Good day, and welcome to the Fidelity National Information Services Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. George Mihalos, Head of Investor Relations. Sir, the floor is yours.

Thank you, everyone, and thank you for joining us today for the FIS second quarter 2024 earnings conference call. This call is being webcasted. Today's news release, corresponding presentation, and webcast are all available on our website at fisglobal.com. Joining me on the call this morning are Stephanie Ferris, our CEO and President, and James Kehoe, our CFO. Stephanie will begin 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 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 it over to Stephanie.

Thank you, George, and good morning, everyone. Over the past 18 months, we have moved with a high sense of urgency to reposition the company on a sustainable path for growth and to unlock greater value for all of our stakeholders. We've taken bold actions to refocus the business and improve client centricity, to simplify our business and strengthen our financial position. In May, we hosted an investor day, the company's first in six years, where we set out to reintroduce investors to the new FIS, laying out our corporate vision to capitalize on our privileged position, powering the global economy by moving money seamlessly across the entire money lifecycle and the strength and durability of our business model across all economic cycles. As our second quarter results demonstrate, we are executing across the growth vectors we laid out at Investor Day to deliver accelerating profitable revenue growth and sustainable double-digit total returns for shareholders. Within money at rest, we are seeing strong demand for our core and digital offerings. In core banking, we are currently on track for a record year of new core signings driven by competitive takeaways and greater traction in the community banking market. In fact, for the first half of 2024, we've signed almost as many cores as we did in all of 2023. Within our digital business, we saw new sales growth of over 30% in the first half of 2024, highlighting the success of our cross-sell into existing core customers and displacing competitors. Within money in motion, our differentiated loyalty solutions and payments offerings continue to resonate in the market, and we signed several new marquee partners in the quarter. We're also winning in the fast-growing treasury and risk market with further penetration in growth verticals such as insurance. Across money at work, we are leaning into our global distribution to win new business and seeing strong double-digit growth in our commercial lending business, where we continue to see a long growth trajectory. So, in summary, we're executing strongly across all growth vectors and are seeing strong momentum across the business. I am pleased to report we delivered our sixth straight quarter of outperformance as we continue to execute against our strategy. Revenue growth in the quarter was 4% with acceleration across both banking and Capital Markets. We exceeded our profitability targets with company margins expanding by 110 basis points, driving normalized adjusted EPS growth of over 30%, well ahead of our outlook. Our strong first half performance is allowing us to once again raise our financial outlook for the year. Now, let me share with you some strategic highlights from the quarter. I am thrilled with the strong new sales momentum we're driving, including our cross-sell initiatives across the enterprise and the benefits we're seeing from our commercial relationships with Worldpay. Over the first half of 2024, cross-sell activity across the enterprise grew an impressive 15%, as our sales transformation efforts continue to take hold. We're accelerating our go-to-market strategy with key partnerships and innovative new product rollouts. We recently teamed up with Curinos, a global data intelligence company, to provide FIS core banking clients with access to Curinos’ proprietary data and analytics, helping them optimize their deposit gathering strategies and improve profitability. We also announced a partnership with Lendio, a leading small business financial solutions technology platform, to streamline SMB loan processing for financial institutions. Also, within Capital Markets, we launched our climate Risk Financial modeler, a best-in-class SaaS-based solution designed to help corporations, insurance companies, and financial institutions assess and quantify climate risk across their portfolios. These are just a handful of examples of the ongoing product innovation across the company. We continue to return capital to shareholders and are well on track to deliver on our $4 billion of share repurchases commitment for the year. Additionally, our board recently approved a new share repurchase authorization of $3 billion. Across the money lifecycle, we secured a number of high-profile new client wins. Beginning with money at rest, we saw strong demand for our core banking platforms with several competitive takeaways, including Third Coast Bancshares, a leading Texas-based community bank. Also within money at rest, Digital had another strong sales quarter as our offerings continue to resonate in the market. We expanded our relationship with a large regional bank with over $25 billion in assets that added its current breadth of products within our Digital One ecosystem. We also saw continued traction across money in motion, with new engagements across payments and loyalty solutions. Synchrony, a leading consumer financial services company, is partnering with FIS in enabling our premium payback loyalty solution. Synchrony joins a long list of leading card issuers who've selected FIS' premium payback offering to help differentiate their value proposition in the highly competitive consumer credit industry. Our award-winning treasury and risk solutions continue to see strong demand as well. This quarter, a large US-based life insurance provider selected FIS' suite of risk and compliance tools. This represents a new relationship for the business as the team builds on its strong presence in the insurance market. Within money at work, we signed several new engagements across trading and asset servicing solutions and commercial lending. Newer, expanded engagements include Trustmoore, a global boutique corporate services company, and a leading global private equity firm, both selecting FIS' private capital suite, our award-winning private equity fund accounting software and reporting solution. Trustmoore is a perfect example of how we're leveraging acquisitions to source and win new opportunities. The combination of FIS' strong accounting and reporting solutions, coupled with the capabilities of recently acquired Deep Pool, an investor servicing software provider, were the deciding factors in allowing FIS to win a highly competitive sales process. Capital Markets continues to differentiate itself from its peers by further expanding into fast-growing verticals and capitalizing on its global reach. In addition to our new wins, our efforts are being recognized by some of the most prestigious independent expert advisory firms and financial publications across the industry, with our treasury and risk solutions products winning top honors from both Global Finance Magazine and Treasury Management International. Additionally, CNBC once again named FIS a top 250 global fintech company. So, in summary, we reported another strong quarter and have good visibility into delivering our forward outlook given the durability of our highly recurring business model. Before I turn it over to James, I'd like to thank all of our colleagues here at FIS who continue to move the company's future forward.

