Fidelity National Information Services, Inc.

and welcome to the FIS third quarter 2022 earnings call at this time all participants are in a listen only mode after the speaker presentation there will be a question and answer session to ask a question during the session you will need to press star 1 1 on your telephone you will then hear an automated message advising that your hand is raised please be advised that today's conference is being recorded I would now like to hand the conference over to your speaker Mr. George Mihalou, Head of Investor Relations. Please go ahead.

Great. Thank you, Operator. Good morning, everyone, and thank you for joining us today for the FIS Third Quarter 2002 Earnings Conference Call. This call is being webcast. Today's news release, corresponding presentation, and webcast are all available on our website at fisglobal.com. Gary Norcross, our Chairman and CEO, will provide a business overview. Stephanie Farris, our president, will provide an operational update. Finally, Eric Hogue, our deputy CFO, will then review our financial results. 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, adjusted net earnings per share, and free cash flow. 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 is presented in our earnings release.

With that, I'll turn the call over to Gary. Thanks, George, and thank you all for joining us this morning. Let me begin by saying this will be Woody Woodall's last official day as Chief Financial Officer. His contributions over the past 14 years have been tremendous, and he has established a firm foundation for Eric Hogue as our new CFO to build upon in the future. I'm also very excited Stephanie Ferris will become President and CEO on January 1, 2023. Stephanie's 28 years of industry experience, varied executive roles, and her understanding of the FIS business and industry positions her well for this promotion. I am confident in her ability to lead this company going forward and excited to continue working with her as I assume the role of executive chairman of the board. Congratulations, Stephanie, on this well-earned promotion. I'll begin on slide five for a quick overview of results. In the quarter, we delivered revenue and adjusted EPS in line with our expectations, a testament to the fundamental resiliency of our business. Organic revenue growth for the quarter was 5%. Banking solutions grew 6%, merchant solutions grew 5%, and capital markets grew 6% all on an organic basis. Our profit margins in the banking and merchant solutions businesses saw continued pressure in the quarter. This resulted in an overall adjusted EBITDA margin contracting by 150 basis points year-on-year, primarily a function of inflationary cost pressures such as wage inflation and downstream supplier increases, as well as incremental macro headwinds such as consumer weakness in the UK. We are not pleased with the profitability performance of the business and are taking actions to address them. We did want to provide you some insight on the underlying performance of the businesses because given the backdrop we operate in and the continued economic slowdown we are seeing in certain geographies around the world. On the slide, you will see we provided some key growth trends with minor adjustments to help investors see the underlying performance of these businesses. As you can see, the underlying growth trends of the businesses are good in this backdrop. If you adjust for pandemic services, our banking revenue grew 8% during the quarter. Merchant Solutions grew 6%, adjusting for Russia-Ukraine, with their e-com business growing 22%. Capital markets had an impressive 9% growth, adjusting for the volatility of license fees, which we have discussed on numerous calls. We also executed on our commitment of returning capital to shareholders. Through a billion dollars of share repurchase, in addition to the almost $300 million of dividends paid, while maintaining leverage at 2.9 times in support of our investment grade credit ratings. Turning to slide six, we are seeing indications of a broader economic slowdown. In banking, as we discussed last quarter, we continue to see deals greater than $50 million taking more time to close than we saw over the last several years. Smaller transactions in banking continue to show good momentum. which allowed us to close more new contract value this quarter as compared to the same quarter last year. In merchant, across the United Kingdom, we saw even greater pullback than we expected last quarter. We continue to see stability in U.S. payment volumes through the first nine months of the year, but are beginning to see a shift in non-discretionary spending towards the big box merchants. Should there be economic pressure in the U.S., FIS is well positioned to capture volume shifts given our size and scale and market-leading distinction in the grocery and pharmaceutical verticals, as well as our strength in enterprise card presence and e-commerce capabilities. Capital markets continues to exceed our expectations as our pivot to a SaaS-based go-to-market strategy has strengthened the resiliency of that segment. This strategy has also supported the profitability of this revenue, as we benefit from a one-to-many operating model, allowing these clients to leverage our scale and expertise to simplify their complex needs. Given the demand for SaaS-based solutions in this segment and the continued macroeconomic issues we are seeing, our license fees each quarter will continue to come under pressure. We will continue to monitor this trend closely. I'll conclude with the actions we are taking to ensure long-term growth and stability. FIS investment grade credit ratings differentiate us from others in the industry and provides us with a strong foundation during uncertain times. We will continue to fortify our balance sheet with a focus on the long term. Because of this, we currently do not anticipate taking out incremental debt in 2023 to fund share repurchase above our excess free cash flow. We will remain focused on allocating capital efficiently, and should market conditions deteriorate, we will deploy our robust free cash flow to pay down upcoming maturities. Fortunately, the strength of our enterprise will allow us to continue to fund share repurchase with excess cash, returning incremental capital to our shareholders above and beyond our dividend. We are also announcing an enterprise transformation program to significantly enhance cash flows through the business with a focus on both operational excellence and prioritizing capital expenditures. As we have completed significant investment programs over the last several years, including our data center consolidation and several banking capital markets and merchant modernization programs, we are now able to reduce our capital requirements in the future. We are reaffirming our commitment to 20% plus annual dividend growth and a 35% payout target, a true differentiator of FIS compared to others in the industry and a testament to our cash flow generation. With that, I'll now turn the call over to Stephanie for the operational update.