Copyright fool
Wednesday, Nov. 5, 2025, at 8:30 a.m. ET CALL PARTICIPANTS Chief Executive Officer — Stephanie FerrisChief Financial Officer — James KehoeOperator Need a quote from a Motley Fool analyst? Email [email protected] Adjusted Revenue Growth -- Adjusted revenue grew 6.3%, driven by recurring revenue strength and segment outperformance, reaching $2.7 billion.Adjusted EBITDA Margin -- 41.8% adjusted EBITDA margin with a sequential improvement of approximately 200 basis points, supported by cost-saving programs in both Banking and Capital Markets segments.Adjusted EPS -- $1.51 adjusted EPS, representing an 8% year-over-year increase, led by operating growth.Free Cash Flow -- $800 million free cash flow, with adjusted free cash flow at approximately $930 million; cash conversion rate exceeded 140% for the quarter.Shareholder Returns -- $509 million returned via share repurchases and dividends; full-year share repurchase target raised to $1.3 billion.Recurring Revenue ACV Growth -- Recurring annual contract value has compounded at 11% annually since 2023, and sales pipeline annual contract value has expanded 13% annually since 2023, showing pipeline strength.Renewal Retention -- Steady improvement of approximately 3% in 2024 and 2025, supporting banking growth.Segment Results – Banking -- Revenue rose 6.2% (including a 150 bps M&A contribution), exceeding guidance (non-GAAP), with strong recurring transaction growth.Segment Results – Capital Markets -- 7.6% recurring revenue growth; nonrecurring revenue rose 12.6%.Pricing Environment -- Net pricing is expected to be positive in both segments for 2025.AI and Data Scale -- AI adoption among bank clients has accelerated; FIS's data assets span over 200 petabytes, powering more than 20 products per client, with the upcoming Credit Issuer Solutions acquisition adding nearly one billion accounts.Commercial Digital Sales -- Sales in commercial digital solutions nearly tripled year to date, with win rates for Dragonfly increasing by 13 points year to date.Payments Momentum -- Payment sales experienced 50% recurring sales growth and a 5% win rate improvement year to date.M&A Highlights -- The Amount acquisition is expected to deliver about 20 basis points of banking growth to the full-year 2025 outlook; Credit Issuer Solutions acquisition expected to close in 2026, add $500 million free cash flow in 2026, and $700 million in free cash flow post-integration.Outlook Raised -- Full-year 2025 adjusted revenue growth guidance increased to 5.4%-5.7%, banking outlook raised to 4.9%-5.3%, and double-digit adjusted EPS growth of 10%-11% reiterated for the full year.Operating Leverage -- Leverage remains steady at three times net debt to EBITDA (or 2.9 times excluding currency effects); capital expenditures were 7.9% of revenue.Capital Markets Nonrecurring and Professional Services -- Professional services declined 5.6% in the segment due to engagement timing.Cost Optimization Impact -- Margin and cash conversion improvements attributed to cost optimization and working capital discipline, including accelerated accounts receivable actions.AI and Product Innovation -- Strategic use of AI in sales, client support, risk management, and product development is driving both revenue and operational efficiency gains. Fidelity National Information Services (FIS +2.49%) management raised full-year 2025 guidance for revenue, adjusted EBITDA, and cash conversion after a quarter of outperformance across all core metrics. They attributed the recurring revenue acceleration and expanded margins to a combination of high retention rates, positive net pricing, and growth in digital, payments, and modernization initiatives. Executives confirmed that the Amount acquisition is immediately contributing to higher growth and long-term cash flow, while the Credit Issuer Solutions acquisition is expected to close in 2026 and drive future growth and cash flow. The operating environment in banking and capital markets remains robust and supports ongoing strategic investment in AI and modernization. The company’s disciplined capital allocation enabled a substantial increase in share repurchase targets, with the full-year target raised to $2.1 billion, and reinforced confidence in margin expansion and cash conversion objectives for fiscal 2025 (ending Dec. 31, 2025) and 2026. Management stated, "We're raising our full-year outlook for revenue, EBITDA, and cash conversion" for fiscal 2025 on a non-GAAP basis, highlighting confidence in sustained future growth.James Kehoe explained, "On a year-to-date basis, cash conversion was 91%, and we now expect full-year cash conversion of more than 85% for fiscal 2025," pointing to improved efficiency and working capital discipline.Stephanie Ferris detailed, "Commercial digital solutions have nearly tripled, with our win rates improving by 13 points with Dragonfly year to date," indicating sales execution is materially improving competitiveness.The company confirmed that M&A effects, specifically from smaller acquisitions in 2024 and 2025, will be margin-accretive in 2026, and that the sizable Credit Issuer Solutions deal will materially expand platform scale and free cash flow.Client adoption of Fidelity National Information Services’s AI-enabled products and services is accelerating. INDUSTRY GLOSSARY Adjusted Revenue: Total revenue excluding certain non-recurring or non-operational items, often used to better reflect ongoing business performance for technology services firms.Annual Contract Value (ACV): The annualized value of total contracted recurring revenue within a given period, used as a leading indicator of future revenue growth.Cash Conversion: The ratio of free cash flow to adjusted net earnings, indicating how effectively earnings are turning into actual cash.Money Movement Hub: Fidelity National Information Services’s core-agnostic, real-time payments platform designed to facilitate payments across various networks and currencies.NICE Network: Fidelity National Information Services’s proprietary debit payments network referenced as a high-growth contributor in the payments segment.Dragonfly: Fidelity National Information Services’s commercial online banking platform specifically identified as displacing competitors and improving win rates.EBITDA Margin: Earnings before interest, taxes, depreciation, and amortization expressed as a percentage of revenue; a key profitability measure for recurring-revenue businesses.TSA (Transition Services Agreement): Agreement outlining temporary services provided post-divestiture, such as the impact of Worldpay separation on margins. Full Conference Call Transcript Stephanie will lead the call with a strategic and operational update, followed by James, who will review our financial results. Turning to slide three. Today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Please refer to the safe harbor language. Also, throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA, adjusted net earnings, adjusted net earnings per share, and adjusted free cash flow. These are important financial performance measures for the company but are not financial measures as defined by GAAP. Reconciliation of our non-GAAP information to the GAAP financial information is presented in our earnings release. And