Fidelity National at Bank of America Symposium: Strategic Insights and Financial Outlook

On Tuesday, 18 March 2025, Fidelity National Information Services (NYSE: FIS) presented at the Bank of America Electronic Payments Symposium. The company discussed its strategic priorities and financial outlook, highlighting improvements in client centricity and innovation while addressing recent challenges. Despite hurdles in the fourth quarter, FIS remains optimistic about achieving consistent quarterly targets, focusing on revenue growth and cash flow generation.

Key Takeaways

• FIS plans to achieve a 90% plus free cash flow conversion by 2026.
• The company is targeting a 4% growth in its banking segment.
• A $2 billion return to shareholders is planned through buybacks and dividends.
• FIS emphasized improvements in the Horizon product and new AI-driven offerings.
• The Worldpay divestiture continues to impact cost reduction efforts.

Financial Results

• Banking segment growth is expected to accelerate by 300 basis points from Q1 to Q2.
• Capital Markets segment is projected to grow 6.5% to 7% in 2025, with a long-term target of 7.5% to 8.5%.
• Sales ACV increased by 9% in 2024, with recurring sales up over 25%.
• Margin expansion of 64 basis points was achieved last year, surpassing initial targets.

Operational Updates

• Strategic priorities include client centricity, innovation, and simplification.
• The Horizon product has doubled core wins in community banks, with high retention rates.
• New AI-driven products like Atelio and Treasury GPT have been launched.
• Simplification efforts include downsizing due to the Worldpay sale and leveraging AI for back-office processes.

Future Outlook

• FIS aims for 82-85% free cash flow conversion in 2025 and over 90% by 2026.
• The company plans $1.2 billion in buybacks and $800 million in dividends.
• Margin expansion initiatives are expected to yield 40 to 45 basis points this year.

Q&A Highlights

• FIS has strong visibility for Q1 performance, expecting to be within the guided range.
• The company plans to monetize its 45% stake in Worldpay when GTCR monetizes.
• FIS is enhancing its competitive position, particularly in the $1 billion to $10 billion bank segment.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Bank of America Electronic Payments Symposium:

Unidentified speaker, Unidentified role: All right.

Jason, Unidentified role: So we’re moving right along here with our payment symposium. Our next session is with FIS and we’re very fortunate to have James Keough here, Chief Financial Officer. So James, thanks for being here with us. We appreciate it. We were just talking about time going fast.

And I mean, you’ve been in your seat for about a year and a half now, accomplished a lot, comprehensive Investor Day, which was almost a year ago. Give us your progress report on the strategic priorities that you kind of laid out in both the banking segment and the capital markets segment. And then like what’s on the top of your list to really focus on in both those areas for 2025?

Unidentified speaker, Unidentified role: Okay. Maybe I’ll give you the guiding principles we had at Investor Day. Great. Maybe step by, client centricity, number one. And I think I’ll come to each of these.

Okay. Second one was innovation and the third one, simplification. Client centricity, I think that’s a clear win across the board. Call it, go back twelve months ago, we were struggling in market, especially in community banks. Horizon, our principal offering in the area, wasn’t performing high level of defects.

Flip forward twelve months, and we’re looking at you know, we we’ve called it out on prior calls. We doubled our core wins in 2024, and most of that was in community banks. So call it I’m calling the range of maybe 1,000,000,000 to 10,000,000,000 in size. And whether anyone else wants to admit it or not, we’ve gained share in the sector, full stop. Horizon is back.

Defects are down. Tickets are way, way, way, way down. And our reputation in market is is much stronger than it was twelve months ago. That’s one on client centricity. The other one is probably on retention exiting the year.

You can see Horizon and the better product offerings in general playing out retention in the high 90s. And finally, the most important one, if you’re really satisfying your clients, your ACV is up. So our ACV was up 9%. And within that, the banking was actually up low double digit. So a really strong year and a strong finish for the year.

You get into innovation. I think Investor Day was a highlight and that we launched what is very much a long term platform, which is Atelio, and we’re still in test and learn phase. More recently, we launched Treasury GPT, which is our first AI enabled product. And I would say innovation looking forward, internal innovation will be very, very focused on AI driven products, probably more in treasury and more in fraud as we look in the short term. The other form of innovation, two other forms, one is acquisition.

So sometimes you can develop your innovation internally or you just buy it in the market and you slam it into your sales force and you drive revenue synergies. The two most recent Dragonfly, that took us upmarket in digital in the core banking. So finally, customized and strategic clients probably bigger than we were able to do with our D1 product. And this kind of fills a gap at the high end of our portfolio. And Endemica is supply chain financing, which fits really well with the last piece of innovation.

