Welcome to the Fiserv 2016 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I will turn the call over to Stephanie Gregor, Vice President of Investor Relations at Fiserv. You may begin.

Thank you, and good afternoon. With me today are Jeff Yabuki, our Chief Executive Officer; Bob Hau, 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, anticipated benefits related to acquisitions 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 the reconciliation of those measures to the nearest applicable GAAP measures. These non-GAAP measures are indicators that management uses to provide additional meaningful comparisons between current results and prior reported results and as a basis for planning and forecasting for future periods. Unless stated otherwise, performance comparisons made throughout this call are year-over-year metrics. With that, I will turn the call over to Jeff.

Thanks, Stephanie, and good afternoon, everyone. We executed the business well in the quarter, delivering solid financial results, strong sales performance and continued progress on our strategic growth initiatives. Internal revenue growth was 4%, adjusted operating income margin expanded 10 basis points, and adjusted earnings per share grew 14%. Sales performance was strong in the quarter, attaining more than 100% of quota and was 34% ahead of last year's second quarter. Importantly, that momentum carried over into July, producing one of our -- the best sales months in our history. Given the strength of our results to date and our expectation of revenue growth acceleration in the second half of the year, we are increasing our adjusted earnings per share guidance to $4.38 to $4.45, an increase of 13% to 15% over last year. Now let me provide an update on our 3 key shareholder priorities for 2016, which as a reminder are: first, continue to build high-quality revenue while meeting our earnings commitments; second, build and enhance client relationships with an emphasis on digital and payment solutions; and third, to deliver innovation and integration which enables differentiated value for our clients. We continue to focus our efforts on increasing our level of high-quality revenue growth. As such, our internal revenue growth of 4% in the quarter was highlighted by 6% growth in our Payments segment. We saw continued strength in our transactional businesses and EMV card distribution. Overall, internal revenue growth in the quarter was compressed by 80 basis points from a combination of lower termination fees, EMV deferral and negative currency impact. Adjusted operating margin was up 10 basis points in the quarter and is up 40 basis points through June 30, in line with our expectations. This was led by strong performance in our Payments segment, which…

Thanks, Jeff, and good afternoon, everyone. Adjusted revenue for the quarter grew 6% to $1.3 billion and increased 5% to $2.5 billion in the first half of the year. Internal revenue growth was 4% in both the quarter and year-to-date. These results included 80 and 50 basis points, respectively, of combined negative impact due to EMV revenue deferrals, reduction in termination fees and FX headwinds. Adjusted operating income in the quarter increased 6% to $413 million and is up a healthy 7% year-to-date to $812 million. Adjusted operating margin was 31.9% in both the quarter and year-to-date periods, increasing 10 basis points and 40 basis points, respectively, over the prior-year periods. These gains are due primarily to strong Payments segment performance and progress in operational efficiency initiatives, offset somewhat by expected margin pressure from our acquisitions and continuing investments in new product innovation. Adjusted earnings per share increased 14% to $1.08 in the quarter. And for the first half of the year, adjusted earnings per share is up a robust 17% to $2.14. Our strong first half performance has resulted in increasing our adjusted EPS outlook for the year. At the segment level, our Payments business continued to deliver strong results with internal revenue growth of 6% in the quarter and 7% year-to-date. Adjusted revenue, which includes a full quarter's contribution from our 2 recent acquisitions, grew 11% in the quarter to $693 million. Performance was led by strong results in card services and Output Solutions including EMV, and solid growth in e-payments. As Jeff mentioned, while we experienced improved EMV personalization, we still lag manufacturing and as a result, deferred an additional $3 million of revenue in the quarter. Payments segment adjusted revenue is up 10% year-to-date to $1.4 billion. We further extended existing relationships with our market-leading solutions,…

