Fidelity National Information Services, Inc. Q4 FY2025 Earnings Call

Good morning, everyone. Thank you for joining us today for the FIS Fourth Quarter 2025 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 CEO and President, Stephanie Ferris; 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 3. 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 and adjusted net earnings per share. These are important financial performance measures for the company, but they 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.

Good morning, and thank you, George. I'm excited to share our results today. But before I do, let me start off by saying how thankful and incredibly proud I am of the teams at FIS. The last 12 months have been full of change and complexity. But through it all, our team has stayed focused on our customers, on executing against our strategy, and delivering on our expected outcomes. We didn't let the noise become a distraction, and that's exactly what you'll see here today. As we move into 2026, market transformation persists, and the technology changes continue to accelerate. But when I look at how the businesses are positioned, the innovation that we're bringing to market, and the strength of our client relationships alongside their growing demand for technology, I've never been more confident in the growth prospects of the financial services industry or of FIS' ability to grow with it. I'm extremely excited by the opportunities that lie ahead of us. Now, let me walk you through why. We delivered very strong results in 2025. First, we met or exceeded our key financial commitments for the year, positioning us for an even stronger 2026. Second, we are executing on our strategy to transform and simplify our portfolio by fully divesting our merchant-focused business and acquiring the market leader in credit issuing, strengthening our position in the large financial institution space. And third, we are positioning our business to double our cash flow in 3 years to over $3 billion. Now, let's move to Slide 4. We delivered on the key strategic pillars we set out to achieve. Adjusted revenue grew 5.8%, exceeding our outlook. EBITDA came in at the high end of expectations. Adjusted EPS grew over 10% to $5.75, and we generated robust free cash flow, enabling us to return $1.3 billion to shareholders through buybacks. These results reflect a business delivering on the commitments we made when we began our transformation journey. But the story isn't just about strong execution; it's about what these results enable us to do at this moment when financial services is positioned to grow. Turning to Slide 5. We are witnessing a generational moment reshaping financial services, and FIS is in the best position to capitalize on it. Three powerful forces are converging simultaneously. First, the banking industry is experiencing exceptional strength. Banks have excess capital, stable credit, and strong operating performance, emboldening them to pursue aggressive growth agendas. Second, banks are executing on those agendas now. We've seen approximately $50 billion in announced M&A in 2025, and analysts project financial services tech spending will increase roughly 30% by 2029. Third, emerging technology, particularly AI, is moving from experimental to mainstream at unprecedented speed. AI adoption is accelerating to 8x 2023 levels, and banks recognize AI isn't a future opportunity; it's a competitive imperative today. Here's what makes this moment so compelling for FIS. No technology provider is better positioned to capitalize on this convergence. We have three important advantages: proprietary data sets spanning the entire money life cycle; long-standing, deeply embedded relationships with institutions built on trust, and a highly specialized regulatory and compliance infrastructure that took decades to build and cannot be replicated quickly. We believe these advantages translate to a significant opportunity for FIS to deliver differentiated AI solutions, which challengers without comparable data, scale, operational integration, trust or relationships cannot replicate. I'm going to discuss more around our AI moat in a few slides. Moving to Slide 6. Unlike some peers, our focus isn't about serving the most banks. Our strategy is partnering with banks that are growing faster than the market, both organically and through consolidation. Our strategy is to grow side-by-side with them in areas where they're spending: payments, digital, and lending. These large financial institutions represent a particularly attractive segment, accounting for a disproportionate percentage of industry revenue, account, and payment transaction growth. Over the past 10 years, the number of large financial institutions has grown by 56%, and those banks continue to increase their spend on technology, with tech spending increasing to 11% of their revenue today. As a reminder, this is exactly where FIS shines, working with growing banks looking to take advantage of technology to continue to grow their franchises. In 2025, bank M&A increased approximately 30% compared to the prior year, with over 170 deals announced, including a number of mega deals creating super regional banks with expanded geographic footprints. FIS was on the winning side of most transactions, including the ones listed on this slide. In fact, one large bank CEO called out FIS as the most scalable platform to help them consolidate acquisitions and grow their business. This is why our strategy is focused on helping these banks modernize and grow and why our investments and innovations are focused on the places where these banks are spending money. Now turning to Slide 7. Our Issuer Solutions acquisition positions FIS to lead across every major industry theme, shaping banking and payments today. Demonstrating the value of our combined data assets, we've already established a modern product roadmap announcing a new product on the first day after the close of our acquisition. This includes the industry's first AI transaction platform supporting Agentic Commerce, enabling AI agents to make, negotiate, and pay for purchases using preapproved payment methods, keeping banks central to those flows. Additionally, total issuing solutions rolled out 12 new modernized offerings in 2025, including enhanced loyalty solutions and origination preapproval and decisioning capabilities. Client validation is equally compelling. With this acquisition, we have expanded our relationship with 14 of the top 25 U.S. large