Fidelity National Information Services, Inc.

Good day and welcome to the FIS third quarter 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's 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 your hand is raised. To withdraw your question please press star 1 1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, George Mialos, Head of Investor Relations. Please go ahead.

Thank you, Abigail. Good morning, everyone, and thank you for joining us today for the FIS Third Quarter 2023 Earnings Conference Call. This call is being webcasted. Today's news release, corresponding presentation, and webcast are available on our website at fisglobal.com. With me on the call this morning are Stephanie Farris, our CEO and President, and James Keough, our CFO. Stephanie will lead the call with a strategic and operational update, followed by James reviewing our financial results and providing forward guidance. 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 Stephanie.

Thank you, George, and thank you, everyone, for joining us this morning. Let me start by saying it's an honor and a privilege to lead this very talented team who are collectively building the future of FIS. I'm pleased to report that we had another strong quarter executing on both our financial and operational commitments. This is our third straight quarter of solid financial results. once again meeting or exceeding the high end of our revenue in adjusted EBITDA outlook and delivering strong free cash flow conversion. We have taken decisive action to transform FIS over the past year with growing predictability of meeting or exceeding our targets and expanding margins with measurable impact from our Future Forward program. The WorldPace separation and our Future Forward execution repositions FIS into a company with a strong balance sheet which enables us to both invest in growth and increase capital return to shareholders, while at the same time reduces exposure to macro consumer trends. Post the WorldPay transaction, FIS will be a global enterprise software leader, positioned for resilient, recurring revenue growth, aided by beneficial secular trends, a marquee set of global clients, and best-in-class products and solutions, which will all accelerate profitable revenue growth. The FIS of the future builds on our strong foundation, repositioning the company as a cloud-based enterprise software as a service provider, servicing the world's most complex financial institutions and capital markets participants. This enables us to expand into new client segments as well as into new, faster growing verticals. All of this leads to confidence in our current year outlook, our future prospects, and our plan to drive long-term shareholder value. Our confidence is further reinforced by positive momentum we are seeing across a number of key leading indicators. First, we continue to deliver steady recurring revenue growth, which extends our visibility and serves as a foundation for sustainable revenue growth. Second, our sales pipeline is robust and new customer engagement is strong. We are seeing an increase in Salesforce productivity, an increasing pipeline of high margin opportunities, and a strong transition from one time to recurring revenue as we take advantage of both market demand as well as secular trends. Finally, the traction that we are getting by bringing many of our clients live on our new platforms like Modern Banking Platform, Digital One, and Risk Management Solutions is driving positive future momentum. Given our confidence in the business and the attractive valuation of our stock, we are resuming share repurchases in the fourth quarter, increasing our total share repurchase goal to at least $3.5 billion by year end 2024. Let's turn now to a discussion of our quarterly results. Moving to slide six. We delivered another strong quarter of financial results with fraud-based outperformance relative to our prior outlook. The outperformance was driven by strong organic revenue growth of 4%, led by 7% recurring revenue growth in the combined banking and capital markets segments, and from profitability improvements driven by our Future Forward program. We continue to generate strong free cash flow and are on track to exceed our 2023 free cash flow conversion target of greater than 80% for the year. Year-to-date free cash flow conversion is a very strong 94%. This is well ahead of our full-year target as efficiency efforts related to Future Forward continue to cascade through the business. Our teams are continuing to move with quality, speed, and a high sense of urgency, accelerating our path forward. Turning to slide seven, we are making significant strides in transforming FIS. Our world-pace operation remains on track to close in the first quarter of 2024. Since our last earnings call, FIS and WorldPay have achieved several important milestones necessary to advance the separation. We are very pleased with the success of the recent $8.7 billion WorldPay debt raise. The strong demand, evidenced by the upsizing of the debt offering at favorable rates, secures the committed financing required to close the deal. Looking ahead, we are working towards securing the necessary regulatory approvals to close the transaction and finalizing terms around commercial agreements. Moving to future forward, we are on track to deliver on all of our commitments, including $1 billion in total savings across the enterprise by year-end 2024. The program is sharpening our focus on innovating and delivering best-in-class solutions and products to markets faster, simplifying our go-to-market approach, and improving client experiences. This, in turn, is driving improved new sales momentum. Turning to slide eight. FIS is uniquely positioned as the leading