The paragraph is an introduction to the FIS Fourth Quarter 2024 Earnings Call. The operator begins by welcoming participants and informing them that the call is being recorded. George Mihalos, Head of Investor Relations, thanks everyone for joining and mentions that the call is being webcasted. He notes that the news release, presentation, and webcast are available on the FIS website. Stephanie Ferris, CEO and President, and James Kehoe, CFO, will provide updates, with Stephanie discussing strategic and operational aspects and James reviewing financial results. Mihalos emphasizes that the call will include forward-looking statements and non-GAAP financial information, which is reconciled in the earnings release. Stephanie Ferris then begins by noting 2024 as a year of continued progress for FIS.

In 2024, the company made progress in executing its strategy to enhance commercial excellence and refocus sales on key growth areas through targeted mergers and acquisitions, while also ensuring profitability and shareholder returns. This strategy led to improved financial outcomes and increased new sales in core banking and key growth areas like digital, payments, and commercial lending. Revenue growth increased from 3% to 4%, though slightly below expectations due to one-time items. Strong sales transformation efforts, including hiring specialists and focusing on cross-selling, led to a 10% increase in Amplify cross sales and higher-margin recurring revenue, positioning the company for accelerated growth in 2025. The focus on profitable growth and business simplification resulted in a 64 basis point margin expansion for the year.

The company exceeded its original financial outlook and is on track for further margin expansion and adjusted EPS growth by 2025, aligning with its strategic goals. It returned $4.8 billion to shareholders through repurchases and dividends and plans to return $2 billion more with continued strong financial performance. The company reports strong sales momentum, record core wins, and key client acquisitions, including Centennial Bank, which will migrate to its IBS platform and adopt its digital offering. Additionally, digital solutions sales grew by 70% compared to the previous year.

FIS experienced a strong demand for its services, driven by cross-sales to its core clients and the bundling of digital solutions with new clients, reducing complexity and cost for banks. The company expects this momentum to continue in 2025, supported by its Dragonfly acquisition and a focused sales strategy. FIS signed new contracts with banks and fintech firms, including a strategic partnership with Affirm to offer buy now pay later (BNPL) capabilities to debit processing clients. This partnership is a first in combining debit processing with BNPL services. FIS also expanded its relationship with NatWest, utilizing new payment and lending products, and signed deals with emerging tech providers to diversify its payments business. Additionally, the company reported strong sales in trade processing and commercial lending, highlighted by a major regional U.S. bank choosing its transfer agency solution, demonstrating successful cross-selling initiatives and strategic acquisitions integration.

In the quarter, Torstone, a post-trade SaaS platform acquired in 2024, successfully leveraged FIS' brand to secure a major deal with a leading digital brokerage. FIS experienced strong growth in commercial lending and secured new engagements with both traditional and alternative lenders. The company's products and solutions were recognized by top industry advisors for their excellence. FIS' Horizon banking platform received multiple accolades, and the company's offerings were consistently placed in leading positions across various industry assessments. FIS is strategically positioned to support CFOs in transforming finance functions from cost centers to growth centers, highlighting the expanding role of CFOs in large enterprises to improve processes, cut costs, and navigate regulatory challenges.

CFOs are turning to technology providers like FIS to meet their goals, tapping into a global market worth over $25 billion. FIS stands out with its comprehensive suite of solutions across payments, supply chain management, digital enhancements, and fraud prevention. The company is advancing further with innovative tools like Treasury GPT, developed with Microsoft, to enhance cash management. Strategic acquisitions, such as the purchase of U.K. Fintech Demaca, bolster FIS's position, particularly in supply chain finance. Through strategic investments, FIS strengthens its ability to grow and serve clients efficiently, focusing on simplifying and innovating services to enhance shareholder value. The CEO, who took charge 2 years ago, highlights the significant transformation undertaken to improve profitability and client outcomes.