I’ll bring you through office of the CFO. So we’re going to surround the CFOs in both corporates and banks with a suite of product offerings ranging from treasury all the way to accounts payable, accounts receivable. And that’s a form of innovation. We’ve set up an office of the CFO within the sales force. So even we’re pushing innovation internally.

And then finally, simplification. The big trigger was selling Worldpay. Right. Let’s face it. But it also opened up really a heavy workload on downsizing.

We have 200,000,000 roughly of TSAs expiring over two year period and we’re in significant cost reduction mode on back office. But at the same time, we’re dramatically simplifying the company. We are leveraging Gen AI in back office, but we are also leveraging third party business process outsourcers, organizational delayering and simplification. So I would say strong ticks across the box since Investor Day. What are my priorities?

We’re not happy with Q4. We had some noise from one time items. We want to get back into a consistent, this is the target we set and we’re going to deliver the target quarter in, quarter out. We will deliver and my number one focus is finance enabling the businesses and sales to be successful. Number one is revenue.

Number two is the margin journey where we play an even bigger role in driving cost reduction. And then the third one for me, a personal one is free cash flow generation. We’ve got a lot of recent questions on, we came in at 77%. We should have been at 85%. We got to drive a harder, sharper agenda and produce results much, much quicker.

So those three would be priorities. They’re all business priorities.

Jason, Unidentified role: Yes. No, it’s a great summary. So even on top of all the progress you’ve made, more work to do. And I’m going to start on the banking side. Obviously, it’s the bigger of the two segments.

And you alluded to some of the one off challenges in Q4 in banking. So now we’re looking ahead to 2025, we’re thinking about the quarterly cadence of growth in the banking segment. 4% is the midpoint of the full year guide and that’s exactly what you told us in May of twenty twenty four at your Investor Day it would be. So no change there, but the shape of the year looks a little bit different. Q1 at the midpoint is about 1% and then you guys talked about 300 basis points of acceleration in the year over year growth rate from Q1 into Q2.

How’s the visibility on that acceleration and anything you want to tell us just about Q1 in terms of how you’re feeling about that?

Unidentified speaker, Unidentified role: Well, Q1, I can’t really say much. We’re too far into the quarter. But I would say that we it gets back to my earlier comment. We wanted to set a set of targets that we can achieve and then achieve or beat those quarter in, quarter out. Probably with the benefit of hindsight, we were a tad conservative on Q1 because it was the start of the year.

We have really strong visibility to the first quarter. What we’re inclined to do as a company and its philosophy is the high end of the range is our internal risk adjusted plan. And there is no real science behind the low end, it’s just the creation of a range. So in theory, we’re always aiming to come in close to the high end of the range, at least that’s our operating plan on a risk adjusted basis. So if you ask about visibility, we have strong visibility that will be well within the range for the first quarter, really well within.

And then if we weren’t confident on the drivers, we wouldn’t have stepped out of policy, which we really stepped out of policy. We actually gave a banking guide for the second quarter Right. Right. Which is kind of there was a lot of debate internally. Yeah.

We were comfortable doing that because we have strong visibility to the build of sales over the course of the quarters. And that’s what gave us the comfort to go out and kind of break with convention. And we were aiming to calm the market. It didn’t actually quite work out that way, but that was the intent and we wouldn’t have done it if we didn’t know we could hit the number. So there is quite a build between Q1 and Q2.

Right? So you’re going from call it the call it midpoint one to midpoint four. But if you take the first quarter, you know, it’s it’s unfortunate, but we are lapping 200 basis points of really strong license quarter in 2024. We had one license deal and one termination in the license deal itself was above $25,000,000 So if you take out those two items, which were really exceptional in the long term trend, That’s about 200 bps. And then and getting back to your question, why do we have good visibility?

There were three shifts, call it, out of Q1 into Q2. Okay. There were two clients requested deferrals of implementations. And the good news is one of those actually just went live and the other one is going live I think in two days’ time, right? So we said that the 100 bps will shift from Q1 to Q2.

It’s actually happened already in terms of it’s actually implemented slightly earlier than we would have anticipated. And then the third one was a merger. It was a contract that was actually signed back in at the end of twenty three, and the acquiring company has deferred the implementation until their merger is approved. So even if the merger doesn’t get approved, the contract still gets implemented, but they’re waiting for approval, which is expected during the course of Q2. So this is why we have such good visibility.

We also have, you know, you could ask the question, well, could something else delay out of Q2 into Q3? Yes, but nothing like the magnitude of what we saw in Q1, the Q4 and Q1. And I guess the way to answer it is, we wouldn’t have guided to Q2 if we thought there was a high element of risk in the number. Right. So we have clear building blocks into Q1 into Q2.

Jason, Unidentified role: Okay. Okay. So it’s those three shifts that you outlined that basically drive the 300 bps and accelerate?