financial institutions across our banking and capital markets businesses. Over the last 12 months, we have renewed or extended relationships accounting for approximately 30% of total issuing revenue and have no large renewals pending in 2026. That renewal momentum tells you something important. The largest, most sophisticated banks in the country are choosing to deepen their commitment to FIS. We're confident in achieving our revenue and expense synergy targets of $45 million and $125 million in 3 years, respectively, as we laid out in April of 2025. The integration is tracking well, and the combined platform positions us to meet evolving market needs from real-time payments and digital currency to AI-powered fraud and risk management. All of this gives us confidence in the value creation ahead. Turning to Slide 8. Now, let's talk a bit more about the value I just discussed. With the completion of this transaction, we exclusively serve the financial services industry and operate the most comprehensive data platform and financial technology. With over 1 billion accounts on file, driving approximately 73 billion transactions annually, we can now see money at rest in core banking deposits, money in motion across all payment rails, and money at work in lending and investing. In a world where data is essential for AI-enabled insights, this integrated visibility is highly differentiating. Demonstrating the power of this combined data even before the transaction closed, we started working with a large regional bank to grow their credit card portfolio, combining core data from FIS and credit transaction data from total issuing solutions, together into a model enabling the bank to increase their consumers' credit limit, ultimately resulting in higher consumer spend and transaction income to the bank. Our product set is wide and deep, creating valuable systems of record. And here's why that matters: A recent Forbes article explained that AI agents make systems of record more valuable because these core systems provide the accurate, authoritative data AI needs to function effectively. FIS operates mission-critical systems of record, defined by deep integration into regulated workflows, decades of accumulated proprietary data, and enterprise-grade governance, security, and auditability. These characteristics cannot be easily replicated by stand-alone AI tools or horizontal platforms. Financial institutions continue to prioritize reliability, accountability, and compliance, areas where incumbency and trust matter most. That scale, that trust, that operational integration are durable differentiating advantages. Turning to Slide 9. Our commercial muscle is flexing across the entire enterprise. In Q4, we grew recurring ACV sales 20% year-over-year, clearly demonstrating enterprise-wide commercial excellence. I will detail these on the next slide. Another example of our strategy in action is our build-by-partner approach. It's driving innovation and accelerating new product development. Beyond our Agentic commerce solution I discussed earlier, we built and rolled out next-gen cloud-based solutions like Money Movement Hub with over 100 customers signed up since our launch in 2025. Other recent launches include SmartBasket, a real-time AI-powered solution that analyzes shopping behavior to automatically apply optimal payment methods, personalized rewards, and targeted promotions at checkout. And our acquisition of Amount is offering clients a modern digital account opening solution that helps banks grow across deposits and lending. We've won 22 new deals since acquiring this capability late last year. More recently, our acquisition of DWA in Capital Markets puts us at the forefront of computational law and regulation. Leveraging DWA's AI capabilities, the acquisition strengthens our competitive position across the buy- and sell-side compliance space, empowering our clients to make millions of accurate regulatory decisions across global jurisdictions. The common thread is modern, cloud-based, and AI-enabled. No one else sees money across its entire life cycle, and that data advantage is now our strategic engine. We've quadrupled our investment in data and AI transformation, unifying our data stack, deploying agents that drive real client outcomes, and building domain-specific AI capabilities. The result is differentiated value for clients on the things that matter most: fraud prevention, deposit and lending growth, and operational efficiency. Our data moat gets stronger every day, given our infrastructure powers critical and complex workflows for our clients at scale. AI is a strategic accelerant for FIS, with adoption unfolding inside existing platforms, augmenting software to improve automation, decision-making, and productivity rather than replacing core systems. This dynamic favors data-rich platform owners like FIS. Moving to Slide 10. We saw strong recurring ACV growth across all segments in Q4, with banking solutions up 13% and Capital Market Solutions up 34% year-over-year. Our high-growth solutions delivered very strong full-year results. Digital Solutions grew recurring sales ACV 123%, payments grew 70%, and lending grew 62%. These are leading indicators of where the enterprise is heading, as we drive improved product and revenue mix. This is our strategy in action, what we highlighted at Investor Day, driving significant increases in highly recurring revenue. And all of this is driving significantly improved and higher quality revenue and margin mix as we head into 2026. Turning to Slide 11. So let me bring this together. We are executing our differentiated strategy from a position of strength. We delivered strong results in 2025, and our commercial and operational excellence momentum gives us confidence heading into 2026. Our innovation strategy is working. Our focus and targeted investments in high-growth vectors such as payments, digital, and lending are resonating in the market with strong recurring ACV growth. We continue to drive innovation across the enterprise, leveraging emerging technology, including AI, to accelerate new product development. We are uniquely positioned for this moment. In a fast-growing financial services sector, we are in the right markets at the right time with the right solutions. We are at the center of an important inflection point in our industry, and we're uniquely positioned to capitalize on it. With that, let me turn it over to James to discuss our financial results and outlook in more detail.

