lower consulting and legal cost along with higher prior year expenses due to the implementation of a new HR system. Our effective adjusted tax rate was 35% in the quarter and 34% for the full year.
Both the quarter and year-to-date rates were 80 basis points lower than their respective prior year periods, primarily due to the street tax benefits recorded in 2014. We expect our adjusted effective tax rate to be up approximately a 100 basis points to 35% in 2015 which will have about a $0.05 to $0.06 negative impact and adjusted EPS for this year.
We also expect a substantial majority of that impact to occur in the first quarter due to a 30% comparable adjusted tax rate. We received $110 million of cash distributions from our StoneRiver joint venture in 2014, which are excluded from both free cash flow and adjusted EPS.
The joint venture has made significant progress effectively and profitably, monetizing the businesses through disposition. As a result, our adjusted equity earnings from this investment, excluding transaction gains is down about $0.03 per share from the prior year.
We anticipate 2015 adjusted equity earnings to also be down sequentially. We generated a record $965 million of free cash flow in 2014 and an exceptional 15% increase in free cash flow per share to $3.82.
Our results were meaningfully higher than expected due to the timing of several working capital items, which positively impacted free cash flow for the year. This strong result is even more impressively considering the 20% free cash flow per share growth in 2013.
Our focus on high quality revenue and disciplined capital allocation continuous to produce excellent free cash flow per share results. Total debt at year end was $3.8 billion or 2.2 times trailing 12 month adjusted EBITDA, which is well within our target leverage ratio.
We repurchased $5.4 million shares of stock in the quarter for $369 million. For the year we’ve returned nearly $1.2 billion to shareholders, repurchasing $18.7 million shares in 2014 at an average cost of approximately $62 per share.
We announced the new $20 million share repurchase authorization in the fourth quarter and at year end had 19.8 million remaining shares authorized for repurchase. With that, let me turn the call back to Jeff.
Jeff Yabuki
Thanks Tom. Sales were 120% of quota for the quarter and we attained 106% of the quota for the year.
Strong results in card solutions, digital channels, lending and account processing led the way to a record 2014 performance. Actual sales were up 7% in the quarter and 12% for the year.
We feel good about our sales performance and expect our momentum to continue. We had $89 million of integrated sales in the quarter and finished the year up 7% to $260 million.
Clients have maintained a keen focus on solutions such as card solutions, bill payment, mobility and source capture. As I mentioned upfront, results within the open solutions client base are very strong nearly doubling integrated sales year-over-year.
We’ve achieved operational effectiveness savings at $70 million in 2014 or 117% of our $60 million goal. Savings this year were driven by strong procurement results and open solutions synergies.
We continue to see substantial opportunities to drive efficiency, particularly across our data center and real estate footprint. We plan to accelerate our execution this year in a manner that should provide meaningful operational effectiveness benefits in 2016 and beyond.
The banking sector firm during the year with only seven regulatory actions in the quarter, it was down meaningfully over the last two years. M&A activity picked up during the year and we expect that trend to continue.
We also saw some improvement in spending patterns compared to the last few years, which we believe will moderately extend 2015. Financial intuitions are focusing their technology spend on solutions that generate revenue, enhance the customer experience, deal with regulatory compliance and drive operational efficiency.
Payments are getting the majority of the industry Inc right now with area such as Apple Pay, tokenization and systemic real time money movement capabilities at the forefront of the discussion. We are well suited partner with our clients in the evolving payments arena.
With that let’s move to 2015. In addition to financial guidance, we have defined three key enterprise priorities for the year.
First continued 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 deliver innovation and integration which enables differentiation and value for our clients. Now let’s move to 2015 financial outlook.
As we accomplished in 2014, our objectives are to sustainably increase our internal revenue growth rate, expand operating margin and turn that combination into compelling free cash flow per share. We expect adjusted internal revenue growth of 5% to 6%, a strong step up from 4% in 2014.
The wider revenue growth range this year considers a number of performance scenarios including among others, the level of EMV card production revenue and currency fluctuation. We also expect our growth rate to buy as to the second half of the year due to the tougher comparisons in the first half of 2015 and the expected ramp of new revenue throughout the year.
We expect adjusted earnings per share growth for the year of 11% to 14% or a range of $3.73 to $3.83. We also expect that our focus on the combination of high quality revenue and operational effectiveness will again translate to full year adjusted operating margin expansion of at least 50 basis points.
We estimate our free cash flow per share for 2015 to be at least $4.12 following our very strong 15% per share growth in 2014, incorporating this year's guidance results and an expected three year compound growth and free cash flow per share of 14%. Our operational effectiveness target for 2015 is $50 million and our integrated sales target is $250 million.
Lastly, although we don’t give quarterly guidance, we expect the first quarter to be our most difficult comparison for the year given the lower tax rate in 2014's first quarter and that Q1 was by far, our strongest revenue growth quarter last year. In conclusion, our business model is working and we enter this year with momentum and excitement about the opportunities -- had, we are well positioned to booster our adjusted internal revenue growth led again this year, extend operating margin and deliver value for you our shareholders due to strong cash flow generation and capital allocation.
