Fidelity National Information Services, Inc. ($FIS)

All right. Guys, thank you again for being with us this afternoon at day 1 of the Wolfe Fintech Forum. Really happy to have everyone here. FIS is a name we've been spending quite a lot of time on over the last few years and recommending the name as we see quite a bit of opportunity for a pretty low valuation, but opportunity across the banking technology area that we think is very resilient. And when you couple that now with the deal they've done and the opportunities there, we're pretty constructive and excited to have them here with us. So Stephanie and James, thank you both. We have the CEO and CFO with us. So guys, thank you so much for joining us.

Thanks for having us.

Just maybe, Stephanie, starting with you. I mean, looking back at the year, it was an incredibly transformative year for the company. If we think about the accomplishments over the last 12 years, what do you see as the most material changes and accomplishments in terms of positioning for the company and where you want it to be for the future?

Yes. I think there's 2 things that are fundamental. One is bringing operational and commercial excellence back into the company. I think we ended 2025 proving that very clearly that our ability to sell the right products to the right clients at the right time, which brought back banking revenue above our expectations from an investor growth standpoint, and you saw -- you're seeing us guide that in 2026. I think we surprised the market on that. That was through pure operational focus, muscle and hustle in terms of new sales as well as client retention. I think also operational excellence, if you look at the cost programs that we drove in 2025 and continue to drive in 2026, which is now part of the culture and the DNA of FIS, both of those together have accreted higher revenue, accreted higher margins and driven operational and commercial excellence. So that was within our kind of control and what we plan to do as we set out at Investor Day, and I'm really pleased with where we are. I think at the same time, we drove a very strategic set of transformative acquisitions and divestitures. So selling the Worldpay stake and ultimately being singularly focused on financial services at a generational moment, we should come back on that. Separating and being focused on financial institutions, financial services, everything with respect to products, innovation, commercial, et cetera. We're not confused on who we are. We don't serve a diverse set of end customers, and we're singularly focused. And at the same time, after the separation, trading it out for the best-in-class credit card processing business in the world, especially given that we serve the largest of financial institutions, both here in North America and around the world. And the thing, if you remember, when I started out at Investor Day, I said it's going to be critical for us to drive commercial and operational excellence, and we have to drive it in the places where banks are growing and have tech spend desires, digital payments and lending. And so everything we've been doing, including this big transformative deal by buying the total issuing business has been trying to lay product and innovation and in that space specifically in payments. Really tough to grow in payments in large financial institutions if you're not in the credit card business. So you think about that strategic transaction at the same time, James will somewhat cover the cash flow generation of those transformation -- transformative initiatives. And I just feel like we are better positioned today coming into 2026 than we've ever been positioned in terms of just being able to better execute as well as strategically where we sit. And then we have this generational moment in front of us.

When I think about the generational moment in front of you, I mean, you have a pretty real vision for change and opportunity ahead of you. I mean just expand on that a little more and what you see the company looking like even in a couple of years into mix and profile.

