Fidelity National Information Services, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the FIS fourth quarter 2019 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press star then zero. And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Nathan Rosehouse. Please go ahead, sir.

Thank you. Thank you. Good morning, and thanks to everyone for joining us today for the FIS Fourth Quarter and Full Year 2019 Earnings Conference Call. This call is being webcasted, and today's news release, corresponding presentation, as well as the webcast link are all available on our website at fisglobal.com. Gary Norcross, our Chairman, President, and CEO, will discuss our recent business trends and describe our quarterly operating performance. Woody Woodall, our Chief Financial Officer, will then review FIS's financial results and provide first-quarter and full-year 2020 guidance. 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 FDC. 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 this call over to Gary. We'll begin his remarks on slide five.

Thanks, Nate. Good morning, and thank you for joining us today. I'm very pleased to be able to announce our fourth quarter and full year results. 2019 was a transformational year for FIS. We successfully closed and are well down the path on integrating the largest financial technology transaction in our industry. This, along with outstanding sales production, delivered strong organic revenue growth of 6% for the full year. All three segments performed exceptionally well for the year as well as the quarter. Our record sales and integration activities position us for an even stronger 2020. Later, I'll talk about our strategy of modernization and how that has led to some very large, noble wins that exemplify how our strategy is working, as well as driving increasing demand for our solution suite. This includes signing three of the largest banks in the country this quarter on our core banking solutions. In the fourth quarter, our organic growth rate accelerated to 7%, resulting in $3.3 billion in revenue. Our new sales results were the largest quarter and year in our history, resulting in an increase of more than 20% in new sales for the year. Our installation backlog, as well as pipeline, continued to expand. Adjusted EBITDA margins expanded by 470 basis points, primarily driven by the high contribution margins resulting from the installation of our new sales, growing transaction volumes, as well as the outstanding execution of our team to overdrive performance of cost and revenue synergies. As we think about integration synergies, we exited the quarter generating $80 million in revenue and $465 million in cost synergies on an annualized run rate basis. When including interest expense savings, we have already exceeded our initial cost synergy target. As a result of our strong performance, we are increasing our future expectations for both revenue and cost synergies, which we will detail later. With our impressive momentum heading into 2020, we expect continued acceleration in organic revenue growth and ranking earnings accretion. Turning to slide six, I want to talk about our strong sales results and client value propositions. Several years ago, we embarked on a transformational modernization journey. We began an ambitious new software development cycle, re-architected our solutions to be open, modular, and cloud-based. And we also began modernizing and consolidating our technology delivery platforms. We did this because we believe that the financial services industry was moving towards its own transformation, and we wanted to be able to empower our clients in the broader industry to change. Disruptive technologies and new business models are forcing the industry to evolve. by embracing future-ready innovations like automation, artificial intelligence and machine learning, cloud-native technologies, and digital omnichannel. Client demand, as evidenced by our new sales results, demonstrate that our thesis about the industry is correct. The investments we've made over the past several years are yielding results for our clients as well as FIS. In our banking segment, I'm very excited to announce that three of the largest banks in the country with combined total assets of more than $600 billion have embarked on the journey to transform their legacy core banking environment with FIS. This includes a top 10, a top 20, and a top 30 bank. MUFG Union Bank, a top 20 bank that we recently announced, as well as a top 10 bank, both selected our modern banking platform for their transformations. They selected us because of our ability to deliver an innovative, personalized, and next-generation solution, as well as our ability to consistently execute large-scale, complex implementations. The modern banking platform is entirely new and built from the ground up. It was developed with state-of-the-art containers, digital-first capability, open APIs, and cloud-based delivery through a SaaS model. This next-generation, highly flexible platform enables innovative financial institutions to transform the future of banking and clearly represents a significant milestone for the industry. I'm also pleased to announce that we signed an agreement with First Republic, a top 30 bank, to power its modernization program with our IBS core banking platform, including our industry-leading open API framework, CodeConnect. IBS continues to prove why it's the leading SAS core banking platform for large regionals throughout the U.S. First Republic is known for its strong growth and outstanding client experience. They chose FIS over the incumbent provider because of our open, scalable platform, which will better serve the needs of the bank's existing client base, as well as allow them to continue to expand and meet their growing consumer and business clients. These three pivotal wins are the start of what we believe will be a decade-long global transition of core banking systems from legacy in-house applications to cloud-native open banking deployments. Turning to our merchant segment, we are winning due to our superior client value proposition, strong integrated systems, and continued flexibility on deployment. For example, one of our marquee clients, A top global search engine continues to shift share to us after developing a proprietary routing engine that evaluates their processors for authorization and fraud rates, as well as cost of acceptance. We consistently demonstrate exceptional results across these categories, leading the client to choose FIS for additional volumes across many of their U.S. businesses. In addition, a large global retailer who's number one in their category selected FIS to deploy omnichannel payment technology across Europe, covering both in-store and online payments. The company was looking to consolidate multiple acquirers and turn to FIS because of our unique capabilities and global reach. In our capital market segment, our ability to simplify clients' complex needs with our end-to-end solution