Unidentified speaker, Unidentified role: And two out of the three are done.

Jason, Unidentified role: Two out of three are done. Right. So that’s gone

Unidentified speaker, Unidentified role: and gone live.

Jason, Unidentified role: So that’s like two thirds of the 300 bps, I guess, that you need. So you’re feeling pretty good about that. So I mean, look, I frankly, I think you guys get there in Q2, it’ll obviously take a lot of angst out of

Unidentified speaker, Unidentified role: the stock.

Jason, Unidentified role: Okay. Very helpful. So maybe we can just to rewind to Q4 for a minute, just so people kind of have the context there. There were the three one time items. Some of it was non recurring, right?

There was a reversal of a contract termination fee. So I think there was a merger called off obviously beyond your control. There was a push out of a large license deal. And then there was a contract recognition adjustment, if I remember correctly, on the recurring side, which was about a 1% headwind. I was curious if you can just elaborate on kind of what the nature of that adjustment was, what caused it.

Is that something that’s commonplace in the business or

Unidentified speaker, Unidentified role: It is and it isn’t. It’s just normal review of balance sheet account positions client by client.

Jason, Unidentified role: Okay.

Unidentified speaker, Unidentified role: And there was this $12,000,000 and it relates to prior years and it was trued up in the fourth quarter. Don dusted behind us. Very unfortunate because we ended up with a perfect storm of a bunch of one time items, but it was cleaned up of historical, client adjustments.

Jason, Unidentified role: Okay. Yeah. Okay. All right. So I mean anything else we should just be aware of?

And we talked about Q2 a lot, but just in the back half just in terms of year over year comps or one time ish things that you’re lapping or anything like that?

Unidentified speaker, Unidentified role: I just go back to what we said in the fourth quarter. There’s two items. If you try to bridge the full year growth rate, it’s probably easier going from two to four ish. You got 60 bps of M and A because we did have M and A in 2024, but it was offset by dissynergy out of Worldpay. So call it the 2% didn’t include any net M and A contribution.

It’s 60 bps next year. Okay. And then we called out 150 bps coming from what we call customer excellence, if you like. It’s a combination of retention and new sales. Retention numbers in the second half were high 90s, so we have good visibility to retention.

That’s about 70 of the 150 bps. And then the 80 bps is new sales. So this what a new sale is, is the it’s stuff that was sold prior to the end of the year and what you need to sell in 2025 That impacts revenue in 2025. So there’s a long sales cycle.

Jason, Unidentified role: Right.

Unidentified speaker, Unidentified role: Right. And of this of whatever you sell in in 2025, only a very small proportion will actually hit the income statement. Yeah. So if you take the 80 bps, 80% of it was signed as of the end of twenty twenty four. So that will have progressed.

It’s higher than 80% now because we’re already two months into the year. Right. So the further you go into the year, the more likely it is there’s so if you wanna calculate a risk on the year, you take 80 bps times 20% Mhmm. Because it’s on-site.

Jason, Unidentified role: Yes. Right to get. Right? So okay. Alright.

So 80 bps, that’s the second half of the year contribution. Did I get that right?

Unidentified speaker, Unidentified role: It’s the step up. No. It’s actually a full year.

Jason, Unidentified role: Oh, that’s the full year number. Okay. Got it. Got it. Okay.

From the sales last year essentially. Okay. Perfect. Alright. Glad we got through all those numbers.

So let’s just maybe a little bit more qualitatively, I want to zoom out on just the competitive landscape in core banking. You alluded to it a little bit. You feel really good about the Horizon product, for example. But how have you seen kind of the evolution there if we kind of break down the market into kind of small, medium and large for lack of better terms?

Unidentified speaker, Unidentified role: I would have said stability. If you look above 10,000,000,000 banks, that’s our sweet spot. The competitive environment is, I would say, easier because we have a share of that segment in the high 50s. So we’ve that competitive dynamics are pretty stable. Nothing to actually highlight.

I think where it’s quite different is from and I said it before, between $1,000,000,000 and $10,000,000,000 we’re much more competitive than we were twelve to eighteen months ago. And that’s where we’re head to head with Jack Henry and Fiserv in general, and we won double the amount of cores last year compared to the previous year. Most of those incremental wins were in community banks. So I’ll leave that the way it is. So I think what I would say in that sector is we’re much more competitive than we were twelve months ago.

So that implies that we believe we’re gaining share in the segment, largely due to a much better product in terms of horizon and much better focus on client, call it the client experience. We’ve put more people behind it. We answer we kind of answer the questions quicker and the clients are happier.

Jason, Unidentified role: Classic just hand holding and relationship management.

