Fidelity National Information Services(FIS) - 2025 Q3 - Earnings Call Transcript

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]