Thank you, Stephanie, and good morning, everyone. Overall, we are very pleased with our performance in the second quarter with strong execution across many vectors. We delivered broad-based outperformance against our financial outlook and this allows us to increase our full year outlook for the second consecutive quarter. Adjusted revenue growth accelerated to 4% in the quarter compared to 3% in the first quarter, and adjusted EBITDA margin expanded by 110 basis points year-over-year, primarily reflecting continued cost savings and favorable revenue mix. Adjusted EPS was $1.36 in the quarter, up 79% compared to the prior year and growing over 30% on a normalized basis. Moving now to our balance sheet and cash flow metrics, total debt at the end of the quarter was $11.2 billion, with a leverage ratio of 2.6 times. We returned $1.3 billion of capital to shareholders, including share repurchases of $1.1 billion. Year-to-date, we have repurchased $2.5 billion of shares and we are well on track to deliver on our $4 billion full year target. Free cash flow was $504 million, with a cash conversion rate of 85%, and we are confirming our full year cash conversion target of 85% to 90%. Turning now to our segment results on slide 10, adjusted revenue growth was 4%, with recurring revenue also growing 4% in the quarter. Banking revenue growth came in at the high end of our outlook range and accelerated to 3% in the quarter. Recurring revenue also grew 3%, in line with our expectations and we are confident recurring revenue growth will accelerate in the third quarter and for the back half of the year, reflecting strong execution and sales momentum. Other nonrecurring revenue grew 21%, reflecting growth in license revenue and deconversion fees associated with bank consolidation. Lastly, professional services revenue declined 13% year-over-year. We expect to see an acceleration in professional services growth in the second half as this revenue stream has stabilized and will reaccelerate in the second half of '24. Adjusted EBITDA margin expanded 140 basis points, primarily reflecting continued cost savings and favorable revenue mix. Turning now to Capital Markets, adjusted revenue growth was 7%, led by recurring revenue growth of 7%, excluding acquisitions. Adjusted revenue grew 6%, up from 5% growth in the first quarter. Other non-recurring revenue grew 15%, primarily reflecting growth in license revenue, and professional services increased 2% in line with our expectations. Adjusted EBITDA margin expanded 60 basis points, reflecting operating leverage and growth in higher-margin license revenue. Consistent with prior messaging, we continue to anticipate full year margin expansion across both segments. Turning now to our full year outlook on slide 11. Our strong year-to-date results and good visibility into second half growth drivers positions us for another increase to our full year outlook. We are raising our full year EPS outlook by $0.13 to $0.15 to $5.03 to $5.11, reflecting normalized growth of 13% to 15%. This increase is driven by strong execution and broad-based favorability across multiple areas. Let's walk through the key changes on slide 12. We are raising our absolute revenue target by $20 million to reflect more favorable Forex impacts. Segment growth rates are unchanged. We continue to expect banking growth of 3% to 3.5% and Capital Markets of 6.5% to 7%. We are increasing the low end of our adjusted EBITDA range by $15 million, reflecting year-to-date outperformance, and we remain confident in achieving our new full year EBITDA range. We are meaningfully increasing our EPS outlook, reflecting continued strong execution and broad-based favorability across depreciation and amortization, interest expense, shares outstanding, and Worldpay EMI. Together, these factors are expected to contribute an additional $0.13 to $0.15 adjusted EPS, with approximately $0.08 coming from Worldpay EMI. Importantly, we remain confident in delivering the 9% to 12% adjusted EPS growth we committed to at Investor Day. Let's now move to our third quarter outlook on slide 13. We are projecting adjusted revenue growth of 4% to 4.5% for the third quarter, with banking solutions growth at 2.5% to 3% and Capital Markets at 7.5% to 8%. As a reminder, the banking outlook includes a significant rollover in nonrecurring revenue. Despite the large nonrecurring headwinds, we expect to deliver steady revenue growth driven by an acceleration in recurring revenue. Importantly, the combination of strong recurring revenue and a rebound in non-recurring revenue provides us with a high degree of visibility around fourth quarter revenue growth of at least 5%. For Capital Markets we are forecasting another good quarter of revenue growth with strong recurring revenue and a rebound in professional services revenue growth. Overall, we are projecting an adjusted EBITDA margin of 40.5% to 40.7% in line with our comments at Investor Day. This reflects a negative impact from a rollover in corporate expenses which were at their lowest absolute level in the third quarter of 2023. Adjusted EPS is projected to increase 35% to 39% to $1.27 to $1.31. We anticipate another good quarter for FIS and we remain highly confident in achieving our full year outlook. Let me now wrap up on Slide 14. In summary, we are encouraged by our financial results delivering our sixth straight quarter of outperformance. During the second quarter, we accelerated revenue growth and drove margin expansion across both operating segments and once again, we meaningfully increased our 2024 adjusted EPS outlook. Lastly, we returned $1.3 billion of capital to our shareholders, an increase of $1 billion compared to the second quarter of 2023. With that operator, could you please open the line for questions?

