Q4 2024 Earnings Summary
- FIS is experiencing strong demand in key growth areas such as core banking, digital solutions, commercial lending, and office of the CFO offerings, which is expected to drive revenue growth acceleration starting in Q2 2025. The company has over 80% of new sales for 2025 already signed, providing high visibility into future revenue from these implementations.
- The company is confident in achieving their 2025 guidance, with the banking segment expected to accelerate growth. Strong ACV sales, up 9% in 2024, and implementations of large deals beginning in Q2 are expected to drive this growth. Management feels confident about their line of sight into hitting numbers in 2025 and sees minimal risk of further delays.
- Worldpay's strong performance is contributing positively to FIS's overall results. Worldpay revenue was up 7% in Q4 2024, and Worldpay's EMI contribution is expected to increase by around 7.5% over 2024, indicating that this business segment is doing very well and adding to FIS's growth prospects.
- Delays in Deal Implementations Could Impact Revenue Growth Targets: FIS's 2025 banking guidance relies on the timely implementation of backlogged deals. Any further delays, particularly due to regulatory approvals for large acquisitions, could affect the expected 100 basis points of growth and hinder revenue acceleration. ( )
- Operational Inefficiencies Affecting Cash Flow Conversion: The company admitted that free cash flow conversion came in at 77%, below the target of 85%, due to weaknesses in net working capital management, such as paying suppliers too quickly and issues with receivables collection. These operational inefficiencies may continue to impact financial performance if not addressed promptly. ( )
- Reliance on Significant Acceleration in Banking Revenue Growth May Be Optimistic: FIS expects banking revenue growth to accelerate sharply after a soft first quarter, counting on delayed contracts and new sales. Given potential nonrecurring headwinds and the necessity for precise execution, there is a risk that the projected growth may not fully materialize. ( )
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2024 | Low end of the full-year revenue range increased by $20M | no current guidance | no current guidance |
Adjusted EBITDA | FY 2024 | Low end of range raised; full-year margin ~40.7% | no current guidance | no current guidance |
Adjusted EPS | FY 2024 | $5.15 to $5.20 | no current guidance | no current guidance |
Free Cash Flow | FY 2024 | ~85% | no current guidance | no current guidance |
Capital Expenditures | FY 2024 | 9% of revenue | no current guidance | no current guidance |
Banking revenue growth | FY 2024 | Expected near lower-to-midpoint of guidance | no current guidance | no current guidance |
Capital Markets revenue | FY 2024 | High end of 6.5% to 7% | no current guidance | no current guidance |
Interest expense | FY 2024 | Q4 implied ~$100M | no current guidance | no current guidance |
Worldpay EMI | FY 2024 | $480M to $495M | no current guidance | no current guidance |
Leverage ratio | FY 2024 | 2.6x | no current guidance | no current guidance |
Revenue growth | FY 2025 | no prior guidance | 4.6% to 5.2% | no prior guidance |
Banking revenue growth | FY 2025 | no prior guidance | 3.7% to 4.4% | no prior guidance |
Capital Markets revenue | FY 2025 | no prior guidance | 6.5% to 7% | no prior guidance |
Full-year margin expansion | FY 2025 | no prior guidance | 40 to 45 basis points | no prior guidance |
Banking EBITDA margin | FY 2025 | no prior guidance | Expected to expand | no prior guidance |
Capital Markets EBITDA margin | FY 2025 | no prior guidance | Expected to expand | no prior guidance |
Adjusted EPS growth | FY 2025 | no prior guidance | 9% to 11% | no prior guidance |
Free cash flow conversion | FY 2025 | no prior guidance | 82% to 85% | no prior guidance |
Share repurchase | FY 2025 | no prior guidance | $1.2B | no prior guidance |
Capital allocated for M&A | FY 2025 | no prior guidance | $1B | no prior guidance |
Dividend increase | FY 2025 | no prior guidance | 11% | no prior guidance |
Worldpay EMI contribution | FY 2025 | no prior guidance | $550M | no prior guidance |
Interest expense | FY 2025 | no prior guidance | $120M to $370M | no prior guidance |
Effective tax rate | FY 2025 | no prior guidance | 12% to 12.5% | no prior guidance |
Diluted shares outstanding | FY 2025 | no prior guidance | Expected to decline by 5% | no prior guidance |
Currency headwind | FY 2025 | no prior guidance | $50M | no prior guidance |
Wind-down | FY 2025 | no prior guidance | Reduce reported revenue by $100M | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Capital Markets Revenue Growth | Q4 2024 | 6.5% to 7% growth | 8.9% year-over-year increase from 754Million in Q4 2023 to 821Million in Q4 2024 | Beat |
Interest Expense | Q4 2024 | ~$100 million | $67 million | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Banking segment growth & core implementations | • Q1–Q3 saw consistent focus on banking growth (2% in Q1, 3% in Q2, 6% recurring revenue in Q3) along with record core signings and backlog conversions. | • Delayed deals from Q4 2024 & Q1 2025 are set to ramp in Q2 2025, with targeted full-year Banking growth of 3.7% to 4.4%. The company remains confident in its core implementations. | Recurring emphasis on this topic across all quarters. |
Deal implementation timelines & potential delays | • Q2 highlighted a robust pipeline and the need for faster implementations, with no major red flags. Q3 reiterated long lead times for core conversions, typically avoided in Q4–Q1 due to freeze windows. | • Delays in Q4 2024 shifted over a point of growth from Q1 to Q2 2025, though confidence remains high in execution. One delayed deal has already started, another is closing soon. | Recurring mentions, acknowledging client-driven and M&A-related delays. |
