Exclusive Interview with Brett Huff of Stephens Inc., Research Analyst Covering Payments and Processing, Real Estate Information Services, & Title Insurance and Insurance Brokerage Stocks: Consolidation and Big Data Drive Business Services Growth

Wall Street Transcript

67 WALL STREET, New York - November 20, 2013 - The Wall Street Transcript has just published its Business and Application Software Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Cloud Computing Secular Trends - International Enterprise and Consumer Demand - Application Software Consolidation Activity - Cloud Computing and SaaS Trends - Health Care Transition to ICD-10

Companies include: Heartland Payment Systems Inc. (HPY), Bottomline Technologies Inc. (EPAY), ACI Worldwide, Inc. (ACIW), Fidelity National Information (FIS), Acxiom Corporation (ACXM) and many others.

In the following excerpt from the Business and Application Software Report, an experienced payments processing and database information analyst discusses the outlook for the sector for investors:

TWST: Looking at the big picture, what macro trends or developments among their customers are driving growth for your business services companies?

Mr. Huff: I'd say there are two big trends, and they're both in the headlines, both familiar to investors, but that I think are particularly relevant to our groups. One is the theme of size and consolidation as banks, both as mortgage lenders and as just regular commercial bankers, are looking to simplify with whom they do business and reduce the number of vendors. So that's one theme that we'll talk about that I think is important and that a couple of stocks that we cover will benefit from.

Another theme, and this is a sort of more of a buzzword, is Big Data. In particular, corporations are trying to figure out how to use Big Data. In the example I'll give later, a company is trying to help its customers use Big Data in a marketing sense, in a one-to-one direct marketing sense, to increase their returns on their marketing investment. So those are the two trends that we think are interesting right now as it relates to our coverage list.

TWST: You recently downgraded Heartland. What factors contributed to your rating change, and what could prompt you to become more positive on the stock once again?

Mr. Huff: We upgraded Heartland (HPY) originally because we really like Heartland's business model, and what we like about it is that they employ directly all of their sales people as opposed to using third-party sales people called independent sales organizations. That unique portion of HPY's model still exists today.

A second thing that we noticed about Heartland as we upgraded it several months ago was that the market was, we think, more fearful of technology disintermediation through some of the commonly known new technology entrants in merchant acquiring, one of which is Square. We thought that market had overreacted to the potential disintermediation on these new entrants as it relates to HPY.

The reason that we downgraded the stock wasn't because we don't like the business model; we still very much do. The reason we downgraded it is that the stock had responded very quickly, more quickly than we had anticipated, realizing that the disintermediation threat by new entrants was much lower than maybe what the market had originally thought. So primarily it was simply that the stock had moved and had correctly, I think, assessed the low level of disintermediation threat, and it got to evaluation that while not expensive, we thought the majority of the move had already been made.

TWST: Another stock I want to talk about is Bottomline. What's your take on their recent acquisitions?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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