Thank you. Our first question comes from the line of Ramsey El-Assal with Barclays. Your line is open.

Hi, good morning and thank you for taking my question. You called out strong visibility to banking growth in both Q3 and Q4 and I was just wondering if you could kind of roll it all up for us and sort of pick apart what the drivers are there. And again, comment on your confidence level about hitting the full year guide, especially given the tough comp in Q3. Are there any levers or are you relying on any kind of events that are coming up to meet your target? Thanks.

Yeah, maybe I'll start and James can add in if he'd like. So, I would say we're very pleased once again with the strong performance in the first quarter and second quarter with respect to banking revenue. As we look at the third and fourth quarters, we have a high level of confidence. I talked on the call about all the sales execution that we had in the back half of last year, which is giving us a lot of confidence in terms of the guidance for the second half of 2024. I'll remind you that in 2023, we had a bit of a lumpy third and fourth quarter. But if you look at them together, first half versus second half, we are calling up the banking revenue and it's really on the back of stronger execution, stronger sales coming into the P&L, and just overall operational execution, and we feel really good about it.

Yes. The only thing I would add is we have very good visibility into Q3. Effectively, we're in the quarter, so it's a very solid number and we have all the drivers to get to this Q4 growth in banking of at least 5%. If you look back on the prior year, the banking business was basically flat in the fourth quarter. So, if you look over a two-year period, you're probably in low single digits on average compound growth rate over the two years, and you can quite easily get to our 5% growth in the fourth quarter.

Okay. And kind of a related question, as a follow up, it looks like recurring revenue growth slowed a little bit versus last quarter. Non-recurring accelerated pretty nicely. I know you commented a little bit on this already, but can you help us think about that algorithm and what we should expect going forward in terms of recurring versus non-recurring in Q3 and Q4, and how those two drivers sort of meet up to get you to your full year targets?

Yeah, I'll start again and James can add some color. So, from a recurring standpoint, as you know, we've been really focused on driving strong recurring profitable revenue and trying to get adjusted revenue and recurring revenue over the midterm to align more closely with each other. Clearly, we have some variability in the prior years that we're going over, but first quarter to second quarter recurring revenue is slightly down because of a large West Coast bank that de-converted off of our platform in the second quarter. And so that coming off, which is what we expected, by the way, that was in the guidance. And even with that, to James, we feel really good about the back half of 2024. I think, as you know, in terms of non-recurring, we are growing over some pretty negative numbers last year. So, we're looking in terms of those becoming more flat to not negative. And I think if you look at our full year guidance with respect to non-recurring, it kind of comes out to be flat year-over-year. So, I think what you should expect to see from us as we move into the midterm is recurring and adjusted revenue in banking become more in line. But we are dealing with some choppy prior year comparables that make some of the numbers go up and down. James and I look at first half, second half, both on a two-year basis and the prior year. And if you look first half, second half on a two-year basis, it's pretty consistent over time, both in terms of recurring and non-recurring.

