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

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 our 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. Unless stated otherwise, performance comparisons made throughout this call are year-over-year metrics. With that, I will turn the call over to Jeff.

Thanks, Stephanie, and good afternoon, everyone. At last month's Investor Day, we shared strategy, our focus on annually increasing our rate of internal revenue growth, further expanding both operating margin and cash flow, and most important, our plans to deliver compelling and differentiating value to clients. We are increasingly optimistic about the opportunities ahead. We delivered another quarter of solid results, including 4% internal revenue growth, strong margin expansion and excellent free cash flow. Importantly, our results were in line with our plans and we remain on track to achieve our full year financial performance outlook. Adjusted operating income growth was 8% in both the quarter and year-to-date. Adjusted operating margin performance was exceptional, increasing 120 basis points in the quarter to 31.8%. Adjusted EPS was up 17% in the quarter and is up 12% year-to-date. Free cash flow totaled $439 million for the first 6 months of the year, and importantly, free cash flow per share through June is up a very strong 18% for the period. We also gained sales momentum, recording a sequential increase in sales value of 11% in the quarter and a 10% increase over the same period last year. We are poised for revenue acceleration in the second half of the year and expect to exit the year positioned to increase our internal revenue growth rate again in 2016. Each quarter, we update you on progress against our 3 strategic focus areas, which given our recent Investor Day, will be a bit more abridged than normal. The 3 areas are: First, continue to build high-quality revenue while meeting our earnings commitments; second, build and extend client relationships with an increased emphasis on payment and channel solution; and third, deliver innovation and integration, which enables differentiation and value for our clients. We've executed well in…

Thanks, Jeff, and good afternoon, everyone. Adjusted revenue was $1.2 billion in the quarter and $2.4 billion year-to-date. Internal revenue growth was 4% in both the quarter and for the year-to-date. Growth on a constant currency basis was 5% in the quarter when excluding the 60 basis point negative impact from foreign currency. The net change in license and termination fee revenue was not material to our results in either the quarter or year-to-date period. Our focus on high-quality revenue growth and optimizing efficiency in our business model continues to pay off. Adjusted operating income increased 8% in both the quarter and year-to-date to $390 million and $761 million, respectively. Adjusted operating margin in the quarter was up 120 basis points over the prior year to 31.8%. First half adjusted operating margin is up 140 basis points, driven by high-quality revenue and scale benefit across both segments, along with continued operational efficiency savings. While we continue to expect strong margin performance, we have a more difficult margin comparison for the balance of the year, as the second half adjusted operating margin in 2014 was nearly 100 basis points higher than the first half of 2014. Adjusted earnings per share increased 17% to $0.95 in the quarter, and for the first half of the year, adjusted earnings per share is up 12% to $1.83, even with a $0.05 headwind from a higher year-to-date tax rate. Now I will move on to the segment detail. Internal revenue growth in the Payments segment accelerated sequentially to 6% in the second quarter from 4% in the first quarter. Adjusted revenue was $627 million in the quarter, led by strength in our card services, biller, bill payment and digital channels divisions. Results in our Output Solutions business were relatively flat compared to the prior year…