Lastly, let me thank the more than 21,000 associates to focus their collective energy on delivering value per clients each and every day. It truly our Fiserv’s most important asset.
With that Tony let’s open the line for questions.
Operator
Absolutely. We'll now begin the question-and-answer session.
[Operator Instructions] And our first question comes from Jim Snyder of Goldman Sachs. Your line is open.
Jim Snyder
Good afternoon. Thanks for taking my question.
I was wondering, if you could may be start on the DNA wins. I believe you said there was 15 customers that converted in 2014 and just to clarify are you expecting 30 more to convert to revenue in 2015?
And maybe you could possibly size the revenue contribution of those conversions?
Jeff Yabuki
Yeah, Jim you got those numbers right. So we have '15 went live and '14 and we expect that to a little bit more than double in 2015 and we wouldn’t be able to size it right now, but clearly that gives us momentum going into '15.
And also keep in mind that those conversions will happen on a ratable basis, not perfectly ratable, but a ratable basis throughout the year and so even the clients that go live in mid year won't even anniversary until 2016. So we expect that momentum to continue into the future.
Mark Ernst
And I think just to add to what Jeff said, Jim is the add-on, the payments revenue etcetera is going to continue to come on as those implementations continue. So that growth will be a nice tailwind over the next several years.
Jim Snyder
That's helpful. Thanks.
And then as a follow-up, maybe you could just comment on -- the Fed released the payment monetization road map last week. Can you maybe talk about the opportunity that you have for real-time payments, Popmoney or other real-time transfers, as you go through the next few years?
Do you think that banks are going to be more willing to accelerate their investments in these areas, or do you think maybe that actually makes and take a bit of a more of a wait and see approach on those investments?
Jeff Yabuki
Yeah, my take on that Jim is all the discussion around real time is quite positive, in terms of banks thinking about how can we systemically allow those $55 billion payments that don’t occur at point-of-sale to move faster than they do today. I think most everyone would say that over -- its going to be a number of years until that roadmap is actually comes together and however it ultimately gets settled that it allows in a single way for that, for the real time systemic movements we occur.
And so from our standpoint, we’re having a lots and lots of conversions with intuitions, who want to take advantage of the idea and turn it into opportunities to drive value for their customers, look at opportunities, drive high quality fee revenue and really using Popmoney and bill payment and other app -- transfer applications as a way to enable that kind of payments capability. So from our perspective, we see it to be positive, ultimately we do think that, that real time changes the nature of how bill payment and P2P specifically work today and that will be important transaction drivers over the next three to five, seven years.
Jim Snyder
Thank you.
Jeff Yabuki
Thank you.
Operator
Our next question comes from David Togut of Evercore ISI. Your line is open.
Rayna Kumar
Good evening. This is Rayna Kumar for David Togut.
Are you seeing DNA gaining share specifically from Symitar and the large credit union space?
Jeff Yabuki
Rayna what we're really seeing is that institutions who are really looking for opportunities to modernize their infrastructure to use data in a way that is different than historically has happened in the account processing or in the core processing engines are looking at this, at this technology as an opportunity. We see that happening in the bank spaces as well as in the credit union space.
Rayna Kumar
Got it. Can you quantify your expected operating margin expansion between the payments and financial segment for 2015 and just talk a little bit about the drivers?
Jeff Yabuki
Yeah, we one of the things that, that we don’t do as we don’t give segments, segment margin guidance and the reason why we don’t do it is we’re going to see at different times and in different places. We’re going to have opportunities to invest, we’re going to see different performance across business lines, you’re going to have changes and comparability and lots of different factors that will have an impact your credit variability within the segments.
And from our standpoint, we’re really operating the company to deliver at least 50 basis points of margin at the company level and that will come from a combination of new growth and existing changes and existing revenue scale, operational effectiveness and the like, so from our perspective it’s hard to sit here right now and say that we will have room in one segment or another, we do have a high degree of confidence that will see margin grow. And certainly in 2015 by at least 50 basis points is the guidance that we talked about as well as our longer term outlook.
Mark Ernst
Yes, I'll just give a little bit more clarity there, a bit more detail around the segments. On the payment side, clearly we had a very strong year and we’re operating at good scale and why those operations continued to grow those very well.
Financial was, as you well know was flat on a year-over-year basis. We clearly have a few things going on there we really have some difficult international comparisons that we’re also investing as Jeff highlighted in our GLD platform during the year.
We’ve also ramped up a lot of resources in our DNA business around implementation and development. And we also had a couple of small product lines consolidation.
So we have expanded margins in that segment about 200 basis points over the last three years and were confidence. As we look into the future, we’re going to continue to expand margins in that segment, but as Jeff indicated you’re going to have different puts and takes in these segments as we go through future years also.