The paragraph highlights the company's achievements in completing five acquisitions and forming new partnerships with industry leaders like Microsoft, Affirm, and Worldpay. These initiatives have strengthened their capabilities in key growth areas such as digital, payments, and commercial lending. The company experienced record success in core banking, with a 70% increase in digital sales and a 9% increase in overall new sales in 2024. They received numerous awards, reinforcing their position as leaders in the industry. The company's strategy aims to accelerate growth, expand profitability, and increase shareholder value, despite acknowledging ongoing work to achieve these goals. The separation of Worldpay was a landmark event, enabling further growth investments and cash returns to shareholders. The financial results for 2024, along with strong sales and commercial excellence, provide confidence for future performance, as adjusted revenue growth was 4% in the last quarter.

In the latest financial report, the company exceeded expectations in capital mortgage but faced revenue growth challenges in banking due to onetime items, which will benefit 2025's revenue growth starting in Q2. The adjusted EBITDA margin surpassed expectations, showing a year-over-year growth of over 100 basis points, driven by capital markets and reduced corporate costs. Adjusted EPS rose by 49%, supported by a 6% increase in EBITDA. The company's total debt stands at $11.3 billion, with a leverage ratio of 2.65x, better than the goal of 2.8x. They returned $1.2 billion to shareholders, meeting their $4 billion annual target, and reported $700 million in free cash flow with a 110% cash conversion rate, although full-year conversion was 77%. Adjusted revenue grew 4%, with banking increasing by 2%, slightly below expectations due to unexpected items impacting revenue growth by 2 percentage points. Recurring revenue grew 1% despite contract recognition adjustments, while nonrecurring revenue declined, affected by delays in a large license deal.

The paragraph discusses financial results and forecasts for a company, highlighting various aspects across different sectors. A $20 million termination fee from an abandoned bank merger was reversed, impacting quarterly results but expected to contribute to recurring revenue in 2025. Professional services grew by 16%, and banking EBITDA margin fell by 120 basis points due to product mix issues. Capital markets performed well, with adjusted revenue growth of 9% and improved EBITDA margin due to strong license sales and operating leverage. For the full year, adjusted and recurring revenue grew 4%, with Worldpay revenue increasing significantly. Banking showed normalized growth above 3%, and the Capital Markets segment reported a successful year with 7% growth and improved margins. The 2025 outlook aligns with Investor Day goals.

The company anticipates accelerating revenue growth of 4.6% to 5.2%, with margin expansion of 40 to 45 basis points. Adjusted EPS growth is expected at 9% to 11%. For 2024, 18% EPS growth exceeded expectations. They target leverage at 2.8x and expect cash conversion to rise to 82% to 85% by 2025. Their dividend increased by 11%, and they plan to spend $1 billion on M&A, raising their share repurchase goal to $1.2 billion. Revenue is projected to reach $10.4 billion to $10.5 billion, considering a $50 million currency headwind and a business wind-down in the Corporate segment, impacting reported revenue by $100 million without affecting adjusted growth. Banking growth is expected at 3.7% to 4.4%, with capital markets growing 6.5% to 7%, despite a slower start in Q1 with 2.5% to 3.5% growth.

The paragraph discusses the banking sector's expected growth, projecting an initial slow start due to nonrecurring revenue impacts but foreseeing acceleration as the year progresses. Despite client-requested delays causing a shift in quarterly revenues, overall banking growth is anticipated to be strong, with a full-year outlook of 3.7% to 4.4% growth. The firm expects margin expansion driven by cost management and operating leverage, forecasting adjusted EPS growth of 9% to 11%. Factors contributing to this growth include strong ACV sales, higher retention rates, deferred implementations, and the recent Dragonfly digital acquisition.

The article discusses the projected financial outlook for 2025, highlighting key growth trends and financial targets. Banking adjusted revenue growth is expected to be between 3.7% and 4.4%, with capital markets growing at a consistent rate of 6.5% to 7%, driven by expansion into faster-growing verticals. Interest expenses are projected to rise due to increased leverage, while the effective tax rate is anticipated to decrease to 12%-12.5%. Diluted shares outstanding will decline by 5%. The Worldpay EMI contribution is expected to reach around $550 million, increasing 7.5% over 2024. The overall financial outlook aligns with previously set goals, targeting capital returns of $2 billion and total returns of 11% to 13%, with margin expansion of 40 to 45 basis points. The company aims to maintain strong cost management and recurring revenue growth to accelerate banking revenue and sustain growth in capital markets.

