Fidelity National Information Services Inc at Morgan Stanley US Financials, Payments & CRE Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: James Foster - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>So maybe just start with a basic progress update. You've spent nearly a year in the seat, and your team and the rest of the management team put together a great Investor Day last month with really pretty clear priorities and targets. Can you remind us the key actions that you and Stephanie have taken within the company so far to really improve the growth profile and margins, kind of what did you do, what was the intention, and then what are the results you're seeing so far?

Question: James Foster - Morgan Stanley - Analyst : 33 minutes.

Question: James Foster - Morgan Stanley - Analyst : Okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 5:00PM, FIS.N - Fidelity National Information Services Inc at Morgan Stanley US Financials, Payments & CRE Conference

Question: James Foster - Morgan Stanley - Analyst : Right. So James, there are a few times you've mentioned operations, you said that the talent maybe spread too thinly across the organization. And so you wanted to get it kind of back into the core operations. But then as you said, a couple of times is focused on running the business, running the business the way it should be done, et cetera. What are some of the things that you felt were probably missing previously that had been improved? Any examples you can give?

Question: James Foster - Morgan Stanley - Analyst : Yes, I think that characterization is interesting because it certainly fits with kind of our -- what has been our thesis around FIS, which -- and that is that a lot of times we engage with investors and there's a lot of conversation about, well, FIS doesn't have the most advanced platforms and so on and so forth, which true, not -- like I think that's easy to dispute. But I think that that customer centricity is actually what matters most, is that a lot of your customers aren't hungry or grasping at, like, the newest and greatest thing. They have other things that matter to them as businesses and where they're focused. And so they don't need and don't want the most advanced thing. They deliver value elsewhere.

Question: James Foster - Morgan Stanley - Analyst : Please do. (multiple speakers)

Question: James Foster - Morgan Stanley - Analyst : Like it. Thanks for that nuance and color because I think that's really important. So let's talk about demand environment. How would you characterize the pipeline and demand strength for FIS solutions right now across both the banking and capital markets? I think the secular growth you've REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 5:00PM, FIS.N - Fidelity National Information Services Inc at Morgan Stanley US Financials, Payments & CRE Conference identified for both is around 3% and 5% respectively. So what's driving the demand in your view, and how can FIS best take advantage of the opportunity set?

Question: James Foster - Morgan Stanley - Analyst : Once again for historical purposes and backward looking, if that was kind of the TAM growth, there was a period that particularly the banking business slipped below that in previous years, and that was a big concern. And I think part of what's happened is that people have gone from hoping that you get back to 3% growth to now increase confidence that that number makes sense on a go-forward basis. But maybe for context, what happened in that period? Was it just simply that the company was, back to what you were saying before, was trying to press too hard in the wrong directions and wasn't quite meeting the market where it needed to be? Or what do you think?

Question: James Foster - Morgan Stanley - Analyst : Got it. And I wanted to make that clear because I think that teasing that out or making sure that investors are clear about that is really important, especially as we go onto the next part of our conversation, which is, okay, so we've kind of identified the market growth, but you're targeting several points of additional growth above market rates for both segments, so which products and services is the team seeing the most traction? And what do you think would be the key incremental drivers of growth? And are there new areas of the market that you're targeting that FIS historically has not addressed?

Question: James Foster - Morgan Stanley - Analyst : Got it. So you've mentioned a couple of times, like, kind of moving more of the revenue, especially revenue growth to more SaaS-type implementations and agreements. And so that leads us to a line of questioning around recurring versus nonrecurring revenue. The banking segment is, I think at last statistic, around 83% recurring and capital markets is around 76%. Where can those rates of recurring revenue mix get to over time and how do you get there? And then in the nonrecurring piece, how much variance should we be prepared for? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 5:00PM, FIS.N - Fidelity National Information Services Inc at Morgan Stanley US Financials, Payments & CRE Conference

Question: James Foster - Morgan Stanley - Analyst : Got it. This is a good time for me to take a quick breath. If anybody has any questions from the audience, please raise your hand and we'll get you a microphone. I'll continue on. You mentioned capital markets cross-sell. You identified -- I think you were quoted as identifying about $300 million in cross-sell opportunity into the capital markets business. How do you expect to realize more of that and which services would FIS be selling? What are you promoting or what's that cross-sell motion look like?

Question: James Foster - Morgan Stanley - Analyst : Got it, got it, got it. And then let's talk about pricing. How has pricing trended historically for FIS? And I guess I'm wondering how much -- you talked about, like, the market, you talked about the inorganic contribution. What about the pricing contribution to the growth algorithm? What does that look like historically versus now? I know at least Stephanie last year made some comments, like, she felt like there's some opportunity there, but give us an update of what's happened. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 5:00PM, FIS.N - Fidelity National Information Services Inc at Morgan Stanley US Financials, Payments & CRE Conference

Question: James Foster - Morgan Stanley - Analyst : Yes. Because I mean, certainly, if you're delivering great solution, the customer, and you're servicing the customer and you're customer centric, that at least the opportunity would seem to be there to at least not have to give so much on the renewals, et cetera, right?

Question: James Foster - Morgan Stanley - Analyst : So I appreciate that. So I want to go back to the thing you promised to circle back on just now, which is impression in the market from your customers, like how are you measuring that? What are you seeing from that perspective? And how should we think about that flowing through the P&L?

Question: James Foster - Morgan Stanley - Analyst : I know. It sounds encouraging. So a few things I want to hit on in the last few minutes here, Worldpay. Obviously you sold the stake in Worldpay, turned over operations and control to private equity, GTCR, there, but it's still an important part of your EPS growth algorithm on a go-forward basis. So where are you staking your confidence in or how are you finding the confidence to guide to kind of that 7.5 to 9.5 earnings growth on the part of Worldpay? I think there's a lot of, and you mentioned it yourself, question about, A, the market, but also just the need for investment and improved operations over on that side.

Question: James Foster - Morgan Stanley - Analyst : Got it. Got it. So let's talk about tax rate. Part of your EPS growth target includes an assumption for a step down in the tax rate going forward. Just can you -- in just a quick moment or so here, can you help us clarify how that's coming about and what the tax optimization efforts look like that are driving it?

Question: James Foster - Morgan Stanley - Analyst : That's what we care about for sure. So speaking of real money, and using that real money, in just the last couple of minutes here, James, we started the conversation talking about capital allocation and some of the things that you've been able to drive and then how some of that, including M&A, factors into your top line. But when you think about the capital return targets that you've set in terms of both buybacks and dividend payouts, how are you thinking about the need to develop and grow product capabilities via M&A and investment versus that commitment for capital return? And really what I care and focus on is should we expect there to be any variance to the expected $1 billion in capital going towards M&A? Or is that a pretty tight target that you think you can deliver on?

Question: James Foster - Morgan Stanley - Analyst : That's great. That's a great way to end it, with a punctuation mark. Thank you very much, James, appreciate you being here today.