with that, I'll turn the call over to Stephanie. Stephanie Ferris: Thank you, George, and good morning, everyone. I'm very pleased to report we delivered strong third quarter results that exceeded expectations across our key operating metrics. Our performance demonstrates real momentum across the business, with adjusted revenue growth of 6.3%, adjusted EBITDA margins of 41.8%, and adjusted EPS of $1.51, up 8% year over year. These are great proof points that our future forward strategy is working by leveraging our strong foundation, executing to deliver profitable growth, and allocating capital with discipline. Let me walk you through what's driving our strong performance. This quarter's 6.4% recurring growth demonstrates the success of our commercial excellence initiatives. We achieved sequential margin improvement of approximately 200 basis points driven by strong segment profitability across both banking and capital markets. Adjusted free cash flow conversion was 142%, enabling us to increase our share repurchase target to $1.3 billion for the year. These results demonstrate the strength of our execution and validate the strategic investments we've been making to position Fidelity National Information Services as a technology company at the forefront of financial services innovation. During the quarter, we returned $509 million to shareholders across share repurchases and dividends. Most importantly, we're entering the fourth quarter well-positioned to achieve our full-year 2025 financial goals and move into 2026 with real momentum. Based on our performance and visibility, we're raising our full-year outlook for revenue, EBITDA, and cash conversion. Turning to slide six. Now let me talk about what we're seeing in the marketplace. Bank technology spending remains strong, and our clients are prioritizing spend across our high-growth verticals: digital solutions, payments innovation, and lending modernization. We anticipated that AI would transform financial services, but the pace and depth of adoption have exceeded our expectations. In fact, industry surveys indicate that more than three out of four banks have actively launched or are piloting GenAI and AgenTex solutions, a marked increase from just a year ago. Our clients are leaning in and asking us to help shape their AI journeys, viewing us as a strategic partner. Data powers the algorithms that underpin AI, and for this reason, Fidelity National Information Services holds a foundational advantage with over 200 petabytes of data powering on average 20 plus products per client across the money lifecycle. This advantage will grow significantly post-acquisition of the Credit Issuer Solutions business, adding almost a billion additional accounts to our platform. As the operating environment for banks continues to improve, they are investing with confidence. Consumer spending patterns support this optimism. Debit and credit card spending remains resilient year to date, and we're seeing strong account growth across our bank clients. Year to date, Fidelity National Information Services core accounts are up mid-single digits as our clients continue to grow. We are also seeing an acceleration in bank M&A across the market. The third quarter had the highest level of quarterly bank consolidation in four years, driven by a more favorable regulatory backdrop. We expect industry consolidation to continue to be a long-term tailwind for Fidelity National Information Services. We're the vendor of choice for financial institutions, positioning us to benefit as the industry consolidates and acquirers seek scalable, enterprise-grade technology partners. The acquisition of Credit Issuer Solutions, which we now expect to close in 2026, will further strengthen our offerings, providing us with scaled credit processing capabilities. Finally, let me address pricing directly. The pricing environment remains stable. Net pricing has been a tailwind for us year to date, across both banking and capital markets, supported by continuous product feature and functionality enhancements that strengthen our value proposition with clients. We operate in a rational market, and we're confident in our ability to continue to price for value. Let's turn to slide seven. Our strong execution and laser focus on helping our bank clients is translating into high-quality sales performance across our business. Our sales pipeline annual contract value, or ACV, has expanded 13% annually since 2023, and we're deploying AI early in the marketing to sales cycle for lead generation, making our go-to-market motion smarter and more efficient. Renewal retention has also shown steady improvement of approximately 3% in 2024 and 2025. This is a key driver of the accelerating banking growth we are delivering. Net pricing has contributed 60 basis points of growth on average over the last two years as we continue to price for value. And in 2025, both segments will have a positive pricing contribution for the year. Recurring ACV, the fuel for future revenue growth, has compounded annually at 11%, with particular strength in verticals such as payments. Our network solutions and money movement hub are driving outsized sales growth. Our strategic investments are paying off. Taken together, all these improvements across our sales engine are fueling the durable, recurring revenue growth acceleration we're seeing across our business. Now turning to slide eight. We are translating this market momentum into sustained growth in our banking segment, which remains the cornerstone of our business. At Investor Day, we outlined three strategic priorities to drive sustainable, accelerating growth: operational excellence, core and digital, and payments. On operational excellence, we're maintaining our relentless focus on client experience and sales execution. Happy clients renew, expand, and advocate. And the numbers I just shared on retention prove we're getting this right. We're achieving this through our investments in AI, which are fundamentally transforming how we operate and improve everything from client support to risk management to product development. Modernizing our solutions to help our clients run, grow, and protect their businesses more effectively. We're helping clients run their business through intelligent automation, predictive insights, and operational efficiencies of the back office that reduce costs and improve service delivery. Helping them grow through AI-powered personalization and intelligent decisioning that drives revenue and deepens customer relationships. And we're helping clients protect their business through advanced fraud detection, real-time risk scoring, and behavioral analytics that stop threats before they impact customers. Let me next update you on the progress we're making in two of our key high-growth vectors, digital, and payments. Beginning with digital on slide nine. Our digital business is performing very well, with growing traction across both our retail and commercial offerings. The US TAM for digital solutions is $10 billion, growing at approximately 12% annually through 2028. Banks are spending aggressively on digital capabilities, and open banking adoption is accelerating. We're capitalizing on this by embedding AI-powered capabilities such as predictive insights