Fidelity National Information Services(FIS) - 2024 Q3 - Quarterly Results

Q3 2024 Earnings Release Third Quarter 2024 Highlights FIS reported strong third-quarter 2024 results, with significant growth in earnings per share and a revenue increase of 4% on an adjusted basis, demonstrating confidence by repurchasing $500 million in shares and raising its full-year financial outlook | Metric | Value | Change vs. Prior Year | | :--- | :--- | :--- | | GAAP Diluted EPS | $0.45 | +7% | | Adjusted EPS | $1.40 | +49% | | GAAP Revenue | $2.6 billion | +3% | | Adjusted Revenue | $2.6 billion | +4% | - The company repurchased $500 million of its shares during the third quarter[1] - FIS raised the low-end of its full-year revenue and adjusted EBITDA outlook and raised its full-year adjusted EPS outlook[1] - CEO Stephanie Ferris stated, "We delivered another strong quarter of financial outperformance, and are once again raising our full-year outlook"[1] Financial Reporting and Capital Allocation Following the sale of a 55% stake in its Worldpay Merchant Solutions business, all financial results are presented on a continuing operations basis, with FIS retaining a 45% interest accounted for via the equity method, and actively returning capital to shareholders with a goal to repurchase $4.0 billion of shares in 2024 - The sale of a 55% stake in the Worldpay Merchant Solutions business to GTCR was completed on January 31, 2024[2] - All reported results are on a continuing operations basis, excluding the Worldpay business, which is classified as discontinued operations[3] - FIS retains a 45% ownership in the new Worldpay joint venture, with its share of earnings recorded under "Equity method investment earnings (loss), net of tax" (EMI)[4] - The company is committed to its goal of repurchasing approximately $4.0 billion of shares in 2024, having bought back $3.0 billion year-to-date[5] - FIS continues to target a dividend payout ratio of 35% of adjusted net earnings, excluding EMI[5] Third Quarter 2024 Financial Performance In Q3 2024, FIS achieved 3% GAAP revenue growth to $2.6 billion, with adjusted revenue growing 4% driven by 6% growth in adjusted recurring revenue, while adjusted EBITDA margin contracted to 41.3% due to a difficult comparison in corporate expenses, and the company maintained a solid balance sheet with $10.9 billion in debt and returned significant capital to shareholders Consolidated Results On a GAAP basis, Q3 revenue increased 3% to $2.6 billion, with net earnings of $246 million, while adjusted results showed stronger performance, with revenue up 4% and adjusted EPS surging 49% to $1.40 per share, though adjusted EBITDA margin saw a 140 basis point contraction year-over-year | Metric | Q3 2024 | Q3 2023 | % Change / Margin Change | | :--- | :--- | :--- | :--- | | GAAP Revenue | $2,570 million | $2,492 million | 3% | | Adjusted Revenue Growth | - | - | 4% | | GAAP Net Earnings | $246 million | $248 million | (1)% | | GAAP Diluted EPS | $0.45 | $0.42 | 7% | | Adjusted EBITDA | $1,060 million | $1,065 million | 0% | | Adjusted EBITDA Margin | 41.3% | 42.7% | (140) bps | | Adjusted Net Earnings | $765 million | $557 million | 37% | | Adjusted EPS | $1.40 | $0.94 | 49% | Segment Performance The Banking Solutions segment saw revenue increase by 3% to $1.8 billion, with a slight margin expansion to 45.2%, while the Capital Market Solutions segment delivered stronger growth, with revenue up 7% on an adjusted basis to $730 million and a notable 90 basis point margin expansion to 49.9%, and the Corporate and Other segment's revenue declined by 27% - Banking Solutions: Revenue grew 3% (GAAP and adjusted) to $1.8 billion, with adjusted recurring revenue up 6%, and adjusted EBITDA margin expanded 10 bps to 45.2% due to cost savings and operating leverage[9] - Capital Market Solutions: Revenue increased 8% (GAAP) and 7% (adjusted) to $730 million, with adjusted recurring revenue up 6%, and adjusted EBITDA margin expanded 90 bps to 49.9%, driven by operating leverage and high-margin license revenue[10] - Corporate and Other: Revenue decreased 27% to $61 million, with an adjusted EBITDA loss of $108 million[11] Balance Sheet and Cash Flows As of September 30, 2024, FIS reported total debt outstanding of $10.9 billion, generated