Thanks, Bob. As we mentioned upfront, sales in the second quarter were excellent coming in 34% higher than last year's second quarter and 108% of quota. Performance was strong across the board and included only a minimal number of large transactions. Sales momentum continue to be very strong in July. We signed several large transactions, which underpin one of our best single month’s sales performance in our history. Importantly, several of these wins have shorter implementation cycles and should provide measurable impact revenue in the fourth quarter. At this point, we fully expect to exceed our sales goal for the year. Integrated sales were $66 million in the quarter, flat to the prior year, and up 38% sequentially, driven primarily by digital and payment solutions. Delivering value to clients through our add-on solutions continues to be a very important element of our company strategy. Our Operational Effectiveness program moved forward in the quarter, including measurable progress on our Data Center Optimization program. To date, we've combined 7 centers and expect to complete additional locations, including one of our largest in footprint later this year. While we're deriving some benefit from these actions currently, there should be a larger aggregate benefit in future years. That said, we did capture $17 million of saves in the quarter, and through June 30, we've achieved nearly 70% of our full year operational effectiveness goal of $40 million. Q2 had more than its fair share of events influencing the environment. We saw many crash in alternative lending as certain highfliers experienced turbulence in their loan portfolios. And while these losses may temporarily slow the proliferation of new lending technologies, we continue to believe the opportunity to introduce new innovative technology is significant. Our offerings are well-positioned to benefit directly and indirectly from the continuing rise…

[Operator Instructions] Our first question is from David Togut of Evercore ISI.

Based on some of your comments about organic growth biasing towards 5% for 2016 as a whole, how should we start to think about next year? And in particular, I'm thinking back to your Analyst Day from last year where you mapped out a 50 to 100 basis point target increase in organic growth over the long term.

Yes. Thanks, David. So first of all, we feel actually quite good about the trajectory of our growth rate. We believe that we will grow or expand our internal revenue growth rate in '16 over '15 within the 50 to 100 basis point range. But the encouraging news for us is that we expected -- we do expect to have much higher growth in the second half of the year, and we expect that to be the jumping-off point going into 2017. So we feel like we're on track. Our strategic initiatives are coming online. We had a little bit more lumpiness in our revenue this year than we're used to, but again, that doesn't affect our longer-term view. And we would expect to see our internal revenue growth rate continue to increase 50 to 100 basis points a year into the foreseeable future.

Do you have a pretty good line of sight as to how the EMV card personalization revenue deferral is going to roll into Q3 and Q4?

Yes.

Got it. And then, you called out some nice growth in DNA implementations year-to-date. Can you talk about the general competitive environment in the large credit union space? You called out in the first quarter call a go live on the Vibrant Credit Union. I mean, how do you see the -- how do you see share trends going forward?

So we continue to have a very, very strong success with DNA on the larger end of the credit union space as well as on the larger end of the bank space. On the credit union side, we have continued to win substantially more than our fair share of competitive takeaways when we go up against anyone in the market. So our win-loss record is quite high going up against a prospect, so we do very well in that environment. And frankly, the Vibrant go-live was very important to us. As you know well, David, because you've known us for a long time, these tend to be longer tail sales processes and then longer tail implementations. With Vibrant going live just in Q1, that created a level of energy in the market, and we have confidence that, that will turn into additional conversations. And frankly, we would have an expectation that would turn into additional wins on the larger credit union end of the market.

Understood. And then, Jeff, your comments regarding the EMV growth runway. I think, you're probably the most bullish in terms of the length of the runway in which you can grow EMV-related revenue. Is there anything specific about your customer base on the card issuer side that, let's say, would give you a longer-term runway for growth? We're starting to see some managements caution that EMV benefit may be near an end, particularly Vantiv on their FI business.

Togut, this is Mark -- or David, this is Mark. The key thing that I'd say that is different is because we are so much focused on debit, and debit has been later than a lot of the credit processors, we think that there's more runway left for us because of that bias. I'd say that's the biggest thing.

Yes. And I would also add to that, David, that we -- remember that we produce cards for a much larger group than just our issuer, kind of our debit issuer banks. And so we -- and much of that business, to Mark's point, is on the debit side. So not only do we have a fair runway in our own base but as well as all the other issuers that don't yet use our debit processing services.

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

Given the fairly steep back-half acceleration, can you help us think through kind of risk factors that might cause you to come in lower than where you think you're going to come in? Are you depending on implementations that can't get pushed back? Or how should we sort of assess the risk of what's to come here?

