Q4 2019 Earnings Call

February 13, 2020

[music].

And gentlemen, thank you for standing by and welcome to be Fiat fourth quarter 2019 conference call. At this time all participants are no listen only mode. Later, we will conduct a question and answer session instructions will be given at that time. If you should require assistance during the call. Please press Star then zero and as a reminder, this conference.

It is being recorded I would now like to turn the conference over to our host Mr. Nathan Rolls off. Please go ahead Sir.

Thank you good morning, and thanks, everyone for joining us today for the last fourth quarter and full year 2019 earnings Conference call. This call is being webcast.

Today's news release corresponding presentation as well as the webcast link or all available on our website at up by Us Global backhaul.

Gary Norcross, our chairman President and CEO will discuss our recent business trends and describe our operate quarterly operating performance Woody Woodall, Our Chief Financial Officer will then review by US financial results and provide first quarter and full year 2020 guidance.

Turning to slide three today's remarks will contain forward looking statements.

These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC.

The company undertakes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise except as required by law. Please refer to the safe Harbor language.

Also throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA adjusted net earnings and adjusted net earnings per share.

These are important financial performance measures for the company.

Financial measures as defined by gap.

Reconciliation of our non-GAAP information to the GAAP financial information are presented in our earnings release.

With that I'll turn the call over to Gary in his remarks on slide five.

Thanks, Nate good morning, and thank you for joining us today I'm very pleased to be able to announce our fourth quarter and full year results 2019 was a transformational year for AFE is we successfully closed on are well down the path on integrating the largest financial text technology transaction and our industry. This.

Along with outstanding sales production delivered strong organic revenue growth of 6% for the full year.

All three segments performed exceptionally well for the year as well as the quarter, our record sales and integration activities position. That's for an even stronger 2020 later I'll talk about our strategy modernization and how that has led to some very large noble wins that exemplify how our strategy is working as well as driving increasing demand.

And for solution suite.

This includes signing three of the largest banks in the country this quarter on our core banking solutions.

In the fourth quarter organic growth rate accelerated to 7%, resulting in $3.3 billion in revenue.

Our new sales results for the largest quarter in year in our history, resulting in an increase of more than 20% in new sales for the year, our installation backlog as well as pipeline continued to expand.

Adjusted EBITDA margins expanded by 470 basis points, primarily driven by the high contribution margins, resulting from the installation of our new sales growing transaction volumes as well as the outstanding execution of our team to overdraft performance of cost and revenue synergies.

As we think about integration synergies, we exited the quarter generating $80 million in revenue and $465 million in cost synergies on an annualized run rate basis, when including interest expense savings, we have already exceeded our initial cost synergy target.

As a result of our strong performance, we are increasing our future expectations for both revenue and cost synergies, which we will detail later with our impressive momentum heading into 2020, we expect continued acceleration in organic revenue growth and ramping earnings accretion.

Turning to slide six I want to talk about our strong sales results and client value propositions.

Several years ago, we embarked on a transformational modernization journey, we began an ambitious new software development cycle re architected, our solutions to be open modular and cloud based and we also began modernizing and consolidating our technology delivery platforms. We did this because we believe that the financial serve.

Mrs industry was moving towards its own transformation and we wanted to be able to empower clients in the broader industry to change disruptive technologies and new business models are forcing the industry to evolve by embracing future ready innovations like automation artificial intelligence and machine learning cloud native technologies in did.

No omnichannel.

Client demand as evidenced by our new sales results demonstrate that our thesis about the industry is correct.

Investments we've made over the past several years are yielding results for our clients as well as GAAP EPS.

And our banking segment I'm very excited to announce at three of the largest banks in the country, what combined total assets to more than $600 billion have embarked on the journey to transform their legacy core banking environment with that by US. This includes a top 10 at top 20, and a top 30 bank.

Indeed, AFG Union Bank at top 20 bank that we recently announced as well as a top 10 bank. Both selected our modern banking platform for their transformations. They selected us because of our ability to deliver an innovative personalized and next generation solution as well as our ability to consistently execute large scale come.

Flex implementations.

The modern banking platform is entirely new and built from the ground up it was developed with state of the art containers digital first capability opened eight the eyes and cloud based delivery through a SaaS model.

This next generation highly flexible platform enables the innovative financial institutions to transform the future banking and clearly represents a significant milestone for the industry.

I'm also pleased to announce that we signed an agreement with first Republic at top 30 bank to power its modernization program with our IBX core banking platform, including our industry, leading opened eight framework code connect.

EPS continues to prove wants the leading SaaS core banking platform for large regionals throughout the US first Republic is known for its strong growth in outstanding client experience. They chose that by us over the incumbent provider buckets of our open scalable platform, which will better serve the needs of the banks existing client base as well as.

Allow them to continue to expand and meet their growing consumer and business clients.

These three pivotal wins or the start of what we believe will be a decade long global transition of core banking systems from legacy in house applications to cloud Native open banking deployments.

Turning to our merchant segment, we are winning due to our superior client value proposition strong integrated systems and continued flexibility on deployment.

For example, one of our marquee clients a top global search engine continues to shift share to us after developing a proprietary routing engine that evaluates their processors for authorization and fraud rates as well as cost of acceptance, we consistently demonstrate exceptional results across these categories, leading the client.

To choose at bias for additional volumes across many of their U.S. businesses. In addition, a large global retailer who is number one in their category selected App I asked to deploy omnichannel payment technology across Europe, covering both in store and online payments. The company was looking to consolidate multiple.

Wires and turned to App I asked because of our unique capabilities in global reach.

And our capital market segment, our ability to simplify clients complex needs with our end to end solution suite is driving demand. Our modernization strategy has resulted in a very strong sales year and we saw exceptionally strong growth in the fourth quarter.

We continue to see increasing demand for SaaS deployments in the team is doing an outstanding job balancing that demand with our on premise license business. For example, we entered into a SaaS agreement one of the world's largest asset managers. In this instance, we will be providing a bundle of investment solution with a next generation digital offering and data visualization.

And tools I.

Im also excited announced at one of our premium payback clients, a large oil and gas company is expanding their relationship with US to include our cloud based solution for their corporate treasury cash liquidity and risk management needs. This further proves that our ability to cross sell and up sell large enterprise customers to help their business on numerous.

Levels.

Turning to slide seven in addition to these new wins, we are also accelerating our achievement in revenue synergies, while initially expecting to reach $100 million of annualized revenue synergies by the end of 2020, we have already achieved $80 million in annual run rate synergies in the first five months after closing.

As a result, we're increasing our revenue synergy targets to $200 million exiting 2020, and $550 million exiting 2022. This reflects the faster than expected ramping of our multiple cross sell opportunities.

During the fourth quarter, we continue to see meaningful volumes ramp across our debit networks as well as ongoing traction for our premium payback solution.

