Fidelity National Information Services(FIS)2024-11-04 16:26Financial Data and Key Metrics Changes - Adjusted revenue grew 4% in Q3 2024, driven by strong recurring revenue growth [8][23] - Adjusted EBITDA margin reached 41.3%, exceeding expectations with year-over-year margin expansion in both operating segments [9][23] - Adjusted EPS was 530 million with a cash conversion rate of 85% [27] Business Line Data and Key Metrics Changes - Banking revenue growth was 3%, with recurring revenue accelerating to 6% [29] - Capital markets adjusted revenue growth was 7%, led by recurring revenue growth of 6% [31] - Professional services revenue increased by 10% year-over-year, indicating stabilization and acceleration in the second half [30] Market Data and Key Metrics Changes - Strong demand was noted in the community bank space, with more core engagements signed in the first three quarters of 2024 than in all of 2023 [10] - The digital business saw nearly double the new sales year-over-year, indicating robust market momentum [11] Company Strategy and Development Direction - The company is focused on driving shareholder value through strategic partnerships and acquisitions, including the recent acquisition of Dragonfly Technologies [9][12] - Continued emphasis on high-quality recurring sales and cross-sell activities, which increased over 20% year-to-date [8] - The company aims to capitalize on growth vectors across the money lifecycle, including treasury and risk management solutions [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in stable economic trends across banking and capital markets, with no significant concerns for Q4 [43] - The company raised its full-year 2024 revenue and EBITDA outlook based on strong operational performance [32][35] - Management acknowledged challenges with rising technology supplier costs but emphasized that these are manageable within free cash flow conversion [46][47] Other Important Information - The company returned 700 million to shareholders in Q3 2024 through buybacks and dividends [9][26] - The company was recognized as one of the world's best companies by Time Magazine, reaffirming its leadership position [20] Q&A Session Summary Question: Can you help us think through the puts and takes for capital markets growth in Q4? - Management expects capital markets growth to be on the high end of the 6.5% to 7% range due to strong Q3 performance and easier year-over-year comparisons [38][39] Question: Can you comment on the contribution expected from the Dragonfly acquisition? - The contribution is expected to be less than 10 million in Q4, with initial dilution to margins but strong synergy opportunities anticipated [40] Question: What is the visibility going into Q4 regarding recurring and non-recurring revenue? - Management sees stable trends in banking and capital markets, with banks continuing to invest in technology [43][45] Question: Can you provide color on banking growth tracking versus different customer types? - Management is pleased with progress in core and digital banking, particularly with banks above $2 billion in assets [52][54] Question: What are the expectations for banking growth in Q4? - Management confirmed a slight adjustment in banking growth expectations due to accounting revisions and timing of client conversions [58][61] Question: What is the strategy for M&A moving forward? - The focus remains on small tuck-in acquisitions that can enhance growth verticals, with a robust pipeline and fair valuations [67][68] Question: How is the company managing rising capital expenditures? - Management indicated that the increase in capital expenditures is temporary and driven by supplier price increases, but cash conversion remains strong [73][75] Question: What is the outlook for Worldpay's growth? - Management sees no reason to be concerned about the 7.5% to 9.5% growth outlook for Worldpay, with strong performance expected to continue [84]