Rayna Kumar
Got it. That’s very helpful.
Can you just talk a little bit the size of your M&A pipeline and the businesses you are interested in acquiring.
Jeff Yabuki
Yeah, I mean we wouldn’t -- we wouldn’t make any comments about the specifics of the pipeline, but I will say that we are focused on, on looking in areas to deploy from an acquisition perspective where we can increase the level of competitive differentiation and businesses where we have scale positions and we have opportunities. And we have a interest in the payments and channels area because we think that’s an important area for clients, that we think there are important growth drivers moving forward of course anything we do from an acquisition perspective, we always going to tie a back to our tradeoffs again share repurchase.
But there is obviously a lot of activity in that market and we’re active and looking at that activity. We're actively looking at what’s out there, just make sure we understand what’s going on in the market at any point in time.
Rayna Kumar
Okay. One quick final question for me.
If you can just quantify the term fees in the fourth quarter and compared that to the term fees from the -- from the year ago quarter.
Jeff Yabuki
Yeah, there were about flat, compared to the prior year.
Rayna Kumar
Thank you.
Jeff Yabuki
Yes. Thank you.
Operator
Our next question comes from David Koning of Baird. Your line is open.
David Koning
Hey guys. Great job again.
You'll have to split your stock soon again.
Jeff Yabuki
Thanks Dave.
David Koning
No, that’s good. So just on the Payments segment, great acceleration through the year.
In the context even of the bill pay transactions and debit transactions decelerating just a touch, is that due to a mix shift towards a little maybe smaller bank transactions that yield higher, or maybe you can just give us a little context why revenue accelerated while those had a little bit of deceleration?
Jeff Yabuki
Yeah, I think overall from a revenue standpoint we’ve had some very good growth in payments really across the Board. When you look at our channels, our bill payment, which had a lot of new wins and our output solutions and we just really, you don’t have a great year there.
We’re building a lot recurring revenue. And our debit processing business continues to perform really exceptionally from a standpoint of growth and I think our fourth quarter transaction growth in debt, there was actually a little bit higher than the, the other quarters at 12% and the full year was 11%.
So combination of new wins, lot of integrated sales activities along with the DNA etcetera and those wins are helping that offering that we have with our integrated bill payment and debit etcetera. So we have good momentum there, we have a little headwind in the current year and our Biller business that’s going to extended the first half of next year but outside of that we have overall good momentum.
Mark Ernst
And the other thing I would say Dave is, is we’re also have had some level of success in adding revenue in our -- specifically in our bill payment business, which is not purely transactionally based any more. So we’re changing that mix a little bit and the other thing that’s happened over the last, call at the last three, four, five years is the bill payment business itself is become a smaller and smaller part of the payment segment.
So yes, the business are growing, but if you think back the check-free days obviously the bill payment business was everything. It’s become a lesser element of the segment.
So the correlation to transaction growth isn’t just pure is it as it once was.
David Koning
Got you. Okay and just I guess my follow up, when you’re guiding to 5% to 6% internal growth, that’s reported number, I’m assuming and just wondering what FX headwind is kind of built in there.
Mark Ernst
Yeah it is a reported number. We don’t report on a constant currency basis.
So we’ve assumed that there will be negative input from currency. We have a variety of different scenarios and which we've worked into our analysis and it's one of the reasons why the range is a bit wider this year than when we entered 2014.
So we expect currency to be down. I don’t think any of us have a perfect crystal ball on where it's going to land, but we do expect it to wait us down, but it is incorporated into our guidance for the year.
Tom Hirsch
And I think Dave, the impact that we highlight on the call was about 40 basis points in the quarter, about 20 basis points for the year. So we expect '15 to be greater than that clearly, but as Jeff indicated, we’ve incorporate range into our broader guidance.
David Koning
Okay. Great.
Thanks. Good job.
Jeff Yabuki
So it's going to be a bigger heading than we had in '14.
David Koning
Yeah. Great.
Thanks.
Jeff Yabuki
Thank you, Dave.
Operator
Our next question comes from Ramsey El-Assal of Jefferies. Your line is open.
Ramsey El-Assal
Hi, guys I have a couple of questions on EMV, you mentioned at the timing of EMV adoption is kind of the key variable revenue driver in 2015, kind seems like a split is developing between large banks that are reassuring that card portfolios. Small banks maybe your customers have seem to be putting it off; I guess A, is it a fair characterization and B, does it imply that at some point you get a real kind of true up and sort of more rapid migration in your base as occurring now?
Mark Ernst
Yeah hey Ramsey, this is Mark Ernst. Let me take that.
The split that we see primarily is first and foremost between credit and debit. So, what you’ve heard principally from the larger banks is -- are those banks that have a large credit portfolio.
And they’re reissuing early run credit and that’s really because of some technical issues, which I think you’re familiar with around kind of clarifying the debit rules as related to debit. The indications that we can see are that people are now getting kind of serious about getting reissuance cycle started with debit.