Thanks, Tom. As I said upfront, sales in the quarter were up 10% over the prior year, 11% sequentially and were 85% of quota. We saw strong pipeline growth in the quarter across the company, including several of the areas we discussed in detail at Investor Day. We expect strong sales performance in the second half of the year. Integrated sales were $67 million in the quarter, which puts us over our $950 million 5-year program goal about 6 months earlier than we originally anticipated. Our continuing strong performance speaks to the value of our integrated solutions combined with compelling market opportunity. We've recorded $111 million of integrated sales through June or 44% of our full year target. We've also realized $27 million of Operational Effectiveness savings to date, in line with our goals for the year. Going forward, we remain bullish on the opportunity to enhance our infrastructure through projects such as the data center and real estate consolidation in Atlanta, which is our largest domestic market area. We are pleased with our progress and anticipate completion in Q4. As we shared at Investor Day, the FI market remains stable. We continue to work with clients to leverage opportunities arising from the eventuality of interest rate gains, new sources of noninterest income and enhanced operational efficiency. Both financial institutions and merchants are marching cautiously towards compliance for the October EMV liability shift date and there continues to be a heightened level of discussion on faster payments. As I mentioned upfront, we remain on track to achieve our full year financial outlook, which includes another step up in internal revenue growth. Internal revenue growth for the full year is still expected to be 5% to 6%, and as I shared at Investor Day, will likely move towards 5%, primarily due to slower than anticipated EMV adoption and negative foreign currency impacts. We still expect adjusted earnings per share growth to be 11% to 14% or $3.73 to $3.83, with a bias above the midpoint of the range for the full year. We also anticipate that adjusted operating margin will expand more than 50 basis points and that free cash flow per share will be at least $4.12 for the year. For modeling purposes, we expect much stronger revenue growth in the fourth quarter due primarily to the timing of EMV and license revenue, prior year comparisons and revenue impact from new client implementations. We're pleased with our results through June and fully expect to deliver on our full year financial expectations. We are executing well in our existing businesses and making strong progress with innovation-based growth. When taken together, we believe this will contribute to further acceleration of our internal revenue growth in 2016 and beyond. This only happens as a result of the incredible contributions of our 21,000 associates around the world who work tirelessly each day to deliver quality, service and innovation to our clients. With that, Tory, let's open the line for questions.

[Operator Instructions] And our first question comes from Mr. David Togut, calling from Evercore ISI.

Jeff, you called out much stronger revenue growth expectation for the fourth quarter this year. I gather that's from some of the DNA implementations that are coming onstream. Can you dimension for us, for example, what the 11 implementation means for the back half of the year and additional implementations you might be seeing coming onstream in Q3 and Q4?

So we had said that we plan to double the number of implementations for the year, which would put us in the 25 to 30 range for the full year. We did 15 last year, we're 11 to date, so obviously, we're picking up some of the revenue from those 11. But we expect to continue -- so for those 11, we'll get, call it in the range of somewhere between 6 and 8 months on average. But we'll also get revenue from each of the remaining implementations that go live in the second half of the year. And that's both in DNA, as well as all of the surround solutions that go with it. We've been fortunate that a large majority of the clients who have selected DNA have also selected a broad suite of our solution to go along with that. In addition to that, to DNA, we also have, as you will remember from our last couple of investor days, talked about the large -- the progress that we made in the large -- primarily in the large bank space, and so a number of those clients we also anticipate going live in this year. So we're starting to get the benefit from, again, the account processing platform revenue as well as the surround revenue that goes with them as well.

Putting that altogether, should we expect the Financial segment revenue growth to exit the year closer to mid-single digits, closing some of the gap we see with payments which has been by far the faster growing segment this year?

Yes, David, we're going to continue to see acceleration in both segments in the second half of the year. So yes, I mean, clearly, the segment is impacted by license revenue and different sorts of things like that but we are clearly going to have an acceleration as we look into '16 in the Financial segment in the back half of this year.

And we would also expect to see continuing acceleration in the Payments segment. We're going to expect to see them both accelerate as we exit 2015.

Yes. And, David, to your kind of point on both of the segments, I think, the other thing that Jeff highlighted, he talked about the core processing segment. But in the second half of the year, we clearly have -- the Biller headwinds that we've been talking about in the first half of the year and that business continues to do very well from a transaction growth and a new sales standpoint, so we expect a very strong second half in our Biller business. Clearly, I highlight on the call also that our Output Solutions business, which includes EMV, was fairly flat compared to the prior year in first 6 months of the year. And again, we expect good revenue acceleration in both the base business in that Output Solutions business and also with EMV. And then, in the fourth quarter specifically, some stronger license sales in regards to that, which is usual, but it's going to be a little bit more heavy this year. So those are some of the things that give us good visibility and confidence as we look into the second half of the year.

Got it. And then, a quick final question. Any thoughts, Jeff, on PayPal's acquisition of Xoom and possible impact on the P2P space?