I think it's fair to say Stephanie has highlighted on the last couple of calls the strength we've seen in new sales, particularly in the second half of last year. And we did say back in the second half that you're going to see the benefits of that approximately six to twelve months later. And that's what we're seeing in the third quarter and fourth quarter. Encouragingly as well, the recurring sales on new sales are very strong in banking as well, so all signals are very positive on the banking business.

Thank you. One moment for our next question. And that will come from the line of Will Nance with Goldman Sachs. Your line is open.

Hey guys, I appreciate you taking the question this morning. I wanted to follow up on some of the comments in the script on, you mentioned, greater traction in the community banking space. I'm just wondering if you can kind of elaborate on what's been resonating with that part of the market, what products have been kind of key to turning that around, and just how you're thinking about the contribution of that segment to growth overall going forward? Thanks.

Sure. As you know, we've been really focused on new sales with respect to what's resonating. I would say broadly the strength of our cores and how those compete against our competitors, specifically in banks that are growing and have commercial banking customers. We operate more in the upper part of the market and our core there, our IDS core resonates very well. So, seeing a lot of momentum there as banks really focus on growing and as banks grow, they typically have needs around the commercial banking customers. We are best-in-class core there. I would say also digital, I highlighted digital sales. We've been making a lot of investment in our product set there, which is resonating very well in the marketplace. So, the combination of core and digital and payments, you know, I talked about at Investor Day really focusing in banking on growth verticals, which are the digital and the payments, they resonate very well. And then the package together with them fully integrated is really compelling in the marketplace. And, you know, as I said on Investor Day, I think we just had lost our way there. Over the last couple of years, we've been really focusing there and we're seeing it resonate in the marketplace as really a best-in-class product suite.

That's super helpful. And just to make sure I understand the commentary on the 5% recurring exiting the year, it sounded like you were kind of pointing towards that being like a relatively easier comp from the prior year. So, when we think about sort of the jumping off point, should we be thinking about somewhere sort of in between that level and where you guys are for the, sort of for the rest of the year?

I think if you look at the fourth quarter 5%, James mentioned, we feel really good about that. We're growing over zero in the prior year, so it's an easier growth over.

But it was a 5% adjusted. We probably will see recurring slightly slower because we are lapping a very strong recurring year in banking. I believe it was around 6.7% to 7% in the prior year. So, as you look at the fourth quarter, we still see good growth on recurring, but it will be slightly below the 5%. And what we said in the prepared comments, we will have a rebound in professional services, some other areas which were down significantly in the prior year. So that's why we have a fairly high degree of comfort around this. But it's a 5% on the adjusted group.

Thank you one moment for our next question. And that will come from the line of Darrin Peller with Wolfe Research. Your line is open.

Guys, hey, thanks. Nice job on the quarter. Just to follow up a little bit on the core strength on the banking side, again, you're saying you're on track for record core signings in '24 and then digital strength. I guess, Stephanie, when you think about where demand is today versus where it was at the beginning of the year. And maybe just the timing of what these new signings can contribute. It seems like this would probably set you up for '25, if I'm not mistaken, just given the conversion timing needed on some of these. And so maybe just help understand and frame a little bit more high level on just where demand is today and what you've seen in the market. And then obviously the timing on some of that opportunity into next year. It seems like third and fourth quarters, you're convicted around from last year's into early half this year. Right? So, these signings would contribute to 25?

Yeah, no, absolutely. So, first of all, I would say the demand environment has been stable. It's been very stable and consistent in terms of if you're a bank that's growing and you are either growing organically or through M&A, you're typically needing a commercial banking capability. Remember, I don't operate down in the credit union space, so that environment is increasing in terms of the demand there. And then there is high demand, as you might expect, across everything digital, because that is how banks are now. Those are their channels to sell. So, they're making the overall technology spend demand is very stable. And where they're spending money is big into digital online account opening payments, which is where they're focused from a banking standpoint. We also announced a partnership that helps them really focus on deposit growth and profitability. So that's really where we're seeing demand. And you're exactly right, Darrin. This is giving us a lot of confidence as we go into next year in terms of record signings and having a high level of visibility into the commits we made in our mid-term guidance for 2025 and onward. So, feel really good about what the team is doing. We're not done here, but feel good about the environment, feel good about our competitive positioning and our product set specifically within core digital payments.