Yes. So financial services is in a generational moment around the globe. So yes, you will hear on TV that there's bubbles here and bubbles there, of course, and there's geopolitical conflict. Banks are in a growth on agenda. If you're a small bank to a large bank, you are now allowed to grow again. Your regulatory oversight, cost, et cetera, has been rolled back. Your ability to grow organically or inorganically is back. You can buy somebody. You can sell something, you can sell yourself. This is very, very important because this is a growth on agenda and is going -- is helping banking grow and also economies grow. At the same time, banks are being allowed and in fact, encouraged to take on very innovative financial technologies inside their ecosystem. They can allow and enable crypto. They can allow and enable tokenized deposits. They are able to financially innovate. Now that is good and bad for all of us, and they're doing that inside the regulatory regime of each of the countries we operate in. That is a growth on agenda for financial services. I have not seen that since pre-global financial crisis. At the same time, there is a tectonic shift in technology with AI. I have never seen banks adopt a technology as fast as they are adopting AI. For the most part, they are slow followers, and they will be very clear to tell you we will slow follow, not this time. They are using AI inside of their companies to drive down costs. It is a technology that they are actively using to take down operational costs inside the banks to either permanently change their ROE, ROI, et cetera, and their ultimate profitability metrics or to enable them to drive the growth on agenda I just talked about. That is happening right now. And so I couldn't be more excited because we are sitting exactly at the right time at the right place, serving the right end market that is generational growth with the right set of products and with AI, in my opinion, as a strategic accelerant. So how do I think about the next couple of years? The growth on agenda is ours to take. And so now how do we -- you've seen us guide into 2026. I think people were pretty surprised at how good we feel about the momentum. I'm not -- that was operational commercial excellence. What is going to really fill our sales and think about how do we go from here is how do we lean into this generational moment in this strategic accelerant. It's not just about core, right? So people aren't talking -- they're not taking down AI costs and say, "Hey, let's go change our core. That's not what they're doing." I know everyone is kind of obsessed in this world about cores. We can talk about cores all the way like how has come home. But when I'm talking to you, I'm talking about -- banks are talking about how do I grow my payments franchise? How do I get more deposits? I need more digital capabilities. How do I do commercial lending? I need money movement capabilities. I need sophisticated money movement capabilities. If I'm going to do money movement, I need fraud capabilities. I need digital account opening. Those are the conversations we're having with banks. Those are the conversations. So that's why I'm so excited because if you think about what we've been doing in addition to those things is really our buy-build partner strategy is around do we have the right digital capabilities? We bought Amount. Since we bought Amount, we've sold -- remind me.

25.

25 new bank -- 25 new bank customers. By the way, banks buy things very slowly since we closed it in July. We bought a credit card processing business very material. We've strategically partnered with several companies that help us follow out the core new product and pricing. It's been very deliberate. What we've been doing is very deliberate. It is game on. It is focused where banks are trying to grow. Sorry, I'm very passionate about that.

No, that was great. I mean when we think about banks taking on so much tech and growth and especially AI, it does bring a question to investors, right? I mean, are you sure that you guys are positioned to actually be a help for them? Are they going to do more on their own or take others? I mean how do you think about that?

So it's a great question. And I'm not going to stand in front of you and say there's nothing that could ever be disrupted in the FIS ecosystem. That would be crazy. But the way to think about it right now is -- majority of what FIS does is core systems of record. These are not predictive things. These are actual things. They are transaction ledgers. They hold how many deposits you have. They hold how many trades you did. Every single system has deep regulatory requirements, regulatory reporting, integrated into payment ecosystems. They by themselves individually, could you pick off and make AI-enabled? You might. But source systems of record fundamentally hold all of the data that make AI so valuable. So when you talk to banks about how they're using AI, they're talking about Stephanie, how do we take the data out of your systems and it's not just a deposit system, a deposit system, a payment system, check system, fraud system, how do we pull that together and then start building AI capabilities or you help us build AI capabilities to get after all the people that we have around know your customer, know your KYC, KYB, CDD, SARs reporting. The amount of cost that banks have around compliance and how to comply as a bank with all the regulation is significant. The majority of that comes off of our core systems. And so it ranges in terms of why we think it's a strategic accelerant. If you're a really large financial institution, and I'm starting to talk to you about, okay, could we build an agent together around suspicious activity reporting, very large banks start to get very excited about that. If you -- and I talked about this in our earnings call, if you're a regional bank and you have already entered into a POC with me where I have your core banking data and I have your credit card data, we're putting that together and building a model for you to help you identify the best customer you can offer an increased credit line to for your commercial and consumer card, that's revenue generating. If you're down in my smaller banks and you're saying to me, "Hey, look, I really need you to help me figure out, I use your core system. I open an account 5 times, and then I ultimately route it around the bank for either workflow or for regulatory purposes, I need to take those costs out. Can you help me figure out inside your ecosystem and enable your core systems to help me take those costs out?" So it depends -- I view it as a strategic accelerant. Now if we don't get after it, do I think there's other people that will come in and do it? Absolutely. Do I think there's plenty of room to play? I do. You're always going to need fundamentally, though, a multiple sources of data, and it's not just one system. And so that's why I think it's such a big opportunity for us.