We think that that will push into the second or really kind of take hold now in the second half of 2015. Indications that we can see out of our client base would say that they are kind of behaving or expecting to reissue in much the way that I think the larger banks have indicated they’re on debit as well.
Jeff Yabuki
I think the other thing to consider is that within our business we have, we do card production for our debit clients and we also do card production for a broad range of clients, who are now within our debit processing footprint. So we have a broader range of clients and we serve only in the debit processing business.
But clearly it’s again one of the reasons why our range is larger this year is as we don’t have perfect estimate of how that’s going to lay in. We think it’s an important opportunity that will benefit Fiserv for the next several years.
And so obviously we’ll know more as we progress over 2015, but we feel good about that opportunity overall.
Ramsey El-Assal
And just a quick follow-up on that the EMV kind of topic, how do we -- so you give just a little color now in terms of quantifying the size of that opportunity I mean do you handle pretty much all the card printing for your bank customers? I understand now you have new customers outside just the bank footprint, but is it something where we can say there’s a price of any EMV card and we're multiplying it by effectively every debit card issued in that Fiserv family of customers or is it more nuance to that, there is some outsourcing, there is some puts and takes or?
Mark Ernst
Yes, again it's a bit more nuance than that. In general we know all those numbers and we can kind of model different scenarios.
But the other kind of wild card and all this is to what degree some institutions will choose to stay with mag stripe only as a cost matter and accept the fraud risk once the conversion date occurs. So there’s a number that kind of puts and takes in there and I think different institutions are looking at that risk in different ways.
Jeff Yabuki
And Ramsey, I would say one of the key topics that we’ll discuss at our June Investor Day is in fact EMV and how we see how our model will take that in and what are the kind of the factors that will be considered as this comes in over the next several years. And clearly it’s important and that’s why we’re going to give it sometime in June.
Mark Ernst
And by June we’ll have much more clarity -- more clarity certainly.
Ramsey El-Assal
Got it. Thanks guys.
That’s all for me.
Operator
Our next question comes from Chris Shutler of William Blair. Your line is open.
Chris Shutler
Yes, good afternoon.
Jeff Yabuki
Hi Chris.
Mark Ernst
Hey Chris.
Chris Shutler
So, first on open solutions, just give us a quick update on the -- I think you initially laid out $100 million and $60 million of revenue and cost synergy targets and just how you’re progressing against those?
Jeff Yabuki
Sure, we’re as I think we mentioned in our prepared remarks, we continue to feel very good about the level of revenue synergies in the open business. We in the middle of last year -- the middle of '13 now, we indicated that we were moving our estimates up, because in fact the receptiveness of the open solutions base to taking the integrated products that we provide have been quite strong and that continued.
We had roughly 20ish million of sales within that grouping in '13 and in another 40 in '15, of which that obviously much of that has not come on yet. It will come on over time and so we see some benefits in that.
And we’ll continue to see opportunities within that base. We typically see in acquisition that it takes two to three years to get our stride from a revenue synergy perspective.
So we began to see in the second half of last year and we think that will continue throughout this year and then early into '16. And we are also seeing some very nice opportunities from the open solutions the open solutions products moving that back into the Fiserv client base as well.
So, very good movement on that front. And then on the cost synergy side, we indicated again this year that a lot of the value that we drove in the operational effectiveness category came from open solutions and so again we feel very good about that and/or in that case in both cases actually well on track if not ahead of where we anticipated we would be.
Chris Shutler
All right, great and then Jeff, I think you said we had 14 million mobile users versus correct me if I’m wrong, I think you have around 70 million online banking users, at least that's the latest number I have. Just curious how you're trying to increase adoption amongst the users given that it’s a bit of a new skill set for Fiserv not only just with EFIs but also consumers.
And to what extent your banking and I guess revenue growth and the payment segment over the next several years being driven by your success increasing mobile adoption?
Jeff Yabuki
I have to say this. Banking, no pun intended, right.
Chris Shutler
Exactly Jeff.
Jeff Yabuki
It’s a great question. It is again one of the topics in terms of the opportunity to take mobile up to a large degree against that $70 million.
Now in fairness, we don’t believe we’ll get all $70 million, because some of those $70 million are on the larger platform and some of that -- some of those institutions have adopt mobility some of them have not. But we do see a much need to grow specifically the ASP subscriber base, which is three million this year.
That number is still at a very low level of penetration and we expect to see meaningful growth. We actually introduced a new program late in 2014, where we’re working with our banking credit union clients to help them drive better adoption in their client base.
The beauty of mobile is the consumers want it and the financial institutions want consumers to use it. And so they’re really looking for ways to drive that together so we have very strong alignment.
So we see that to be a big opportunity and you’ll continue to hear us talk about it and we would expect that over time that will continue to accelerate for us and drive some nice recurring revenue.