and hyper-personalized recommendations into our Digital One platform to deliver a more seamless, intelligent digital banking experience. Clients are also prioritizing solutions with seamless integration and robust API connectivity, which are core strengths of our platforms. We've seen over 30% growth in users across our digital platforms, and we see this as a growth engine for our banking segment for years to come. We also had significant competitive takeaways this quarter. SMBC, Manubank, a U.S. Subsidiary of Sumitomo Mitsui Bank Corporation, selected our commercial online banking offering, Dragonfly, to help the bank better service enterprise customers. This win displaces a monoline digital competitor and underlines the rationale behind our targeted M&A strategy. As year to date, our sales in commercial digital solutions have nearly tripled, with our win rates improving by 13 points with Dragonfly. During the quarter, we completed the acquisition of Amount, an AI-powered platform providing seamless, unified digital account opening capabilities. This acquisition is a perfect example of how we are using AI to help clients grow their business. Amount's platform fundamentally changes how banks acquire and onboard customers while helping to grow revenue and reduce friction and risk. And we've hit the ground running, signing seven new deals since closing the acquisition and expanding our relationship with a top 10 U.S. Bank. Now let's turn to slide 10. Payments is the other major growth driver, and the momentum here is equally compelling. We're operating in a $53 billion market growing at 5% annually. Card issuing debit transactions remain robust at 6%, providing a steady foundation. But the real market acceleration is in instant payments and digital currency, which represent the future of money movement and areas where Fidelity National Information Services is strategically investing. The complexity of this growing market is creating new opportunities for Fidelity National Information Services as banks increasingly rely on us to help them navigate the changing landscape. And we're seeing this in our sales performance. Our payment sales have been outstanding, with 50% recurring sales growth year to date and a 5% improvement in win rates. In addition to traditional debit and credit offerings, we are leading the way in alternative payments with modernized cloud-native solutions like our money movement hub, which is our core agnostic, real-time payment gateway for our clients. Launched just a quarter ago, we're already seeing strong traction with over 40 new clients signed. Additionally, the NICE network has been a particularly bright spot, with sales more than doubling and a pipeline growth of three times versus last year. Here again, AI is a critical differentiator. Fraud is one of the biggest threats facing financial institutions today. We're using machine learning and behavioral analytics to detect and prevent fraud in real-time across billions of payment transactions daily. We also continue to expand our capabilities and geographic presence. We recently acquired EverLink to strengthen our payments offering in Canada, and the credit issuer acquisition will add scale in both US and international credit processing and significantly higher cash flow when we close that deal in the first quarter. In closing, let me bring this all together. Fidelity National Information Services delivered a very strong quarter that exceeded expectations. We're seeing favorable market conditions, and we're executing on our strategy as a technology company at the forefront of financial services innovation. This isn't a one-quarter story. We're building sustainable, profitable growth on a foundation of operational excellence, product leadership, and client partnership. We're confident in our trajectory and are raising our full-year outlook. With that, I'll turn it over to James to walk through the financial details. James Kehoe: Thank you, Stephanie, and good morning. I'll begin on slide 12 with a summary of our financial results. We had a great quarter, exceeding our outlook on revenue, EBITDA, and EPS. Revenue grew 6.3% to $2.7 billion driven by outperformance from our banking business and strong recurring revenue growth across both segments. Adjusted EBITDA grew 7.1% with margins expanding by more than 50 basis points. Margins were up nicely in both segments, led by strong execution across our cost-saving programs. Adjusted EPS increased 7.9% to $1.51, led by strong operating growth. Turning now to free cash flow. Moving forward, we will report on both adjusted and unadjusted cash flow measures, and I'm happy to report that both are performing well. As we've messaged on prior calls, we are running extensive cash optimization programs, and we drove significant improvements in the third quarter. Free cash flow was $800 million in the quarter, and more than doubled year over year. Adjusted free cash flow was approximately $930 million with cash conversion coming in at more than 140%. While we anticipated a cash conversion of over 100%, the outperformance was driven by accelerated working capital actions, with particularly strong results from our accounts receivable initiatives. Capital expenditures were 7.9% of revenue, in line with our expectations. On a year-to-date basis, cash conversion was 91%, and we now expect full-year cash conversion of more than 85%. And we are well-positioned to deliver on our 2026 Investor Day goal of 90%. Leverage remains steady at three times, or 2.9 times excluding the impact of currency fluctuations. We returned over $500 million to shareholders, including $300 million of share repurchases, and we recently increased our annual target for share repurchases from $1.2 to $1.3 billion. In summary, we outperformed across all key metrics. Strong execution is driving high-quality growth, and this gives us great confidence as we look forward to 2026. Turning now to our segment performance, on slide 13. Adjusted revenue and recurring revenue both grew 6%, with strong recurring revenue growth from both segments. Banking exceeded our expectations in the quarter. Revenue growth of 6.2% was well above the high end of our range, reflecting strong core growth and an M&A contribution of 150 basis points. The performance was led by recurring revenue growth of 6%, with strong transaction growth across our payments business in addition to strength in digital banking. Non-recurring revenue increased 8% mostly due to card personalization and deconversion fee timing. Professional services accelerated to 6% growth and net pricing was positive in the quarter and on a year-to-date basis. Banking EBITDA margin expanded by 68 basis points primarily due to a rising contribution from cost-saving programs. We expect these positive trends to continue into the fourth quarter and drive even stronger margin expansion. Turning now to capital markets. Adjusted revenue growth of 6.4% came in close to the high end of our expectations, 130 basis points consistent with prior quarters. Recurring revenue grew 7.6% as we saw a rebound of lending activity and stronger momentum in our treasury and risk businesses. Nonrecurring revenue increased 12.6% reflecting strength in license sales. Lastly, professional services declined 