Fidelity National Information Services, Inc. 2026 Q2 Earnings Call

Thank you, operator. Good morning, everyone. Thank you for joining us today for the FIS Second Quarter 2026 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. On the call with me this morning is our CEO and President, Stephanie Ferris, and our CFO, James Kehoe. 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.

Throughout this 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. With that, I'll turn the call over to Stephanie.

Thanks, George. Good morning, everyone. Several years ago, we laid out a bold multi-year plan to reposition FIS. We committed to re-accelerating growth in our banking business, improving our margins, and driving increased cash flow. Every one of those actions was in service of three outcomes: to make FIS more client-centric, to simplify how the company runs, and to drive shareholder value. Our second quarter results demonstrate that this transformation is achieving the outcomes we set out to deliver. Banking grew at the high end of our range with continued strength across Banking and payments. Adjusted EBITDA margins expanded and free cash flow more than tripled year-over-year. Our Total Issuing Solutions acquisition TSYS is playing out as expected, with real client wins and revenue growth across the portfolio, as well as significantly improved cash flow. At the same time, our partnership with Anthropic is progressing.

While our overall results reinforce the strategy and priorities we've been executing against for several years, you've seen by now our expectations for Capital Markets for the remainder of the year. I want to assure you that we are not satisfied with our performance in Capital Markets and remain focused on improving those results. Both James and I will cover this in our prepared remarks. Turning to slide five. Our second quarter results are strong and demonstrate the durability of our business model. We delivered revenue of $3.4 billion, up 5.3% on a pro forma basis. Banking grew 6.1% at the high end of our outlook, driven by continued momentum in both Banking and payments. Capital Markets grew 3.2% at the low end of our outlook. Recurring revenue grew 5% across both segments, and recurring sales grew 14%.

Adjusted EBITDA grew 7.4%, margins expanded 113 basis points, and adjusted EPS grew 9% toward the high end of the range, reflecting stronger execution across the business. Free cash flow was extremely strong in the quarter, increasing more than threefold and leading us to raise our full-year free cash flow outlook by $100 million. These results reflect the financial model we've been intentionally building. Durable revenue, expanding margins, disciplined capital deployment, cash generation, and to drive shareholder value. Turning to slide six. Let me spend a moment on how we've structured FIS because it is central to understanding both this quarter's results and where we're headed. We serve financial services companies of every size, from the largest and most complex financial institutions in the world to small banks and credit unions. We are central to our clients' day-to-day operations and modernization efforts, and we deliver against that privilege.

Post the Total Issuing Solutions acquisition, we expanded our total addressable market by $28 billion, significantly increasing the opportunity for our combined solution portfolio. Most importantly, that broader portfolio complements the way clients have always engaged with us. Now, 72 of our top 100 clients consume capabilities across Banking, payments, and Capital Markets. We typically enter a client relationship through a core ledgering platform, whether a Banking core, a commercial lending core, or a trading system in Capital Markets. Once that foundation is established, we expand the relationship by selling payments and other value-added services, executing our cross-sell and expand strategy. The economics of this model are compelling. On average, clients consuming solutions across all three ecosystems generate nearly twice the revenue of clients using only a single solution. A second benefit of our integrated portfolio is AI.

Because we run many of our clients' core systems, we sit on a rich set of data across Banking, payments, and Capital Markets. As AI adoption grows, that data becomes a meaningful advantage and enables us to deliver smarter solutions, automate workflows, and improve outcomes for clients. We're already seeing early proof points in areas such as fraud and financial crimes, where connecting data across our platform creates value for clients and further differentiates FIS. The third benefit of serving clients across an integrated portfolio is showing up in our commercial performance. As I said earlier, we serve financial service companies of every size. Our consolidated commercial engine continues to gain momentum as we execute our strategy to shift from lower-margin products to higher-margin solutions. Enterprise-wide sales growth increased double digits over the last 12 months, reflecting a more focused portfolio and strengthening commercial motion.