Margin expansion, cost savings, & operational efficiencies | • Q1–Q3 consistently emphasized cost optimization and annual margin expansions of 40–60 bps, aided by Future Forward initiatives. | • 88 bps of margin expansion in Banking for 2024 and a projected 40–45 bps expansion in 2025. Continued focus on cost discipline and synergy offsets remain central to profitability. | Ongoing strategic priority and positive margin traction. |
Worldpay performance | • Q2 showed mild concerns but reported 3% revenue growth; Q3 turned more optimistic, citing better revenue and operational improvements. | • Q4 highlighted 7% growth from Worldpay, marking a strong rebound. Some expected headwinds in 2025 from standing up the full organization but overall improved sentiment. | Sentiment improved from concerns in Q2 to strong results in Q4. |
Free cash flow conversion challenges | • Q1’s FCF conversion was 18%, dampened by tax and TSA timing. Q2 noted timing issues with bonus and interest outflows. Q3 didn’t focus heavily on FCF challenges. | • Q4 ended at 77% vs. 85% target, citing early supplier payments and late collections. Plans to extend payment terms and enhance collections to hit 82–85% in 2025. | Recurring challenge, explicitly highlighted in Q1 and Q4. |
Dragonfly acquisition | • Q2 made no reference. Q3 mentioned it as a small digital acquisition, expected to be margin-dilutive initially but strategically important. | • In Q4, it contributed 60 bps of revenue growth and aided digital solutions momentum into 2025. | Still referenced in Q4 (not discontinued). |
Prior-period accounting revision | • Discussed briefly in Q3 as an immaterial EPS impact of $0.01 each in Q1 and Q2. | • No mention in Q4. | No longer referenced this quarter. |
Future Forward initiatives | • Q1–Q2 emphasized cost savings and operational improvements under Future Forward. Q3 had fewer direct mentions; they focused on broader cost programs. | • Q4 still referenced Future Forward in the context of 2025 margin expansion (40–45 bps). | Ongoing but less frequently mentioned, still a driver of cost discipline. |
Commercial lending, office of the CFO, & net working capital inefficiencies | • No mentions in Q1–Q3 about these items specifically [n/a]. | • Q4 introduced strong commercial lending demand (double-digit growth), office of the CFO as a $25B+ market, and inefficiencies in net working capital prompting supplier-payment term extensions. | New topics emerging in Q4. |
2025 guidance, backlog impact, & new sales signings | • Q1–Q3 generally deferred specific 2025 outlook, though they reaffirmed mid-term targets (e.g., 3.5–4.5% for Banking). | • Q4 stressed over 80% of 2025 new sales are already signed and a large banking backlog under implementation. Full-year 2025 revenue growth expected at 4.6%–5.2%. | Accelerated mentions in Q4, showing high confidence in 2025 growth. |
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Banking Revenue Growth Acceleration
Q: What are the banking revenue growth expectations for 2025?
A: Management expects banking revenue growth to accelerate to 3.7% to 4.4% in 2025, with Q1 being the low point at 2.5% to 3.5% due to contract delays impacting about 100 basis points. They anticipate a sharp increase in Q2, aligning with full-year growth, driven by implementations of delayed contracts and strong sales execution, with over 80% of new sales already signed. -
Free Cash Flow Improvement
Q: How will you improve free cash flow conversion by 2026?
A: The free cash flow conversion was 77%, below the 85% target, due to aggressive supplier terms and working capital inefficiencies. Management plans to enhance cash flow by extending supplier payment terms, improving collections, and reducing capital expenditures from 9% to the long-term goal of 8% of revenue. They have clear line of sight to reaching 90% free cash flow conversion by 2026. -
ACV Sales Growth Outlook
Q: Will ACV sales growth exceed 9% in 2025?
A: Yes, management expects ACV sales growth to be more than 9% in 2025, building on record core wins in 2024. They are focusing on high-growth areas like digital, payments, and lending, and have increased their salesforce to drive further growth. -
Confidence in Deal Implementations
Q: Are you confident delayed deals will implement as expected?
A: Management is very confident that the delayed deals, impacting about 100 basis points of growth, will be implemented on schedule in 2025. One implementation is already underway, and while minor timing shifts are possible, they have high visibility and believe these will contribute to growth starting in Q2. -
Banking Margin Outlook
Q: What is the outlook for banking margins in 2025?
A: Management expects banking margins to expand in 2025, maintaining strong cost discipline and focus on cost programs. The unfavorable product mix in Q4 was due to a reversal of a termination fee, which impacted revenue and profit. They continue to manage Worldpay dis-synergies and are focused on both top-line and bottom-line growth. -
Strategic Portfolio Positioning
Q: How do you view your current portfolio and strategy?
A: FIS is pleased with its portfolio, focusing on core business wins in trading, processing, and core banking growth. They invest organically and inorganically in high-growth areas such as digital payments, lending, treasury, and risk. They uniquely position themselves by serving large corporates and financial institutions, leveraging scale and global distribution, rather than being an SMB payments company. -
Capital Markets Performance
Q: What are capital markets growth expectations for 2025?
A: The capital markets business is projected to grow consistently at 7%, with acquisitions contributing about 140 basis points to growth, similar to 2024. The slight variance from Investor Day targets is due to a higher base year and timing of license revenues, but the business remains strong with predictable revenue and industry-leading margins. -
Share Buyback Plans
Q: Why is the share buyback set at $1.2 billion?
A: The $1.2 billion share buyback aligns with previous guidance, scaling up by about $400 million to account for the underspend in 2024. Management believes this amount effectively returns prior underspend to shareholders and is consistent with their capital allocation strategy.