No bad stock

Fidelity National Information Services, Inc.
CEO : Ms. Stephanie L. Ferris

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	1.1% YoY	8.4%	-6200.0%	2023-02-13

Stephanie Ferris says,

1. Fourth Quarter Financial Results

• FIS met its financial goals for the fourth quarter.

2. 2023 Guidance

• FIS’s new agenda aims to improve operational performance, client focus, and earnings quality.
• Future Forward program has exceeded the original target of $500 million cash savings and is now targeting $1.25 billion by end of 2024.
• FIS plans to prioritize maximizing free cash flow and profitable revenue growth.
• The company is focused on returning to a quality compounder model.
• FIS anticipates margin expansion in banking and capital markets for 2023.

3. Strategic Review

• FIS is pursuing a spin-off of its merchant business, Worldpay, and creating two standalone public companies.
• Worldpay will pursue a more growth-oriented strategy and return to consistent M&A.
• FIS aims to maintain its competitive advantage in delivering innovative next-generation technology solutions.

4. Operational Improvements

• FIS is committed to creating a client-centric culture and continuing to innovate across its portfolio of solutions.
• The company plans to simplify and streamline operations, decision-making, and time to market to improve profitability.
• FIS is realigning its incentive programs to be tied to shareholder value creation, company performance, and client satisfaction scores.
• The company is focused on cost management, cash generation, and earnings quality.

5. Leadership

• The CEO of Worldpay, Charles Drucker, has agreed to return as a strategic adviser to FIS.

Erik Hoag says,

Priorities for 2023 and Beyond

• FIS will prioritize delivering double-digit total shareholder return by managing the company as a high-quality compounder with predictable and consistent earnings growth
• FIS is taking actionable steps to increase cash flow in 2023 by decreasing capital expenditures by approximately $200 million and reducing one-time spend associated with transformation and integration programs

Q4 2022 Financial Results

• Consolidated revenue increased 4% organically to $3.7 billion with an adjusted EBITDA margin of 43.2% and adjusted EPS of $1.71
• Banking grew 4% organically, and capital markets had a strong quarter with 10% organic revenue growth and 220 basis points of margin expansion
• Merchant grew 2% on a constant currency basis, and e-commerce revenue growth remained strong, increasing 16% on a constant currency basis
• Recurring revenue grew 11%, marking the fifth consecutive quarter of recurring revenue growth greater than 8%

2023 Guidance

• Consolidated organic revenue growth of negative 1% to positive 1%, adjusted EBITDA of $5.9 billion to $6.1 billion, and adjusted earnings per share of $5.70 to $6
• Banking organic revenue growth of 0% to 2%, capital markets organic revenue growth of 4% to 6%, and merchant organic revenue decline of 2% to 4%
• FIS anticipates expanding its free cash flow conversion to over 80% in 2023

Future Forward Initiatives

• FIS expects to generate approximately $150 million of in-year operating expense reduction and ramp to approximately $600 million on a run rate basis exiting 2024
• FIS is targeting a $200 million reduction in CapEx during 2023 and intends to reduce CapEx by another $100 million in 2024
• FIS is aggressively ramping down spend associated with transformation and integration projects, resulting in a benefit to cash

Capital Allocation Priorities

• FIS is focused on paying down debt, increasing its dividend, and decreasing CapEx in 2022 and 2023
• FIS recently announced an increase to its core quarterly dividend of more than 10% and intends to continue increasing its dividend roughly in line with earnings growth
• FIS intends to conduct a comprehensive review of its capital structure to reduce future volatility in its net interest expense in conjunction with the spin

Q & A sessions,

Capital Allocation and Market Separation

• The company has been able to allocate capital, both M&A and organic, to two separate end markets, i.e., the payments market and the Banking and Capital Markets piece.
• The aim is to set these two markets separately from each other, with a focus on M&A in the payments market.

Revenue Growth and Expense Reduction

• The company is reducing investments associated with revenue to a more normal run rate, as they have already made significant capital investments in products such as Modern Banking platform, PaymentsOne, and Digital One.
• The focus is on protecting the business to ensure delivery of recurring revenue growth.
• The company is committed to the 3% to 5% underlying margin expansion and believes that it will reaccelerate in 2024.
• The Future Forward initiatives are not just about cost-cutting but also about faster time to market, faster implementation speed, and agility.

Payment Strategy

• The payment strategy going forward is focused on e-commerce and omnichannel capabilities, using the global platform and global distribution capabilities to deliver best-in-class products.
• The company is focused on bringing embedded payments and platforms to small e-commerce clients and large enterprises.

Large Financial Institutions and Economic Conditions

• The company serves all sizes of financial institutions but is the premier provider to very large financial institutions, which are becoming more cautious due to uncertain economic conditions.
• Large deals continue to be in the pipeline, but the company does not want a repeat of 2022, where a big number did not close.

Newco and Capital Markets

• The company will not include a strategic review after 60 days but will always continue to evaluate opportunities.
• Given the amount of M&A that Newco will want to do, they might not go after an investment-grade credit rating and will look at something slightly below that.

Revenue Growth and Margin Expansion

• The company is focused on returning the Banking and Capital Markets business to 3% to 5% revenue growth going forward.
• The investments in modernized products will continue, albeit at lower capital expenditure levels.
• The Future Forward program is focused on speed to market and delivering results faster, balancing appropriately revenue growth and margin expansion.