Unidentified speaker, Unidentified role: Yes. But as I said, stable, demand is stable. But I would say aside from bigger banks, we we I would say their spend continues to be in digital, risk, compliance, fraud Mhmm. Less so on core.

Jason, Unidentified role: Less so on core.

Unidentified speaker, Unidentified role: Okay. But spending is resilient.

Jason, Unidentified role: Yeah. And so just as we think about kind of that move down market into the one to 10 where you’ve had more success, are those deals more profitable than your upmarket deals?

Unidentified speaker, Unidentified role: Honestly, the way we look at it, it doesn’t matter that much. We have sufficient scale on all of the platforms because we are generally a scale player. I think I’d turn it around the other way and say IBS is called a scaled platform for the largest, most commercial focused banks. Yeah. And Horizon is community banks.

Both products are doing exceptionally well. We’re really not interested in going to credit unions or banks below 1,000,000,000. And the reason is not product. Mhmm. It is the service model is too heavy, and then you would be dragging down margins.

Right. Yes.

Jason, Unidentified role: Right, right, right. Okay. Well, plenty of wood to chop north of a billion, right? Yes, there is. Yes.

Okay. I think you briefly mentioned office of the CFO earlier kind of a newer solution bundle. Just tell us more about that product set, how you’re bringing it to market? Does your guidance for 2025 contemplate any material contribution from this initiative?

Unidentified speaker, Unidentified role: Yes, there is a contribution already in there. We have the natural growth in all of the product suites. I think the goal we’ve set on past occasions is we’ve lined up about 100 salespeople against this initiative. So we’ve reorganized sales in general. We have less layers of management, more quota couriers, and we’ve increased the amount of specialization.

And one of these groups that has been set up is called office of the CFO. And what they’re doing is they’re targeting a specific persona in in the target company. So they’re going and they’re selling a bunch of products to the CFO. And think about the first product they would start with treasury, right? So we have a suite of treasury products that at the high end competes with Kyriba, for example, but we have mid market offerings as well.

We also have risk products. We have Forex management products, right? And then you go all the way into accounts payable, accounts receivable. We bought a supply chain financing company. So you can go to the CFO and offer him a suite of products on how does he manage efficiency and cash management across the company and offer him all these offerings at the same time.

So call it a new persona within our clients that we will specifically target to sell a suite of products. We believe our products are best of breed, and we’re going with a suite that’s unbeatable and the competition doesn’t have it.

Jason, Unidentified role: So this will all fall into the capital markets segment or will No, it’s it

Unidentified speaker, Unidentified role: actually will straddle both. Okay. We’ll straddle both. Okay.

Jason, Unidentified role: Yeah. Some of the different pieces

Unidentified speaker, Unidentified role: of the product. Salesforce does not necessarily mirror. The salesforce is set up by persona where you’re trying to address in the client.

Jason, Unidentified role: Oh, I see. Rather than being aligned by product.

Unidentified speaker, Unidentified role: Rather than being fully aligned by product, you’ll still have a VP sales for capital markets. Okay. But there’s also one for CF for office of the CFO. Right. There’s another one for core banking.

There’s another one for VP of, cards and money movement. Okay.

Jason, Unidentified role: Yes. Okay.

Unidentified speaker, Unidentified role: So it’s set up call it by natural sales territory.

Jason, Unidentified role: Presumably some of those doors to the CFO are already open to you guys because they’re using your core, right? Yes. So okay, interesting to watch. So post Worldpay, obviously, FIS is not in the merchant acquiring business anymore, but you still have some exposure to the payments market. You’ve got the issuer processing business.

I mean, it’s actually about half of your banking segment. So I was just curious to kind of get an update there on how are you getting paid per transaction, right? So and it’s primarily debit. How are the transaction trends looking in the card business?

Unidentified speaker, Unidentified role: They’re actually okay. There’s nothing really to call out. There was a bit of a negative couple of weeks when bad weather in February, I believe. Mhmm. And then it’s since bounced back.

So it was kind of just a blip on weather and it’s passed us and it’s back to fairly normalized trends.

Jason, Unidentified role: Okay. Okay. Good to hear. Obviously, a fair bit of macro noise there. Yeah.

You do

Unidentified speaker, Unidentified role: get paid by transactions. So Yeah.

Jason, Unidentified role: You’re not worried about ticket size.

Unidentified speaker, Unidentified role: And we’re more exposed to debit, much more exposed to debit. And debit in general in a recession or in a time of, call it, uncertainty, debit cards are inclined to be used more and are inclined to be used more frequently.

Jason, Unidentified role: For sure, for sure, yes. We’ve seen that historically. So I want to move over to the Capital Markets segment. Execution has been really good there.

Unidentified speaker, Unidentified role: Yes.

