Fidelity National Information Services, Inc. (FIS) Earnings Call Transcript & Summary

Thank you, everyone, for being here. We save the best for last.

Thank you. That's very kind.

To close out KBW's 2025 FinTech Conference, we welcome Stephanie Ferris. She's the CEO and President of FIS. Stephanie has over 25 years of experience in financial services. She was the CFO at Worldpay. We're excited to introduce her to as our final keynote speaker.

Stephanie, it's been nearly three years since you took over as CEO of FIS, and you've accomplished a lot, including the Worldpay separation, the future forward realignment. What are your current priorities? And how do you feel about the current state of the business?

Yes. Well, first of all, thank you for having me. Happy to be the closing keynote, and thank you for all of you coming to the very last one. I appreciate that. It's been a fascinating time in fintech. I would -- let me start by saying I couldn't be more excited about where we sit here today. And that's because of the work that we've been doing over the last three years, which is what I'll talk about, which has really been the infrastructure and the kind of the launch pad for where we are as we move into 2026 and beyond and really start to think about scaled technologies like AI and tokenized deposits and things like that, but I'll come back to that. I came into the role in 2022, at the very end of 2022, and we really focused what we call our Future Forward strategy around three things. So, one was putting clients at the center of everything that we do. Then the second was innovation. And innovation was everything from delivering new products, but also delivering our existing set of products on time and with great quality and then simplicity. We were a very large fintech that had grown through a lot of M&A and really focusing on being easier to do business with. We put all that in motion and focused on what I think are our three core strategic strengths. We have scaled global technology, which matters a lot in terms of fintech and in terms of a financial algorithm. We have a global distribution and a marquee client set and product set. And so when we put those together and we look at the opportunity in terms of serving clients, better and making sure that we have a best-in-class client service platform. We look at being able to deliver our existing organic, build organic products, deliver them into our existing client base, partner for new products and then buy new products, put them on the platform, scale them and accrete more revenue and more margin, we think that's pretty powerful. And so we kind of came into this -- came into the CEO really focused on durable revenue growth, profitable margins and reestablishing what I thought the algorithm of the company should be around return on invested capital and really focusing on customers, shareholders and our colleagues. So that's been what it's about. It's been quite a journey, as you've mentioned, and I remain very optimistic after our what I think is pretty good third quarter print, kind of starting to show the fruits of all that labor.

Great. So what are you seeing competitively across the banking segment? How do you think about industry trends, Pricing dynamics have been something that's been in talks among the investment community. Just your thoughts.

Yes. So just rewinding the tape a little bit. As you mentioned, we repositioned FIS to serve the financial services industry. We kind of got out of our payments business and separated our Worldpay business, and we'll complete that as we sell the remaining 45% and then buy the TSYS transaction in the first quarter. So, for us, it's been about serving banks and serving financial institutions and serving financial services clients. So when you think about the industry that we're in, things couldn't actually be any better from a banking standpoint. Regulatory pressures are coming down. M&A and banking is increasing. You're continuing to see banks invest significantly. And the focus is they're investing in terms of how do they grow their banks. So whether it's increasing how much they're spending on their digital products and services so they can all sell and service us more, whether it's making sure that they have the best-in-class products around money movement and payments capabilities, debit credit, tokenized deposits, et cetera. They're focused there. They're focused also on serving their clients and they're focused on fraud. Fraud is a big cost for them. And so when you look at where they're spending money, they continue to spend very robustly. And so from an FIS standpoint, we've been very focused on making sure we're making our investments both inorganically and organically in those growth areas. So I think from a banking standpoint, and this is across the world, I think things are feeling really pretty good. Credit is good. Consumer spend is good. The regulatory environment is good. Consolidation is up. So I would say that from an overall FI standpoint. In terms of the fintech industry, it always is -- what I would say, first and foremost, is it is a very rational industry. We serve a lot of financial institutions. They're quite savvy. And so -- and it's very competitive. It's always been competitive. So I think that continues. I think for us, where we've seen a lot of success is making sure that we now sell those products that have high margin, high recurring revenue into our existing client base, again, accreting the right level of revenue and margin so we can create that low double-digit EPS growth. So that's where we've been focusing and taking advantage of where the trends are really going in the industry.