Yes, that's a great question, Ramsey. So we obviously are committed to producing internal revenue growth within our outlook, right? We said biasing to 5% for the year. And the Payments segment has performed quite well all year long. And we do expect a bit of continuing compound growth coming there as well as new live clients, as we've been talking about for the last several years. So that points the majority of the focus on the financial segment. And our out[ph] calculus, and we've looked at this a variety of different ways, primarily because we are expecting more growth later in the year than we have historically seen, and it really comes down to a couple of factors, and let me lay them out. The first one is we've had some kind of lumpiness in the prior year on our compares. So we had some regulatory, and we talked about in the first quarter some license-related revenue that was lumpy in our '15 numbers. And we've had to overcome the substantial majority of that in the first half of the year. And so we see that easing on both fronts. And therefore, we're already covering that in terms of our recurring revenue. And we would expect, as that lumpiness in the prior year went away, that we'll get some comparable benefit. The second item, and this is one of the larger ones, is just this -- the continuing growth in our transactional services. Now some of these are certainly on the payments side, lending -- I'm sorry, Mobiliti, EMV, as we were talking about the reduction of the deferral but we've also seen very good growth in our lending businesses. Our largest account processing client went live late in Q2, so all of those, we believe, will provide benefit.…

Great. That's super helpful. Another question I wanted to ask was about free cash flow. You'd mentioned there were a couple of puts and takes in terms of why it was, on an absolute basis, I think, relatively flat versus last year and not growing too fast on a per share basis. Can you visit that? For some reason, I was expecting the EMV revenue deferral to have a somewhat positive impact on cash flow but I might not be getting that correct. Could you go through again just sort of the cash flow dynamics and why you expect them -- what's been weighing on them and why they're going to pick up a little later in the year?

Yes, Ramsey, it's Bob. There really were the 2 key drivers that I talked about from a working capital standpoint in terms of accounts receivable as well as the timing of our tax payments, that's actually the bigger weighting on accounts receivable. And yes, you're right. The way to think about EMV, some of that deferral is cash positive because we see the cash in advance of booking the revenue but that has declined pretty precipitously over the last 4 quarters, down to only about $3 million this quarter, so not a big driver from a cash flow standpoint. And that receivables collection is really a timing, and in fact, we started to see that collection turn already in July. So those receivables have started to turn into cash already for the third quarter.

Our next question is from Tien-tsin Huang of JP Morgan.

Just wanted to, I guess, clarify just, I guess, the bias to the 5%. It sounds like term fees is the biggest contributor to that? And then, I may have missed it, if that's the case, then how are you able to, I guess, upgrade your EPS target given that's a higher-margin component? Is it just mix or are you pulling some levers to get there?

Yes, Tien-tsin, you did hear that on the termination fees, and it is by far the largest single impacting item, I would say, or the unplanned item in our results -- or estimated results for '16. Obviously, it's kind of a mixed bag, right? On one hand, it's always better to not have termination fee revenue. On the other hand, termination fee revenue tends to have fairly high margins, as you note. You've probably heard in our prepared remarks that we're doing quite a nice job on our Operational Effectiveness program. We're already at about 70% of our full year target. And the beauty of that is that's real economic benefit that -- the margins on that are comparable to margins on term fees. So there is some benefit there. And frankly, as you know well, if you look at the sources of our growth being in the Payments segment, the Payments segment, I think, we mentioned in our remarks crossed over 34% for the first time ever. I mean, those -- that -- the mix of the revenue is actually working quite favorably for us this year and we're not pulling any levers beyond the normal levers that we always pull. It just so happens that in some of the products, take Mobiliti, that we invested in several years ago, once you cross the line on that, the contributions are pretty attractive.

Okay. So high incremental margins there. Makes sense. Just as a follow-up. Just Jeff, you commented about -- it sounds like your June, July are pretty strong from a sales perspective, despite what you called out, right, Brexit and out-lending stuff. So why do you think that's the case? What pulled through some of this strong selling because we've heard sort of mixed things around discretionary spend. It sounds like you're seeing good sales execution. Why is there a delta in your mind?

One of the -- it's really across 2 plains as best I can see. One is the majority of our larger sales are tending to be nondiscretionary. So it's using our BillMatrix platform to process payments for a very large -- one of the very large Blues where there's a very interesting dynamics going on in the health insurance, and therefore, the health payments industry, that we're just starting to play in. We've been farming that space for a couple of years. We mentioned we signed one of the largest wireless companies in the U.S., again, to use one of our payment acceptance platforms. And that, we talked about a lot, is an important differentiator in our now strategy. So the ability to route payments, not just through issuers but being able to have issuers, consumers and billers using the same real-time ecosystem, you may have seen that we signed an arrangement with EWS, so again, building out that payment movement or the movement of money capability. So on the non-issuer side, that's working out quite well. On the issuer side, we're continuing to see lots and lots of energy around capabilities that are improving the digital experience. So mobile, online -- online is getting an interesting wave of at least refreshed lookie-loos saying, "Hey, I've got this really great mobile experience. What do I do with online?" And then, some of our payments capabilities that are -- whether it's our IPS set of capabilities, account transfer, bill payment, which is still kind of, as I mentioned, the killer app of non-point-of-sale payments. Those are all the areas which we're getting focus and having good interest. And frankly, that's why our sales are good, but importantly, our pipeline continues to grow pretty precipitously.