Jason, Unidentified role: And tell us what you think has primarily been driving that. I know you’ve got a myriad of products and you gave us some good detail on that at the Investor Day last year. But what would you highlight as kind of really driving the strong performance?

Unidentified speaker, Unidentified role: Great products. Okay.

Jason, Unidentified role: If I

Unidentified speaker, Unidentified role: had to say one thing, it’s just great products. They largely started a modernization journey maybe three years back or four years back, and the products are much more modernized than some of the competitors we’re meeting against. They’re generally best in breed. I would say an unbeatable sales coverage globally. They’re you know, it’s highly exposed to international as well.

Right. And so international is a big business based out of London or Singapore. So they it’s a very international business. It’s got more price leverage than banking. Right.

The TAM, I would say, if if you go back to Investor Day, the TAM is 5% to 6%. So this is a it’s a category that’s sitting with high underlying growth rates and a great set of products. And generally, if you got great products, you’ll outpace the TAM.

Jason, Unidentified role: And so if we think about the growth rates for that business, so you’re guiding capital markets 6.5% to 7%, right, for 2025%. I think the longer term target from the Investor Day is 7.5% to 8.5%, so a point ish of difference. What are the accelerants that get us there? I mean, is it just some incremental acquisition activity or

Unidentified speaker, Unidentified role: Yes, it’s mostly M and A. Okay. We were a little slower in 2024 on M and A. We only spent 600 out of the $1,000,000,000 we had thought. So you don’t get the carryover impact of that.

And then secondly, I think the guide includes about 140 bps of M and A. And I think we ranged at 150 to 200 kind of thing. Okay. So there’s probably it’s probably mostly it’s mostly I would say there’s two factors in capital markets. It’s lower M and A and some element of conservatism.

We come in quite strongly at the end of the year on licenses, and we didn’t change our license forecast for ’25. So the growth rate kind of shifted down slightly.

Jason, Unidentified role: Okay. Right. Maybe it’s called pull forward or whatever it was. Yeah.

Unidentified speaker, Unidentified role: Well, it wasn’t even a pull forward. We saw strength as well in the first quarter on license. Right. Right. The business is really, really strong.

Yeah. Yeah. I think you’ll see if you look at the first quarter, we’re actually guiding, I think, the 7% to 8% growth in the first quarter. So opposite the banking, actually, capital markets is coming out stronger in the first quarter than the full year growth. So it would imply probably it’s a fairly conservative full year ago.

Jason, Unidentified role: Okay. Understood. So I want to talk about diversification into some of the nontraditional end markets within the Capital Markets business. And because at the Investor Day, I think you highlighted that about 30% of the revenue is coming from some of those nontraditional areas. So maybe give us some examples of those markets.

And then how fast is that 30% piece growing?

Unidentified speaker, Unidentified role: Yes. I’ll take the last piece first. It’s growing double digit. So this 30 is growing double digit. And we see it as you think of it as insurance company, corporates, but it’s also asset leasing and lending, those type of clients.

And I would say we’re less overall, it’s the areas are less penetrated, more fragmented. And it’s one of the reasons why we’ve set up office of the CFO. If you can think about one of our targets is the CFO of corporates and the door to get in is with treasury systems. And our treasury systems sit probably quite a bit above where SAP is in the market and much more head to head with Kyriba. So you’re going in there with a highly sophisticated treasury product, a suite of risk products, and then you’re going to offer accounts payable, accounts receivable, supplier financing, commodity trading products if needed, companies like Cargill, for example.

Those kind of companies are way more sophisticated in the usage of capital market type products. That’s why it’s a it’s a big vertical.

Jason, Unidentified role: Yeah.

Unidentified speaker, Unidentified role: And I think our treasury I got this wrong. I think we said at investor day. We have 1,300 installed treasury systems. So we’re not a small player in treasury. Right.

It’s a lot.

Jason, Unidentified role: Right.

Unidentified speaker, Unidentified role: Right? So we’re we’re a fairly big player, especially at the high end.

Jason, Unidentified role: Yeah. Yeah. Right. And you can cross sell into that base of it.

Unidentified speaker, Unidentified role: And cross sell. Yeah. Then we find asset leasing is very dynamic. The move to electric cars has changed the model. The increasingly the software is much more sophisticated.

So there’s many reasons why there’s double digit growth here in these verticals.

Jason, Unidentified role: So let’s talk about sales. You alluded to it earlier. So in 2024, total company, new sales, ACV, if you will, up 9%. I think you just mentioned earlier that banking was actually a little bit better than that, right? Low digits.

Yes.

Unidentified speaker, Unidentified role: Low double digits.

Jason, Unidentified role: Yes. So how should we be thinking about the potential growth rates in sales for 2025? What have you built into the plan?

