The speaker introduces the FIS Fourth Quarter 2023 Earnings Call and introduces the participants. He also mentions that the call is being recorded and directs listeners to the company's website for more information. The CEO and CFO will be presenting updates on the company's performance, and the call will include forward-looking statements and non-GAAP financial measures. The CEO highlights 2023 as a successful year for FIS.

As the new CEO, the author faced challenges such as an uncertain economy and a company that had lost its focus. However, through decisive action and a renewed focus, the company has seen measurable results and successfully completed a major sale. FIS holds a stake in the new company, Worldpay, and they will continue to work together closely through a strategic partnership. This partnership will benefit both companies and their clients.

FIS is partnering with Charles Drucker and GTCR to reinvigorate revenue and earnings growth. The separation reinforces FIS' position as a global enterprise software leader. They are well-positioned to capitalize on industry trends and are raising their share repurchase target to at least $3.5 billion. They are also committed to their Future Forward strategy, which focuses on operational excellence and has already shown success in returning the company to year-over-year margin expansion.

In 2024, we expect to see further improvements in profitability due to our focus on higher-value technology sales and efforts to improve the customer experience. Our financial results for 2023 exceeded our expectations, with strong recurring revenue growth and improved profitability driven by our Future Forward program. We also returned over $1.7 billion in capital to our shareholders. Looking ahead, we are confident in our trajectory of recurring revenue growth and expense management, which should lead to an acceleration in revenue growth and profitability in 2024.

The acceleration in revenue growth for Banking is expected to continue in 2024, driven by the success of the Capital Markets segment and expansion into new verticals. The company returned to year-over-year adjusted EBITDA margin expansion in the third quarter of 2023 and is confident in sustainable margin expansion in 2024 and beyond. This, along with balanced capital deployment, will result in 5% to 7% normalized EPS growth. The company plans to return over $4 billion of capital to shareholders in 2024. Favorable market trends and operational efficiencies leave the company confident in further earnings acceleration beyond 2024. Client demand and a growing sales pipeline are expected to contribute to revenue growth beyond 2024, with multiple notable wins already secured in the fourth quarter.

FIS is experiencing increased demand for their bundled offerings of core digital payments from regional community banks. They have signed new and expanded core engagements with various financial institutions, including a competitive takeaway of a bank with $40 billion in assets. Demand for their digital banking solutions remains strong, with major banks and financial institutions selecting their Digital One platform. Their digital suite is also seeing robust sales, with leading banks using it to improve customer experience and drive deposit growth. FIS is expanding their sales focus in payments and network businesses, with strong sales for their NYCE debit network and over 215 clients in their pipeline for FedNow.

In the fourth quarter of 2023, FIS experienced positive momentum in their market-leading Cleared Derivatives solution and Treasury Solutions, with new sales from various companies. Their Lending Solutions also had impressive wins, and the CEO is confident in a sales acceleration in 2024. FIS plans to host an Investor Day in May to discuss their corporate strategy and financial targets. The CFO then discusses the fourth quarter financial results and 2024 outlook.

In 2023, the company exceeded their original EBITDA guidance and saw strong recurring revenue growth from both Banking and Capital Markets. The completion of the majority sale of the Worldpay business has allowed for a transformation of the company's capital structure and a return to sustainable margin expansion. In 2024, the company is projected to see accelerated revenue growth and an increase in adjusted EBITDA margin. Adjusted EPS is also expected to grow significantly, with a contribution from the deployment of Worldpay proceeds and the first-time inclusion of the Worldpay Equity Method Investment contribution. Despite a negative impact from dis-synergies, the company expects strong core business performance and their Future Forward program to offset this.

In the first quarter of 2024, FIS will report its 45% financial interest in Worldpay separately on the Equity Method Investment line of the income statement. The 2024 adjusted EPS outlook includes a $0.69 to $0.71 contribution from Worldpay for 11 months. FIS will also provide condensed quarterly financial results for Worldpay and present revenue growth on an adjusted basis. In the fourth quarter, total company revenue increased 1%, with an adjusted EBITDA margin of 43.2% and adjusted EPS of $1.67. Continuing operations revenue was flat, with strong recurring revenue growth offset by expected declines in non-recurring revenue and professional services.