We signed two very large premium pay back clients during the fourth quarter as we are experiencing significant demand for this innovative solution.

First we will be partnering with Paypal to enable millions of online consumers to redeem earn rewards at checkout by allowing in the pay with points from thousands of US banks second I'm excited announced that we entered into agreement with a top three us retailer to help innovate its customer loyalty program with our premium paybacks.

Solution together, we are enabling this client a deepening relationships with millions of consumers across its 3000 locations.

We also signed another large merchant referral agreement during the quarter, we continue to be very pleased with our ability to take share from incumbent providers across our mid size in regional bank clients in the first five months. We are well ahead of our expectations regarding merchant referral sales agreements our pipeline and sales activities continued to grow.

And we think this sales opportunity, we'll continue to exceed our initial plans.

Now that we're well into our integration execution, we continue to discover new opportunities to cross sell and bundle offerings as we go to market, giving a strong confidence in our newly raised targets.

For example, our joint prepaid solutions have emerge as a new cross selling opportunity into a world pay client base, we have already signed a partnership with the global solutions provider to develop reloadable fire cards for transit systems. Together. This partnership has already won our first large metro client and expect more to fall.

Hello.

With our very successful achievement of expense as well as revenue synergies. We're running a full 12 months ahead of our original integration schedule due to this accelerated timeline. We're also taking earlier steps to further streamline our organization to drive a much more functional operating model.

Some of the changes we have recently implement will allow us to better leverage our go to market strategy between our banking and merchant segments. We believe this will not only further accelerate or revenue synergies, but also allow us to drive innovation into these markets.

We have also consolidate technology development for our merchant and banking businesses within our combined Chief operating officer organization. This alignment will allow us to increase or speed to development and deployment in this highly dynamic industry, creating what we believe will be a best in class software Engineering organization.

As you can see we feel great about how the companies have come together in this momentum in success gives us great confidence for an even stronger 2020.

Moving to slide eight.

We have a highly resilient business model that is differentiated by our market leading solutions across our segments and merchant solutions. We are clearly a leader in global E Commerce and integrated payments as we continue to grow these channels have expanded to approximately 45% of our merchant business mix up from 37% a world pay in 27.

And team.

Due to the highest secular growth trends in these markets, we expect them to maintain their high rates of growth and to continue increasing as a percentage of our revenue mix reinforcing the durability of our organic growth profile.

In banking solutions, we are differentiated by our comprehensive portfolio of next generation solutions.

Is uniquely position us to help large global financial institutions, as well as community banks and credit unions to transform their business models and to provide seamless customer experiences. Therefore as the financial services industry continues to evolve we will be the primary beneficiary of the growing momentum towards outsourced cloud based technology from legacy in.

How software.

Finally in capital markets, our investments in advanced technology, and Reg tack are paying dividends, we developed bundled offerings to enable our clients to simplify their complex front middle and back office processes with an end to end automated workflows that is helping us to win market share.

In addition by using a SaaS delivery based model, we have an opportunity to further increase our revenue growth profile my driving an increasing mix are predictable recurring revenue streams.

In order to reinforce our reporting segments and drive increasing rates of organic growth. Our priorities for 2020 are as follows first we will continue to invest in sales innovation and delivery to capitalize on our growing new sales pipelines.

Clearly our investments over the past five years are driving landmark new wins, and we're going to continue to lean into the strategy in 2022nd we will seamlessly execute the worldpay integration in order to achieve our revenue and cost synergy goals. We're already well ahead of schedule and we'll look to further accelerate or momentum in 2020.

Third we will continue drive efficiency through their datacenter consolidation program.

Lastly, we will continue to scale in our high growth sector or markets in order reinforced the durability of our revenue growth profile as.

As you can tell by our exciting wins and accelerated synergy realization 2019 was a transformational year and we have line of sight, achieving even more in 2020 I'll now turn the call over to would need to round out the financial discussion before he opens the call to questions Woody.

Thank you Gary I would also like to welcome everyone to todays call.

This morning, I'll cover our 2019 financial results and 2020 outlook, but before I take you through this and we'd like to recap some of the financial highlights that we achieved in 2019, beginning with slide 18.

During 2019, we transformed our company and positioned it for continued acceleration in revenue growth and ongoing margin expansion with an eye toward creating superior shareholder returns, both now and into the future.

First.

We accelerated our organic growth profile by executing the most significant and transformational acquisitions in our company's history.

We also reinforce the durability of our growth profile with record new sales and notable client wins like the ones. Gary mentioned earlier. These reflect the outcome of our investments in innovation and technology that we made to benefit our clients.

Given our success, we will continue to make these investments.

We expanded margins by aggressively driving cost synergies through our integration efforts as well as ongoing internal expense initiatives that were in place well before the Worldpay acquisition.

Third we enhance these operating savings with disciplined management of our below the line items. For example, we generated $275 million of annualized interest expense savings by strategically managing our capital structure.

Finally, we generated $2.1 billion and free cash flow according to 20% of revenue.

We anticipate free cash flow generation to accelerate and expect approximately 24% to 26% conversion to revenue in 2020.

We used our strong free cash flow generation to not only pay down $1.4 billion in debt since the transaction close but also the fund investments in innovation and integration as well as to continue to pay our dividend.

For example, we recently acquired a majority stake in Vertis partners Virtus is a small the strategic tuck in acquisition within our capital market segment.

It provides high value managed services and technology solutions focused on the credit and loan markets, which is an area of rapid growth.

While it's too small no material impact on our consolidated results. It will further reinforce the capital market segment accelerating growth profile.

Looking forward, we will continue to prioritize debt repayment in order to reach our 2.7 times leverage target by the end of Tony Tony.

Our strong cash flow will allow us to continue investing in technology and innovation to drive new sales and to make strategic tuck in acquisitions, even as we deliver.

As we move into 2021 and beyond our capital allocation priority will shift towards reviewing strategic M&A opportunities that will increase our scale and secular high growth markets absent M&A opportunities, we will return capital to shareholders through ongoing dividends and resuming buybacks.

As you can see based on our accomplishments in 2019, we are doing what we said we would do and even more first we initially expected to worldpay transaction to be modestly dilutive in 2020 before turning accretive in 2021.

Today, we announced our formal adjusted EPS guidance for 2020 in the entire ranges now accretive.

Second our initial revenue synergy target was $500 million today, we increased our revenue synergy target about 10% to $550 million further we increased our 2020 revenue synergy target about 33% to $200 million.

Third we initially expected cost synergies of $400 million, which we raised again today to $675 million.

Finally, we continue to see accelerating revenue growth in 2020 and beyond.

These accomplishments demonstrate the hard work and the team and further increased my confidence in our strong outlook for 2020.

Turning to our results on slide 11, we finished the year on a high note exceeding our revenue and adjusted EPS guidance in the fourth quarter revenue increased 7% on an organic basis to $3.3 billion with strong topline performance across all three of our segments, which I will summarize in a moment.