Thank you, Stephanie, and good morning. As you just heard, we are entering 2026 with positive momentum, both operationally and strategically. We are seeing clear results across commercial excellence, operating efficiency, and cash generation. Strategically, the acquisition of the total issuing solutions enhances our financial profile by reinforcing our durable recurring revenue growth and delivering strong free cash flow. All of this positions us to deliver strong growth across revenue, margins, and free cash flow. Moving to our financial results on Slide 13. Fourth quarter revenue growth accelerated to 7.4%, led by strong recurring revenue growth and another quarter of outperformance from banking. EBITDA grew 7.3% in the quarter. As expected, we delivered good margin expansion across both operating segments. But the segment gains were offset by corporate expenses, where we were lapping an exceptionally low prior year period. Adjusted EPS increased 20% in the quarter, led by both EBITDA growth and below-the-line favorability. Full-year revenue grew 5.8% to $10.7 billion, and EBITDA grew 4.7% with margins contracting 28 basis points, a rising contribution from cost-saving programs almost entirely offset a 45 basis point dilutive impact from acquisitions and a 70 basis point headwind from declining TSA income. Absent these two factors, underlying margins would have increased by approximately 90 basis points. EPS increased 10.2% for the year, well within our midterm guide. Free cash flow was a strength for us, outpacing EPS growth and growing 19% to $1.6 billion. Capital expenditures came in at 9.3% of revenue, in line with our expectations, and cash conversion finished strongly and ahead of expectations at 88%. We returned $2.1 billion to shareholders, exceeding our capital allocation commitments. Our Board of Directors recently increased the annual dividend by 10%, underscoring their confidence in the durability of our business. Turning now to our fourth quarter segment results on Slide 14. Adjusted revenue growth was 7.4% with recurring revenue growing faster at 7.8%. Once again, banking exceeded our expectations. Revenue growth was 8.3%, well above the high end of our implied outlook, led by recurring revenue growth of 8.8% with strength in digital and payments and higher output solutions than we anticipated. M&A contributed 130 basis points. And as a reminder, revenue growth also benefited from an easier year-on-year comparison of around 190 basis points. Nonrecurring revenue increased 28%, including a 16-point benefit from an easier prior year comp, and professional services declined 16%, as we continue to prioritize recurring revenue sales activity. Banking EBITDA margin expanded 132 basis points, including a rising contribution from cost management, favorable product mix, and an easier comparison. Turning now to capital markets. Adjusted revenue growth of 5.6% came in largely in line with our expectations, with recurring revenue growth of 5.3%. Nonrecurring revenue increased 13.7%, reflecting strength in license sales, whereas professional services declined 6.9%, as we continue to focus on recurring sales. Capital Markets EBITDA margin expanded by more than 200 basis points, reflecting continued cost optimization, operating leverage, and favorable revenue mix. Moving now to Slide 15 for a quick overview of our full-year results. Full-year revenue was consistent and resilient across both banking and capital