suite is driving demand. Our modernization strategy has resulted in a very strong sales year. and we saw exceptionally strong growth in the fourth quarter. We continue to see increasing demand for SaaS deployments, and the team is doing an outstanding job balancing that demand with our on-premise license business. For example, we entered into a SaaS agreement with one of the world's largest asset managers. In this instance, we will be providing a bundled investment solution with a next-generation digital offering and data visualization tools. I'm also excited to announce that one of our premium payback clients, A large oil and gas company is expanding their relationship with us to include our cloud-based solution for their corporate treasury, cash, liquidity, and risk management needs. This further proves that our ability to cross-sell and up-sell large enterprise customers to help their business on numerous levels. Turning to slide seven. In addition to these new wins, we are also accelerating our achievement of revenue synergies. While initially expecting to reach $100 million of annualized revenue synergies by the end of 2020, we have already achieved $80 million in annual run rate synergies in the first five months after closing. As a result, we are increasing our revenue synergy targets to $200 million exiting 2020 and $550 million exiting 2022. This reflects the faster than expected ramping of our multiple cross-sell opportunities. During the fourth quarter, we continue to see meaningful volumes ramp across our debit networks as well as ongoing traction for our premium payback solution. We signed two very large premium payback clients during the fourth quarter as we are experiencing significant demand for this innovative solution. First, we will be partnering with PayPal to enable millions of online consumers to redeem earned rewards at checkout by allowing them to pay with points from thousands of U.S. banks. Second, I'm excited to announce that we entered into an agreement with a top three U.S. retailer to help innovate its customer loyalty program with our premium payback solution. Together, we are enabling this client to deepen its relationships with millions of consumers across its 3,000 locations. We also signed another large merchant referral agreement during the quarter. We continue to be very pleased with our ability to take share from incumbent providers across our midsize and regional bank clients. In the first five months, we are well ahead of our expectations regarding merchant referral sales agreements. Our pipeline and sales activities continue to grow, and we think this sales opportunity will continue to exceed our initial plans. Now that we are well into our integration execution, we continue to discover new opportunities to cross-sell and bundle offerings as we go to market, giving us strong confidence in our newly raised targets. For example, our joint prepaid solutions have emerged as a new cross-selling opportunity into the WorldPay client base. We have already signed a partnership with the global solutions provider to develop reloadable fare cards for transit systems. Together, this partnership has already won our first large metro client and expect more to follow. With our very successful achievement of expense as well as revenue synergies, we are running a full 12 months ahead of our original integration schedule. Due to this accelerated timeline, we are also taking earlier steps to further streamline our organization to drive a much more functional operating model. Some of the changes we have recently implemented will allow us to better leverage our go-to-market strategies between our banking and merchant segments. We believe this will not only further accelerate our revenue synergies, but also allow us to drive innovation into these markets. We have also consolidated technology development for our merchant and banking businesses within our combined chief operating officer organization. This alignment will allow us to increase our speed of development and deployment in this highly dynamic industry, creating what we believe will be a best-in-class software engineering organization. As you can see, we feel great about how the companies have come together, and this momentum and success gives us great confidence for an even stronger 2020. Moving to slide eight, we have a highly resilient business model that is differentiated by our market-leading solutions across our segments. In merchant solutions, we are clearly a leader in global e-commerce and integrated payments. As we continue to grow, these channels have expanded to approximately 45% of our merchant business mix, up from 37% of world pay in 2017. Due to the high secular growth trends in these markets, we expect them to maintain their high rates of growth and continue increasing as a percentage of our revenue mix, reinforcing the durability of our organic growth profile. In banking solutions, we are differentiated by our comprehensive portfolio of next generation solutions. These uniquely position us to help large global financial institutions as well as community banks and credit unions to transform their business models and to provide seamless customer experiences. Therefore, as the financial services industry continues to evolve, we will be the primary beneficiary of the growing momentum towards outsourced cloud-based technology from legacy in-house software. Finally, in capital markets, our investments in advanced technology and reg tech are paying dividends. We develop bundled offerings to enable our clients to simplify their complex front, middle, and back office processes with an end-to-end automated workflow that is helping us to win market share. In addition, by using a SAS delivery-based model, we have an opportunity to further increase our revenue growth profile by driving an increasing mix of predictable reoccurring revenue streams. In order to reinforce our reporting segments and drive increasing rates of organic growth, our priorities for 2020 are as follows. First, we will continue to invest in sales, innovation, and delivery to capitalize on our growing new sales pipelines. Clearly, our investments over the past five years are driving landmark new wins and we're going to continue to lean into this strategy in 2020. Second, we will seamlessly execute the WorldPay integration in order to achieve our revenue and cost synergy goals. We're already well ahead of schedule and we'll look to further accelerate our momentum in 2020. Third, we will continue to drive efficiency through our data center consolidation program. Last, we will continue to scale in our high-growth secular markets in order to reinforce the durability of our revenue growth profile. As you can tell by our exciting wins and accelerated synergy realization, 2019 was a transformational year, and we have line of sight to achieving even more in 2020. I'll now turn the call over to Woody to round out the financial discussion before he opens the call to questions. Woody?