Fidelity National Information Services, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the FIS third quarter 2019 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you have a question, press star then one on your touchtone phone. You may remove yourself from queue at any time by pressing the pound key. If you should require assistance during the meeting, please press star zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Head of Corporate Finance and Investor Relations, Nate Rosoff. Please go ahead.

Good morning, and thank you for joining us today for the FIS Third Quarter 2019 Earnings Conference Call. The call is being webcasted. Today's news release, corresponding presentation, and webcast are all available on our website at fisglobal.com. Beginning on slide two, Gary Norcross, our chairman, president, and CEO, will discuss our third quarter 2019 business highlights and FIS's growth strategy. Woody Woodall, our chief financial officer, will then review FIS's third quarter financial results, synergy performance, and provide updated guidance for the fourth quarter and full year. Turning to slide three, today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Please refer to the Safe Harbor language. Also, throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share. These are important financial performance measures for the company, but are not financial measures as defined by GAAP. Reconciliation of our non-GAAP information to the GAAP financial information are presented in our earnings release. With that, I'll turn the call over to Gary.

Thank you, Nate. Good morning and welcome to today's call. Beginning on slide five, I'm very pleased to be able to share our outstanding third quarter performance with you. Our financial results were excellent, with revenue, adjusted EBITDA, and adjusted EPS all significantly exceeding our expectations. We also got off to a very fast start with both revenue and cost synergies, especially considering we operated for only two months as a combined company. As a result, we are raising our fourth quarter and full year guidance for revenue, EBITDA, and EPS, as well as our 2020 cost synergy targets. The strength of our third quarter performance and raised outlook clearly demonstrates the power of this combination and our overall growth strategy. Including two months of WorldPay contribution, we generated more than $2.8 billion in revenue and approximately $1.2 billion in adjusted EBITDA. This represents 35% revenue growth on a GAAP basis, over 5% organic growth, and 350 basis points of margin expansion. We generated $1.43 of adjusted EPS, which was well above our expectations. In the third quarter, sales were up more than 25%, increasing our backlog 9% organically, accelerating from 7% growth last quarter. This gives us clear line of sight to continued revenue growth throughout 2020. FIS has successfully generated seven consecutive quarters of exceptionally strong sales. Merchant Solutions also saw continued strong sales momentum within our e-commerce portfolio, including 23 cross-sell wins in the quarter, accelerating from 14 wins in the second quarter. We think these cross-sell wins are another strong indicator of the success and scale that our newly combined company can deliver. Turning to our early synergies from the WorldPay integration, they clearly show that the combination of our two companies is paying significant dividends. Our combination is strategically differentiated on three main fronts. First, we have a unique strategy to accelerate organic growth by aggressively investing in innovative technologies and automating complexity. Second, we are combining the premier assets in the industry to create leading solutions focused on secular high-growth markets. Third, we are bringing value to our clients with our world-class scale. We exited the quarter generating more than $30 million in annualized run rate revenue synergies with significant future opportunity. I'm excited to announce that we have already signed agreements with two of our bank clients to expand our relationships into merchant services. This includes a merchant referral agreement with an $11 billion bank in the United States, as well as an agreement with a large banking client in Brazil. With this agreement, we are now enabling merchant processing in Brazil at the point of sale for over 500,000 merchants. This step forward demonstrates the power of our new company's global reach, as neither company would have won these transactions on their own. These early wins illustrate the power of our end-to-end value proposition, and we have a solid plan and execution timeline that will drive our results to achieve our $500 million revenue synergy goal. With regard to cost synergies, our team began executing immediately and upon close and generated well over $200 million in savings on an annualized run rate basis exiting the third quarter. Woody will go into more detail regarding cost synergies, but given the outstanding results today and our current plans, we are very confident in delivering more than $500 million in total cost synergies. The integration of these large transformational M&A transactions continues to be a core competency. and we will utilize it as part of our strategy and further accelerate our organic growth and shareholder value. Turning to slide six to discuss our growth strategy. We continue to aggressively invest in new technologies across all three of our segments. Investing in future innovation to benefit our clients started more than three years ago. It's part of everything we do at FIS and will continue to drive our client value proposition. These significant innovations are now coming to market and not only driving our sales results, but leading to our accelerated growth. Our clients depend on us to stay ahead of the market and make investments that enable them to run their operations more efficiently, connect with their customers, and grow their businesses. With the addition of merchant solutions, our growth rate will expand to 6% in the fourth quarter. We see numerous secular growth opportunities in all three segments, and our clients and partners are excited about the potential value we can bring to them by solving their current and future needs. Turning to our segment performance, our merchant segment continues to benefit from its exposure to secular high growth markets and ability to win market share through superior client service. For example, a leading global coffee chain selected FIS for in-store payment technology across more than 600 locations in the UK and Europe. Our global reach, innovative capabilities, and differentiated approach resonated with the iconic coffee giant as it expands into new markets. In addition to this marquee new client win, Merchant renewed its important strategic relationship with Kroger to continue providing our innovative suite of omnichannel payment solutions. While we typically do not highlight renewals, this is one of the largest clients of the former WorldPay business. and we were thrilled with the early commitment Kroger showed in extending our long-standing partnership. In our banking segment, our clients are reinventing their business models to create seamless digital experiences for their customers using our advanced technologies. For example, we expanded our relationship with a global bank to implement a real-time payment solution for their corporate clients in nine countries. The bank chose to partner with us due to our proven capabilities and expertise as well as our ability to move quickly to meet Europe's regulatory requirements. In addition, a large regional bank in the U.S. decided to switch to our outsourced suite of core banking solutions after acquiring one of our clients. The combined company now has assets approaching $50 billion and represents a consistent theme of large financial institutions looking to FIS to solve their complex core banking business challenges. The decision was driven by our scalability and our consistent investment in new products, as well as our tremendous scale in the large regional banking market. Similarly, in our capital markets segment, our investments to automate complex processes using advanced end-to-end technologies are resonating with clients. For example, a large institutional broker signed an agreement to implement our consolidated audit trail solution to effectively meet new regulatory requirements for monitoring securities trading. Regulatory compliance is critical for our capital markets clients, and our ability to automate these processes is a true differentiator. This is our 12th consolidated audit trail win this year and shows our ability to work at scale to simplify the complex. We also expanded our strategic relationship with a large global financial services corporation. In this instance, we are bundling several FIS cloud-based solutions to help this organization's global travel services enhance treasury controls, optimize cash visibility, and reduce fraud. These impressive client wins across our segments demonstrate the strength of our business model and powerful client value proposition. I'm very proud of the team's sales and operational execution, especially given the backdrop of the significant integration activities occurring throughout the company. With such strong results and revenue synergies already starting to ramp, I am increasingly confident in our expectation for organic growth to approach 7% next year and to further expand to 8% to 9% in the future. I'll now turn the call to Woody to round out the financial discussion before he opens the call to questions. Woody?