Yes. I think the underappreciation in the market is pretty notable when it comes to the KYC, when it comes to the compliance and the regulatory that your software, your work is actually requires. Relative to other stocks we cover, I think the AI as a risk theme should be -- you guys should be looking as a safe moment. In fact, it could be an opportunity more than a risk. On that note, I mean, when we think about the business now putting up even more barriers to entry and buying an issuer, you really have a full stack now for the large banks, right? And so help us understand what you look like now when you're talking to a customer pro forma for this issuing business combined. Is the conversation changed? Is it helping with more cross-sell? Just talk about the differentiation of the market now.

Yes. We've had a -- we generally serve larger financial institutions. We have great customers that are small as well. But if you think about $20 billion in up banks, this is where we've historically had a very big strength. We've served them from a core standpoint. We've served them from a debit card processing standpoint and a network standpoint. We do their trading and asset processing. We do their commercial lending. This is all running their systems and software. The place that we haven't historically played is in credit card processing. So now we -- it is a very specific complementary product that's inside the suite of products. So we were already very important and valuable partners to these large financial institutions with a broad suite of products and credit card kind of comes in, lays in. So it's a perfect complementary product for us. And then each customer is a little bit different. So if you think about the total issuing customers, they generally serve the largest credit card issuers in North America. And then they have a very active set of credit card customers they're selling outside the U.S. And I would take those 2 separately. The large financial institution, the top 30, you can think of them as -- you could roll them off your -- probably off the top of your head right now. Each one of them we're talking to very specifically, what are they trying to accomplish? Are they focused on growth? Are they focused on driving a digital economy? Where are they thinking about driving their credit card? Are they trying to put a front end on commercial card capabilities? Are you trying to be an M&A bank? How do you want to grow your M&A? Is credit card a priority? So each one is different. The great news about this business is it's large, it's scaled. It's revenue generating for the bank, which is different for us than typically core banking or trading and processing where we're talking to the back office parts of the bank, which is fantastic. I will tell you, every single one of the banks, and we know them well, has been very happy to see us ultimately -- they view us as the rightful owner versus a global payments, merchant acquiring focused, and we have great relationships. So we'll continue to work with them and figure out how we can help them grow.

And I guess while we're on the topic, I mean, the cross-sell opportunity, it should be very real just based on you already providing debit issuer processing and core. And so just remind us of that potential on the horizon as well.

Yes. I'm going to have James remember what we laid out in our Investor Day in terms of what the white space looks like in cross-sell. But we really didn't play in credit card processing at all. And so we have a very strong debit card processing business in the large financial institution space and historically had a merchant acquiring business. So when TSYS would go, for example, to a large bank and try to sell credit card processing by itself or we showed up and we had the core and the debit, there was always competitors that could be more competitive with us with the bundle. And so we think we're more valuable there. And we also remember, have not just the credit and debit in the core, but also the trading and processing. So we think there's a lot of cross-sell opportunity. The reason why we took the revenue synergies and said we think it will take a couple of years is these are really large financial institutions. I will tell you the low-hanging fruit on revenue synergies, I think, for us is total issuing has a product called Prime, that is very significantly growing in revenue in their book, and it's sold internationally. It's been underpenetrated because they didn't have the amount of salespeople they needed. So we're, in fact, putting -- we've added Prime to our international sales team's books, and then we're adding sales specialists. And we think there's a huge international opportunity because we have -- just have a distribution focused on financial services. I don't know if there's anything you want to add around how to think about the size and scale.

Yes. And I think we're sitting pretty comfortably when you talk about cross-sell, a lot of it will also be cross-sell into TSYS customers of our basic Payments business. And Payments was the highlight of last year when it came to ACV growth on recurring. It went up by the guts of 50%. So we got massive momentum across our Payments business. And just to get back to Prime, it's growing at 15%. The sky is the limit on this. The actual pipeline...

What's the Prime, just explain that.

It's the international credit card processing system. It's the one that's used outside the States, and we're concentrating our entire business on that asset outside the U.S. and us competing strongly in the market.

