Summary of Fidelity National Information Services (FIS) 2025 Conference Call Company Overview - **Company**: Fidelity National Information Services (NYSE: FIS) - **Industry**: FinTech, Financial Services Key Points and Arguments Current Business State and Strategy - CEO Stephanie Ferris expressed excitement about the company's position and the work done over the past three years, focusing on infrastructure and future technologies like AI and tokenized deposits [4][5] - The "future forward strategy" emphasizes three core areas: client-centricity, innovation, and simplicity, aiming to enhance client service and product delivery [5][6] - The company aims for durable revenue growth and profitable margins, focusing on return on invested capital [6][7] Competitive Landscape - The banking segment is experiencing positive trends, including reduced regulatory pressures, increased M&A activity, and significant investments in digital products and services [9][10] - FIS has repositioned itself to serve financial institutions, moving away from its payments business [9][10] - The fintech industry remains competitive but rational, with FIS focusing on high-margin, recurring revenue products [12][14] Pricing Environment - The pricing environment for new business remains competitive, but FIS has seen net pricing as a tailwind due to effective client retention and cross-selling strategies [13][14] - FIS's banking clients typically utilize an average of 26 products, highlighting opportunities for cross-selling [13][14] Banking Segment Performance - FIS reported strong growth in its banking business, driven by net new sales and increased account activity [16][17] - Consumer spending and digital account growth are also strong, contributing to positive performance [17] Digital Capabilities and Acquisitions - FIS has invested in digital capabilities, including the acquisition of Dragonfly to enhance commercial banking services [20][21] - The recent acquisition of Amount is expected to improve digital account opening capabilities, addressing significant fraud concerns [23][24] Office of the CFO as a Growth Vector - FIS is focusing on providing integrated treasury management solutions for CFOs, leveraging AI to enhance cash flow management [26][27] M&A Strategy - The company is pursuing an opportunistic M&A strategy, focusing on digital payments and lending capabilities as key areas for growth [45][48] - The upcoming TSYS issuer transaction is expected to enhance FIS's credit card processing capabilities and generate significant cash flow [32][33][35] AI and Technology Adoption - FIS views AI as an opportunity, with banks adopting technology faster than ever, particularly in areas like underwriting and KYC [51][52] - The company is integrating AI into its products to enhance client service and operational efficiency [53][54] Stablecoins and Digital Currency - FIS is not planning to issue a stablecoin but aims to enable financial institutions to offer digital currency capabilities through its Money Movement Hub [56][57] Investor Sentiment - Despite positive developments, the stock performance does not reflect the company's momentum, with the CEO suggesting that investors may be missing the underlying growth algorithm [60][61] Additional Important Insights - The company emphasizes cultural integration post-M&A as a critical success factor, focusing on aligning values and client-centric approaches [40][41] - FIS is committed to transforming its operations and positioning itself as a leading player in the fintech industry, aiming for double-digit earnings growth [62][63]

Core Insights - The company is expected to expand its scale, margins, and cash conversion through a pending credit issuer acquisition and AI-driven digital investments into 2026 [1] - FIS reported a 6.3% increase in revenue for the third quarter, reaching $2.7 billion, primarily driven by strong performance in banking and payments [2][3] Payments and Card Issuer Expansion - Payments remain a crucial growth engine for FIS, operating in a $53 billion U.S. market growing at 5% annually, with debit transactions increasing by 6% [4] - The company has achieved 50% recurring sales growth year-to-date and a 5% improvement in win rates [4] - The Money Movement Hub has signed 40 new clients, and the NYCE Network has seen sales more than double, with pipeline growth three times higher than a year ago [5] Digital Growth and AI Enablement - FIS' Digital One platform has experienced over 30% user growth as banks invest in digital integration and open banking capabilities [7] - The acquisition of Amount, an AI-based account opening platform, is accelerating digital growth, with seven new deals signed [7] - AI is integrated throughout the company, enhancing operations, client service, risk