I mean, I thought the Xoom acquisition was a good acquisition. From my vantage point, it looks like a good acquisition for PayPal, being able to leverage not just the large number of accounts that they have in the U.S., but they have a very attractive worldwide footprint. And I think, Xoom has built a nice revenue model, but a good technology platform that will be likely valuable for them as they continue to move forward. I see it to be interesting but not that impactful, again, from my vantage point, to P2P more directly, but I do see it to be valuable within the PayPal network. But more importantly, creating a much larger visibility to a cross-border capability that a lot of digital users don't have access to today.

Understood. And Tom, I appreciate the June 30 share count as well.

Sure, David.

Thanks, David.

Our next question comes from Glenn Greene of Oppenheimer.

I guess, I'll just build on the last question, but just sort of I want to understand a little bit better the visibility to the back half organic growth acceleration, meaning, your 4% year-to-date sort of implies at least 6% kind of in the back half and your commentary on the fourth quarter suggests it might even be higher than that in the fourth quarter, so maybe 7%. But is it -- do you have the visibility just based on the DNA conversion, some of the large bank account conversions and some of the headwinds, whether it's the Biller headwinds or the output headwinds just sort of abating? I guess, what I'm getting at is how much incremental new books of business do you need to sign? Or is it just a function of really the conversions just happening as you planned?

Yes, Glenn, there's always going to be -- even though, as you know, the substantial majority of our revenue is recurring, I think we said at Investor Day, it's in the 80 -- last year was about 86%, we still have to always continue to sign business. And as you know, revenue -- a few million dollars of revenue can impact your growth rate in any quarter. From our perspective, we have a pretty darn good visibility to the big chunks of revenue that we need to deliver in the second half of the year. And as we commented on, we think it will bias even further to the fourth quarter. The big blocks of revenue, as Tom talked about, just to reiterate, are the revenue that's coming from the conversions, DNA is the one that we talked about a lot but we have DNA and our Signature platform. Frankly, we've got good size clients coming in there that will spread across both of the segments. The second area is in our Biller business, as Tom referenced again, it's growing quite well. And we also have the benefit of some headwinds that have now abated as we've crossed the threshold of the middle of this year. And so we get the combined benefit of better compare and some nice growth. The third area is really around our Output Solutions business which is responsible for EMV. We talked about the size of our production book which is quite strong. It's really a matter of when are the banks going to take delivery of the product, when are they going to be ready for it? We've indicated that it's slipped based on what our internal expectations were at the beginning of the year. It's not a demand item at all. In fact, I think, demand is probably in better shape than we would have anticipated it to be holistically but the timing of the revenues has been slipping, that's why we believe we're going to have a pretty nice boost and likely going to be biased into the fourth quarter. And then, the last thing is around license revenue. We do expect to see more license revenue based on what we can see in the pipe coming in, in the fourth quarter this year. And we also had -- we had a little bit of a tougher compare in the third quarter, that's why that growth will look a little bit stronger in Q4. So overall, we have pretty good visibility to those numbers. We have actually good, strong -- good, solid, I'll say, visibility into how that will translate -- that exit rate will translate into growth into next year, like we talked about at Investor Day, we have a pretty high level of confidence that we'll be able to grow 50 -- add that 50 to 100 basis points of growth in 2016.

Okay. And then, similar question on the margin side. And Tom, you sort of -- I think, were prepared for this. But up 140 basis points year-to-date and the guide is for greater than 50 basis points, is there any sort of incremental investment in the back half, or is it just the function of sort of somewhat of a tougher comp?

Yes, Glenn, I would say, obviously, we're very pleased with our performance in the first half of the year on the margin side. It was ahead of our internal expectations. Really better performance and some timing. That said, we clearly expect to exceed 50 basis points of margin expansion for the year given where we are in the first half. But we do, as you mentioned, we face some more difficult comparisons in the second half mainly around '14 because the second half was about 100 basis points higher than the first half of '14. So -- but there's nothing else unusual going on there. We're going to continue to deliver good margin performance, but we do have some tougher comps and we're we'll clearly exceed 50 basis points for the year.

Glenn, the other thing I would add to that is when you heard in our prepared remarks that we talked about that we now expect -- that on our adjusted EPS for the year, that we now have a bias above the midpoint of the range for the full year. I think that really begins to reflect the fact that our margin, as we talked about, will absolutely be greater than the 50 basis points. And we think we've picked that up there.

