Fidelity National Information Services Inc Q3 2024 Earnings Call Transcript

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

Question: Ramsey El-Assal - Barclays Capital Inc. - Analyst : Hi, thank you very much for taking my question this morning. Can you help us think through the puts and takes for capital markets growth in Q4 -- the implied expectations in Q4? The year-over-year comparison gets easier. I'm just trying to back into how we get to your applied guide. Thank you.

Question: Ramsey El-Assal - Barclays Capital Inc. - Analyst : Got it. Okay. And one more for me. On the Dragonfly acquisition, can you comment on the contribution you're expecting as we close out of the year here in the fourth quarter from that deal?

Question: Tien-Tsin Huang - J.P. Morgan Securities LLC - Analyst : Hey, thank you. Good morning. Happy Monday. Just wanted to ask on visibility going into the fourth quarter in general. Any changes across recurring, non-recurring in both the segments? And it looks like just higher CapEx investments is really the only change. Any other color on that specifically? Thanks.

Question: Tien-Tsin Huang - J.P. Morgan Securities LLC - Analyst : Great. Very clear. Thank you both for that. Just quickly, what's driving the prior period accounting revision again? And given the new baseline, should we consider any adjustments to the longer-term outlook as well? Thank you.

Question: Dan Dolev - Mizuho Securities USA, LLC - Analyst : Hey, guys. Great results again. Quick question on banking, looks like growth is expected to accelerate organically in the fourth quarter. Can you maybe give us some color on how you're tracking versus different customer types? And we're hearing some chatter that you're doing really well in the down market versus the incumbent? So maybe, Stephanie, if you can elaborate on that, that would be great. Thank you.

Question: Jason Kupferberg - BofA Global Research (US) - Analyst : Good morning, guys. Thanks. I wanted to start on the banking segment. I think you said you expect to be in the lower to middle part of the full-year guidance range. So I know last quarter you had talked about doing at least 5% growth in the fourth quarter for banking. So see maybe if you can clarify if you're down-ticking a little bit there, and just put a finer point on what you do now expect for Q4 in banking and maybe what changed around the margin in the last three months? Thanks.

Question: Jason Kupferberg - BofA Global Research (US) - Analyst : Okay. But it's actually a good segue to my second question. I know at the Investor Day earlier this year, you talked about banking growing 3.5% to 4.5% next year and in 2026, and then 7.5% to 8.5% on cap markets. So just as we start to tune the models for 2025, what should we be considering in terms of factors that maybe land you more at the lower end versus the higher end? Both implied there will be a little bit of acceleration versus 2024. Thank you.

Question: Darrin Peller - Wolfe Research, LLC - Analyst : Hey, thanks, guys. Nice job. Just to quickly touch on M&A for a minute. I think you had talked about doing about $1 billion for the year, and if you didn't get stuff done, you would be focused on returning capital to shareholders. And so with having done a relatively small amount so far, maybe just give us a quick update on thoughts around what you foresee doing maybe in the next couple of quarters that you'd save capital for versus buybacks or if it can be expected to be share repurchase. And then really just remind us the strategy of what you're looking for to add onto the business?

Question: Darrin Peller - Wolfe Research, LLC - Analyst : All right. That's really helpful, Stephanie. Thanks. Guys, just to reiterate again, the acceleration in the recurring banking growth, I know comps were easy, but the trends do sound like there's some strength being seen by the -- on the core side. So can you just remind us sort of rank order the top three drivers that are really giving you confidence in the recurring revenue on the banking side, having accelerated in the second half and probably into the first half a little bit?

Question: John Davis - Raymond James & Associates, Inc. - Analyst : Hey, good morning, guys. Just want to circle back to CapEx. I think you said 9% this year, the medium-term guide is 7% to 8%. So is that more near term? Or how should we think about CapEx on the next couple of years?

Question: John Davis - Raymond James & Associates, Inc. - Analyst : Yeah, that's helpful. Thanks, James. And then, there's been a lot of chatter recently on international tax changes with Pillar Two. You guys are obviously guiding to tax rate will step down next year. Any impact for you guys? Anything to call out with the tax changes?

Question: Vasu Govil - Keefe, Bruyette, & Woods, Inc. - Analyst : Hi. Thank you for taking my questions. Maybe first one for Stephanie. Core signing seemed to be picking up with banks below $10 [million], and that's really great to see. I was just curious what your discussions are looking like with larger banks and if there's a pipeline there and if there's any catalysts on the horizon you would think that could drive more momentum with larger banks?

Question: Vasu Govil - Keefe, Bruyette, & Woods, Inc. - Analyst : Thank you for the color there. And just a quick follow-up on the Worldpay. The equity income there continues to outperform. Just any color on what's driving that outperformance. And then as we look at the base, it is much higher for 2024, but is the 7.5% to 9.5% growth outlook in outer years still the right algorithm for us to think about?

Question: Will Nance - Goldman Sachs & Company, Inc. - Analyst : Hey, thanks for taking the question this morning. Nice job today. Maybe just dovetailing off that last question a little bit. I was wondering if you had any thoughts on just margin cadence next year and particularly as it relates to the TSA with Worldpay. Just how are you thinking about kind of the cadence of that rolling off as well as any associated kind of cost efficiency actions that you might take to offset that? I know you've kind of spoken about feeling good about finding the offsets to that. But is there anything we should be considering from a cadence perspective next year?

Question: Will Nance - Goldman Sachs & Company, Inc. - Analyst : Got it. That's super helpful. And just maybe a little bit more strategically. You had the MBP win in APAC and also the South African sale that you mentioned in the prepared remarks. We've heard some chatter that you guys are just been very active recently and international. So we'd love to hear about kind of where -- what you're most excited about where you're seeing the most momentum across the business in international markets. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2024 / 1:30PM, FIS.N - Q3 2024 Fidelity National Information Services Inc Earnings Call

Question: Timothy Chiodo - UBS Securities LLC - Analyst : Great. Thank you. I want to talk a little bit about bank M&A, both recent, what you've been seeing and also expectations ahead, really in highlighting that mean benefit that you get a lot around the 00 ;basically the acquisition of more accounts on file, more transactions, support your growth with the larger bank customers that you serve. And then it's a minor benefit, literally maybe less impactful you guys, but the term fees that you receive when some of your smaller customers are also acquired. So was hoping you could touch around bank M&A in general and the impact to your P&L.

Question: Dave Koning - Robert W. Baird & Co. Incorporated - Analyst : Yeah. Hey, guys, nice job. Maybe first of all, I know you answered a lot of questions about banking recurring revenue, but one other way to look at it -- sequentially was up $50 million this Q3. The last couple of years was pretty flat sequentially. Was that -- was there macro or pricing or maybe just revenues coming out from new signings? What was so different this year and then into Q4 -- will Q4 be different? Was there anything in Q3 that was a little elevated because of this that comes out in Q4? Or maybe you can just go through the sequentials.

Question: Dave Koning - Robert W. Baird & Co. Incorporated - Analyst : Got you. Thanks for that. And just quick follow-up on interest expense. I think that interest expense Q4 implied is about $100 million. Is that about how to think about the quarters of 2025 as well, just about a $100 million a quarter?

Question: Andrew Schmidt - Citi Investment Research (US) - Analyst : Hey, Stephanie. Hey, James. Thanks for taking my questions. Go back to just the core banking pipeline. Can you just talk about the implementation pipeline for next year? It sounds like that's a better tail on that we've seen in prior years. And then on the sales pipeline, separately, can you talk about -- I know you mentioned expansion in the pipeline, what you're seeing there, whether that supports a higher bookings number for 2025. Thanks so much.