Okay, that's great. And just a very quick follow-up would just be for an update on the commercial relationship with Worldpay. It obviously came out better than we expected at your Investor Day, and it's been a couple of quarters now, and so maybe just a quick update on thoughts on how that's been trending and cross-sell and partnership there?

Yes, no, it's been. First of all, I might just comment on Worldpay broadly. We feel really good about the separation of Worldpay. You can see in their numbers that, that team over there is operating the business better than we were when it was inside FIS. The commercial relationships with Worldpay are really strong and continue to be strong as we go to market together, and as we identify opportunities in different regulatory schemes where we can put, for example, the network, the network and the merchant relationships together, we will do that, where we can compete together around data. So, we landed as part of the acquisition a set of commercial relationships, and we continue to identify even more opportunities and we'll be finding those as well. So it's going very, very well.

Thank you. One moment for our next question. And that will come from the line of Dan Dolev with Mizuho. Your line is open.

Hey, guys, great results here. Thank you for taking my question. Can you, I mean, EBITDA margins were really strong. Can you maybe give us a little bit of a puts and takes of strong? Can you maybe give us a little bit of a puts and takes of the headwinds and tailwinds that went into EBITDA margin this quarter and then have a quick follow up?

You know, I think we're, as we highlighted, as we gave guidance at the beginning of the year, we did highlight that the first half will be especially strong. What you need to think through is we're not seeing the full extent of the synergy with Worldpay, but we're getting significant traction on the future-forward cost savings, which, if you recall, we started rebuilding margins in the second half of last year. So, margins grew very strongly in Q3 and Q4 last year. Incredibly strong in the first quarter, second quarter here. When you look at it as very visible cost management across both businesses and in the headquarters. We still have a long runway on this, so this is not, but it will taper off a little bit in the second half. The second one is revenue mix was pretty strong in both quarters this year, where we have more profitable, high license mix. So, we're very happy about the first half. We're on eight cylinders, literally on margins. And, you know, we remain entirely confident on our long-term goal of 40 to 60 basis points margin enhancement going into the future.

Got it. Thank you. And then quick one on M&A. Can you give us a quick update on the pipeline? And were there any acquisitions you made in Q2? Thank you.

Yeah, no, we did. We didn't close anything in the second quarter. The pipeline, Dan, is very good. In fact, we like the economic environment as it sits right now. High interest rates and lots of macro pressure into potential M&A candidates make them much more willing to sell at the right price. So, the pipeline is good. Just as a reminder, we're very focused on organic acquisitions where we have or need a product that we haven't been able to develop organically. We can add it to the platform and then push it through our very large distribution so it's accretive to revenue and margins as quickly as possible. So, continue to have a very healthy pipeline. That being said, we're very focused on the return on invested capital. So, we aren't dying to put a transaction on, but we are very active and we think the market is very helpful right now.

Thank you. One moment for our next question, and that will come from the line of Jason Kupferberg with Bank of America. Your line is open.

Good morning, guys. So just coming back to the banking segment, a big part of the acceleration here in the second half is the ramp of the bookings from the second half of last year, as you mentioned. Can you talk a bit about just implementation efficiency? Sounds like there's probably been some improvement there. Maybe just talk about some of the elements of that. And are those now optimized, those kind of implementation timelines, or is there room for further improvement? Because it sounds like you're executing solidly to plan there.

Yeah, no, I think there's always room for improvement in terms of implementations, but I think we have a nice robust pipeline of implementations, and we need to make sure that we can add capacity to get them on faster. So that's what we're really focused on without adding cost. And so that's what the team is really focused on. But I don't see any issues in terms of getting what we've sold onto the books in the back half of next year and the first half of next year as they come through. We have a very, very active backlog there, and the teams are working very well together. So, I think it's good. I always, as you know, Jason, I always think we should be able to go faster. So, the teams know that we're always working to become more efficient and effective. But I think that broadly, the teams, you know, once we sign it, even before it's signed, we start putting it in our backlog and making sure that we have enough people to implement it and convert it. I'm really happy with where the teams are now.