Our next question comes from Ramsey El-Assal from Jefferies.

I have a question on -- you mentioned another bank in Georgia taking up -- a relatively larger asset sized bank taking on the DNA platform. Can you speak a little more to the opportunity there for DNA kind of upmarket at the larger asset sized banks? Is the pipeline there growing? Are you seeing incremental interest deploying that solution in a segment of banks that maybe you didn't intend to -- factor on to begin with?

Ramsey, this is Mark Ernst, let me take that. The reference was to Georgia's Own which is a credit union. And we've had great success with DNA with the credit union market in general and continue to have a strong pipeline in the credit union market. I think, your question really goes to the topic that we kind of covered at Investor Day, which was that one of the things that's been surprising -- a bit surprising to us pleasantly with DNA is that, that technology is kind of opening doors for us in larger -- the larger bank market for some banks that are looking for that kind of technology. So we've got a nice, solid pipeline of institutions that are looking at that as a possibility. Now clearly, the sales cycle on some those transactions is a bit longer because of the size of the institution, but yes -- no, we clearly see that in our pipelines.

And Ramsey, I would add -- the only thing I would add to that is, as Mark referenced, at Investor Day we did talk about our happiness with how we're doing with DNA in the larger bank space. That was an area that we had not anticipated, specifically in the large in-house realtime market. And that there are several opportunities that we're working on and involved in. And the beauty of that is we are competing against platforms that, frankly, not just some of the domestic platforms but some of the platforms outside the U.S. And it will -- the more swings we get at the plate, the more likely it is that we're going to begin penetrating that space. And frankly, as we begin penetrating that space, we have a pretty high degree of confidence that the combination of that technology with our surround solutions, with our expertise and knowledge of the U.S. banking market, is going to make us quite formidable and turn into some very attractive revenue over the next, call it, the next 2 to 4 years.

Great. I misheard you, I guess, in your prepared remarks in terms of the size of the bank and whether it was a credit union or not, though. But thanks for those comments, those were helpful. So I wanted to ask you a kind of a longer-term question, it seems like there's a little more buzz these days with cloud-based offerings. Obviously, you guys have Agiliti. I think, Temenos is building something, Fidelity is working on something, I think [indiscernible] has something out there. In the U.S. specifically, do you see any change in the appetite of banks to sort of put their -- smaller banks that you service, to put their core accounting processing kind of in the public cloud? And I guess, the question is sort of if they become more comfortable doing that, does that open up the door to new entrants or competition in a way that you kind of have not seen in the past? And I know it's a relatively long-term question, but just curious on your thoughts there.

Yes, sure. So it's an interesting question that sometimes bounces from conjecture to nomenclature. And what I mean by that is most of us who have been providing outsourced services to banks for years and years would say, we didn't know it but we were basically offering cloud-based services, and we continue to do that. The question of does the utilization of a public cloud make -- allow -- change the barriers to entry in the business, I suspect the people who are trying to get in would say, yes. We would say that at least our belief is that the public cloud as we know it today doesn't have the robustness that would be necessary to support the regulatory environment. Then there are some private cloud utilizations that I think could come in, and we're certainly looking at that as a way to provide the most modern technology solutions possible. But I would say that, yes, it will allow people to talk about being in the market. But the reality is in order to make a solution like that work, you have to win enough clients to get to scale so that the investment makes sense. And it's just -- it's a long, long road to get there. Ultimately, I would not be so bold as to say no one will crack that code. Someone may crack that code and I can tell you that we're looking for what are the best ways to use these emerging technologies to make sure that we have the winning solutions in the market.

Our next question comes from Mr. Jim Schneider of Goldman Sachs.

On the DNA activations and customers going live, I think, Jeff, you talked about before, 30 wins coming online. I think you said something in the range of 25 to 30 coming online when you talked about it today. Was there any change in terms of your expectation in terms of anybody pushing off into 2016? Or how should we just think about the confidence level in terms of getting to that 25 versus the 30 number?

Yes, Jim, thanks for asking that question. I realized when I was saying it that I was going to look for an opportunity to correct that. I originally said 25 to 30 because I was trying to recall if it was 14 [ph] or 15 [ph], and clearly, it was 15 [ph], and clearly, we plan to bring all 30 online this year.