strong cash flow during the third quarter with $641 million from operating activities and $530 million in adjusted free cash flow, and returned approximately $700 million to shareholders through buybacks and dividends - Total debt outstanding was $10.9 billion as of September 30, 2024[12] | Cash Flow Metric (Q3 2024) | Amount | | :--- | :--- | | Net Cash from Operating Activities | $641 million | | Adjusted Free Cash Flow | $530 million | - In Q3, the company returned approximately $700 million to shareholders, consisting of $500 million in share repurchases and $199 million in dividends[12] Full-Year 2024 Outlook FIS has raised its full-year 2024 guidance, increasing the lower end of its revenue and adjusted EBITDA outlooks and raising its adjusted EPS forecast by approximately 2% to a new range of $5.15 to $5.20 | Metric | FY 2024 Outlook | | :--- | :--- | | Revenue | $10,140 - $10,170 million | | Adjusted EBITDA (Non-GAAP) | $4,125 - $4,140 million | | Adjusted EPS (Non-GAAP) | $5.15 - $5.20 | - The adjusted EPS outlook reflects 11 months of Equity Method Investment (EMI) contribution for the full year[13] Supplemental Information and Disclosures This section provides important context for the financial results, including definitions for non-GAAP measures, a discussion of forward-looking statements and associated risks, and a comprehensive set of detailed financial exhibits covering primary financial statements, reconciliations, and revisions to historical financial statements Use of Non-GAAP Financial Information FIS utilizes several non-GAAP financial measures, such as adjusted revenue growth, adjusted EBITDA, and adjusted EPS, to provide investors with a clearer understanding of the company's underlying operational performance by excluding items not indicative of core business trends - The company uses non-GAAP measures including constant currency revenue, adjusted revenue growth, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings, adjusted EPS, and adjusted free cash flow[18] - Management believes these non-GAAP measures help investors better understand the underlying fundamentals of the business by eliminating items not indicative of FIS' operating performance[19] Forward-Looking Statements The earnings release contains forward-looking statements regarding financial outlooks, dividends, share repurchases, and business strategy, which are subject to significant risks and uncertainties including economic conditions, regulatory changes, cybersecurity threats, and potential challenges in realizing the expected benefits from the Worldpay separation - Forward-looking statements include projections on financial outcomes, business conditions, dividends, share repurchases, and the impacts of the Worldpay Sale[27] - Key risks that could cause actual results to differ materially include changes in economic conditions, integration risks from acquisitions, cybersecurity breaches, and the risk that expected benefits from the Worldpay separation may not be realized[28] Detailed Financial Statements (Exhibits) The exhibits provide detailed, unaudited financial data for the third quarter and nine months ended September 30, 2024, including condensed consolidated statements of earnings, balance sheets, and cash flows, along with supplemental exhibits offering reconciliations of GAAP to non-GAAP measures, disaggregated revenue details, information on the Worldpay Holdco, LLC joint venture, and a comprehensive explanation of revisions made to previously issued financial statements - Exhibit A: Presents the Condensed Consolidated Statements of Earnings, showing key metrics like Revenue, Operating Income, and Net Earnings from continuing operations[32] - Exhibit B: Details the Condensed Consolidated Balance Sheets, outlining assets such as Goodwill and liabilities including Long-term debt[33] - Exhibit G: Provides detailed reconciliations of GAAP measures like Net Earnings to non-GAAP measures such as Adjusted EBITDA and Adjusted Net Earnings[48][50] - Exhibit J: Discloses and quantifies immaterial non-cash misstatements in previously issued financial statements for 2022, 2023, and early 2024, which have now been revised, primarily related to the timing of expense recognition for inventory-related accruals[78]