And then just a follow up. A big theme at the Investor Day was cross-selling. I think you mentioned cross-sell is up 15% year-to-date. Not sure if that's bookings or revenue, but which specific cross-sell initiatives are you getting the most traction with?

Yeah, yeah. No, we're thrilled. So, 15%. Yes, you're exactly right. It was a 15% increase in cross-sell in the first half of 2024. That's ACV. Where we're seeing a lot of traction is like we talked about within banking, there's a big opportunity to cross-sell digital and payments into our core clients. So, we've seen some significant wins there. We've also seen a lot of cross-sell going on between our commercial lending and treasury products being cross-sold into the banking business and then some of the banking value-added services being cross-sold into the Capital Markets business. So, we're seeing it. We're seeing it exactly where we would expect as we highlighted on the investor day. We think there's more opportunity here and we continue to focus, but we feel really good about where this number is trending.

Thank you. One moment for our next question. And that will come from the line of Tien-Tsin Huang with JP Morgan. Your line is open.

Hey, good morning. Good results here. Just two questions. One on card processing. Just curious. With a lot going on there, litigation pushed out. I think Visa announced some new card products as well, like flex credentials. Is that having any influence on pipeline activity? And are you satisfied with your win share on the card side?

Yeah. All of that creates opportunity for us and for Worldpay as we look at both the merchant and the issuer sides. We are a very big consumer and obviously sell the Mastercard and Visa products as they come through, enabling us to take share. So, I wouldn't say anything accelerated there, but we continue to look at the opportunities that those present and as you know, those do create more ways for us to win. I think in terms of the payments business, we're just starting to get our mojo back there in terms of really focusing and winning new sales. As you know, that was one of the growth verticals for us, and we got a little distracted, I would say, as we really, the company really focused on Worldpay. So, bringing back the focus in banking and digital, to issuer, to the network, to the loyalty products, we're starting to see early wins in sales there. They're very competitive products and they're highly integrated with the core. So that's a lot of where we expect to see the cross-sell. And we think any of that regulatory risk and opportunity is also a big opportunity for us as we look at that set of assets.

Okay, great. Just my quick follow-up on the Capital Markets side, a lot of market volatility, up versus down markets, down market have any change in how you generate revenues or penetrate your traditional verticals? Just trying to revisit some of the old SunGard stuff, if you don't mind. Thank you.

Yeah, no, I would say our trading and processing business, continues to trend well, as you know, those were some places. We added some of the acquisitions that add a product capability. I mentioned the Deep Pool acquisition that allowed us to win some of the key wins we highlighted this quarter. Nothing new there, continues to be a very strong business for us, continues to take share, and as a reminder, it doesn't price to AUM. It's very SaaS-based with a very, very small amount of transactions going across the platform. So, no risk with respect to market volatility going on. But as you mentioned, there is a lot of transactions processing, and our platforms remain very stable and feel really good about the scalability of our overall platforms.

And one moment for our next question. That will come from the line of John Davis with Raymond James, your line is open.

Hey, good morning, guys. James, on the free cash flow, I hear you reiterating the 85% to 90% guide this year, which implies well over 100% in the back half of the year. So, any comments there on kind of what gives you that confidence and then anything on the 3Q, 4Q cadence?

Yes. There's a lot of timing between the first half and the second half. For example, there's a misalignment in that you're inclined to pay out your prior year bonus in the first half of the year, and there's no bonus outflows in the second half. Similarly, with the timing of cash interest that you pay for some reasonable contracts are more skewed to cash outflows in the first half. These are two examples. That shifts around 300 kind of millions between first half and second half in terms of change of trajectory. And with the benefit of hindsight, we probably should have gone out with our 85 to 90 and said it will be lower in the first half because that's what the plan said, and it will be much higher in the second half. So, if I adjust for these two or three timing items that are just naturally higher in the first half, between first and second half, I comfortably get to the $1.5 billion number. But you're right, it does require a 1.15 in the second half, and we have good line of sight with that. Good question on growth, we're very focused on it.

Okay. Great. And then Stephanie, a little bit of follow-on to Tien-Tsin's question. How do you think about the card processing business and maybe the Banking business overall? Maybe just remind us what percent of that is more transaction-based or it could be a little bit more cyclical in nature as we think about slowing spending in the US?