Okay. That's really helpful. And then, I guess, benefit of riches, but in terms of the integrated sales target now that you've met the 5-year goal 6 months early, can you give us some color on how you're thinking about the next 2 years or some other kind of time frame beyond this?

Yes, I would say that right now, we are looking at making sure that we continue to deliver the -- generally the level that we have had over the last several years. And as we get further down the road on some of these newer technology initiatives, whether it be our integrated payment solution or our now network or the next-generation capabilities of Mobiliti, I think, you'll see us likely look to put some new targets out there. But for now, we're going to continue to run at the play -- at the level we're at now, look to build it up. We know that the only way that we can really grow since there are not a lot of new financial institutions in the market is by selling more deeply in. And in fact, one of the things that we're quite focused on is the -- we've traditionally set this up as a way to extend the privileged relationship that exists on the account processing side. One of the comments in our prepared remarks was actually signing a top 40 financial institution to some of our Biller -- a lending client that was referred to our Biller area. So we're really now, over the last 18 months, really been building some muscle in building out that ability to identify good, exciting solutions for us to deliver to our non-account processing solution. And then, also beginning to bring our account processing area into -- or being able to cross over into some of the account processing solutions. A couple of these new DNA solutions that we're out pitching right now to these larger institutions, both of them originated out of relationships that we have in other payments and channel solutions where we have credibility with those clients and therefore, they're looking at us to bring in -- potentially bring in DNA. So we're building a lot of muscle in there regardless of the fact that we haven't set a new program goal.

And just a quick housekeeping question. Any moving pieces to think about in terms of term piece for Q3 and Q4?

No.

Our next question comes from Tien-Tsin Huang from JPMorgan.

I'm just curious about sales cycle. It feels like it's improving. Is that the case? I heard the wins like Synchrony, a lot of good wins on DNA, just curious how the sales cycle is shaping up?

Yes, I would say, Tien-Tsin, that we have continued to have momentum in our results. I would actually say that our first-half sales results were a little bit -- even though they were nice performance against the prior year, they were a little bit lighter in the first half of the year than we would've anticipated at the beginning of the year. Now we see a lot of strength in our pipeline and we're quite bullish about prospects in the second half of the year. But that said, to be a little bit more direct on your question, I would say sales cycles are feeling about the same in terms of duration. I don't see any big changes in there. And I would say that there's a lot of interest in the market to look at things like realtime areas in which we see operational efficiency. And frankly, some of these new products [Audio Gap] are going to drive high-quality fee revenue. We're seeing a lot of interest in those arenas.

Okay. So just to, I guess clarify, maybe build on that, what exactly drove the acceleration on the Payments segment? If you could just rank some of the items?

You mean in the second quarter?

In the second quarter, yes.

Well, it's really kind of continued growth across the board, in 3 or 4 businesses there. Continued acceleration in our card services business, our bill payment business adds some incremental, our channels business, which is our online and mobile business. And then, a little acceleration from our Biller business. But those headwinds in our Biller business are still in there in the second quarter, so those completely go away in the second half, so we're going to continue to see some good ramp. So really good growth across all 4 of those businesses. And I would also say that as I highlighted, the one that has not performed at the level we anticipated at plan was our Output Solutions business. You can kind of see that on our P&L in the product revenue line item. But given EMV and some prior year comparison to base business, that business was flattish. So again, we continue to have good momentum in those other businesses as we head into the second half and we should see much improved performance in our output business in the second half.

Okay. Understood. Just one more if you don't mind. Just the United Way win, I always thought that was a cool one because it fits pretty well with your -- the NOW Network. But I'm just trying to understand a little bit better the integration that's required on the United Way side, do you work with acquirers to turn Popmoney on as a, I guess, I call it a payment tender? I'm just trying to understand how it's scaled using United Way as the case study, if that makes sense?

