Earnings

Post-Worldpay Deal, FIS Eyes eCom and Real-Time Payments

Fidelity National Information Services (FIS) released results Tuesday (Aug. 6) that showed organic growth for FIS and recently acquired Worldpay as standalone entities and updated the outlook for the combined entity — with particular emphasis on real-time payments and eCommerce opportunities.

FIS said that in terms of its own consolidated results, revenues were $2.1 billion, roughly flat year on year (under GAAP), but added that organic revenue growth was 5 percent.

Adjusted earnings per share were $1.78.

Drilling down into the numbers, Integrated Financial Solutions was $1.1 billion, logging 6 percent growth for the year, paced by payments, which also grew by 6 percent to $399 million.

Within that same segment, corporate and digital sales were up 6 percent to $221 million.

In FIS’s other main segment, Global Financial Solutions, FIS said in supplementals that it saw revenues of $865 million, up 4 percent year on year.

Broken out separately, Worldpay’s revenues gained 9 percent to $1 billion. Growth in technology solutions stood at 19 percent to $466 million, outpacing the 2 percent growth seen in each of the merchant and issuer-focused segments, at a respective $520 million and $87 million.

The company said it has “increased confidence” in meeting the previously stated goals of $500 million in revenue synergies, and with $500 million in annual savings.

In remarks to analysts on the post-earnings conference call, FIS CEO Gary Norcross said that the acquisition “gives us the ability to create seamless end to end experiences.” With a nod toward digital initiatives, he said that within the Integrated Financial Services segment, the firm signed a multiyear agreement with a bank with $35 billion in assets to deploy FIS’s Digital One item processing and capture solutions. Worldpay, he said, had 14 cross sell wins in its latest quarter.

The combined company, according to management, saw 6 percent growth to $3.2 billion, where the pro-forma merchant solutions segment gained 10 percent to $1.1 billion.

A detail of the pro-forma 2018 revenue contribution by segment shows 49 percent derived from banking, 32 percent from merchants and the remainder from capital markets.

The combination should increase FIS’s organic growth rate from 4 percent to 6 percent, said FIS management.

“We expect to begin realizing revenue synergies in the coming months, accelerating organic revenue growth trends towards 7 percent next year, and then into the 7 percent to 9 percent range in the future,” said Norcross.

The combined entity will have three reported segments spanning merchant solutions, banking solution and capital market solutions. In merchant solutions, FIS will go to market using the Worldpay brand, said Norcross.

Asked about revenue growth rates for the three business segments, Norcross told an analyst on the call that “we’re looking at the merchant to be in kind of a high-single, low-double-digit growth rate over the next few years. We are looking at banking in the mid-single-digits and capital markets to be in the lower-single-digits. I think we’ll see revenue synergies in both banking and in the merchant business driving higher growth over the next few years. But we’re very pleased with the acceleration we’ve seen in both businesses and the momentum both businesses have going into 2020.”

Separately, he told analysts that in terms of revenue synergies, “when you start thinking about the data and analytics that Worldpay can do around merchants and merchants’ portfolios to provide that access into that information to merchants, we were really nascent in that space over our merchant portfolio, so there is a real opportunity going that way.” He also said the company continues to see opportunity within eCommerce penetration in markets such as India, Brazil and Australia.

He also said faster payments are important for growth for the combined company — and spotlighted the recent announcements that the Federal Reserve would launch a faster payments service and that, separately, Mastercard would acquire Nets.

Of FIS, he said, “we actually got into real-time payments now a little over four years ago with our Clear to Pay acquisition. That’s gone very well. We’re now in more than 20 countries running their real-time payment platforms today on FIS software…as real-time payments accelerate, we’re very well-positioned to capture that volume. As eCommerce accelerates, we’re very well-positioned to capture those volumes.”

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