management, and product development [8] Core Modernization and Client Retention - Strong banking technology spending is noted, particularly in digital solutions and payments innovation, leading to higher renewal rates and expanding sales pipelines [11] - Annual contract value has increased by 13% since 2023, with renewal retention improving by 3% over two years [11] AI and the Next Phase of Growth - The company is leveraging AI across its operations, with over 75% of banks actively launching or piloting generative AI solutions [12] - FIS is investing in digital asset enablement through a partnership with Circle, connecting stablecoin payments to the Money Movement Hub [12] - The company aims to provide technology capabilities to financial services clients without competing directly in stablecoin issuance [13]

Financial Data and Key Metrics Changes - Adjusted revenue grew by 6.3% to $2.7 billion, driven by strong performance in the banking business and recurring revenue growth across both segments [19][22] - Adjusted EBITDA increased by 7.1%, with margins expanding by more than 50 basis points [19] - Adjusted EPS rose by 7.9% to $1.51, reflecting strong operating growth [19] - Free cash flow was $800 million for the quarter, more than doubling year over year, with adjusted free cash flow at approximately $930 million and cash conversion exceeding 140% [20][21] Business Line Data and Key Metrics Changes - Banking segment revenue grew by 6.2%, exceeding expectations, with recurring revenue growth of 6% and strong transaction growth in payments [22] - Capital markets adjusted revenue growth was 6.4%, with recurring revenue growing by 7.6% due to a rebound in lending activity [23] - Non-recurring revenue in banking increased by 8%, primarily due to card personalization and deconversion fee timing [22] Market Data and Key Metrics Changes - Bank technology spending remains strong, with clients prioritizing investments in digital solutions, payments innovation, and lending modernization [7][8] - More than three out of four banks have launched or are piloting GenAI and Agentic solutions, indicating a significant increase in AI adoption [8] - Consumer spending patterns are resilient, with strong debit and credit card spending year to date [8] Company Strategy and Development Direction - The company is positioning itself as a technology leader in financial services, focusing on operational excellence, core and digital banking, and payments [11][12] - Strategic investments in AI are transforming operations, enhancing client support, risk management, and product development [12][66] - The acquisition of credit issuer solutions is expected to close in Q1 2026, enhancing the company's credit processing capabilities [17][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year 2025 financial goals and raised outlook for revenue, EBITDA, and cash conversion [7][27] - The operating environment for banks is improving, leading to increased investments and a favorable regulatory backdrop for M&A activity [9][10] - Management noted that the pricing environment remains stable, with net pricing contributing positively to growth [10][56] Other Important Information - The company returned $509 million to shareholders through share repurchases and dividends [7] - The sales pipeline annual contract value (ACV) has expanded by 13% annually since 2023, indicating strong sales performance [10] - The company is focused on enhancing its digital and payment solutions, with significant growth in user adoption across digital platforms [13][15] Q&A Session Summary Question: Insights on banking segment growth - Management noted strong technology spending in banking and expressed confidence in organic growth, although not ready to raise midterm guidance yet [30][32] Question: Revenue modeling for 2026 - Management indicated that banking is outperforming capital markets and expressed comfort with the revenue trajectory, highlighting a shift towards higher-margin recurring products [34][36] Question: Growth drivers in banking - Management emphasized the importance of net new sales and investments in digital capabilities, which are expected to support organic growth [40][42] Question: Free cash flow quality for next year - Management projected strong free cash flow growth, with expectations of 90% conversion driven by lower capital intensity and improved working capital [46][47] Question: Margin expansion dynamics - Management discussed the expected margin expansion due to improved revenue mix and cost-saving programs, with a focus on high-margin recurring revenue [50][54] Question: Competitive dynamics in core processing - Management acknowledged the bank modernization trend and expressed confidence in retaining clients while competing for new business [58][59] Question: EBT revenue pool impact - Management indicated that EBT revenue is not material to the company and does not expect significant impact from federal changes [60][61] Question: Confidence in investment strategy and AI integration - Management expressed satisfaction with the future forward strategy and highlighted AI's role in enhancing client experiences and operational efficiency [64][66]