Our next question is from Dave Koning of Baird.

And I guess, first of all, you mentioned about 80 basis point headwind from some of the one-offs this quarter, low lower term fees, FX, EMV, the deferral there. Can you give us what that impact is on each of the segments?

We typically wouldn't do that. But EMV sits in Payments. And the others are generally, I think, in Financial. So I'm not exactly giving it to you, Dave, but that's the roundabout.

Yes. Okay. And then, I guess, secondly, for Q3, you mentioned the $15 million to $20 million term fee headwind, does that mean that Q3 -- the core, it sounds like the core of the full half -- the second half of the year is going to accelerate, but does Q3 get kind of pushed back down towards kind of the same growth as Q1 and Q2 given that roughly a little over 1% headwind to the business? And then, Q4 is where the real acceleration happens, right?

Yes. That's -- I think that's a good way to think about it because of obviously the termination fees. Those termination fees, while they're not from the account processing businesses, they are sitting in that segment. So I think that's a reasonable way to think about it.

Okay. And then, I guess, just the last thing, the $26 million of acquisition benefit this quarter, is there any real seasonality there? Or is that a pretty good number, kind of the rest of the year, to think about the $26 million per quarter?

We think, Dave, overall, the acquisition benefit for the year is about 75 to 85, so about 25 a quarter. Of course, we acquired both those businesses kind of mid to latter part of first quarter, so minimal impact Q1, full benefit in Q2.

Our next question is from James Schneider of Goldman Sachs.

I was wondering if you could maybe give us a little bit of an update on where the pipeline of DNA wins stand today. You talked about 8 new conversions coming on with the 3 over $1 billion. Can you maybe talk a little bit about -- and I think that the total pipeline has had a little over 20 as of last quarter. So have you resold that pipeline? And do you expect the remaining ones over $1 billion to come on before the year-end?

Well, we're optimistic, Jim, that we're always going to have a nice backlog of DNA wins. But we don't have any reason to believe that our expectation for go lives in the year has changed. I mean, we're moving that along. And again, as I mentioned to Dave's question earlier, interest in DNA continues to be very strong across all charter types, so we would -- from a pipeline perspective, we would expect that to continue to be additive.

That's helpful. And then, with respect to the Operational Effectiveness program, you talked about the 70% attainment towards the $40 million target for the year. Is that something you would expect that you would kind of potentially pool future program savings into this year or would you plan to kind of get to that $40 million attainment and then just kind of stop and reset for 2017? And can you maybe talk about how much more there is to go on the data center side, specifically?

So we are not -- we don't really manage it around the financials. We manage it to drive as much operational effectiveness as we can. The target that we have has specific programs attached to it. And those are all tracking well or better than we might have expected going into the year. But we don't moderate the pace of those around kind of how much is realized in any one given year. So no, we wouldn't slow that down.

Yes. I would say, Jim, I mean, to Mark's point, we -- in most years, we exceed our target by a bit, and that -- I would -- obviously, given where we are this year, we would expect that. On the data center piece itself, there's a lot of runway, right? As we talked about at our Investor Day last year, it's taken us a while to get some muscle and the cadence around it. We've gotten 7 so far completed year-to-date and we would expect that to continue to grow for the next several years. Ultimately, we're going to go down to a handful of larger data centers that we think will help deliver a better service to our clients and frankly, reduce our cost. So that's a meaningful opportunity moving forward.

And Jim, I'd just to remind you, we're in year 1 of a 5-year program that's got a $250 million 5-year objective for savings. So we're in the very early stages of 5 years of cost improvement.

Our next question is from Paul Condra of Crédit Suisse.

Just a couple. First on the Early Warning, can you just talk a little more about what -- I guess, what Fiserv gets out of that arrangement? And anything about economics that work for you?

