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Fidelity National Information Services Inc (FIS) (Q1 2024) Earnings Call Transcript Highlights: ...

GuruFocus Research
·3-min read

Release Date: May 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Fidelity National Information Services Inc (NYSE:FIS) reported a strong start to 2024, outperforming financial commitments with broad-based outperformance across revenue, adjusted EBITDA, and adjusted EPS.

  • The company has raised its EPS outlook for 2024, reflecting a sustainable lower tax rate and a higher EMI contribution from its Worldpay stake.

  • Fidelity National Information Services Inc (NYSE:FIS) experienced solid new sales momentum, particularly in digital banking, payments, and risk compliance solutions, expecting this trend to continue.

  • The company has increased its share repurchase target for 2024 by $500 million, planning to repurchase a total of $4 billion in shares, demonstrating strong capital return to shareholders.

  • Fidelity National Information Services Inc (NYSE:FIS) has successfully managed cash and tax initiatives, allowing significant financial flexibility and improved full-year EPS outlook.

Negative Points

  • Despite overall positive performance, the company's free cash flow was negatively impacted by temporary factors including delayed tax payments and timing of TSA reimbursements, resulting in a lower free cash flow conversion rate of 18% for the quarter.

  • Professional services revenue within the Banking segment declined by 14%, reflecting a challenging year-over-year comparison.

  • Adjusted EBITDA margin in the Capital Markets segment contracted by 80 basis points during the quarter, primarily due to less favorable revenue mix.

  • The company noted that backlog data will no longer be focused on during earnings presentations, which could reduce transparency regarding future revenue expectations from existing contracts.

  • While Fidelity National Information Services Inc (NYSE:FIS) is confident in achieving its full-year cash conversion target, the first quarter's performance was impacted by several temporary items amounting to $195 million.

Q & A Highlights

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Q: Can you provide an update on FIS's performance in the first quarter of 2024? A: (Stephanie L. Ferris - CEO, President & Director) FIS has had a strong start to 2024, outperforming financial commitments with broad-based outperformance across revenue, adjusted EBITDA, and adjusted EPS. The company is also raising its EPS outlook due to a sustainable lower tax rate and higher EMI contribution from its Worldpay stake.

Q: What are the key drivers behind the adjusted EBITDA margin expansion? A: (James Kehoe - Corporate Executive VP & CFO) The adjusted EBITDA margin expanded by 200 basis points year-over-year, primarily due to cost optimization initiatives that boosted margins, especially in the Banking segment.

Q: How is FIS managing its capital allocation in 2024? A: (Stephanie L. Ferris - CEO, President & Director) FIS is increasing its share repurchase target by $500 million to a total of $4 billion for the year. The company returned $1.6 billion to shareholders in the first quarter, including $1.4 billion through repurchases.

Q: What is the outlook for FIS's revenue and adjusted EBITDA for the full year of 2024? A: (James Kehoe - Corporate Executive VP & CFO) FIS is reiterating its full-year outlook for revenue and adjusted EBITDA, expecting continued strong performance based on first-quarter results. However, the full-year adjusted EPS outlook has been raised by $0.22 to reflect improved tax and interest expense management.

Q: Can you discuss the performance of the Banking and Capital Markets segments in the first quarter? A: (James Kehoe - Corporate Executive VP & CFO) In the Banking segment, adjusted revenue growth accelerated to 2%, with an adjusted EBITDA margin expansion of 350 basis points. The Capital Markets segment saw a 6% adjusted revenue growth, driven by strong recurring revenue growth.

Q: What are the expectations for the second quarter and the remainder of 2024? A: (James Kehoe - Corporate Executive VP & CFO) For the second quarter, FIS projects adjusted revenue growth of 3% to 4%, with Banking Solutions at 2% to 2.5% and Capital Markets at 7% to 8%. The company expects continued favorable trends and is confident in its full-year outlook, including a raised EPS forecast.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.