Mark Ernst
The other thing I was going to add to that is to your point about this thing and new skill set to some degree for Fiserv one of the benefits that we have is given the broad range of financial institutions that are using some of these solutions, we now have the opportunity to look across that base of institutions that find those who are performing better versus others and understand a benchmark what they’re doing and bring those best practices out to other clients. That is proving to be very successful for us so far as we help our clients figure out how to better engage their customers.
Chris Shutler
Make sense. Thanks a lot guys.
Operator
Our next question comes from Paul Condra of BMO Capital Markets.
Paul Condra
Great. Thanks for taking my call.
I wanted to ask a little bit about the NOW network that you’ve been speaking about a bit now, but I wondered if could give a little more detail just about what kind of new functionality is going to have or going to be the kind of first users the initial end users. And then maybe derive some detail about how that rolls on, what’s the expected revenue impact how should we be thinking about it?
Jeff Yabuki
Sure Paul. At a headline level the purpose of the network is to create opportunities to have more data connected to the payments beyond point of sale this is really to focus on the 55 billion payments that happened through the non-POS side of the system.
And so we’re looking at how do we use data? How do we use speed?
How do we integrate those capabilities into application such as Bill Payment and Popmoney to allow we think the important convenience aspect of these -- of electronifying in a much faster way these payments. So we would see this coming in over the next three to five years.
An important element of this infrastructure is creating more electronification. Obviously paper payments are only going to move at a certain pace.
So one of the things that we are looking at is how do we create a faster and faster electronification. That’s one of the aspects as well.
And over time as we’ve seen institutions today be able to create differentiated pricing around this and we think that’s one of the areas that institutions will use to drive new value. I would say on the call that’s probably about as much as details we can go into, but we’ll talk about this in more depth in June.
Paul Condra
And a follow-up on -- it sounds like you didn’t raise your interest sales target and I’m just wondering if there’s any shift in strategy there or how you get to that number?
Tom Hirsch
Yeah, we didn’t raise it in terms of where we perform this year versus last year, but we do think that the $250 million is an appropriate -- is an appropriate level. We were $250 million in 2014.
We delivered $260. Obviously we’re always looking to deliver as much as we can and we think it’s appropriate at this point.
Paul Condra
Thank you. Thanks a lot.
Jeff Yabuki
Thank you.
Operator
Our next question is from Darrin Peller of Barclays. Your line is open.
Darrin Peller
Thanks guys. Can you just provide a bit more color on the financial margin in the quarter and just the moving parts during 2015?
I think I know you mentioned earlier that variable comp levels and I think you said it was relative to last year's margin level. Maybe just Tom if you can give a little more explanation of what the driver was between last years and this year.
And then going forward, it’s good to see once again another year of 50 basis points plus of margin expansion for '15. Is that -- is that a function of mix and scale or are there any cost initiatives?
Just can you give us little color on the driving force?
Tom Hirsch
Okay Darrin I’ll start with that one and in the Q4 quarter we had a couple of things one in particularly in the financial segment. First and foremost if you look back at our margin in the fourth quarter last year that’s the highest margin I believe we’ve had ever in that segment, which was a very strong comparison to this quarter.
The second thing as we had timing associated with some variable comp both incentives and commissions, we had a strong sales finish in the quarter in that particular segment. So we expense commissions and we also had some ASIP which was some variable comp which we had expense in the current quarter.
And then the other piece that was about a 100 basis points and then the other piece was international, which I highlighted, which had a revenue mix, it had a very difficult comparison. Also we’ve had this during the year and it also saturated in the fourth quarter.
And then we had some increased spending in our agility platform that came through in the quarter also. So all of those kind of contributed to the Q4 item.
As I also highlight on the call our margins in that segment over the past three years are up about 200 basis points. And clearly as we look forward and you indicated where is the margin driver is going to happen.
We’re clearly from the payment segment standpoint at a good place we're executing very well there. Continue to drive incremental revenue in our recurring base solutions like card and bill payment all the rest.
Regarding financial we talked about international, which was a tough compare in the current year. And clearly DNA is an area where we've ramped up a lot of expense and we’re going to be implementing a lot of clients in 2015 and so that scale is starting to return there as we’ve had to put more into development and implementation.
And so we’re confident overall along with our operational effectiveness initiatives. We have a number of those.
We're going to be executing on in 2015 that will benefit us in '16 and forward. So those things leaves us much comfort that we’re very confident that we’re going to have margin expansion greater than 50 in 2015.
Darrin Peller
Okay. That’s great I was just going to say, when you compare to 2014 with all the investments you made in DNA now they're actually rolling on the vast majority of these clients.
I would think there could be even better than 50 basis points now?
Tom Hirsch
We’re going to guide that they’re greater than 50 and we’re highly confident that we’re going to continue to be able to expand margins through our high…
Darrin Peller
That’s helpful. Thanks.