Yes, so this is Mark. I mean, the arrangement, we're pretty excited about it. The Early Warning, as you probably know, is kind of really -- has picked up the clearXchange business, and they have been working on this development of a kind of large bank P2P network that their owners can all sign onto. What we announced today is that we will be a technology provider to offer our technology, our P2P technology, which includes lots of different kind of back-end services that would enable any financial institution in the country to participate in that network that EWS is going to be introducing. So in many ways, I think, we're really in the leading position to provide this turnkey technology that financial institutions in general will need. Now some of the larger banks that are -- that are owner-members of EWS have built of their own technology but an awful lot of other financial institutions. And certainly, as you go into the larger number of community institutions still rely on a technology provider like us to give them the back-end systems they need to participate in that kind of a network.

I would also say, Paul, I mean, part of this is we're in the early stages of understanding what it's all going to mean. Like many other service offerings, some banks will create -- some institutions will create their own P2P offering and some will use parts of ours or parts of someone else's and -- but many of them, we believe, will use all of ours. We've got roughly 2,400 institutions today in the U.S. that are using our Popmoney technology. And as Bob mentioned in his prepared remarks, we're op to a pretty solid cadence of a 30% transactional growth. Every quarter, we're announcing year-over-year growth kind of in that range. It is our belief that there are roughly 100 person-to-person payments per household per year. So 100 times 110 million households roughly in the U.S. that have an opportunity to be digitized, electronified and moved in a different way. And whether that is -- ends up being 5% or 10% or 50%, none of us really know, but we believe that our technology is central to having that happen. So ultimately, we think we'll drive transaction volume. We think there'll be network gateways, there'll be risk products. There'll be all kinds of different pieces of that value chain. And we've been in this for a while. We've got a nice footprint. Some clients will probably link to Early Warning but what we do know is with the 5,000 institutions that we provide core account processing for today, we think, will play an important role in serving them. And the 4,000 institutions that use our bill payment solution, including 8 of the top 10 banks in the U.S., will continue to operate with us. We think there's ultimately going to be quite an exciting and interesting payment ecosystem beyond point-of-sale that's created.

Yes. I mean, it sounds like there's a lot going on that kind of leads to my next question, which is as you're getting into these emerging areas, lending, mobile, you talked about biometrics and P2P. How does that feed into the way you're thinking about M&A? Do you have all the capabilities you need? Are there some assets out there that might make sense?

I think, any of us would be foolish to say we have all the assets that we need. We feel quite good that we've got the lion's share of what's necessary today but we will continue to be active reviewers of what's going on in the market and look for opportunities to improve our product set or our solution set to help drive value for our financial institution and nonfinancial institution clients. So we're active out there but we'll continue to be pragmatic and compare every allocation of capital to share repurchase, as we always do, and again, look for opportunities to get the tailwind of the macros whenever we can.

Our next question is from Darrin Peller of Barclays.

Just starting off quickly, just if you could help us understand what the normalized growth rate do you think would have been in the Financial segment if you can sort of address or adjust for all those items that affected this quarter just so we can help understand the normalized growth going forward?

I'm only pausing, Darrin, because I'm trying to think about -- we typically don't give much segment by segment guidance, but I would say that it would be measurable and probably we'll leave it at that.

Okay. All right. Let me just follow then on a question that was asked before with your thoughts on what you have in terms of assets. I'm really just trying to understand, A, the competitive environment now, I mean, obviously, one of your biggest competitors has made a very large acquisition focusing on larger financial institutions. Has that led to a change at all in your area of focus around the core, or area of focus around some of the larger banks, some of the ancillary services you may provide some of the larger financials? And then, maybe a follow-on would be just on the M&A side again. I mean, you've talked a lot about international over the years being an opportunity, and yet, I think, we're still waiting to see if something actually happens on the M&A front there. So can you just update us on your thoughts around anything outside of the domestic market?

Sure, Darrin. So I assume that on the competitive question, you were talking about talking about the guys who bought SunGard. And we don't really compete very much against the SunGard assets set and it's -- that is not strategically aligned with where we're focused in the market. So frankly, we have not seen very much change in the competitive market because of that. And I don't see a lot of parallel between, for example, what's going on in the P2P space with the Early Warning announcement and our over 2,000 institutions using Popmoney and what is being done in that larger end. So strategically, that's not where we've elected or opted to focus. So we'll continue to look for ways to increase the robustness and the relevance of our model, but I don't think you'll see us do something like that. As it relates to the non-U.S. side of the market, the beauty of the U.S. market is it's a relatively singular large market. And there are not any other large singularly focused markets in the world with the exception of probably China and perhaps India. And those markets have nuances of their own that we won't talk about at this point. So the challenge for us is being -- we'd like to -- in some ways, have a larger non-U.S. footprint, but we want that non-U.S. footprint to have the high-quality revenue characteristics that we look for, and those would be sustainable recurring streams of revenue that have attractive levels of free cash. So we continue to use those screens and that's always going to be the constraints to how we think about deploying capital, both in and out of the U.S.