Yes, it's a good question. So we work directly with United Way to integrate -- we see -- one of the interesting use cases we see with Popmoney is we think about it simplistically as a disbursement use case, so allowing us to basically allow a consumer or a business to move money to another consumer or business. And so it feels a little bit more -- mechanically, it feels a little bit more like an ACH as opposed -- an ACH receipt as opposed to taking it through an acquirer on a point-of-sale basis. So they'll have that payment capability up. Now we will -- we are going to have to get it integrated into our bank partners. We'll have it available on the public site but it will take about 6 months to get it fully integrated into our -- the actual bank-based product. But we have a lot of -- we think it's going to not just drive transaction volume but we like the visibility aspect of it out, kind of the billboarding aspect of it quite a bit.

Our next question comes from Mr. Dave Koning from Baird.

And just a couple of questions on cash. First of all, with the refinancing, you ended the quarter with $530 million of cash, which usually you end around $300 million. And I'm just wondering, with that extra cash a little more than normal, I mean, do you expect to deploy that and bring it back down to $300 million through repurchases or anything else kind of over the next quarter?

Yes, we're -- Dave, obviously, we're going to redeploy that cash to enhance shareholder value and we have a number of means to be able to do that. But as you know, our debt ratio right now, our debt-to-EBITDA ratio is at the lower end of our range. So again, we have a number of options with that cash that's sitting on our balance sheet at June 30, but we're going to continue to redeploy that to build shareholder value.

Okay. Great. And then, the second one, I was just looking back at CapEx, and from '08 to 2012, every year, it was kind of $200 million or a little less than that even on a full year basis. This quarter, it was $113 million just for the quarter, and it looks like over the last couple of years, it's trended up a bit. I guess, I'm just wondering what's behind that? Is that kind of investments into Open Solutions, or what else? And should this higher level be sustainable?

Yes, and Dave, just so you know, we have about $50 million, it's in our footnote that's in there, in CapEx associated with our Alpharetta, primarily leasehold improvements, that's our largest domestic location we have. So we're consolidating, just from a real estate standpoint, about 10 locations into 1 facility. We're also consolidating 2 of our larger data centers into our data center infrastructure. But Dave, we incurred about $50 million of leasehold improvements in that CapEx number through the first 6 months. And so that's what's driving that. We're going to continue to be at 5% to 6% of revenues on an ongoing basis. This is one of those things that's going to occur largely very infrequently just because of the fact it's our largest domestic location. And again, they're leasehold improvements. So when you take that out, we're going to be at the 5% to 6% range. And most of our investment, as you know, really goes through our P&L from a standpoint of development dollars, et cetera.

Our next question is from Mr. Darrin Peller from Barclays.

Look, I just want to hone in for a minute on the margin again. I know you mentioned the mix before, but I mean, obviously, 190 basis points is a pretty substantial increase in the Payments side in particular. And I guess, number one, and just make sure there's nothing unusual there like a term fee or anything else that may have lifted that, and if not, maybe just talk about the sustainability to that kind of expansion given if this is all about mix and operating leverage, I mean, it's obviously a great sign for the future. So maybe the key parts of your Payments business that have such a high level of operating leverage versus the other parts that may not, I think, that'd be a great understanding.

Yes, Darrin, we appreciate that question. And again, we're really pleased with our overall margins. And I would say that, clearly, in our Payments businesses, inside that particular segment, our card business, our bill payment business and also in our Biller business, we're at scale in those particular areas and continue to really have very good operating leverage and very focused on that, very focused on bringing in high-quality revenue. I would say, outside of that, our output business clearly doesn't have that same type of margin dynamic from a long-term standpoint. And that's probably the business in there that can move around with EMV. As we kind of talked about, as Mark kind of highlighted on Investor Day, we don't see it having a big impact, but that can kind of move around as that revenue kind of goes around. But we feel good about our margin performance. Clearly, it was above our expectations in the first half of the year, but we're going to continue to focus on driving high-quality revenue and we'll continue our strategy as we've laid out.

And Darrin, the only thing I would add to that is to say, as we've talked about a number of times, we have a mix of super scaled solutions, bill payment and debit, we have a lot of solutions in that segment which are growing into themselves and it will be a long time until they scale. And I only bring that up because we do believe that, that is one of the big points of validation on why we believe we'll be able to continue to grow the margin at the level that we've talked about. I don't believe that we'll be able to grow it at 190 basis points on a continuing basis. But there is a lot of runway just by the very nature of these systems which are big scale systems, you put a lot of money into them upfront and then the revenue comes on slowly over time and it flows through nicely.