Yes, John, I was waiting for someone to ask me this. I want to remind everyone that the Banking business includes a payments segment, primarily centered around debit card transactions. When considering consumer spending volatility, everyday spending tends to be insulated. We also price based on transactions, which means we don't benefit from inflation going up or down. Thus, we are shielded from its effects. Overall, I would say our debit processing business, compared to credit, which is smaller, is aligning with market trends. It's been stronger in the first quarter, slightly weaker in the second quarter, and July has seen a further decline. However, despite these shifts, our exposure to consumer spending trends across FIS is minimal. Therefore, regarding the safety from any impact on consumer spending, this is the current state of the Banking business, especially since we have separated the Worldpay business. Even with a minor decline in consumer transactions, we have accounted for this in our guidance, and we are confident about the outlook.

Thank you. One moment for our next question, and that will come from the line of Dave Koning with Baird.

Great job, everyone. My first question is about Capital Markets, which had a really strong quarter. We saw ongoing growth in recurring revenue, but it seems like nonrecurring revenue had its strongest growth since around 2021. Is this part of the reason for the positive guidance in Q3 and the sequential margin strength in Q2?

Yes. I think I'll start and maybe James can jump in. As we look at Capital Markets, they did have a strong nonrecurring benefit in the second quarter, which obviously helps both the revenue growth and the margins in terms of the contribution there. I think as you look out over the first half and second half in terms of 2024. We continue to feel good about the recurring revenue, and we are seeing a little bit of an increase in terms of the nonrecurring pieces that are contributing a little bit to revenue. I don't know, James, if you have anything else you want to add.

Well, I think in general, you could look at it. Professional services in Capital Markets last year was down in most quarters. And as we said on the prepared, that stabilized. The growth has accelerated. So that's one driver. It went from like a negative 5% to a plus 5% kind of thing. And then what we are seeing is we're seeing good buoyancy in licenses, particularly in international. That's, I think, the different trend in Q3, and that's what gives us the confidence to call out pretty good visibility to that.

Thank you. And I guess my follow-up, the Worldpay contribution was something like $150 million, I think, in Q2 and you're guiding to something like $110 million in Q3. Is that line item going to be lumpy like that? Or is there something in Q2 that was a little one-off, and the $110 million is kind of the baseline to think of in kind of future quarters?

Yes. And I'll again start and let James add in. I think what we're expecting to see with Worldpay is the EMI contribution, as they stand up their organization would be a little bit lumpy as they add all the people into their organization and they take down the TSAs. So, I don't know that we could call a normalized number of $110 million quite yet. We feel really confident with the forecast they gave us, which they do give to us, and they're obviously outperforming that. But I think the back half for them is really about adding and standing up the people to run the systems as they prepare to take down the TSAs over 2025, etc. So, it's really investments they're making in the business as they stand those costs up.

Yes. I would just add that we rely on the forecast they provide to us. We don't go into extensive detail, but Stephanie is correct; they currently have standup costs and need to make some targeted investments to foster future growth in the business. Therefore, we all believe the forecast is very achievable, and we are quite confident in the full year projections we are presenting today.

Thank you. One moment for our next question, and that will come from the line of Vasu Govil with KBW. Your line is open.

Hi. Thanks for taking my question, Stephanie. I wanted to follow up on the prior question about consumer spend, just given the macro concerns in the market. I know like you called out the FIS business is more defensive than the Worldpay piece. But if you could give us any sort of guidelines on how to think about potential sensitivity to the extent we do start to see some slowdown? And then the same question for the Worldpay EMI contribution, just given that, that business is more exposed to spend, any high-level views on how they might look to balance expenses versus investments if the macro were to slow down?

Yes. Generally, consumer spending doesn't significantly affect FIS in its current form. We earn revenue from transactions, and fluctuations in transaction volumes, whether up or down by a point or two over a quarter, aren't substantial enough to impact overall revenue. The majority of our revenue comes from core services, digital offerings, and other segments of the Payments business. Consumer spending doesn't have a major effect on our payments and banking operations. Historical data from 2020 shows that even when consumer spending was nearly non-existent, revenue in Capital Markets still grew by about 3%. Regarding Worldpay EMI, while I can't provide specific comments, you're aware that their business is indeed influenced by consumer spending. However, their revenue and EBITDA improvements in the first and second quarters indicate they are executing operations effectively. They've shown better revenue growth due to their operational efficiencies. Although I won't comment on historical revenue trends in relation to consumer spending for Worldpay, we are satisfied with the Worldpay team's focus. They are dedicated to improving operational execution over the next two to three years and positioning themselves to capture market share. The performance in their first and second quarter revenue suggests they are on the right track.

