Although the company raised its full-year guidance, third-quarter margin projections seemed to disappoint investors, who sent the shares down 9% Tuesday morning.
Adjusted revenues were up 5% to $2.6 billion in the second quarter, where banking solutions sales were up 6%, according to an earnings presentation. The company boosted its full-year revenue growth outlook to a gain of 4.8% to 5.3%, where that range had previously been 4.6% to 5.2%. Prior adjusted EBITDA margins had been 41.3%; in the revised guidance, that metric stands at 41%.
The Banking Momentum
During a conference call with analysts, CEO Stephanie Ferris said second-quarter revenue growth accelerated from the beginning of the year, underpinned by “momentum in banking” and by strength in digital solutions.
The Global Payments issuer business acquisition and the sale of the minority Worldpay stake remain on track, according to management commentary on the call.
“We continue to work with international regulators, and the acquisition close remains on schedule,” Ferris said. “This transaction adds best-in-class credit issuing solutions to our end-to-end banking offerings, creating immediate cross-sell opportunity and complements our broad suite of best-in-class solutions.”
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AI and Stablecoins
In reference to artificial intelligence, the company is on track to launch its Banker Assist solution by year-end, which Ferris described on the call as “the agentic AI platform for commercial banking that embeds intelligent, voice-powered assistance directly into client interaction.”
Chief Financial Officer James Kehoe said during the call that recurring revenue growth continued to outpace adjusted revenue. Within the capital markets segment, he said: “Adjusted revenue growth came in at 5%, slightly below our expectations, with recurring revenue growth of 5%.”
Macro uncertainty impacted the lending business, he said, adding: “The good news is that we have seen a rebound in July with lending activity returning more in line with the strong pace we experienced in the first quarter.”
Asked on the call about the growth in the banking business, Ferris said that “we are selling more than we have been over the last couple of years, and the quality of those sales is strong. So, we talked about a couple of years ago selling not just professional services and license, but really focusing on selling higher-margin products, so, think digital, think payments, think software that is recurring and that really focuses the business on those new sales.”
She said there’s also interest in stablecoins and “everybody is looking in terms of the use cases. But certainly, every single financial institution is looking at how they serve their clients and make it available. So, I would say demand is much higher. [It remains] TBD in terms of which use cases take effect.”
Analysts also delved into pricing and competition in the market tied to processing during the call.
“Our pricing is very consistent,” Ferris said. “So, when you think about it in terms of either what we have to price on new wins or compression, I think what you’re hearing from a lot of people is likely challenges in terms of quality of products and then corresponding pricing that they have to take. But from an FIS standpoint, again, we stand very large and scaled, and so we can get pretty price-competitive if we need to. It is not impacting our overall revenue.”
Both businesses — banking and capital markets — had positive net pricing trends, Kehoe said on the call.
Ferris also said that banks, particularly small banks, are “looking for FIS to provide them with their modernization journey. We’ve already put all of our clients generally in the cloud.”
Modernization is generally about componentization of the core, she said.
“And in the larger financial institution standpoint, there is a desire to do more componentized and come out with products and solutions and deliver value more quickly than a big bang core conversion,” she said during the call.