5.6%, due to the timing of some engagements. Capital Markets EBITDA margin expanded 60 basis points reflecting higher cost savings, accelerating growth in high-margin recurring revenue, and higher license sales. As with banking, we expect segment margins to expand in the fourth quarter. Moving now to slide 14, year-to-date results are strong, with both adjusted revenue and recurring revenue growing over 5%. Banking growth of 4.8% is in line with our increased outlook, and we are confident in delivering a strong fourth quarter. It's a similar story in capital markets, with year-to-date growth of 6.6% aligned to our full-year outlook. Overall, we delivered good results across both segments, and we are executing well on the second half revenue acceleration and margin expansion that we guided to earlier in the year. Turning now to our increased full-year outlook on slide 15. We are raising our outlook for revenue and adjusted EBITDA to reflect the stronger operating results and the recently closed Amount acquisition. We are raising our revenue by $65 million at the midpoint, resulting in an adjusted revenue growth of 5.4 to 5.7%, well ahead of our Investor Day outlook. For banking, we are increasing our revenue growth range from 4 to 4.5% to 4.9 to 5.3%, an increase of almost 1%. The recently closed Amount acquisition is expected to contribute around 20 basis points of additional growth, with stronger operating performance driving the remaining 65 basis point increase. For capital markets, we are updating our outlook to approximately 6.5% to better align with the performance we have seen year to date and reflecting a tough comparison in the fourth quarter. We are raising our full-year EBITDA outlook to reflect our third-quarter performance, and we are updating our margin outlook to include the impact of M&A. Importantly, we are confident in delivering margin expansion across both segments in the fourth quarter. Lastly, we are tightening our EPS range by $0.02 and reiterating double-digit growth of 10 to 11%. Consistent with prior quarters, we have provided updated modeling assumptions in the appendix. Before closing, I wanted to reiterate some points related to the coming year. While tuck-in M&A tends to weigh on margins in the short term, the M&A deals signed in 2024 and 2025 will be accretive to Fidelity National Information Services margins in 2026, with further margin benefits in the out years. Because of this, and combined with the underlying margin profile of the business, we are confident in delivering margin expansion of greater than 60 basis points in 2026. As you can see, we are driving improved cash conversion, going from 77% in 2024 to over 85% in 2025, and we are on track to deliver 90% conversion in 2026 as our cash optimization initiatives continue to bear fruit. Overall, we are seeing positive revenue trends across the business, and we have good momentum as we exit the year. Lastly, we're excited the credit issuing acquisition is expected to close in 2026, and continue to expect the transaction to be accretive in the first year and add $500 million of free cash flow in 2026, rising to $700 million post-integration. I'll conclude on slide 16. In summary, our third-quarter results were ahead of expectations, driven by strong recurring revenue and margin expansion from both segments, and we are increasing our revenue and EBITDA outlook for the year for the second time. Free cash flow was exceptional in the quarter, and we are increasing our 2025 cash conversion target to over 85%. We returned over $500 million to our shareholders, and we've increased our full-year target to $2.1 billion. With that, operator, could you please open the line for questions? Operator: Thank you. Star one on your telephone, and wait for your name to be announced. To withdraw your question, press 11 again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. And our first question will come from the line of Jason Kupferberg with Wells Fargo. Your line is open. Jason Kupferberg: Good morning, guys. Nice to see these numbers. Your commentary clearly on the health of the end markets for banking sounds quite positive across the sub-segments, both from a demand and pricing perspective. Definitely. So I'm wondering if that translates to a more bullish view on how fast you can grow the banking segment structurally over the couple of years. I think at the Analyst Day, we talked about approximately, call it, 3% organic growth for banking as a medium-term target, but clearly, you're performing above that level currently. Stephanie Ferris: Yeah. Thanks, Jason. Yeah. We are feeling very good about technology spend in banking as I talked about. Banks are spending money on technology in the places that are important to them, and we've been very focused on ensuring that our product sets and solutions are in those right places like digital, for example, like payments, like bank modernization. You're exactly right. We are exactly on or actually ahead in our banking business from an organic basis and with M&A, in 2025. It gives us a lot of confidence as we go into 2026 around the banking business. Not sure I'm ready yet to call a higher midterm guidance on banking, it certainly gives us a lot of confidence as we go into 2026 in terms of the step change we've seen in revenue and banking. And, you know, that's multiple things happening at the same time. The end markets are very strong. We're the beneficiaries of large-scale M&A. But most importantly, around commercial excellence. And we gave some of the stats here of how important and how successful that's been, as we really have changed our Salesforce, not only in terms of the leader, but also how we're focusing and where we're focusing there. In terms of recurring, highly profitable, revenue, which is driving both our banking revenue growth as well as helping us change the mix on our margin. So overall, feeling really good about 2026, but I'm not yet ready to call higher midterm guidance there. Jason Kupferberg: Okay. Well, fair enough. But let me ask a follow-up on 2026 specifically. You touched on margins going up over 60 basis points. But from a revenue perspective, should we feel comfortable modeling the numbers, consistent with the medium-term guide from the Investor Day and just James, any one-off headwinds or tailwinds on revenue we need to be mindful of either at the segment level or for the total company? For 2026? Thanks, guys. James Kehoe: No. I think as Stephanie said, our banking is sizably outperforming. And capital markets. The only thing I think you should consider is our guide longer term included the impact of acquisitions. So effective once credit issuer closes, we won't be doing any tech on acquisitions. So that will kind of pull down a little bit the capital markets. But I think you hit the nail on the head. The banking business right now is clearly outperforming, and we've now had three quarters of above. You know, I would say on an organic basis, the recurring is around four and a half. Plus. Percent. So that's a really positive one. I think the overall, we're super comfortable on the revenue trajectory. I think capital markets probably a little lighter and banking just generally stronger. I think the overall business, what I think you will