Our next question is from Andrew Jeffrey of SunTrust.

Nice win with the Early Warning. And Jeff, it sort of, I guess, dovetails into my bigger picture with regard to Mobiliti and Payments. The Payments segment's obviously performed very nicely. Can you quantify perhaps in your segment organic revenue growth the contribution from Mobiliti solutions in aggregate? And then, maybe the -- I know it's hard to quantify but maybe -- and it's early, perhaps frame up timing for contribution from the clearXchange solution? It -- I mean, is that a function of banks rolling it out? Is it a function of transaction volume on the platform? How should we think about that?

So let me -- I'll give it a shot, and Mark will fill in where I have missed. So I'm going to take the second one first. So we have ideas on how the rollout will go. I think, there's been some discussion publicly about advertising and some marketing around the P2P services for some of the larger institutions. We've seen that going on intermittently but there seems to be a lot of energy around that. And our experience, at least with services such as bill pay is when you think about them to consumers, they tend to want to start using them. So we would expect to see transactions start to grow as awareness is raised. And perhaps it won't be as -- the velocity won't be the same as Venmo. But frankly, we believe that most consumers would prefer to transact in an area that is safe and secure and through their trusted financial institution. And so we're optimistic about how that will turn into growth in the future. We would expect that growth to primarily be -- to come through as payment transaction volumes, some services, helping institutions think about how they're going to best position their offerings, or embed some of our technologies in their own unique offerings if they would like to do. There are many, Andrew, institutions who use our bill pay technology but they embed it into an experience that's unique to them, and I think, we'll see some of that as we move through P2P. So I think, it'll come through in a lot of different ways, ultimately be through transactions, and either transactions that we initiate or transactions that we accept on behalf of our clients, so a little bit more of a gateway nuance on top of the normal end-to-end processing that we do overall.

Yes, the only thing I'd add, as Jeff said, the volume of transactions is where we think this is ultimately going to -- why this might be different this time. And fundamentally, we've known for some time that in order to get sort of a ubiquitous P2P offering really to take off in the United States, you needed a couple things that most of these networks were not able to fully deliver. You needed -- it's coming from a trusted financial institution, that's why we have been around this business and kind of pushing this business so hard, we think that's a big opportunity. It needs to be a branded solution that people will recognize, and that's been a challenge to break through with a brand in the market. But very importantly, there's 2 other factors that I think is going to come through with this. One is the ubiquity of it. Being available through the largest financial institutions and being able to find endpoints through much of the banking system is really where the promise of, we think, the EWS offering plays. The other aspect of this is that network will be, at its inception, a real-time network. And we think that the consumer value proposition that comes along with a real-time network and a real-time transaction is the kind of thing that will generate more enthusiasm for use over some of the other competitive alternatives. So for all those reasons, we're again optimistic. We've been optimistic about P2P as a potential game-changer for some time and we think this continues to be a nicely evolving line of business.

Andrew, let me just move on to the other half of your question. We don't disclose what the size of the mobile or digital business on a stand-alone basis. We have, at our investor days, we have kind of put wheels out there that give the general sizing as typically part of our -- I think, it's part of our e-payments business but it's out there. It's a growing -- a rapidly growing piece of the business. The growth contributions are important. And we are -- I would actually venture to say we are even earlier in our mobile journey and our online transformation journey than we are in our EMV journey. And that is -- we have significant growth runway to go. Most of the pundits believe that we'll see, over the next 3 to 5 years, 70% to 80% of the -- of banking users be mobile, and that number for us is well, well, well south of that. So we feel quite good about that. And again, I would not underestimate the importance of remodeling the digital experience for online as well. So both of those, we think, are important. And then, we did do the little -- the ACI, the Community Financial Services acquisition early on. We're just starting to move those client institutions and ultimately, their customers into the mix. And we think there's a lot of value to be created there as well.

Our next question is from Ashwin Shirvaikar of Citigroup.