Unidentified speaker, Unidentified role: Well, you shouldn’t be because we’re not going to give you a target, So we want to continue to make I would highlight one thing about ’24. We also said the recurring sales were up probably 25% plus across both of the businesses. There’s a shift within the business. Were actually okay if the ACV is growing even low to mid single digit, but we’re really focused on the recurring sales, because that is the long term lifeblood of the company. It’s durable revenue.

It’s repeating every quarter in quarter out. So I would say looking into 2025, what have we done recently or what are we doing that we expect ACV to be positive outcome again. I talked about the specialization of the sales force. Office of the CFO is one example. The other example is, and this is over the last six months, we realized that the generalist sales force and banking was selling too many products.

So now that we hired a VP sales, actually, from one of the competition responsible for Cards and Money movement. So call it that that big part of the business, which is it’s a $2,000,000,000 business. Right? And then we’ve put dedicated salespeople mostly hired from the outside, under this position. So we have a dedicated cards and money movement of about 60 people, which we didn’t have before.

And as we do this, you’re obviously shifting resources between the various categories. So more specialization, much more focus on faster growing categories, hiring more from the outside to get this, I would call it scrappiness that comes with Card and Money movement versus call it longer term contracting that is more banking. Yeah. So there’s large changes and we change the incentive schemes in the first quarter for twenty five fiscal year, generating more focus on recurring versus professional services.

Jason, Unidentified role: Okay. So those plans are just kicking in now in this current quarter? They’re kicking in

Unidentified speaker, Unidentified role: for this year, and so I think you’ll see a change in the composition. The change in the composition of ACV is much more important to us than the absolute growth number. So we want to sell. We’re giving incremental incentives to the sales force to sign a recurring versus a professional services.

Jason, Unidentified role: Right, right, right, right, which makes sense. Okay. And then you have the cross selling initiative, Amplify, as you call it. I think there was a 10% boost in sales there for Amplify. So any specific callouts in terms of what drove that?

Or are there kind of isolated areas of particular focus for Amplify in 2025?

Unidentified speaker, Unidentified role: Not really. I think it’s the Salesforce has it built into their goals at the start of the year. So it’s not it is there are a set of goals against it. Examples, like, the examples can be quite small or quite big, but we call out some now and then on the calls. So Yeah.

In the most recent quarter, a large regional bank who buys a lot of banking products for the first time bought a product from capital markets to manage transfer agency. That’s one example. So that’s a it’s a clear cross sell that we probably wouldn’t have done if we didn’t have the banking client. Another one was another client in the quarter took a commercial lending product from Capital Markets. So there is cross sell.

It just needs to be it’s kind of a matrix like this. You got to do cross sell, but the specialization is also important.

Jason, Unidentified role: Right.

Unidentified speaker, Unidentified role: Sales guy cannot go in and sell 100 products. It’s too many.

Jason, Unidentified role: Exactly.

Unidentified speaker, Unidentified role: They have to be focused on the segment they’re expert in.

Jason, Unidentified role: Yes. Okay. And so let’s shift over to margins because that was an important topic at the Investor Day, and I know you’ve been very focused on it. You guys did a really good job on margins last year. You’re talking about 40 to 45 basis points this year.

What’s going to drive that? And then maybe you can tack on a little bit of mention of what drives sort of the incremental acceleration in the rate of margin expansion in 2026 per the Investor Day targets that are out there?

Unidentified speaker, Unidentified role: Yes. You said that last year was a great year for margins. It didn’t sink in on the call for many investors. We were quite proud of it, 64 bps expansion versus a goal at the beginning of the year, I think, was 20 to 40 bps. So we took out a lot of costs during the year.

We still have a lot of costs to take out over the next two years to offset TSAs. So you can think about it cost reduction of, I think we said 170 bps roughly a year, which is a large number offsetting exiting TSAs of 95 bps and call it the cost of doing business, which is inflation and growth investments. So we have on the 40 to 45 bps of this year, I would say the degree of certainty on the cost reduction is exceptionally high, right? But many of the initiatives were rolled out in the fourth quarter. So we’re not going we’re not waiting for something to happen and roll out in the second half of this year.

Most, I would say, 85% of what needed to be done was rolled out before the start of the year. So we’re getting savings early in the year. And then I think longer term, I think where you’re going to see the model changes, once you got the TSAs behind us, you’re going to see pure, I call it operating leverage and favorable mix drive the equation. There’ll always be some cost reduction to offset inflation, but we said that the natural leverage of the business is I think 70 to 90 bps. Right.

So if I was to do a trajectory, I’d say 40 to 45 bps in ’25, ’60 kind of range in 2026 and pro well above probably above 60 in ’27. Right. It’ll be a continued escalation as the revenue throws off because let’s face it, if we’re if you work out the math and we’re doing if we’re delivering the guided mid single digit on total company and you manage your overheads reasonably tightly, you’re going to throw off leverage. That’s it. That’s the business we’re in.