see is our recurring revenue is much, much stronger. Stephanie has covered it on prior occasions, there's a big shift in quality as we work through driving the ACV in the current year. So think about a business model now that is we're currently above 80% on recurring. The focus going forward is more and more recurring. Less nonrecurring and professional services, and then within the recurring, a much greater tilt to higher margin products such as the payments category. Digital the core business. So I think it's also a strong quality discussion for next year. Operator: One moment for our next question. And that will come from the line of Darrin Peller with Wolfe Research. Your line is open. Darrin Peller: Hey, guys. Thanks. It's good to see the organic banking trends in that mid-4s mid to high-4s range we're seeing now this quarter and I think embedded in your guide for next quarter, if I'm not mistaken. Maybe just Stephanie and James, if you could just give us a little more on the building blocks. You started touching on it in your slides around issuing and payment digital payments and then core. A little more color on what you're seeing in each of them. Specifically in terms of growth that's driving that trajectory, just to ensure we know that's somewhat sustainable going forward would be helpful. Stephanie Ferris: Sure. You're exactly right. We're feeling really good about the organic banking revenue. In the mid to high fours. We Q3 and then the guide expresses that in the fourth quarter. And like we talked about, feel good about that going into 2026. I think the way to think about it is really around making sure that we are selling to our net new sales is delivering about 100 basis points every year of growth for us. As we think about where that growth comes from, we're really taking advantage of our investments that we've made both in terms of organic and inorganic in driving new sales into the higher quality. So think bank modernization and continuing to drive growth out of our core business. Really leaning into our digital business as banks continue to invest in their digital capabilities to drive both new business into the bank as well as service and then in payments. So if we focus there and we think about that on an annual basis on a net new sales perspective driving about 100 bps, in those categories. Then it fully supports what we would typically see around organic. The organic overall base of the banking business, which, as you know, is a combination of transactions that are going across the platform, from a payments perspective, and then accounts on file. So think about more accounts coming across on core and digital. And that gives us a lot of confidence around what we've historically seen with organic in terms of, you know, two to three points of growth every year. So you start with your new sales. And make sure you're selling in the categories that are higher quality, higher recurring, with higher organic growth. In them, and you get a net new sales number of about 100 basis points. You get organic growing for you on two to three points per year. And then you come down to a net pricing capability, which we've been talking about anywhere from a zero to 50 basis points per year, and we're really starting to see a tailwind in that. So overall, it's you think about the basic building blocks of banking, to support kind of a three and a half to a four and a half percent range, that's how we think about it. And for us, it's really been about making sure we focus on the mix of what we're selling so we can get that really strong organic growth and we can deliver the profitable margins that go down at the segment level. Darrin Peller: Okay. Stephanie, that's helpful. Guess one quick follow-up, James, on free cash. You're talking constructively about what we're seeing now and into next year, 90% plus. Obviously, that's adjusted when you consider the deal you're going to be closing. Soon in the first quarter. And so just help us understand how you're going to think about segmenting out what I guess will be some restructuring charges and how close we can get to that, let's call it, 80% plus even with some of those restructuring. Wanna know the quality of free cash that we're hoping for next year. Thanks. James Kehoe: Yeah. I think it's a little bit early to give precise numbers on the acquisition. We didn't give them before. But the way I think about it is we on the core business, you know, we were we're gonna exit this year I think if we had the 85 guide, we're talking about free cash flow growing roughly 15% to 16% year on year. Outpacing EPS. And on a GAAP basis, it's the same number. So GAAP is trending in line with adjusted. That's the first thing. And we'll exit with a healthy 85% conversion. And then I'll get into some building blocks on the base Fidelity National Information Services. I'll cover that first one is a slightly lower capital intensity next year will drive incremental cash conversion. And then the other thing is this year, we've been hampered all year by higher cash taxes in the current year compared to last year. But pull down conversion that normalizes next year. So literally, addressing capital intensity, and the tax rate just naturally flows through. We're really comfortable about 90 a 90 cash conversion. There's probably even slight upside to that because our working capital programs, you've seen the third quarter, we significantly outperformed. We pulled a little bit from prior quarters, and we strongly against the programs themselves. So we're feeling really, really comfortable on the momentum and the base. During diligence, we went through their business. They're roughly at a 90% conversion as well. So we're gonna add two nineties together. I think it's a little bit early on the onetime expense. But think about you could take our cash flow today on an adjusted basis. You increase it probably at a faster pace increase it at a faster pace than the EPS growth. You add on $500 million of adjusted cash flow coming from the issuer business. You're gonna get a substantial step up in cash flow. We do need to absorb some incremental one-time expenses coming the integration, it's too early to call that number. You know? So but I think you will see a strong year on both adjusted and GAAP free cash flow next year? Operator: And that will come from the line of Tim Chiodo with UBS. Your line is open. Tim Chiodo: Great. Thank you for taking the question. I think the two some of the key numbers at least for next year, the 60 bps plus on the margin expansion and then the free cash flow conversion both on the adjusted and the non-adjusted I think we just covered the free cash flow quite well. Maybe we could dig into the margin expansion a little bit in terms of the moving parts. We know there's kind of a lower exit run rate of cost this year. There's the TSA headwind this year, which I believe is 70 bps or so to margins. That will be a lesser headwind next year. Maybe you could give an update on that. And then the associated cost savings. And then you already mentioned, but maybe dig into a little more on the accretion from the past few years, smaller M&A deal, starting to contribute a little bit more to EPS or sorry, to EBITDA next year. Thank you. Stephanie Ferris: Yes. So thanks, Tim. I'll start, and then I'll let James kind of get into the nitty-gritty of the numbers. You're exactly right. So in 2025, we have had some dilution overall on an EBITDA margin standpoint even though we've been able to care for it in the absolute dollar from M&A which we've been very clear about, and we feel really good about that becoming accretive in 2026. So we will not have that headwind feeling really good about that. So that's number one. The second is you are right. The TSA this year for us, and both of these were very well known as we went into the year, the impact of Worldpay separation and the TSA revenue going down is impacting our margin because as those revenues go away from us and the costs go away from us, it takes us a little bit of time to get the cost out of the system. We're gonna benefit as we move into 2026 from no longer having those grow overs. We'll have moved the M&A into an accretive position. We'll have taken the cost out from a TSA standpoint. And then you can see in the third and fourth quarter, we've moved significantly in terms of margin expansion in both the banking and the capital markets businesses in Q3 and what we're guiding for Q4. Which is exactly what we had expected, as we're executing against our future forward savings in terms of both making sure that we're selling high-margin recurring revenue so we have quality of revenue. And then also making sure that we are taking out cost as we reposition the company as we've separated on Worldpay. So those are very strong tailwinds for us as we move into 2026. James, any other comments you might make? James Kehoe: I think Stephanie kinda covered them. So principal one, and it's easy to conceptualize. In the M&A tack-ons this year, that cost, that pulled us down by about 45 to 50 bps this year. Rough numbers, it'll probably be slightly accretive next year, probably 10 bps. So you know, a headwind disappears completely. And that gives you a lot of confidence in next year because we're not doing tech on M&A next year. The TSA is at, like, a 50 bps negative next this year. That's not going to change very much next year. Sorry. This year was 50 bps. It's roughly the same number next year, so that doesn't change anything. Where the change is coming from is what's Stephanie said. It's the quality of the mix of the ACV that's sold already this year has substantially pivoted. There's a stronger pivot to core digital and the payments business, and those margins are north of 50 compared to some of the categories that are growing slower. We're gonna see a natural favorability coming from revenue mix. And I want to emphasize that the banking margins are you've seen it in Q3. The banking margins have recovered strongly. It'll be even stronger in Q4. And then the final one, the biggest lever we actually have and the one that's been pulled quite strongly in the second half of this year. And we said this at the beginning of the year would have been a first half, second half story. You're seeing it come true now. There's a reason why the margins are up in both segments in Q3. And we're projecting in Q4. That's the strength of the cost programs. So they're second-half loaded, which means we'll start next year very strongly out of the gate with the level of cost reduction. So three drivers, the M&A less dilutive. The natural product mix and the quality of the ACV sold this year. And then the third one is the cost programs will probably give you even more tailwind next year compared to this year. Tim Chiodo: Thank you. Thank you, Stephanie and James. If you don't mind, just a brief comment on any of the debit network pricing environment, just given it's been a little bit of an investor topic over the past week or so, if there's anything you could comment around pricing environment related to NICE? Stephanie Ferris: Well, I would say on a pricing standpoint, broadly, you heard me say, and I do wanna reiterate that we live in a rational pricing environment. I know there's been a lot of commentary around it, and I really we really tried to give some good stats from us. I think, overall, we are in a rational pricing environment, whether it's new business and whatever product. We obvious and we have some great competitors, and we obviously all compete with each other. But I don't see an irrational pricing environment whether it's in any of the products and in particular in NICE. So, you know, we're happy with NICE's performance. Generally, as we've talked about the strong performance for us, been more around adding more account volume to the platform, which is about winning more merchants onto the NICE network. That's not a pricing per se issue. That's how do you deliver value out to those merchants and least cost routing. So the pricing comment, I can't really make in terms of what's going on in the competitor. But I can tell you we feel really good with where we are with NICE. The value prop, it provides out to the merchant community and the issuer community in terms of delivering value there. And it's not something that you can, you know, just immediately drive price up or down and create a one-time benefit. But I'll leave it there. Operator: One moment for our next question. That will come from the line of Trevor Williams with Jefferies. Your line is open. Trevor Williams: Great. Thanks very much. I wanted to ask on some of the competitive dynamics in core processing. One of your major competitors is consolidating the number of cores they're running down by about two-thirds. With a process like that, is that potentially a catalyst for banks to open up to an RFP? I'm just wondering how much of a potential opportunity that's either presenting, could present for you guys, to win new business. Very much. Stephanie Ferris: Yeah. So I think overall, you've seen across the industry bank modernization trend. And this is really being driven by the end markets who are really looking for banks to modernize, drive digital capabilities, account open capabilities, real-time transaction capabilities, and these capabilities, in order for them to new products and services, need to be able to be delivered in a component way. So that bank modernization trend is in market and continues to be really important. And everybody in the industry is at different places and where they are delivering their products and solutions there. Yes. We have heard about the platform consolidation. As you guys know, we went through that several years ago. We have effectively three strategic platforms, and we're really happy with how those are performing, spent a bunch of money, to make that modernization happen. You saw that in increased capital, and we brought that down over time. Obviously, anytime anyone does anything in the market it becomes a competitive opportunity. As you know, overall, there's not a lot of core transitioning every year. It's pretty small. There's a lot of stickiness in this business. We're really happy with our renewal rates. I think we talked about those in the year and, you know, increasing how much we've been able to retain our existing clients. So do we think it's an opportunity? Of course, we do. Do we think it's a you know, we expect to see a massive swing? It's a competitive market, and I think it's, you know, it's a