That's good to see. I mean, I guess, looking into next year, are there any other big investments needed to keep up pace with the size and scale you're turning into?

Darrin, I would say there continues to be things, clearly, as Jeff highlighted, right? And if you look at our Investor Day, a lot of those initiatives are inside of our Payments segment, whether they be IPS or now, we're going to continue to invest in our mobile strategy, which is a big part and continue to invest in there and in online. And again, clearly, our performance was very strong in the first half of the year. We're going to continue to make the necessary investments that we need to make to continue to grow our top line over the longer term and we'll continue to do that. But we clearly have some good scale businesses in our Payments segment, and that should continue as long as those businesses continue to grow at the levels they are.

The other thing I would add is that we always talk about our operational efficiency measures or metrics and initiatives, and a lot of those are paying off for us and there's no reason to think they won't continue to work for us.

Sure. All right. That's helpful, guys. Just one last quick one. I mean, in terms of the items that you -- it was helpful before. I think, Jeff, when you talked through all the items that are going to help for acceleration in the second half and into next year, but just to remind us, sort of the unusual items that had the impact as a headwind in this current year, which has abated [ph], can you just remind us of those couple of items again? I mean, whether it's the term fees or it's certain contracts that moved away or whatever? But obviously, that abates into next year and that helps acceleration also.

Yes, I think, Darrin, I'll take a couple and I'll turn it over to Jeff. I mean, clearly, in the current year, we're having a currency impact, right, that's higher than what we anticipated. So when you look at our 4% growth in the second quarter, right, it would've been 5% on a constant currency basis. So we clearly have a headwind. It was roughly 60 basis points in the second quarter. That's something that was out there. We talked a little bit about the Biller business and some headwinds there in the first half of the year, which are dissipating clearly as we get into the second half of the year. And we did also talk a little bit about output in the first half of the year given the fact that we had a tough compare. And those are probably the 3 that I kind of see from kind of things that are out there from just a headwind that as we look out into future, we continue to believe that some of those will clearly go away.

Our next question comes from Andrew Jeffrey of SunTrust.

Appreciate the insight into the drivers of growth acceleration, because I know investors are keenly interested there. You mentioned, I think, Jeff, a 40% increase in realtime payment transactions in the quarter, maybe 50% in the first half, if I caught that correctly.

That's right.

Can you talk a little bit about at what point you think it's reasonable for us to expect that realtime, in the context of mobile in particular, where I know you've made a push with your Mobiliti suite, will start to move the needle in payments. Can we consider that as a '16 event or is that overly optimistic?

So that's a great question. We think about that all the time. I think, we will start to see -- I think we will see the seeds in '16 in terms of beginning to create somewhat of a tailwind. But I don't think we're going to see the real growth benefits start to lay in until '17. And I do think that it will be a bit of a wave. Once it starts, it will be very, very difficult to stop it. I think we will grow rapidly. And I think the clients will become attached to that kind of a service delivery, whether it is realtime credit of a deposit or to being able to send money to a family member immediately or even paying a bill as if they were at a Biller website. So as I think about it, I really do think we'll see some level of growth in '16, but the real measurability will be in '17.

Okay. And it sounds like you remain pretty confident that customers will indeed pay for those functions in the context of what is currently a free P2P environment [indiscernible]?

That's right. But remember, P2P, in fact, P2P would be the smallest of the near-term use cases that we would see for that. We would see -- I would see bill payment -- kind of the RXP-based bill payment service where we have 1.4 billion or 1.5 billion transactions a year. It doesn't take a very high percentage of those transactions to really move the needle on realtime. I see realtime deposit, realtime mobile deposit being a very interesting use case where today, there are many, many banks in the U.S. who are charging relatively nominal amounts, anywhere from $0.25 to $1 per deposit or per item depending on the institution to use those remote mobile deposit capabilities, and I think there's an opportunity there. And then, of course, I do see P2P and then I see B2B as another very intriguing use case. So yes, I am bullish on that. I'll tell you what, if you asked me where my nervousness is, it's not on the transactions, it's on the price per transaction. And the nervousness is only not -- if there's 1 billion transactions at a relatively small amount, or 100 million transactions at a relatively large amount, it's still going to create a very interesting, scalable opportunity for us, but more importantly, for the financial institutions that offer that service. So I do think -- I think there are a number of ways that use case will come together and we're really excited about it over the next several years.

