Stephanie Ferris, CEO and president of FIS, stated, "Our 2023 results and our 2024 outlook reflect the continued positive momentum of the business as we delivered on our financial commitments for the fourth consecutive quarter and successfully closed the Worldpay transaction." "We are happy to report that we have exceeded our Future Forward projections. This shows our continued dedication to giving shareholders their money back and our faith in the company's success. We will be increasing our share repurchase goal by $500 million. As we begin the next chapter of FIS, I'm excited to give you a thorough, in-depth look at the company's corporate strategy at our next Investor Day on May 7th in New York City.

A Look Into Financial Reporting After a Successful Worldpay Transaction

The company announced on July 6, 2023, that it would be expediting its previously announced plan of separation in order to become two globally focused companies with increased strategic freedom. A formal agreement was struck by FIS to sell private equity funds run by GTCR a 55% share in its Worldpay Merchant Solutions company. The payment via Worldpay was finished on January 31, 2024.

All results, unless otherwise specified, are based on continuing operations and do not include the Worldpay Merchant Solutions segment of the Company, which was categorized as discontinued operations as of the third quarter of 2023.

FIS will report its 45% stake in Worldpay Merchant Solutions under the income statement's "Equity method investment earnings (loss)" line starting in the first quarter of 2024 (EMI).

Update on Capital Allocation

The company is still dedicated to providing returns to shareholders, and it has raised its objective to buy back at least $4.0 billion of shares by the end of 2024 from the previous target of at least $3.5 billion, which included the acquisition of $510 million of shares in the fourth quarter of 2023. The Company additionally maintains its goal of paying out 35% of adjusted net earnings as dividends, with equity method investment earnings (loss) (EMI) excluded.

The Board of Directors of FIS authorized a normal quarterly dividend of $0.36 per common share on February 25, 2024. To stockholders of record as of the close of business on March 8, 2024, the dividend is payable on March 22, 2024.

Financial Results for the Fourth Quarter of 2023

With $1.2 billion in revenue categorized as discontinued operations subtracted, revenue on a GAAP basis fell 1% to roughly $2.5 billion from the same quarter in the previous year. GAAP net results from continuing operations that were attributable to common stockholders were $64 million, or $0.11 per diluted share. GAAP net earnings attributable to common stockholders were $251 million, or $0.42 per diluted share, including discontinued operations.

Revenue was flat on an adjusted basis compared to the same quarter last year, with a 16% decrease in adjusted non-recurring revenue offsetting a 7% increase in adjusted recurring revenue. Due mostly to cost reductions, adjusted EBITDA margin increased by 70 basis points (bps) to 42.1% over the same time last year. Adjusted EPS dropped by 4% from the same quarter last year to $0.94 per diluted share, mostly because of a $0.07 headwind related to higher interest costs. Adjusted net earnings for continuing operations came to about $558 million. Adjusted net earnings, including ceased operations, were about $985 million. Adjusted EPS down 2% from the same quarter last year to $1.67 per diluted share, mostly because of a $0.05 headwind related to increased interest expenses.

Complete Year 2023 Financial Outcomes

On a GAAP basis, revenue climbed 1% from the previous year to approximately $9.8 billion, excluding $4.9 billion in revenue that was classified as discontinued operations. $503 million, or $0.85 per diluted share, was the GAAP net results from continuing operations attributable to common stockholders. GAAP net earnings (loss) attributable to common stockholders, including discontinued operations, were $(6,654) million, or $(11.26) per diluted share. The amount included in the loss was a $6.8 billion non-cash goodwill impairment charge that was recorded in the year for the Merchant Solutions reporting unit.

Revenue climbed 3% on an adjusted basis over the previous year, driven by a 5% growth in adjusted recurring revenue that was somewhat offset by a 4% decrease in adjusted non-recurring revenue. The adjusted EBITDA margin decreased to 40.4% from 40.4% in the previous year due to a decrease in the contribution from higher margin non-recurring revenue, which was more than offset by cost reductions.

Adjusted EPS fell by 11% from the previous year to $3.37 per diluted share, mainly because of a $0.49 headwind related to higher interest costs. Adjusted net earnings for continuing operations were estimated to be $2.0 billion. Adjusted net earnings, including ceased businesses, were almost $3.7 billion. Adjusted EPS fell 7% from the previous year to $6.17 per diluted share, mostly because of a $0.46 headwind related to higher interest expenses.