place where there's a lot of renewals and a lot of stickiness to it. So we're happy to compete and, you know, and continue to focus for our own clients on our bank modernization journey. But we are at the tail end of that in terms of going from many to few and really investing now in terms of making sure that what we're doing is focused on helping our banks deliver products to their clients faster. Trevor Williams: Okay. All right. Thanks, Stephanie. And then just for my quick follow-up, I wanted to ask on the EBT exposure that you have within banking, if it's possible to give us a rough sense for how big that revenue pool is and if the shutdowns have any having any impact on that in Q4. And then with the changes in eligibility requirements that are being made at the federal level, just how you guys are potentially thinking about the downstream impact in 'twenty-six and beyond to that revenue pool? Thanks. Stephanie Ferris: Yeah. I don't think we've ever given the size of the EBT revenue. It's not overall material to Fidelity National Information Services. It is a nice piece of business for us. We don't expect the shutdown to have an impact on the EBT business. And if it does, we would expect to care for it within the guide we provided. We generally get paid a number of cards, and so it's not necessarily how much is funded on a card. And generally, thus far, you know, cards continue to be active. Think as we think about 2026 and the criterion it's a wait and see in terms of how much that really impacts the overall business. Again, it's based on the number of cards. So if there's fewer we'd obviously earn less revenue. But at this point, we're, you know, sizing that out and don't expect it to be a material impact for 2026. Operator: One moment for our next question. That will come from the line of Dan Dolev with Mizuho. Your line is open. Dan Dolev: Hey, guys. Stephanie. Great results here as always. You know, Stephanie, you initiated your future forward strategy three years ago. And I wanna know, like, how much confidence you have in your, you know, investing strategy and rationalizing the business appropriately? And maybe just as a follow-up to that is, like, how does how's AI shaping into the you know, investment, roadmap that you put together? And then I have a very quick follow-up. Thanks. Stephanie Ferris: Yeah. Thanks, Dan. So we're very pleased with our future forward strategy. You've seen the benefit of it both in terms of commercial excellence. And, you know, you're seeing, we're seeing really strong pivoting there in terms of driving high-value recurring revenue. So been focused there continue to focus on making the commercial excellence part of the company even better with AI. We spent a little bit of time in the prepared remarks talking about how Nasir and his team, are using AI to not only increase, top of funnel and, you know, the sales pipeline, but also, to deliver, higher productivity in terms of the sales team. So I feel really good about the commercial pillar. Then when you come to the client pillar, around making sure that we're doing a better job serving our clients and making it easier to do business with us. We are using AI there. So our chief client officer is very focused on in the back half of this year, using AI to make a much better experience. Not only internally for our folks who serve our clients, but also putting tools into the hands of our clients so they can self-serve. And with that, we're obviously getting not only cost savings, and we're feeling really good about those coming into '25, but also really levering up in 2026. But more importantly, much better outcomes for our clients and making happier clients. And, you know, we're seeing the returns of that in higher levels of retention. And then finally, around innovation, we are really pivoting hard in terms of our overall investment strategy around where we see the opportunities in AI from a product standpoint and just to spend a little bit of time thinking about that, you know, the base level AI and what everybody's wanting to do with AI is you do need to have access to your underlying data. And as you know, given our base systems are primarily ledgers, we do and with the payment systems that have tons and tons of data in them and then very excited about adding the credit issuing business. We're working with our bank customers who really want continued access to their data faster, cleaner, and more secure. So we're spending a bunch of time there in terms of investing in our underlying data infrastructure and piloting out capabilities in terms of how we deliver that data infrastructure up and down the stack. I think when you go to regional community banks, we're working with them and really turning our focus on agentic workflows. To help them automate their back office operations. We have a major product launch that we're planning at Emerald which is incremental to our banking assist solution that we rolled out last year. So focused on helping, our banks automate and really drive down back office, costs. And then in the capital market space, focused in our treasury business, we see a significant amount of clients adopting our neural treasury product with almost 700 clients live now, which is bringing AI to cash forecast risk management, payment optimization. So we're seeing through our future forward strategy both or all around in terms of commercial excellence, client excellence, and then really making sure that we can innovate and deliver best-in-class products. And we're seeing AI through we're using AI through all of that. Admittedly, we're at the beginning stages of that, and so it also makes us really confident in terms of how we end the year and where we're focusing in terms of our investment strategies, whether it's in making the back office more seamless, creating more capacity in technology for us to invest, or to make some significant investments in continuing to make our products AI-enabled, we're feeling really good about where we are right now. Dan Dolev: Yeah. That's great. Amazing. And really quick follow-up. Maybe just housekeeping, and sorry if this is redundant for James. Like, we're getting a lot of questions about M&A contribution, like, you know, organic, inorganic towards the end of the year and then into 2016, maybe help just make, some, order there in terms of what to expect from, stuff that's been acquired thus far, that would be great. James Kehoe: We added some disclosure to the current charts that I've laid out. What's the impact in the quarter and on the full year? In both of the businesses? So just to reemphasize that the banking contribution from M&A was 150 basis points in the quarter. And that's 110 basis points on the full year. And I believe we gave the Q4 guide as well for M&A contribution in banking. That's 120 basis points. So capital markets then full year is 130 basis points and roughly the same in Q3. And Q4. So we've increased the disclosure going forward. And then and then as you as you look at on the or call up on the guide, so we called up 85 bps midpoint versus midpoint. The impact of the amount acquisition which wasn't in the previous guide, was about 20 bps. So the majority of the increase on the full-year guide in banking 65 bps, that's coming from