Financial Data and Key Metrics Changes - The company reported adjusted revenue growth of 6.3%, reaching $2.7 billion, with adjusted EBITDA margins at 41.8% and adjusted EPS of $1.51, up 8% year-over-year [5][18] - Adjusted free cash flow conversion was 142%, with free cash flow at $800 million, more than doubling year-over-year [5][19] - The company returned $509 million to shareholders through share repurchases and dividends [6] Business Line Data and Key Metrics Changes - Banking segment revenue grew by 6.2%, driven by strong core growth and M&A contributions [21] - Capital markets adjusted revenue growth was 6.4%, with recurring revenue growth of 7.6% [22] - Non-recurring revenue in banking increased by 8%, primarily due to card personalization and deconversion fee timing [21] Market Data and Key Metrics Changes - Bank technology spending remains strong, with clients prioritizing investments in digital solutions, payments innovation, and lending modernization [6][7] - The U.S. total addressable market (TAM) for digital solutions is projected to grow at approximately 12% annually through 2028 [13] - The payments market is valued at $53 billion, growing at 5% annually, with strong performance in instant payments and digital currencies [15] Company Strategy and Development Direction - The company is focused on operational excellence, core and digital banking, and payments as strategic priorities for sustainable growth [10] - The acquisition of credit issuer solutions is expected to close in Q1 2026, enhancing the company's credit processing capabilities [17][27] - The company is leveraging AI to enhance client experiences and operational efficiencies, driving growth in high-margin products [66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the banking segment's growth, driven by strong technology spending and M&A activity [30][31] - The company raised its full-year outlook for revenue, EBITDA, and cash conversion based on strong performance and market visibility [6][24] - Management noted that the pricing environment remains stable, with net pricing contributing positively to growth [9] Other Important Information - The company is experiencing a significant increase in bank M&A activity, with the highest level of quarterly bank consolidation in four years [8] - The company is focused on enhancing its digital capabilities and has seen over 30% growth in users across its digital platforms [13][14] Q&A Session Summary Question: Outlook on banking segment growth - Management is optimistic about technology spending in banking and is currently outperforming previous organic growth targets, but is not ready to raise mid-term guidance yet [30][31] Question: Revenue modeling for 2026 - Management indicated that banking is outperforming capital markets, and while there may be some headwinds from acquisitions, overall revenue trajectory remains strong [33][34] Question: Organic banking revenue drivers - Management highlighted that net new sales are contributing significantly to organic growth, particularly in digital and payments [39][40] Question: Free cash flow quality for next year - Management expects strong free cash flow growth, driven by lower capital intensity and improved working capital management [41][45] Question: Margin expansion drivers - Management noted that margin expansion will benefit from improved revenue mix and cost-saving programs, with a focus on high-margin recurring revenue [47][50] Question: Competitive dynamics in core processing - Management acknowledged the bank modernization trend and the potential opportunities arising from competitors consolidating their core offerings [56][58] Question: EBT revenue pool impact - Management stated that EBT revenue is not material to the company and does not expect significant impacts from federal changes [60][61] Question: Confidence in investment strategy and AI integration - Management expressed confidence in the future forward strategy and highlighted the role of AI in enhancing client experiences and operational efficiencies [64][66]