Adjusted EBITDA increased to $1.5 billion during the quarter and our margins expanded by 470 basis points to 45%.

Reflecting our strong operating results adjusted EPS was $1.57 cents per year.

I'll now provide some color on our segment results on slide 12.

Merchant solutions organic growth accelerated sequentially to 10% as expected and E commerce and integrated payment. So continued strong growth in the mid to high teens.

The segment generated EBITDA of $584 million in the quarter, representing a 52% margin.

As we looked at 2020, we expect this segment to grow in the low double digits as underlying business trends remain robust and we expect revenue synergies to ramp throughout the year.

Our banking solution segment generated 5% organic growth for the quarter and 6% for the year, primarily driven by continued demand for our market leading solutions.

This segment generated $682 million and adjusted EBITDA for 44% margin.

We expect banking to continue to generate strong mid single digit growth in 2020, and our impressive new wins provide increased confidence in the recent trends.

Capital markets organic revenue growth was very strong accelerating the 6% when excluding a onetime items drove approximately two percentage points of growth during the fourth quarter. This segment generated $339 million, an adjusted EBITDA, representing a 51% margin.

For 2020, we project capital markets to show modest acceleration over 2019 and improvement from our for our messaging as we continue to drive growth in recurring revenue.

Turning to slide 13, we've made significant progress on our cost synergies as our integration of Worldpay is running ahead of schedule.

We exited the fourth quarter generating $465 million annual run rate cost synergies, including $275 million of interest expense savings and $190 million and reduced operating expenses, we are making substantial progress in reducing duplicative corporate costs as well as consolidating our merchant an issuer platforms to gena.

The operating expense savings, which are also running well ahead of plan.

With all of the progress that we've achieved already we are increasing our 2020 cost synergy target the $600 million in annual run rate cost savings, we are pushing hard to accelerate cost synergy attainment.

And complete our integration plans as fast as possible.

About completing these efforts along with deleveraging our balance sheet in 2020, we will be able to focus even more of our energy on driving revenue growth and be ready to execute strategic M&A as we enter next year.

Before I provide the details of our 2020 guidance I would like to set the stage on slide 14.

We have significantly accelerated our organic revenue growth profile and expand our adjusted EBITDA margins over the past three years revenue top $10 billion from the first time in our company's history in 2019, and we're highly confident in our ability to further accelerate organic revenue growth in 2020 and beyond over the past three years organic revenue growth increase.

From 2% in 2017% to 3% in 2018 and now 6% in 2019.

With the multiple revenue synergy opportunities and accelerating sales momentum that Gary described earlier, we have significant visibility into the year on year increasingly confident in our expectation for organic revenue growth to approach, 7% in 20 tuning before moving higher in the out years.

Turning to margins, we've expanded adjusted EBITDA margins by more than 700 basis points over the past three years and we project another 300 points of expansion in 2020.

This consists of ongoing initiatives and synergy achievement to generate approximately 400 to 450 points of underlying margin expansion, which will be partially offset by 100 to 150 basis points of additional investments.

We're investing but we are reinvesting a portion of our below the line interest expense savings back into the business has increased in the investment and innovation sales and delivery. All these investments are targeted at driving continued acceleration revenue growth.

We are making these investments in order to capitalize on the significant momentum that we are seeing in the market right now our new sales pipeline has the largest I've ever seen and I want to make sure we're positioned to win.

In addition, we have the largest implementation backlog of ever seen as you'd expect following record new sales capped off with the big wins that we announced this quarter.

Therefore, I also want to invest in delivery. So we can get our clients utilizing these new capabilities faster and start converting those big wins into revenue.

Finally, I'd like to provide details of our first quarter and full year guidance on slide 15.

Based on current business trends, we expect revenue of 13.550 billion to $13.675 billion, an adjusted EPS of $6.17 to $6 in 35 cents per share for full year 2020. This project represents organic revenue growth, 6% to 7% and adjusted EPS.

Growth of 10% to 13%.

We expect to increase our adjusted EBITDA margins to approximately 44% for the full year and we will provide more planning assumptions on the bottom of this loan.

Our new sales momentum substantial backlog and multiple cross selling opportunities provide significant visibility, which gives me high confidence in achieving our guidance ranges.

Turning to our first quarter guidance, we expect revenue of 3.180 billion to $3.210 billion and adjusted EPS of $1.30 cents to $1.34 cents per share. This represents organic revenue growth of 5% to 6% and adjusted EPS growth of 12% to 16%.

As a reminder, we face a tough comp during the first quarter after receiving about a point of onetime benefits during the first quarter of 2019, which we will have to grow over in 2020.

After the first quarter. We then expect revenue growth to ramp toward the upper end of our 6% to 7% range for the remainder of the year.

Before we open the line up for questions I'll wrap up our prepared remarks with the following we're well positioned to continue delivering substantial shareholder value in 2020 and beyond as we continue to increase revenue momentum expand margins and generate significant free cash flow.

2019 was a transformational year and I'm looking forward to even stronger financial performance in 2020.

This concludes our prepared remarks, operator, you may now open the lines for questions.

Thank you ladies and gentlemen, please be advised that we have a new system for asking a question.

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One moment please for our first question.

And we do have something from the line Jason Kupferberg. Thank you Ma'am. Please go ahead.

Hey, good morning, guys really nice results here in the quarter. So I just wanted to probe to 2020 EPS guidance.

A little bit further it looks like on share count, maybe a little bit higher than midstream is estimating which kind of is what it is but on the margin point you talked about that hundreds of hundred 50 bips of additional reinvestment Woody I just wonder if you can elaborate a little bit further maybe by segment, where youre going to be concentrated in some of those.

Investment dollars.

I thought it might be you unhelpful to walk you through the margin bridge. We expect for 2020, we closed out 2019 with about a 41% margin. We are seeing synergies both revenue and opex driving a little greater than 200 basis points of improvement, we've got normal operating efficiency and scale in the business driving.

Roughly 50 to 100 basis points of improvement the datacenter consolidation efforts are driving about 50 basis points of improvement and then the impact of having world today in the business for the full year as driving about 100 basis points of improvement that aggregates to about 400 to 450 basis points, then we talked about the IND.

Estimates roughly 100 to 150 basis points offsetting that to get you to about 300 basis points of expansion or an expectation of about 44%.

The 20.

When you specifically thinking about the investments I think a lot of it's being driven towards delivery.

Those are those big wins, Gary talked about or significant dollars of revenue sitting in the implementation backlog that we want to get those capabilities in their faster.

And get and get the wins turning into revenue they would flow across both banking and merchant primarily in terms of the incremental investment.

With incremental sales flowing in banking and merchant as well as we see a very very robust pipeline, particularly in some large opportunities in the marketplace right now.

Okay understood and just as a follow up the 250 million dollar increase in the.

