FIS Charts Path as Cloud-Based SaaS Provider, Worldpay Transaction Nears Completion

Payments firm FIS released third-quarter results on Tuesday (Nov. 7) that pointed to widespread recurring and organic revenue growth, and a continued shift by banks to digital channels.

As had been widely reported over the summer, FIS struck a deal to sell a majority, 55% stake in Worldpay Merchant Solutions operations to private equity firm GTCR.

CEO Stephanie Ferris said that, with the consummation of the Worldpay transaction, slated for the first quarter of next year, the company is repositioning “as a cloud-based enterprise software as-a-service provider” that will “expand into new client segments as well as into new faster growing verticals.”

CFO James Kehoe said on the call that recurring revenues were up 7%, with strength across both banking and capital markets, which in turn led to organic revenue growth of 4% for the quarter.

Backlog was $22.5 billion, increasing 2% year on year.

Drilling down into the segment level details, banking revenue grew 3% organically in the quarter and recurring revenue grew 7%. Capital markets revenue increased 6% organically, led by what the CFO said was “continued strong recurring revenue growth of 8%.” Merchant Solutions revenue of $1.2 billion was down roughly 1% year on year.

Looking ahead, Kehoe said, the company anticipates banking revenue growth of between 1.3% to 1.7%. Capital markets operations should see organic revenue growth of approximately 5% to 5.5%.

Shares were down 1.1% in late afternoon trading.

Non-Traditional Verticals

Asked about revenue trends during the question-and-answer session with analysts, Ferris noted that capital markets strength has been tied to “selling more to existing clients, as well as being able to sell our products and services into non-traditional verticals that are faster growth — insurance, asset management, auto finance. There are a lot of secular trends there that are driving growth and demand, including regulatory mandates, climate and ESG.”

Separately, and in discussing banking demand, she said that “given the focus of banks on deposit generation, there is a high focus and demand for digital solutions. That’s been in market, it’s not necessarily new although it’s definitely heightened.”

Looking to Some ‘Needle Movers’

Later in the call, Ferris noted that there remains potential debit routing for card-not-present transactions. And there is opportunity to gain share for the NYCE debit card network. “We’ve been tripling down on it and selling it,” Ferris said. “We actually are one of the few networks that had that up and running very quickly and had the dual messaging capability that’s required. We continue to press on it. We’ve had some significant wins.”