Financial Data and Key Metrics Changes - The company reported adjusted revenue growth of 6.3%, reaching $2.7 billion, with adjusted EBITDA growing 7.1% and adjusted EPS increasing 8% year-over-year to $1.51 [4][18] - Adjusted free cash flow conversion was 142%, with free cash flow at $800 million, more than doubling year-over-year [4][18] - The company returned $509 million to shareholders through share repurchases and dividends, increasing the share repurchase target to $1.3 billion for the year [5][18] Business Line Data and Key Metrics Changes - The banking segment saw revenue growth of 6.2%, driven by strong core growth and M&A contributions, with recurring revenue growth of 6% [20] - Capital markets adjusted revenue grew 6.4%, with recurring revenue increasing 7.6% due to a rebound in lending activity [22] - Non-recurring revenue in banking increased 8%, primarily from card personalization and deconversion fee timing [21] Market Data and Key Metrics Changes - Bank technology spending remains strong, with clients prioritizing investments in digital solutions, payments innovation, and lending modernization [5][6] - The third quarter experienced the highest level of bank consolidation in four years, indicating a favorable regulatory backdrop for M&A activity [8] - Consumer spending patterns are resilient, with strong debit and credit card spending year-to-date [7] Company Strategy and Development Direction - The company is positioning itself as a technology leader in financial services, focusing on operational excellence, core and digital solutions, and payments [10][11] - Strategic investments in AI are transforming operations, enhancing client support, risk management, and product development [11][58] - The acquisition of credit issuer solutions is expected to close in Q1 2026, enhancing the company's credit processing capabilities [17][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year 2025 financial goals and raised the outlook for revenue, EBITDA, and cash conversion [5][24] - The company anticipates continued strong performance in the banking segment, with organic growth expected to exceed previous targets [29][30] - Management highlighted a stable pricing environment and the ability to price for value, supported by product enhancements [9][49] Other Important Information - The company is experiencing a significant increase in AI adoption among clients, with over 75% of banks piloting or launching GenAI solutions [6] - The digital solutions market is projected to grow at approximately 12% annually through 2028, with the company capitalizing on this trend [12] - The NICE network has seen sales more than double, indicating strong demand for alternative payment solutions [16] Q&A Session Summary Question: Health of end markets for banking - Management noted positive demand and pricing trends in banking, with technology spending focused on digital and payments [29][30] Question: Revenue modeling for 2026 - Management indicated confidence in revenue trajectory, with banking outperforming capital markets, and emphasized the importance of recurring revenue [31][32] Question: Organic banking trends - Management confirmed organic banking revenue growth in the mid to high-4% range, supported by net new sales and investments in digital capabilities [34][35] Question: EBT exposure and revenue pool - Management stated that EBT revenue is not material to the company and does not expect significant impact from federal changes [54][55] Question: Competitive dynamics in core processing - Management acknowledged the bank modernization trend and expressed confidence in retaining existing clients while pursuing new opportunities [50][51]

Core Insights - FIS has partnered with Glia to integrate AI technology into its Digital One suite, aiming to enhance customer service for retail and business banking products [1][2] - The integration is designed to provide financial institutions with tools for a more personalized and efficient customer experience, addressing routine inquiries with AI while escalating complex issues to human agents [1][4] Group 1: Technological Integration - The collaboration allows banks and credit unions to benefit from a virtual workforce while maintaining high-touch, personalized service [2] - The AI agents are programmed to handle basic inquiries immediately, which is expected to reduce wait times and improve first-call resolution rates [4] - The service is context-aware and available across various platforms, including mobile apps and web platforms [4] Group 2: Operational Efficiency - The integration aligns with FIS's Banking Modernisation Framework, emphasizing open banking as a key element for transforming operations and customer experiences [3] - Bank staff can focus on more complex customer interactions rather than repetitive tasks due to the AI's capabilities [3] - The AI system can manage account inquiries, transaction support, and provide basic financial advice outside standard banking hours [5] Group 3: Strategic Developments - Glia's CEO highlighted that the AI-powered platform allows organizations to achieve both efficiency and customer experience without compromise [5] - In May, FIS launched the Money Movement Hub, which streamlines payment processing across multiple networks for financial institutions [5]