Run rate cost synergies.

For 2020 is that is that mostly all opex or is there a little bit more interest expense in there too I think you had that.

Incrementally in December.

We expect it to be almost every dollar opex related absolutely perfect. Yeah. Okay. Great. Thanks, guys. Thank you. Thanks, Jason. Thank you and next we will go to line up Darrin Peller with Wolfe Research. Please go ahead.

Hey, Thanks, guys Nice results look we saw strong revenue during the quarter Hey, we saw strong revenue trends at about 7% I think it was really driven by merging and 10 in capital markets really strong eight.

We look at these synergies rolling on notwithstanding the tough comp in first quarter can you just touch on the range the six to seven versus the fourth quarter run rate notwithstanding the first quarter tough comp.

It seems like there should be a trend towards the better end of that seven if not higher and then.

Maybe if you just give us some scenarios that would be at the high end in the low end that you could see playing out through the year I.

I think even call to that in my prepared remarks.

After the first first quarter, we anticipate the be at the high end of our growth guidance for the remainder of the year.

Again consolidator plays in about a point of growth, that's where the five to six came from.

Beyond that we would expect to be towards the high end of that range.

Okay, I guess, what I'm wondering is if like what specific scenarios could bring you to the high end or potentially the low end beyond just the timing the cadence.

Tightening on synergies, perhaps and maybe just some examples of how revenue synergies are going what led you to raise the revenue synergy targets yet now we rates. There is great question, Darren we raised the revenue.

Synergy guidance, just because of our actual cross sell wins.

What propels us to the upper end of that will clearly be the timely onboarding.

Of these of these large implementation.

That would you discussed and as you see.

Like we have in the past we were accelerating some investment into this growth curve as the growth curve accelerates in our backlog build obviously, we want to make sure that we have the personnel necessary to install the solutions, but the response to our solution capabilities is just really been tremendous across both banking in merchant we feel.

And capital markets for that major we highlighted cross sell when and capital markets.

With a premium pay back in prepared remarks, so really across all the segments. We're just seeing really good solid demand for our next generation solution suite, our pipeline continues to grow and our sales more importantly, we continue to close the business in all of that.

Pushed us to raise our our revenue guide, we exited the year with $80 million and run rate. That's that's installed in producing revenues. So that's well ahead of our initial hundred million dollars target for the into 2020. So when you just back into that we're already at 80 million through the first five months when you look at the sales that we even.

Just highlight in Q4 and as those onboard in the first half or through the first three quarters of the year plus with our pipeline, we feel really good about revenue synergies and to Woodys point feel very confident about that brand of those.

Those guidance ranges.

Thanks, guys, if I could just squeeze in the two big Bang C.

First Republican Union those are really large wins that we don't see often so can you just give a little quick color on that in the Midwest, Yes, I know we've talked a lot about on this call about.

One there was three significant wins there was a top 10, we didn't name, but there was also the top 20 in top 30 that you just mentioned we've talked a lot about on this call is that there is a tremendous amount of pent up demand.

In the marketplace and this is a global statement of very large financial institutions that are tied to extremely old legacy platforms, and we talked a lot about when we'll see.

That market finally, starting to transition to a much more modern much more open architecture to allowing the continued to compete.

For the next the next several decades and I think this quarter wasn't was a significant.

Moment in the industry, where we saw as I said, a top 10 and station on top 20 and station as top 30 institution, all make that decision and to go through a transformation of their core banking in many instances they are going off very multiple decades old type legacy capability.

These two.

More much more future modern architecture. So we're we're real excited about what we're seeing in the industry I can honestly tell you the pipelines this fall as I've ever seen.

For for core banking on a global basis for next generation capabilities and and we feel very good about the fact, we started this investment cycle three four years ago, we've been investing heavily into these next generation capabilities and really feel like we're in a very good spot as far as.

Timing the industry for when that transformation is going to begin.

That's great. Thanks, guys.

Thank you next we welcome your line Tim with Credit Suisse. Please.

Please go ahead.

Thanks, a lot guys. So my question is on the Worldpay E Commerce acquiring business clearly a leader in global ecommerce acquiring and then also worldpay in many many in store markets sort of a good number of key markets globally, but there does seem to be an opportunity to expand in store acquiring into new international countries.

I just wanted to see if you could talk a little bit about how is how we should think about that expansion rough timing what the opportunity is and just a confirmation that that potential upside is not actually and the formal revenue synergies.

Now Thats a great great question, and you're exactly right. It's not in the it's not in the revenue synergy as upside and we're actively working through those strategies and we will be pushing into those other markets. As you described we're very excited.

About the merchant team and how it's come together under AFE is we're very excited about the combinations that we're seeing between our banking relationships and our broader merchant relationships and so like everything we do we participate on a global basis, we've already been teeing up the countries.

That we're focusing on building out those go to market strategies aligning our development initiatives to correspond to that and so more will be coming on that but that's absolutely upside to that.

To the future of the company.

Great. Thank you.

Thank you and next we've all gotten line up Ashwin Shirvaikar with Citi. Please go ahead.

Hi, Thank you hi, guys highway.

Good solid hey, good solid close to 19, new though Q.

I am kind of.

I was hoping that since you stood by the.

The future, 8% to 9% growth.

Im hoping you can breach the seeks to seven this year and think thinking this is going to be closer to seven like you mentioned in nearly a question.

If you could bridge that gap with regards to how much of that flows from incremental synergies versus some of these larger wins it seem like they have.

Yes.

They seem to be longer advance because they're very logical.

Top 10 Banquet example might take longer could you talk a little bit about that.

Yes, no I think.

You're exactly right. Obviously these larger programs do take a longer period of time to do ample in that we've talked about that multiple times on the call. So it's not uncommon that go through.

12, plus months sales cycle, and then you've got to reciprocal 12 plus months implementation cycle.

What makes us excited about.

Of driving our growth rates beyond 7% and upper single digits is not only that demand that we're seeing on cross sell.

And revenue synergies, we talked a lot about that and we continue to not only raise.

They the.

The dollar amount of that we also raised the timing of it being pulling it in earlier than what we thought but we're also when we talked about this.

Now for multiple multiple quarters were in well over a year now have really rapid sales growth around our newer technologies and thats, whether its own the banking business on the merchant business or on the capital market business that demand were seeing for our cloud based deployments are.

Bill at the to lower the total cost of ownership of these large institutions and drive a real differentiating value proposition is is.

Playing out very well in the market. So you've got this combination of revenue synergies, but more importantly, this combination of being able to compete and take share and drive.

Drive significant new sales wins across all three of our verticals gives us a lot of confidence that our growth profiles going to continue to accelerate in the out years has already discussed.

Got it and I might've missed it but did you.

Gratification perspective provide.

Either the.

TRD terminations include any of the tax rate outlook and I might've missed the ecommerce capabilities, specifically put it back within leading merchant.