markets. Banking adjusted revenue grew 5.6%, led by strong 6% growth in recurring revenue. Capital Markets posted adjusted revenue growth of 6.3%, including recurring revenue growth of 5.8%. Turning now to Slide 16 to discuss our expectations for 2026. The recently acquired Total Issuing Solutions business will be included in our Banking Solutions segment, and we have provided a full set of historical pro forma financials in the appendix. Additionally, we will be reporting two divisions within banking solutions, payments and banking. We've included a summary of the platforms that make up each division on Slide 26. To further align our business with our strategic vision, we have also transitioned certain businesses across our operating segments or into the Corporate and Other segment. For example, we have moved our Automated Finance business from Banking to Capital Markets to better align with our office of the CFO strategy. Overall, these changes had an immaterial impact on our historical segment growth rates. Our 2026 outlook will be presented on an adjusted basis, which includes 8 days of Worldpay EMI plus Total Issuing Solutions from the date of acquisition. However, we are providing growth metrics on both an adjusted and pro forma basis. Please note, post the close of the acquisition, we have reclassified certain non-GAAP expenses to operational expenses and refined our revenue and EBITDA expectations to account for some minor perimeter changes. As compared to our original assumptions at the time of announcement, this will reduce pretax earnings by $40 million and adjusted EPS by $0.07, and this is accounted for in our 2026 outlook. We have provided a full reconciliation on Page 29. For the first time, we will be providing an outlook for free cash flow, reflecting cash flow from operations less capital expenditures and adjusted only for cash taxes on the Worldpay sale, which will be payable in 2026 and won't repeat in 2027 and beyond. With that, let's review our full-year outlook on Slide 17. On an adjusted basis, revenue is projected to grow 30% to 31% with EBITDA growing 34% to 35%. EBITDA margins are projected to increase 155 to 175 basis points with 62 basis points coming from the addition of total issuing solutions to the pro forma base. On a pro forma basis, revenue is anticipated to grow 5.1% to 5.7%, compared to 4.5% to 5.5% at Investor Day. Pro forma EBITDA will grow faster than revenue with anticipated growth of 7.2% to 8.4%. As a result, we expect pro forma margins to expand by 95 to 110 basis points, as we ramp our cost efficiency programs, drive favorable revenue mix, and deliver year 1 synergies. Adjusted EPS is projected to grow 8% to 10% to a range of $6.22 to $6.32, consistent with our prior commentary. The issuer transaction is slightly accretive in the first year. As a reminder, our outlook does not include share repurchases, as we temporarily paused buybacks to prioritize deleveraging post-deal close. A key thesis for the acquisition was generating significant and sustainable free cash flow growth, and we are confident in delivering on this commitment. For 2026, we anticipate free cash flow of over $2 billion, growing 27% to 33% year-on-year and growing more than 3x faster than EPS. As I mentioned earlier, this is an all-in number. The only item that is excluded is any cash taxes paid on the recent sale of Worldpay. On an adjusted basis, we continue to target cash conversion of 90% for the year.