Financial Data and Key Metrics Changes - The company reported a strong 5% revenue growth in Q2 2025, up from 4% in Q1 2025, driven by momentum in the banking sector [8][18] - Adjusted EBITDA grew 5%, exceeding expectations, with margins improving by 200 basis points sequentially [8][18] - Adjusted EPS was $1.36, meeting expectations, while free cash flow was $292 million with a cash conversion rate of 52% [19][18] - The company returned $460 million to shareholders through share repurchases and dividends in Q2, remaining on track to meet the $1.2 billion target for the year [9][25] Business Line Data and Key Metrics Changes - Banking revenue grew 6% in Q2, exceeding the high end of the outlook range, driven by improved commercial excellence and strong client retention [25][26] - Capital Markets adjusted revenue growth was 5%, slightly below expectations, impacted by a temporary slowdown in lending activity due to macroeconomic uncertainty [27][28] - Recurring revenue growth in banking was 7%, while nonrecurring revenue increased by 5%, reflecting growth in license revenue [26][28] Market Data and Key Metrics Changes - The company secured a major consolidation win with two Northeast financial institutions, validating its position as a partner of choice for bank consolidation [10] - Digital solutions saw double-digit ACV growth, with significant new engagements across various sectors, including energy technology and European banks [12][10] Company Strategy and Development Direction - The company is focused on client centricity, operational simplification, and innovation, aiming to create greater value for shareholders and clients [7] - The strategic acquisition of Global Payments Issuer Business and the sale of the minority Worldpay stake align with the operational simplification strategy [8][9] - The company is expanding its capabilities in digital assets and AI, with plans to launch new solutions by year-end [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving increased full-year outlook due to strong first-half results and a robust implementation pipeline [9][34] - The company anticipates a return to margin expansion in the third quarter, with further improvements expected in the fourth quarter [26][33] - Management noted that while macroeconomic uncertainty impacted lending activity, a rebound was observed in July, providing confidence for the second half of the year [68][69] Other Important Information - The company reiterated its full-year cash conversion target of 82% to 85% and capital expenditures were in line with expectations at 8% of revenue [19][20] - The company is committed to its buy-build-partner strategy, with a robust pipeline of M&A opportunities expected shortly [15][17] Q&A Session Summary Question: Key drivers of banking segment growth and sustainability - Management highlighted net new sales and high retention rates as key drivers of growth in the banking segment, with a focus on selling higher-margin products [38][39] Question: Client decision-making changes due to macroeconomic factors - Management noted increased client interest in digital currencies and stablecoins, viewing it as an opportunity to provide capabilities to clients [48][49] Question: Organic growth in Worldpay and its drivers - Management indicated that Worldpay's growth was supported by seasonality and the onboarding of significant e-commerce clients, contributing to revenue expectations [53][54] Question: Margin expectations and bad debt impact - Management quantified the bad debt charge at approximately $8 million, impacting margins, but expressed confidence in margin recovery in the upcoming quarters [60][61] Question: Capital markets growth visibility and loan syndication activity - Management confirmed a rebound in loan syndication activity in July, providing confidence for capital markets growth in the second half of the year [68][69] Question: International strategy and recent acquisitions - Management emphasized that the Everlink acquisition aligns with the international strategy to enhance payment capabilities and expand the company's footprint [105][107]