That's great. That's great. Stephanie, now that Worldpay is no longer part of the company, I mean, does it change your ability to focus on the end market differently? Does it change anything else about the business in terms of investment?

It just -- absolutely. First of all, the -- as we've talked about, the total issuance transaction drives a ton of cash flow. We're able to trade out the Worldpay asset that didn't have cash flow. And we were very focused on driving significant amount of cash flow. But from a strategic standpoint, it makes it so much easier because we are focused on financial services. We know who our client base is. When we're talking about driving product and innovation, it's for financial services. We don't have to split across a combination of corporate customers with merchants and SMBs, and we are focused on financial services. And it just makes it easier. And the dollar that we put into an investment can get pushed -- the product can be pushed across an entire distribution. It's just -- it's a much more simplified and easier portfolio to run than having the multi capabilities.

Okay. James, maybe we talk about guidance for a moment. I mean you came out with pretty strong guidance for the year ahead, both on the top line and margins and free cash for that matter. So maybe just touch on the building blocks there for a moment. If you could remind everybody here what your guide is and your confidence level around it.

Yes, I'll run through them. The total revenue FIS is -- the midpoint is about 5.4%. If you go 2 years back to Investor Day, midpoint was 5 points. So the total ship is performing ahead. And it's led by banking. We guided to 5%, 5.5%, which is well ahead of the Investor Day guide. And the organic growth on the Banking business is accelerating in '26 compared to 2025. So all systems go. Capital Markets, we guided 5.5% to 6.5%. I think the standout in Capital Markets will be faster growth on recurring, and we are deemphasizing nonrecurring because you asked what's the negative in there? The only negative in revenue is a deemphasizing of nonrecurring, and that's a deliberate strategic move to pivot the business even quicker to recurring. You get down to margins. The expectation in the market was 60 bps. At Investor Day, I think we said 60 to 80 midterm. This is a solid 100 bps. Including them the only negative is TSA is a drag of 40 bps. So the core margins are actually up 140 bps. Cost programs, 80 bps, 70% identified going into the year. And then you've got the big change for us and the hyper focus in all of '25, and you'll see the results is improved leverage in operating mix and product mix, that's 60 bps. That's coming out of last year where we sold -- we were exiting with 20% recurring growth. It's not just the 20% recurring growth in ACV. It's the quality of the products we sold, a high concentration in digital payments and lending. And they, on average, have a margin probably 10 basis points -- sorry, 1,000 basis points higher than the company average. So that's driving favorable mix, all coming from the strength in commercial excellence in 2025. And then finally, on cash flow, we're just going to throw off cash flow. It's a 30% increase at the midpoint from $1.6 billion to $2.1 billion. And we were quite explicit that the game doesn't stop there. We will add another $1 billion of cash flow over the following 2 years to get north of $3 billion. So we're really -- we -- I get really excited about the cash one because she gets excited about the customer and product. But like really, we are driving all levers on cash, and we're not -- it's an ambitious goal for 2026 to grow 30%. And it does demonstrate it's growing 3x the level of EPS growth. It's quality growth.

And sitting where we are year-to-date, March, it's almost -- most of the way through the first quarter, you still feel pretty good about everything you laid out?

Yes. We're feeling even more positive, all systems go, no surprises in the first 2 months of the year.

And when we think about the drivers, and Stephanie, maybe just thinking about what's underneath the surface for Banking being the sound and accelerating organically, what are the key aspects of that? What are the key drivers?