It’s highly scaled, highly levered. We’re not going down market into low margin products. Quite the opposite. We’re continuing to drive scale, right, in all of our platforms, less platforms, more scale, more operating mix favorabilities and then tightly manage overheads as part of the business model.

Jason, Unidentified role: Yes. So it sounds like a lot of it’s really in your control and you’re just benefiting from the natural economy.

Unidentified speaker, Unidentified role: Yes. Very high level of visibility on especially on the cost reduction, really, really high.

Jason, Unidentified role: Excellent. Yes. Excellent. Let’s talk about free cash flow. I know you mentioned it as a priority of yours for 2025 and there’s some moving parts here.

I wanted to start with the acquisition and integration related payments. I know those get added back in the adjusted free cash flow calculation. If I’m not mistaken, that was about $475,000,000 last year. How much of that is related to Worldpay separation versus other factors? And any way to think about how that $4.75 may trend this year or next year?

Unidentified speaker, Unidentified role: Yes. We get the question a lot. I was surprised when I joined the company, it’s the first time I’d ever seen a free cash flow adjusted for one time items. And when I wanted to change it, I was told that’s what the financial services sector does. But the four seventy five, we said we’ll go down to four fifteen to 4.25, call it a 12% reduction cash basis.

The accrued basis reduction is much higher because we’re starting to step out of Worldpay. So on a crude basis, the P and L accruals will drop by about 30%. So what that means is the reduction on a cash basis in 2026 will be well above 15%, right? So you’ll continue to the decline will start accelerating in 2026 and will be quite dramatic in 2027. There’s two big two really big drivers.

One is future forward and the other one is Worldpay. And, you know, you get kind of applauded, great, you saw Worldpay, but then people don’t like the one time cost to actually get rid of it. Right? So there’s huge teams working on transferring the systems from our company to Worldpay.

Jason, Unidentified role: Right.

Unidentified speaker, Unidentified role: Huge teams.

Jason, Unidentified role: Is that happening on schedule so far?

Unidentified speaker, Unidentified role: It’s they’re actually accelerated a bit. So within our guide they’re exiting the TSAs quicker to the tune of maybe 20,000,000. So we’ve basically taken out more costs. But it’s world pay costs and that will trend down future forward as of the end of this year as a cost program will start trending down.

Jason, Unidentified role: Right.

Unidentified speaker, Unidentified role: And we’ll have some residual cost reduction into 2026. Mhmm. Basically, the streamline corporate functions continue to streamline them. So our commitment is we’re going to dramatically reduce cash restructuring costs over the next couple of years. Right.

But we got to get this world pay stuff behind us first.

Jason, Unidentified role: Right.

Unidentified speaker, Unidentified role: Yeah.

Jason, Unidentified role: Okay. So we’ll be looking at smaller add backs basically.

Unidentified speaker, Unidentified role: Much smaller add backs longer term.

Jason, Unidentified role: With each successive year essentially. Okay. Okay, good. CapEx, I know a couple of quarters you guys started talking about the fact that there were some pretty big price hikes from some of your IT vendors. So I think you’re running about 9% of revenue now and you’re expecting that to persist this year.

Target range is a little bit less than that, 7% to 8%. So is seven percent to 8% achievable in 2020 six percent?

Unidentified speaker, Unidentified role: Does it take longer? Well, I’d say the nine this year, take it a different way. It’s got about 40 bps in there for pressure on pricing coming from those two suppliers. We will we are developing plans to exit the suppliers or at least have a credible backup. So the next time we negotiate, the power is in our hands, not in theirs.

But that’s going to take two or three years to wind through. The other one is we are ramping up infrastructure and capacity investments. Okay. Honestly, the way I look at it is I’d much prefer to be spending more on CapEx to drive future revenue. Right?

So it’s either Exactly. You know? So Rather than just paying

Jason, Unidentified role: your business. Less of a problem.

Unidentified speaker, Unidentified role: I gotta deliver total cash, and then I gotta give cash back to shareholders. Right. That’s my different problem. So Yeah. With all of this noise on free cash flow, I do want to point out one thing.

It’s it’s kind of frustrating. We still like, we we committed 77% at the end of the year versus 85, right, cash conversion. We still return 4,800,000,000.0 to investors, which is exactly what we said four months previously.

Jason, Unidentified role: Sure.

Unidentified speaker, Unidentified role: Because with the benefit of hindsight, I probably spent too much time on capital allocation and optimizing tax rate. Now I’m shifting my guns to cash flow, and we will get results quickly. Where I’ve intervened aggressively and moved cash flow, call it the cash who wasn’t really a czar. I thought they were in out of treasury and into strategic finance. Okay.