I'll touch on both of those on the E Commerce growth rate E Commerce and integrated together grew mid to high teens with ecommerce growing higher.

Over the average and integrated growing slightly lower than an average rolling back to the mid to high teens with regard to the TR A's the structure of the deal is only giving an immaterial benefit to EPS in 2020, and 2021 with further EPS benefit in 2022 in 2023.

Just on the way the deal was actually structured and the timing of the actual ownership of the Trs management.

Right. Thank you.

Thank you next we will go to the line David Togut with Evercore. Please go ahead.

Thank you good morning, Gary.

Good morning, David.

Good to see.

The merchant solutions growth returned to 10% organic in Q4, if you could break down your expectations for 2020, what do you called out low double digit organic expected from merchant what would what would your outlook be for E com and integrated as kind of one bucket and then so to the other channels.

Kind of growth rate for 2020.

Yes, if you think about merchant I think we would still anticipate E com and integrated to be in the mid to high teens from a planning perspective growth in the fourth quarter was strong.

Expectation and pipeline is strong so we still feel very good about that with the profile of the remainder of the business being similar to what you saw in the fourth quarter.

On the growth profile, obviously, we're hoping to see some of those synergies flow into both banking and merchants. So you've got a balanced them around 2020, our expectation around revenue synergies blends.

Roughly 50 50 going into the banking segment versus the merchant segment, but we're still pleased with the overall growth certainly pleased with the acceleration in the fourth quarter.

And are looking for low double digits all of 2020.

Got it and then just as a quick follow up I think what do you historically you model in about a 150 basis points of revenue headwind.

Annually from consolidation in pricing pressure can you kind of share with us your expectation on that front for 2020 and are there any specific consolidations.

Kind of baked into your guidance.

Yes, we would have similar levels of competitive headwinds that we always bake into the model. So no real change there David I would say at this point, we don't have anything specifically outlined other than the historical trends down now when we when we think about consolidation in the industry, we think obviously across our client.

Base, primarily impacting the banking capital markets group, that's going to continue but we're not or not.

We're not projecting that's going to us accelerate dramatically from where.

From what we saw in 2019, so it's been it's been a fairly consistent trend wander the nice things about that at biases position is because we're typically positioned and a large regional market.

Those tend to be our customers that are doing a consolidating so where the we've been in a lot of instances the beneficiary of that of those combinations, but we'll continue to watch it closely and but modeling pretty well consistent.

Behavior over 2019 on that front I.

Understood. Thank you very much.

Thank you.

Thank you and next we look what's your line of Dave Koning.

Robert W. Baird. Please go ahead, yeah, guys. Thank you good job.

Next I said, yes, and I guess first of all.

When you first gave the accretion to the 616 number.

Maybe a few quarters ago or so I guess since then we've had what we think maybe is 30 cents a benefit from just better synergies lower refinance tax rate I think a little better is it fair to think of the bridge that that would have maybe brought it up 30 cents or so but these incremental investments and then what looks like no real use of cash in 2000.

20, it looks like you're not really trying to push the share count down at least in guidance. Those two things maybe are what's bringing it back a little bit down is that fair bridge, that's pretty close yet when we guided accretion in I think the third quarter, we didnt anticipate the second round of refile benefit.

We absolutely, we're pleased and being able to go back into the market and grab another 135 million or so of interest savings, we sell that as an opportunity along with the sales execution that was delivered in the fourth quarter to reinvest that in sales and delivery, which we kind of described before we certainly are not buying back shares.

Ears.

This point until we reach our deleveraging targets. So those are primarily your two big deals as Dave you got a pretty close.

Okay. Good and then to really quick modeling ones.

The size of that acquisition and when that hits and then is the tough comp in Q1 is that solely in the banking segment.

The tough comp in Q1 is in the banking segment.

The the small acquisition was roughly revenue contribution of about $75 million in 2019.

And we closed the relatively early in Q1.

Alright, great. Thank you.

Thank you and next we will go to the line up George Mihalos with Cowen. Please go ahead.

Hey, guys. Thanks, Thanks for taking my questions I.

Yes, Gary and what I'm not sure if I missed it but did you give what the increase in backlog is year over year I think it was up 9% last quarter. Just just curious if you have they'd give an update on that and any color on any specific segments strength that.

That may have been surprising deal.

We didn't give the specific dollar amount of backlog that'll that'll get disclosing the 10-K, what we did talk about was the implementation backlog component of that overall backlog was the highest I've ever seen while we didn't give a dollar amount. It's certainly connected to three or four the three big wins in core banking gear described plus some of the big wins and.

Yeah, we really saw great strength in the quarter and frankly for the whole year across all three of our segments.

Really saw great growth in capital markets around our ragtag solutions and some of the things we're doing through our SaaS model and cloud based technologies.

The banking business saw strong sales across our next generation solutions. Our next generation digital our Omnichannel things were been there obviously, we highlighted what's going on with our core banking transformation and then what he has talked about several times on the call. The strength, we saw across E com and integrated.

In the merchant business so.

We're very pleased with how our 19 unfold in obviously all that pushes us into 2020.

With a with a lot of a lot of new sales, we have to deliver on which is good for that that's that's great you guys on really buildup on on on the opportunity and just just as a quick follow up if we can kind of shift gears a little bit just just to the merchant side I'm. Just curious your perspective, there's been some more consolidation in Europe now curious if you think that will.

Have any impact on the business, whether competitively or from from.

A partnership standpoint.

And visa.

Looking to adjust.

Interchange and potentially raising it I guess on the E. Com side, just just curious if you think that will have any impact on the on the legacy will pay business. Thank you.

Well look we continue to focus on all kinds of all combinations going on any M&A activity any partnerships and obviously, we watch that very closely at this point in time, we feel very good about our position.

Across the globe, especially in merchant and our ability when you look at our when you look at our scale on merchant and our ability to truly be they owned global provider E. Com at scale, and we feel very good or better positions, but we'll continue to we'll continue to watch those things.

As far as visa typically we pass all in all of those.

Through through our fee structure very transparently. So obviously, we're working through those changes, but we.

We don't see any impact at the moment.

Thank you and next we will go to the line of Tim Willi with Wells Fargo. Please go ahead.

Yes. Thanks.

Good morning, and two questions personal again back to the merchant a little debt.

Thinking about again the capabilities you talked about with world pay in the omni channel.

Over the last four to five years whatever it is retailers have been investing substantial digital commerce platforms. What you think about pipelines for sales activity or are we at a point where.

Yes, the retailers are sort of reevaluating what they've now built.

Sort of focusing on backend side the operational aspect of this now that they got to consumer side correct them sort of wondering if there's an escalation in RFP or something you might see coming down the pipe.

For sort of global omni channel that might be different now than year ago.

Farther down this journey what the retailers.