Just one quick follow-up, financials like you said before it was flat growth in '13, it had accelerated to 2% '14. I know you’re not really giving segment level guidance, but these drivers whether it’s DNA or some of the larger clients, should we expect at some point that that growth rate to continue to accelerate or is that a low single-digit grower while payments really drives the engine for your overall top line?
Tom Hirsch
I think we’re going to continue to have -- our payment segment is going to be higher than our financial segment clearly over time, just given the nature of the businesses that are in each segment. I do think over the longer term, financial segment should continue as we continue to expand our international and to your point, continue to get a lot of revenue from DNA and our other strong market share wins that we've had in the account processing space.
So, I think remember the international stuff does fall into our financial segment and over the next few years we continue to believe we’re going to be growing there and then clearly what the DNA implementations coming on '15 that’s going to also provide an accelerator.
Darrin Peller
Okay. Just last question I’ll turn it to the queue.
But on the free cash flow per share growth you guys have always done a great job of not only generating a lot of free cash, but returning it through buybacks and guidance now suggest that continues. The only question I have is just the free cash flow per share guidance.
I think you called for $4.12 if I remember correctly?
Tom Hirsch
At least $4.12.
Darrin Peller
All right. Well I guess what I’m wondering is why that’s sort of a high-single digit growth rate when you are calling for 11% to 14% EPS growth and I think you mentioned earlier some moving parts on working capital, but any more color on that will be great.
Thanks guys.
Tom Hirsch
Okay, I think we had -- we significantly outperformed in the current year at $3.82 versus our greater than $3.65 per share guidance. So when we looked at that, we did have some working capital that benefit us this year and some of that is going to reverse as we go forward into '15.
But overall Darren, our compounded annual growth rate of free cash flow per share including '15, '14, and '13 is roughly 14% on a CAGR basis at the $4.12 level and as you know our guidance is greater than $4.12. So again I think you’re going to have some fluctuation in working capital.
But we’ve really from a just a free cash flow per share standpoint have had really some strong results.
Darrin Peller
Okay, great. Thanks guys I appreciate it.
Thanks.
Tom Hirsch
Thanks Darrin.
Operator
Our next question comes from Tien-tsin Huang of JPMorgan Securities. Your line is open.
Tien-tsin Huang
Great. Thanks.
Just a couple of follow-ups everything is pretty clean here. Just on the guidance -- the revenue guidance what’s it going to take to get to the 6% adjusted revenue growth?
Do you have some large deals that you see or maybe that could ramp to get you there?
Jeff Yabuki
Yeah, as you know Tien-tsin, for us it’s difficult to do to get large deals in a year that make a big enough difference that we can have a meaningful impact. The big drivers for us are areas like EMV where we think there is a broad range of scenarios that we could see depending on what happens in the market.
What goes on with currency trends and frankly to get there upper hand you have to have many more things go right than would not I mean we feel good about the range and again. There are some things going on as we talked about that are little bit different in 2015 than we saw in 2014.
But we feel quite confident about where we sit today and it won’t be really sales based, it will be what goes on in the kind of in the market or I am sorry, what goes on within our client base currently.
Tien-tsin Huang
Understood. And then just on FX, I heard those comments on 40 bips in the fourth quarter, but obviously the dollar has strengthened quite a bit, could it be as much as could round up to 1% hit if current rates hold.
Just trying to get a sense of where we stand today?
Tom Hirsch
As you know, our revenue is call it 6%, 7% outside. So we have to see I think some pretty negative things to have to be at that level.
But we don’t have a crystal ball.
Tien-tsin Huang
Yeah it could be rounding basis points here but, I’ll figure that out. Just one last follow-up if you don’t mind for you Jeff on tokenization, we've been doing a lot of research there.
Can you just -- can you get us on Fiserv's role or future role and in a tokenized world? Are you aiming to be a token bulk provider and there’s a lot of definitions around token service provider.
So what is Fiserv’s role?
Jeff Yabuki
Yeah so I think at this stage we’re looking to play the most important partnering role we can with our clients I’m sure you know as well as I do if not better that there’s lots of evolution going on with kind of the “token control” in quotes, right now. So we do see opportunities there and we actually see opportunities to think about tokenization even more broadly than just on the card size.
So when you think about some of these 50 -- kind of how do you move with more speed and alacrity for the 55 billion payment set that are outside a point of sale. We see some opportunities there as we'll.
So I think it’s an evolving topic right now. We are having lots and lots of conversations that would say that our clients would like to see us play an important role there and so we're looking for what's the -- how can we work with the existing provider space to make sure that we’re doing the best thing we can for our clients and also driving as much value as possible on the shareholder side.
Tien-tsin Huang
Yeah, makes sense. Thank you.
Jeff Yabuki
Thank you.
Operator
Our next question is from Brett Huff of Stephens. Your line is open.
Brett Huff
Good afternoon. Can you hear me okay.
Jeff Yabuki
Yeah. Hey Brett.