Okay. And a quick one for you, Tom. You've done a great job on working capital management, another good quarter. How much more room do you have to improve cash flows from that particular source?

I think, on the working capital side, clearly, we have a relentless focus internally around continuing to improve that. But clearly, we've done a lot out of that. But we -- our business model, as you well know, our free cash flow per share has been very consistent above our adjusted EPS, probably running at 10% plus a year over the last 5 years pretty consistently. So while we continue to manage and improve working capital, do I think that there's a lot there? No. Do I think we'll continue to manage that tightly? Absolutely. And so that's how I would kind of hone in on that question.

Our next question comes from Bryan Keane of Deutsche Bank.

Jeff, just wanted to see if I could get your outlook on the business. Maybe what outperformed so far year-to-date better than your expectations? And then, what kind of underperformed that needs to be fixed as you kind of look into [indiscernible] '16?

Yes, thanks, Brian. I would say that most of the businesses are performing well. As I've mentioned, we are right on top of our internal expectations for the year. The area -- really, the big area that we talked about of underperformance would be impact from foreign currency, which is greater than we anticipated it to be. And because we don't issue our numbers on a constant currency basis, we haven't had that benefit. And then, really, in our Output Solutions, and there's a twofold impact there. The first one is that EMV, while we've had a very large demand and future orders logged, we have not seen the level of production that we had anticipated earlier in the year. That's a matter of timing. The other thing that is intricately connected to that is there were -- because of the large number of breaches last year, we had a lot of reissue. And we're finding institutions trying to balance out how do I think about last year's big reissues with the EMV this year? And we're not seeing the number of programs come through that we typically would have, and we believe that's solely related to the -- these blips and breach timing from last year. So those are the things that we hadn't anticipated. But on balance, we feel like we're making good progress. In that we're well-positioned for the second half acceleration that we had planned originally.

Okay. Helpful. And then, the other question I had is on acquisitions and the acquisition environment. What do you see out there in terms of valuations or attractive properties right now in the marketplace?

Sure. Thanks, Brian. So we've been pretty disciplined on how we think about our capital and how we allocate that capital. There are a lot of attractive properties out there, lots of payments properties that are out there. But valuations are high, and on that basis, when we think about acquisitions, we want to make sure that we're doing things that are strategic, that are going to be accretive to the value that we deliver to our clients as well as our internal revenue growth rate and that they're going to generate sustainable and attractive streams of free cash flow. So we evaluate lots of things, we don't pull the trigger that much and I think we'll continue to be wired in that way.

Our last question comes from Mr. Brett Huff of Stephens Inc.

Just one question. We talked a little bit about Agiliti in the U.K. challenger banks. Can you give us an update on that? From Investor Day, that was something that piqued my interest and it seems like there might be a bigger pot of gold at the end of that rainbow than maybe we thought originally. How is that progressing? And what's your kind of take so far in the last few months?

Yes, thanks, Brett. It's progressing well. We continue to add new names into our pipeline. We continue to build like crazy. We are doing a lot of work to get built. And we expect to go live with our first client towards the end of Q4, beginning of Q1. We expect to sign at least a couple of clients in this quarter. And I think, you'll continue to see us start to announce some names moving forward. We've been pretty circumspect with the new clients to make sure that we can absolutely deliver on what the clients need when they need it. We think it's really important that these new challenger banks get started in the right way. But the thing that's really been different, Brett, than we had originally anticipated is there are lots and lots of names in our pipeline that are not challenger bank names, and that's what's makes this opportunity much larger than we anticipated, and that is working quite well. And we're -- again, I hate to keep saying this, but we're really bullish on that opportunity as well. Thanks, everyone, for joining us today. We appreciate your support. If you have any questions, please give us a call. Have a great day.

Thank you. And that concludes today's conference. Thank you all for joining. You may now disconnect.