You know Tim it's a good question one I would tell you is obviously, we've only only been involved now a little over five six months, what I'm, telling you what we're seeing in the sales cycle I wouldn't say an increase in RFP activity.

But what I would say is we're seeing increased pipeline and increased demand for capabilities and so we're obviously leaning into that Worldpay had made some significant investments around omni channel.

Leading up to our combination obviously they've made some significant investment in E. Commerce they'd also made some.

Some significant investments in the UK on the new acquiring platform. So when you look at all of those things what they had done on the consolidation between Vandeven Worldpay all of that's playing in very nicely into our sales success and allowing us to compete on a on a global on very effectively so we're seeing very good strong.

Loan pipeline growth and good solid sales success.

Especially across the ecommerce and omni channel as I highlighted one in Europe in my prepared remarks.

Great and then my follow up and I'll hop back in the queue is on sales you talked a lot about cost shell on this call and I know you guys are always looking at the sales force and optimization and making sure you're cross selling at selling effectively have there been any changes as you move through this integration with world pay in terms of sales structure.

Compensation for cross selling anything along those lines at maybe is kicking in and helping to elevate the performance that you highlighted on this call.

On prior calls we actually highlighted the fact that we didn't want to change any commission plans. We wanted to make sure that everybody was very focused.

Im prepared to execute and got they got the same credit they got before the combination pulled together that's always been an important step for us because the last thing we want to do is create any confusion across our salesforce. So I think the costs of those because we haven't made any changes and bucket.

Yes, we're now gaming ever by opportunity to pull these other products. That's helped increase our pull through I think the other side of it and we highlighted on the call in the prepared remarks is we're just finding more and more capabilities across the two companies that resonate with those exist.

Adding customers. So I highlighted our prepaid opportunity that was something we really didnt identified during due diligence, but what that came out of a cross sell into an existing worldpay customer that announced allowed us to create a whole new opportunity and we see a lot.

Growth in that opportunity now as we built that out so I think those two things just just pulling the teams together because we're a full 12 months ahead of where we thought we'd be on integration the benefits of the team coming together and working as a team and identifying those opportunities you just really saying that paid through and in the crop.

Sales.

Great. Thank you so much.

Thank you and next we will go to the line Kumar with Autonomous. Please go ahead.

Good morning, Thanks for taking the questions.

First is I wanted to understand what's assumed in underlying UK trends to allow you to hit guidance. This year as we've seen some significant call outs as a weaker UK from visa card et cetera and.

Secondly, there was a meaningful uptick or at least significantly more than higher than our expectation in stock based compensation and I wanted to understand that trend there. Thank you.

Well on the UK front as we talked about in prior calls we model.

Frankly, our UK volumes already pretty much at recessionary levels, we saw a little softness.

In quarter of on the UK, but weve modeled that end, we've really modeled in no recovery.

But we've also model then the volumes.

At about where they were in Q4 in other words were not modeling them to turn bid to fall off a significant amount, we feel very comfortable though with our with the business that we are signing we've also got some new leadership in the UK. So we think theres an opportunity there really grow our share.

In the UK as well so we're pretty excited what the team is coming together on that front, but the quick answer is for 2020, we pretty much modeled the UK consistent with what we saw in 2019 on the on the stock compensation comment.

Yes majority of is around accelerations related to severance activity in the fourth quarter.

Thank you.

Thank you and next we will go to Ramsey El Assal with Barclays. Please go ahead.

Hi, Thanks for taking my question.

I guess Dovetailing with quick question just before mine.

Can you comment on external and macro factors that you have baked into guidance, obviously, you've been hearing a lot of branded virus, but also debates I just spending environment any other election year impacts on bank budgets, just what do you presuming.

In the context of your guidance.

Yes, let me let me take a few of these and then we'll let woody get into the details. The quick answer is we model in a fairly consistent 2019, now what I would say it that way and our pandemic task Force is obviously, a very focused on the Corona virus right now we don't see any material.

Empaque unforced throughout the Asian region, if we do have any impact at all it would just be a matter of a few million dollars in Q1, but we're monitoring it very closely and and frankly, we're very comfortable that.

That's not going to be an issue. So we continue to watch those things, but as far as when we look at the growth rates around the world where moderate modeling consistency through 2020.

Any other comp yeah, you know as we've talked about last quarter, we continue to see and model softness in the UK in Europe and broadly we have not put anything in our 2020 plan with regard to some outcome from the election.

The remainder of it has been relatively status go in terms of the underlying health of the global economy, that's right.

Okay.

And then secondly, and lastly from me could you give us it kind of status report on some of the key revenue synergy buckets. I think you mentioned that the pin debit opportunity was now at scale. It does the linkage east and especially in the presentation, which I presume is somewhat fully executed upon what about the other the other key synergy.

Thats what inning are you in terms of the premium payback.

As a nation.

Synergies and maybe also in the card not present authorization rates of progress you mentioned that a little bit that much but yes. No ramp is great questions I would say, we're just obviously, we're just getting started with our revenue synergies. We while we're excited about 80 million. We've got a long way to go through better reach or raise targets, we feel great about our.

Targets and obviously, we feel great about the sales success, we've had a I would tell you even put in my prepared remarks, our debit routing has done very well.

And so that continues to contribute we actually saw good volumes additional volumes in coming through in the quarter.

So I would say were not completely finished there, but as you highlighted in late innings and those were some very early wins premium payback. We're just getting started on it we had some very significant signings.

You don't want to trivialize a top three.

Merchant and pay Pal I mean, if those are those are just huge opportunities obviously, we've got to deploy those.

Next year. So we haven't started seeing revenue growth, but more important that we're seeing really large.

Pipeline and additional sales around premium payback, so thats, what those aren't the only two weeks on we've now signed a number of customers. The one that has surprised us as the merchant referral program across our regional banks, we actually didnt predict the response that we're seeing on that base in our and our larger institutions, which is.

Which is a very pleasant surprise.

The the as far as the authorization rates in fraud rates, we talked about that on prior calls really just working on the model's working on the data consolidation. So I would argue those results im not even started at this point down we're doing the work leading up to one doing the work that will then drive the reserve.

All.

In late 2020 in 2021, so very early stages on a lot of these things, but feel really good about the about the early results the signings to date and the pipeline.

That's super helpful. Thank you very much.

Thank you and next we will go to the line of Brett Huff with Stephens. Please go ahead.

Good morning, guys, congrats on a nice quarter. Thanks.

I know near the end of the game here on the Q. So I'll just ask one.

Detail on the core wins, so we've been doing this a long time and we've been hearing about the big banks going to do their core transformations for what 15 years, yes really at the beginning of that and you guys got three of the big ones, but I guess my question really is if we're finally at that tipping point what is your visibility into.

The other big banks that you serve also doing the same thing.

