Monday , March 1, 2021

With Worldpay Firmly Onboard, FIS Sees Further M&A as ‘an Important Pillar’ in Its Strategy

Top management at FIS Inc. made it plain Tuesday morning that growth through further acquisitions is a key priority only about 18 months after the company completed its massive buyout of the merchant processor Worldpay. But while the Jacksonville, Fla.-based company still keeps its powder dry for M&A, executives on an early-morning earnings call also focused on new products and services in the pipeline following a flat quarter for organic growth.

“M&A is going to continue to be an important pillar in our strategy,” said Gary Norcross, FIS’s chief executive. “We don’t have to do M&A in order to grow, but if we can accelerate our growth, absolutely we will do another M&A transaction.” Neither Norcross nor chief financial officer Woody Woodall commented on reports that emerged in December that the company had broken off talks to acquire rival processor Global Payments Inc. 

But in answer to an analyst’s question about the potential size of an acquisition target, Norcross downplayed the importance of size, adding, “Our preference would be [a deal] that drives the most shareholder value, whether a tuck-in or a transformational M&A.”

Norcross: “We’re in a good position going into the recovery.”

Norcross drew attention to the importance of the pacing of new products and services. “We’ll be investing in our business, not only in new products but in introducing new products faster,” he said, without mentioning specifics.

In the company’s merchant-solutions unit, at $1 billion in fourth-quarter revenue the second biggest of its three divisions, Covid-19 in 2020 took a toll on restaurant, travel, and airline spending, which generates higher yield for the company. Lower-yield segments like grocery, pharmacy, and government sales grew much faster, the company said, with e-commerce volume outside of travel up 32%. Indeed, e-commerce will get a big boost this year with the signing of Walmart, Norcross said. Overall, total revenue in merchant solutions was down 9% for the quarter compared to 2019’s fourth quarter.

Norcross said he doesn’t expect a total rebound for airlines until 2022, but added restaurant and retail spending should return to normal earlier. “We’re in a good position going into the recovery,” he noted, pointing particularly to a referral program the company offers for independent software vendors that offer payments services along with the merchant platforms they build. “Our ISV referral program will pay huge dividends for us going into the recovery,” he said.

Overall, FIS logged $3.3 billion in revenue for the quarter and $12.6 billion for the year. The former number was flat year-over-year, while the latter number rose 21% because the Worldpay acquisition didn’t close until July 2019. Adjusting for acquisitions, total revenue for the year was down 1%.

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