Our first question comes from Tien-Tsin Huang with JPMorgan.

I appreciate the question. Stephanie, thank you for your comments. I hope you don't mind me asking the first question about AI. I liked what you said regarding the systems of record businesses, but could you elaborate on your perspective about the risk that AI might automate or replace some key functions that FIS currently offers to banks, especially relating to surrounding products and core banking? I know this has endured previous technology shifts, but I'm curious if you see AI presenting any new challenges.

Thank you, Tien-Tsin. I'm glad to address the AI question. I think this earnings season would not be complete without it. I want to emphasize a few points regarding our durable advantage in AI. We consider AI to be a strategic accelerant for our business, and I will outline how we intend to leverage it in areas where it can add significant value within our systems. Firstly, concerning FIS, we manage mission-critical systems of record, which provide accurate and reliable data sources. These systems require regular audits and must adhere to regulations. Our systems of record across FIS contribute to our competitive edge, which can be summarized in three key advantages. First, we possess proprietary datasets that span decades of accumulated data throughout the money life cycle, covering core banking, payments, lending, and investing. These extensive datasets are essential for developing AI capabilities. Second, our core systems are fully integrated into regulated workflows that must be auditable, generating many compliance and regulatory reports. Lastly, we implement enterprise-grade governance, security, and auditability. These three advantages encapsulate our durable strengths in managing systems of record. I also mentioned a Forbes article that highlighted how AI agents can enhance the value of systems of record. We firmly believe that our technology and data offer a strategic advantage. When it comes to considering AI as a strategic accelerant, our data moat is crucial. We now have access to more than 1 billion accounts and handle 73 billion transactions via our credit issuing business, covering every payment rail. This vast data is essential for creating AI capabilities. We've committed to quadrupling our investment in data and AI to unify our data stack, which involves significant spending on enhancing data capabilities, deploying AI agents in our existing systems, and developing domain-specific AI features. Our focus is on areas where predictive capabilities can be improved, such as fraud prevention and identifying the next best deposit or lending accounts. We aim to enhance our offerings by utilizing our datasets for these predictive functionalities, streamlining client onboarding through quicker regulatory risk assessments, and aiding banks in productivity initiatives by automating processes with AI. We view AI as a strategic accelerant rather than a risk, while remaining attentive to the overall market trends.

Our next question comes from Ramsey El-Assal with Cantor Fitzgerald.

I wanted to ask about the pace of the shift in capital markets to higher-quality recurring revenue within the segment. How long do you expect this shift to have an impact on segment revenue growth? And how should we think about the steady state segment kind of growth profile after the shift is complete?

Yes. Maybe I'll start in terms of how to think about that strategically and James can add on in terms of if he thinks I missed anything. If you look back, and I think we talked about this to 2020, the recurring revenue was 69% of Capital Markets revenue. We ended 2025 at 71%. The market is moving away from licenses, which is a good thing. And we are, at the same time, while the market is moving away from licenses, really focused on driving recurring, highly profitable product revenue. So we are leaning into that as we think about continuing that journey, and I would expect to see a similar like an accelerating recurring increase, as you think about the total. I think we also said in our prepared remarks that we would expect recurring revenue in capital markets to be mid- to high-single digits in 2026. So you would expect us to continue to lean into recurring. It's a market condition. It's also a better outcome for FIS. It's how our customers want to buy, and it's a higher recurring revenue, higher margin business over time. I don't know, James, if there's anything you want to add?

No, nothing to add. I think you'll see a similar trend over the coming years, with an acceleration in recurring growth and moderate growth in nonrecurring revenue. Keep in mind that nonrecurring revenue is still growing in 2026, but at a much slower pace. We are very optimistic about the business and the accelerating trend in recurring revenue.

Our next question comes from Darrin Peller with Wolfe Research.

Great job on the quarter and the year. I’d like to bring up a broader question again, shifting away from AI and focusing on the issuer business. There have been increased discussions about competitive dynamics, especially with larger networks entering issuer processing and some newcomers aiming to disrupt the space. Similar to the previous high-level question regarding AI, I’d like to know what barriers you see in maintaining your position in issuer processing, particularly after your significant acquisition in the credit sector. Additionally, from a financial perspective, what are you projecting for the year in terms of issuer synergies? Is it still too early to expect these to be reflected in your financial outlook, or do you anticipate cross-sell opportunities may start to appear later this year?