Brett Huff
How are you guys doing?
Jeff Yabuki
Good. How are you?
Brett Huff
Good. One sort of big picture question and it was kind of hinted at in the last one, if you guys look out three years whatever you are medium-term horizon planning period is, what is the thing that if you could spend more on you’d really pour some gas on the fire, because you think there’s something there.
I was thinking like top money maybe in payments. I’m not sure what the equivalent is in the financial segment.
But what is that thing where you think the investment would be -- its big enough that you really think you’d want to do more if you could?
Jeff Yabuki
Yeah I would say this entire space outside a point of sale -- this $55 billion payments, which includes everything from person to person, to account to account, to business to business, small business to consumer, consumer to small business. That space I really think about as the last horizon of payments and the opportunity for us to work with financial institutions to ensure that non-FIs don’t come in and take over that space.
It’s as you know, it’s a highly competitive world out there. And there are lots and lots of providers trying to scrape away pieces of that value chain.
So we’re looking to both protect that value chain, but more importantly protect it by adding differentiated value. So if I lived in a non-constrained resource world, I would think that would be one of the biggest areas that I would focus on.
And I think the other big opportunity out there is on the lending side of the equation. I think we’re going to see over the next call it two to three years, three to five years a lot of movement on the lending side, both in terms of financial institutions looking for ways to make more money in both decisioning as well as in terms of the types of loans that are able to be made so basically through new product.
So we see that to be a big opportunity. And then thinking about how can you use the data to enhance those kinds of decisions both in terms of origination as well as on the servicing side.
So those are two areas that are at least quite interesting to us as we think about where the world will go over time. And clearly we are investing in those kinds of areas, but we’re not doing it in an unconstrained way.
We’re doing in a responsible way so that we can continue to drive high-quality revenue to make sure that, that we can meet our margin commitments at the same time.
Brett Huff
That makes sense. And as a follow-up, on bill pay you mentioned that your -- it sounds like the business model maybe evolving a little bit -- it’s not as purely tied to a per trend basis maybe.
Is there a -- first of all make sure I understand that right. And second of all, is there a world in which Bill Pay stops being as a per trend revenue and becomes more, I don’t know not inclusive or whatever more bundled or even a license arrangement, is that a foreseeable outcome/
Jeff Yabuki
Yeah so Brett, I would say that we do see a variety of different ways in which we’re driving value in the bill payment business. Some of it has to do with services customization.
So the ability to allow financial institutions to design experiences that make the most sense for their customers. One of things that we talked about is that spend focus is really big time around customer experience.
And you know well the traditional killer app in the digital world has been bill payment. So the ability to provide bill payment services and allow institutions to consume that the way they want to certainly one of the opportunity is out there and so we’ve had an opportunity to create some additional streams of revenue in that space.
You’ve got some add-on transactional opportunities whether it’s around risk management e-bill those kinds of things. And then there’s another emerging category which really ties into this whole notion of systemic real-time and that is premium transaction.
So allowing financial institutions to use our capabilities on the front end so whether there be bill payment, P2P, or account to account transfer linking that to real-time and then charging consumers a reasonable fee that, that they can -- so that they will avail themselves of that real time capability want to make sense for their own situation. So add all those up and we do see a time where different kinds of transactions get monetized differently and I think we’ve talked about the fact that, that there may be and there may be some point where, where slower transactions are priced differently relative to the more quote premium or faster transactions.
And so we are looking at different pricing model then different ways to make sure that we find that balance between what consumers, financial institutions and what we need. But I will say, the only thing I would say is I don’t see as moving to a licensed kind of a model, I see this continuing to be a cloud based an ASP solution because there is a network effect that’s very important and we need to continue to build that network out so that we can have the highest percentage of electronic transactions possible which is, which is absolutely paramount when you talk about driving real time transaction.
So it is an evolving space. We’re actually quite excited about this evolution and believe that we are extremely well positioned to lead that over the next three, five, seven years.
Brett Huff
That’s really helpful. And then just last quick one, did you guys talk a little bit about the tenure of what you think the deployment of the REPO authorization might be this year.
Jeff Yabuk
Kind of how, how -- we did not give any guidance to how we move through the, the remaining shares.
Brett Huff
Okay. Thank you, appreciated.
Jeff Yabuk
Thank you.
Operator
Our next question is from Glenn Greene of Oppenheimer. Your line is open.
Glenn Greene
Thanks and thanks for squeezing me in. Couple of quick question, just first on the sales growth another good year, the 12% year-over-year, may be Jeff said, at a high level the two or three key drivers of that?
And then also just to clarify are the open solution sales results includes in that or that’s sort of a separate metric and then what directionally would be the increase in the quarter for ’15.
Jeff Yabuk
So, I would say Glenn that, that easy answer is open, the open solutions, the old open solutions business is included in there and it was included in that on an actual basis, it was included in the prior year as well. So it’s an apples-to-apples comparison.