Financial Data and Key Metrics Changes - The company reported a strong revenue growth of 5% in Q2 2025, up from 4% in Q1 2025, with total revenue reaching $2.6 billion [8][18] - Adjusted EBITDA also grew by 5%, exceeding expectations, with margins improving by 200 basis points sequentially [18][24] - Adjusted EPS was $1.36, meeting expectations, while free cash flow was $292 million with a cash conversion rate of 52% [19][20] Business Line Data and Key Metrics Changes - Banking revenue grew by 6% in Q2, driven by improved commercial excellence and strong client retention [24] - Capital Markets adjusted revenue growth was 5%, slightly below expectations, impacted by a temporary slowdown in lending activity due to macroeconomic uncertainty [26][68] - Recurring revenue growth was strong at 7%, while nonrecurring revenue increased by 5%, reflecting growth in license revenue [25] Market Data and Key Metrics Changes - The company secured a major consolidation win with two Northeast financial institutions, forming a $25 billion regional banking leader [10] - Digital solutions saw double-digit ACV growth, with significant new engagements from top U.S. banks [10][12] - The company expanded its relationship with a leading financial services technology company through a multiyear commitment [12] Company Strategy and Development Direction - The company is focused on client centricity, operational simplification, and innovation, aiming to create greater value for shareholders and clients [7] - The strategic acquisition of Global Payments Issuer Business and the sale of the minority Worldpay stake align with the operational simplification strategy [8][9] - The company is actively pursuing M&A opportunities to enhance its product offerings and expand its international footprint [15][105] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving increased full-year outlook due to strong first-half results and a robust implementation pipeline [9][34] - The company anticipates a return to margin expansion in the third quarter, with further improvements expected in the fourth quarter [25][33] - Management noted that client interest in digital currencies and AI is increasing, presenting opportunities for the company [49][50] Other Important Information - The company returned $460 million to shareholders in Q2 through share repurchases and dividends, reaffirming its $1.2 billion annual target for share repurchases [9][24] - Capital expenditures were $218 million in the quarter, representing 8% of revenue, in line with expectations [20] Q&A Session Summary Question: Key drivers of banking segment growth and sustainability - Management highlighted net new sales and high client retention as key drivers of recurring growth in banking, with a focus on selling higher-margin products [38][40] Question: Changes in client decision-making due to macroeconomic factors - Management noted increased client interest in digital currencies and AI, with financial institutions eager to enhance their offerings [49][50] Question: Organic growth in Worldpay and its drivers - Management indicated that Worldpay's growth was supported by new e-commerce clients and seasonal tax processing payments [54][55] Question: Margin expectations and bad debt impact - Management quantified the bad debt charge at approximately $8 million, impacting margins, but expressed confidence in margin recovery in Q4 [60][63] Question: Visibility on capital markets growth and loan syndication activity - Management reported a rebound in loan syndication activity in July, providing confidence for capital markets growth in the second half [68][69] Question: Revenue drivers in capital markets - Management clarified that revenue growth is primarily driven by net new sales and consistent net pricing, with minimal impact from AUM or transaction activity [110]

Financial Performance - Adjusted revenue grew by 5%[9] - Adjusted EBITDA margin reached 39.8%[10] - Adjusted EPS increased by 1% to $1.36[10] - The company returned $459 million to shareholders and is on track for $1.2 billion in share repurchases for the year[10] - Adjusted free cash flow was $292 million, with a 52% conversion rate[21] Segment Results - Banking Solutions adjusted revenue grew by 6%, with a 43.6% adjusted EBITDA margin[24] - Capital Markets adjusted revenue grew by 5%, with a 50.3% adjusted EBITDA margin[24] - Year-to-date adjusted revenue for Banking Solutions grew by 4%, with a 41.9% adjusted EBITDA margin[26] - Year-to-date adjusted revenue for Capital Markets grew by 7%, with a 49.3% adjusted EBITDA margin[26] Outlook - The company raised its full-year revenue outlook to a range of $10.52 billion to $10.57 billion, reflecting an adjusted revenue growth of 4.8% to 5.3%[27] - The adjusted EPS growth outlook was raised to 10% to 11%, with a range of $5.72 to $5.80[27] - Third-quarter revenue is projected to be between $2.65 billion and $2.665 billion, with adjusted revenue growth of 3.8% to 4.4%[29]

Industry Developments - Circle launched CCTP V2 on Hyperliquid and Sei, aligning with new regulations and infrastructure [1] - JP Morgan enables USDC redemptions [1] - Hyperliquid accounts for 70% of arbitrage volume [1] - FIS integrates Money Movement Hub [1]