The operator welcomes participants to the Fidelity National Information Services Second Quarter 2024 Earnings Call and introduces the speakers, including George Mihalos, Head of Investor Relations, Stephanie Ferris, CEO and President, and James Kehoe, CFO. The call will include forward-looking statements and non-GAAP financial information. Stephanie will begin with a strategic and operational update, followed by James who will review financial results.

The company has been working diligently for the past 18 months to reposition itself for growth and improve its financial standing. At an investor day, the company outlined its vision to capitalize on its position in the global economy and has since seen accelerating profitable revenue growth. The company is experiencing strong demand for its core and digital offerings, with record signings in core banking and new sales growth in digital. Their loyalty solutions and payments offerings are also gaining traction, and they are seeing success in the treasury and risk market. Additionally, their commercial lending business is experiencing strong double-digit growth.

The company had a strong quarter with 4% revenue growth and exceeded profitability targets. They are seeing strong momentum in new sales and cross-sell initiatives, as well as partnerships and product rollouts. Some recent examples include a partnership with Curinos to provide data analytics to banking clients and a climate risk financial modeler for corporations and financial institutions.

The company has continued to return capital to shareholders and has a new share repurchase authorization of $3 billion. They have also secured new client wins across the money life cycle, including a large regional bank, Synchrony, and a US-based life insurance provider. They have also signed new engagements in trading, asset servicing, and commercial lending, including Trustmoore and a leading global private equity firm.

The paragraph discusses the success of FIS in the second quarter, with strong execution and outperformance against their financial outlook. Their adjusted revenue growth accelerated to 4% and their adjusted EBITDA margin expanded by 110 basis points. This resulted in an adjusted EPS of $1.36, which is a 79% increase from the previous year. FIS has also received recognition from various industry publications and has a strong, highly recurring business model.

In the sixth paragraph, the company discusses their balance sheet and cash flow metrics, including their total debt, leverage ratio, and capital returns to shareholders. They also mention their free cash flow and cash conversion rate, confirming their full year target. The segment results for the quarter show a 4% growth in adjusted revenue, with banking revenue at the high end of their outlook range and recurring revenue expected to accelerate in the third quarter. Other nonrecurring revenue and professional services revenue also saw growth. The adjusted EBITDA margin expanded, driven by cost savings and favorable revenue mix in both the banking and capital markets segments.

The company is confident in their full year margin expansion and is raising their EPS outlook by $0.13 to $0.15. This is due to strong execution and favorable factors such as forex impacts, outperformance, and Worldpay EMI. The company remains committed to their 9% to 12% adjusted EPS growth target. For the third quarter, they are projecting adjusted revenue growth of 4% to 4.5%, with steady growth despite non-recurring headwinds in the banking sector.

The company is confident in their revenue growth for the fourth quarter, expecting at least 5% growth due to strong recurring revenue and a rebound in non-recurring revenue. They are also projecting a good quarter for Capital Markets with strong recurring revenue and rebound in professional services revenue. The company is expecting an adjusted EBITDA margin of 40.5% to 40.7% and an increase in adjusted EPS of 35% to 39%. They returned $1.3 billion of capital to shareholders and are encouraged by their financial results in the second quarter. They have a strong visibility for banking growth in Q3 and Q4 and are confident in achieving their full year outlook, despite a tough comparison in Q3. They are not relying on any specific events and have multiple levers to meet their target.

Stephanie Ferris and James Kehoe discuss the strong performance of banking revenue in the first and second quarters and their high level of confidence for the third and fourth quarters. They attribute this to sales execution and operational execution. They also mention that they have good visibility for the third quarter and expect at least 5% growth in banking revenue in the fourth quarter. They note that recurring revenue growth slowed a bit compared to last quarter, but non-recurring revenue accelerated. They expect both drivers to contribute to meeting their full year targets.

The company has been focused on increasing recurring profitable revenue and aligning adjusted revenue with recurring revenue in the midterm. However, in the second quarter, recurring revenue was slightly down due to a large bank that de-converted from their platform. Despite this, the company expects to see growth in the back half of the year and non-recurring revenue to become more flat. The company has been experiencing some variability in prior year comparables, but overall, recurring and non-recurring revenue have been consistent on a two-year basis. The company has also seen strength in new sales in the second half of last year, which is now being reflected in the third and fourth quarter.

The speaker discusses the positive performance of the banking business, specifically in community banking. They attribute this success to the strength of their cores and digital products, as well as their focus on growth verticals such as digital and payments. The integration of these products has been well received in the marketplace.