Thank you for your question, Darrin. To provide some clarity, our acquisition of the Total Issuing business has significantly enhanced our product offerings in the global credit processing sector. In terms of competition, we are leveraging both the capabilities of our new products and our extensive relationships within the industry. In North America, our product credit business stands out as the largest and most established, equipped with decades of expertise. A testament to this value is our renewal of nearly 30% of our existing revenue base in 2025, with no renewals anticipated for 2026, showcasing our customers’ confidence in our offerings. On the modernization front, we can delve into that later. As for our international operations, our prime product is the industry leader, generating around $200 million in revenue and experiencing a 15% compound annual growth rate from 2016 to 2025. It competes effectively on a global scale, retaining competitiveness against any new entrants. Overall, we believe our product capability is robust, whether in North America or internationally. We also have a significant advantage through our relationship with FIS, which positions us favorably against our larger competitors who benefit from their wider networks. Our diverse services include debit processing, credit processing, core banking, lending, trading, and more. This breadth of service allows us to leverage our scale and relationships to ensure the continued competitiveness of our total issuing business. Lastly, I want to emphasize the crucial role of data, especially in relation to AI initiatives pursued by financial institutions. Our integration of core banking with credit issuing provides a unique opportunity. We're currently collaborating with a large regional bank to combine data from these systems to help improve their credit line increases for cardholders in ways previously not possible. This capability sets us apart from our competitors in the marketplace. We anticipate developing our data products further as we enhance our data capabilities.

Our next question comes from Will Nance with Goldman Sachs.

I appreciate the disclosures regarding the structure of the Banking business. I would like to focus on how you view the growth potential between these segments. It is somewhat unexpected to see that TSYS constitutes only around 40% of the Payments business, demonstrating the diversity within the segment. Could you elaborate on the growth drivers in these areas? It seems that TSYS experiences mid-single-digit growth. Should we anticipate the Banking segment to grow at a lower, single-digit rate while expecting stronger and more sustained growth in payments over time?

Yes, thanks, Will. I don't think we're ready to discuss the growth rates for specific segments. What we can share is that the overall issuing business is expected to grow at a rate similar to what it achieved in 2025, around 4.5%. We anticipate this growth rate to remain steady in 2026, while the legacy FIS business is expected to grow slightly faster to support the overall guidance. We're really excited and proud of the progress we've made across the FIS organic business and Banking, which is showing acceleration in 2025 and is expected to continue into 2026. As we reflect on TSYS today, that's the best information we can provide at this time. When we reach the first quarter, we'll be able to offer more insights regarding growth rates for specific subsegments.

Our next question comes from Dan Dolev with Mizuho.

Stephanie, great results, really, really nice. Just maybe a strategic question here on the portfolio. Obviously, you've got like a really good portfolio right now, and your shares are definitely trading below what they're worth. As you think about sort of your portfolio today in terms of the assets that you have, is everything from now on considered core? Is there anything you're thinking of in terms of what could be done to enhance buybacks, just to get the sense of how you're thinking about the portfolio?

Yes, we are very satisfied with the current state of our portfolio. We've executed two strategic transactions to significantly simplify it, concentrating on a single client base and financial services, which aligns our products well. We will continue to make adjustments to the portfolio, as we have for years, but you shouldn't anticipate any large sales. Our main priority right now is integrating the TSYS business and ensuring we execute effectively on that and also on our existing operations. As mentioned by James in his prepared remarks, we are also committed to repaying our debt, which is our primary focus. Until that is accomplished, we won’t be talking about buybacks.

Our next question comes from Jason Kupferberg with Wells Fargo.

I wanted to go a bit deeper into the Banking segment. Obviously, the organic outlook here, again, is outpacing your medium-term range from the Investor Day, I think, by maybe about 150 bps at the midpoint. So just wanted to get some more perspective on what's driving the above trend performance. You talked about it a little bit high level in the prepared remarks, but it seems like there's sustainability behind that. So if you can just unpack where you've seen particular success with some of your refreshed go-to-market motion over the last year or so? It seems like it's bearing fruit. So we'd love to just hear more on that.