One of the best examples of this is in our Total Issuing business. Turning to slide seven. Let me remind you of the TSYS for this deal. Through the acquisition of TSYS, we gained access to a large and rapidly growing global issuing TAM, a market we did not previously serve at scale, and we did it by acquiring the industry's best, most scaled processor. Importantly, that platform serves the same set of financial institutions FIS has built its business around. The strategic fit was there from day one. Same clients, complementary capabilities, one integrated value proposition. In the quarter, we won two new very large financial institutions, a top 10 Latin American bank and a top 10 private sector commercial bank in India. On renewal velocity, we continue our momentum of renewals.

Since the start of 2025, we've renewed approximately a third of Total Issuing revenue, with 72% of the portfolio now under contract through 2029 and beyond, up from 65% the last time we spoke. That's validation of the platform and the predictability of the revenue base. More than 90 accounts are now signed up for our consuming modernized components, including 60 U.S. banks. Opportunities of 1 million accounts or more is above 85%. Further proof that when the deal is big and complex, we win. The most important part of our TSYS, though, is the better together story. It is starting to compound. Enterprise-wide ACV sold to joint clients grew 35% year-over-year in the first half. Put simply, strength and complexity at scale, plus a modern roadmap is driving commercial momentum.

This is exactly what we envisioned when we brought these businesses together. Total Issuing strengthens FIS strengthens Total Issuing, and clients are choosing the combined proposition. I know there's been some concerns around Visa Pismo entering this space and disrupting our business. You heard from the CEO of Visa last week that their strategy around Pismo is to target small to mid-size banks and fintechs, not large banks where we operate. The complexity and scale needed to win and serve these large clients is the strength and strategy of Total Issuing Solutions. Taken together, client wins, renewal performance, modernization progress, and growing cross-sell momentum give us confidence that the acquisition TSYS is playing out as expected. The business is performing very well, and we are very much on track to deliver against our synergy targets for 2026 and beyond. Let me now turn to Capital Markets on slide eight.

We are providing additional detail on this segment because it is important to understand the factors shaping performance through 2026. Capital Markets operates across three solution ecosystems. Trading and asset services, lending, and treasury and risk. In the first half of the year, the segment generated $1.6 billion in revenue, 74% of which was recurring, and delivered a 51.7% adjusted EBITDA margin. This is a business that is actively transforming. In 2026, we leaned in hard to accelerate that transformation across a genuinely tough operating backdrop. We began the year with a known revenue headwind related to UBS's acquisition of Credit Suisse. The resulting client attrition is impacting 2026 revenue growth by approximately one percentage point.

That impact has been concentrated within trading and asset services, and together with the timing of renewals, negatively affected both recurring and total revenue growth in the business during the first half of the year. We entered the year leaning in hard to accelerating our sales momentum and the conversion of our existing backlog, as well as an expectation for organic growth to recover in our lending business from the volatility we saw in 2025. Unfortunately, these expectations did not materialize. We began the year expecting the lending business to drive one point of organic growth for the segment. First quarter interest rates pressures weighed on lending volumes, and we now expect growth to be tempered, creating a modest drag on the segment recurring revenue growth. Rest assured, we are actively addressing these misses with actions that we've already taken and with new actions that we're putting in place now.

What has not changed is the underlying business fundamentals. The backlog is strong. Demand is strong. Client relationships are strong. Margin quality, our recurring revenue base, and our market position all remain intact. We have confidence in this business going forward. As a result, we're re-basing our Capital Markets guide to reflect actual first half trends with modest re-acceleration in Q4. As part of that same discipline review, we're also announcing an evaluation of strategic alternatives relating to select products that we're actively managing within our Capital Markets segment that may not fit the strategic profile of our overall business. That work reflects our commitment to focus this segment on its highest value, highest margin solutions. James will take you through the shape of the revised outlook in a moment. Turning to slide nine. AI is becoming an increasingly important driver of growth, innovation, and client value across FIS, and is increasingly a core driver of how we build, sell, and serve.