Payments, digital, core, -- we drove -- I mean, it's literally straight in line with the strategy. You need to sell and retain high levels of payments inside your existing customer base and new customer base. That's been gone exceptionally well with our existing core business, sell digital to our existing customer base, don't let any other digital come off of our base, have done really well there. Lending as well. Think about account origination, which we just acquired, cross-selling that into the base. So really, really important to think about the size and scale we serve customers up and down the market. It's interesting. I just saw a note that we don't sell -- we don't care about customers below $10 billion. That's completely false. That's not true at all. We've not receded from that marketplace at all. In fact, we had more core wins there in '25 than we had in '24, totally false. But what I would say is if you really think about what -- where we are in the marketplace, the reason why we're so excited, and we highlighted this in our last quarter call, the amount of M&A consolidation that's coming our way, and we put that on the piece of paper, Synovus, Pinnacle, who are picking us because we are the bigger -- we are with the acquirer of the bigger bank and need to come to our platforms, in particular, core and payments because they serve larger financial institutions. If you are a bank that's organically growing, whether you're small or getting medium-sized or large, you ultimately will need to serve commercial banking customers. If you need to serve commercial banking customers, we, by far and away, are the best in the industry. That's where we win. If you're a growing bank organically and inorganically. And so our core is the workhorse of the industry. That's where we win every single time. And you have to also have very sophisticated payments and money movement capabilities and a digital capability, which is Draganfly that we bought in there. So we are serving up and down the stack. We win in the place where you ultimately are growing into a place organically, organic and inorganically. And that is what's driving ultimately our sales wins as well as well as our success into 2026. It's not just about how many cores can we flip.

Right. That makes sense. James, just on margins, I just want to ask, I mean, last year, overall financials were strong, but fourth quarter margins were a little below what we had expected. And so -- despite that, you guided to, like you said, a better-than-expected year on margins when you came into this -- when you reported last quarter. Help us understand the confidence around that margin expansion, 100 basis points now.

It's super high. We got 70% of the cost savings in the income statement in 2026 were programs announced or contracts signed prior to the end of last year. So that's high levels of visibility. And then secondly, on the mix was the second biggest driver, 60 basis points. Most of the ACV, new sales ACV that gets converted comes from '25 or 2024. So it's stuff already done. The conversion of ACV sold in '26 is minor, 10% of the total number. So again, it's the magnitude of the visibility. And then it's a little bit the absence of headwinds as well. So we struggled during the course of 2025. We didn't -- we should have, with the benefit of hindsight, told the market, our guide on margins doesn't include dilutive M&A that we haven't yet done. And we did a bunch of M&A in 2025 that were dilutive to the margins. And at the same time, we were hit by currencies. What happens in '26? There's no new acquisitions. They're all in the guide. So that -- call it, that call it, slippage that we got in '25 won't repeat. The other thing is I've made sure this year, we planned conservatively on currency rates. We will not be coming out quarter-on-quarter saying, oh, we have a problem on currency. We have a plan that's laid out almost every quarter is increasing by a similar amount on margins. All both of the segments will increase margins each quarter. So there's going to be no outliers here. This is a firm with high levels of visibility.

That's great. Stephanie, usually, you guys have been acquisitive for a number of years. You've obviously now done a very large transformative acquisition and divestiture. But when we think about going forward, you're probably going to partner more or organically build more. So just help us understand what areas you want to do that in? Is it more of a partner or organic build mode? And what do you see out there that's on the horizon for the year end?

Yes. So we are absolutely focused on paying down our debt. We've made that commitment, which we should have paid down by the end of 2027. So we have a very clear buy-build partner strategy. So build what is fundamentally we are best-in-class in, for example, core and integrations ultimately, partner where we think there's opportunities where we see people in the ecosystem doing things that we ultimately can't do or have gotten to market faster than we have, potentially buy them. And then buy where we think we can't build it fast enough to be in market. We're in a lot of markets, and we're in big spaces, and we need to make sure that we stay competitive. It's -- since we restarted the strategy post the Worldpay separation, it is very important and strategic for us to be able to do that, and it is working very significantly. When you think about set TSYS aside, which was big and transformative, our success around buying Dragonfly and how many digital sales we've had into our existing base as well as into people's other cores with that has been significant. We bought a commercial lending capability that has gone extremely well for us inside the Capital Markets business and really enhance their ability. Again, all of these go into our global distribution that's already in place. We put them in their bags, and we put them on our platform, drive cost synergies and accrete more revenue and then ultimately bring them up to company margins. It's a little bit of bringing the old school playbook back from kind of fintech of yesteryear. But this is exactly how we think about it. You'll see us continue to place out. It's working very, very well and then come out with our digital account open capabilities. We're also getting some pretty significant talent as we do this and those leaders are kind of taking over leadership roles for us of these very significant products. So it's not just a strategy of buying the product consolidating and then getting rid of the teams. We have the CEOs of these still in the organizations taking on lead roles for us in being product leaders and being strategic leaders for us. So it's not just a buy the product. We're also getting a very significant leadership team for us.