Thank you, Jason. We're very pleased with our commercial performance. We have concentrated on selling the products that align well with FIS and where market demand is evident. Looking towards 2025, we anticipate maintaining this focus on commercial excellence. As we exit 2024, we knew we had favorable conditions ahead. We discussed revitalizing our sales efforts and achieving higher renewal rates, both of which have been instrumental in driving superior performance in our banking division, even exceeding our expectations. Demand is widespread across all our products, especially in core capabilities as we move past core consolidations. Importantly, during Investor Day, I mentioned the necessity of focusing on payments, digital, and lending, and we continue to observe strong demand in these areas, with our products experiencing substantial uptake. Additionally, we have successfully enhanced our organic offerings like Money Movement Hub, which has seen significant demand, alongside acquired products such as Amount that focus on digital capabilities. Overall, our commercial effectiveness has returned, our products are robust in the market following our buy-build partner strategy, and we're committed to sustaining this momentum as we approach 2026, feeling very optimistic about the Banking business's performance.

Our next question comes from Timothy Chiodo with UBS.

Great. First on the Worldpay revenue. So there's the Worldpay revenue that hits into the Banking segment. In 2023, I believe that was about $30 million. It was about $140 million in 2024, and it was expected originally to be sort of flat to down in 2025. I believe that it came in ahead of expectations for the full year for 2025. And I was hoping you could give us a little context on, one, what was that full year number for '25 and a little more context on what's in there. You've mentioned in the past that there's premium payback and maybe some other services that are being provided through Worldpay. And then lastly on this topic, just what revenue contribution is implied in 2026, meaning will it be a headwind, a tailwind or relatively neutral?

Thank you, Tim. When we separated Worldpay from FIS, we discussed how our commercial revenues are interconnected. The growth we’re seeing is influenced by Worldpay’s utilization of our loyalty and premium payback product and our network routing capabilities on NICE. These are robust products that facilitate cross-selling. Their ongoing expansion is organic, reflecting their status as a separate customer now. Demand remains strong for these top payment products, and that’s been a key factor in their impressive growth across the market. As these have developed into natural third-party agreements post-separation, they continue to stand out as valuable offerings. While I don’t think we’ll provide specific guidance for 2026 anymore due to the changes with Global Payments, this scenario highlights the significance of our commercial agreements, and I’m eager to see Global continue to leverage these products.

Our next question comes from Bryan Bergin with TD Cowen.

I want to dig in a bit on free cash flow and talk about the bridge to '28. So can you give us a sense what the largest sources of that projected expansion from the $2.1 billion base here in '26 to the $3 billion target that you have? What are the building blocks? And kind of where do you have most confidence versus where it may be more fluid?

Yes. I would take a couple of blocks here. One is on capital intensity. So last year, it was 9.3%. We're projecting 8.5% for this year. We think longer term, the natural trend level is around 8%. So that's 0.5 points from capital. Two is we're not at the end yet of our working capital optimization. I think we made great inroads in 2025. We have significant carryover benefits into '26. And there's probably still some optimization in 2027. The biggest one, however, is going to be the reduction in transformation and integration. It's intuitive because in the 2026 year, there's about $200 million of cash costs relating to the integration of the credit issuer business. By the time we get to 2028, those costs will no longer be in the cash flow statement. Two is 2026 is a pretty high level for, call it, transformation expenses. And you've seen from our margins that we're driving core FIS margins substantially higher than what we said when we gave the midterm guide of 60 bps. It's closer to 80 bps on the base business. So we're getting good traction on cost reduction in '26. Those programs will decline as we get closer to '28. So the biggest single driver, '28 versus '26, is actually lower one-time costs. So a significant reduction on the credit issuer integration and a significant reduction on FIS transformation.

Our next question comes from Andrew Schmidt with KeyBanc Capital Markets.

Stephanie, I totally agree with you on the generational moment at financial services, certainly an exciting time. Just 2 questions, if you don't mind, if I could squeeze in. Just one bank M&A, just can you talk about to what extent bank M&A is included in the outlook and then opportunities in subsequent years as more product is taken and customers grow? And then the second one, just on Agentic or GenAI solutions, maybe you can level set us. What are customers actually asking for? And maybe you could just talk about the opportunity for FIS to be a conduit versus other third parties coming in and providing different workflows? I think there's an opportunity to be a conduit versus the runaround that we currently hear out there as a narrative. But anything on those would be helpful.