And anything on pricing environment?

I knew you were going to ask that. It seems to be the favorite topic of the day. So, in terms of pricing, we spent some time in our third quarter call talking about pricing being a net positive for FIS. Both -- and the way we think about pricing is twofold. First, we're out in the market pricing new business, obviously, and then we're selling existing products into our customer base. And it is both, right? We have to sell new business, but then we bring a client on and on average, our banking clients have 26 products. And so it is about continuing to cross-sell into those -- into that base. And once you've brought the client on, the pricing is a little bit less competitive, and it's more about adding the product and the return on that. So, I would say, overall, the pricing competitive market for new business continues to be competitive. And -- but it's been competitive. So I don't know that's anything new. I think that now when you think about FIS in particular, and we talk about our algorithm, which is net new sales. So think about new sales revenue outperforming attrition. It's a net number. And then we think about net pricing for us, it's about are we retaining more customers than we're compressing from a revenue standpoint. And net pricing for us has been a tailwind, and we provided some of that detail in our third quarter call. So, I think for both, the industry continues to remain competitive but rational. And then for us, because of the work we've been doing, it has flipped into a tailwind for us this year, and we're quite pleased with that.

That's great. I think the Banking segment was pretty strong in the third quarter. Maybe you could talk a little bit about what drove that outperformance and how sustainable that outperformance or that level of growth is going forward?

Yes, we were really pleased. I think we maybe took some people by surprise in terms of how strong the banking business growth has been this year. We weren't surprised. We came into 2025 talking about the tailwinds coming out of 2024, which was net new sales. So, again, 150 basis points of new sales coming into 2025. That was both how much new business we had sold and then how much more retention that we were taking into the year. So we knew we were coming into 2025 with a really strong tailwind. In addition to that, it's been really nice to see our accounts on file grow nicely. I mean those typically grow in the 2% to 4% range on an annual basis. They had a nice uptick in the third quarter and continue to be strong. Consumer spend, which is really for us about debit cards, continues to be strong. Digital account growth, which is where we've been focused, continues to be strong. So for us, the third quarter had a nice organic tailwind to it. We expect to see that in the fourth quarter. I think it really connects back to just overall strength in Banking broadly. And so for us, we're pretty excited as we go into 2026 that we've really been able to re-rate that banking business back from, I think, a low of 2 in 2022 up to where we are today. And we're feeling really good about as we step into even the organic number into 2026 that we're putting it back on the right trajectory.

I think digital has been an area of strength. You highlighted about a TAM of $10 billion in the U.S. alone. What are the key differentiators for FIS that are enabling share gains in the market digital side?

Well, I think it's twofold. Again, we are seeing -- so as FIS, we tend to serve the larger financial institutions. And the larger you are as a financial institution, you typically serve both consumers and commercial banking customers. And so serving you digitally, if you're a consumer or a small business, is very different than serving you as if you're a commercial banking customer. And so we've had digital capabilities across that. We've invested in our D1 Flex capabilities, which serve the consumer and the small business. We have been investing in our commercial banking digital capabilities, but felt like they weren't moving at the pace we needed to. So we bought a company in the beginning of this year called Dragonfly, which really helped us secure that D1C is what we call a Digital One Commercial bank capability. Because when you're a commercial banking customer and you're using our digital capabilities, you need a lot more sophisticated money movement capabilities. You need -- there's a different type of fraud capabilities you need embedded in that type of digital work. So, all of those investments, whether we've built them or bought them, is enabling us to take advantage of a lot of that organic growth where banks -- our banks are really looking to be in terms of selling and servicing their customers.

And you just spoke about Dragonfly. Maybe you could also give us a little color on the amount acquisition and how that's enabling widening moat.