Great. Thank you for the color. And just a quick follow-up for you, James. I don't know if I missed it, but did you give us the growth rates excluding M&A and dis-synergy in the quarter? And then just any change to the dis-synergy expectations either on revenue or EBITDA for the year?

Well, we mentioned that I missed the second half. I'm focused on the first part. Essentially, Capital Markets has an impact of 100 basis points for the quarter, while the Banking business has no contribution. Overall, it's nearly balanced out. The net contribution is around 30 or 40 basis points, which doesn't even round to a full point. What was the second part of your question?

Just any change to the dis-synergy expectations either on revenue or EBITDA for the year?

No, nothing of any materiality. It's in line with expectations.

Thank you. One moment for our next question, and that will come from the line of James Faucette with Morgan Stanley. Your line is open.

Great, thank you very much. Thanks for all the details. A lot of my questions have been asked, but I did want to understand a couple of things that are happening. First, can you help us understand what's driving what looks like an expected acceleration in Professional Services in the second half and fourth quarter? Like what are the services you're expecting to pick up? And how do we think about durability of that?

Yes, I can address that. Looking at the trends from the second half of last year, professional services experienced a decline. This was primarily due to a lack of new projects that we were converting. Professional services usually correlates with high levels of implementation. As we entered the first half of this year, professional services revenue stabilized and continues to be influenced by our new sales implementations, whether they are related to core, digital, or payments. As we consider the latter half of this year, we anticipate easier growth compared to previous periods, and we have generally stabilized the numbers. This improvement is closely linked to new wins on the platform.

No, I think what you've seen in our medium-term guidance, reflecting the success with Future Forward, indicates that we will be facing TSAs that will be rolling off the business over the next 24 months, which will put pressure on future margins. However, we have committed to achieving annual savings of 165 basis points to 175 basis points each year. Therefore, you should anticipate that while current performance may taper off slightly in the second half of this year, it likely has a runway of 24 months. At this point, as the TSAs wind down, we need to adjust our corporate expense structures to better align with a company of $10 billion after the sale of Worldpay. Consequently, we have several cost initiatives planned for the future. One key area we discussed on the call was how to leverage GenAI and automation across the company’s functions to lower costs, enhance customer service, and create new revenue sources. In summary, we believe there is a substantial runway for cost reduction, likely around 24 months, as we work to eliminate the TSAs. We have already begun addressing this and are actively pursuing cost initiatives moving forward.

Thank you. And we do have time for one final question, and that will come from the line of Ken Suchoski with Autonomous Research. Your line is open.

Hey, good morning. Thanks for taking the question. I wanted to ask about the $4 billion repurchase outlook. The company did $2.5 billion year-to-date, including $1.1 billion in 2Q. So, it seems like you're well on track to hit your $4 billion target for the full year. Maybe just talk about your appetite to continue the pace of buyback that we saw in 2Q? And could we actually end up above that $4 billion target that you called out? Thank you.

No, I think that leaves $1.5 million for the remainder of the year; you should expect a skew towards the fourth quarter. So, you could roughly say, one-third, two-thirds. The reason is that to achieve the $4 billion target, we need to bring some cash back from overseas. As mentioned in a previous call, we anticipate this repatriation happening in the fourth quarter. If we can bring in cash earlier, we will, but currently, we are leaning towards the fourth quarter.

Okay. Great. That's really helpful. And then maybe just as my follow-up, I wanted to ask about Worldpay. I know it's a smaller part of the business, but what's allowing you to raise the EMI contribution related to Worldpay? I think you said it added $0.08 to the EPS guide. I think if I have the numbers right, Worldpay revenue grew 3% year-over-year, but I think EBITDA was down mid-single digits. So, any thoughts on how that EMI contribution is increasing would be great.

We take a different perspective. We are comparing it to our previous forecast. I can share that the positive difference is coming equally from EBITDA and interest expense. Recently, we completed some refinancing that is already yielding future savings. Additionally, a similar amount is generated from EBITDA. They are performing quite well in terms of margins, so it's not just an increase in revenue. We're pleased with this, as it reflects good quality improvement in the minority of cases with Worldpay. Stephanie Ferris mentioned that they also refinanced in the second quarter, which is providing nice EMI benefits for both us and them.

Thank you all for participating. This concludes today's program. You may now disconnect.