Friday , April 19, 2024

Post Worldpay, FIS Looks to Share Buybacks And Growth in Digital Payments

Having completed on Feb. 1 a 55% spin-off of its massive Worldpay processing operation, FIS Inc. is now looking to concentrate on priorities including digital banking, real-time payments, and share buybacks, the company’s top executives said early Monday.

Nor is the big Jacksonville, Fla.-based processor ignoring its potential gains from Worldpay’s operations. With its substantial minority stake, “we’ll still have access to Worldpay,” FIS chief executive Stephanie Ferris reminded equity analysts during a call to discuss the company’s fourth-quarter 2023 results. The closing of the spinoff has had virtually no impact on FIS’s valuation. Its shares were trading at just shy of $67 early Monday, little changed from the price at the start of the year.

“Worldpay will remain an important distribution center for us,” Ferris pointed out. “We will work together to reinvigorate revenue growth.” With this point, Ferris touched on a challenge FIS has confronted in recent months. Total adjusted revenue growth came to 2% last year, a number Ferris forecasts will get a boost in 2024 to at least 4%. This will come not just from FIS’s share in Worldpay, she noted, but also from the company’s two remaining divisions, banking and capital markets. The former includes digital-payments technology, like real-time transfers, as well as the NYCE electronic-funds transfer network.

Still, a doubling in growth rate leaves some long-time observers unimpressed. FIS, they argue, is capable of growing at a faster rate. “Industrial-strength processor FIS is just chugging along. It should aim to do more,” notes Eric Grover, principal at Minden, Nev.-based consultancy Intrepid Ventures.

Ferris reported the company’s stake in banking is paying off with its support of the Federal Reserve’s FedNow real-time payments network, which launched last summer. More than 215 FIS clients are now participating in the system, she said. More to come, Ferris added. “We’re seeing a large amount of backlog in FedNow,” she said.

Ferris took the opportunity to say FIS will also continue to be aggressive in buying back its shares, having increased its buy-back commitment to $3.5 billion from $3 billion.

Following the big move to spin off Worldpay, which the company paid more than $40 billion to acquire in 2019, FIS will embark on a program of tighter management, Ferris promised. “FIS had lost its focus in recent years,” she told the analysts on the call. “We were selling in areas that didn’t contribute to the bottom line. Now, we’ve successfully executed while delivering financial outcomes ahead of expectations.” Ferris on Jan. 1 last year succeeded Gary Norcross as CEO.

The company reported full-year 2023 revenue of $14.7 billion, including $3.7 billion in the December quarter, up 1%. Of that quarterly total, Worldpay accounted for $1.2 billion.

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