The paragraph discusses expectations for the acceleration of recurring revenue over the year and the impact of nonrecurring headwinds. Stephanie Ferris highlights that the implementation of new sales wins from late 2023 and early 2024 will begin in the first quarter and contribute to revenue starting in the second quarter of 2025. This shift affects fourth quarter and first quarter numbers, making them lighter than expected. Ferris emphasizes confidence in commercial excellence, sales wins, and client retention, providing visibility into quarterly growth for 2025, particularly starting from the second quarter. James Kehoe is expected to elaborate on the specifics of recurring and nonrecurring elements in the quarters mentioned.

The paragraph discusses the company's financial outlook for the year, emphasizing that the first quarter will be the lowest point with growth between 2.5% and 3.5%. However, the second quarter is expected to see a significant increase in line with the full year's growth, with a slight acceleration in the second half. Despite Q1 challenges, such as termination and license headwinds and contract delays, the company's core business is performing well, with a projected run rate of around 4%. Additionally, new sales for 2025 are strong, providing good visibility into future performance. William Nance appreciates the explanation and asks about a technology outage in the first quarter.

In the paragraph, Stephanie Ferris addresses a previous system outage, clarifying that it was not due to a cyberattack and caused no data breaches. She reassures that clients were quickly back online and the incident is not expected to impact FIS' results or operations materially. Subsequently, Tien-Tsin Huang from JPMorgan inquires about the projected growth for 2025. Ferris expresses optimism, anticipating growth of more than 9% and emphasizing a focus on core business sectors, such as digital, payment, and lending sales, to accelerate growth, as discussed during Investor Day. She highlights record core wins in 2024 and asserts confidence in maintaining this trajectory into 2025.

In the paragraph, the speakers discuss their company's sales growth and strategic focus areas, such as commercial lending and digital services, with a particular emphasis on the Office of the CFO. They anticipate increased growth in these sectors by 2025 and highlight the expansion of their sales team. A question is raised about the potential impact on EBITDA margin due to changes in product mix, specifically within banking. In response, Stephanie Ferris emphasizes the company's strong cost discipline and their ongoing efforts to manage costs effectively, mentioning the reversal of a termination fee that impacted margins. They also express confidence in their margin guidance for 2025, aligning with targets set at Investor Day.

In the paragraph, Darrin Peller asks James Kehoe about the factors affecting free cash conversion and their future trends. Kehoe explains that their performance came in below target due to unusually aggressive suppliers, resulting in about 50 basis points of annual pressure on capital expenditures. He also mentions issues with net working capital management, pointing out that they are paying suppliers too quickly compared to industry norms and experienced delays in customer payments. Kehoe emphasizes the need to be more vigilant and improve collection processes. Despite these challenges, he is confident in reaching their forecasted range, aiming for the higher end despite recent volatility.

The paragraph is a conversation between Darrin Peller and Stephanie Ferris, focusing on the demand for banking services. Stephanie highlights that there is strong demand for digital experiences in the financial sector, driving their investment both organically and through acquisitions. She mentions significant interest in commercial lending, not just from banks but also private credit and asset managers. Additionally, there's a high demand for solutions related to the office of the CFO, where they believe they have a unique position and are seeing strong market performance. Overall, Stephanie emphasizes continued growth and demand in these areas, with their market strategy receiving recognition.

In the paragraph, James Kehoe discusses the performance and growth factors for their banking sector in the fourth quarter. Worldpay contributed about $34 million, boosting growth by 200 basis points. M&A and dis-synergies had a net positive impact of 30 basis points. However, there were negatives primarily due to pandemic-related dis-synergies and contract recognition issues, which offset these gains. Overall, the core growth in the quarter was around 3%, with recurring growth slightly above that. Dan Dolev then asks Stephanie Ferris about the company's strategic direction and satisfaction with the current portfolio, given changes in the competitive landscape, and what might be needed to enhance client relationships.