The company has been focusing on their product suite and it has been well received in the market. They expect to see a 5% growth in recurring revenue in the fourth quarter, but it may be slightly slower than the previous year due to strong growth in the prior year. They are confident in their projections and anticipate a rebound in professional services. They are also on track for record core signings in 2024 and the strength in digital demand is contributing to this growth. The company expects these new signings to contribute to their success in the near future.

The demand for commercial banking capabilities has been stable and consistent, with high demand for digital services. The company's recent partnerships and signings give them confidence in meeting their goals for 2025 and beyond. The team is still working on expanding their product offerings.

The speaker asks for an update on the commercial relationship with Worldpay and the speaker responds by saying that they feel good about the separation of Worldpay and that the commercial relationships are strong. They continue to identify opportunities and the acquisition has been successful. The speaker then answers a question about EBITDA margins, stating that they were strong due to guidance given at the beginning of the year.

In the paragraph, the speaker discusses the synergy with Worldpay and the significant traction they are seeing with cost savings. They also mention the strong margins in the past few quarters and their confidence in achieving their long-term goal. The speaker also provides an update on the M&A pipeline, stating that they did not close any deals in Q2 but have a healthy pipeline and are focused on finding acquisitions that will be accretive to revenue and margins. They are also taking a cautious approach and focusing on return on invested capital.

The operator introduces the next question from Jason Kupferberg of Bank of America. Kupferberg asks about the efficiency of implementations in the banking segment and whether there is room for further improvement. Ferris responds that there is always room for improvement, but they have a robust pipeline and are focused on adding capacity without increasing costs. She also mentions that cross selling has increased by 15% year-to-date.

During the first half of 2024, the company saw a 15% increase in cross-selling, particularly in the banking sector. They have had success in cross-selling digital and payment services to their core clients, as well as cross-selling between their commercial lending and treasury products. The company sees more opportunity for cross-selling and is satisfied with their win share in the card processing market, despite the recent developments in the industry.

The company is refocusing on its payments business and seeing early wins in sales. They believe there is a lot of opportunity for growth in this area, especially with the potential for regulatory changes. The Capital Markets side continues to perform well, with no risk from market volatility. The company's platforms are stable and scalable.

James Kehoe and Stephanie Ferris discuss the company's free cash flow and growth plans. Kehoe explains that the first half of the year will have lower cash outflows due to timing factors such as bonus payouts and interest payments, but the second half is expected to see a significant increase. He also mentions that the company is focused on achieving a 15% growth rate. Ferris adds that the Banking business includes a payments business, with a majority of it being related to debit card transactions.

The paragraph discusses the performance of FIS' Capital Markets business, which had a strong quarter with both recurring and nonrecurring revenue growth. The nonrecurring revenue growth was the strongest since 2021 and contributed to a good guide for the third quarter and strong margins in the second quarter. The company expects this trend to continue in the second half of 2024, with recurring revenue remaining strong and nonrecurring revenue increasing slightly.

James Kehoe and Stephanie Ferris discuss the performance of professional services in Capital Markets and the impact of the Worldpay acquisition. They note that professional services stabilized and have seen growth, particularly in international licenses. The Worldpay contribution is expected to be lumpy as they add people and take down transition service agreements, but the company is confident in the forecast provided by Worldpay. Standup costs and investments are being made to drive future growth in the business.

The speaker, Stephanie Ferris, is confident in the company's full year projections and believes they are achievable. She addresses concerns about potential macroeconomic slowdown and explains that consumer spend does not have a significant impact on the company's revenue. She also mentions that the Worldpay EMI business may be affected by consumer spend, but cannot comment further.

The speaker discusses the operational improvements that have contributed to Worldpay's revenue growth in the first and second quarter. They also mention the focus on driving operational execution and taking market share in the next few years. The speaker also confirms that there have been no changes to the dis-synergy expectations for the year.

The speaker is asked about the expected acceleration in Professional Services in the second half and fourth quarter. They explain that the trend in the back half of last year was driven by a lack of new wins, but it has stabilized in the first half of this year due to new sales implementations. They also mention that there are still cost savings actions in progress, but they have signed up for annual savings over the next 24 months.

The company is focused on resizing their corporate expense structures to align with their new size after the sale of Worldpay. They have several cost initiatives in place, including implementing GenAI and automation, and expect to see cost reductions over the next 24 months. They have already started working on these initiatives and are ahead of schedule. The company also plans to repurchase $4 billion in stock this year, with a skew towards the fourth quarter due to the need to repatriate cash. They may repurchase more if they can get cash in sooner.

The speaker asks about the increase in EMI contribution from Worldpay and the reasons behind it. The company's CFO explains that the beat is coming from both EBITDA and interest expense, with some future savings from refinancing. The company is pleased with the quality improvement in minority and credits a refinancing in the second quarter for the increase in EMI. The call concludes after the Q&A session.

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