We have a SWAT team ongoing. We’re taking this incredibly seriously, improve forecasting capability, extend terms to suppliers more aggressively than was done in the past. And then, actually, just ensure appropriate enforcement and governance over client terms. There were some extended terms given in 2024. The good news is we collected in 2025, but that should never have happened.

Finance was getting involved too late in the process, and commitments were already taken with customers.

Jason, Unidentified role: So

Unidentified speaker, Unidentified role: look to 2025 as, and I’ll get back to your question on CapEx. CapEx at 9%, a different outlook on networking capital. And some of this is 2024 was an unusually bad year for net working capital. If we just eliminate the extended terms, we’ll have a decent free cash flow conversion year in 2025. But we’re putting in place a significant number of actions to make sure we can deliver the consistency that investors expect.

And even with the 2025 guide, we’re still giving $1,200,000,000 of buybacks, 800 of dividends, so a total return of 2,000,000,000 in the year, which is actually 400,000,000 higher than what we said at Investor Day. Right. So we’re not shy on giving the ship money back. Yeah. There’s other ways to get cash, repatriating cash from international, changing your treasury structures.

It’s what’s called trapped cash. We released about 500,000,000, 8 hundred million of closer to $800,000,000 of trapped cash over the last eighteen months, which is cash that was offshore and it was brought back. The problem is can you bring it back cash tax free? Right. And we’ve brought all the cash back tax free.

And that’s what’s allowed us to deliver on commitments to shareholders.

Jason, Unidentified role: Is there still more of that that you can do? Or

Unidentified speaker, Unidentified role: No. We’re kind of there. Yeah.

Jason, Unidentified role: Yeah. Yeah.

Unidentified speaker, Unidentified role: But that’s why we could continue to deliver on the cash returns to shareholders. Right.

Jason, Unidentified role: So on the working capital side, I guess, are the opportunities more on the payable side or the receivable side? Both, I

Unidentified speaker, Unidentified role: would say. We don’t intend to go out and shorten terms to clients. We actually just intend to enforce what we have. Right. Don’t give extended terms when you don’t have to.

Ensure better trade off between cash and pricing and insert finance earlier in the process. So receivables is the absence of negatives and payables will be driving extension of payables. On average, thirty to forty five days, which is outrageous. We will be over a two year period mandating ninety day terms. Okay.

Jason, Unidentified role: So that make a big difference.

Unidentified speaker, Unidentified role: Yeah. We’ve already changed three of the four consulting companies that work for us.

Jason, Unidentified role: Is that right? Yeah.

Unidentified speaker, Unidentified role: So no, no, we’ll be dogmatic if Yeah. And the instructions we’ve given, if you don’t agree to ninety days, you’re not getting RFPs. Right. You won’t get them. You’re not a strategic supplier.

Jason, Unidentified role: Right. So when you boil all this down, free cash flow conversion, I think the guide is 82% to 85%, right, this year. The longer term target, I think, still

Unidentified speaker, Unidentified role: stands at It still stands at 9%. Okay. You think we can get there next year? But capital, in 2026, the goal is to get to 90% plus.

Jason, Unidentified role: Yeah.

Unidentified speaker, Unidentified role: And I’d say capital will be in or around 8%, kind of right.

Jason, Unidentified role: 8%. Okay. Okay. Understood. Understood.

I know we’re running out of time, but just tell us, I’m curious just on Worldpay, just remind us what are the options

Unidentified speaker, Unidentified role: at least over the long term to monetize potentially the 45% stake? I think Worldpay will always be almost like a sales channel or a partner into perpetuity. Right. That’s one piece of it. The other piece is we do not want to be a longer term holder of a 45% stake in Worldpay.

Right. And we said it on multiple occasions and it’s unchanged. We will monetize when GTCR monetizes. That’s the private equity company. When they monetize, we will sell at the same time.

You know, unfortunately, an IPO would take multi years to to, free up your stake Right. Because you’ll probably have a lock in for a couple of years. But Right. It’s not a long term strategic asset for the company, and that’s consistent with what we said previously.

Jason, Unidentified role: For sure.

Unidentified speaker, Unidentified role: But they’re doing really well. We’re doing They are. Well, and it’s worked a lot more than it was when we when we Yeah.

Jason, Unidentified role: Did the first Revenue growth has really turned around there.

Unidentified speaker, Unidentified role: And revenue growth has turned around. There’s a great management team in there. They’re performing strongly. And it just shows the benefit of good management who knows the sector and strong focus on the business. Yes.

Jason, Unidentified role: All right. We’ll end on that happy note. James, thank you very much. We appreciate it. Thank you for the time.

Unidentified speaker, Unidentified role: Thanks, Jason. Thank you.

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