Yes. Very, very excited about this. So, again, along the digital journey. So when you start to think about how we interact with a financial institution, you typically need to be able to get on your mobile phone, you need to be able to get on online, teller, et cetera, ATM. However, you also want to be able to open up an account online. You want to be able to open up your deposit account. You want to be able to open up your credit card account, secured lending, et cetera. Historically, in financial institutions, we didn't really allow you to do that because the fraud associated with online account opening is very significant. Also because you need an underwriting capability flow that is digitized. So we're very excited about the Amount acquisition that we just completed in the third quarter of this year. It brings all of those capabilities to us. Now we've had those not in a digital way. They exist in our existing cores. So now we're taking this digital account opening capability, and we can put it on top of all of our cores and banks can provide out digital account opening, whether you're opening your deposit account, your consumer account, your credit card account, and it's an all-in-one type of product for us.

Good stuff. You've highlighted the office of the CFO as a major growth vector, leveraging your unique end-to-end capabilities. Can you talk about your go-to-market strategy there and how it's resonating in the marketplace?

Yes. I think, again, another great market for us. The TAM there is significant and growing, very competitive as well. And what we're seeing in this market, we serve corporate CFOs, whether you're a bank CFO or you're a corporate CFO. And typically, you're looking about -- you have a treasury management solution that we've potentially sold to you. Then you're looking at how do you optimize your cash flow payments. And how do you make -- get customers to make payments to you more quickly. So whether it's accounts receivable, accounts payable, integrating all that together in a cash flow -- one of our cash flow solutions capabilities and into your treasury management solution is really what the office of the CFO is all about. And so we've had these capabilities, quite frankly, spread across the firm, and we've sold them individually. And what we're seeing is if we bring them together and package them and we really put some integration together in them as well as some AI because this is where we've really enabled some treasury ChatGPT capabilities, some AI-enabled cash flow capabilities for our CFOs. We're seeing a very big uptake in the sales of those as CFOs are continuing to really want to automate and speed up their receivables or slow down their payables or be better cash flow forecasters. So, all of those assets together, we're bringing together, and it's hitting the market at a time where that market is quite dynamic in terms of its growth and the competitors in it.

Great. So maybe a few minutes ago, you alluded to the bank consolidation activity and how that's sort of a tailwind for you. And while that can be a tailwind, I think that's also sometimes an opportunity for clients to reevaluate their tech stack. Can you talk about your positioning on that front and why you feel positive about that being a tailwind for FIS?

Yes. So I think that every time a bank consolidates and whether FIS is the buyer or the seller, it creates an opportunity, to your point, Vasu. I will say typically, if the acquiring bank is with FIS and is the much larger bank, the sole bank will consolidate into the acquiring bank. Because when you think about the CEO of the bank and the Boards of the bank, typically, they're doing those transactions and they're assuming there's going to be a ton of synergies. And they want to get to day 1 and have a seamless consumer experience. So typically, they'll take the smaller banks platform and put it on the big bank platform. We tend to serve larger financial institutions. So we tend to be on the winning side of that. So we believe that to be a tailwind. That said, we also lose on that side as well because some of our banks are the smaller ones that get sold to the bigger ones. But broadly, we think it's a tailwind for us because we tend on average to be in the bigger bank. We have seen a lot more transactions this year. And I'm happy to report that when we are typically on the bigger bank side, almost 100% of the time, they will choose us. Now where it tends to be the flip is or where it can go either way is when it's a merger of equals. And that's when we really have to show up and do our best, we try to do our best all the time, but that's when it can get very competitive. So if two banks merge of equal size, then we have to make sure that we're showing up and presenting the products and the solutions to the new management team, and that can go either way. What we typically -- where we typically win again is we have really best-in-class commercial banking capabilities, whether it's our commercial banking core, our money movement capabilities, our digital capabilities. And typically, if you're a commercial bank, you end up being bigger, and so that is one of our biggest value props when we're selling to a bank and they're merging of equals.

So as we think about the bank M&A that's happened in the market where you might have some tailwinds, is that still on the come in terms of the revenue trajectory that we'll see from that?

No, I think we have that all generally baked in.

Got it. The Issuer acquisition, that's now expected to close a little bit sooner in the first quarter. Can you remind us of the strategic and financial benefits you're expecting that will bring to FIS? And then what should investors expect in terms of timing of some of the synergies and when they will start to become apparent in the numbers?

