Fidelity National Information Services expects to deliver bigger profit margins this year from its bank and capital markets businesses, following a sale of a majority stake in its Worldpay merchant services unit.
Top FIS executives said as much while discussing the company’s forecast for this year and fourth-quarter results during a conference call with analysts Monday.
“We're expecting a good start to the year, with revenue growth accelerating compared to the fourth quarter and improved alignment between adjusted revenue and recurring revenue growth,” FIS Chief Financial Officer James Kehoe said on the call with analysts. “Margins will expand. This is consistent with the performance delivered in the second half of last year.”
It remains to be seen whether the company will engage in any acquisitions to make that happen, based on a response from CEO Stephanie Ferris to an analyst who asked about FIS M&A during the call.
“TBD in terms of consolidation,” she said, referencing to be decided. “We continue to see folks that would love to consolidate. We'll see what happens with the regulatory environment.” She also noted that FIS benefits from bank industry consolidation.
Ferris said she could understand the business sense of the recently announced Capital One acquisition of card company Discover Financial Services. “In terms of Capital One-Discover, I think it's another representation of why it's really important, and how people strategically value, having many different assets across the fintech ecosystem,” she said on the call.
Ferris added that such a broader set of assets was also “critical” for FIS, with the ongoing ties to Worldpay being a benefit on the acquiring side of the business.
She also noted that the Capital One-Discover combination should be a “net positive” for FIS, given its “strategic relationships” with those companies.
The forecast follows the Jacksonville, Florida-based company’s completion of its Worldpay spin-off earlier this month. FIS sold a 55% stake in that unit to the Chicago private equity firm GTCR.
Former FIS CFO Erik Hoag was appointed chief integration officer last week, with oversight for the company’s ongoing 45% stake in Worldpay, according to a filing with the Securities and Exchange Commission.
FIS’s fourth-quarter net earnings from continuing operations after the Worldpay spin-off were $64 million, down from $109 million, according to FIS’s Monday earnings release. Operating revenue for continuing banking and capital market units, on that same basis, rose 1% to $2.45 billion, the release said.
The company’s leaders promised more in-depth answers at an upcoming investor day in May.
