Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fidelity National Information Services Inc (FIS, Financial) delivered strong financial results, with adjusted revenue growing by 4% and adjusted EBITDA margin exceeding expectations at 41.3%.
- The company achieved a 13% year-over-year increase in adjusted EPS, reaching $1.40, and returned $700 million to shareholders through buybacks and dividends.
- FIS reported significant sales momentum, with cross-sell activity up over 20% year-to-date and new sales nearly doubling in the digital business.
- The acquisition of Dragonfly Technologies enhances FIS's digital offerings and creates attractive cross-sell opportunities.
- FIS's Premium Payback loyalty offering had a standout quarter, signing new partnerships with leading companies across various industries, including Apple and Commerce Bank.
Negative Points
- FIS made non-cash adjustments to previously reported financial statements, impacting adjusted EPS for 2022 and 2023, though the impact was immaterial.
- The company faces increased capital expenditures, now expected to be closer to 9% of revenue for the full year, impacting free cash flow conversion.
- Some client conversions have been delayed into the first half of next year, affecting the timing of revenue recognition.
- FIS is experiencing pressure from technology suppliers increasing prices, which has impacted capital spending.
- The banking segment is expected to come in closer to the lower to midpoint of the revenue growth range due to a higher revenue base in 2023 and timing of client conversions.
Q & A Highlights
Q: Can you help us think through the puts and takes for capital markets' growth in Q4, the implied expectations in Q4?
A: James Kehoe, CFO: We expect to be at the high end of our 6.5% to 7% full-year guide for capital markets, resulting in strong recurring and total adjusted revenue growth in Q4. The prior year comparison is easier, and we're confident in achieving this target.
Q: On the Dragonfly acquisition, can you comment on the contribution you're expecting as we close out the year here in the fourth quarter from that deal?
A: George Mihalos, Head of Investor Relations: The contribution is expected to be less than $10 million in revenue for the quarter. The acquisition is initially dilutive to company margins but offers strong synergy opportunities, particularly on the revenue side.
Q: Any changes across recurring nonrecurring in both the segments? And it looks like just higher CapEx investments is really the only change. Any other color on that specifically?
A: Stephanie Ferris, CEO: We see stable economic trends across banking and capital markets with consistent spending from banks. James Kehoe, CFO: We are investing in the business to drive revenue growth and facing increased costs from technology suppliers, but these are manageable within our free cash flow conversion.
Q: What's driving the prior period accounting revision again? And given the new baseline should we consider any adjustments to the longer-term outlook as well?
A: James Kehoe, CFO: The revision was immaterial, primarily a non-cash adjustment related to our Output Solutions business. It has no impact on cash flows or future operations, and we remain confident in our business outlook.
Q: Can you maybe give us some color on how you're tracking versus different customer types in banking?
A: Stephanie Ferris, CEO: We are confident in our banking growth, focusing on core and digital solutions. We are targeting banks with commercial customers and have been successful in selling our strategic cores, including Modern Banking Platform, IBS, and HORIZON.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