operational execution and strong execution, particularly in the third quarter. Operator: And that will come from the line of Tien-Tsin Huang with JPMorgan. Your line is open. Tien-Tsin Huang: Thanks a bunch. Good quarter here. Just wanted to ask about the bank consolidations. Duffy, you mentioned it's going to be there's quite a bit there. You have pretty good visibility or line of sight into being on the right side of the larger deals here. When do you expect to get more clarity on that? Could it be enough to impact growth next year, that kind of thing? Stephanie Ferris: Yeah. Great question. I mean, clearly, everyone's seen bank consolidation has certainly picked up. In 2025. We tend to be, as you know, up we serve the larger financial institutions. So when we are with the bank that's being consolidated, we have a very high win rate where they, you know, pick us in terms of consolidating over to us. And then we have a really good win rate as well when we're battling with the incumbent provider on the other side. I think we have pretty good visibility in terms of the 2026 M&A. But to be fair, Tien-Tsin, it feels like every Monday, we have a new announcement. So I say that, but I don't have a crystal ball into what's gonna happen through the rest of the year with M&A. But I think we're feeling pretty good as we sit here today. Tien-Tsin Huang: Yeah. Well, history says you guys are usually on the right side. I know you got a couple of questions on AI. So going to different conferences, Stephanie, just wanna ask you on digital assets and deposit tokens, things like that. Any interest in investing more there or doing more there, buying infrastructure, Is that on the roadmap for Fidelity National Information Services in the near term? I know there's a lot on plate with the deal coming soon. Thanks. Stephanie Ferris: Yeah. No. I'm glad you asked that. We're doing a lot in digital assets and stablecoin. So in just a couple of comments. One is in Money in Money in Motion as you know, we announced last quarter a strategic partnership with Circle. Which is enabling, you know, money to move across the Circle platform and it's connected into our money movement hub. Our money movement hub continues to have and take a lot has a lot of demand in the market. We view ourselves to be agnostic there in terms of whether you want to move money across Circle or a payment network, ACS ACH real-time payments, etcetera. So that capability is driving a ton of demand, and we tend to be agnostic there in terms of you know, we're not a part of digital asset in per se. Our job is really to enable financial solutions and financial technology. So we've done that money motion. Money at work, in terms of tokenizing assets in the commercial loan and secured days space, we have a first pilot going on with a client to move close to about half a billion on chain to create balance sheet capacity for them via some new technology. So around tokenizing assets, we're investing there and spending some time in terms of how to make that happen for our clients. Again, we're not looking to do something for us ourselves only. And then in terms of tokenized deposits, lots of activity there. We're spending a bunch of time there, and we're actively working through what our tokenized deposits solution needs to be in conjunction with various of our clients. We are hearing a lot of demand here and we see you know, we're looking to figure out how to enable that capability again. So our strategy in digital, the digital space is really around enablement. You're not gonna see us take a position in terms of issuing a stablecoin Fidelity National Information Services issuing a stablecoin. We're not gonna compete with our banks in that way. We wanna make sure that we're creating and providing the technology, whether we partner for it, buy it, or build it to make sure that we have the capabilities we can deliver out to our financial services clients to enable it, we're not gonna take a competitive position. There. But lots going on, and we have a lot of folks that are keeping a close eye on it. Operator: And we do have time for one final question. And that will come from the line of Bryan C. Bergin with TD Cowen. Your line is open. Bryan C. Bergin: Hey. Good morning. Thank you. So cap markets looks like it's back on track here. Can you comment on what you've seen in that in the loan syndication area and then the latest in some of the non-traditional vertical demand? I'm curious if you're seeing the underlying backdrop in those areas. As healthy as banking or somewhat more mixed. Stephanie Ferris: Yes, we are. We're pleased to see the capital markets loan syndication is back on track. As we had expected in the second quarter, that's good. So don't see significant trends negative there as we move into the end of the year. In terms of nontraditional demand, we're seeing the same thing that you're seeing. Private credit continues to be in high demand. The underlying markets the nontraditional markets continue to be strong. Overall, we see strength in all of the nontraditional. And as you know, it's been really important for us to make sure that we have our capabilities enabled there, whether you're traditional or nontraditional. So nothing new, Bryan, really to report there. Health demand remains healthy. Bryan C. Bergin: Okay. Understood. And then in advance of the Issuer Solutions acquisition, just comment on how perspective banking client conversations are trending. Just curious if there's any updated views on the potential pipeline opportunities just as you bring credit card in broader credit into the fold? And particularly, if you're seeing any incremental opportunities amid other challenges to move quickly? On those opportunities post close? Stephanie Ferris: Yeah. We continue to remain very excited about the opportunities. I would say, we're, in particular, excited about enabling a couple of products at the time that we close the transaction that can really excite the existing base in terms of cross-sell. But as you know, we know each other's clients really well. We think there's a lot of opportunity to cross-sell and we're getting a lot of positive feedback about Issuer Solutions. They like the team there. They think it's a great product. It served these financial services very well. And as you know, this has been a product for us that we have not had. So people are pretty excited about, you know, what we can do with it. And, you know, just to share a little bit, if you think about the number of accounts that come on file, thinking about bringing it back to AI enablement and doing something with the Gen Commerce, etcetera. It's pretty exciting. The amount of accounts and transactions we'll be able to see going across credit, debit in all of our cores. So, we're really bullish about that opportunity as well. And then on their modernization program, it excited about getting our hands on that and what that can deliver for clients. So all positive. Looking forward, to getting them on board with us and you know, getting them in the team and getting going. But feeling really good about it. Operator: That is all the time we have today for question and answers. This concludes today's program. Thank you all for participating. You may now disconnect.