In the fourth quarter, the company saw a 70 basis point increase in adjusted EBITDA margin, led by improvements in Banking Solutions. Adjusted EPS for continuing operations declined by 4%, mainly due to higher interest expenses. Discontinued operations had a 2% increase in revenue, but a 160 basis point contraction in adjusted EBITDA margin. The company generated strong free cash flow and ended the year with a leverage ratio of 3 times. They also repurchased $510 million in shares and returned $1.7 billion to shareholders in the year. Segment results showed flat adjusted revenue growth, with stable backlog and a 7% increase in recurring revenue. Banking revenue was flat, but adjusted EBITDA margin expanded by 270 basis points due to cost initiatives. Recurring revenue growth in the Banking segment was 7%, but there were changes in the calculation method.

The company has transitioned certain non-strategic businesses from Banking Solutions to the Corporate and Other segment, and has moved revenue from recurring to non-recurring due to the expiration of federal funds related to pandemic relief programs. These adjustments have a minimal impact on full year recurring revenue growth. In the Capital Markets segment, adjusted revenue increased by 1% due to strong recurring revenue growth, while non-recurring revenue declined due to a difficult year-over-year comparison. Looking ahead, the company expects to see closer alignment between adjusted revenue growth and recurring revenue growth. Overall, adjusted revenue growth increased by 3% for the full year, driven by strong recurring revenue growth of 5%.

The banking and capital markets revenue showed growth in the past year, with recurring revenue being the main driver. Adjusted EBITDA margin remained flat, but improved in the second half of the year due to savings from the Future Forward program. The program has exceeded its 2023 savings target and is raising its 2024 target. The company's capital allocation priorities remain the same, with a focus on maintaining an investment-grade rating, investing in growth, and returning capital to shareholders. The company plans to increase its share repurchase target and continue paying an above-market dividend.

In 2024, the company plans to repurchase at least $3.5 billion of stock and invest in complementary acquisitions. They expect to return over $4 billion to shareholders and project accelerating revenue growth and expanding margins. The Banking segment is expected to grow by 3% to 3.5%, while Capital Markets revenue is projected to grow by 6.5% to 7%. The company also anticipates a 20 to 40 basis point margin expansion due to the Future Forward program and their business model.

The company's outlook for the future includes a $280 million benefit from the Future Forward program and a $250 million offset from dis-synergies. The company has provided details on key items in the appendix, including projected D&A, tax rate, interest expense, and shares outstanding. The company expects adjusted EPS of $4.66 to $4.76, a growth rate of 38% to 41% on a continuing operations basis. On a normalized basis, adjusted EPS is expected to grow 5% to 7%, including a negative impact from dis-synergies. On a pro-forma basis, adjusted EPS is expected to be $4.72 to $4.82. The company is confident in its balanced outlook and believes it is well-positioned for long-term earnings growth. The company's first quarter outlook includes projected revenue growth of 2.5% to 3.5%, with Banking Solutions at 1% to 2% and Capital Markets at 6% to 7%.

The company expects banking revenue to grow in the coming year, with improved margins and increased earnings per share. The completion of a recent transaction has improved the company's financial position and they are confident in their future success. They have also increased their share repurchase target. A question and answer session will follow.

The speaker is discussing the revenue growth in the Banking segment for the company. They mention that there are multiple factors contributing to this growth, such as lapping nonrecurring headwinds and strong sales in the back half of 2023 and into 2024. They also mention that the company's strategic relationships and assets in the fintech ecosystem are important for their success. The speaker is also asked about potential M&A opportunities in the bank sector, and they mention the recent Capital One-Discover deal as an example of the value of having various assets in the fintech ecosystem. They also mention the company's strategic relationship with Worldpay.

The speaker discusses the importance of having all assets together and the positive impact of strategic relationships with Capital One and Discover. They mention the potential for consolidation in the industry and the company's position as a beneficiary. When asked about macro assumptions and the bank IT spending environment, they mention a consistent consumer spend but potential for banks to decrease discretionary spending while increasing investments in digital and money movement capabilities.