Yes ill add some color Brett and then let Gary follow on even if you go back to Investor Day, a couple of years ago. We had one of the questions in the audience was will you ever see a top 20, a top 30 bank outsource.

To to a company like if I ask this quarter. We saw three so I want to say is really important that we're seeing some of this is a tipping point as I've described the pipelines very full and we feel very optimistic about.

Yes, no I really do I think it's just a matter we talked about it in the past, we're really seeing a transformation around technology that frankly, none of us have seen in our careers and so with this transformation and technology a lot that we'll talk about fourth industrial Revolution.

It is these newer technologies are going to it or require a replacement you're not going to be able to at a rate.

Your legacy technologies, you're going to have to go through a conversion to really take the advantage of these new open standards. This new scaled standards. This new availability standards and so yes, Brad I think we really have as I said in our prepared remarks, we were seeing a significant milestone in the industry when you've got.

Our top 10 top pointing top 30 bank all making their decision that go through that through that transformation Woodys point stat on we've had a lot of early success.

With our next generation core banking system, the monitor making platform, but what were but now frankly, that's one of the reasons why we're in investing so much in delivery.

We've got a very very strong pipeline.

In active discussions going on so we don't expect phase to be.

The only the only big deals announced so we're excited about it and we do believe.

This is a global issue I was just over in Asia.

Earlier in January and every customer I met with and even in Q4, when I was outside of the country every CEO as meeting with is talking about this issue and and so this is a global opportunity for F by Us and I just think we're very well positioned and just getting started I think for the next 10 years.

You are going to see this kind of this kind of transformation is going to occur across core banking.

So I need to thanks, guys.

Thank you and our last question comes from James Friedman with Susquehanna. Please go ahead.

Hi, Thank you and let me echo the congratulations I'll just ask my two upfront and the interest of time.

So with regard to the 100 150 basis points of reinvestment related to delivery Woody should we think about that is onetime in nature will go away in 21, and then well, we're making a models on a quarterly basis. Thank you for the call Thats about Q1 are there any other color that we should remember about the other.

Orders in terms of nonrecurring thank you.

Your second question first I think the only other call out would be fourth quarter 2019, we called out about two points of benefit in capital markets that we don't anticipate we actually normalize instead, the underlying growth of six versus a that you see on some of the charts.

Beyond that no other call outs.

You go back to the original question would we continue to investors as one time I certainly hope we continue to invest here. If we continue to see sales, particularly some of these larger institutions outsourcing their core banking.

Certainly be happy to continue to make this investment and deliver again.

Look we want to make sure gains whatever we do is that we continue to invest behind our growth to continue to accelerate that growth curve. So likely seen in the we've got a real unique opportunity here, where we really do see the market moving.

There are sales results in our sales channels across all of our segments. So then need to have ability to invest in that and deliver on these capabilities and get them in market and help further accelerate our sales team we're investing in sales resource as well so woody talked about that is not just all delivery.

Right now we've got a tremendous amount of demand we want to make sure that we have the necessary people end markets.

That can go that can deck.

Capture and capitalize on these opportunities.

Okay.

Thank you and we will now go back to Gary Norcross with any closing remarks.

Thank you I'm proud of our outstanding results in 2019, I also want to recognize the worker team has done to accelerate or integration timeline by a full 12 months I'd also like to thank all of our associates across the globe, who are working hard every day to advance the way the world pace banks and EMC.

Yes, maybe have any question following todays call. Please reach out their investor relations team I want to thank you for joining us today.

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And gentlemen, thank you for standing by and welcome to the Fiat fourth quarter 2019 conference call.

This time all participants are in listen only mode. Later, we will conduct a question and answer session instructions will be given at that time. If you should require assistance during the call. Please press Star then zero and as a reminder, this conference is being recorded I would now like to turn the conference over time, that's an attorney General's office. Please go ahead Sir.

Thank you good morning, and thanks, everyone for joining us today for the fast fourth quarter and full year 2019 earnings Conference call. This call is being webcast that and today's news release corresponding presentation as well as the webcast link or all available on our website at by US Global Dot com.

Turning to slide three today's remarks will contain forward looking statements.

These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC.

Also throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA adjusted net earnings and adjusted net earnings per share.

These are important financial performance measures for the company, but are not financial measures as defined by gap.

Reconciliation of our non-GAAP information to the GAAP financial information are presented in our earnings release.

With that I'll turn the slope call over to Gary in his remarks on slide five.

Thanks, Nate good morning, and thank you for joining us today I'm very pleased to be able to announce our fourth quarter and full year results 2019 was a transformational year for half I guess, we successfully closed on are well down the path on integrating the largest financial text technology transaction and our industry. This.

Along with outstanding sales production delivered strong organic revenue growth of 6% for the full year, all three segments performed exceptionally well for the year as well as the quarter, our record sales and integration activities position us for an even stronger 2020.

Later, I'll talk about our strategy of modernization and how that has led to some very large noble wins that exemplify how our strategy is working as well as driving increasing demand for solution suite.

This includes signing three of the largest banks in the country this quarter on our core banking solutions.

In the fourth quarter organic growth rate accelerated to 7%, resulting in $3.3 billion in revenue.

Our new sales results for the largest quarter in year in our history, resulting in an increase of more than 20% a new sales for the year, our installation backlog as well as pipeline continue to expand.

As we think about integration synergies, we exited the quarter generating $80 million in revenue and $465 million and cost synergies on an annualized run rate basis, when including interest expense savings we have already exceeded our initial cost synergy target as a result of our strong performance we are increase.

Our future expectations for both revenue and cost synergies, which we will detail later with our impressive momentum heading into 2020, we expect continued acceleration in organic revenue growth and ramping earnings accretion.

Turning to slide six I want to talk about our strong sales results and client value propositions.

Services industry was moving towards its own transformation and we wanted to be able to empower clients in the broader industry to change disruptive technologies and new business models are forcing the industry to evolve by embracing future ready innovations like automation artificial intelligence and machine learning cloud native technologies in debt.

Total omnichannel.

Client demand as evidenced by our new sales results demonstrate that our thesis about the industry is correct. The investments we've made over the past several years are yielding results for our clients as well as that by us.

And our banking segment I'm very excited to announce at three of the largest banks in the country. What combined total assets a more than $600 billion have embarked on the journey to transform their legacy core banking environment with that by US. This includes a top 10 top 20, and a top 30 bank.

And you have GE Union Bank, a top 20 bank that we recently announced as well as a top 10 bank. Both selected our modern banking platform for their transformations. They selected us because of our ability to deliver an innovative personalized and next generation solution as well as our ability to consistently execute large scale comp.

Flex implementations.

This next generation highly flexible platform enables the innovative financial institutions to transform the future banking and clearly represents a significant milestone for the industry.

I'm also pleased to announce that we signed an agreement with first Republic topped 30 bank to power its modernization program with our RBS core banking platform, including our industry, leading open Apiay framework code connect.