Information by Segment

Financial Solutions:

In comparison to the same period last year, revenue for the fourth quarter was $1.7 billion, flat on a GAAP basis and adjusted for a 7% increase in adjusted recurring revenue offset by a 22% decline in adjusted non-recurring revenue. Due mostly to cost reductions, adjusted EBITDA margin increased by 270 basis points to 44.2% from the same time last year.

Revenue for the entire year rose to $6.7 billion, up 2% on an adjusted basis and 2% on a GAAP basis over the previous year. This growth in adjusted recurring revenue was largely offset by a 6% decline in adjusted non-recurring revenue. The adjusted EBITDA margin was 43.5%, unchanged from the previous year, with a smaller contribution from higher margin non-recurring revenue and Future Forward cost efficiencies offsetting this.

Solutions for the Capital Market:

Revenue for the fourth quarter climbed to $755 million from the previous year's amount by 1% on an adjusted basis and 2% on a GAAP basis. This increase was mostly attributable to a 10% reduction in adjusted non-recurring revenue, which was somewhat offset by a 7% growth in adjusted recurring revenue. Compared to the same time last year, adjusted EBITDA margin decreased by 250 basis points to 53.2%, mostly as a result of lower contribution from higher margin non-recurring revenue.

Revenue for the entire year rose to $2.8 billion, up 5% on an adjusted basis and 5% on a GAAP basis over the previous year. This gain was mostly driven by a 9% increase in adjusted recurring revenue, which was somewhat offset by a 7% decrease in adjusted professional services revenue. Due mostly to the revenue mix, adjusted EBITDA margin decreased by 60 basis points to 50.3% from the previous year.

Business and Additional:

Revenue for the fourth quarter dropped by 32% to $63 million from the same period last year, mostly as a result of non-strategic business divestitures. $92 million was lost on adjusted EBITDA, which included $101 million in corporate expenses.

The revenue for the entire year dropped to $322 million, a 31% fall from the previous year. $345 million was the adjusted EBITDA deficit, which included $410 million in corporate expenses.

The Company recast all previously reported segment statistics for the quarter ended December 31, 2023, and reclassified certain non-strategic operations from Banking Solutions to Corporate and Other as a result of our continuing portfolio reviews. About 1% of the total revenue for the year ended December 31, 2023, which was consolidated, came from the activities that were reclassified during the fourth quarter of 2023.

Worldpay Merchant Solutions' operations have been discontinued.

Revenue for the fourth quarter of the year grew to $1.2 billion, up 2% on an adjusted basis and 3% on a GAAP basis over the same period last year. EBITDA after adjustments fell by 1% to $556 million. The revenue mix was the main cause of the adjusted EBITDA margin's 160 basis point decline to 45.5% from the same quarter last year.

Compared to the previous year, full-year revenue climbed by 1% on a GAAP basis and 1% on an adjusted basis, totaling $4.9 billion. At $2.2 billion, adjusted EBITDA dropped by 2%. The revenue mix was the main cause of the adjusted EBITDA margin's 160 basis point decline to 44.9% from the previous year.

Cash flows and the balance sheet (for the entire company, including discontinued operations)

Debt outstanding as of December 31, 2023, was $19.1 billion. In the fourth quarter, operating activities generated $1.5 billion in net cash, and free cash flow was roughly $1.1 billion. Through $510 million in share repurchases and $305 million in dividend payments, the company returned $815 million in capital to shareholders during the quarter.

During the year, operating activities generated $4.3 billion in net cash, while free cash flow was roughly $3.6 billion. Through $510 million in share repurchases and $1.2 billion in dividend payments, the Company gave back $1.7 billion in capital to shareholders throughout the year.

Prospective Forward Outcomes

At the end of the quarter, the Company's annualized run-rate Future Forward cash savings of over $550 million, including over $370 million in savings from operating expenses and about $180 million from capital expenses, exceeded its expectations as of December 31, 2023, on a continuing operations basis. The company is raising its goal of saving operating expenses and restating its goal of saving $1.0 billion in total cash by the year 2024, of which more than 75% is expected to come from run-rate cash savings.

Outlook for the First Quarter and Whole Year 2024

The company is releasing its first quarter and full year guidance. For the full year, it anticipates growing adjusted EBITDA margins, year-over-year adjusted EPS growth, and faster sales growth. Two months of EMI contribution for the first quarter and eleven months of EMI contribution for the entire year are reflected in the adjusted EPS forecast.

FIS will report its 45% stake in Worldpay Merchant Solutions under the income statement's "Equity method investment earnings (loss)" line starting in the first quarter of 2024 (EMI).