Yes. We couldn't be more excited about the TSYS Issuer transaction. As you said, we do expect it to close in the first quarter. I'll start with the strategic benefits, and then we can kind of go into the financial benefits, which is cash flow, cash flow, cash flow, but we'll come back to that in a second. So, strategically, I'm happy to tell you that FIS and TSYS have had a long history of trying to do this transaction. I think both management teams over the last 10 years would tell you that they thought these assets should come together. TSYS has a fantastic best-in-class credit card processing platform. FIS does not have a large bank credit card processing platform. We've always just served smaller community banks in the U.S. TSYS also has a very big global credit card processing capability, and we don't have anything outside the U.S. from an FIS standpoint. So, for us, it is a perfect product add because the majority of our clients, we know and serve each other's clients. Today, we go to market and we serve them. We just go without a large bank credit card capability, and they go and they sell without any kind of debit or core or merchant acquiring capability. So we think bringing this all together makes it a much more valuable proposition because, quite frankly, we have other folks in the market that sell that bundle together, and it's quite a valuable bundle. So we're very excited about that for our customers. I think also something more exciting is the amount of accounts -- accounts, clients, data transactions that we will have going across our platform after we close this transaction is absolutely amazing. And when you think about that, what clients are really excited about talking to us about is, great, I want you to give me my credit card data, my core data, my debit card data and all my money movement data real time and give it back to me. These are large financial institutions and/or help me build a small language model on top of it. So there really hasn't been a vendor that has had this level of data of their data to enable for them. So they're really, really excited about talking to us about that. I think that's something we'll be exploring with them as we think about adding to the product capabilities. Now coming back to the strategic value of the issuer processing acquisition, it really is around -- we had 45% stake left over in Worldpay. It was a noncash generating earnings stake. And so we were able to sell that 45% of that and trade it for the issuer business. which is 4% revenue, accretive margins to FIS and creates a significant amount of cash flow once we get that debt paid down. So it is a humongous cash flow generator for us at FIS. So strategic product value, strategic client value and then creating a significant amount of cash flow for the firm has been really a home run for us.

And in terms of the timing of when these synergies start to show up in the numbers?

You sound like James. Okay. So synergies, the great news for us is we feel like the synergies that we put out are fairly modest, both in terms of revenue synergies, which I think we talked about $50 million of revenue synergies by year three with $150 million annually. I always get nervous about revenue synergies transparently because they're the hardest things to get. I feel really good about them, though. More importantly, the cost synergies are more around facilities consolidations, capabilities that both sides of the business have. It's less about duplicative technology organizations. We don't have them. It's less about duplicative sales organizations. We don't have those. So the synergies are much easier. And in terms of the totality of the deal are pretty modest. That being said, we're really focused on getting after them very hard, very fast in the first year.

Great. Just one I have to ask, large-scale M&A can be challenging to integrate. So what are some key KPIs that you will be tracking to ensure the success of the deal over the first 24 months?

So this is an interesting question for me because I've been on both sides of this. I've been the acquirer in a large-scale transaction where Vantiv bought Worldpay. And then I've been the acquiree when FIS bought Worldpay. And I think that transparently, the revenue and expense synergies are the easier part of big transactions. They really are. The harder part about big transactions is can you capture the hearts and minds of the collective new company. And so KPIs that I use, revenue and expense synergies is easy. So sales pipeline, how many products we sold, how many customers we sold, put it in people's bags, that kind of stuff, very easy. tracking cost synergies, very easy. Figuring out and making sure that we actually have put together and that the new acquired company has bought into the ultimate culture, that's transparently much harder. We just had the issuer processing senior leadership team with us in Jacksonville yesterday. And the thing -- and both of us have talked a lot about how similar our cultures are. So that's one thing as I've come into transactions. First of all, you have to understand that being acquired is -- you go through a life cycle and it's hard. And I'm very empathetic to that because I've been through that. And then secondly, you have to make sure that culturally, you are a close fit. You can't be perfect. Everybody is different. The nice thing about the Issuer Solutions business and the FIS business is that we serve the same client base. We serve financial institutions. The way we serve them is similar. We care about our clients deeply. They have a fantastic client service model. Resiliency is absolutely critical. So they're also very client-centric. So what they care about is the same things that we care about. Now we're going to nitpick around your model, our model, my model, who's ever model. That will be hard. But the culture piece transparently is one of the harder things, I think, from a KPI standpoint to measure. And so for me, personally, I get involved in the people side of all of it to make sure that I'm actually talking to the 2 and 3 downs and the new company to make sure that we aren't getting organ rejection.