Thank you for the question. Regarding bank mergers and acquisitions, we believe this is a pivotal time, with significant activity expected in 2025 and even more in 2026. We consider ourselves positioned to gain market share, although we recognize we won't win every opportunity. We have experienced success with many acquisitions. As for our guidance for 2026, we only provide forecasts for transactions we are aware of. If there is another acquisition in 2026, we will update our projections. Typically, if we hear about something in 2026, it might close in 2027, so we currently have no specific deals accounted for, meaning any outcome could represent either upside or downside. However, we anticipate a broad increase in bank M&A activity, and we plan to remain attentive to developments. Concerning Agentic, there's been considerable discussion about Agentic commerce, primarily focusing on how merchants, acquirers, and companies like Visa and Mastercard can support these capabilities. Our focus is strictly on financial institutions. We aim to ensure that when we manage an Agentic transaction for a bank, we can properly identify it as an agency transaction. One key concern is to authorize these transactions without decline, even if they occur at unconventional times, ensuring that agents' transactions are recognized and allowed. Additionally, we are collaborating with financial institutions to address potential Agentic fraud, which is a newer area of concern. There are risks from individuals exploiting agency relationships for fraudulent activities. Financial institutions often have robust fraud detection systems in place, and we either supply them with data or help manage these systems. Our current efforts involve helping financial institutions adapt their fraud models to address new threats stemming from Agentic commerce. Our singular focus on financial institutions allows us to prioritize their needs over facilitating merchant transactions, a role we leave to Visa, Mastercard, and acquirers. We are committed to ensuring transaction authorization and protecting our clients from the anticipated increase in fraud.

Our next question comes from Vasu Govil with KBW.

Maybe Stephanie, another AI question for you. Just how much engagement are you seeing from bank clients today on deploying AI solutions? And if you could give us a sense of whether it's coming from the largest banks, the mid-sized banks? And how quickly do you think we will start to actually see traction and sort of flowing into the P&L? And if I could ask a quick one to James as well, just on the margin variability we saw in the quarter, I got the dilutive impacts from M&A and TSA headwinds. I'm just guessing like what surprised you in the quarter relative to expectations on that front, I guess.

I've never seen banks adopt technology, especially AI, as quickly as they are now. They recognize the potential benefits. Considering their cost structures, which can be significant whether the bank is large or small, there's pressure to address operational efficiencies—particularly in areas like compliance with regulations such as KYC and KYB, or in managing deposits and loans where staffing is high. Banks are motivated to leverage AI to reduce these costs and reinvest savings into growth areas like deposits and loans. Regardless of size, banks are focused on this shift, although their approaches vary: large banks tend to implement AI directly and rely on us for real-time data and core services. Many mid-sized banks seek our assistance in developing their models and capabilities, while smaller banks often request help in embedding supportive technology within their core systems to cut back-office costs. Overall, banks are primarily using AI to lower operational expenses, especially in compliance and regulation, which typically involve many employees. Additionally, they are investing efforts in improving fraud detection, as AI enhances the predictive capacity of models. We offer extensive data and capabilities to help with this, making our fraud models increasingly valuable. There are numerous discussions happening at various stages of implementation, but I can confidently say that every bank I speak with is exploring the possibilities of AI.

Vasu, regarding your question on margins in the fourth quarter, we were initially pleased with consumer demand. However, later in the quarter, we observed significantly increased customer demand for output services and equipment. Additionally, currency rates experienced a slight decline of 35 basis points. This demand was primarily for lower-margin products, which did impact our margins slightly. Nonetheless, as you mentioned, we are finishing the year strong; on a full-year basis, excluding TSA and M&A, our core margins improved by about 90 basis points. Looking ahead to 2026, the projected pro forma margin growth is around 95 to 100 basis points. Furthermore, if we exclude the benefits from synergies on credit issuance, the actual FIS margins for next year are expected to expand by approximately 80 basis points, which is better than the 60 basis points we anticipated during Investor Day. We are quite optimistic about our margins.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.