The big drivers in the sales results for the year are going to around our account processing platforms. We had some nice wins across most of our platforms in 2014.
In terms of DNA, but also around premiere signature position, clear touch, we’ve had good success because the beauty of our product set is that we don’t think there is one size that’s all, we know that different institutions want different solutions. So, the account processing business is did well, our lending business had a very good year, very happy with the work there, our risk solution, our risk area had a good year as well and in fact everyone had a good year card solutions did very well.
We mentioned that our fourth quarter bill payments results were the highest that we had since 2012, so really across the board and I think it is a matter of having products that are appealing to clients on the accounts processing side where we have a good strong integrated value proposition because we’re delivering products that are universally taken across the entire landscape from the largest clients through some of the smaller community banks. So that’s worked out well and we expect that to continue into this year.
Lastly we don’t -- we wouldn’t talk about the number and quote but I will say, I think this is our third year in a row that we would say we had record sales and we’re continuing to be in a place where we expect from the basis of the investments that we make to continue to be able to drive, to drive increased sales. Part of that comes from being better with our existing clients and part of it comes from delivering some new products into the market.
We indicated that we went live with our mobility for business, which is our commercial -- our commercial mobile solution. And that we expect to drive across hundreds of financial institutions over the next several years, so again it’s a combination of continuing to have the best sales force and also introducing new products.
Glenn Greene
Okay. And then for Tom on the FX, Jeff I think mentioned that international was 6% to 7% of revenue, is that roughly evenly split between your euro and the Aussie dollar?
Just so the conservative modeling can think about it?
Tom Hirsch
I don't know if that's evenly split and I can get back to you offline on that one. I think it's probably a combination of both and a few other smaller one.
So that's how we put and I would say. We're as I highlighted 40 basis points in the quarter, 20 basis points for the year and we expect that to be bigger in '15 from a headwind standpoint.
Glenn Greene
And then just real quick on the decrease in the year-over-year corporate cost, I thought I heard you say something about lower incentive comp, which I didn't fully understand why that would be.
Tom Hirsch
No, no, not on the, I said lower consulting and legal cost and then in the prior year when we had an implementation of a new HR system which we have a lot of expense associated with.
Glenn Greene
Okay. Great.
Thanks a lot.
Jeff Yabuki
Thank you.
Operator
Our last question comes from Kartik Mehta. Your line is open of Northcoast Research.
Kartik Mehta
Thanks. Jeff, you talked about gaining market share on the bill payment side, I am wondering is the competitive environment changing or what are the drivers that for you to be able to gain that market share?
Jeff Yabuki
I think what we said is we had our strongest sales quarter in the fourth quarter since 2012 when we had somewhere north of 300 wins for the year, which is pretty consistent with what we've seen going for the last several years. So I would say its two fold.
It is first and foremost having what we believe is the best solution in the market and that's especially important as speed becomes more and more important to consumer. So the ability to link up the certainly the -- again we think is the best product in the market with some of our solutions such as PEP+ which are going to help today enable real time.
And they've got a big opportunity and a big differentiator and then secondly, the continuing ability to deliver that into our account processing base, which a you know is somewhere in the area of 5,000 financial institutions. So is really the combination of those two that's creating the success.
Kartik Mehta
And then just a question Jeff may be a business that's been forgotten or not talked about, the check processing business and as you see checks declined, are there opportunities for you out there and our client base or outside your client base to when that business and potentially help the check processing business these banks come under pressure as their volumes are declining?
Jeff Yabuki
The theoretic answer is yes. I would say that over time, there have been several different junctures where we believed that given the financial pressures that there would be motivation to outsource that solution.
And today, we've had discussions, but we frankly haven't seen a lot of movement in that space and I am sure there are a variety of reasons why, but for now, we certainly are counting on that happening when we think about forward revenue growth. If it happens that's great, but it's certainly in our part it's not an important part of our growth formula moving forward.
Kartik Mehta
And then Jeff, just a last question, any benefits or hurdles from the regulator environment that could help you grow revenue or when additional market share from others?
Jeff Yabuki
I there is a general -- there is a general quote “benefit in the market” because of the level of regulatory scrutiny and pressure, which is causing institutions to take a good look at how they spend and are they getting the most or they getting the optimal value for that spend. I would say that's a more systemic benefit and that the providers themselves are generally equal on that front.
Mark Ernst
There probably are a few of our product lines that are disproportionally benefitting from the regulatory pressure. We talked about the opportunity in lending, which has a strong kind of regulatory under current to the changes that we've seen in that market.
Kartik Mehta
All right, thanks Mark; thanks Jeff. Appreciate it.
Jeff Yabuki
Absolutely. Thanks everyone for joining us this afternoon.
I know we went a little bit longer than we typically do, but we appreciate your support. If you have any further questions, please don't hesitate to contact our investor relations team.
Have a good evening.
Operator
Thank you for your participation in today's call. You may now disconnect.