That's helpful. I'm going to ask a couple of more quick ones, and then we'll take 1 or 2 from the audience. But just, James, quickly on free cash flow just because it's been a hot topic for you guys and a big focus also. You're targeting over $3 billion of free cash by '28, a pretty notable move from where we are today. And so just thinking about the step function of getting there, and also the adjustments and making sure, I mean, you guys were -- I thought we appreciated you going more towards a GAAP free cash. I think the market also appreciates that, but help us understand the bridge.

Yes. And it's not a long-term story. So we're going -- our free cash flow last year, GAAP was $1.6 billion, projected this year at $2.1 billion, 30% increase. And then we're going to add another $1 billion over the following 2 years. It's really simple math. There's ongoing capital efficiency. So we'll reduce our capital ratio from maybe 9.3% last year, closer to 8%. These are the minor numbers. The 2 big numbers are EBITDA growth, and you can work these out. And the other one is a significant reduction in transformation costs and integration costs. So currently, in 2026, our estimate is $800 million of onetime transformation and integration, of which thesis integration is $250 million. That $250 million, we won't be spending in '28. The core onetime costs are about $550 million. They will go down a significant amount as well. So if you think about adding $1 billion of cash, roughly half will come from EBITDA net of taxes and the other half will come from a significant reduction in onetime expense. I don't want to say it's in the bag, but it's [indiscernible].

At least there's building block there. Stephanie, end of the year 2026, what would you want to see to call the year a success?

Hit every number every time, deliver everything. I would say really, at the end of 2026, we should have a really good feel for 2 things. One is, again, feeling really good about our revenue synergies around total issuing and seeing some of those really come into the P&L in '26, but most importantly, looking at that run rate in '27. We're focused on that every day, all day. I think the second thing is really getting after data and AI and leaning into what does it look like for us because it's not in any of our models, and we're getting a lot of demand out of our client base for it. So figuring out what those products look like and how they get consumed and can they provide upside as we think about '27 and '28.

Great. Guys, I think we have time for maybe one question if anyone has.

First of all, congratulations on everything. How is your partnership with Circle going? And do you expect that as tokenization starts to evolve for doing experiment to real? Do you expect to add that to your stack?

Circle is -- so we have a product called Money Movement Hub. And Money Movement Hub is actually one of the things we've developed organically that is also selling significantly quickly throughout our entire -- the banking base. Circle is integrated to Money Movement Hub. So whether you want to do real-time payments via ACH or go across, we view Circle as another payment platform effectively. So we've integrated that into the Money Movement Hub, so it's there. TBD on the use cases as people -- so what most banks tell us is we need to have all of these capabilities for our commercial customers. We don't yet see huge amounts of use cases for them. But it's a little bit we have to have it in order to compete, especially if you're a growing bank into the commercial banking customer set, you have to have the full suite. The partnership is going great. We haven't seen a huge amount of demand, like I said. But for us, it's about making sure we have the enablement capabilities. I think the digital tokenized deposits and all of that stuff is a huge amount of topics within financial institutions. And for us, it's about we need to make sure that we have the software and are in place at the time that they want to put it in place. That's why I'm so bullish around what's happening in financial services. I've never had banks talking about so many different things at the same time that all need to be enabled with technology. And so I know, like I said, I started, everyone is worried about AI disruption. I see it as an accelerant. This isn't where banks are really looking to disrupt themselves or bring technology in-house. And then also everyone is obsessed in core land here. Banks are really focused on how to grow their franchise, not about flipping their core.

Guys, I think we're out of time. I want to thank the team from FIS. Stephanie, James, thank you very much for being with us.

Thank you. Thank you.