Yes continues to prove wants the leading SaaS core banking platform for large regionals throughout the US first Republic is known for its strong growth and outstanding client experience. They chose that biomass over the incumbent provider buckets of our open scalable platform, which will better serve the needs of the banks existing client base as well as.

Allow them to continue to expand and meet their growing consumer and business clients.

These three pivotal wins are the start of what we believe will be a decade long global transition of core banking systems from legacy in house applications. The cloud native open banking deployments.

Turning to our merchant segment, we're winning due to our superior client value proposition strong integrated systems and continued flexibility on deployment.

For example, one of our marquee clients a top global search engine continues to shift share to us after developing proprietary routing engine that evaluates their processors for authorization and fraud rates as well as cost of acceptance, we consistently demonstrate exceptional results across these categories, leading the client.

To choose App I asked for additional volumes across many of their U.S. businesses. In addition, a large global retailer who is number one in their category selected AFE I asked to deploy omnichannel payment technology across Europe, covering both in store and online payments. The company was looking to consolidate multiples.

Wires and turned to App I asked because of our unique capabilities in global reach.

And our capital market segment, our ability to simplify clients complex needs with our end to end solution suite is driving demand. Our modernization strategy has resulted in a very strong sales here and we saw exceptionally strong growth in the fourth quarter.

We continue to see increasing demand for SaaS deployments and the team is doing an outstanding job balancing that demand with our on premise license business. For example, we entered into a SaaS agreement one of the world's largest asset managers. In this instance, we will be providing a bundled investment solution with a next generation digital offering and data visualization.

And tools.

I'm also excited announced that one of our premium payback clients, a large oil and gas company is expanding their relationship with US to include our cloud based solution for their corporate treasury cash liquidity and risk management needs. This further proves that our ability to cross sell an upsell large enterprise customers to help their business on numerous.

Levels.

Turning to slide seven in addition to these new wins, we are also accelerating our achievement of revenue synergies, while initially expecting to reach $100 million of annualized revenue synergies by the end of 2020, we have already achieved $80 million an annual run rate synergies in the first five months after closing.

During the fourth quarter, we continue to see meaningful volumes ramp across our debit networks as well as ongoing traction for our premium payback solution.

We signed two very large premium payback clients during the fourth quarter as we are experiencing significant demand for this innovative solution.

First we will be partnering with Paypal to enable millions of online consumers to redeem earn rewards at checkout by allowing in the pay what points from thousands of US banks second I'm excited to announce that we entered into agreement with a top three us retailer to help innovate its customer loyalty program with our premium.

Payback solution together, we are enabling this client to deepen its relationships with millions of consumers across its 3000 locations.

We also signed another large merchant referral agreement during the quarter. We continued to be very pleased with our ability to take share from incumbent providers across our mid size in regional bank clients in the first five months, we are well ahead of our expectations regarding merchant referral sales agreements our pipeline and sales activities continue to grow.

And we think this sales opportunity, we'll continue to exceed our initial plans.

For example, our joint prepaid solutions have emerge as a new cross selling opportunity into Worldpay client base, we have already signed a partnership with the global solutions provider to develop reloadable fire cards for transit systems. Together. This partnership is already won our first large metro client and expect more to fall.

Hello.

With our very successful achievement of expense as well as revenue synergies. We're running a full 12 months ahead of our original integration schedule due to this accelerated timeline. We're also taking earlier steps to further streamlining our organization to drive a much more functional operating model.

Some of the changes we have recently implement will allow us to better leverage our go to market strategies between our banking and merchant segments. We believe this will not only further accelerator revenue synergies, but also allow us to drive innovation into these markets.

We have also consolidate technology development for our merchant and banking businesses within our combine chief operating officer organization. This alignment will allow us to increase or speed of development and deployment in this highly dynamic industry, creating what we believe will be a best in class software Engineering organization.

As you can see we feel great about how the companies have come together and this momentum and success gives us great confidence for an even stronger 2020.

Moving to slide eight.

And team.

In banking solutions, we are differentiated by our comprehensive portfolio of next generation solutions. These uniquely position us to help large global financial institutions as well as community banks and credit unions to transform their business models and to provide seamless customer experiences. Therefore, as the financial services industry continues to evolve.

We will be the primary beneficiary of the growing momentum towards outsourced cloud based technology from legacy in house software.

Finally in capital markets, our investments in advanced technology, and ragtag are paying dividends, we developed bundled offerings to enable our clients to simplify their complex front middle and back office processes with an end to end automated workload that is helping us to win market share.

In addition by using a fast delivery based model, we have an opting to further increase our revenue growth profile my driving an increasing mix are predictable recurring revenue streams.

Third we will continue drive efficiency Threer datacenter consolidation program.

Lastly, we'll continue to scale in our high gross act or markets in order to reinforce the durability of our revenue growth profile as you can tell by our exciting wins and accelerate synergy realization 2019, once a transformational year and we have line of sight to achieving even more in 2020.

I'll now turn the call over to Woody to round out the financial discussion before he opens the call to questions Woody.

Thank you Gary I would also like to welcome everyone to todays call.

This morning, I'll cover our 2019 financial results and 2020 outlook, but before I take you through this I would like to recap some of the financial highlights that we achieved in 2019, beginning with slide team.

First.

We accelerated our organic growth profile by executing the most significant and transformational acquisition in our company's history.

We also reinforced the durability of our growth profile with record new sales and notable client wins like the ones. Gary mentioned earlier. These reflect the outcome of our investments in innovation and technology that we made to benefit our clients.

Given our success, we will continue to make these investments.

We expanded margins by aggressively driving cost synergies through our integration efforts as well as ongoing internal expense initiatives that were in place well before the Worldpay acquisition.

Finally, we generated $2.1 billion and free cash flow according to 20% of revenue.

We anticipate free cash flow generation to accelerate and expect approximately 24% to 26% conversion to revenue in 2020.

For example, we recently acquired a majority stake in Vertis partners Virtus is a small but strategic tuck in acquisition within our capital market segment.

It provides high value managed services and technology solutions focused on the credit and loan markets, which is an area of rapid growth.

While it's too small have material impact on our consolidated results. It will further reinforce the capital market segment accelerating growth profile.

Looking forward, we will continue to prioritize debt repayment in order to reach our 2.7 times leverage target by the end of 2020.

Our strong cash flow will allow us to continue investing in technology and innovation to drive new sales and to make strategic tuck in acquisitions, even as we de lever.

As we move into 2021 and beyond our capital allocation priority will shift towards reviewing strategic M&A opportunities that will increase our scale and secular high growth markets.

Absent M&A opportunities, we will return capital to shareholders through ongoing dividends and resuming buybacks.

Today, we announced our formal adjusted EPS guidance for 2020 in the entire ranges now accretive.

Third we initially expected cost synergies of $400 million, which we raised again today the $675 million.