Great. That's good color. Maybe switching gears to capital markets. That business saw a bit of a slowdown earlier this year, but that has since rebounded. How are you feeling about the forward growth trajectory there and the key growth drivers in that business?

Yes. So, capital markets, great business. Again, another fantastic TAM. The team there has done a great job growing their organic business and really thinking about taking their monolithic pieces of software, componentizing it, offering it in an as-a-service way and then figuring out how to -- if you want to do sophisticated commercial lending and you want to do that in a bank or if you want to do that in private credit and moving and taking those products and making them available across the financial services spectrum as we're seeing everybody kind of merges around the products and solutions they want to sell. So they've done a fantastic job at that. We did, you're right, get caught up a little bit this year post Liberation Day on loan syndication falling off in the second quarter that impacted capital markets. We were happy to report in the third quarter, it's back. For the full year, we just won't make up that quarter of loan syndication activity.

Great. Maybe we can talk about your M&A strategy a little bit, how the tuck-in acquisitions fit into your strategy and long-term vision for growth.

Yes, happy to. So, I would say, again, the growth algorithm is really about how do we continue to serve our existing set of clients, which is quite large and vast, selling our existing capabilities. I mentioned like in banking, 23 products, how do we get it to 24 to 25 to 26. Well, in order to do that, you continue to invest in your existing products and sell them something new that they need. Let's talk about continuing to expand the digital capabilities or -- and we also look at acquisitions that could also enable more revenue growth, higher-margin revenue growth, putting it in that distribution channel, getting the revenue booked on the transaction and accreting more margin. So it is very important to part of the thesis. That being said, it is an opportunistic strategy. All to say, we don't use it as we have to use every dollar of it every year. It is more focused on what do we think the customer -- what do we think -- how does the customer -- what products and services do they need where we can serve them organically first. And then if we think there's a market and there's a really a big market need there for our customer, and we can't deliver it fast enough because remember, we're in a pretty dynamic, then we will go out and buy it. Now when we look at M&A, and again, I would really push that it is opportunistic, and we do look at it from a return standpoint, we get immediately first back to culture. So does this company that we're buying, are we -- do they want to be bought? Are they comfortable working in a big company? Are they excited about global distribution? They're all excited about global distribution by every small company wants us to sell their stuff. But you have to really look at that. I think the other thing that we really pressure test is, is the product scalable? Because when we put it on our platform, we're going to sell it to 15,000 clients. And so can it scale? And we can make it pretty scalable. So our M&A strategy is really focused on that. But again, it's focused on returns first and making sure the fit works, and we're obviously focused on organic before we would do any M&A.

And then if you think -- we were thinking about any specific areas within banking or capital markets where you feel like there's an opportunity to buy a product and scale it? Like are there any specific areas you're seeking out?

I continue -- I'll sound like I'm repeating the same thing over and over. I apologize. Digital payments, continuing to anything around hauling out the core digital payments, digital payments, digital payments.

That makes sense.

I think -- so on the capital markets side, lending. So really trying to build out that lending capability, we think is very valuable.

You talked a lot about AI on your last earnings call. Can you give us some examples of what you are doing and what the benefits are? And do you view AI as more of an opportunity or a threat?