The speaker discusses the interest in digital and money movement capabilities in the banking sector, as well as the focus on regulatory technology products. They note that overall IT spending in the banking sector is consistent, but is shifting towards these specific areas and away from discretionary spending. The speaker also mentions the non-recurring and professional services revenues in Banking, stating that in 2024, recurring revenue is expected to at least be equal to adjusted revenue, with a slight headwind in 2023. They caution that while recurring revenue will be better on average, there may be some variability in individual quarters.

In response to a question about recurring revenue growth, the company's CFO explains that the second half of 2023 saw a 7% increase in recurring revenue, driven by strong performance in the payments business and lapping an artificially depressed prior-year period. However, he expects recurring revenue growth to return to a more typical 3-4% range in 2024, with the potential for outperformance in the banking segment. Overall, the CFO believes the business has the ability to meet its targets.

The company is confident about meeting its goals for the full year. They have seen a decrease in merger integration costs and expect them to continue to decrease in the future. However, there will still be costs related to the Worldpay separation in 2024 and 2025. The company has also made significant progress in separating Worldpay, but it will still take up to 24 months to complete.

Stephanie Ferris and James Kehoe discuss the margin expectations for the company, with a focus on the Future Forward program and the impact of shifting sales towards higher technology-enabled solutions. They anticipate natural margin expansion in the Banking Solutions business, while expecting Capital Markets margins to remain consistent in order to drive organic growth. They plan to provide a more detailed view of margins at the upcoming Investor Day.

The speaker mentions that the company will see consistent margin expansion in the future, with some of their businesses and the Future Forward initiative contributing to this growth. They will discuss the growth algorithm and margin expansion at Investor Day. The Banking and Capital Markets sectors are both expected to show strong margins in 2024. The speaker also mentions that the total addressable market and expansion into new verticals will support the growth of these sectors.

The speaker is discussing the company's guidance for 2024 and their confidence in achieving it. They mention good line-of-sight and strong performance in 2023. They also mention free cash flow conversion, with a goal of 85-90%, and potential for improvement in the long-term. They also mention feeling good about their CapEx plans and potential for conservatism in their outlook.

The company has brought down its high revenue from last year to 9%, and expects it to decrease to 7-8% due to continued investments. They are pleased with their consistent guidance and are transparent and credible. The backlog has increased to $23 billion in the fourth quarter and is flat compared to December 2022. The company plans to provide better KPIs for understanding backlog at the upcoming Investor Day.

The speaker discusses the technical accounting number of $23 billion and their positive outlook for 2024. They mention FedNow and its adoption by banks, but note that it remains to be seen how quickly it will be adopted by customers. The speaker also provides more detail on their new sales momentum, specifically mentioning a shift in the team to focus on selling technology-enabled solutions.

The speaker discusses the current momentum in the digital and money movement space for banks. There is high demand for digital capabilities such as mobile and online banking, as well as payment solutions to become the primary deposit account for loans. In Capital Markets, there is demand for solutions in securities and processing, commercial lending, treasury, and ESG reporting.

Vasu Govil asks a question about EPS and dis-synergies, and James Kehoe responds by saying that Future Forward will help offset the dis-synergies but the level of contribution will go down next year. Ashwin Shirvaikar asks about the redirection of the sales force towards higher-yielding products and Stephanie Ferris explains that they are both redirecting and adding to the sales force, as well as changing how they compensate them.

The company changed its incentive comp sales to focus on higher-margin products, resulting in an 80 basis point increase in the mix of low-margin to high-margin products. They also looked at sales team productivity and saw significant increases in the first half of '23. The number of salespeople remains the same, but output has improved due to productivity and higher margins. The company expects this to continue in the back half of '24 and '25. On the Banking side, revenue will increase as sales pick up in the second half of '23. The NCI contribution in the first quarter will be lower due to only two months of sales.

The speaker suggests that the first quarter can be used as a guideline for the rest of the year, but they are not able to provide further guidance at this time. The operator then thanks everyone for participating and ends the program.

This summary was generated with AI and may contain some inaccuracies.