Jeff, actually, your last question is a good segue into what I wanted to ask or clarify. As Mobiliti becomes more or less mainstream, and clearly, you have many development front-end products for that, should that not lower your cost structure over time because these channels are also inherently more self-service, more cloud-based? Is that already part of your operational effectiveness thought process? How should we think about the cost side implications of it?

Yes. The answer is for the client institutions over time, when digital is scale, self-service is a much more important piece of the equation. And so I do believe that for the financial institutions, they'll see cost benefits. For us, the most important part of us getting cost benefits is scaling the platform. So the more scale we get in the platform, the lower our cost -- kind of a unit cost will get over time.

But you shouldn't -- you won't see lower support cost or anything like that? You're primarily benefiting from those [ph]?

Yes. I mean, again, if you think about -- we supply these technologies to the financial institution, they're supplying them to their end customers. We will -- we take in -- if we have a core account processing client, we're providing them with support for any one of the 28 different applications that they have. I think, as humans get more dependent on self-service, it could have a derivative impact on us. But we haven't thought about that as a way of reducing our cost but I'll certainly have Bob take a look at that.

Bob, sorry to create work for you there. The other question I had was on pipeline. And I think, you may have answered part of it but just wanted to revisit. It seems like it took maybe 6 or 7 months to go from 1 sales peak last December to this July, if I can call this July sort of sales peak. Does that mean that you now have to again replenish for the next 1, 2 quarters in terms of what your sales is going to look like in the second half of the year?

I think, that, at least from our standpoint, one of the reasons why we're so bullish, both for our results this year but also moving into '17 is our pipeline, even with the very strong performance, the pipeline is quite robust right now. And it's not as geometric as we had a peak in December and a peak in July because, frankly, we did have a slower year last year. We had a very, very strong year in '14. We spent a good part of '15 replenishing the pipeline but not just replenishing it by adding in clients but really looking at our processes and building what we believe is a more sustainable engine for the future in ensuring that, that pipeline maintains at a higher level. I would actually say that we have more large transactions in our pipeline right now than -- even with our closes in July -- than we had at the same juncture last year. So the values and especially the kind of probability-weighted values are substantially better now than they were a year ago. And given some of the momentum that we're seeing, we would at least be optimistic that we would be in even better shape a year from now.

Our last question is from Bryan Keane of Deutsche Bank.

Most of my questions have been asked and answered. Just a couple of clarifications. If 3Q '16, if there's not going to really be an acceleration in internal revenue growth, I think that would suggest a bigger number in fourth quarter, maybe an 8% internal revenue growth in the fourth quarter to make it average out to 5% for the year. I just want to make sure that's true because you're also talking about that being the jumping-off point for '17. So that's quite -- 8% would be a quite higher growth rate than what we've seen in the past when we think about '17. So...

Yes, I know, that's right. I mean, I can't speak to the exactness of the numbers but I would say that they're directionally correct. And one of the biggest swing factors though is the termination swing. So we're getting -- Bob, we mentioned in our remarks that we expected termination fee revenue to be down, call it $15 million, $20 million in Q3, but we expect to return to normal termination fee levels in Q4. So you have that kind of oddity that you have to, I think, normalize. But beyond that normalization, we always have a little seasonality in Q4. But I think, directionally, that's why we have a good amount of confidence when we think -- start thinking about how that translates to '17.

Okay. That's helpful. And then, just on free cash flow, I know it was flat kind of year-to-date. What does that look like then for -- by the time we get to the full year? Does that -- will free cash flow grow with adjusted earnings per share, which I think is expected to grow 13% to 15%? Will that catch up to grow with that kind of growth rate?

That's essentially the right way to think about it, Bryan. We'll see better growth in the second half of the year that will more closely approximate the growth in earnings per share. And as we pointed out in the opening comments, we expect to be more than $4.70 free cash flow to shares.

Yes, Bryan, I think, you know pretty well that typically, we're running a little bit better than operating earnings in our free cash flow and then we have the benefit of reduced share count. And Bob will probably reprimand me, but basically, in Q2, we had a receivable -- we had a billed-in receivable without any corresponding billed-in days and we also had kind of an unusually large tax payment. And those kinds of things, we would not expect to recur for the remainder of the year. So we would expect to be kind of generally back on track.

Correct.

Thanks, everyone, for taking time with us this afternoon. It's always a pleasure. If you have any follow-up, please be sure to conduct our Investor Relations group. Have a good evening.

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