Fidelity National Information Services Inc (FIS)

• FIS is experiencing strong growth and acceleration in its Banking segment, with confidence in better second-half results driven by successful sales in all three strategic core platforms—Modern Banking Platform, IBS, and Horizon—and increased demand for their best-in-class product suite. - - -
• The company is seeing significant international success, particularly in Capital Markets and Banking, with strong demand for their products in Europe and Asia Pacific, including a major Modern Banking Platform win in the Asia-Pacific region, positioning FIS well for continued growth in these markets. - -
• FIS is raising its full-year EPS guidance and has strong financial confidence, evidenced by solid EBITDA performance and current business results, indicating a positive outlook for future operations. -

• The Dragonfly acquisition is expected to be dilutive to company margins during the initial 12 months, potentially impacting profitability. -
• There was a prior period accounting revision, which, despite being labeled as immaterial by management, might raise concerns about financial reporting controls. -
• Core banking conversions are time-consuming, and with "a lot of work to do," there may be delays in realizing benefits from new core banking clients. -

1. Capital Markets Growth Guidance
   Q: How will Capital Markets growth look in Q4?
   A: We expect to reach the high end of our 6.5% to 7% full-year guidance for Capital Markets growth. - This implies strong recurring and total adjusted revenue growth in Q4, especially since we're lapping a weak prior-year quarter where Capital Markets was up only 1%. - We're very confident about hitting 7% growth for the full year. -

2. CapEx Increase and Impact
   Q: Why is CapEx higher, and what's the outlook?
   A: We're seeing temporary pressure on CapEx due to aggressive price hikes by technology suppliers, with increases of 50%, 60%, even 70%. - This, along with select investments to drive revenue growth, has pushed our CapEx to about 9% of revenue this year. - We expect this pressure to last 12 to 18 months but remain confident that over the longer term, CapEx will return to 7% to 8% of revenue. - Despite this, our cash flow conversion is strong, and we have good visibility on returning capital to shareholders. - -

3. Banking Growth Acceleration
   Q: What's driving the acceleration in Banking growth?
   A: We're confident in Banking, expecting growth to accelerate in Q4 due to easy comps from last year and success in selling our strategic cores: Modern Banking Platform, IBS, and Horizon. - Organic growth is driven by transactions across debit, issuer capabilities, and accounts, typically in the 3% range. - Adding new core sales and accounts is boosting recurring revenue, leading to a better second half compared to the first. -

4. Dragonfly Acquisition Impact
   Q: What's the expected contribution from Dragonfly acquisition?
   A: The Dragonfly deal is closing now, contributing less than $10 million in revenue for Q4. - It's dilutive to margins in the initial 12 months, but we see strong synergy opportunities, especially on revenue. - It's a highly strategic acquisition that will benefit us in the long term. -

5. Margin Outlook and TSA Roll-Off
   Q: How will margins be affected by TSA roll-offs next year?
   A: We're on track with our margin guidance of 40 to 60 basis points expansion. - We expect to be at the lower end due to TSA dis-synergies from Worldpay separation, estimated at 95 bps per year. - However, we're ahead on cost-saving programs, aiming for savings of 165 to 175 bps, which will offset these headwinds. - The transition will be manageable, with no surprises. -

6. Worldpay Performance and Outlook
   Q: How is Worldpay's outperformance affecting growth outlook?
   A: Worldpay is performing better under Charles Drucker and GTCR, with stronger revenue growth than anticipated. - Benefits from slower stand-up of operations and debt refinancing are contributing to outperformance. - We see no reason to adjust the 7.5% to 9.5% growth outlook for future years but will work with our Worldpay partners on the long-term forecast. -

7. Accounting Revision Impact
   Q: Does the prior period accounting revision affect outlook?
   A: The accounting revision is immaterial, impacting EPS by $0.01 in each of the first two quarters. - It was a non-cash adjustment related to a small card production business. - There's no impact on future operations, cash flow, or our confidence in the business. -

8. Tax Rate Guidance and Pillar 2 Impact
   Q: Will international tax changes affect tax rate guidance?
   A: Based on current legislation, we see no risk to our tax rate guidance of 12% to 13% for the next few years. - Our circumstances are well under control, and we have strong visibility. -

9. International Growth and MBP Win
   Q: What's driving international growth and MBP success?
   A: We're seeing strong demand internationally, especially in Capital Markets products like treasury, risk, and processing in Europe and Asia Pacific. - We announced a Modern Banking Platform (MBP) win in Asia Pacific and see robust demand for international payments. - We're optimistic about continued momentum, including potential M&A to enhance our offerings. -

10. Bank M&A Impact
    Q: How does bank M&A affect your business?
    A: The bank M&A market is fairly suppressed, mostly active among smaller banks. - While we win some and lose some in that space, we benefit when larger banks—our clients—acquire smaller ones, as we gain from consolidation over time. - Overall, we're a net beneficiary due to our market position. -

Annual guidance for FY 2024:

• Adjusted EPS: $5.15 to $5.20 - (raised from $5.03 to $5.11 - )
• Adjusted EBITDA: Increased the low end by $10 million - (raised from previously increasing the low end by $15 million - )
• EBITDA margin: Approximately 40.7% - (no prior guidance)
• Capital Markets Segment Revenue Growth: Expected to achieve the high end of 6.5% to 7% - (no change from 6.5% to 7% - )
• Banking Segment Revenue Growth: Anticipated closer to the lower to midpoint of 3% to 3.5% - (no change from 3% to 3.5% - )
• Free Cash Flow Conversion: Approximately 85% - (lowered from 85% to 90% - )
• Capital Expenditures (CapEx): Closer to 9% of revenue - (no prior guidance)
• Worldpay EMI Outlook: $480 million to $495 million - (no prior guidance)
• Tax Rate: 12% to 13% - (no prior guidance)
• Share Repurchases: On track for $4 billion - - (no prior guidance)