Well, that's a great question. I'm always optimistic, so I always think of it as an opportunity, but there are places that can be threatening. For us, we are doing with AI just like every other company -- I might say this, I've never seen banks adopt technology faster in my entire -- however long you said I've been 25 years. sounds better than what it really is. They typically don't adopt technology quickly. They've adopted this technology faster than I've ever seen. Where they're adopting it in financial institutions is more around places where they just have a ton of cost. So underwriting, deposit operations, KYC, KYB, et cetera. And so there continues to be an opportunity for us because those capabilities surround our core banking applications. So we're really interested in leaning into that. But I would say where we've spent a ton of time today or over the last 18 months is in our own back office, doing what they're doing, which is how do we deploy copilot, et cetera, make our developers more productive, yes, continue to focus on that. Very, very helpful as you think about investing in yourself organically. We've really focused it with my Chief Client Officer in the client experience. So if you think about, again, productivity, but more importantly, how do you serve a client faster, which makes them want to sell -- buy more things. So we've deployed a ton of work in our AI agents, and that's been more around how do we help our human agents serve our clients better. That's been really successful, and we'll continue to lever that. I think on the product side, we've spent a bunch of time really thinking about which ones of our products we can enable with AI immediately. So when you think about just adding an agent to your product, no one really wants to spend more money on an agent. Where you really see value is when you can make a model or prediction or have some kind of better outcome for your client. So think about things like where we do cash flow forecasting as a product. We've put in AI capabilities to make those cash flow forecasting products better. Treasury, ChatGPT. So lots of things in the treasury and risk model capabilities within our fraud business where we already had a lot of AI and how do we make our large language models there more sophisticated and block more fraud on the card transactions. So done a lot in the existing product space. And then to your question on a threat, I think we spend a lot of time trying to think about our end customers and where we think things could be a threat or an opportunity. Agentic Commerce, so think about our payments business and the TSYS acquisition. We will all -- well, maybe we won't all, but my kids will eventually let an agent buy anything for them. And at some point, they will -- the agent will buy something that they will claim they never authorize the agent to buy, b*******. So at that point, we, as a credit card processor and the debit card processor for our financial institutions need to create some sort of capabilities for them because just because someone tells the banks that they should authorize a transaction today does not mean that they automatically do that. So I think agentic commerce is potentially an opportunity and a threat. Now I actually view it as an opportunity as we think about bringing TSYS into the fold for us because I think we're uniquely positioned with a pretty significant amount of data there and end clients.

Great. So no conversation in the financial services industry is complete these days without talking about stablecoins. So we have to talk about that. How is FIS navigating the developments on that front? Are you seeing any real appetite from banks -- and are you confident that the partnerships you've announced like the ones with Circle are sufficient? Or could this be an area for M&A down the road?

It's a great question. So we think stablecoin is really interesting, and it is scalable technology. From an FIS standpoint, we are not going to issue a stablecoin. We're never going to compete with our customers. Where we view our value is enabling whatever type of next digital currency a financial institution may want to provide. So we have what we call a money movement hub, which is a piece of technology that is sold into financial institutions that enables them to deliver money movement capability to their end customers. So think about this money movement hub enables real-time payments, ACH, wire, FedNow, and that's where our Circle partnership is integrated. So think about the Circle, the digital currency capability is yet another capability alongside the existing capabilities today. We view our role in the digital currency as an enablement factor. And so as we -- as more digital currency capabilities get bought up and more capabilities, banks want to continue to bring them, we view our role in the ecosystem as the infrastructure player, not necessarily a digital currency issuer.

Great. So in the last few minutes, I do want to open it up to the audience if anyone has questions. Any questions from the audience? Great. I'll keep going. So maybe just one last one for me. It sounds like a lot of good stuff is happening. Momentum is building in both sides of the business, but the stock doesn't seem to reflect that. What do you think investors are missing?

That's a great question. I think they're missing that the algorithm around the FIS fintech and in fintech in general. It really is about a scaled distribution, selling to an existing client base more and more products that you build by your partner, you accrete more revenue at the top. It should naturally drop an EBITDA margin and into a low double-digit EPS. In addition to that, the free cash flow is very significant. I say they're missing that, but everybody in this room is really pretty smart. So there's no way they could be missing that. I think from an industry standpoint, we're in a tough spot. But I think for FIS, in particular, what I would say is we have some real momentum. We couldn't be more excited about where we are. We feel really good about our pillars, client centricity, innovation and simplicity. We think we've done some pretty transformative things in the firm, both in terms of separating Worldpay and then being excited about bringing TSYS on. And we'll continue to be transformative in the way in terms of positioning this company so that it can continue to be a very big powerhouse in the industry, serve our clients and be a double-digit earnings provider.

Great. With that, we'll just end it right here. Thank you so much, Stephanie, for