The paragraph discusses the company's strategic focus following Investor Days, emphasizing its commitment to core business areas like trading, processing, and core banking growth. The company is exploring both organic and inorganic growth opportunities in sectors such as digital payments, lending, treasury, and risk management. It aims to carve out a unique position, especially in commercial lending and private credit, while differentiating itself from competitors. Although no longer with Worldpay, the company maintains strategic agreements with it and focuses on serving large corporates and financial institutions globally. The company is leveraging its scale and product offerings and pursuing mergers and acquisitions to grow in high-potential areas.

The paragraph discusses the banking and Worldpay revenue outlook for 2025, emphasizing an expected growth rate acceleration to 3.7% to 4.4% due to strong sales and execution, with most new sales contracts already secured. The recurring growth rate will be slightly ahead of adjusted figures, while professional services and nonrecurring will grow slower, but not by much. The core business, excluding Worldpay, is predicted to grow faster. Worldpay, which contributed $140 million this year with some nonrecurring components, is expected to be a slight headwind next year, reducing the banking growth rate by 20-30 basis points. Worldpay's role is seen as a commercial strategic partnership rather than a growth driver.

The paragraph discusses the company's commercial relationships, specifically noting that Worldpay revenue will not drive growth in 2024 or 2025 due to offsets by pandemic-related revenue and expected declines. Jason Kupferberg inquires about the capital markets outlook for 2025, noting it's slightly below the Investor Day target. James Kehoe explains that acquisitions, including Idemica, contributed about 140 basis points in 2024 and are expected to contribute similarly in 2025. He notes that capital markets performed better than expected at the end of the year, particularly due to profitable last-minute licenses, which raised the base year metric. Despite this, they did not adjust their target for 2025 and remain optimistic about the capital markets business over the long term.

The paragraph discusses a business experiencing a growth rate of 7% to 8% and predicts consistent growth over the next three quarters. The company is pleased with its revenue and high-quality margins and has not included potential acquisitions in its projections. During a call, Ramsey El-Assal from Barclays inquires about the 2025 banking guide's dependence on deal implementation timing. Stephanie Ferris expresses confidence, stating that while acquisition timing might slightly vary, they are assured about the implementations proceeding as expected, contributing to a 100 basis points growth. Additionally, El-Assal asks about the 2025 free cash flow conversion guidance, which is higher than 2024 but below the longer-term target, seeking insight into potential measures to align it with future goals.

James Kehoe discusses capital projections and identifies key areas for improvement in cash flow management, including reducing early payments and improving collections. He emphasizes the importance of EBITDA in driving cash flow. Vasundhara Govil inquires about the contribution from Worldpay, highlighting strong performance and potential growth. Kehoe notes Worldpay's robust fourth-quarter performance, with revenue up by 7%, primarily driven by EBITDA improvements. He states that the guidance for 7.5% growth aligns with Worldpay management's expectations, and the outlook considers recent debt refinancing.

The paragraph discusses financial plans and expectations for future performance. Vasundhara Govil asks Stephanie Ferris about the impact of bank mergers and acquisitions (M&A) on the company's outlook. Stephanie confirms that normal M&A contributions are included in their outlook, but they don't factor in unknowns. The company works with larger financial institutions that are favorable for consolidation, so they feel positive about M&A opportunities. John Davis questions James Kehoe about the company's $1.2 billion buyback, suggesting it could have been larger due to low M&A activity last year. Kehoe explains that the buyback was scaled up by $400 million, almost compensating for the low spend in 2024 and aligning with their projections.

In the paragraph, Stephanie Ferris addresses concerns about the need for business acceleration beyond the second quarter. She mentions that three major client implementations were delayed, one due to a merger and acquisition and the others at the clients' requests. However, she reports progress, with one implementation underway and the M&A nearing completion. Despite potential risks of further delays, she is confident in the signed deals and the implementation pipeline for 2025 and 2026. Ferris acknowledges the frustration from previous delays but is optimistic about hitting performance targets, with increased focus on sales and new client wins. Overall, she expresses strong confidence in achieving the company’s goals going forward.

The paragraph signals the end of the program and thanks the participants, indicating they can now disconnect.

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