software solutions provider to the most demanding and complex financial institutions globally. And while recognized as the provider of choice for large FIs and regional banks, our next-generation offerings are increasingly resonating with a broader base of clients who have increased financial services needs. This includes leading multinational corporates, insurance companies, leading global fintechs, and neobanks. We have developed a full suite of cloud-based, componentized enterprise solutions delivered via a SaaS offering. Over this past year, we've focused significant efforts on bringing these solutions to market across our core digital and issuing platforms. As a result, our next generation core banking solution, Modern Banking Platform, is now live with a number of Tier 1 financial institutions and fintechs. This includes a new digital savings platform for BMO in the U.S. a digital interest-bearing deposit account product for PayPal, and a deposit account for SMBC Group member manufacturer bank's new digital banking division, Genius Bank. Looking ahead to 2024, we expect three more Tier 1 banks to go live with MVP offerings as part of a broader multi-year core modernization effort. We are equally excited about the prospects for our Digital One and Payment One solutions. bringing enhanced front-end digital experiences and complex issuer processing capabilities to the most demanding financial institutions. Our overall vision for our enterprise core platforms is to leverage the full value of our open architecture and robust APIs going forward, eliminating mass conversion complexities. This creates an open environment that speeds the FIS product and development flywheel to bring new capabilities to our clients with increased flexibility. In capital markets, we are seeing strong tailwinds across the business, a function of both increased wallet share and faster growth in non-traditional verticals. As the leading global provider of treasury and risk solutions, capital markets is benefiting from several secular trends. These include increased regulatory mandates, climate and environmental risk demands in verticals such as insurance and asset management, and growth in lending from non-bank providers. Turning to slide nine, I am very encouraged by our sales momentum during the third quarter and pleased to announce several marquee wins across our banking and capital markets segments. Beginning with the enterprise core platforms, FIS was selected by Provident Bank to drive the bank's core modernization going forward. In digital, we had several wins in the quarter, including Origin Bank, selecting our digital one suite over the offerings of notable disruptors. We also had a particularly strong quarter in payments and network, as money movement remains front and center for banks, fintechs, and corporates. Sales of the NICE network accelerated in the third quarter with notable signings of several leading retailers, restaurants, and fintechs. And lastly, while still early days, we are encouraged by the interest we are seeing related to the rollout of FedNow, where we currently have over 190 clients in our pipeline, up from 116 clients just last quarter. Moving to capital markets. During the quarter, we had a number of impressive wins, including newer expanded engagements with some of the largest financial services providers in the world. We recently signed a long-term extension for our industry-leading derivatives clearing solution with a top five U.S. financial institution. We also signed our largest contract ever for our private equity fund accounting software to a leading global investor services company. Demand for risk tools was strong across all geographies and verticals. Our FIS enterprise risk suite continues to gain traction with global investment banks and broker dealers, especially in the growing insurance vertical, with new sales to several leading U.S. and international clients. Overall, we are encouraged by the level and quality of engagement that we are seeing across the enterprise. Moving to slide 10, during the third quarter, our differentiated solutions received a number of prominent industry accolades. First, leading research and advisory firms to Lent recognized three of FIS's core offerings with awards in advanced technology, customer base, and breadth of functionality. Our industry-leading treasury solutions were recognized by leading advisory firm IDC and several industry publications. We are delighted to see that our solutions are not only resonating with clients, but also with leading experts and influential advisory firms in the industry. Turning to slide 11. Over the course of the year, we have been moving with a high sense of urgency to improve the performance of the business, free cash flow, and capital allocation. We set a new agenda to ensure that clients are at the center of everything that we do to innovate across our portfolio with next gen solutions. We've made significant progress delivering on our financial and strategic commitments to date. The separation of world pay affords us the benefit of substantial upfront proceeds, which creates immediate capital allocation flexibility for us to accelerate capital return to shareholders while investing in growth. We're excited about the outcome that this strategic transaction drives and remain confident in the underlying strength of our business and sustainable operating model going forward. We look forward to hosting all of you at an FIS Investor Day in the second quarter of 2024. With that, I'd like to introduce James Kehoe, our new CFO, who brings decades of experience navigating the dynamic financial environment and managing its aspects unique to large international organizations. I will now turn the call over to James.