Fidelity National Information Services Inc at UBS Global Technology and AI Conference Transcript

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

Question: Tim Chiodo - UBS Securities LLC - Analyst : All right. We have a great list of topics that we're going to go through today, just to kind of run down what we're going to try and tackle. We're going to talk a little bit about the Worldpay divestiture one year later and what it's meant to the company in terms of focus on the core business. We'll talk about banking revenue growth. We'll talk about some of the pricing within the banking segment. We'll talk a little bit about the capital markets revenue growth guide and just the broader guidance approach in terms of inclusion of M&A, when it's included, when it's not. We'll talk about the transition services agreement and what that means for margins and timing. And then we'll wrap up the conversation with a little bit around CapEx and free cash flow conversion and a little bit on buybacks. So a lot to get through. Why don't we get started? Worldpay. So finalized that divestiture about a year ago or so, and part of the point was to allow the management team to be more focused on the core banking and capital markets business. And that's part of what's giving you the confidence to guide to a re-acceleration in revenue growth

Question: Tim Chiodo - UBS Securities LLC - Analyst : Excellent. Thank you, James. I think that was a great way to start off the discussion. Let's move to the next topic which is banking revenue growth. I think this is worth just clarifying given we get a lot of investor questions around it, meaning what was the true underlying banking revenue growth in Q3? And as we frame for this discussion, we think there's kind of three buckets. The first is the incremental Worldpay revenue that's disclosed in the 10-Q. The second is any revenue dis-synergy associated with Worldpay. And the third is the fact that we're lapping some of the pandemic relief-related programs. So maybe you could help us bridge down to the true kind of go-forward underlying growth rate.

Question: Tim Chiodo - UBS Securities LLC - Analyst : Excellent. Thank you, James. I think you did a great job clarifying that for investors, and we would agree it's a question we get a lot. Let's move on to pricing within banking. So in the past, you've talked about really a net zero pricing benefit for the banking segment. You've talked about how some of the larger clients when they renew, there's a little bit of pricing pressure there that might offset what otherwise would be some of the CPI-based escalators that maybe some of the other have. Recently, coming out of this last earnings season, you talked about potentially adding back or going after adding that CPI-based escalator clause to some of your contracts. Maybe you could just talk about the portion of revenue that might receive that CPI-based escalator clause within banking.

Question: Tim Chiodo - UBS Securities LLC - Analyst : Great. Thank you. I think there was a great context on pricing across the board, a number of levers there. Why don't we move on to capital markets? So this is a two-part item. One, let's talk about the guide specifically for capital markets. But two, let's talk about the mechanics of the guidance. So first, you guided capital markets to be in the kind of -- up to 8.5% growth in '25 and '26. But that guidance included about 2 points of acquisition benefit at the high end. So 1.5 to 2 points stated at the Investor Day. So with that context, I think it's important just to clarify the guidance approach that you've been giving. And I believe it is that the medium-term guidance includes an assumption of the inorganic contributions. However, any given year's guidance only includes the completed acquisitions. Could you just clarify that for the audience?

Question: Tim Chiodo - UBS Securities LLC - Analyst : Excellent. All right. I'm glad we went over that. Let's move on to the transition services agreement, which has been also an investor topic. So you've guided and provided a great bridge at the Investor Day around the margins, and you talked about this being about a 95 basis points drag to margins as a part of that medium-term guide. Maybe you could just talk about the puts and takes there including the implied cost savings from Future Forward and other initiatives that will help to offset the run-off of the TSA. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 6:35PM, FIS.N - Fidelity National Information Services Inc at UBS Global Technology and AI Conference

Question: Tim Chiodo - UBS Securities LLC - Analyst : Thank you, James. So you just broke down a big part of the margin outlook. Maybe just to round it out, we could talk about some of the other building blocks in the 40 to 60 basis points of annual margin expansion guide?

Question: Tim Chiodo - UBS Securities LLC - Analyst : Okay. Thank you, James. Let's move into CapEx and free cash flow conversion. On the last earnings call, you talked about some elevated pricing from some of your suppliers that was causing CapEx to maybe be more in the 9% of revenue range versus previously, we had been modeling sort of in the 7% to 8% range. And you talked about how this will be mitigated but it could take 12 to 18 months or so. Maybe you just talk a little bit about what was happening there and the free cash flow conversion outlook.

Question: Tim Chiodo - UBS Securities LLC - Analyst : Excellent. Thank you James. So getting back to that 8% level and 90%-plus is within reason. All right. Great. All right. Well, related to this topic -- and we were just talking about this earlier -- but the add back that goes into your adjusted free cash flow metric has been sort of in the 130 million ballpark for the last two quarters. And investors are certainly interested around the direction of that number over time, i.e., the compression of the of closing of the gap between the reported and the adjusted metrics. Could you speak on that?

Question: Tim Chiodo - UBS Securities LLC - Analyst : Well, excellent. You just bought us some time, James, because that was the next question.

Question: Tim Chiodo - UBS Securities LLC - Analyst : No, that's great. We have time to squeeze in one more. Let's just talk about the Worldpay EMI. Maybe you could just talk about what have been the drivers of the upside there this year and how investors should think about that contribution next year.